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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended June 30, 1995
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission File Number: 33-28622-A
MSU CORPORATION
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(Exact Name of Registrant as Specified in its Charter)
FLORIDA 22-274288
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(State or other Jurisdiction (IRS Employer Identification No.)
of Incorporation or Organization)
ELDER HOUSE, 526-528 ELDER GATE, CENTRAL MILTON KEYNES, MK9 1LR, ENGLAND
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(Address of Principal Executive Offices, Including ZIP Code)
Registrant's Telephone Number, Including Area Code: 011 441 908 232100
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Securities registered pursuant to Section 12(b) of the Act:
Name of Each Exchange
Title of Each Class on Which Registered
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NONE NONE
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Securities registered pursuant to Section 12(g) of the Act:
NONE
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(Title of Class)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 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 No X
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Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K 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-K or any amendment to
this Form 10-K. N/A
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As of October 9, 1996, the aggregate market value of the voting stock held by
non-affiliates of the Registrant computed by reference to the average bid and
ask prices for such stock as reported by Bloomberg Financial, Inc. was
$49,491,462 (for purposes of calculating this amount, only directors, officers,
and beneficial owners of 5% or more of the capital stock of the Registrant have
been deemed affiliates).
The number of shares of common stock of the Registrant outstanding as of
October 9, 1996 was 15,509,722 according to the Company's transfer agent. The
Company's internal records indicate that there were 15,534,722 shares of its
common stock outstanding as of October 9, 1996. After significant due
diligence, the Company has been unable to account for the 25,000 share
discrepancy.
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FORM 10-K INDEX
PART I
<TABLE>
<S> <C> <C>
ITEM 1. BUSINESS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
ITEM 2. PROPERTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
ITEM 3. LEGAL PROCEEDINGS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS . . . . . . . . . . . . . . . . . . . . . . . . 12
ITEM 5. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS. . . 13
ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS . . . . . . . 14
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE . . . . . . . . 18
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT . . . . . . . . . . . . . . . . . . . . . . . . . 19
ITEM 11. EXECUTIVE COMPENSATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K . . . . . . . . . . . . . . . . . . 27
</TABLE>
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PART I
ITEM 1. BUSINESS
BUSINESS DEVELOPMENT
MSU Corporation, formerly Capital Acquisition Company, was
incorporated in Florida in 1986. MSU Corporation conducted no substantive
business until all of the outstanding shares of MSU Public Limited Company
("MSU PLC") were exchanged for Capital Acquisition Company shares in October
1994 (the Exchange"). The Exchange was treated for financial reporting
purposes as a reverse acquisition, as if MSU PLC recapitalized its common stock
and then issued shares of common stock (equal to such number of shares which
represented the then outstanding shares of Capital Acquisition Company) for
costs representing the then capital deficiency of Capital Acquisition Company.
MSU PLC, an England and Wales company formed under the Companies Act of 1985,
in turn owns all of the outstanding shares of MSU (UK) Limited ("MSU Ltd."), an
England and Wales company formed under the Companies Act of 1985. MSU Ltd. was
formed in March 1991 and commenced operations in March 1992. MSU Corporation's
business is based in the United Kingdom and is conducted almost exclusively by
MSU Ltd., its second tier subsidiary. Unless the context otherwise requires,
references in this Annual Report on Form 10-K to the "Company" refer to MSU
Corporation, MSU PLC and MSU Ltd. Historical financial information for periods
prior to the Exchange has been presented as that of MSU Corporation, as if MSU
PLC and MSU Ltd. were owned by MSU Corporation during such periods.
Although this Annual Report on Form 10-K is for the Company's fiscal
year ended June 30, 1995, it is delinquent and was filed with the Securities
and Exchange Commission on November 27, 1996. As a result, unless
otherwise stated, the information contained in this Annual Report on Form 10-K
is as of November 15, 1996.
EXCHANGE RATES
MSU PLC and MSU Ltd. conduct a significant amount of their operations
in pounds sterling. References to "$" in this Annual Report on Form 10-K are
to U.S. dollars and in many instances represent translations of pounds sterling
into dollars at specified rates. These translations should not be construed as
representations that the pound sterling amounts actually represent such dollar
amounts. Unless otherwise stated, the translations of pounds sterling into
dollars have been made at the average rate for the year indicated. See Notes
to Consolidated Financial Statements for rates used by the Company in the
preparation of its consolidated financial statements included elsewhere herein.
The following table sets forth, for the periods indicated, certain information
concerning the rates of pounds sterling per dollar:
<TABLE>
<CAPTION>
Fiscal Year Ended At End of Average
June 30 Period Rate(1) High(2) Low(2)
- --------------------- ---------- ------- ------- ------
<S> <C> <C> <C> <C>
1992 .52 .56 .59 .52
1993 .67 .63 .69 .50
1994 .65 .67 .68 .65
1995 .63 .63 .65 .61
1996 .65 .65 .67 .63
1997 (through October 31, 1996) .61 .63 .64 .61
</TABLE>
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(1) Represents the average of the rates on the last day of each month
during the relevant period.
(2) Represents the highest and lowest rates used in the average rate
calculation.
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GENERAL OVERVIEW
The Company designs and develops computer chips and chipsets
principally for use in consumer electronics products. Most of the Company's
chips incorporate multiple functions, eliminating the need for several or more
chips and permitting a more efficient use of printed circuit board design, a
diminished risk of malfunction and error and a lower cost.
The Company also develops prototype electronic products with
particular emphasis on prototype consumer electronic products. The prototype
electronic products developed by the Company are almost exclusively based on
the Company's proprietary chips and chipsets. Such prototype products are used
for demonstration and marketing purposes in connection with presentations
before consumer electronics manufacturers and others with an interest in the
Company's chip technology and products.
The Company has, to date, developed numerous consumer electronic
products pursuant to development contracts or arrangements with manufacturers
based in China, Taiwan, Germany, the United States, Hong Kong and the United
Kingdom. The contracts typically have provided for the payment of development
fees plus royalties based on sales of products utilizing the Company's chips or
chipsets. To date, no products developed pursuant to such development
contracts have been sold and no royalties have been paid. In most instances,
the Company has no control over a third party's manufacturing, marketing or
purchase decisions and, accordingly, there can be no assurance that any
developed products will be manufactured, marketed or sold. In fiscal 1995, the
Company's revenue was derived from product development (46% of total revenue),
chip sales in connection with product development (51% of total revenue) and
support services (3% of total revenue). In fiscal 1996, the Company's revenue
was derived from product development (87.8% of total revenue) and support
services (12.2% of total revenue).
In October 1993, MSU Ltd. entered into several agreements with IBM
pertaining to the development of software and hardware for consumer multimedia
units using the Slipstream ASIC Chip - version 4.5. See "BUSINESS-Chip
Technology." In April 1995, after all development projects contemplated by the
agreements had been completed, IBM advised the Company that it had determined
not to pursue, at that time, the consumer multimedia product market and that it
would not announce prior to July 1995 a product using the intellectual property
developed by the Company in conjunction with and licensed to IBM. IBM retains
a non-exclusive license to use such intellectual property. Additionally, any
major enhancements to and replacements of such intellectual property as well as
any other technology developed by the Company must be offered first to IBM in
writing. The Company has offered its prototype Internet Access Device and
related ISP Chip technology to IBM and IBM has advised the Company of its
rejection of such offer. The Company has not yet offered the Envoy Chip or the
Wynpeg Chipset to IBM.
CHIP TECHNOLOGY
Slipstream Application Specific Integrated Circuit ("Slipstream ASIC
Chip"). The Slipstream(TM) ASIC Chip is a multi-function chip which provides
graphics capability and high quality sound for multimedia systems. The
Slipstream ASIC Chip incorporates (i) a video generator, that generates the
video signal from digital information; (ii) a graphics accelerator, that
controls memory and access to digital information allowing the manipulation and
control of images; and (iii) digital signal processors, that allow the
compression and decompression of data from CDs permitting the storage of
massive amounts of data necessary for the storage and retrieval of images.
These functions are typically achieved through the use of a group of chips in
series.
Computer image creation begins with the creation of pixels. Pixels
are individual picture elements that make up a video display such as a computer
or television screen. Each pixel contains information that is defined by the
signal or program, such as a movie or video game, that it is displaying. The
more information that may be held in each unit, the sharper and more defined
the image. As computer hardware is able to process the
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information in a signal or program with greater speed, the information
projected in each pixel may be changed more quickly, creating an improved
illusion of motion, animation and shading of images on the computer screen.
The Slipstream ASIC Chip generates and processes the pixel information
necessary for image creation and movement. Because conventional computer discs
and storage devices are unable to store efficiently the additional amount of
data necessary in each pixel and within each time frame to generate images
adequately, the Company's Slipstream ASIC Chip makes use of CD technology and
uses a CD interface and a graphics accelerator for enhanced retrieval. The
Slipstream ASIC Chip further enhances retrieval from the CD using a digital
signal processor that interfaces to a digital-to-analog converter and makes use
of the advanced CD compression techniques. The signals are compressed to allow
for more effective and efficient storage. The Slipstream ASIC Chip also
includes algorithms which eliminate unimportant or redundant data so that
storage space is not wasted.
The Slipstream ASIC Chip-version 4.5 is available in silicon. The
Company's prototype Generic (Video) CD Player is based upon the Slipstream ASIC
Chip. See "BUSINESS-Prototype Products."
Internet Services Processor ("ISP Chip"). The ISP Chip is a version
of the Slipstream ASIC Chip designed for use in Internet products such as the
Company's prototype Consumer Internet Access Device. See "BUSINESS-Prototype
Products." Prior prototype Consumer Internet Access Devices used the
Slipstream ASIC Chip. The ISP Chip provides more Internet related features (at
a lower cost) than the Slipstream ASIC Chip. The ISP Chip is a graphics and
sound processor which also provides interfacing and logic for the CPU and
system memory.
The ISP Chip is available in silicon. The Company is in the late
stages of development of an ISP Chip-version 2 and in the early stages of
development of an ISP Chip-version 3. Such ISP Chips are intended to provide
enhanced Internet features and capabilities.
CD Services Chip ("Envoy Chip"). The Envoy(TM) Chip reduces the
complexity in compact disc drive systems and the cost of interfacing to compact
disc drives in both PC's and consumer CD products. The Envoy Chip replaces six
chips typically used within a CD mechanism. The three principal electronic
components of a compact disc player are the servo processor, signal processor
and micro controller. The Envoy Chip provides the servo, signal and control
functions. The Envoy Chip is also suitable for CD ROM applications as it can
replace principal components along the data path.
The Envoy Chip is available in silicon.
M-PEG Chipset ("Wynpeg Chipset"). The Wynpeg(TM) Chipset incorporates
the Slipstream ASIC Chip and another non-proprietary chip that implements the
decoding standards of the Motion Picture Experts Group. M-PEG is an
international standards body that has defined a worldwide standard for the
compression of video data called Philips White Book Video CD M-PEG Standard.
The Company's Wynpeg Chipset is capable of decompressing digital video signals
in accordance with such standard. The Company intends to develop a version 2
of the Wynpeg Chipset at some unspecified time in the future. There can be no
assurance that the development of such Wynpeg Chipset-version 2 will ever be
commenced or completed.
PROTOTYPE PRODUCTS
Generic (Video) CD Player. The prototype Generic CD Player, based on
the Slipstream ASIC Chip, is a multimedia product capable of use as a video CD
player, audio CD player, and for photo CD and Karaoke. This CD based
multimedia product consists of a conventional CD player equipped with an
internal audio amplifier; a Karaoke function which has the ability to run
stereo soundtrack and produce graphics on the screen with overlaying of text
for lyrics; and a photo CD compatible with standard photo CDs and capable of
supporting Kodak multi-session photo CDs. The prototype Generic CD Player
operates with a standard television set.
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The Company has utilized the prototype Generic CD Player for
demonstration purposes only. Specific products were designed and developed in
connection with development contracts with two manufacturers in Taiwan and
China, respectively. To date, no products have been manufactured for sale.
Consumer Internet Access Device. The Company's prototype Consumer
Internet Access Device (the "Internet Access Device") is a low cost, easy to
use, small box-like device which provides access to the Internet and on-line
services via a telephone connection, standard television set and a hand held
remote control unit. A keyboard is available at an additional cost to the
consumer. Access to the Internet and on-line services is conventionally via
PCs, which represents both a cost and technology barrier to many consumers.
Prior prototype Internet Access Devices were based on the Company's Slipstream
ASIC Chip; however, the most recent prototype Internet Access Device is based
on the ISP Chip. It is anticipated that future generations of the prototype
Internet Access Device will be based on the ISP Chip-version 2, the ISP
Chip-version 3 or future generations and derivations.
The Company has developed and is continuing to modify the software
contained in its prototype Internet Access Device. The software is stored on
memory chips and hard coded in the prototype Internet Access Device. The
software enables users to interact with the Internet via its e-mail and browser
functions. The Company recently made an initial release of its software for
use with production samples of its Internet Access Device. The Company
anticipates a significant release of its software in November 1996 for use in
customized Internet Access Devices anticipated to be manufactured by Mitac,
Inc., a Taiwanese company. There can be no assurance that a significant
release of the Company's software will be made or that the customized Internet
Access Devices will be manufactured by Mitac, Inc. Although there can be no
assurance, it is anticipated that software updates and "bug" fixes to Internet
Access Devices sold and in use will be accomplished by downloading software via
the Internet or from a licensed on-line or Internet service provider. Although
steps will be taken by the Company to protect its software from unauthorized
modifications, there can be no assurance that unauthorized modifications will
not occur.
The Company's ISP Chip prototype Internet Access Device has been
demonstrated internationally to manufacturers and others. The Company has
experienced significant interest in this prototype Internet Access Device and
related technology. The Company has entered into agreements with American
Interactive Media, Inc. and Mitac, Inc. for the development, manufacture and
sale of customized Internet Access Devices. It is anticipated that Mitac, Inc.
will manufacture for sale all customized Internet Access Devices developed
pursuant to both the American Interactive Media, Inc. and Mitac, Inc.
agreements. In late October 1996, American Interactive Media, Inc. placed an
initial order for 5,000 customized Internet Access Devices. The Company
anticipates that shipment of these products will commence in November 1996. In
addition, the Company has received non-binding conditional orders for
customized Internet Access Devices from two companies. Such orders are subject
to the approval of final production samples which were made available on
October 8, 1996. No final production samples have been approved yet; however,
the Company has received no indication of any material problems with such
samples. There can be no assurance that the final production samples will be
approved by these two companies or any other third parties; that orders, once
placed by a third party, will not be cancelled; or that any products will be
manufactured or sold to any third party.
Consumer PC. The Consumer PC is a CD-based consumer product
compatible with most PC software and providing Internet connection capability
but operating via a standard television set. The Consumer PC resembles a VCR
or CD player in both appearance and operation but serves in many capacities
including as a video CD player and a PC CD ROM software disc player. The
Consumer PC is not currently based on chip technology, but is based on system
software designed by the Company. The Company plans to design a custom chip to
incorporate the key features of the Consumer PC in the near future. The
Company has participated in a Consumer PC product development arrangement with
a German manufacturer. Development of the product has been completed, however,
to date, no products have been manufactured for sale.
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SUPPORT SERVICES
The Company has provided and will continue to provide consulting and
other development services pursuant to contracts entered into with consumer
electronics manufacturers and others. Company employees assist in, among other
matters, identifying trends in consumer preferences and generating new product
ideas. The Company is involved in the development of software compatible with
certain of its products and intends to offer technical support to consumers of
its products and hardware and software engineers; however, there can be no
assurance such activities will result in profits to the Company. In fiscal
1995 and 1996, 3% and 12.2% of total revenue, respectively, were attributable
to support services.
SUPPLY AND MANUFACTURING
American Microsystems, Inc., a semiconductor manufacturer, has
historically manufactured the Slipstream ASIC Chip-version 4.5 and the ISP
Chip. Prior versions of the Slipstream ASIC Chip were manufactured by Toshiba
and Es2. It is anticipated that United Micro Corporation, a Taiwanese chip
manufacturer, will manufacture a majority of the ISP Chip-version 2 to be used
in the customized Internet Access Devices proposed to be manufactured by Mitac,
Inc. The Company has no written agreement with either American Microsystems,
Inc. or United Micro Corporation. See "BUSINESS--Prototype Products--Consumer
Internet Access Device." To date, the Company has not experienced any
significant problems obtaining the requisite number of chips for its operations
although its demands have been relatively small. The Company has commenced
discussions with additional manufacturers for the production of additional
chips and chipsets should the need arise. Should demand for the Company's
chips or chipsets increase significantly, there can be no assurance that the
Company will be able to meet such demand through American Microsystems, Inc.,
United Micro Corporation or other manufacturers, which could have a material
adverse effect on the Company. Arrangements with new manufacturers could
result in substantial delays, engineering charges and additional expense.
Mitac, Inc. is the only present manufacturer of customized Internet
Access Devices using the Company's chips and software. Should Mitac, Inc.
cease to manufacture the customized Internet Access Devices, the Company would
be adversely affected.
RESEARCH AND DEVELOPMENT
Since 1992, the Company has been engaged in developing its own chips
and prototype products. It has done so independently and pursuant to research
and development contracts. Research is conducted at the Company's facility
located in Milton Keynes, England through engineers and programmers employed by
it as well as independent contractors. During the fiscal years ended June 30,
1994, 1995 and 1996, the Company expended approximately $1.7 million, $1.3
million and $1.2 million, respectively, on unreimbursed research and
development (which excludes all overhead costs other than employee, independent
contractor, development tool and prototyping cost), all of which has been
expensed. Approximately 42%, 56% and 28% of the amounts expended on research
and development in the fiscal years ended June 30, 1994, 1995 and 1996,
respectively, were customer sponsored.
EMPLOYEES
The Company has 13 employees, including three executives, two business
development personnel, six technical personnel and one administrator. The
Company also uses independent contractors for certain research and development
matters.
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MARKETING
The Company markets its chips and prototype electronic products
through exhibitions at trade shows and direct selling to OEMs and potential
licensees of its technologies. The Company targets corporations in the
consumer electronic, multimedia, computer hardware and software industries.
RISK FACTORS
The following are risk factors in addition to those set forth
elsewhere in this Annual Report on Form 10-K, including those risk factors set
forth elsewhere in this "Business" section and in "Management's Discussion and
Analysis of Financial Condition and Results of Operations."
Significant Operating Losses; Accumulated Deficit; Uncertainty of
Future Operating Results. The Company has achieved only limited revenue,
primarily in connection with development contracts, and has incurred
significant losses each year since the inception of its operations. For the
fiscal years ended June 30, 1994, June 30, 1995, and June 30, 1996, the Company
incurred net losses of approximately $1,365,000, $878,000, and $1,397,000,
respectively, resulting in an accumulated deficit of approximately $5,026,000
and a total shareholders' deficit of approximately $1,816,000 at June 30, 1996.
There is no assurance that the chips or other products developed by the Company
will be marketed or sold, or that, if sold, such products will achieve consumer
acceptance. There can be no assurance that the Company's operations will ever
be profitable or that the Company will be able to continue as a going concern.
See "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS."
No Sales of Products That Employ Company's Chips; Dependence on Third
Parties; Adequacy of Insurance. Products that incorporate the Company's chips
or chipsets have only been manufactured in pre-production quantities pursuant
to development contracts and arrangements. There can be no assurance that any
of these products will ever be manufactured, marketed and sold to the public.
In connection with the manufacture and sale of any such products, the Company
will be dependent upon the manufacturing, marketing, financial, technological
and other abilities of third parties with which it has established or is
attempting to establish commercial relations to develop, manufacture and market
products using the Company's chips or chipsets. If the Company is unable to
establish the requisite third party commercial relations, products using its
chips or chipsets may never be successfully manufactured, marketed or sold. If
any such third party fails to commit sufficient resources to complete the
proper development, manufacturing or marketing of such products, the Company's
reputation, business relationships, and product acceptance could be adversely
affected. In addition, the Company will have little, if any, control over the
timing or methods employed in the manufacture, marketing or sale of such
products. Accordingly, if any products using the Company's chips or chipsets
perform poorly, are inferior in quality or do not achieve market success, poor
performance may be associated with the Company's chips and chipsets. The
Company is currently reviewing with its insurance representatives the adequacy
of its insurance coverage in light of recent agreements and related anticipated
product purchases and sales. The Company believes its current coverage is
inadequate but feels it will be able to obtain adequate coverage, although
there can be no assurance.
Rapid Technological Changes. The multimedia, consumer electronics,
computer hardware and software industries are characterized by rapidly changing
technology, evolving industry standards and frequent introductions of new
products. The broad array of competing and incompatible emerging technologies
may lead consumers to postpone buying decisions until one or more of such
technologies gain widespread acceptance. The Company's success will depend
upon its ability to anticipate such technological changes, adapt its products,
introduce competitive products with features that meet changing customer
requirements, and remain competitive in terms of price and product performance,
and there can be no assurance that the Company will be able to meet any of
these demands. Any material failure of the Company to meet any of these
demands would adversely affect the use and acceptance of the Company's chips
and chipsets and the introduction and sale of products using the
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Company's chips or chipsets, and would increase the likelihood that competitive
products will become broadly accepted. There can be no assurance that the
Company will successfully anticipate technological changes or that products
developed by others will not render obsolete or commercially unviable the
Company's chips and chipsets and the products using such chips and chipsets.
Service Provider. The Company has no binding agreement with an
Internet or on-line service provider. If customized Internet Access Devices
using the Company's ISP Chip are ultimately manufactured and sold to consumers,
arrangements with service providers will be required to ensure that a direct
connection between a customized Internet Access Device and the Internet can be
effected. Such arrangements will be between the service provider and either
the Company, the manufacturer or purchasers of the Internet Access Devices.
There can be no assurance that satisfactory arrangements will be entered into
with one or more service providers or that the Company will enter into any
agreement directly with a service provider, which the Company believes would be
preferable. A service provider may agree to use the Company developed
software, as is, or with minimal modifications; to jointly develop new software
with the Company, or to develop its own software. It is possible that a
service provider could elect to use the Company's software and retain the
services of the Company for software, technical and development support. It is
also possible that a service provider will purchase the Internet Access Devices
from the Company, the manufacturer or other party, develop and incorporate its
own software and sell the Internet Access Devices to consumers at a
significantly lower price. Larger service providers will likely prefer to have
less dependence on the Company and others. There can be no assurance that a
service provider will agree to use the Company's software and retain the
Company's services for support which would likely result in greater potential
revenues to the Company.
Dependence on Key Personnel and Attraction of Qualified Personnel.
The Company is highly dependent on the experience of certain key personnel
including certain of its executive officers and computer programmers, designers
and engineers who contribute to the development and production of the Company's
chips, chipsets and other products. If the Company were to lose the services
of one or more of these key employees, before a qualified replacement could be
obtained, its business could be materially adversely affected. The Company has
entered into an employment agreements with Messrs. Holloway and Hall which
restricts certain of their activities for one year after departure from the
Company. See "EXECUTIVE COMPENSATION -- Employment Agreements." The Company
has no "key man" life insurance on any of its key personnel. The multimedia,
consumer electronics and computer industries are characterized by a high level
of employee mobility and aggressive recruiting of skilled personnel. There can
be no assurance that the Company's current employees will continue to work for
the Company or that the Company will be able to obtain the services of
additional personnel, whether for replacement purposes or for new positions,
necessary for the Company's growth and success.
Competition. The market for multimedia, consumer electronics,
computer and Internet products is highly competitive. Numerous competitors
have commercialized, are developing or are expected to introduce hardware,
software and other products that are or may be directly competitive with the
Company's products. Substantially all of these competitors are more
established and have greater financial, marketing and other resources than the
Company. The 3DO Company, C-Qube, and other companies are believed by the
Company to be engaged in research and development of products with multimedia
applications similar to certain of the Company's products. The Company also
believes that Motorola, Inc., Sony Corp. and Cirrus Logic Inc., may be
developing chips competitive with the Company's chips. Additionally, numerous
companies, such as Web TV, ViewCall, Oracle, Sun Microsystems, Microsoft and
IBM are involved in the development, sale and/or provision of Internet access
devices or alternative means of permitting access to the Internet, all of which
do or could compete with the Company's Internet Access Device. Because such
companies have greater financial and marketing resources than the Company, as
well as substantially larger research and development staffs and facilities,
they represent significant potential competition to the Company. Competitive
factors could result in price reductions or increased spending on product
development, marketing and sales that would adversely affect the Company's
ability to compete and to be profitable. Accordingly, there can be no
assurance that the Company will be able to compete successfully against its
present competitors or potential competitors or that such competition will not
have a material adverse
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effect on the Company. In addition, to the extent any of the Company's
competitors are able to develop products similar to the Company's products
which become the industry standard, such competitor will have a competitive
advantage over the Company.
Intellectual Property and Proprietary Rights; Absence of Patent
Protection. The Company's ability to compete successfully depends, in part, on
its ability to protect its intellectual property and proprietary technology in
the United Kingdom, the United States and other countries. The Company has no
issued patents but relies on a combination of trade secret protection,
confidentiality agreements and licensing agreements with strategic partners,
employees, consultants, vendors and licensees. The Company believes that the
two dimensional design representation prepared for each of its chips is
protected under the UK Copyright, Designs and Patent Act of 1988, which
requires no registration with respect to such technology, and that the three
dimensional aspects of each of its chips, including the electronic routes in
the silicon, are protected under the UK Topography Rights. The Company further
believes that its chip technology is entitled to comparable protection under
the US Copyright Act of 1976 and the Semiconductor Chip Protection Act of 1984.
Although the Semiconductor Chip Protection Act does not require registration,
the failure to register results in the loss of benefits after the passage of
two years from the first commercial sale of a chip. The Company has not
registered any of its chips under such Act; however, it intends to do so within
the prescribed period. It is the Company's belief that patents for ASIC chip
technology are rarely granted because of rapid technology changes and the
relative ease of designing around such patents. Despite this, the Company has
filed patent applications in the United Kingdom and the United States directed
to the Slipstream ASIC Chip technology. The Company elected not to continue
with the prosecution of these applications, due in large part to a lack of
working capital, and the applications have been abandoned. No assurance can be
given that any patent will issue from any applications that may be filed or
that, if any patent does issue, the claims will be sufficiently broad to
provide effective legal protection or monopoly. In addition, no assurance can
be given that any patent issued to the Company will not be challenged,
invalidated or avoided by design-around efforts, that the rights granted under
any such patent will provide competitive advantages to the Company or that the
Company's competitors will not independently develop or patent technologies
that are substantially equivalent or superior to the Company's technologies or
that such patents will not be subservient to other dominant patents.
Accordingly, the Company may be unable to protect certain technology relating
to its chips.
The Company's license agreements prohibit unauthorized disclosures of
the Company's technology to third parties. In cases where the Company has
contracted with third parties in foreign countries, these provisions may be
difficult to enforce in such foreign countries despite the existence of any
applicable international treaties or conventions designed to protect rights to
technology. The Company is aware that third parties may attempt to reverse
engineer the Company's technology. There can be no assurance that the
Company's confidentiality agreements will not be breached, or that the Company
would have adequate remedies for any such breach. There can be no assurance
that the Company's technology may not otherwise become known or be
independently discovered by competitors. Under United Kingdom law, copyrights
and mask rights related to technology designed and developed by independent
contractors, while commissioned by the Company for such purpose, remain the
property of the Company unlike in the United States where an assignment of such
rights from the independent contractor would be necessary to attain ownership
of all such rights.
The Company has registered trademarks for the name Wynpeg in the
United Kingdom (Reg. No. 1572811, effective May 21, 1994), Hong Kong (Reg. No.
06937/96, effective December 20, 1994), and Taiwan (Reg. No. 00708445,
effective April 1, 1996). There can be no assurance that the registration will
not be cancelled or invalidated or that the Company's rights will not be
subject to rights of prior users. The Company relies heavily on trademark
protection under common law. There can be no assurance that such common law
rights will not be limited or invalidated by third parties.
10
<PAGE> 11
Significant Customers. The Company has no customers, to date, that
frequently and systematically purchase its products. The Company's revenue for
the fiscal years ended June 30, 1995 and June 30, 1996 was largely attributable
to four and three companies, respectively, in connection with product
development arrangements. In fiscal 1995, such four companies were TXC
Corporation (22% of total revenue), Yanion Company Limited (18.8% of total
revenue), Tianjin New Star Electronics Co. Ltd. (30% of total revenue) and
Peacock AG (28.2% of total revenue). Fiscal 1995 revenue consisted of
development fees, chip sales made solely for research and development purposes,
and fees for support services. In fiscal 1996, such three companies were
American Interactive Media, Inc. (64% of total revenue), Tianjin New Star
Electronics Co. Ltd. (23.7% of total revenue) and Peacock AG (12.3% of total
revenue). Fiscal 1996 revenue consisted of development fees and fees for
support services. Unless the products developed or to be developed in
conjunction with these companies are manufactured, marketed and sold, no future
revenue, other than development fees not yet paid, are likely to be received
from any of these companies under existing arrangements. The Company could be
materially adversely affected if no products developed in conjunction with
these companies are ultimately manufactured, marketed and sold.
Variability of Operating Results. If the Company is able to generate
significant revenues, the Company expects that its operating results will
fluctuate as a result of changes in the composition of its revenues, the
occurrence and timing of new product introductions, if any, by third parties
that it develops products with and the Company's expenditures on research and
development. Should the Company derive revenue from sales of its chips and
chipsets to and/or royalties or license fees from third parties, based on the
sale of products utilizing the Company's chips and chipsets, the Company's
revenue will vary with the demand for such products. Any revenue may be
affected by the seasonal nature of the market for consumer electronics,
multimedia and computer products. Such demand may increase or decrease as a
result of a number of factors that cannot be predicted and which are not
within the Company's control, such as consumer preferences and product
announcements by competitors.
International Operations and Changes in Exchange Rates. The Company
has entered into contracts with manufacturers located in the United States,
Taiwan, Hong Kong, Germany and the People's Republic of China. The Company's
international operations will subject it to various government regulations,
export controls, and the normal risks involved in international operations and
sales. A majority of the Company's revenue to date has been received in US
dollars; however, the Company's subsidiaries conduct business in pounds
sterling. Any decline in the value of the pound sterling against the US dollar
will have the effect of decreasing the Company's earnings when stated in US
dollars. The Company currently does not engage in any hedging transactions
that might have the effect of minimizing the consequences of currency exchange
fluctuations and does not intend to do so in the immediate future.
ITEM 2. PROPERTIES
The Company presently leases approximately 2,900 square feet of office
space at Elder House, 526-528 Elder Gate, Central Milton Keynes, MK9 1LR,
England. The lease is for a five year term expiring March 21, 2001 and
provides for annual rental of $44,080. The Company will also be responsible
for taxes, insurance and interim and service charges which should approximate,
in the aggregate, $35,000 annually. Management believes its leased facility is
suitable and adequate for its intended use.
ITEM 3. LEGAL PROCEEDINGS
The Company is not a party to any material pending legal proceedings.
In September 1994, MSU PLC entered into a placement agent agreement
with Millport Ltd. ("Millport"), believed by the Company to be a Liberian
corporation (with a Channel Island office address), which arrangement
11
<PAGE> 12
was amended and confirmed by the Company in June 1995 (collectively the
"Millport Agreements"). Under the Millport Agreements, Millport agreed to
place 2.2 million shares at $2.50 per share in a Regulation S offering. It
is the Company's belief that Martin Miller, a former officer and director of
the Company and a present stockholder of the Company, is affiliated with and
controls Millport, directly or indirectly. In June and July 1995, the Company
issued an aggregate 1,162,500 shares of common stock in connection with the
Regulation S offering (although additional shares were issued in contemplation
of subscriptions which were ultimately not received, which shares were
subsequently cancelled). In June 1995 and as part of such Regulation S
offering, the Company issued 110,000 shares of common stock to two Liberian
corporations in consideration of $275,000. No payment has been received for
these shares. In July 1995 and as part of such Regulation S offering, the
Company issued 950,000 shares of common stock in consideration of three
promissory notes representing an aggregate principal amount of $1,297,500. All
three notes were due on December 31, 1995 and only $852,500 principal amount
has been repaid. The three obligors on the notes are Liberian corporations.
Limited information is obtainable regarding officers, directors and principal
stockholders of Liberian corporations. Due to a lack of working capital, the
Company has been unable to proceed legally against the Liberian corporations
although demands have been made to Martin Miller who has orally offered to pay
various sums provided he is issued additional shares, and subject to additional
conditions. The Company has not accepted any of such offers. Mr. Miller has
also alluded to claims that customers of Millport Ltd. have against the Company
although no specific claims have been made. The Company is unaware of any
claims of merit that any such customers might have. An additional reason for
not proceeding against potential defendants in this matter, to date, has been
the likelihood that it would be unable to collect upon any judgment it might
obtain against any of such potential defendants. The Company intends to
proceed against these potential defendants to the extent prudent and reasonable
as soon as it has sufficient working capital; however, there can be no
assurance that any action will be taken, that such actions will not be barred
by applicable statutes of limitation or that it will be able to collect upon
any judgment it might obtain.
The Company has no access to a significant portion of its corporate
records, other than drafts and copies of certain documents, for the period from
approximately September 1994 through December 1995, making it difficult to
conclude that certain corporate matters were properly effected. The Company
believes matters were effected properly; however, it can not confirm this with
total certainty. The corporate records are currently in the possession of one
of the Company's former New York law firms which has refused, upon demand, to
release such records until amounts allegedly due such law firm are paid. The
Company intends to contest the amount allegedly due this firm based on the
Company's belief that it was billed for many matters that were not authorized
by the Company, some of which matters appear to have been rendered for or at
the request of Martin Miller and/or Millport, Ltd. The Company believes such
law firm also represents Martin Miller and represented Millport Ltd. at the
same time it represented the Company in connection with the Regulation S
offering. Such law firm has never provided the Company with copies of the
subscription agreements governing the acquisition of the shares in
consideration of the three notes, referenced above, in connection with the
Regulation S offering. The Company relied to a significant extent on this
United States law firm in light of the fact that management and United Kingdom
counsel had extremely limited knowledge of United States securities laws.
In November 1994, the Company and certain of its stockholders received
a written demand from Paragon Capital Corporation for $75,000 plus additional
unspecified amounts based upon an alleged breach of contract entered into with
MSU PLC and covering public and private financing for MSU PLC. Paragon claimed
the Company negotiated with a third party in breach of such contract. The
Company's position was that Paragon failed to perform in accordance with the
contract and that the contract was of no further effect. The Company advised
Paragon that it did not believe it had any liability to Paragon. To the
Company's knowledge, Paragon has taken no further action in connection with
this claim.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
12
<PAGE> 13
PART II
ITEM 5. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON
EQUITY AND RELATED STOCKHOLDER MATTERS
Since May 24, 1995, bid and ask quotations of the Company's common
stock have been reported by the National Association of Securities Dealers
("NASD") Electronic Bulletin Board. From November 2, 1994 through May 24, 1995
there was no "established public trading market," although bid quotations were
reported only sporadically in the "pink sheets" published by the National
Quotation Bureau and on the NASD Electronic Bulletin Board. The Company's
NASDAQ symbol is MUCP. The following table sets forth the range of high and
low bid quotations, as reported by Bloomberg Financial, Inc. for the periods
indicated. Bid quotations represent interdealer quotations without adjustment
for retail markups, markdowns or commissions and do not necessarily represent
actual transactions.
<TABLE>
<CAPTION>
Range of Bid Information
------------------------
High Low
---- ---
<S> <C> <C>
Fiscal Year Ended June 30, 1996:
Quarter Ended June 30, 1996 . . . . . . . . . $10.75 $ 4.38
Quarter Ended March 30, 1996 . . . . . . . . . $ 5.63 $ 1.00
Quarter Ended December 31, 1995 . . . . . . . $ 5.00 $ 3.03
Quarter Ended September 30, 1995 . . . . . . . $13.75 $ 1.00
Fiscal Year Ended June 30, 1995:
Quarter Ended June 30, 1995
(commencing May 24, 1995) . . . . . . . . . . $10.63 $10.50
</TABLE>
On October 9, 1996, there were approximately 230 stockholders of the
Company's common stock, including holders of record and participants in
security position listings.
The Company has never paid cash dividends on its common stock and does
not anticipate it will do so in the foreseeable future.
ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA
The following selected financial data have been derived from the
financial statements of the Company. The financial statements for each of the
fiscal years in the two-year period ended June 30, 1995 have been audited by
Moore Stephens-Lovelace, P.L., independent certified public accountants. The
financial statements for each of the fiscal years in the three-year period
ended June 30, 1993 are unaudited, however, the financial statements for MSU
Ltd. for the two-year period ended June 30, 1993 were audited by Michael R. Hoy
FCA and the financial statements for Capital Acquisition Company for each of
the fiscal years in the two year period ended February 28, 1992 were audited by
Coopers & Lybrand LLP. The following selected financial data should be read in
conjunction with and are qualified in their entirety by the MSU Corporation
Consolidated Financial Statements and the notes thereto included elsewhere in
this Report on Form 10-K.
13
<PAGE> 14
<TABLE>
<CAPTION>
Fiscal Years Ended June 30,
----------------------------------------------------------------
1995 1994 1993 1992 1991(1)
-------- ---------- ---------- ----------- -----------
(unaudited) (unaudited) (unaudited)
----------- ----------- -----------
(in thousands, except per share data)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Total Revenue . . . . . . . . . . . . . . $ 1,596 $ 875 $ 152 $ 498 $ -
Loss from operations . . . . . . . . . . $ (882) $(1,366) $(1,300) $ (56) $ (10)
Net loss . . . . . . . . . . . . . . . . $ (878) $(1,365) $(1,296) $ (56) $ (10)
Primary loss per share . . . . . . . . . $ (0.07) $ (0.31) $ (0.38) (2) $(1.74) (2) $(0.00)
Fully diluted loss per share . . . . . . $ (0.07) $ (0.31) $ (0.38) (2) $(1.74) (2) $(0.00)
BALANCE SHEET DATA (AT YEAR END):
Working capital . . . . . . . . . . . . . $(2,662) $(1,841) $(1,290) $ (49) $ (9)
Total assets . . . . . . . . . . . . . . $ 363 $ 197 $ 229 $ 103 $ 4
Stockholders' deficit . . . . . . . . . . $(2,620) $(1,770) $(1,264) $ (48) $ (6)
</TABLE>
- --------------------
(1) Represents financial data derived from the financial statements of
Capital Acquisition Company. MSU Ltd. was formed in March 1991;
however, its operations did not commence until March 1992.
(2) Per share amounts were computed based on the number of shares
outstanding at the end of the fiscal year.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
As previously stated, this Annual Report on Form 10-K for the fiscal
year ended June 30, 1995 is delinquent and was filed with the Securities and
Exchange Commission on November 27, 1996. On such date, the Company also
filed its Annual Report on Form 10-K for the fiscal year ended June 30, 1996
(the "1996 Form 10-K"). The reader should obtain the 1996 Form 10-K for
Management's Discussion and Analysis of Financial Condition and Results of
Operations covering the three-year period ended June 30, 1996.
OVERVIEW
On October 3, 1994, MSU Corporation, formerly Capital Acquisition
Company, acquired the outstanding capital stock of MSU PLC, the parent of MSU
Ltd. (MSU PLC and MSU Ltd. referred to as "MSU") through the issuance of
9,422,222 shares of its common stock. This transaction has been accounted for
as a recapitalization of MSU, with MSU as the acquirer (a reverse acquisition)
and accordingly, the historical consolidated financial statements through the
date of the transaction are those of MSU. Shareholders equity reflects the
equivalent number of common shares received in the recapitalization and all
references in the consolidated financial statements with regard to the number
of shares of common stock have been restated to give retroactive effect to the
transaction.
14
<PAGE> 15
The Company operates primarily through MSU Ltd. which is principally
engaged in the design and development of computer chips and chipsets for use in
consumer electronics products.
The consolidated financial statements include the accounts of MSU
Corporation, MSU PLC and MSU Ltd. (collectively, the "Company"). All
significant intercompany accounts have been eliminated in the consolidated
financial statements.
SIGNIFICANT RISKS
The Company's consolidated financial statements have been prepared
assuming that the Company will continue as a going concern. During the years
ended June 30, 1995, 1994 and 1993, the Company incurred net losses of
approximately $878,000, $1,365,000 and $1,296,000, respectively. At June 30,
1995, there was an accumulated deficit of approximately $3,629,000.
Additionally, the Company has had recurring negative cash flow from its
operations. The foregoing factors raise substantial doubt about the Company's
ability to continue as a going concern without sufficient funds to meet its
cash requirements. There can be no assurance that the Company will be able to
obtain sufficient funds to enable it to continue as a going concern.
RESULTS OF OPERATIONS
REVENUES
The Company has no customers to date that frequently and
systematically purchase its products or retain its services. Revenues during
the years ended June 30, 1995, 1994 and 1993 were approximately $1,596,000,
$875,000 and $152,000, respectively. These revenues were derived principally
through development arrangements in which the Company performed engineering and
design work for its customers for a development fee and, in fiscal 1995, from
chip sales in connection with a development arrangement. Typically, the
Company's development arrangements also provide for royalty and/or license
fees to be paid to the Company if the customer sells products developed in
conjunction with the Company and/or incorporating the Company's proprietary
technology. To date, none of these arrangements have resulted in royalty or
license revenue to the Company. The Company could be materially adversely
effected if its customers fail to manufacture, market and sell products
developed in conjunction with the Company.
During the years ended June 30, 1995, 1994 and 1993 the Company's
revenues were principally derived from three, two and one customers,
respectively. Because of the concentration of its revenues in such a small
number of customers, the loss of any one customer could have a material adverse
effect on the Company's business.
The Company's revenues by geographic region during the years ended June
30, 1995, 1994 and 1993 were approximately as follows:
<TABLE>
<CAPTION>
Location 1995($) 1994($) 1993($)
-------- ---- ---- ----
<S> <C> <C> <C>
Europe 440,000 130,000 --
Far East 640,000 60,000 152,000
North America 520,000 690,000 --
</TABLE>
The Company's revenues increased approximately 476% in 1994 compared
to 1993. The increase was largely due to development fees received as a result
of development arrangements entered into in fiscal 1993 and fiscal 1994. The
approximate 82% increase in 1995 compared to 1994 was largely attributable to
the sale of chips
15
<PAGE> 16
and chipsets for approximately $823,000 in connection with development
arrangements completed in fiscal 1994 and fiscal 1993.
COST OF REVENUES
Cost of revenues for the years ended June 30, 1995, 1994 and 1993 were
approximately $604,000, $107,000 and $136,000, respectively. As a percentage
of revenues, cost of revenues were approximately 38% in 1995, 12% in 1994 and
89% in 1993. The cost of revenues fluctuations are due to variations in gross
margins as between chip sales, support services, development services and
computer peripheral sales. The gross margin on development and support
services is approximately 90% to 95%; on chip sales, approximately 48% to 54%,
depending on the number and type of chips purchased; and on computer peripheral
sales, approximately 15%. The Company sold computer peripherals only during
fiscal 1993.
RESEARCH AND DEVELOPMENT EXPENSES
Research and development expenses generally consist of expenditures
related to the Company's independent development of its chips and prototype
products and specific research and development performed pursuant to
development arrangements with third parties. For the years ended June 30,
1995, 1994 and 1993, research and development expenses were approximately
$1,297,000, $1,692,000 and $1,715,000, respectively. As a percentage of
revenues, research and development expenses were approximately 81% in 1995,
193% in 1994 and 732% in 1993. The fluctuations from year to year reflect the
varying demands for research and development which are dictated by
technological changes and the need for the Company's products to remain
competitive and commercially viable, and the requirements of the Company's
customers.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling general and administrative expenses were approximately
$520,000, $419,000 and $183,000 for the years ended June 30, 1995, 1994 and
1993, respectively. Selling general and administrative expenses principally
consist of advertising and promotion costs, which are charged to operations as
incurred; telephone, rent and occupancy costs; and professional fees. In 1995
this category of expenses was higher than 1994 and 1993 because of costs
associated with the Exchange. In 1994, this catagory of expenses was higher due
to an increase in the Company's business activity.
DEPRECIATION EXPENSE
Depreciation expense was approximately $21,000, $20,000 and $9,000,
for the fiscal years ended June 30, 1995, 1994 and 1993, respectively.
Depreciation is calculated using the straight line method over the estimated
useful lives of the Company's depreciable assets which consist principally of
electronics equipment used in the design and testing of the Company's products.
INTEREST EXPENSE
Interest expense was approximately $35,000, $2,000 and $9,000 for the
fiscal years ended June 30, 1995, 1994 and 1993, respectively. The Company has
borrowed funds from time to time for working capital under various secured
credit facilities with its principal bank. These borrowings have generally
provided for interest on outstanding amounts at a rate of 3% above the National
Westminster Bank Plc prime rate. All such borrowings have been subject to the
bank's discretion, secured by a floating debenture on substantially all of the
assets of the Company and payable on demand.
LIQUIDITY AND CAPITAL RESOURCES
The Company has financed its operations almost exclusively through
private sales of equity securities. For the fiscal year ended June 30, 1995,
cash used in operating activities of approximately $600,000 was primarily
16
<PAGE> 17
attributable to the Company's net loss of approximately $878,000 for the fiscal
year. Cash used in investment activities of approximately $7,000 in the fiscal
year ended June 30, 1995 related primarily to acquisition of electronics
equipment. Cash flows from financing activities of approximately $824,000 in
the fiscal year ended June 30, 1995 were primarily attributable to aggregate
net proceeds of approximately $71,000 from private sales of common stock and
borrowings of approximately $753,000 under a credit facility.
Capital expenditures were approximately $7,000 for the fiscal year
ended June 30, 1995. The Company has no material commitments other than an
operating lease and three employment agreements.
At June 30, 1995, the Company's principal source of liquidity was
approximately $228,000 in cash.
The Company believes that cash on hand and cash flows expected to be
generated by operations in fiscal 1996 will be insufficient to meet anticipated
cash needs for working capital and capital expenditures for fiscal 1996. To
satisfy the balance of the Company's liquidity requirements, the Company will
attempt to sell additional equity or debt securities and/or obtain additional
credit facilities to the extent the Company is able to do so, for which there
can be no assurance. The sale of additional equity or convertible debt
securities will result in additional dilution to the Company's stockholders.
There can be no assurance that the Company's liquidity requirements will be met
or that the Company will be able to continue as a going concern.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements and supplementary data are set forth in this
annual report on Form 10-K commencing on page F-1.
17
<PAGE> 18
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
In March 1996, the Board of Directors of the Company approved the
engagement of Moore Stephens-Lovelace, P.L. as auditors of the Company's
consolidated audited financial statements for the fiscal year ended June 30,
1995. Subsequently, such auditors were engaged to undertake the audit of the
Company's consolidated financial statements for the fiscal years ended June
30,1994 and June 30, 1996. The consolidated audited financial statements for
the fiscal years ended June 30, 1994 and June 30, 1995 are for the consolidated
group as if MSU PLC and MSU Ltd. were owned by MSU Corporation during the
fiscal year ended June 30, 1994 and the first portion of the fiscal year ended
June 30, 1995 prior to the Exchange in October 1994.
In February 1996, MSU Corporation's prior auditors, Coopers & Lybrand
LLP (which audited the financial statements of Capital Acquisition Company
prior to the Exchange in October 1994), declined to stand for re-election as
auditors in connection with the preparation of the Company's consolidated
audited financial statements for the fiscal year ended June 30, 1995.
There have been no disagreements between management and Coopers &
Lybrand LLP, or any predecessor firm, for any periods which they audited as set
forth below, in connection with Capital Acquisition Company's audits and any
subsequent interim period preceding the engagement of Moore Stephens-Lovelace,
P.L. on any matter of accounting principles or practices, financial statement
disclosure, or auditing scope or procedure of a nature which if not resolved to
the satisfaction of Coopers & Lybrand LLP would have caused it to make
reference in connection with its report to the subject matter of the
disagreements. Coopers & Lybrand LLP's reports on the financial statements of
Capital Acquisition Company for the fiscal years ended February 28, 1993,
February 28, 1994, and June 30, 1994 (a four- month period) have not contained
an adverse opinion or a disclaimer of opinion and none of such reports was
qualified as to uncertainty, audit scope or accounting principles; provided,
however, that the reports of Coopers & Lybrand LLP for each of such periods
express an uncertainty as to Capital Acquisition Company's ability to continue
as a going concern.
The Company has requested Coopers & Lybrand LLP to furnish it with a
letter addressed to the Securities and Exchange Commission stating whether
Coopers & Lybrand LLP agrees with the above statements.
18
<PAGE> 19
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
DIRECTORS AND EXECUTIVE OFFICERS
The directors and executive officers of the Company (and their
respective positions with MSU PLC and MSU Ltd.) and their respective ages are
as follows:
<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<S> <C> <C>
Wynford Peter Holloway 47 Chief Executive Officer and Director of the
Company and Chairman of MSU PLC and MSU Ltd.
Keith Charles Hall 48 President and Director of the Company and
Managing Director of MSU PLC and MSU Ltd.
William Derek Snowdon 42 Secretary and Director of the Company and
Secretary of MSU PLC and MSU Ltd.
</TABLE>
Wynford Peter Holloway has served as Chief Executive Officer and a
director of the Company since October 1994, and as Chairman of MSU PLC
and MSU Ltd. since June 1994 and March 1991, respectively. Mr.
Holloway is the founder of MSU Ltd. From 1991 through 1992, Mr.
Holloway was a self-employed design consultant providing professional
design services to clients in the computer peripherals business. From
1985 to 1990, Mr. Holloway was the Chairman and a principal
stockholder of Creative Devices Research, Limited, a company involved
in manufacturing and marketing computer peripheral equipment, such as
joysticks, and in preliminary design activities related to the
Company's products. On October 1, 1990, joint administrative
receivers were appointed for Creative Devices Research, Limited.
Keith Charles Hall has served as President and a director of the
Company since October 1994 and as Managing Director of MSU PLC and MSU
Ltd. since June 1994 and September 1993, respectively. From March
1992 to September 1993, Mr. Hall was a full time consultant to the
Company. From 1984 to 1993, Mr. Hall was Managing Director of
Personal Computer Services Limited providing business/marketing
consultant services and training to the computer industry. Over the
course of his career, Mr. Hall has been involved in a number of
projects in the computer industry. From 1982 through 1984, Mr. Hall
was the sales and marketing director of Apple Computer UK Limited
during which time he was responsible for the launch of the Macintosh
Computer in the UK. From 1979 to 1982, he was sales and marketing
manager of Commodore Business Machines UK Limited.
William Derek Snowdon, LLB, has served as Secretary and a director of
the Company since October 1994 and as secretary of MSU PLC and MSU
Ltd. since June 1994 and March 1991, respectively. Mr. Snowdon is a
solicitor and has been a partner with the firm of Phoenix Walters for
the past 14 years. Mr. Snowdon's practice focuses on commercial
contracts and intellectual property law. From 1989 to 1990, Mr.
Snowdon served as a director of Creative Devices Research, Limited.
On October 1, 1990, joint administrative receivers were appointed for
Creative Devices Research, Limited.
19
<PAGE> 20
ITEM 11. EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth certain information concerning the
compensation earned during the Company's last three fiscal years by the
Company's Chief Executive Officer and the Company's one other executive officer
receiving in excess of $100,000 in total annual salary and bonus (collectively
the "named executive officers"):
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long-Term Compensation
-----------------------------------
Annual Compensation Awards Payouts
------------------- ------ -------
Other
Annual Restricted Securities All Other
Compen- Stock Underlying LTIP Compen-
Name and Principal Fiscal Salary Bonus sation Award(s) Options Payouts sation
Position Year ($)(1)(3) ($) ($)(2)(3) ($) (#) ($) ($)
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Wynford Peter Holloway 1995 112,000 -- 24,083 -- -- -- --
Chief Executive Officer 1994 112,000 -- 29,267 -- -- -- --
1993 112,000 -- 27,982 -- -- -- --
- -------------------------------------------------------------------------------------------------------------------------
Keith Charles Hall 1995 96,000 -- 14,400 -- -- -- --
President 1994 96,000 -- 9,600 -- -- -- --
1993 96,000 -- 1,600 -- -- -- --
=========================================================================================================================
</TABLE>
(1) All salaries and other annual compensation were paid by MSU Ltd.
(2) Represents personal benefits in addition to salary. Of Mr. Holloway's
personal benefits, 31% of the 1993 amount was for a car allowance; 44%
and 42% of the 1994 amount were for a Company car and house rental
expense, respectively; and 51% of the 1995 amount was for house rental
expense. Of Mr. Hall's personal benefits, 100% of each of the 1993,
1994 and 1995 amounts was for a car allowance.
(3) All compensation information for periods prior to the Exchange has
been presented as if MSU Ltd. was owned by the Company during such
periods.
20
<PAGE> 21
EMPLOYMENT AGREEMENTS
Effective September 1, 1994, MSU PLC entered into employment
agreements with each of Wynford Peter Holloway, Keith Hall and William Snowdon
providing for annual base salaries (subject to annual increases within the
discretion of the Board) of $193,404, $128,936, and $32,234, respectively,
which base salary requirement was waived by each of Messrs. Holloway and Hall
for the first two years of the employment term. Subject to earlier termination
as provided in the agreements, the agreements are each for three year periods
ending August 31, 1997. Unless terminated in accordance with the agreements,
each agreement renews for a further period of three years (in place of the then
unexpired period) on each anniversary of the commencement date. The agreements
also provide for a car allowance or use of an automobile, including
reimbursement of any automobile expense, and participation in bonus plans when
and if formulated by MSU PLC. MSU PLC is also obligated to provide private
medical coverage and life insurance. For one year after termination, the
executives are restricted from holding a material interest in any competitor,
seeking or receiving orders for any products or services produced or marketed
by MSU PLC or MSU Ltd., or soliciting or enticing away any person who was a
material employee of MSU PLC or MSU Ltd. six months prior to termination of the
executive.
Prior to the execution of Mr. Snowdon's employment agreement,
Morgannwg Consultants, which is controlled by Mr. Snowdon, was compensated in
the amount of $1,604 per month for providing the services of Mr. Snowdon as
Secretary of the Company. This arrangement was superseded by Mr. Snowdon's
employment agreement.
COMPENSATION OF DIRECTORS
Directors are reimbursed for all reasonable expenses in attending each
Board meeting.
STOCK OPTION GRANT TABLE
There were no options granted to the named executive officers during
the Company's fiscal year ended June 30, 1995.
STOCK OPTION EXERCISES AND HOLDINGS TABLE
There were no options exercised by the named executive officers during
the fiscal year ended June 30, 1995 and there were no unexercised options held
by the named executive officers at June 30, 1995.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Company has no compensation committee. During fiscal 1995 and
fiscal 1996, Messrs. Holloway, Hall and Snowdon, collectively representing all
of the Company's directors and executive officers, participated in
deliberations of the Board of Directors concerning executive officer
compensation.
Since October 1994, the law firm of Phoenix Walters Solicitors has
regularly rendered legal services as counsel to the Company. W.D. Snowdon, a
director and executive officer of the Company, is a partner of Phoenix Walters
Solicitors.
In November 1992, MSU, Ltd., Mr. Holloway, TXC Corporation and a third
party entered into an agreement relating to the development of a CD based
multisystem. Such agreement contemplated that a new entity, owned 46% by Mr.
Holloway, 46% by TXC Corporation and 5% by the third party, would develop and
own such product; however, MSU Ltd., Mr. Holloway and TXC Corporation
subsequently agreed that MSU, Ltd. would independently develop and own the
product. The third party never performed under the November 1992 agreement
and, accordingly, MSU Ltd's position is that such third party has no rights or
claims under such agreement. TXC Corporation and Mr. Holloway agreed to
indemnify MSU Ltd. in connection with any claim
21
<PAGE> 22
made by such third party. Pursuant to the November 1992 agreement, TXC
Corporation contributed $1,541,910 to MSU Ltd. Pursuant to a June 1993
agreement, restating the 1992 agreement, TXC Corporation loaned $618,000 to
MSU, Ltd. Of the $2,159,910 aggregate capital contribution, $1,400,000 is
represented by an unsecured, interest free loan payable to TXC Corporation at
such time as the Company is reasonably able to do so without jeopardizing its
financial condition and the balance was an equity contribution. Pursuant to a
March 1994 agreement, TXC Corporation agreed to waive certain rights under the
November 1992 and June 1993 agreements in exchange for 550,000 shares of MSU
Ltd. stock and certain additional consideration. TXC Corporation has waived
any claims it may have had to such additional consideration. The MSU, Ltd.
stock issued to TXC Corporation was exchanged for MSU PLC stock in June 1994,
and the MSU PLC stock was exchanged for Company common stock in October 1994 in
connection with the Exchange. TXC Corporation is a principal stockholder of
the Company and holds a nonexclusive license to use the Wynpeg Chipset
technology in connection with the manufacture of video CD players. Such
license was granted to TXC Corporation in connection with a development
contract entered into in July 1994.
At October 9, 1996, Mr. Holloway was indebted to Sabre Advanced
Microelectronics Limited, an agent for American Microsystems, Inc. (the
Company's principal chip manufacturer), in the approximate amount of $139,500,
excluding interest. The loan, made in May 1994, is past due, however the
lender has agreed to permit Mr. Holloway to repay the debt at such time as he
is able to sell shares of Company common stock owned by him under Rule 144
under the Securities Act of 1933. The loan is secured by a pledge of all
shares of Company common stock owned by Mr. Holloway and the lender has the
right to direct action in connection with any proposed transaction affecting
all or any part of the pledged shares. Mr. Holloway loaned approximately
$68,000 of the loan proceeds to MSU Ltd. in July 1994 on an unsecured, interest
free basis. At October 9, 1996, approximately $8,000 was outstanding under the
loan.
In June 1996, MSU Ltd. obtained a $76,000 credit facility from
National Westminster Bank Plc. The credit facility was secured by a floating
debenture on all of the Company's assets and the personal guarantees of each of
Messrs. Holloway, Hall and Snowdon. The guarantees of each of Messrs. Hall and
Snowdon were secured by a pledge of the pledgor's shares of Company common
stock. In consideration of the benefit derived by the Company as a result of
the guarantees provided by the Company's directors, each director was granted,
effective June 7, 1996, an option to acquire 100,000 shares of Company common
stock at an exercise price of $5.00. The options are exercisable in full
commencing on June 7, 1997 and expire on June 6, 2001. The credit facility
expired in August 1996 at which time there were no amounts outstanding under
the facility. The debenture and personal guarantees remain in place with the
Bank to serve as collateral for additional credit facilities requested by the
Company and approved by the Bank. The pledged shares have been released but
the Bank is likely to require that such shares be pledged again in connection
with any credit facility.
On October 14, 1994, the Company completed an exchange of all of the
shares of MSU PLC for 9,422,222 shares of the Company's common stock pursuant
to an Exchange Agreement. After the Exchange, the former stockholders of MSU
PLC owned approximately 73.6% of the Company's common stock. Such stockholders
presently own approximately 62.4% of the Company's common stock. Upon
completion of the Exchange, Mr. Holloway, an officer and director of the
Company, TXC Corporation, and the Employee Discretionary Trust became owners of
more than five percent (5%) of the Company's common stock. Additionally, each
of Keith Hall and William Snowdon, officers and directors of the Company,
received 515,277 shares in connection with the Exchange. All of the MSU PLC
shares were acquired in June 1994 in exchange for shares of MSU Ltd.
The Company believes that the abilities of the foregoing members of
the Board of Directors to make fair compensation decisions have not and will
not be compromised by the relationships referred to above.
22
<PAGE> 23
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
The following table sets forth certain information concerning the
beneficial ownership of the Company's common stock as of October 9, 1996, by:
(i) each person known by the Company to be the beneficial owner of more than 5%
of its common stock, (ii) each named executive officer of the Company, (iii)
each director of the Company, and (iv) all directors and executive officers as
a group. Unless otherwise indicated, each of the stockholders has sole voting
and investment power with respect to the shares beneficially owned.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY
NAME OF BENEFICIAL OWNER OWNED PERCENT OF CLASS
- ------------------------ ------------------- ----------------
<S> <C> <C>
Wynford Peter Holloway 5,152,777 (1)(2)(3) 33.2%
Keith Charles Hall 515,277 (3)(4) 3.3%
William Derek Snowdon 515,277 (3)(4) 3.3%
Peter Brian Webber and 2,944,444 19.0%
Vivian George Bines as
Trustees for the Employee
Trust(2)
48 The Parade
Cardiff CF2 3AB
United Kingdom
TXC Corporation 2,208,333 14.2%
5F No. 15. SEC. 2
Chung Yang S Road
Peitoi, Taipei
Taiwan
McLaughlin Group LLC 2,164,015 (5) 13.5%
13750 U.S. 281 North #660
San Antonio, Texas 78232
All directors and executive 6,183,331 (1)(3) 39.9%
officers as a group (3 persons)
</TABLE>
(1) Mr. Holloway owns 2,208,333 shares of record. Mr. Holloway's shares
have been pledged as security for a loan from Sabre Advanced
Microelectonic Limited. See "EXECUTIVE COMPENSATION - Compensation
Committee Interlocks and Insider Participation." Pursuant to an
unwritten arrangement and understanding, Mr. Holloway shares voting
and dispositive power with respect to the shares held by the Employee
Trust and has been deemed to beneficially own the shares held by the
Employee Trust.
(2) The Employee Trust constituted by a Trust Deed dated May 24, 1994 (of
which Wynford Peter Holloway was the settlor) is in favor of all past,
present and future employees of MSU Ltd. and MSU PLC and any
subsequent companies, and their spouses and children. No allocations
under the trust have been made. Under the Trust Deed and so long as
Mr. Holloway is living, his consent, as settlor, is required for the
appointment of beneficiaries and the appointment of new trustees. The
trustees also have the authority to delegate powers to Mr. Holloway.
Pursuant to an unwritten arrangement and understanding Mr. Holloway
shares voting and dispositive power with respect to the shares held by
the Employee Trust.
23
<PAGE> 24
(3) Excludes in the case of each of Messrs. Holloway, Hall and Snowdon,
100,000 shares issuable pursuant to options which are not
currently exercisable (or exercisable within 60 days).
(4) See "Executive Compensation-Compensation Committee Interlocks and
Insider Participation" regarding a potential pledge arrangement with
National Westminster Bank Plc covering shares held by Messrs. Hall and
Snowdon.
(5) Includes 564,015 shares issuable pursuant to a currently exercisable
warrant to purchase such number of shares of Company common stock as
equals 3.5% of the outstanding shares of common stock on the date the
warrant is exercised (with such determination to be made on a fully
diluted basis). Assumes the warrant had been exercised on October 9,
1996.
24
<PAGE> 25
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In November 1988, Flare Technology Limited and Creative Devices
Research, Ltd., a company controlled by Mr. Holloway prior to its receivership
in October 1990, entered into an agreement pursuant to which Flare Technology
Limited was to design and develop a custom chip to operate within an
entertainment product developed by Creative Devices Research, Ltd. After an
assignment by Creative Devices Research, Ltd. of its rights under such
agreement to a third party and the subsequent insolvency of such third party,
the rights to the technology developed (known as the Slipstream ASIC Chip,
predecessor to the Company's current versions of the Slipstream ASIC Chip and
ISP Chips) by Flare Technology Limited for Creative Devices Research, Ltd.
vested in Flare Technology Limited. In June 1993, Flare Technology Limited
transferred all right, title and interest in such technology to MSU Ltd. As
partial consideration for the transfer, Flare Technology Limited was to receive
certain royalties. These rights were subsequently waived by Flare Technology
Limited in consideration of $360,000 to be paid by MSU Ltd. As of October 9,
1996, $31,000 remained unpaid.
Martin Miller, a former director and executive officer of the Company,
is believed by the Company to be affiliated with Millport Ltd., a corporation
retained by MSU Ltd. in September 1994 to serve as a placement agent in
connection with a Regulation S offering. The placement agent arrangement was
amended and confirmed by the Company in June 1995 (such agreements collectively
referred to as the "Millport Agreements") and the offering was conducted in
June and July 1995. In connection with the offering and as compensation,
Martin Miller was issued 150,000 shares of Company common stock, Millport, Ltd.
received commissions on shares sold, and Millport Ltd. was to be granted a two
year option to acquire up to 500,000 shares of Company common stock at the time
of completion of the offering. The option was never granted and it is the
Company's position that Millport Ltd. did not perform according to the terms of
the Millport Agreements and is, accordingly, not entitled to the option. It is
the Company's further position that it is not bound by any of the restrictions
under the Millport Agreements. See "Item 3. LEGAL PROCEEDINGS."
The Company and Lawrence Ko, a director and former employee of TXC
Corporation, entered into an agreement in February 1996 pursuant to which Mr.
Ko will represent and promote the Company and its technologies in Taiwan and,
at the Company's request, mainland China and Hong Kong. The Company's
intention is to work through Mr. Ko in most matters relating to such countries
and territories; however the Company has reserved the right to handle
independently all matters relating to existing contacts, negotiations and
contracts. Mr. Ko will receive compensation based upon revenue attained by the
Company (consisting of from 5% to 10% of revenue plus warrants to acquire
75,000 shares for each $1 million of revenue attained, with an exercise price
of 50% of market value at the time the warrant is issued, up to maximum of
300,000 shares) as a result of transactions attributable to Mr. Ko.
In August 1996, Direct International Limited, a Taiwanese company,
loaned $300,000 to the Employee Trust. Such loan is secured by 250,000 shares
of Company common stock owned by the Employee Trust and was due on October 2,
1996. The loan is to be repaid in 37,500 shares of Company common stock owned
by the Employee Trust no later than December 31, 1996. Direct International
Limited will also receive on December 31, 1996, 10,000 shares of Company common
stock owned by the Employee Trust as consideration for the advance of the loan.
The $300,000 proceeds received by the Employee Trust were loaned by it to Wyn
Holloway ($140,000) and the Company ($160,000). Such loans are unsecured,
interest free, due and payable on an as yet undetermined date, and are not
evidenced by written agreements.
Effective January 30, 1996 and February 29, 1996, McLaughlin Group LLC
acquired from the Company, in a private transaction, 800,000 and 800,000
shares, respectively, of the Company's common stock. The common stock
acquisitions were effected pursuant to a common stock purchase agreement, as
amended. Consideration for the common stock was $1.0 million in cash. The
common stock purchase agreement provides McLaughlin Group LLC with the right to
acquire additional shares of capital stock upon the issuance by the
25
<PAGE> 26
Company of additional capital stock (except in certain specified cases) in
order to maintain the same proportion of voting power of the Company as it
owned prior to the issuance. McLaughlin Group LLC was also granted certain
demand and piggyback registration rights. The Company has agreed to indemnify
McLaughlin Group LLC against certain liabilities in connection with any shares
so registered. McLaughlin Group LLC was also granted a warrant to purchase
such number of shares of Company common stock as equals 3.5% of the outstanding
shares of common stock on the date the warrant is exercised (with such
determination to be made on a fully diluted basis). The warrant is
exercisable, in whole only, at an exercise price of $1.0 million and expires
eighteen months after March 1, 1996. McLaughlin Group LLC was also granted
certain demand and piggyback registration rights in connection with the shares
issuable under the warrant. The Company has agreed to indemnify McLaughlin
Group LLC against certain liabilities in connection with any shares so
registered.
Mark McLaughlin, a member of McLaughlin Group LLC, is president and a
principal stockholder of McLaughlin International, Inc. McLaughlin
International, Inc. serves as a consultant to the Company pursuant to two
engagement letters entered into on November 8, 1995 and May 17, 1996,
respectively. The engagement letters provide that McLaughlin International,
Inc. will act as a consultant to the Company in connection with certain
strategic transactions, relating to the marketing and distribution of the
Company's products and technology in Japan and to a select number of companies
located principally in the United States, for a period of six months, subject
to extension by mutual agreement. The November 8, 1995 engagement letter was
extended for an additional six month period. As compensation under the
November 8, 1995 engagement letter, which covers Japan, McLaughlin
International, Inc. will receive for a period of seven years (in the case of
revenue and royalties) or an indefinite period or one time payment (in the case
of fees) a percentage of revenue, royalties and fees (with such percentages
ranging from 5% to 10% dependent upon what and how much is received) received
by the Company as a direct or indirect result of McLaughlin International,
Inc.'s efforts. As additional compensation, McLaughlin International, Inc.
will receive warrants to acquire 75,000 shares of common stock per each $1
million in fees received by the Company (not to exceed 750,000 warrant shares)
plus bonus warrants to acquire 250,000 shares in the event the Company receives
$20 million in fees, in each case as a direct or indirect result of the efforts
of McLaughlin International, Inc. Such warrants will be exercisable for a five
year term at a price equal to the lesser of $10 or 50% of the market price of
the Company's common stock on the date of issue. Shares of common stock
issuable upon exercise of the warrants will carry customary registration
rights. As compensation under the May 17, 1996 engagement letter, McLaughlin
International, Inc. will receive for the duration of the relationship (between
the Company and the party introduced by the consultant) a percentage of upfront
research and development fees/payments; equity private placement proceeds;
service provider revenue/fees; and chip sales (with such percentages ranging
from 4% to 8%) received by the Company as a direct or indirect result of
McLaughlin International Inc.'s efforts. To be entitled to percentage
compensation under either engagement letter, the revenue, payments, sales or
fees must commence or be paid during the engagement period or during the twelve
month period immediately following the engagement period. As of October 9,
1996, the Company was indebted to McLaughlin International, Inc. in the amount
of $54,404.
See "Item 11. EXECUTIVE COMPENSATION-Compensation Committee
Interlocks and Insider Participation" for additional relationships and related
transactions.
The Company believes that all transactions with officers, directors or
affiliates to date are on terms no less favorable than those available from
unaffiliated third parties. It is the Company's policy that all future
transactions with officers, directors, or affiliates will be approved by
members of the Company's Board of Directors not having an interest in the
transaction and will be on terms no less favorable than could be obtained from
unaffiliated third parties.
26
<PAGE> 27
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM
8-K
(a) The following documents are filed as part of this report:
Financial Statements
Independent Auditors' Report
Consolidated Balance Sheets at June 30, 1994 and 1995
Consolidated Statements of Income for the years ended June 30, 1993,
June 30, 1994 and June 30, 1995
Consolidated Statements of Changes in Stockholders' Deficit for the years
ended June 30, 1993, June 30, 1994 and June 30, 1995
Consolidated Statements of Cash Flows for the years ended June 30, 1993,
June 30, 1994 and June 30, 1995
Notes to Consolidated Financial Statements
The Company's consolidated financial statements for the fiscal year ended June
30, 1993 have not been audited due to impracticability, based upon the passage
of time, changes in personnel, anticipated difficulties in locating documents,
the inability to observe opening inventories and a shortage of working capital.
Financial Statement Schedules
None.
Exhibits
2 Exchange Agreement among Capital Acquisition Company and the
shareholders of MSU PLC(3)
3.1 Articles of Incorporation(1)
3.2 Amendment to Articles of Incorporation(4)
3.3 Bylaws(1)
3.4 Amendment to Bylaws(2)
4.1 Common Stock Purchase Agreement with McLaughlin Group LLC(4)
4.2 Amendment to Common Stock Purchase Agreement with McLaughlin Group
LLC(4)
4.3 Warrant issued to McLaughlin Group LLC(4)
10.1 Service Agreement with Wyn Holloway(4)
10.2 Service Agreement with Keith Hall(4)
10.3 Service Agreement with W.D. Snowdon(4)
10.4 Placement Agent Agreement with Millport Ltd. as amended and
confirmed(4)
10.5 Employee Trust(4)
10.6 Office Lease Agreement with Brixton Estate Plc(4)
10.7 Manufacturing, Distribution and Joint Venture Agreement with American
Interactive Media, Inc. Confidential treatment has been requested for
specific portions of the Manufacturing, Distribution and Joint Venture
Agreement(4)
10.8 Engagement Letter, dated November 8, 1995, as amended, with McLaughlin
International, Inc.(4)
10.9 Engagement Letter, dated May 17, 1996, with McLaughlin International,
Inc.(4)
10.10 Form of Director Option granted to each director in consideration of
guarantee of National Westminster Bank Plc credit facility (4)
10.11 Development and Licensing Agreement with TXC Corporation.
Confidential treatment has been requested for specific portions of the
License Agreement(4)
10.12 Agreement with Mitac, Inc. Confidential treatment has been requested
for specific portions of the Agreement(4)
16 Letter re change in certifying accountant from Coopers & Lybrand
LLP(4)
21 Subsidiaries of Registrant(4)
24 Power of attorney. Reference is made to the signature page of this
report.
27 Financial Data Schedule
27
<PAGE> 28
Exhibits
27.4 Financial Data Schedule
- -------------------------
(1) Contained in exhibits to the Registration Statement on Form S-18 (file
no. 33-07861-A), declared effective by the Securities and Exchange
Commission on November 6, 1986.
(2) Contained in exhibits to the Annual Report on Form 10-K for the fiscal
year ended February 28, 1990, filed with the Securities and Exchange
Commission in May 1990.
(3) Contained in exhibits to the Current Report on Form 8-K, filed with
the Securities and Exchange Commission in October 1994.
(4) Filed herewith.
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the quarter ended
June 30, 1995.
28
<PAGE> 29
Index to Financial Statements
-------------
<TABLE>
<CAPTION>
Page
Number
------
<S> <C>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS F-1
FINANCIAL STATEMENTS
Consolidated Balance Sheets F-2
Consolidated Statements of Operations F-3
Consolidated Statements of Changes in Shareholders' Deficit F-4
Consolidated Statements of Cash Flows F-5
Notes to Consolidated Financial Statements F-6
</TABLE>
<PAGE> 30
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors
MSU Corporation
Central Milton Keynes, England
We have audited the accompanying consolidated balance sheets of MSU Corporation
(formerly Capital Acquisition Company) and subsidiaries as of June 30, 1995 and
1994, and the related consolidated statements of operations, changes in
shareholders' deficit, and cash flows for the years then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of MSU Corporation and
subsidiaries as of June 30, 1995 and 1994, and the results of their operations
and their cash flows for the years then ended in conformity with generally
accepted accounting principles.
The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note 1 to
the consolidated financial statements, the Company has suffered and continues
to suffer significant losses from its operations, has an accumulated deficit
and revenue and cash flows from its operations have not developed to the point
where the Company can internally fund its operations. These factors, among
others, raise substantial doubt about its ability to continue as a going
concern. Management's plans with regard to these matters are also described in
Note 1. The consolidated financial statements do not include any adjustments
that might result from the outcome of this uncertainty.
/s/ MOORE STEPHENS LOVELACE, PL
Certified Public Accountants
Orlando, Florida
September 12, 1996, except for Note 9,
as to which the date is November 11, 1996
F-1
<PAGE> 31
MSU CORPORATION
(FORMERLY CAPITAL ACQUISITION COMPANY) AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
JUNE 30, 1995 AND 1994
ASSETS
<TABLE>
<CAPTION>
1995 1994
------------ ------------
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 227,818 $ 10,146
Accounts receivable 49,441 63,122
Inventory -- 10,010
Prepaid expenses and other 44,167 59,373
------------ ------------
TOTAL CURRENT ASSETS 321,426 142,651
EQUIPMENT, net of accumulated depreciation of
$55,227 in 1995 and $29,990 in 1994 41,306 54,034
------------ ------------
TOTAL ASSETS (Note 7) $ 362,732 $ 196,685
============ ============
LIABILITIES AND SHAREHOLDERS' DEFICIT
CURRENT LIABILITIES
Shareholder advance payable (Note 3) $ 1,400,000 $ 1,400,000
Short-term borrowings (Notes 7 and 9) 878,513 111,953
Accounts payable 371,160 314,741
Related-party payable (Notes 3 and 9) 13,445 --
Accrued liabilities 319,873 156,891
------------ ------------
TOTAL CURRENT LIABILITIES 2,982,991 1,983,585
COMMITMENTS AND CONTINGENCIES
(Notes 1, 2, 3, 6, 7, 8 and 9)
SHAREHOLDERS' DEFICIT (Notes 3, 5, 6, 8 and 9)
Common stock, $0.01 par value; 50,000,000
shares authorized; 12,934,722 and
10,196,380 shares issued and outstanding
at June 30, 1995 and 1994, respectively 129,347 101,964
Additional paid-in capital 1,074,081 805,492
Stock subscriptions receivable (225,000) --
Cumulative translation adjustments 30,349 56,261
Accumulated deficit (3,629,036) (2,750,617)
------------ ------------
TOTAL SHAREHOLDERS' DEFICIT (2,620,259) (1,786,900)
------------ ------------
TOTAL LIABILITIES AND
SHAREHOLDERS' DEFICIT $ 362,732 $ 196,685
============ ============
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-2
<PAGE> 32
MSU CORPORATION
(FORMERLY CAPITAL ACQUISITION COMPANY) AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED JUNE 30, 1995, 1994 AND 1993
<TABLE>
<CAPTION>
1995 1994 1993
------------ ------------ ------------
(Unaudited)
<S> <C> <C> <C>
REVENUES (Note 8) $ 1,595,856 $ 875,460 $ 152,225
EXPENSES (Notes 3, 7 and 8)
Cost of revenues 604,058 107,414 136,169
Selling, general and administrative 520,196 418,955 183,280
Depreciation 20,996 20,460 9,279
Interest expense 35,050 2,307 9,243
Research and development 1,297,374 1,691,846 1,114,726
------------ ------------ ------------
TOTAL EXPENSES 2,477,674 2,240,982 1,452,697
------------ ------------ ------------
OPERATING LOSS (881,818) (1,365,522) (1,300,472)
NONOPERATING INCOME
Interest income 3,399 905 4,389
------------ ------------ ------------
NET LOSS $ (878,419) $ (1,364,617) $ (1,296,083)
============ ============ ============
LOSS PER COMMON SHARE $ (0.07) $ (0.31) $ (0.38)
============ ============ ============
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 12,508,000 4,347,000 3,429,000
============ ============ ============
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-3
<PAGE> 33
MSU CORPORATION
(FORMERLY CAPITAL ACQUISITION COMPANY) AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES
IN SHAREHOLDERS' DEFICIT
YEARS ENDED JUNE 30, 1995, 1994 AND 1993
<TABLE>
<CAPTION>
COMMON STOCK
$.0.01 PAR VALUE ADDITIONAL STOCK CUMULATIVE TOTAL
-------------------------- PAID-IN ACCUMULATED SUBSCRIPTIONS TRANSLATION SHAREHOLDERS'
SHARES AMOUNT CAPITAL DEFICIT RECEIVABLE ADJUSTMENTS DEFICIT
---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE -JULY 1,
1992 (UNAUDITED)
(NOTES 1 AND 5) 3,332,135 $ 33,321 $ -- $ (88,974) $ -- $ 7,504 $ (48,149)
ISSUANCE OF COMMON
SHARES (UNAUDITED) 192,812 1,928 -- (943) -- -- 985
TRANSLATION
ADJUSTMENTS
(UNAUDITED) -- -- -- -- -- 57,729 57,729
NET LOSS (UNAUDITED) -- -- -- (1,296,083) -- -- (1,296,083)
---------------------------------------------------------------------------------------------------
BALANCE - JULY 1, 1993
(NOTES 1 AND 5) 3,524,947 35,249 -- (1,386,000) -- 65,233 (1,285,518)
ISSUANCE OF COMMON
SHARES (NOTES 3 AND 5) 6,671,433 66,715 805,492 -- -- -- 872,207
TRANSLATION
ADJUSTMENTS -- -- -- -- -- (8,972) (8,972)
NET LOSS -- -- -- (1,364,617) -- -- (1,364,617)
---------------------------------------------------------------------------------------------------
BALANCE - JUNE 30, 1994 10,196,380 101,964 805,492 (2,750,617) -- 56,261 (1,786,900)
ISSUANCE OF COMMON
SHARES (NOTE 5) 2,738,342 27,383 268,589 -- (225,000) -- 70,972
TRANSLATION
ADJUSTMENTS -- -- -- -- -- (25,912) (25,912)
NET LOSS -- -- -- (878,419) -- -- (878,419)
---------------------------------------------------------------------------------------------------
BALANCE - JUNE 30, 1995 12,934,722 $ 129,347 $ 1,074,081 $(3,629,036) $ (225,000) $ 30,349 $(2,620,259)
===================================================================================================
</TABLE>
The accompanying notes are an integral part of these
financial statements.
F-4
<PAGE> 34
MSU CORPORATION
(FORMERLY CAPITAL ACQUISITION COMPANY) AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED JUNE 30, 1995, 1994 AND 1993
<TABLE>
<CAPTION>
1995 1994 1993
------------ ------------ ------------
(Unaudited)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (878,419) $ (1,364,617) $ (1,296,083)
Adjustments to reconcile net loss to net
cash used in operating activities
Depreciation 20,996 20,460 9,279
Decrease (increase) in accounts
receivable, net 15,533 24,018 (93,480)
Decrease in inventories 10,205 1,500 50,091
Decrease (increase) in prepaid and
other expenses 16,918 2,244 (19,113)
Increase in accounts payable 45,619 130,236 66,236
Increase in related-party payable 13,276 -- --
Increase in accrued liabilities 155,508 65,480 80,985
------------ ------------ ------------
TOTAL ADJUSTMENTS 278,055 243,938 93,998
------------ ------------ ------------
NET CASH USED IN
OPERATING ACTIVITIES (600,364) (1,120,679) (1,202,085)
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisitions of equipment, net (6,693) (47,894) (35,959)
CASH FLOWS FROM FINANCING ACTIVITIES
Net proceeds from borrowings 753,328 252,546 1,234,040
Issuance of common stock 70,972 872,207 985
------------ ------------ ------------
NET CASH PROVIDED
BY FINANCING ACTIVITIES 824,300 1,124,753 1,235,025
EFFECT OF EXCHANGE RATE CHANGES 429 (1,169) 57,758
------------ ------------ ------------
NET INCREASE (DECREASE) IN CASH 217,672 (44,989) 54,739
CASH AT BEGINNING OF YEAR 10,146 55,135 396
------------ ------------ ------------
CASH AT END OF YEAR $ 227,818 $ 10,146 $ 55,135
============ ============ ============
</TABLE>
The accompanying notes are an integral part of the
financial statements.
F-5
<PAGE> 35
MSU CORPORATION
(FORMERLY CAPITAL ACQUISITION COMPANY) AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED JUNE 30, 1995 AND 1994
NOTE 1 - ORGANIZATION, BASIS OF PRESENTATION AND SIGNIFICANT RISKS
ORGANIZATION AND BASIS OF PRESENTATION
On October 3, 1994, MSU Corporation, formerly Capital Acquisition
Company, acquired, through the issuance of 9,422,222 shares of
its common stock, the outstanding capital stock of MSU Public
Limited Company (MSU Plc.), a private company organized and based
in the United Kingdom, which owns all of the capital stock of MSU
(UK) Limited (MSU Plc. and MSU (UK) Limited together referred to
as `MSU'). This transaction has been presented in the
accompanying consolidated financial statements as a
recapitalization of MSU, with MSU as the acquirer (a reverse
acquisition) and, accordingly, the historical consolidated
financial statements through the date of the transaction are
those of MSU. Shareholders' deficit reflects the equivalent
number of common shares received in the recapitalization, and all
references in the financial statements with regard to number of
shares of common stock have been restated to give retroactive
effect to the transaction.
MSU Corporation operates primarily through MSU (UK) Limited,
which is principally engaged in the design and development of
computer chips and chipsets for use in consumer electronic
products.
The consolidated financial statements include the accounts of MSU
Corporation, MSU Plc. and MSU (UK) Limited (the Company). All
significant intercompany accounts have been eliminated in the
consolidated financial statements.
In Management's opinion, the Company's unaudited financial
statements for the year ended June 30, 1993 include the
adjustments, all of which are of a normal recurring nature, that
are necessary for a fair statement of the results for that
period. Note disclosures relating to the year ended June 30, 1993
are also unaudited.
SIGNIFICANT RISKS
The Company's consolidated financial statements have been
prepared assuming that the Company will continue as a going
concern. During the years ended June 30, 1995, 1994 and 1993, the
Company incurred net losses of $878,419, $1,364,617, and
$1,296,083, respectively. At June 30, 1995, the Company had an
accumulated deficit of $3,629,036. Additionally, the Company has
had recurring negative cash flows from operations. These factors
raise substantial doubt about the Company's ability to continue
as a going concern.
F-6
<PAGE> 36
NOTE 1 - ORGANIZATION, BASIS OF PRESENTATION AND SIGNIFICANT RISKS
(CONTINUED)
SIGNIFICANT RISKS (CONTINUED)
Management's plans with regard to these matters include increased
cash flows from operations through further development, upgrade
and marketing of its chips and products, the issuance of
additional shares of the Company's common stock or debt
securities in exchange for proceeds, which may be used to provide
the working capital needed to commercially exploit the Company's
core technologies. The Company also intends to develop its
infrastructure and organization to support its enhanced
operations as funds become available. At present, contracts have
been concluded with American Interactive Media, Inc. for the
development of customized internet access devices and for the
formation of a joint venture to market the Company's technology
in the United States. Additionally, an agreement has been
negotiated which provides for Mitac, Inc. to manufacture and
market customized internet access devices using the Company's
proprietary technology. However, there can be no assurance that
management will be successful in the implementation of its plans.
The accompanying consolidated financial statements do not include
any adjustments that might result from the outcome of this
uncertainty.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
CASH EQUIVALENTS
Cash equivalents include all highly liquid investments with an
original maturity of three months or less.
EQUIPMENT
Equipment is stated at cost. Depreciation is provided for using
the straight-line method over the estimated useful lives of the
equipment, generally four years.
INCOME TAXES
The Company recognizes deferred tax assets and liabilities for
the expected future tax consequences of events that have been
included in the financial statements or tax returns. Deferred tax
assets and liabilities are determined based on the difference
between the financial statement and tax bases of assets and
liabilities using enacted tax rates in effect for the year in
which the differences are expected to reverse (see Note 4).
REVENUE RECOGNITION
The Company enters into development arrangements with certain
customers to design computer chips and chipsets using existing
and enhanced technology which are suitable for use in the
customer's application. The Company's development arrangements
are generally performed under contractual arrangements which
stipulate the Company's fee as certain performance criteria are
met. The Company recognizes these development fees when its
customers acknowledge that the fee has been earned by accepting
the Company's work product. Development fee and related support
services fees revenue recognized by the Company amounted to
approximately $772,000, $741,000 and $-0- for the years ended
June 30, 1995, 1994 and 1993, respectively.
F-7
<PAGE> 37
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
REVENUE RECOGNITION (CONTINUED)
Certain arrangements provide for the customer to pay a royalty or
licensing fee. Such fees are to be paid to the Company if the
customer uses the Company's work product in commercial
applications. Through June 30, 1995, none of these arrangements
has resulted in royalty or licensing revenue to the Company.
Revenue from the sale of chipset products to customers is
recognized at the time the products are shipped.
NET LOSS PER SHARE
Net loss per common share is computed based upon the weighted
average number of common shares and common share equivalents
outstanding during each period, as restated for the reverse
acquisition effected in October 1994. Common share equivalents
represent shares issuable upon the assumed exercise of stock
options. The stock options are included in the computation using
the treasury stock method, if they would have a dilutive effect
in years where there are earnings. Common share equivalents are
not considered in calculations of per share data when their
inclusion would be anti-dilutive.
TRANSLATION OF FOREIGN CURRENCY
For the Company's operations outside of the U. S. that prepare
financial statements in currencies other than the U. S. dollar,
the Company translates statement of operations amounts at the
average exchange rates for the year. Assets and liabilities are
translated at the rate of exchange in effect on the balance sheet
date. Resulting translation adjustments are presented as a
separate component of shareholders' deficit.
CREDIT RISK AND FAIR VALUE OF FINANCIAL INSTRUMENTS
Financial instruments which potentially subject the Company to
concentrations of credit risk consist principally of cash
deposited in a financial institution and accounts receivable.
There are no individually significant receivable balances (see
Note 8).
Financial instruments reflected in the Company's balance sheets
at June 30, 1995 and 1994 include cash and cash equivalents, and
borrowings from shareholders and related parties. The carrying
amount of cash and cash equivalents approximates fair value
because of the short maturity of those instruments. Because of
the circumstances and the nature of the Company's relationship
with its creditors, it was not practical to estimate the fair
value of the $1,400,000 shareholder advance payable (see Note 3).
ESTIMATES
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
F-8
<PAGE> 38
NOTE 3 - RELATED-PARTY TRANSACTIONS
Prior to June 30, 1994, the Company was advanced a total of
$2,159,910 from a previously unrelated third party, of which
$759,910 was contributed to capital when the Company agreed to
accept this amount as consideration for the issuance of 2,208,333
shares of its common stock pursuant to a March 1994 agreement. As
of June 30, 1995, the $1,400,000 remaining balance of the advance
remains unpaid. The advance is noninterest bearing, unsecured and
is due and payable, under the terms of the borrowing, when the
Company is reasonably able to do so without jeopardizing its
financial condition.
The Company has received services from a law firm in which a
director of the Company is employed. Amounts charged to
operations for these legal services during the years ended June
30, 1995, 1994 and 1993 amounted to approximately $33,000,
$35,000 and $41,000, respectively.
In November 1995, the Company entered into a consulting agreement
with a company indirectly controlled by one of its shareholders.
The consulting agreement provides, among other things, for the
consultant to provide services to the Company in connection with
the marketing and distribution of the Company's products and
technology to certain potential customers and markets. As
compensation, the consultant will receive a fee to be calculated
as a percentage of the Company's revenues, if any, attributable
to the consultant's efforts. In addition, the consultant may
receive warrants to acquire up to an aggregate of 1,000,000
shares of the Company's common stock, if certain revenue criteria
are met. The warrants, if issued, will be exercisable over a five
year period at a price per share equal to the lesser of $10, or
50% of the market value of the Company's common stock on the date
of issuance of the warrants.
The Company has also entered into a marketing agreement with an
individual who is a director of a principal stockholder of the
Company. The agreement provides for, among other things, the
individual to receive compensation based upon revenue attained by
the Company, as a result of transactions attributable to the
individual's efforts. Compensation under the agreement will
consist of from 5% to 10% of revenue plus warrants to acquire
75,000 shares of the Company's common stock for each $1 million
of revenue attained, with an exercise price of 50% of market
value at the time the warrant is issued, up to a maximum of
300,000 shares.
In July 1994, a director loaned the Company approximately
$68,000. The loan is unsecured, bears no interest and has no
defined terms for repayment. Approximately $54,000 was repaid in
the year ended June 30, 1995.
NOTE 4 - INCOME TAXES
As of June 30, 1995, the Company has a United States net
operating loss carryforward of approximately $60,000 available to
offset future taxable income through the year 2009. Under U. S.
federal tax law, certain changes in ownership of a company may
cause a limitation on future utilization of these loss
carryforwards.
As of June 30, 1995, the Company's subsidiaries have a United
Kingdom net operating loss carryforward of approximately $3.4
million, which carries forward indefinitely under United Kingdom
tax laws.
Deferred tax assets resulting from the Company's income tax loss
carryforwards were approximately $850,000 and $640,000 at June
30, 1995 and 1994, respectively. The Company has established a
valuation allowance to fully offset these deferred tax assets as
their future realization is doubtful.
F-9
<PAGE> 39
NOTE 5 - STOCKHOLDERS' DEFICIT
During the year ended June 30, 1994, the Company issued in
private transactions an aggregate of 6,671,433 shares of its
common stock in exchange for consideration of $872,207.
Consideration of $759,910 was in the form of previously received
advances contributed to capital in exchange for 2,208,333 shares
of the Company's common stock (see Note 3).
During the year ended June 30 1995, the Company issued in private
transactions an aggregate of 2,738,342 shares of its common stock
in exchange for proceeds of $570,972. Of this amount, $500,000 was
received in stock subscriptions, which were originally
recorded as subscriptions receivable reducing shareholders'
equity. As of June 30, 1996, of the $500,000 stock subscriptions
receivable, only $225,000 was subsequently collected. As a
result, the balance of the stock subscriptions receivable has
been charged to additional paid-in capital.
During the year ended June 30, 1996, the Company issued in
private transactions an aggregate of 2,600,000 shares of its
common stock in exchange for proceeds of $2,359,500. Of this
amount, $1,297,500 was received in the form of notes
receivable, which were originally recorded as stock subscriptions
receivable, reducing shareholders' equity. Subsequent collections
on the notes receivable amounted to $852,500. The $445,000
balance of the notes receivable has not been collected and the
notes are in default. As a result, the balance of the notes
representing stock subscriptions have been charged to additional
paid-in capital.
NOTE 6 - STOCK OPTIONS AND WARRANTS
In April 1995, the Company granted options to four of its
employees to acquire an aggregate of 115,000 shares of the
Company's common stock at an exercise price of $2.50 per share.
Approximately 57,500 of these options become exercisable in April
1996 and 57,500 become exercisable in April 1997. All of these
options expire in April 2000.
In January 1996, the Company granted options to four of its
employees to acquire an aggregate of 40,000 shares of the
Company's common stock at an exercise price of $2.50 per share.
Approximately 20,000 of these options become exercisable in
January 1997 and 20,000 become exercisable in January 1998. All
of these options expire in January 2001.
During the year ended June 30, 1996, the Company issued to a
consultant warrants to purchase up to 100,000 shares of the
Company's restricted common stock at an exercise price of $1.00
per share. Compensation charged to operations in the year ended
June 30, 1996 related to these warrants amounted to $21,500,
which represents the difference between the market price of
100,000 shares of the Company's common stock on the date the
options were granted, discounted at 50% for the restrictions, and
the $1.00 option exercise price.
Also during 1996, the Company issued options to three of its
directors to purchase an aggregate of 300,000 shares of the
Company's restricted common stock at an exercise price of $5.00
per share. The options become exercisable in June 1997 and expire
in June 2001. No compensation expense was recorded for these
options as management believes the restrictions associated with
any shares received by the option grantees on exercise will
subject those shares to a discount from unrestricted market
value.
F-10
<PAGE> 40
NOTE 6 - STOCK OPTIONS AND WARRANTS (CONTINUED)
In connection with the private placement of 1,600,000 shares of
its common stock in 1996, the Company issued a warrant, which is
exercisable through September 1, 1997, to purchase 3.5% of the
then outstanding shares (calculated on a fully diluted basis) of
the Company's common stock for consideration of $1,000,000. The
warrant is subject to certain anti-dilution provisions.
NOTE 7 - SHORT-TERM BORROWINGS
The Company has borrowed funds from time to time for working
capital under various secured credit facilities with its
principal bank. These borrowings have generally provided for
interest on outstanding amounts at a rate of 3% above the
financial institution's prime rate. All such borrowings have been
subject to the bank's discretion, collateralized by a floating
debenture on substantially all of the assets of the Company and
are payable on demand.
As of June 30, 1996, the Company had an arrangement in place with
its bank to borrow up to $76,000 subject to the foregoing terms
through August 1996 (see Note 9).
Cash paid for interest was approximately $35,000, $2,000, and
$9,000 for the fiscal years ended June 30, 1995, 1994 and 1993,
respectively.
NOTE 8 - COMMITMENTS AND CONTINGENCIES
LEASES
The Company leases office space under an operating lease entered
into during 1996, which expires March 2001. Future minimum rental
payments and service charges required under this lease, are
approximately as follows:
<TABLE>
<CAPTION>
Year Ending June 30, Amount
-------------------- ------
<S> <C>
1996 $26,000
1997 $79,000
1998 $79,000
1999 $79,000
2000 $79,000
2001 $58,000
</TABLE>
For the years ended June 30, 1995, 1994 and 1993, rent expense
totaled approximately $24,000, $23,000 and $9,000, respectively.
EMPLOYMENT AGREEMENTS
As of September 1, 1994, the Company entered into employment
agreements with each of its executive officers requiring the
payment of aggregate minimum annual salaries of approximately
$355,000 until August 31, 1997. The agreements are rolling-term
agreements and automatically renew for a further three-year term
at the expiration of each year. The minimum salary requirements
were waived by two of the officers for the first two years of the
employment term.
F-11
<PAGE> 41
NOTE 8 - COMMITMENTS AND CONTINGENCIES (CONTINUED)
CONCENTRATIONS
The revenues for years ended June 30, 1995, 1994 and 1993 were
generated from a small number of customers, the loss of any one
of which could have a material adverse effect on the Company's
business.
The Company presently has only one supplier manufacturing
customized internet access devices using its chips and software.
Should the supplier cease production, the Company could be
adversely affected.
The Company's revenue by geographic region during the years ended
June 30, were approximately as follows:
<TABLE>
<CAPTION>
Location 1995 1994 1993
---------- ---------- ----------
<S> <C> <C> <C>
Europe $ 440,000 $ 130,000 $ --
Far East 640,000 60,000 152,000
North America 520,000 690,000 --
---------- ---------- ----------
$1,600,000 $ 880,000 $ 152,000
========== ========== ==========
</TABLE>
CONTESTED LIABILITY
In November 1994, the Company received a written demand from a
third party for $75,000, plus additional unspecified amounts
based upon an alleged breach of contract. The Company has advised
the third party that it did not believe it has any liability
since the third party failed to perform in accordance with the
contract and that the contract was of no further effect. The
ultimate outcome of this matter and the amount of damages, if
any, that may ultimately be incurred cannot presently be
determined, and no provision for liability has been made in the
accompanying consolidated financial statements.
EMPLOYEE TRUST
As of June 30, 1995 and 1994, 2,944,444 shares of the Company's
common stock were held by an employee trust (the Trust) whose
beneficiaries are substantially all the employees of the Company.
Contributions to the Trust are at the discretion of the Company's
Board of Directors. During the years ended June 30, 1995 and
1994, the Company made no contributions to the Trust.
OTHER
The Company does not have access to certain of its corporate
records, other than drafts and copies of certain documents, for
the period from approximately September 1994 through December
1995, making it difficult for the Company to conclude that
certain corporate matters were properly effected. Current
management believes that all matters during this period were
effected properly, including approval of the reverse acquisition
of Capital Acquisition Corporation by MSU, Plc. (see Note 1). The
corporate records for the aforementioned period are in the
possession of one of the Company's former law firms, which has
refused to release such records until amounts allegedly due such
firm are paid. The Company is contesting the amount allegedly due
that firm based on the Company's belief that it was billed for
services that were not authorized by the Company. The ultimate
outcome of these matters and the amount of damages, if any, that
may ultimately be incurred cannot presently be determined. The
accompanying financial statements contain no provision or
adjustments related to the ultimate outcome of these
uncertainties.
F-12
<PAGE> 42
NOTE 9 - SUBSEQUENT EVENTS
In August 1996, the Company received a loan in the amount of
$160,000 from its employee trust. The loan is unsecured, bears no
interest, and has no defined terms for repayment.
In September 1996, the Company sold in a private transaction,
50,000 shares of its common stock for net proceeds of $250,000.
In October 1996, the Company received $500,000 in connection with
a private sale of 83,334 shares of its common stock. The
purchaser has agreed to purchase an additional 83,333 common
shares for approximately $500,000 in November 1996. The agreement
for the sale of the shares also provided that upon completion of
the aforementioned transactions, the Company will issue to the
purchaser an option to acquire 166,667 shares of the Company's
common stock at an exercise price of $6.00 per share. The option
expires in October 1997.
F-13
<PAGE> 43
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended, the Registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized.
MSU CORPORATION
By: KEITH CHARLES HALL
-------------------------
Keith Charles Hall
President
Date: November 25, 1996
------------------
Each person whose signature appears below authorizes Keith Charles
Hall and William Derek Snowdon or either of them, each of whom may act without
joinder of the other, to execute in the name of each such person who is then an
officer or director of the Registrant and to file any amendments to this annual
report on Form 10-K necessary or advisable to enable the Registrant to comply
with the Securities Exchange Act of 1934, as amended, and any rules,
regulations and requirements of the Securities and Exchange Commission in
respect thereof, which amendments may make such changes in such report as such
attorney-in-fact may deem appropriate.
Pursuant to the requirements of the Securities Exchange Act of 1934,
as amended, this report has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----
<S> <C> <C>
Wynford Peter Holloway Chief Executive Officer November 25, 1996
- -------------------------- and Director (Principal -----------------
WYNFORD PETER HOLLOWAY Executive Officer)
Keith Charles Hall President and Director November 25, 1996
- -------------------------- (Principal Financial and -----------------
KEITH CHARLES HALL Accounting Officer)
William Derek Snowdon Secretary and Director November 25, 1996
- --------------------------- -----------------
WILLIAM DEREK SNOWDON
</TABLE>
<PAGE> 44
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NO.
- --------
<S> <C>
2 Exchange Agreement among Capital Acquisition Company and the
shareholders of MSU PLC(3)
3.1 Articles of Incorporation(1)
3.2 Amendment to Articles of Incorporation(4)
3.3 Bylaws(1)
3.4 Amendment to Bylaws(2)
4.1 Common Stock Purchase Agreement with McLaughlin Group LLC(4)
4.2 Amendment to Common Stock Purchase Agreement with McLaughlin Group
LLC(4)
4.3 Warrant issued to McLaughlin Group LLC(4)
10.1 Service Agreement with Wyn Holloway(4)
10.2 Service Agreement with Keith Hall(4)
10.3 Service Agreement with W.D. Snowdon(4)
10.4 Placement Agent Agreement with Millport Ltd. as amended and
confirmed(4)
10.5 Employee Trust(4)
10.6 Office Lease Agreement with Brixton Estate Plc(4)
10.7 Manufacturing, Distribution and Joint Venture Agreement with American
Interactive Media, Inc. Confidential treatment has been requested for
specific portions of the Manufacturing, Distribution and Joint Venture
Agreement(4)
10.8 Engagement Letter, dated November 8, 1995, as amended, with McLaughlin
International, Inc.(4)
10.9 Engagement Letter, dated May 17, 1996, with McLaughlin International,
Inc.(4)
10.10 Form of Director Option granted to each director in consideration of
guarantee of National Westminster Bank Plc credit facility (4)
10.11 Development and Licensing Agreement with TXC Corporation.
Confidential treatment has been requested for specific portions of the
License Agreement(4)
10.12 Agreement with Mitac, Inc. Confidential treatment has been requested
for specific portions of the Agreement(4)
16 Letter re change in certifying accountant from Coopers & Lybrand
LLP(4)
21 Subsidiaries of Registrant(4)
24 Power of attorney. Reference is made to the signature page of this
report.
27 Financial Data Schedule
- -------------------------------
(1) Contained in exhibits to the Registration Statement on Form S-18 (file
no. 33-07861-A), declared effective by the Securities and Exchange
Commission on November 6, 1986.
(2) Contained in exhibits to the Annual Report on Form 10-K for the fiscal
year ended February 28, 1990, filed with the Securities and Exchange
Commission in May 1990.
(3) Contained in exhibits to the Current Report on Form 8-K, filed with
the Securities and Exchange Commission in October 1994.
(4) Filed herewith.
</TABLE>
<PAGE> 1
EXHIBIT 3.2
ARTICLES OF AMENDMENT
OF
CAPITAL ACQUISITION COMPANY
PURSUANT TO SECTION 607.1006 OF THE
FLORIDA BUSINESS CORPORATION ACT, THE UNDERSIGNED
CORPORATION ADOPTS THESE ARTICLES OF AMENDMENT
FIRST: The name of the Corporation is CAPITAL ACQUISITION COMPANY.
SECOND: The Articles of Incorporation of this Corporation are amended
by changing the Article number I so that, as amended, said Article shall read
as follows:
ARTICLE I - NAME
The name of this Corporation is MSU Corporation.
THIRD: The Amendment to the Articles of Incorporation of the
Corporation set forth above was adopted on the 7th day of November, 1994.
FOURTH: The Amendment was approved by the Shareholders. The number of
votes cast for the Amendment by the Shareholders was sufficient for approval.
Signed this 14th day of November, 1994.
CAPITAL ACQUISITION COMPANY
By: Paul Abrams, Vice President
-----------------------------------
<PAGE> 1
EXHIBIT 4.1
COMMON STOCK
PURCHASE AGREEMENT
AGREEMENT, made effective the 30th day of January, 1996, by and among
McLaughlin Enterprises, Inc., a Texas corporation (the "Purchaser"), MSU
Corporation, a Florida corporation ("the Company"), MSU Public Limited Company,
a corporation formed under the laws of England and Wales and MSU (UK) Limited,
a corporation formed under the laws of England and Wales.
SECTION I
AUTHORIZATION AND SALE OF THE SHARES
1.1 Sale of the Shares. Subject to the terms and conditions
hereof, the Company agrees to issue and sell to the Purchaser and the Purchaser
agrees to purchase from the Company the total number of shares of the $.01 par
value common stock of the Company (the "Common Stock") as are determined in
accordance with the terms and at the times set forth below (the aggregate
shares purchased pursuant to 1.1(a) and 1.1(b) being referred to as the
"Shares"):
(a) On the date hereof, Purchaser is purchasing for
$500,000 the greater of (i) 800,000 shares of Common Stock, and (ii)
such number of shares of Common Stock as will result in Purchaser
being the registered holder of 5% (exclusive of any ownership interest
attributable to Purchaser's Warrant described in Section 1.2 below) of
the outstanding Common Stock (on a fully diluted basis, with all
warrants [excluding Purchaser's Warrant], options, convertible
securities and the like, deemed exercised or converted, as
appropriate). (The "First Round Shares"). The number of First Round
Shares and related representations by the Company are set forth in
Exhibit A hereto.
(b) On February 29, 1996, Purchaser shall purchase for
$500,000 the greater of (i) 800,000 shares of Common Stock, and (ii)
such number of shares of Common Stock as will result in Purchaser
being the registered holder of 10% (exclusive of any ownership
interest attributable to Purchaser's Warrant and inclusive of the
first 5% referred to in (a) above) of the outstanding Common Stock (on
a fully diluted basis, with all warrants [excluding Purchaser's
Warrant], options, convertible securities and the like deemed
exercised or converted, as appropriate). (The "Second Round Shares").
1.2 Description of the Transactions. On the date hereof,
Purchaser shall be issued a Warrant to purchase certain shares of Common Stock
pursuant to the terms and conditions of the Warrant, a copy of which is
attached as Exhibit B hereto. The Warrant will be exercisable for a period of
18 months commencing on March 1, 1996.
1.3 Authorization of the Shares. The Company has authorized the
sale and issuance of the Shares to the Purchaser. The closing of the purchase
and sale of the First Round Shares (the "First Closing") is being held on the
date hereof and the Closing of the purchase and sale of the Second Round Shares
(the "Second Closing") shall be held on the last to occur of (i) February 29,
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1996 or (ii) such date as Coopers & Lybrand (or equally established
international accounting firm) commences its audit of the Company's
consolidated financial statements for the fiscal year ended June 30, 1995. The
First Closing and Second Closing are sometimes collectively referred to as the
"Closings."
1.4 Issuance of the Shares. Subject to the terms and conditions
hereof and in reliance upon the representations, warranties and agreements
contained herein, the Company will issue and sell to Purchaser and Purchaser
will purchase from the Company the Shares.
1.5 Delivery. At the First Closing, Purchaser will wire transfer
$500,000 to an escrow account at Allied Irish Bank, maintained by Allied Irish
Bank as Escrow Agent, and the Company or its transfer agent will deliver to the
Escrow Agent (or Purchaser's counsel) two stock certificates for the First
Round Shares. At the Second Closing, Purchaser will wire transfer $500,000 to
an escrow account at Allied Irish Bank, maintained by Allied Irish Bank as
Escrow Agent, and the Company or its transfer agent will deliver to the Escrow
Agent (or Purchaser's counsel) a stock certificate for the Second Round Shares.
With respect to each Closing, upon receipt of the requisite funds by the Escrow
Agent and stock certificate(s) by the Escrow Agent (or Purchaser's counsel in
the case of the stock certificate(s)), the funds and stock certificate(s) shall
be disbursed to the Company and Purchaser, respectively.
SECTION 2
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Purchaser as follows:
2.1 Organization, Standing and Corporate Power. The Company is a
corporation duly organized and validly existing under the laws of the State of
Florida and is in good standing under such laws. The Company is qualified to
do business as a foreign corporation in any state or other jurisdiction where
its failure to do so would have a materially adverse effect on its business or
properties. The Company has all requisite corporate power and authority to
own, lease or operate all properties owned, leased or operated by it, to
conduct business as presently being conducted or proposed to be conducted by
it, to enter into this Agreement and the Warrant, and to carry out and perform
its obligations under the terms of this Agreement and the Warrant, including
but not limited to issuance of the Shares. Each of the Company's two
subsidiaries, MSU Public Limited Company ("MSU PLC") and MSU (UK) Limited ("MSU
LTD") (with MSU PLC and MSU LTD sometimes collectively referred to as the
"Subsidiaries") are companies, duly organized and validly existing under the
laws of their respective jurisdictions and have all requisite power and
authority to own, lease or operate all properties owned, leased or operated by
them, to conduct business as presently being conducted or proposed to be
conducted by them.
2.2 Authorization. All corporate action on the part of the
Company, its directors and stockholders necessary for the authorization,
execution and delivery and performance by the Company of this Agreement and the
Warrant and the consummation of the transactions contemplated herein and
therein and for the authorization, issuance and delivery of the Shares has
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been taken. This Agreement and the Warrant are the valid and binding
obligations of the Company, enforceable in accordance with their respective
terms, subject to applicable bankruptcy, insolvency, reorganization and
moratorium laws and other laws of general application affecting enforcement of
creditors' rights generally. The authorization, execution, delivery and
performance by the Company of this Agreement and the Warrant and compliance
therewith and the authorization, issuance and delivery of the Shares will not
result in any violation of the terms of, or constitute a default under, any
provision of state, federal or other applicable laws to which the Company is
subject, the Company's Articles of Incorporation, as amended, or By-laws, as
amended, or any mortgage, indenture, agreement, instrument, judgment, decree,
order, rule or regulation or other restriction to which the Company is a party
or by which it is bound, or result in the creation of any mortgage, pledge,
lien, encumbrance or charge upon any of the properties or assets of the
Company. The Shares when issued, will be validly issued, fully paid and
nonassessable, will be free of any liens or encumbrances, are not subject to
any preemptive rights or rights of first refusal and are the valid and binding
obligations of the Company.
2.3 Capitalization. The Company's total authorized capital stock
consists of 50 million shares of Common Stock, of which 13,909,877 shares
(excluding the First Round Shares issued pursuant hereto) are issued and
outstanding. The Company has not authorized or issued any preferred stock of
any class or any securities convertible into or exchangeable for Common Stock.
In addition, the Company currently has outstanding 100,000 Common Stock
warrants exercisable at $1.00 per share of Common Stock and 150,000 Common
Stock options exercisable at $2.50 per share of Common Stock. All the
aforesaid issued and outstanding shares of Common Stock have been duly
authorized and validly issued, are fully paid and nonassessable, are owned of
record and (to the best of the Company's knowledge and belief) beneficially by
the shareholders and in the amounts set forth on Exhibit X, and all such
outstanding shares, warrants and options have been offered, issued, sold and
delivered by the Company in compliance with applicable securities laws. Except
as set forth (including the name of each holder, the number of shares of Common
Stock such holder has the right to acquire and the price therefor) in Exhibit A
there are no outstanding preemptive, conversion or other rights, claims,
options, warrants or agreements granted or issued by or binding upon the
Company or otherwise existing for the purchase, acquisition or obtainment of
any of its shares of Common Stock (and to the extent this representation and
warranty is not true and correct, Purchaser shall be entitled [in addition to
any other remedies or rights available to Purchaser] to receive such additional
shares of Common Stock as will result in it receiving the number of shares of
Common Stock to which it was entitled under Section 1.1 hereof ). The Company
holds no shares of its Common Stock in its treasury. MSU PLC has total
authorized capital stock of 3 million shares of Common Stock of which 2,932,039
shares are issued and outstanding and held of record by the Company (as to
2,772,239 shares) and Shield Capital Corporation (as to 159,800 shares). MSU
LTD has total authorized capital stock of 10 million shares of Common Stock all
of which are held of record by MSU PLC. There are no outstanding preemptive,
conversion, or other rights, options, warrants or agreements granted or issued
by or binding upon MSU PLC or MSU LTD for the purchase or acquisition of any of
their respective shares of common stock.
2.4 Articles and By-Laws. The copies of the Articles of
Incorporation and By-laws of the Company and each of its Subsidiaries, as
amended through the date of Closing, attached hereto as Exhibit Y and Exhibit Z
respectively, are true, correct and complete, and are in effect
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on the date hereof, and the Articles of Incorporation of the Company, as so
amended, have been properly filed with the Secretary of State of Florida.
2.5 Financial Information. The (i) consolidated financial
statements of the Company and Subsidiaries for the year ended June 30, 1995,
included in the Company's Form 10-K for such year, (ii) consolidated financial
statements of the Company and subsidiaries for the quarter ended March 31,
1995, included in the Company's Form 10-Q for such quarter, and all related
notes to each thereof, and (iii) all other financial information pertaining to
the Company and/or its subsidiaries, provided to the Purchaser by the Company
were true and correct as of the dates thereof and present fairly the financial
position and results of operations of the Company at the dates and for the
periods to which they relate, have been prepared in accordance with generally
accepted accounting principles consistently followed throughout the periods
involved and show all material liabilities, absolute or contingent, of the
Company required to be recorded thereon in accordance with generally accepted
accounting principles as at the respective dates thereof. Such consolidated
financial statements of the Company, referred to in (i) and (ii) above, at and
as of each such dates are hereinafter referred to collectively as the
"Financial Statements".
2.6 Subsidiaries. Except for the Subsidiaries, the Company has no
subsidiaries and does not own of record or beneficially any capital stock or
equity interest or investment in any corporation, association or business
entity.
2.7 Outstanding Debt. The Company (and each Subsidiary) has no
outstanding indebtedness for borrowed money except as reflected in the
Financial Statements or the Disclosure Documents and is not a guarantor or
otherwise contingently liable for any such indebtedness. There exists no
default under the provisions of any instrument evidencing any indebtedness or
otherwise or of any agreement relating thereto, except as set forth in the
Disclosure Documents. No security interest in or lien on any of the Company's
assets has been granted except for the lien granted to National Westminister
Bank Plc.
2.8 Absence of Undisclosed Liabilities. The Company (and each
Subsidiary) has no material liabilities (fixed or contingent, including without
limitation any tax liabilities due or to become due) which are not fully
reflected or provided for in the Financial Statements. The Company (and each
Subsidiary) does not know of any material liability of any nature, direct or
indirect, contingent or otherwise, or in any amount not adequately reflected or
reserved against in the Financial Statements.
2.9 Absence of Certain Changes. At all times since June 30, 1995,
up to and including each Closing, except to the extent described in the
Disclosure Documents, there has not been and will not be any event or condition
of any character which has adversely affected or will adversely affect the
Company's (or any Subsidiary's) business or prospects, including, but not
limited to:
(a) any material adverse change in the condition, assets,
liabilities or business of the Company (or any Subsidiary) from that
shown on the consolidated balance sheet for the fiscal year ended June
30, 1995;
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(b) any damage, destruction or loss of any of the
properties or assets of the Company (whether or not covered by
insurance) materially adversely affecting the business or plans of the
Company (or any Subsidiary);
(c) any declaration, setting aside or payment or other
distribution in respect of any of the Company's capital stock (or any
Subsidiary's capital stock), or any direct or indirect redemption,
purchase or other acquisition of any of such stock by the Company (or
any Subsidiary); or
(d) any labor trouble, or any event or condition of any
character, materially adversely affecting the business or plans of the
Company (or any Subsidiary).
2.10 Taxes. The Company (and each Subsidiary) has filed or will
file within the time prescribed by law (including extensions of time approved
by the appropriate taxing authority) all tax returns and reports required to be
filed with the United States Internal Revenue Service, with the State of
Florida and (except to the extent that the failure to file would not have a
material adverse effect on the condition or operations of the Company (or any
Subsidiary)) with all other jurisdictions (including the United Kingdom) where
such filing is required by law; and the Company (and each Subsidiary) has paid,
or made adequate provision on its books as reflected in the Financial
Statements for the payment of all taxes, interest, penalties, assessments or
deficiencies shown to be due or claimed to be due on or in respect of such tax
returns and reports. The Company (and each Subsidiary) knows of (i) no other
tax returns or reports which are required to be filed which have not been so
filed and (ii) no unpaid assessment for additional taxes for any fiscal period
or any basis thereof. The Company's federal income tax returns have not, to
the best of the Company's knowledge and belief, been audited by the Internal
Revenue Service.
2.11 Consents. All consents, qualifications, orders, approvals, or
authorizations of, or filings with, any governmental authority or any other
person required in connection with the Company's valid execution, delivery or
performance of this Agreement and the Warrant, or the offer, sale or issuance
of the Shares by the Company, or the consummation of any other transaction
contemplated on the part of the Company hereby or thereby shall have been duly
obtained and shall be effective on and as of each Closing to the extent
required by law.
2.13 Issuance Taxes. All taxes imposed by law in connection with
the issuance, sale and delivery of the Shares shall have been fully paid, and
all laws imposing such taxes shall have been fully complied with, prior to each
Closing.
2.14 Offering. The offer, sale and issuance of the Shares as
contemplated by this Agreement are exempt from the registration requirements of
the Securities Act of 1933, as amended (the "Securities Act," which term shall
include any successor federal statute), any applicable state blue sky laws and
any other applicable law. Neither the Company nor anyone acting with the
Company's authorization on its behalf will take any action hereafter that would
cause the loss of such exemption.
2.15 Compliance with Other Instruments. The Company (and each
Subsidiary) is not in violation of any term of its Articles of Incorporation or
By-Laws (or comparable constituent
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documents) nor of any term of any mortgage, indenture, contract, agreement,
instrument, judgment, decree, order, statute, rule or regulation to which the
Company (or any Subsidiary) is subject and a violation of which would have a
material adverse effect on the condition, financial or otherwise, or operations
of the Company (or any Subsidiary), except as set forth in the Disclosure
Documents.
2.16 Registration Rights. Except as provided for in this Agreement
and the Warrant, the Company is not under any obligation to register (as
defined in Section 7.2 below) any of its currently outstanding securities or
any of its securities which may hereafter be issued.
2.17 Disclosure. This Agreement, including the exhibits and
schedules hereto, the Financial Statements, the form 10-Q for the quarter ended
March 31, 1995, the Offering Memorandum dated June 19, 1995 and the Company
Disclosure Addendum dated the date hereof (collectively referred to herein as
the "Disclosure Documents"), when read together, do not contain any untrue
statement of a material fact and do not omit to state a material fact necessary
in order to make the statements contained therein or herein not misleading in
the light of the circumstances under which they were made. The Disclosure
Documents describe all transactions between the Company and its officers,
directors or stockholders and between the Company and any other affiliated,
related or interested party.
2.18 Contracts; Insurance. Except as otherwise described herein or
as set forth in the Disclosure Documents, the Company (and each Subsidiary) has
no currently existing contract, obligation agreement, plan arrangement,
commitment or the like (written or oral) of any material nature, including
without limitation, the following:
(a) employment, bonus or consulting agreements, pension,
profit sharing, deferred compensation, stock bonus, retirement, stock
option, stock purchase, phantom stock or similar plans, including
agreements evidencing rights to purchase securities of the Company (or
any Subsidiary) and agreements among shareholders and the Company (or
any Subsidiary);
(b) loan or other agreements, notes, indentures, or
instruments relating to or evidencing indebtedness for borrowed money,
or mortgaging, pledging or granting or creating a lien or security
interest or other encumbrance on any of the Company's (or any
Subsidiary's) property or any agreement or instrument evidencing any
guaranty by the Company (or any Subsidiary) of payment or performance
by any other person;
(c) agreements with dealers, sales representatives, brokers
or other distributors, jobbers, advertisers or sales agencies;
(d) agreements with any labor union or collective bargaining
organization or other labor agreements;
(e) any contract or series of contracts with the same person
for the furnishing or purchase of machinery, equipment, goods or
services, including without limitation agreements with processors and
subcontractors;
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(f) any indenture, agreement or other document (including
private placement brochures) constituting a binding obligation on the
part of the Company (or any Subsidiary) to either sell or repurchase
shares of the Company (or any Subsidiary);
(g) any joint venture contract or arrangement or other
agreement involving a sharing of profits or expenses to which the
Company (or any Subsidiary) is a party;
(h) agreements limiting the freedom of the Company (or any
Subsidiary) to compete in any line of business or in any geographic
area or with any person;
(i) agreements providing for disposition of the business,
assets or shares of the Company (or any Subsidiary), agreements of
merger or consolidation to which the Company (or any Subsidiary) is a
party or letters of intent with respect to the foregoing;
(j) letters of intent or agreements with respect to the
acquisition of the business, assets or shares of any other business;
and
(k) insurance policies.
The Company (and each Subsidiary) has complied with all the
material provisions of all said contracts, obligations, agreements,
plans, arrangements, and commitments and is not in default thereunder
except as set forth in the Disclosure Documents.
The Company (and each Subsidiary) maintains insurance which is
adequate, in the Company's opinion to protect the Company (and each
Subsidiary) and its financial condition against the risks involved in
the business conducted by the Company (and each Subsidiary).
2.19 Ownership in Competitive Entities. To the best of the
Company's knowledge and belief, none of the officers or directors or
significant employees or consultants of the Company (or any Subsidiary), or
their respective spouses or relatives, owns directly or indirectly,
individually or collectively, a material interest in any entity which is a
competitor, customer or supplier of (or has any existing contractual
relationship with) the Company (or any Subsidiary).
2.20 Litigation and Bankruptcy Proceedings.
(a) There is neither pending nor, to the Company's knowledge
and belief, threatened, any action, suit, proceeding or claim, or any
basis therefor or threat thereof, whether or not purportedly on behalf
of the Company, to which the Company (or any Subsidiary) is or may be
named as a party or its property is or may be subject and in which an
unfavorable outcome, ruling or finding in any such matter or for all
such matters taken as a whole might have a material adverse effect on
the condition, financial or otherwise, or operations of the Company
(or any Subsidiary); and the Company has no knowledge of any asserted
claim, the assertion of which is likely and which, if asserted, would
seek damages, an injunction or other legal, equitable, monetary or
nonmonetary relief which claim individually or collectively with other
such unasserted claims if granted would have a
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material adverse effect on the condition, financial or otherwise, or
operations of the Company (or any Subsidiary), except as set forth in
the Disclosure Documents.
(b) The Company (and each Subsidiary) has not admitted in
writing its inability to pay its debts generally as they become due,
filed or consented to the filing against it of a petition in
bankruptcy or a petition to take advantage of any insolvency act, made
an assignment for the benefit of creditors, consented to the
appointment of a receiver for itself or for the whole or any
substantial part of its property, or had a petition in bankruptcy
filed against it, been adjudicated a bankrupt, or filed a petition or
answer seeking reorganization or arrangement under the Federal
bankruptcy laws or any other law or statute of the United States of
America or any other jurisdiction.
2.21 Title to Properties, Liens and Encumbrances. The Company (and
each Subsidiary) has good marketable title to its respective properties and
assets, and has good title to all its leasehold interests, in each case free
from all mortgages, pledges, liens, security interests, conditional sale
agreements, encumbrances or charges, except as set forth in the Disclosure
Documents.
2.22 Leases. Set forth on Exhibit C is a correct and complete list
(including the amount of rents called for and a description of the leased
property) of all material leases under which the Company (or any Subsidiary) is
a lessee. The Company (or Subsidiary) enjoys peaceful and undisturbed
possession under all such leases, and all of such leases are valid and
subsisting and none of them is in default in any material respect.
2.23 Business of the Company. Except as set forth in the
Disclosure Documents, the Company has no knowledge or belief that (i) there is
pending or threatened any claim or litigation against or affecting the Company
(or any Subsidiary) contesting its rights to produce, manufacture, sell or use
any product, process, method, substance part or other material presently
produced, manufactured, sold or used by the Company (or any Subsidiary) in
connection with the operations of the Company (or any Subsidiary); or (ii)
there exists, or there is pending or planned, any patent, invention, device,
application or principle, or any statute, rule, law, regulation, standard or
code which would materially adversely affect the condition, financial or
otherwise, or the operations of the Company (or any Subsidiary); or (iii) there
is any other factor (other than fire, flood, accident, act or war or civil
commotion, or any other cause or event beyond the control of the Company) which
may adversely affect the condition, financial or otherwise, or the operations
of the Company (or any Subsidiary). The Company currently intends to engage in
the business of the same general type as described in the Disclosure Documents.
2.24 Franchises, Licenses, Trademarks, Patents, Proprietary and
Other Rights.
(a) To the best of the Company's knowledge and belief, the
Company has all franchises, permits, licenses and other similar
authority necessary for the conduct of its business as now being
conducted by it and as planned to be conducted, the lack of which
could materially and adversely affect the operations or condition,
financial or otherwise, of the Company (or any Subsidiary), and it is
not in default in any material respect under any of such franchises,
permits, licenses, or other similar authority. The Company possesses
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or has applied for all patents, patent rights, trademarks, trademark
rights, trade names, trade name rights and copyrights necessary and as
planned to be conducted without conflict with or infringement upon any
valid rights of others and has not received any notice of infringement
upon or conflict with the asserted rights of others. The lack of such
patents, patent rights, trademarks, trademark rights, trade names,
trade name rights and copyrights would not materially adversely affect
the operations of condition financial or otherwise, of the Company (or
any Subsidiary).
(b) All key employees, consultants or similar persons have
each assigned to the Company all proprietary information including,
but not limited to, processes, formulae, data and know-how,
improvements, inventions, techniques, software, and new products, as
set forth in the Disclosure Documents, which he may have acquired
prior to or during his employment or association with the Company (or
any Subsidiary) (except that which was required to be assigned to a
former employer), which proprietary information was lawfully acquired
by such individual.
2.25 Employees. To the best of the Company's knowledge and belief,
no employee of the Company (or any Subsidiary) is, or is now expected to be, in
violation of any term of any employment contract, patent disclosure agreement,
non-competition agreement, or any other contract or agreement or any
restrictive covenant or any other common law obligation to a former employer
relating to the right of any such employee to be employed by the Company (or
any Subsidiary) or to the use of trade secrets or proprietary information of
others, and the employment of the Company's (or any Subsidiary's) employees
does not subject the Company, any Subsidiary thereof, or Purchaser to any
liability with respect thereto. There is neither pending nor, to the Company's
knowledge and belief, threatened, any actions, suits, proceedings or claims, or
to its knowledge any basis therefor or threat thereof with respect to any
contract, agreement, covenant or obligation referred to in the preceding
sentence. The Company (and each Subsidiary) does not have any collective
bargaining agreement covering any of its employees.
2.26 Shareholders of Record and Total Assets. The Company has 84
shareholders of record and total assets of less than $1 million.
2.27 Accounts Receivable. The Company's accounts receivable set
forth in the Financial Statements are not contingent upon the performance by
the holder of any material obligations or contracts and are subject to no known
material counterparts or setoffs.
SECTION 3
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser represents and warrants to the Company as follows:
3.1 Receipt of Information. It has received and reviewed the
information which it has requested from the Company concerning the investment
in the Company, including but not limited
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to, the Disclosure Documents. It has had the opportunity to discuss the
Company's business, management and financial affairs with its management.
3.2 Suitability as a Purchaser. The Purchaser represents that it
can bear the economic risk of investment in the Company, and:
(a) The Purchaser is investing in its own name;
(b) The Purchaser is an "Accredited Investor" as defined in Rule
501(a) of Regulation D under the Securities Act.
3.3 Investment. It is acquiring the Shares for investment for its
own account and not with the view to, or for resale in connection with, any
distribution thereof. It understands that the Shares have not been registered
under applicable state or federal securities laws by reason of certain
exemptions from the registration provisions thereof which depend upon, among
other things, the bona fide nature of the Purchaser's representations and
investment intent as expressed herein.
3.4 Rule 144. It acknowledges that the Shares must be held
indefinitely unless they are subsequently registered under the Securities Act
or an exemption from such registration is available.
3.5 Risks of Investment. Purchaser recognizes, acknowledges and
warrants that it has such knowledge and experience as to be capable of
evaluating the merits and risks of the investment in the Company and is aware
of the speculative nature of and risks of loss associated with investments in
general. The investment is suitable and consistent with Purchaser's overall
investment program and the financial situation of Purchaser enables it to bear
the risks of this investment for an indefinite period of time, which may
include total loss of the amount paid to the Company.
3.6 Requisite Authority. All necessary action on the part of
Purchaser for the acquisition of the Shares and the consummation of the
transactions contemplated herein, has been taken or will be taken prior to the
issuance of such Shares, and this Agreement will be a valid and binding
obligation of Purchaser, enforceable in accordance with its terms, subject to
applicable bankruptcy, insolvency, reorganization and moratorium laws and other
laws of general application affecting enforcement of creditors' rights
generally. Execution of this Agreement by Purchaser shall not be in
contravention of or result in a default under any bylaw, charter, contract,
mortgage, indenture, agreement, judgment, decree, order, rule or regulation to
which Purchaser is a party or by which it is bound.
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SECTION 4
CONDITIONS TO CLOSING OF PURCHASER
The obligation of Purchaser to purchase the Shares to be purchased at
the respective Closings is subject to the fulfillment, to Purchaser's
satisfaction, on or prior to each Closing, of each of the following conditions:
4.1 Representations and Warranties Correct. The representations
and warranties made by the Company in this Agreement shall be true and correct
in all respects when made, and shall be true and correct in all respects on the
date of each Closing with the same force and effect as if they had been made on
and as of the date of each Closing.
4.2 Performance. All covenants, agreements and conditions
contained in this Agreement to be performed or complied with by the Company on
or prior to the date of each Closing shall have been performed or complied with
in all respects on the date of each Closing.
4.3 Legal Investment. At the time of each Closing, the purchase
of the Shares to be purchased by Purchaser hereunder shall be legally permitted
by all laws and regulations to which Purchaser and the Company are subject.
4.4 Compliance Certificate. The Company shall have delivered to
Purchaser a certificate of the President of the Company, dated the date of the
Closing, certifying to the fulfillment of the conditions specified in Sections
4.1 and 4.2 of this Agreement and with respect to such other matters as
Purchaser reasonably requests.
4.5 Proceedings and Documents. All corporate and other
proceedings in connection with the transactions contemplated hereby and all
documents and instruments incident to such transactions shall be satisfactory
in substance and form to Purchaser and its counsel.
4.6 Qualifications. All authorizations, approvals or permits, if
any, of any governmental or regulatory body that are required in connection
with the lawful issuance of the Shares to be purchased pursuant to this
Agreement shall have been duly obtained and shall be effective on and as of the
date of each Closing.
4.7 Legal Fees. Each party will pay its own respective legal fees
with respect to this Agreement, and the transactions contemplated hereby.
4.8 Confidentiality Agreements. All employees and all consultants
(as determined by the Purchaser) with access to confidential or proprietary
information of the Company (or any Subsidiary), shall have executed and
delivered to the Company (and Subsidiary, if employed thereby) a
Confidentiality Agreement.
4.9 Additional Matters. In addition to any other conditions set
forth herein to Purchaser's obligation to purchase the Second Round Shares,
Purchaser shall not be obligated to purchase the Second Round Shares unless on
or prior to the Second Closing (i) Coopers &
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Lybrand (or other equally established international accounting firm) shall have
commenced its audit of the Company's consolidated financial statements for its
fiscal year ended June 30, 1995, (ii) Company shall have delivered to Purchaser
unaudited consolidated financial statements for the quarter ended September 30,
1995 and an unaudited consolidated balance sheet at December 31, 1995, and
(iii) Purchaser shall have received one or more stock certificate(s) in proper
form and duly executed representing the First Round Shares. The stock
certificate for the Second Round Shares shall be delivered at the Second
Closing.
SECTION 5
CONDITIONS TO CLOSING OF COMPANY
The Company's obligation to sell the Shares to be purchased at the
respective Closings is subject to the fulfillment, to its satisfaction, on or
prior to each Closing, of each of the following conditions:
5.1 Representations. The representations made by Purchaser
pursuant to Section 3 hereof shall be true and correct when made and shall be
true and correct on the date of each Closing.
5.2 Legal Investment. At the time of each Closing, the conditions
set forth in Section 3.6 hereof shall have occurred and the purchase of the
Shares to be purchased shall be legally permitted by all laws and regulations
to which Purchaser and the Company are subject.
SECTION 6
COVENANTS AND AGREEMENTS OF THE COMPANY
The Company hereby covenants and agrees (with Sections 6.1 through 6.9
to apply only so long as the Purchaser owns at least 50% of the Shares
purchased) as follows:
6.1 Basic Financial Information. The Company will furnish to the
Purchaser copies of each Form 10-K, 10-Q, 8-K and all other reports or
documents to be filed with the Commission (as defined in Section 7.2 below),
all within two (2) days of the filing (or due date) of such report or document.
6.2 Additional Information. The Company will permit Purchaser (or
its designee or representative) to visit and inspect any of the properties of
the Company (or any Subsidiary), including its books and records of account,
and to discuss its affairs, finances and accounts with the Company's officers
and its independent public accountants, all at such reasonable times and as
often as any such person may reasonably request. The Company will deliver the
reports described below in this Section 6.2 to each such person.
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(a) As soon as practicable after the end of each month and in
any event within thirty (30) days thereafter, a consolidated balance
sheet of the Company and its Subsidiaries, if any, as at the end of
such month, and consolidated statements of income and of sources and
applications of funds of the Company and its Subsidiaries, for each
month and for the current fiscal year of the Company to date, prepared
in accordance with generally accepted accounting principles
consistently applied, together with a comparison of such statements to
the Company's operating plan then in effect, if any, and approved by
its Board of Directors, and certified, subject to changes resulting
from year-end audit adjustments, by the principal financial or
accounting officer of the Company.
(b) As soon as available (but in any event within sixty (60)
days after the commencement of its fiscal year) a summary of the
financial plan of the Company (and its Subsidiaries), as contained in
its operating plan, if any, approved by the Company's Board of
Directors. Any material changes in such financial plan shall be
submitted as promptly as practicable after such changes have been
approved by the Board of Directors.
(c) With reasonable promptness, such other information and
data with respect to the Company and its Subsidiaries as Purchaser may
from time to time reasonably request.
(d) The foregoing provisions of this Section 6.2 shall not be
in limitation of any rights which Purchaser may have with respect to
the books and records of account of the Company and its Subsidiaries,
or to inspect their properties or discuss their affairs, finances and
accounts, under the laws of the jurisdictions in which they are
incorporated or organized.
6.3 Maintenance of Properties and Leases. The Company will keep
its properties and those of its Subsidiaries in good repair, working order and
condition, reasonable wear and tear excepted, and from time to time make all
needful and proper repairs, renewals, replacements, additions and improvements
thereto; and the Company and its Subsidiaries will at all times comply with
each provision of all leases to which any of them is a party or under which any
of them occupies property if the breach of such provision might have a material
adverse effect on the condition, financial or otherwise, or operations of the
Company (or any Subsidiary).
6.4 Insurance. The Company will keep its assets and those of its
Subsidiaries which are of an insurable character insured by financially sound
and reputable insurers against loss or damage by fire, explosion and other
risks customarily insured against by companies in the Company's line of
business, in amounts sufficient to prevent the Company or any Subsidiary from
becoming a co-insurer and not in any event less than 100% of the insurable
value of the property insured; and the Company will maintain, with financially
sound and reputable insurers, insurance against other hazards and risks and
liability to persons and property to the extent and in the manner customary for
companies in similar businesses similarly situated.
6.5 Accounts and Records. The Company will keep true books and
records of account in which full, true and correct entries will be made of all
dealings and transactions in relation to its and its Subsidiaries business and
affairs in accordance with generally accepted accounting principles applied on
a consistent basis.
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6.6 Independent Accountants. The Company will retain independent
public accountants of recognized national standing who shall certify the
Company's consolidated financial statements at the end of each fiscal year. In
the event the services of the independent public accountants so selected, or
any firm of independent public accountants hereafter employed by the Company,
are terminated, the Company will promptly thereafter notify Purchaser and will
request the firm of independent public accountants whose services are
terminated to deliver to Purchaser a letter of such firm setting forth the
reasons for the termination of their services. In the event of such
termination, the Company will promptly thereafter engage another such firm of
independent public accountants. In its notice to Purchaser the Company shall
state whether the change of accountants was recommended or approved by the
Board of Directors or any committee thereof.
6.7 Compliance with Requirements of Governmental Authorities. The
Company and all its Subsidiaries shall duly observe and conform to all valid
requirements of governmental authorities relating to the conduct of their
businesses or their properties or assets.
6.8 Maintenance of Corporate Existence, etc. The Company (and
each Subsidiary) shall maintain in full force and effect its corporate
existence, rights and franchises and all licenses and other rights to use
patents, processes, licenses, trademarks, trade names or copyrights owned or
possessed by it and deemed by the Company (or any Subsidiary) to be necessary
to the conduct of their business.
6.9 Certain Restrictions on Corporate Action.
(a) The Company shall not without the Purchaser's approval:
(i) pay or declare any dividend or distribution on
any shares of Common Stock or apply any of its assets to the
redemption (other than to eliminate fractional shares or to
pay dissenting shareholders entitled to payment for their
shares), retirement, purchase or other acquisition directly or
indirectly, of any shares of Common Stock; provided, however
that this restriction shall cease to apply after the Company
has had four consecutive quarters of positive earnings (after
interest, taxes, depreciation and amortization);
(ii) authorize or issue any shares of stock having
any preference or priority as to dividends or assets superior
to or on a parity with any such preference or priority of the
Company's Common Stock or reclassify any capital stock into
shares having any preference or priority superior to the
Company's Common Stock;
(iii) grant any new security interest in any
securities or property or other assets of the Company (or any
Subsidiary) to any person except a financial institution;
provided, however that this restriction shall cease to apply
after the Company has had four consecutive quarters of
positive earnings (after interest, taxes, depreciation and
amortization).
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6.10 Stock Issuances.
(a) The Company will not hereafter issue any Common Stock
or grant any option or warrant to purchase any of its Common Stock to
any director, officer or employee of the Company or a Subsidiary,
except for options to purchase up to 200,000 shares to be granted to
employees (other than officers and directors) under a stock option
plan not to be adopted prior to September 1, 1996.
(b) Upon the issuance by the Company of any additional
capital stock (excluding the issuance of Common Stock pursuant to (i)
the exercise or conversion of any outstanding subscriptions, warrants,
options, calls, commitments or securities set forth in the Company
Disclosure Addendum, or (ii) a merger, acquisition [of a business or
assets] or underwritten public offering of Common Stock registered
under the Securities Act for gross proceeds of $10 million or more) or
any debt or equity instruments that are convertible into or
exercisable or exchangeable for capital stock, Purchaser will have the
right to acquire additional shares of Common Stock in an amount
sufficient to own, following the issuance of such additional shares of
Common Stock, the same proportion of the voting power of the Company
(as calculated in subsection (c) below) as it owned prior to the
issuance by the Company of such additional shares of capital stock, at
a price per share of Common Stock equal to the price per share of
capital stock received by the Company in connection with the
transaction triggering Purchaser's right hereunder and provided
further, that if the Company issues debt or equity shares convertible
into or exercisable or exchangeable for capital stock of the Company,
Purchaser's right to purchase additional shares of Common Stock will
not become effective until the convertible securities holder notifies
the Company of its intention to convert or exercise or exchange all or
a portion of its shares. Within five business days of receiving
notice from any convertible securities holder of its intention to
convert or exercise or exchange such convertible securities for
capital stock, Company will notify the Purchaser in writing of such
impending conversion. The Purchaser will have fifteen business days
from receipt of such notice to provide the Company with written notice
of its intent to exercise its right to acquire additional shares of
Common Stock. Failure of Purchaser to provide such written notice
will be deemed a waiver by Purchaser of its right to acquire
additional shares of Common Stock, however, a waiver by Purchaser of
its right to acquire additional shares of Common Stock in one instance
will not be deemed a waiver of any subsequent right to acquire
additional shares of Common Stock.
(1) The Company will, no less than 30 days prior
to the commencement thereof, notify Purchaser in writing of
its intention to effect a transaction involving the issuance
of shares of Common Stock. Purchaser will have 15 business
days from receipt of such notice to provide the Company with
written notice of its intent to exercise its right to acquire
additional shares of Common Stock pursuant to this Section
6.10. Failure to provide such written notice to the Company
will be deemed a waiver by Purchaser of its right to acquire
additional shares of Common Stock however, a waiver by
Purchaser of its right to acquire additional shares of Common
Stock in one instance will not be deemed a waiver of any
subsequent right to acquire additional shares of Common Stock.
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(2) In calculating the proportion of the voting
power of the Company referenced above, all (i) outstanding
subscriptions, warrants, options, calls, commitments or
securities entitling any person to purchase or acquire any
shares of the Company's Common Stock or other capital stock of
the company with voting rights, and (ii) obligations or
securities convertible into or exchangeable or exercisable for
shares of any Common Stock of the Company or any commitments
entitling any person to purchase or otherwise acquire any such
obligations or securities, all as set forth in Schedule 6.10,
to the extent not previously converted, exercised or
exchanged, will be deemed converted, exchanged or exercised.
(3) Purchaser's right to acquire additional
shares of Common Stock under this Section 6.10(b) shall
terminate at such time as Purchaser's Common Stock ownership
falls below four percent (4%) of the Company's outstanding
shares of Common Stock or at such time as the Company
completes an underwritten public offering of Common Stock
registered under the 1933 Act for gross proceeds of $10
million or more.
6.11 Use of Proceeds. The Company will use the proceeds from the
sale of the Shares for general corporate purposes, but not for the payment of
(i) dividends or (ii) existing material undisclosed claims or indebtedness as
of the applicable Closing.
6.12 Confidentiality Agreements. The Company will cause all future
employees and all future consultants (as determined by Purchaser) with access
to confidential or proprietary information of the Company or any Subsidiary to
execute and deliver a Confidentiality Agreement in such form as is adequate to
protect all confidential information of the Company and the Subsidiaries.
6.13 Reports Pursuant to Section 15(d) of the Exchange Act. The
Company will cause all delinquent reports, required to be filed pursuant to
Section 15d of the Exchange Act, to be filed with the Commission as soon as
reasonably possible, and thereafter to timely file all reports required under
the Exchange Act. All such reports shall be prepared in compliance with the
Exchange Act and all rules and regulations promulgated thereunder. In
conjunction therewith, the Company agrees to use its best efforts to obtain a
completed audit of its consolidated financial statements for the fiscal year
ended June 30, 1995 as promptly as possible. The Company will use its best
efforts to register its Common Stock under Section 12g of the Exchange Act (and
will notify Purchaser when such registration occurs) and, when the requisite
criteria have been met, to list its Common Stock on the NASDAQ SmallCap
Market(SM).
6.14 Additional Covenant. The Company agrees (i) to take all steps
reasonably possible to pursue all valid claims (to the extent deemed warranted
by the Board of Directors after review and consultation with Company counsel)
against Millport Limited and other appropriate parties, arising in connection
with the Company's 1995 Regulation offering, and (ii) to disassociate itself
with Millport Limited and all parties affiliated with, related to or doing
business with Millport Limited.
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SECTION 7
COVENANT OF PURCHASER
7.1 Change of Control. In the event Purchaser should determine to
seek control of the Company (i.e., more than 50%), it will do so only in
accordance with applicable law and will take no wrongful or illegal action,
with the intent of adversely affecting the Company to Purchaser's advantage, in
connection with any such action to obtain control of the Company.
SECTION 8
RESTRICTION ON TRANSFERABILITY OF
SECURITIES; COMPLIANCE WITH SECURITIES ACT
8.1 Restrictions on Transferability. The transferability of the
Shares shall be subject to the conditions specified in this Section 8, which
conditions are intended to insure compliance with the provisions of the
Securities Act or, in the case of Section 8.13 hereof, to assist in an orderly
distribution. Purchaser will cause any proposed transferee of Shares held by
Purchaser to agree to take and hold those securities subject to the provisions
and upon the conditions specified in this Section 8.
8.2 Certain Definitions. As used in this Section 8, the following
terms shall have the respective meanings:
"Commission" shall mean the Securities and Exchange Commission or any
other federal agency at the time administering the Securities Act.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, or any successor federal statute.
"Restricted Securities" shall mean the securities of the Company
required to bear or bearing the legend set forth in Section 8.3 hereof.
"Registrable Securities" shall mean the Shares, and any Common Stock
issued in respect of any thereof upon any stock split, stock dividend,
recapitalization or similar event.
The terms "register," "registered" and "registration" shall refer to a
registration effected by preparing and filing a registration statement in
compliance with the Securities Act and applicable rules and regulations
thereunder, and the declaration or ordering of the effectiveness of such
registration statement.
"Registration Expenses" shall mean all expenses incurred by or on
behalf of the Company in compliance with Section 8.5 and 8.6 hereof, including,
without limitation, all registration and filing fees, printing expenses,
reasonable fees and disbursements of one counsel for all the selling Holders
and other security holders for, but not limited to, a "due diligence"
examination of the Company, and the expense of any special audits incident to
or required by any such registration
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(but excluding the compensation of regular employees of the Company, which
shall be paid in any such event by the Company).
"Securities Act" shall have the meaning given to it in Section 2.14
hereof.
"Selling Expenses" shall mean all underwriting discounts and selling
commissions applicable to the sale of Registrable Securities and all fees and
disbursements of separate counsel for any individual Holder.
"Holder" shall mean any holder of the outstanding Registrable
Securities which have not been sold to the public.
"Initiating Holders" shall mean Purchaser or its assignees under
Section 8.13 hereof who in the aggregate are Holders of thirty percent (30%) or
more of the Registrable Securities which have not been sold to the public.
8.3 Restrictive Legend. Each certificate representing (i) the
Shares or (ii) any other securities issued in respect of the Shares upon any
stock split, stock dividend, recapitalization, merger, consolidation or similar
event, shall (unless otherwise permitted or unless the securities evidenced by
such certificate shall have been registered under the Securities Act) be
stamped or otherwise imprinted with a legend substantially in the following
form (in addition to any legend required under applicable state securities
laws):
"THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933 OR ANY STATE SECURITIES LAWS. THEY MAY NOT BE SOLD OR OFFERED
FOR SALE IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO
THESE SECURITIES UNDER SAID ACT AND ANY APPLICABLE STATE SECURITIES
LAW OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH
REGISTRATION IS NOT REQUIRED."
Upon request of a holder of such a certificate, the Company shall
remove the foregoing legend from the certificate or issue to such holder a new
certificate therefor free of any transfer legend, if, with such request, the
Company shall have received either the opinion referred to in Section 8.4(i) or
the "no-action" letter referred to in Section 8.4(ii) to the effect that any
transfer by such holder of the securities evidenced by such certificate will
not violate the Securities Act and applicable state securities laws.
8.4 Notice of Proposed Transfers. The Holder of each certificate
representing Restricted Securities by acceptance thereof agrees to comply in
all respects with the provisions of this Section 8.4. Prior to any proposed
transfer of any Restricted Securities (other than under circumstances described
in Sections 8.5, 8.6 and 8.8 hereof), the holder thereof shall give written
notice to the Company of such holder's intention to effect such transfer. Each
such notice shall describe the manner and circumstances of the proposed
transfer in sufficient detail, and shall be accompanied (except in transactions
in compliance with Rule 144) by either (i) a written opinion of legal counsel
who shall be reasonably satisfactory to the Company, to the effect that the
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proposed transfer of the Restricted Securities may be effected without
registration under the Securities Act, or (ii) a "no-action" letter from the
Commission to the effect that the distribution of such securities without
registration will not result in a recommendation by the staff of the Commission
that action be taken with respect thereto, whereupon the holder of such
Restricted Securities shall be entitled to transfer such Restricted Securities
in accordance with the terms of the notice delivered by the holder to the
Company. Each certificate evidencing the Restricted Securities transferred as
above provided shall bear the appropriate restrictive legend set forth in
Section 8.3, above, except such certificate shall not bear such restrictive
legend if the opinion of counsel or "no-action" letter referred to above is to
the further effect that such legend is not required in order to establish
compliance with any provisions of the Securities Act.
8.5 Requested Registration.
(a) Request for Registration. If the Company shall
receive from Initiating Holders, a written request that the Company
effect any registration with respect to all or a part of the
Registrable Securities, the Company will:
(i) promptly give written notice of the proposed
registration to all other Holders; and
(ii) as soon as practicable, use its diligent best
efforts to effect such registration (including, without
limitation, the execution of an undertaking to file
post-effective amendments, appropriate qualifications under
applicable blue sky or other state securities laws and
appropriate regulations issued under the Securities Act) as
may be so requested and as would permit or facilitate the sale
and distribution of all or such portion of such Registrable
Securities as are specified in such request, together with all
or such portion of the Registrable Securities of any Holder or
Holders joining in such request as are specified in a written
request given by such Holders within thirty (30) days after
receipt of such written notice from the Company; provided that
the Company shall not be obligated to effect, or to take any
action to effect, any such registration pursuant to this
Section 8.5:
(A) In any particular jurisdiction in which
the Company would be required to execute a general
consent to service of process in effecting such
registration, qualification or compliance, unless the
Company is already subject to service in such
jurisdiction and except as may be required by the
Securities Act or applicable rules or regulations
thereunder;
(B) After the Company has effected one such
registration pursuant to this Section 8.5(a) and such
registration has been declared or ordered effective
and the sales of such Registrable Securities shall
have closed; or
(C) Prior to October 15, 1996.
Subject to the foregoing clauses (A), (B) and (C), the Company
shall file a registration statement covering the Registrable
Securities so requested to be
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registered as soon as practicable, after receipt of the
request or requests of the Initiating Holders.
The registration statement filed pursuant to the request of
the Initiating Holders may, subject to the provisions of Section
8.5(b) below, include other securities of the Company which are held
by officers or directors of the Company or which are held by persons
who, by virtue of agreements with the Company, are entitled to include
their securities in any such registration, but the Company shall have
no right, other than as provided in Section 8.5(b), to include any of
its unissued or treasury securities in any such registration.
(b) Underwriting. If the Initiating Holders intend to
distribute the Registrable Securities covered by their request by
means of an underwriting, they shall so advise the Company as a part
of their request made pursuant to Section 8.5 and the Company shall
include such information in the written notice referred to in Section
8.5(a)(i) above. The right of any Holder to registration pursuant to
Section 8.5 shall be conditioned upon such Holder's participation in
such underwriting and the inclusion of such Holder's Registrable
Securities in the underwriting (unless otherwise mutually agreed by a
majority in interest of the Initiating Holders and such Holder with
respect to such participation and inclusion) to the extent provided
herein. A Holder may elect to include in such underwriting all or a
part of the Registrable Securities it holds.
If officers or directors of the Company holding other
securities of the Company shall request inclusion in any registration
pursuant to Section 8.5, or if holders of securities of the Company
who are entitled, by contract with the Company, to have securities
included in such a registration (the "Other Shareholders") request
such inclusion, the Initiating Holders shall, on behalf of all
Holders, offer to include the securities of such officers, directors
and Other Shareholders in the underwriting and may condition such
offer on their acceptance of the further applicable provisions of this
Section 8. The Company shall (together with all Holders, officers,
directors and Other Shareholders proposing to distribute their
securities through such underwriting) enter into an underwriting
agreement in customary form with the representative of the underwriter
or underwriters selected for such underwriting by a majority in
interest of the Initiating Holders and reasonably acceptable to the
Company. Notwithstanding any other provision of this Section 8.5, if
the representative advises the Initiating holders in writing that
marketing factors require a limitation on the number of shares to be
underwritten, the securities of the Company held by officers or
directors or Other Shareholders (other than Registrable Securities) of
the Company shall be excluded from such registration to the extent so
required by such limitation and if a limitation of the number of
shares is still required, the Initiating Holders shall so advise all
Holders of Registrable Securities and other securities that may be
included in the registration and underwriting shall be allocated among
all such Holders in proportion, as nearly as practicable, to the
respective amounts of Registrable Securities and other securities
which they had requested be included in such registration. No
Registrable Securities or any other securities excluded from the
underwriting by reason of the underwriter's marketing limitation shall
be included in such registration. If any Holder of Registrable
Securities, officer, director or Other Shareholder
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who has requested inclusion in such registration as provided above
disapproves of the terms of the underwriting, such person may elect to
withdraw therefore by written notice to the Company, the underwriter
and the Initiating Holders. The securities so withdrawn shall also be
withdrawn from registration. If the underwriter has not limited the
number of Registrable Securities or other securities to be
underwritten, the Company may include its securities for its own
account in such registration if the underwriter so agrees and if the
number of Registrable Securities and other securities which would
otherwise have been included in such registration and underwriting
will not thereby be limited.
8.6 Company Registration. If the Company shall determine to
register any of its securities, other than a registration relating solely to
employee benefit plans, or a registration relating solely to a Commission Rule
145 transaction, or a registration on any registration form which does not
permit secondary sales or does not include substantially the same information
as would be required to be included in a registration statement covering the
sale of Registrable Securities, the Company will:
(a) promptly give to each Holder written notice thereof
(which shall include a list of the jurisdictions in which the Company
intends to attempt to qualify such securities under the applicable
blue sky or other state securities laws); and
(b) include in such registration (and any related
qualification under blue sky laws or other compliance), and in any
underwriting involved therein, all of the Registrable Securities
specified in a written request or requests, made by any Holder within
fifteen (15) days after receipt of the written notice from the Company
described in clause (a) above. Such written request may specify all
or a part of a Holder's Registrable Securities.
8.7 Expenses of Registration. All Registration Expenses incurred
in connection with any registration, qualification or compliance pursuant to
this Section 8 shall be borne by the Company, and all Selling Expenses shall be
borne by the Holders of the securities so registered pro rata on the basis of
the number of their shares so registered.
8.8 Registration Procedures. In the case of each registration
effected by the Company pursuant to Section 8, the Company will keep each
Holder advised in writing as to the initiation of each registration and as to
the completion thereof. At its expense, the Company will:
(a) Keep such registration effective for a period of one
hundred twenty (120) days or until the Holder or Holders have
completed the distribution described in the registration statement
relating thereto, whichever first occurs; provided, however, that in
the case of any registration of Registrable Securities on Form S-3
which are intended to be offered on a continuous or delayed basis,
such 120-day period shall be extended, if necessary, to keep the
registration statement effective until all such Registrable Securities
are sold, provided that Rule 415, or any successor rule under the
Securities Act, permits an offering on a continuous or delayed basis,
and provided further that applicable rules under the Securities Act
governing the obligation to file a post-effective amendment, permit,
in lieu of filing a post-effective amendment which (y) includes any
prospectus required by Section 10(a)(3) of the Securities Act or (z)
reflects facts or events
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representing a material or fundamental change in the information set
forth in the registration statement, the incorporation by reference of
information required to be included in (y) and (z) above to be
contained in periodic reports filed pursuant to Section 13 or 15(d) of
the Exchange Act in the registration statement;
(b) Furnish such number of prospectuses and other
documents incident thereto as a Holder from time to time reasonably
requests;
(c) In connection with any underwritten offering pursuant
to a registration statement filed pursuant to Section 8.5 hereof, the
Company will enter into any underwriting agreement reasonably
necessary to effect the offer and sale of Common Stock, provided such
underwriting agreement contains customary underwriting provisions and
provided further that if the underwriter so requests the underwriting
agreement will contain customary contribution provisions.
8.9 Indemnification.
(a) The Company will indemnify each Holder, each of its
officers, directors and partners, and each person controlling such
Holder, with respect to which registration, qualification or
compliance has been effected pursuant to this Section 8, and each
underwriter, if any, and each person who controls any underwriter,
against all claims, losses, damages and liabilities (or actions in
respect thereof) arising out of or based on any untrue statement (or
alleged untrue statement) of a material fact contained in any
prospectus, offering circular or other document (including any related
registration statement, notification or the like) incident to any such
registration, qualification or compliance, or based on any omission
(or alleged omission) to state therein a material fact required to be
stated therein or necessary to make the statements therein not
misleading, or any violation by the Company of the Securities Act or
any rule or regulation thereunder applicable to the Company in
connection with any such registration, qualification or compliance,
and will reimburse each such Holder, each of its officers, directors
and partners, and each person controlling such Holder, each such
underwriter and each person who controls any such underwriter, for any
legal and any other expenses reasonably incurred in connection with
investigating and defending any such claim, loss, damage, liability or
action, provided that the Company will not be liable in any such case
to the extent that any such claim, loss, damage, liability or expense
arises out of or is based on any untrue statement or omission based
upon written information furnished to the Company by such Holder or
underwriter and stated to be specifically for use therein.
(b) Each Holder and Other Shareholder will, if
Registrable Securities held by it are included in the securities as to
which such registration, qualification or compliance is being
effected, indemnify the Company, each of its directors and officers
and each underwriter, if any, of the Company's securities covered by
such a registration statement, each person who controls the Company or
such underwriter within the meaning of the Securities Act and the
rules and regulations thereunder, each other such Holer and Other
Shareholder and each of their officers, directors and partners, and
each person controlling such Holder or Other Shareholder, against all
claims, losses, damages and liabilities (or
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actions in respect thereof) arising out of or based on any untrue
statement (or alleged untrue statement) of a material fact contained
in any such registration statement, prospectus, offering circular or
other document, or any omission (or alleged omission) to state therein
a material fact required to be stated therein or necessary to make the
statements therein not misleading, and will reimburse the Company and
such Holders, Other Shareholders, directors, officers, partners,
persons, underwriters or control persons for any legal or any other
expenses reasonably incurred in connection with investigating or
defending any such claim, loss, damage, liability or action, in each
case to the extent, but only to the extent, that such untrue statement
(or alleged untrue statement) or omission (or alleged omission) is
made in such registration statement, prospectus, offering circular or
other document in reliance upon and in conformity with written
information furnished to the Company by such Holder or Other
Shareholder and stated to be specifically for use therein; provided,
however, that the obligations of such Holders and Other Shareholders
hereunder shall be limited to an amount equal to the proceeds to each
such Holder or Other Shareholder of securities sold as contemplated
herein.
(c) Each party entitled to indemnification under this
Section 8 (the "Indemnified Party") shall give notice to the party
required to provide indemnification (the "Indemnifying Party")
promptly after such Indemnified Party has actual knowledge of any
claim as to which indemnity may be sought, and shall permit the
Indemnifying Party to assume the defense of any such claim or any
litigation resulting therefrom provided that counsel for the
Indemnifying Party, who shall conduct the defense of such claim or any
litigation resulting therefrom, shall be approved by the Indemnified
Party (whose approval shall not unreasonably be withheld), and the
Indemnified Party may participate in such defense at such party's
expense, and provided further that the failure of any Indemnified
Party to give notice as provided herein shall not relieve the
Indemnifying Party of its obligations under this Section 8. No
Indemnifying Party, in the defense of any such claim or litigation,
shall, except with the consent of each Indemnified Party, consent to
entry of any judgment or enter into any settlement which does not
include as an unconditional term thereof the giving by the claimant or
plaintiff to such Indemnified Party of a release from all liability in
respect to such claim or litigation. Each Indemnified Party shall
furnish such information regarding itself or the claim in question as
an Indemnifying Party may reasonably request in writing and as shall
be reasonably required in connection with defense of such claim and
litigation resulting therefrom.
8.10 Information by Holder. Each Holder of Registrable Securities
holding securities included in any registration, shall furnish to the Company
such information regarding such Holder and the distribution proposed by such
Holder as the Company may reasonably request in writing and as shall be
reasonably required in connection with any registration, qualification or
compliance referred to in this Section 8.
8.11 Limitations on Registration of Issues of Securities. From and
after the date of this Agreement, the Company shall not enter into any
agreement (excluding the Warrant) with any holder or prospective holder of any
securities of the Company giving such holder or prospective holder the right to
require the Company to initiate any registration of any securities of the
Company or the right to require the Company, upon any registration of any of
its securities, to
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include, among the securities which the Company is then registering, securities
owned by such holder; provided, however, the holders in interest of 51% of the
Shares not sold to the public , may waive the requirement that the Company not
enter into any agreement giving a holder of any securities of the Company the
right to require the Company to initiate registration of any securities of the
Company. Any right given by the Company to any holder or prospective holder of
the Company's securities in connection with the registration of securities
shall be conditioned such that it shall be consistent with the provisions of
this Section 8, with the rights of the Holders provided in this Agreement, and
with the registration rights held by Purchaser under the Warrant.
8.12 Rule 144 Reporting. With a view to making available the
benefits of certain rules and regulations of the Commission which may permit
the sale of the Restricted Securities to the public without registration, the
Company agrees to:
(a) Use its best efforts to file with the Commission in a
timely manner all reports and other documents required of the Company
under the Securities Act and the Exchange Act;
(b) So long as Purchaser owns any Restricted Securities,
furnish to Purchaser forthwith upon request a written statement by the
Company as to its compliance with the reporting requirements of Rule
144 and of the Securities Act and the Exchange Act, a copy of the most
recent annual or quarterly report of the Company, and such other
reports and documents so filed as Purchaser may reasonably request in
availing itself of any rule or regulation of the Commission allowing
Purchaser to sell any such securities without registration.
8.13 Transfer or Assignment of Registration Rights. The rights to
cause the Company to register Purchaser's Registrable Securities granted to
Purchaser by the Company under this Section 8 may be transferred or assigned
by Purchaser to a transferee or assignee of any of Purchaser's Registrable
Securities, provided that the Company is given written notice by Purchaser at
the time of or within a reasonable time after said transfer or assignment,
stating the name and address of said transferee or assignee and identifying the
securities with respect to which such registration rights are being transferred
or assigned; and provided further that the transferee or assignee of such
rights assumes the obligations of Purchaser under this Section 8.
SECTION 9
RESCISSION OF SALE OF THE SECURITIES
9.1 Rescission Rights. If the Company shall fail to comply with,
breach or violate any material covenant contained in this Agreement and such
failure or breach shall have continued for thirty (30) days after written
notice thereof to the Company by Purchaser, the Company shall immediately offer
to rescind, within (30) days of receipt of such election, all purchases of the
Shares, at the price paid for the Shares, and Purchaser by accepting such
rescission offer shall relieve the Company of and be relieved from all
obligation under this Agreement. The Company hereby covenants and agrees that
it shall, to the fullest extent permitted by law, do all things necessary,
including, but not limited to, making all appropriate adjustments to stated
capital,
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which shall permit the Company to implement the rescission rights of Purchaser
pursuant thereto. This provision shall not be construed as being in
substitution for or as a limitation of any other rights or remedies available
to Purchaser at law or equity. The rescission rights set forth in this Section
9.1 will terminate on January 29, 1997.
SECTION 10
MISCELLANEOUS
10.1 Governing Law. This Agreement shall be governed in all
respects by the laws of the State of Texas applicable to contracts made and to
be wholly performed in the State of Texas.
10.2 Survival. Except as stated herein, the representations,
warranties, covenants and agreements made herein shall survive (i) any
investigation made by Purchaser and (ii) each Closing.
10.3 Successors and Assigns. Except as otherwise expressly
provided herein, the provisions hereof shall inure to the benefit of, and be
binding upon, the successors, assigns heirs, executors and administrators of
the parties hereto; provided, however, the Company may not assign its rights
hereunder.
10.4 Entire Agreement; Amendment. This Agreement (including the
Schedules and Exhibits hereto) and the other documents delivered pursuant
hereto constitute the full and entire understanding and agreement between the
parties with regard to the subjects hereof and thereof. Neither this Agreement
nor any term hereof may be amended, waived, discharged or terminated, except by
a written instrument signed by the Company and the Purchaser.
10.5 Notices, etc. All notices and other communications required
or permitted hereunder shall be in writing and shall be mailed by first-class
mail, postage prepaid, or delivered either by hand or by messenger, addressed
(a) if to Purchaser, at 13750 U.S. 281 North, Suite 660, San Antonio, Texas
78232, or at such other address as Purchaser shall have furnished to the
Company in writing, or (b) if to the Company, at 270 Upper 4th Street, Milton
Keynes Bucks MK9 1DP, or at such other address as the Company shall have
furnished to the Purchaser in writing.
10.6 Delays or Omissions. No delay or omission to exercise any
right, power or remedy accruing to any party, upon any breach or default of the
Company under this Agreement, shall impair any such right, power or remedy of
such party nor shall it be construed to be a waiver of any such breach or
default, or an acquiescence therein, or of or in any similar breach or default
thereafter occurring; nor shall any waiver of any single breach or default be
deemed a waiver of any other breach or default theretofore or thereafter
occurring. Any waiver, permit, consent or approval of any kind or character on
the part of any party of any breach or default under this Agreement, or any
waiver on the part of any party of any provisions or conditions of this
Agreement must be made in writing and shall be effective only to the extent
specifically set forth
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in such writing. All remedies either under this Agreement or by law or
otherwise afforded to any holder, shall be cumulative and not alternative.
10.7 Rights; Separability. In case any provision of the Agreement
shall be invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions shall not in any way be affected or
impaired thereby.
10.8 Agent's Fees.
(a) The Company hereby agrees to indemnify and to hold
Purchaser harmless of and from any liability for commission or
compensation in the nature of an agent's fee to any broker, finder or
other person or firm (and the costs and expenses of defending against
such liability or asserted liability) arising from any act by the
Company or any of its employees or representatives.
(b) Purchaser (i) represents and warrants that it has
retained no broker or finder in connection with the transactions
contemplated by this Agreement and (ii) hereby agrees to indemnify and
to hold the Company harmless from any liability for any commission or
compensation in the nature of an agent's fee to any broker or other
person or firm (and the costs and expenses of defending against such
liability or asserted liability) for which it, any of its employees or
any of its representatives are responsible.
10.9 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
10.10 Subsidiary Guarantees. Each Subsidiary guarantees the
performance of all obligations of the Company hereunder and under the Warrant.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed and delivered by their proper and duly authorized officers effective
the day and year first above written.
McLAUGHLIN ENTERPRISES, INC. MSU CORPORATION
By: MARK McLAUGHLIN By: KEITH CHARLES HALL
------------------------------- ---------------------------------
Mark McLaughlin Keith Charles Hall
President President
MSU PUBLIC LIMITED COMPANY MSU (UK) LIMITED
By KEITH CHARLES HALL By: KEITH CHARLES HALL
------------------------------- ---------------------------------
Keith Charles Hall Keith Charles Hall
Managing Director Managing Director
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EXHIBIT A
1. The number of First Round Shares is 800,000 shares of Common Stock
representing the greater of 800,000 shares of Common Stock as per Section
1.1(a)(i) of the Agreement and 789,439 shares of Common Stock as per Section
1.1(a)(ii) of the Agreement.
2. The Company represents and warrants that the Company's outstanding
preemptive, conversion or other rights, claims, options, warrants or agreements
granted or issued by or binding upon the Company or otherwise existing for the
purchase acquisition or obtainment of any of its shares of Common Stock consist
solely of the following:
a. Irving Goldstein warrant to acquire 100,000 shares;
b. Options to acquire 150,000 shares under the Company's employee
stock option plan; and
c. Charles McLaughlin right to acquire 50,000 shares.
3. The Company represents and warrants, without giving effect to the
transactions contemplated by this Agreement, that there are 14,209,897 shares
of Common Stock outstanding on a fully diluted basis (with all warrants
[excluding Purchaser's Warrant], options, convertible securities and the like
[which consist solely of the three items disclosed in 2.a. through 2.c. above
in this Exhibit A] deemed exercised or converted, as appropriate).
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<PAGE> 1
EXHIBIT 4.2
Amendment to Common Stock
Purchase Agreement
This Amendment, made effective the 29th day of February, 1996, by and
among McLaughlin Group LLC (as assignee of McLaughlin Enterprises, Inc.) (the
"Purchaser"), MSU Corporation, a Florida corporation (the "Company"), MSU
Public Limited Company, a corporation formed under the laws of England and
Wales (a "Subsidiary"), and MSU (UK) Limited, a corporation formed under the
laws of England and Wales (a "Subsidiary"), amending that certain Common Stock
Purchase Agreement, dated effective the 30th day of January, 1996 (the
"Purchase Agreement"). Defined terms used herein and not otherwise defined
herein shall have the meanings ascribed to them in the Purchase Agreement.
R E C I T A L S
This Amendment is entered into in connection with the Second Closing
under the Purchase Agreement pursuant to which Purchaser is purchasing the
Second Round Shares.
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
Section 1.
Amendment
Section 6.10 of the Purchase Agreement is hereby amended to add a new
Section 6.10(c) to hereafter read as follows:
6.10(c) In the event any capital stock or any debt or equity
instruments that are convertible into or exercisable or exchangeable
for capital stock are issued to any Company shareholders in connection
with matters pertaining to or related to any one or more of (i)
Millport Limited, (ii) the Company's Regulation S Offering for which
Millport Limited served as placement agent, (iii) certain recipients
of Company common stock in such Regulation S Offering, and (iv) the
Exchange Agreement, dated October 3, 1994, among certain persons and
Capital Acquisition Company, the Company's predecessor; then Purchaser
shall be issued such number of additional shares of Common Stock as
will result in Purchaser being the registered holder of 10% (exclusive
of any ownership interest attributable to Purchaser's Warrant) of the
outstanding Common Stock (on a fully diluted basis with all warrants
[excluding Purchaser's Warrant], options, convertible securities and
the like deemed exercised or converted, as appropriate).
With regard to the matters referenced in the preceding
paragraph, the Company acknowledges its commitment to promptly take
all reasonable and prudent action to obtain recovery from Millport,
Ltd., Martin Miller and the obligors on the notes (the "Miller
Group"). The Company agrees not to issue any
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capital stock or any debt or equity instruments that are convertible
into or exchangeable for capital stock to any one or more Company
shareholders in connection with any matter referenced in the preceding
paragraph unless and until the following have occurred:
1. All reasonable and prudent action to recover from the
Millport Group has been taken.
2. Proper claims are asserted by one or more of the
Company shareholders.
3. Liability is determined to exist either by a court of
competent jurisdiction or an independent committee of the Company's
Board of Directors applying, in each case, Florida and other
applicable law; and, assuming liability is determined to exist, such
independent committee determines that an issuance of Company
securities is a prudent and advisable means of settling the liability.
Section 2.
Representations and Warranties of the Company
The Company hereby represents and warrants to Purchaser as follows:
2.1 Corporate Power. The Company and each Subsidiary has all
requisite corporate power and authority to enter into this Amendment and to
carry out and perform their respective obligations under the terms of the
Purchase Agreement, as amended hereby.
2.2 Authorization. All corporate action on the part of the Company
and each Subsidiary, their respective directors and stockholders necessary for
the authorization, execution, delivery and performance by the Company and each
Subsidiary of this Amendment and the consummation of the transactions
contemplated herein has been taken. The Purchase Agreement, as amended hereby,
is the valid and binding agreement of the Company and each Subsidiary,
enforceable in accordance with its terms, subject to applicable bankruptcy,
insolvency, reorganization and moratorium laws and other laws of general
application offering enforcement of creditors' rights generally. The
authorization, execution, delivery and performance by the Company and each
Subsidiary of this Amendment, and the Purchase Agreement, as amended hereby,
will not violate or constitute a default under any provision of state, federal
or other applicable laws to which the Company or any Subsidiary is subject, the
Company's or any Subsidiary's Articles of Incorporation (or comparable
document), as amended, or Bylaws (or comparable document), as amended, or any
mortgage, indenture, agreement, instrument, judgment, decree, order, rule or a
regulation or other restriction to which the Company or any Subsidiary is a
party or by which it is bound, or result in the creation of any mortgage,
pledge, lien, encumbrance or charge upon any of the properties or assets of the
Company or any Subsidiary.
2.3 Consents. All consents, qualifications, orders, approvals, or
authorizations of, or filings with, any governmental authority required in
connection with the Company's and each Subsidiary's valid execution, delivery
and performance of this Amendment and the consummation
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of the transactions contemplated on the part of the Company and each Subsidiary
under the Purchase Agreement, as amended hereby, have been duly obtained and
are effective on and as of the date hereof to the extent required by law.
Section 3.
Miscellaneous
3.1 Governing Law. This Amendment shall be governed in all respects
by the laws of the State of Texas applicable to contracts made and to be wholly
performed in the State of Texas.
3.2 Counterparts. This Amendment may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
3.3 Amendments. No provision hereof shall be modified or amended
orally or by a course of conduct but only by a written instrument expressly
referring hereto signed by both parties.
IN WITNESS WHEREOF, the parties have caused this Amendment to be duly
executed and delivered by their proper and duly authorized officers, directors
or members effective the day and year first above written.
MSU Corporation McLaughlin Group LLC
By: KEITH CHARLES HALL By: MARK McLAUGHLIN
-------------------------------- ------------------------------
Keith Charles Hall, President Mark McLaughlin, Member
MSU Public Limited Company MSU (UK) Limited
By: KEITH CHARLES HALL By: KEITH CHARLES HALL
-------------------------------- ------------------------------
Keith Charles Hall, Keith Charles Hall,
Managing Director Managing Director
3
<PAGE> 1
EXHIBIT 4.3
WARRANT
THIS WARRANT AND ANY SHARES ACQUIRED UPON THE EXERCISE OF THIS WARRANT HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES
LAWS OF ANY STATE AND MAY NOT BE SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE
OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER SUCH ACT AND APPLICABLE
STATE SECURITIES LAWS. NEITHER THIS WARRANT NOR ANY OF SUCH SHARES MAY BE
TRANSFERRED EXCEPT UPON THE CONDITIONS SPECIFIED IN THIS WARRANT. UNLESS AND
UNTIL SUCH CONDITIONS SHALL HAVE BEEN COMPLIED WITH, NO TRANSFER OF THIS
WARRANT OR ANY OF SUCH SHARES SHALL BE VALID OR EFFECTIVE.
VOID AFTER 5:00 P.M., NEW YORK TIME, ON THE EXPIRATION DATE, AS DEFINED HEREIN,
OR IF NOT A BUSINESS DAY, AS DEFINED HEREIN, AT 5:00 P.M., NEW YORK TIME, ON
THE NEXT FOLLOWING BUSINESS DAY.
WARRANT TO PURCHASE
SHARES OF COMMON STOCK
OF
MSU CORPORATION
NO. W-2
This certifies that, for good and valuable consideration, McLaughlin Group
LLC and its assigns (collectively, the "Warrantholder"), is entitled to
purchase from MSU Corporation, a corporation incorporated under the laws of the
State of Florida (the "Company"), subject to the terms and conditions hereof,
at any time on or after 9:00 a.m., New York time, on the Commencement Date (as
defined herein), and before 5:00 p.m., New York time on the Expiration Date (as
defined herein) (or, if such day is not a Business Day, at or before 5:00 p.m.,
New York time, on the next following Business Day), the Warrant Shares (as
defined herein) at the Exercise Price (as defined herein). The Exercise Price
and the number of shares purchasable hereunder are subject to adjustment from
time to time as provided in Article 3 hereof.
ARTICLE 1
1.1 Definition of Terms. As used in this Warrant, the following
capitalized terms shall have the following respective meanings:
(a) Business Day: A day other than a Saturday, Sunday or other day on
which banks in the State of New York are authorized by law to remain closed.
(b) Common Stock: Common stock, $.01 par value, of the Company.
(c) Commencement Date: 9:00 a.m., New York time, on March 1, 1996.
(d) Demand Registration: See Section 6.2.
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(e) Exchange Act: The Securities Exchange Act of 1934, as amended.
(f) Exercise Price: $1 million for the Warrant Shares, as such price
may be adjusted from time to time pursuant to Article 3 hereof.
(g) Expiration Date: 5:00 p.m., New York time, on such day that is
eighteen months after the Commencement Date or, if such day is not a Business
Day, the next succeeding day which is a Business Day.
(h) Holder: A Holder of Registrable Securities.
(i) NASD: National Association of Securities Dealers, Inc. and
Nasdaq: NASD Automatic Quotation System.
(j) Person: An individual, partnership, joint venture, corporation,
trust, unincorporated organization or government or any department or agency
thereof.
(k) Piggyback Registration: See Section 6.1.
(l) Prospectus: Any prospectus included in any Registration
Statement, as amended or supplemented by any prospectus supplement, with
respect to the terms of the offering of any portion of the Registrable
Securities covered by such Registration Statement and all other amendments and
supplements to the Prospectus, including post- effective amendments and all
material incorporated by reference in such Prospectus.
(m) Public Offering: A public offering of any of the Company's equity
or debt securities pursuant to a Registration Statement under the Securities
Act.
(n) Registration Expenses: Any and all expenses incurred in
connection with any registration or action incident to performance of or
compliance by the Company with Article 6, including, without limitation, (i)
all SEC, national securities exchange and NASD registration and filing fees;
all listing fees and all transfer agent fees; (ii) all fees and expenses of
complying with state securities or blue sky laws (including the fees and
disbursements of counsel of the underwriters in connection with blue sky
qualifications of the Registrable Securities); (iii) all printing, mailing,
messenger and delivery expenses, (iv) all fees and disbursements of counsel for
the Company and of its accountants, including the expenses of any special
audits and/or "cold comfort" letters required by or incident to such
performance and compliance, and (v) any disbursements of underwriters
customarily paid by issuers or sellers of securities including the reasonable
fees and expenses of any special experts retained with the approval of the
Company in connection with the requested registration, but excluding
underwriting discounts and commissions, brokerage fees and transfer taxes, if
any, and fees of counsel or accountants retained by the holders of Registrable
Securities to advise them in their capacity as Holders of Registrable
Securities.
(o) Registrable Securities: Any Warrant Shares issued to McLaughlin
Group LLC and/or its designees or transferees and/or other securities that may
be or are issued by the Company upon exercise of this Warrant, including those
which may thereafter be issued by the Company in respect of any such securities
by means of any stock splits, stock dividends, recapitalizations,
reclassifications or the like, and as adjusted pursuant to Article 3 hereof;
provided, however, that as to any particular security contained in Registrable
Securities, such securities shall cease to be Registrable Securities when (i) a
Registration Statement with respect to the sale of such securities shall have
become effective under the Securities Act and
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<PAGE> 3
such securities shall have been disposed of in accordance with such
Registration Statement; or (ii) they shall have been sold to the public
pursuant to Rule 144 (or any successor provision) under the Securities Act.
(p) Registration Statement: Any registration statement of the Company
filed or to be filed with the SEC which covers any of the Registrable
Securities pursuant to the provisions of this Agreement, including all
amendments (including post-effective amendments) and supplements thereto, all
exhibits thereto and all material incorporated therein by reference.
(q) SEC: The Securities and Exchange Commission or any other federal
agency at the time administering the Securities Act or the Exchange Act.
(r) Securities Act: The Securities Act of 1933, as amended.
(s) Warrants: This Warrant, all other warrants issued on the date
hereof and all other warrants that may be issued in its or their places
(together evidencing the right to purchase the Warrant Shares), originally
issued as set forth in the definition of Registrable Securities.
(t) Warrantholder: The person(s) or entity(ies) to whom this Warrant
is originally issued, or any successor in interest thereto, or any assignee or
transferee thereof (subject to the restrictions set forth in Section 5.2), in
whose name this Warrant is registered upon the books to be maintained by the
Company for that purpose.
(u) Warrant Shares: Such number of shares of Common Stock as equals
3.5% of the outstanding shares of Common Stock on the date this Warrant is
exercised (with such determination to be made on a fully diluted basis, with
all warrants [excluding this Warrant], options, convertible securities and the
like deemed exercised and converted).
ARTICLE 2
DURATION AND EXERCISE OF WARRANT
2.1 Duration of Warrant. The Warrantholder may exercise this Warrant at
any time and from time to time after 9:00 a.m., New York time, on the
Commencement Date, and before 5:00 p.m., New York time, on the Expiration Date.
If this Warrant is not exercised on the Expiration Date, it shall become void,
and all rights hereunder shall thereupon cease.
2.2 Exercise of Warrant.
(a) The Warrantholder may exercise this Warrant, in whole only, by
presentation and surrender of this Warrant to the Company at its corporate
office at 270 Upper 4th Street, Milton Keynes Bucks MK9 1DP or at the office of
its stock transfer agent, if any, with the Subscription Form annexed hereto
duly executed and accompanied by payment of the full Exercise Price for the
Warrant Shares.
(b) Upon receipt of this Warrant with the Subscription Form fully
executed and accompanied by payment of the Exercise Price for the Warrant
Shares, the Company shall cause to be issued one or more certificates for the
Warrant Shares (adjusted to reflect the effect of the anti-dilution provisions
contained in Article 3 hereof, if any, and as provided in Section 2.4 hereof)
in such denominations as are requested for delivery to the Warrantholder, and
the Company shall thereupon deliver such certificates to the Warrantholder.
The Warrantholder shall be deemed to be the holder of record of the shares of
Common
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Stock issuable upon such exercise, notwithstanding that the stock transfer
books of the Company shall then be closed or that certificates representing
such shares of Common Stock shall not then be actually delivered to the
Warrantholder. If at the time this Warrant is exercised, a Registration
Statement is not in effect to register under the Securities Act the Warrant
Shares issuable upon exercise of this Warrant, the Company may require the
Warrantholder to make such representations, and may place such legends on
certificates representing the Warrant Shares, as may be reasonably required in
the opinion of counsel to the Company to permit the Warrant Shares to be issued
without such registration.
(c) The Company shall pay any and all stock transfer and similar taxes
which may be payable in respect of the issuance of the Warrant Shares.
2.3 Reservation of Shares. The Company hereby agrees that at all times
there shall be reserved for issuance and delivery upon exercise of this Warrant
such number of shares of Common Stock or other shares of capital stock of the
Company from time to time issuable upon exercise of this Warrant. All such
shares shall be duly authorized, and when issued upon such exercise, shall be
validly issued, fully paid and non-assessable, free and clear of all liens,
security interests, charges and other encumbrances or restrictions on sale
(except as contemplated by Section 2.2(b)) and free and clear of all preemptive
rights.
2.4 Fractional Shares. The Company shall not be required to issue any
fraction of a share of its capital stock in connection with the exercise of
this Warrant, and in any case where the Warrantholder would, except for the
provisions of this Section 2.4, be entitled under the terms of this Warrant to
receive a fraction of a share upon the exercise of this Warrant, the Company
shall, upon the exercise of this Warrant, pay to the Warrantholder an amount in
cash equal to the fair market value of such fractional share as of the exercise
date.
2.5 Listing. Prior to the issuance of any shares of Common Stock upon
exercise of this Warrant, the Company shall secure the listing of such shares
of Common Stock upon each national securities exchange or automated quotation
system, if any, upon which shares of Common Stock are then listed (subject to
official notice of issuance upon exercise of this Warrant) and shall maintain,
so long as any other shares of Common Stock shall be so listed, such listing of
all shares of Common Stock from time to time issuable upon the exercise of this
Warrant; and the Company shall so list on each national securities exchange or
automated quotation system, and shall maintain such listing, of any other
shares of capital stock of the Company issuable upon the exercise of this
Warrant if and so long as any shares of the same class shall be listed on such
national securities exchange or automated quotation system.
ARTICLE 3
ADJUSTMENT OF SHARES OF COMMON STOCK
PURCHASABLE AND OF EXERCISE PRICE
The Exercise Price and the number and kind of Warrant Shares shall be
subject to adjustment from time to time upon the happening of certain events as
provided in this Article 3.
3.1 Adjustments.
(a) If at any time prior to the exercise of this Warrant, the Company
shall issue or sell any Common Stock without consideration or for consideration
per share less than the current market price per share on the date of such
issuance or sale, or fix a record date for the issuance of subscription rights,
options or warrants to all holders of Common Stock entitling them to subscribe
for or purchase Common Stock at a
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price (or having an exercise or conversion price) less than the current market
price of the Common Stock, the Exercise Price shall be appropriately adjusted
in favor of the Warrantholder..
(b) If at any time prior to the exercise of this Warrant, the Company
shall fix a record date for the issuance or making of a distribution to all
holders of the Common Stock (including any such distribution to be made in
connection with a consolidation or merger in which the Company is to be the
continuing corporation) of evidences of indebtedness, any other securities of
the Company or any cash property or other assets (excluding a standard
combination, reclassification or recapitalization), the Exercise Price shall be
appropriately adjusted in favor of the Warrantholder.
(c) If at any time prior to the exercise of this Warrant, the Company
shall make a distribution to all holders of the Common Stock of stock of a
subsidiary or securities convertible into or exercisable for such stock then in
lieu of an adjustment in the Exercise Price or the number of Warrant Shares
purchasable upon the exercise of this Warrant, each Warrantholder, upon the
exercise hereof at any time after such distribution, shall be entitled to
receive from the Company, such subsidiary or both, as the Company shall
determine, the stock or other securities to which such Warrantholder would have
been entitled if such Warrantholder had exercised this Warrant immediately
prior thereto, all subject to further adjustment as provided in this Article 3,
and the Company shall reserve, for the life of the Warrant, such securities of
such subsidiary or other corporation; provided, however, that no adjustment in
respect of dividends or interest on such stock or other securities shall be
made during the term of this Warrant or upon its exercise.
(d) Whenever the Exercise Price payable upon exercise of each Warrant
is adjusted pursuant to one or more of paragraphs (a) and (b) of this Section
3.1, the Warrant Shares shall simultaneously be appropriately adjusted in favor
of the Warrantholder.
3.2 Form of Warrant After Adjustments. The form of this Warrant need not
be changed because of any adjustments in the Exercise Price or the number or
kind of the Warrant Shares, and Warrants theretofore or thereafter issued may
continue to express the same price and number and kind of shares as are stated
in this Warrant, as initially issued.
ARTICLE 4
OTHER PROVISIONS RELATING TO RIGHTS OF WARRANTHOLDER
4.1 No Rights as Shareholders; Notice to Warrantholders. Nothing contained
in this Warrant shall be construed as conferring upon the Warrantholder or its
transferees the right to vote or to receive dividends or to consent or to
receive notice as a shareholder in respect of any meeting of shareholders for
the election of directors of the Company or of any other matter, or any rights
whatsoever as shareholders of the Company. The Company shall give notice to
the Warrantholder by registered mail if at any time prior to the expiration or
exercise of the Warrant, any of the following events shall occur:
(a) the Company shall authorize the payment of any dividend payable in
any securities upon shares of Common Stock or authorize the making of any
distribution (other than a cash dividend subject to the parenthetical set forth
in Section 3.1(b)) to all holders of Common Stock;
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(b) the Company shall authorize the issuance to all holders of Common
Stock of any additional shares of Common Stock or Common Stock equivalents or
of rights, options or warrants to subscribe for or purchase Common Stock or
Common Stock equivalents or of any other subscription rights, options or
warrants;
(c) a dissolution, liquidation or winding up of the Company shall be
proposed; or
(d) a capital reorganization or reclassification of the Common Stock
(other than a subdivision or combination of the outstanding Common Stock and
other than a change in the par value of the Common Stock) or any consolidation
or merger of the Company with or into another corporation (other than a
consolidation or merger in which the Company is the continuing corporation and
that does not result in any reclassification or change of Common Stock
outstanding) or in the case of any sale or conveyance to another corporation of
the property of the Company as an entirety or substantially as an entirety.
Such giving of notice shall be initiated (i) at least 20 Business Days
prior to the date fixed as a record date or effective date or the date of
closing of the Company's stock transfer books for the determination of the
shareholders entitled to such dividend, distribution or subscription rights, or
for the determination of the shareholders entitled to vote on such proposed
merger, consolidation, sale, conveyance, dissolution, liquidation or winding
up. Such notice shall specify such record date or the date of closing the
stock transfer books, as the case may be. Failure to provide such notice shall
not affect the validity of any action taken in connection with such dividend,
distribution or subscription rights, or proposed merger, consolidation, sale,
conveyance, dissolution, liquidation or winding up.
4.2 Lost, Stolen, Mutilated or Destroyed Warrants. If this Warrant is
lost, stolen, mutilated or destroyed, the Company may, on such terms as to
indemnity or otherwise as it may in its discretion impose (which shall, in the
case of a mutilated Warrant, include the surrender thereof), issue a new
Warrant of like denomination and tenor as, and in substitution for, this
Warrant.
ARTICLE 5
SPLIT-UP, COMBINATION
EXCHANGE AND TRANSFER OF WARRANTS
5.1 Split-Up, Combination and Exchange of Warrants. This Warrant may be
split up, combined or exchanged for another Warrant or Warrants containing the
same terms to purchase a like aggregate number of Warrant Shares. If the
Warrantholder desires to split up, combine or exchange this Warrant, it shall
make such request in writing delivered to the Company and shall surrender to
the Company this Warrant and any other Warrants to be so split-up, combined or
exchanged. Upon any such surrender for a split-up, combination or exchange,
the Company shall execute and deliver to the person entitled thereto a Warrant
or Warrants, as the case may be, as so requested. The Company shall not be
required to effect any split-up, combination or exchange which will result in
the issuance of a Warrant entitling the Warrantholder to purchase upon exercise
a fraction of a share of Common Stock or a fractional Warrant. The Company may
require such Warrantholder to pay a sum sufficient to cover any tax or
governmental charge that may be imposed in connection with any split- up,
combination or exchange of Warrants.
5.2 Restrictions on Transfer; Restrictive Legends. Subject to the other
restrictions on transfer contained in this Warrant, the Warrant Holder may
freely assign or transfer this Warrant; provided, however that the
Warrantholder shall not, without the Company's consent (not to be unreasonably
withheld) assign or
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transfer this Warrant to any person who or which might be deemed to have an
interest adverse to the Company.
Except as otherwise permitted by this Section 5.2, each Warrant shall (and
each Warrant issued upon direct or indirect transfer or in substitution for any
Warrant issued pursuant to Section 5.1 shall) be stamped or otherwise imprinted
with a legend in substantially the following form:
"THIS WARRANT AND ANY SHARES ACQUIRED UPON THE EXERCISE OF THIS WARRANT
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD OR OTHERWISE
TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM
UNDER SUCH ACT AND APPLICABLE STATE SECURITIES LAWS. NEITHER THIS WARRANT
NOR ANY OF SUCH SHARES MAY BE TRANSFERRED EXCEPT UPON THE CONDITIONS
SPECIFIED IN THIS WARRANT. UNLESS AND UNTIL SUCH CONDITIONS SHALL HAVE
BEEN COMPLIED WITH, NO TRANSFER OF THIS WARRANT OR ANY OF SUCH SHARES SHALL
BE VALID OR EFFECTIVE."
Except as otherwise permitted by this Section 5.2, each stock
certificate for Warrant Shares issued upon the exercise of any Warrant and each
stock certificate issued upon the direct or indirect transfer of any such
Warrant Shares shall be stamped or otherwise imprinted with a legend in
substantially the following form:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY
STATE AND MAY NOT BE SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH
REGISTRATION OR AN EXEMPTION THEREFROM UNDER SUCH ACT AND APPLICABLE STATE
SECURITIES LAWS."
Notwithstanding the foregoing, the Warrantholder may require the
Company to issue a Warrant or a stock certificate for Warrant Shares, in each
case without a legend, if (i) the issuance of such Warrant Shares has been
registered under the Securities Act, (ii) such Warrant or such Warrant Shares,
as the case may be, have been registered for resale under the Securities Act or
sold pursuant to Rule 144 under the Securities Act (or a successor thereto) or
(iii) the Warrantholder has received an opinion of counsel reasonably
satisfactory to the Company that such registration is not required with respect
to such Warrant or such Warrant Shares, as the case may be.
ARTICLE 6
REGISTRATION UNDER THE SECURITIES ACT OF 1933
6.1 Piggyback Registration.
(a) Right to include Registrable Securities. If at any time or from
time to time prior to the fifth anniversary of the Expiration Date, the Company
proposes to register any of its securities under the Securities Act on any form
for the registration of securities under such Act, whether or not for its own
account (other than by a registration statement on Form S-8 or Form S-4 or
other form which does not include substantially the same information as would
be required in a form for the general registration of securities or would not
be available for the Registrable Securities) (a "Piggyback Registration'), it
shall as
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expeditiously as possible give written notice to all Holders of its intention
to do so and of such Holders' rights under this Section 6.1. Such rights are
referred to hereinafter as "Piggyback Registration Rights." Upon the written
request of any such Holder made within 20 days after receipt of any such notice
(which request shall specify the Registrable Securities intended to be disposed
of by such Holder), the Company shall include in the Registration Statement
(subject to the limitations set forth in this Section 6.1) the Registrable
Securities which the Company has been so requested to register by the Holders
thereof and the Company shall keep such registration statement in effect and
maintain compliance with each Federal and state law or regulation for the
period necessary for such Holder to effect the proposed sale or other
disposition (but in no event for a period greater than 120 days).
(b) Withdrawal of Piggyback Registration by Company. If, at any time
after giving written notice of its intention to register any securities in a
Piggyback Registration but prior to the effective date of the related
Registration Statement, the Company shall determine for any reason not to
register such securities, the Company shall give notice of such determination
to each Holder and, thereupon, shall be relieved of its obligation to register
any Registrable Securities in connection with such Piggyback Registration. All
best efforts obligations of the Company pursuant to Section 6.3 shall cease if
the Company determines to terminate prior to such effective date any
registration where Registrable Securities are being registered pursuant to this
Section 6.1.
(c) Piggyback Registration of Underwritten Public Offerings. If a
Piggyback Registration involves an offering by or through underwriters, then
(i) all Holders requesting to have their Registrable Securities included in the
Company's Registration Statement must sell their Registrable Securities to the
underwriters selected by the Company on the same terms and conditions as apply
to other selling shareholders and (ii) any Holder requesting to have his or its
Registrable Securities included in such Registration Statement may elect in
writing, not later than three Business Days prior to the effectiveness of the
Registration Statement filed in connection with such registration, not to have
his or its Registrable Securities so included in connection with such
registration.
(d) Payment of Registration Expenses for Piggyback Registration. The
Company shall pay all Registration Expenses in connection with each
registration of Registrable Securities requested pursuant to a Piggyback
Registration Right contained in this Section 6.1.
(e) Priority in Piggyback Registration . If a Piggyback Registration
involves an offering by or through underwriters, the Company shall not be
required to include Registrable Shares therein if and to the extent the
underwriter managing the offering reasonably believes in good faith and advises
each Holder requesting to have Registrable Securities included in the Company's
Registration Statement that such inclusion would materially adversely affect
such offering; provided that any such reduction or elimination shall be pro
rata to all other holders of the securities of the Company exercising
"Piggyback Registration Rights" in proportion to the respective number of
shares they have requested to be registered.
6.2 Demand Registration.
(a) Request for Registration. If, at any time or from time to time
after October 15, 1996 and prior to the fifth anniversary of the Expiration
Date, the Warrantholder requests that the Company file a registration statement
under the Securities Act (a "Demand Registration"), as soon as practicable
thereafter the Company shall use its best efforts to file a registration
statement with respect to all Warrant Shares that it has been so requested to
include and obtain the effectiveness thereof, and to take all other action
necessary under any Federal or state law or regulation to permit the Warrant
Shares that are held and/or that may be acquired upon the exercise of the
Warrants specified in the notices of the Holders or holders hereof to be sold
or otherwise disposed of, and the Company shall maintain such compliance with
each such Federal
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and state law and regulation for the period necessary for such Holders or
holders to effect the proposed sale or other disposition; provided, however,
the Company shall be entitled to defer such registration for a period of up to
120 days if and to the extent that its Board of Directors shall determine that
such registration would interfere with a pending corporate transaction. The
Company shall also promptly give written notice to the Holders and the holders
of any other Warrants and/or the holders of any Warrant Shares who or that have
not made a request to the Company pursuant to the provisions of this Section
6.2(a)of its intention to effect any required registration or qualification,
and shall use its best efforts to effect as expeditiously as possible such
registration or qualification of all such other Warrant Shares that are then
held and/or that may be acquired upon the exercise of the Warrants, the Holder
or holders of which have requested such registration or qualification, within
15 days after such notice has been given by the Company, as provided in the
preceding sentence. The Company shall be required to effect a registration or
qualification pursuant to this Section 6.2(a) on one occasion only.
(b) Payment of Registration Expenses for Demand Registration. The
Company shall pay all Registration Expenses in connection with the Demand
Registration.
(c) Selection of Underwriters. If any Demand Registration is
requested to be in the form of an underwritten offering, the managing
underwriter, the co-manager (if any) and the independent pricer required under
the rules of the NASD (if any) shall be selected and obtained by the
Warrantholder. Such selection shall be subject to the Company's consent, which
consent shall not be unreasonably withheld. All fees and expenses (other than
Registration Expenses otherwise required to be paid) of any managing
underwriter, any co-manager or any independent underwriter or other independent
pricer required under the rules of the NASD shall be paid for by such
underwriters or by the Holders or holders whose shares are being registered.
(d) Procedure for Requesting Demand Registration. Any request for a
Demand Registration shall specify the aggregate number of the Registrable
Securities proposed to be sold and the intended method of disposition. Within
ten (10) days after receipt of such a request the Company will give written
notice of such registration request to all Holders, and, subject to the
limitations of Section 6.2(b), the Company will include in such registration
all Registrable Securities with respect to which the Company has received
written requests for inclusion therein within 15 Business Days after the date
on which such notice is given. Each such request shall also specify the
aggregate number of Registrable Securities to be registered and the intended
method of disposition thereof.
6.3 Registration Procedures. If and whenever the Company is required to
use its best efforts to take action pursuant to any Federal or state law or
regulation to permit the sale or other disposition of any Registrable
Securities that are then held or that may be acquired upon exercise of the
Warrants in order to effect or cause the registration of any Registrable
Securities under the Securities Act as provided in this Article 6, the Company
shall, as expeditiously as practicable:
(a) prepare and file with the SEC, a,, soon as practicable within 150
days after the end of the period within which requests for registration may be
given to the Company a Registration Statement or Registration Statements
relating to the registration on any appropriate form under the Securities Act,
which form shall be available for the sale of the Registrable Securities in
accordance with the intended method or methods of distribution thereof, subject
to Section 6.1(e) hereof, and use its best efforts to cause such Registration
Statements to become effective; provided that before filing a Registration
Statement or Prospectus or any amendment or supplements thereto, including
documents incorporated by reference after the initial filing of any
Registration Statement, the Company will furnish to the Holders of the
Registrable Securities covered by such Registration Statement and the
underwriters, if any, copies of all such documents provided to be filed, which
documents will be subject to the review of such Holders and underwriters;
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(b) prepare and file with the SEC such amendments and post- effective
amendments to a Registration Statement as may be necessary to keep such
Registration Statement effective for a reasonable period not to exceed 120
days; cause the related Prospectus to be supplemented by any required
Prospectus supplement, and as so supplemented to be filed pursuant to Rule 424
under the Securities Act; and comply with the provisions of the Securities Act
with respect to the disposition of all securities covered by such Registration
Statement during such period in accordance with the intended methods of
disposition by the sellers thereof set forth in such Registration Statement or
supplement to such Prospectus;
(c) notify the selling Holders of Registrable Securities and the
managing underwriters, if any, promptly, and (if requested by any such Person)
confirm such advice in writing, (i) when a Prospectus or any Prospectus
supplement or post-effective amendment has been filed, and, with respect to a
Registration Statement or any post-effective amendment, when the same has
become effective; (ii) of any request by the SEC for amendments or supplements
to a Registration Statement or related Prospectus or for additional
information; (iii) of the issuance by the SEC of any stop order suspending the
effectiveness of a Registration Statement or the initiation of any proceedings
for that purpose; (iv) if at any time the representations and warranties of the
Company contemplated by paragraph (m) below ceases to be true and correct in
all material respects; (v) of the receipt by the Company of any notification
with respect to the suspension of the qualification of any of the Registrable
Securities for sale in any jurisdiction or the initiation or threatening of any
proceeding for such purpose, and (vi) of the happening of any event that makes
any statement of a material fact made in the Registration Statement, the
Prospectus or any document incorporated therein by reference untrue or which
requires the making of any changes in the Registration Statement or Prospectus
so that they will not contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary to make
the statements therein not misleading;
(d) make every reasonable effort to obtain the withdrawal of any order
suspending the effectiveness of a Registration Statement at the earliest
possible moment;
(e) if reasonably requested by the managing underwriters, immediately
incorporate in a Prospectus supplement or post-effective amendment such
information as the managing underwriters reasonably believe (on advice of
counsel and after consultation with the Company and its counsel) should be
included therein as required by applicable law relating to such sale of
Registrable Securities, including, without limitation, information with respect
to the purchase price being paid for the Registrable Securities by such
underwriters and with respect to any other terms of the underwritten (or
"best-efforts" underwritten) offering; and make all required filings of such
Prospectus supplement or post-effective amendment as soon as notified of the
matters to be incorporated in such Prospectus supplement or post-effective
amendment;
(f) furnish to each selling Holder of Registrable Securities and each
managing underwriter, without charge, at least one signed copy of the
Registration Statement and any post-effective amendment thereto, including
financial statements and schedules, all documents incorporated therein by
reference and all exhibits (including those incorporated by reference);
(g) deliver to each selling Holder of Registrable Securities and the
underwriters, if any, without charge, as many copies of the Prospectus or
Prospectuses (including each preliminary Prospectus) any amendment or
supplement thereto as such Persons may reasonably request; the company consents
to the use of such Prospectus or any amendment or supplement thereto by each of
the selling Holders of Registrable Securities and the underwriters, if any, in
connection with the offering and sale of the Registrable Securities covered by
such Prospectus or any amendment or supplement thereto;
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(h) prior to any public offering of Registrable Securities, cooperate
with the selling Holders of Registrable Securities, the underwriters, if any,
and their respective counsel in connection with the registration or
qualification of such Registrable Securities for offer and sale under the
securities or Blue Sky-laws of such jurisdictions within the United States as
any selling Holder or underwriter reasonably requests in writing, keep each
such registration or qualification effective during the period such
Registration Statement is required to be kept effective and do any and all
other acts or things necessary or advisable to enable the disposition in such
jurisdictions of the Registrable Securities covered by the applicable
Registration Statement; provided that the Company will not be required to
qualify to do business in any jurisdiction where it is not then so qualified or
to take any action which would subject the Company to general service of
process in any jurisdiction where it is not at the time so subject;
(i) cooperate with the selling Holders of Registrable Securities and
the managing underwriters, if any, to facilitate the timely preparation and
delivery of certificates representing Registrable Securities to be sold and not
bearing any restrictive legends; and enable such Registrable Securities to be
in such denominations and registered in such names as the managing underwriters
may request at least two Business Days prior to any sale of Registrable
Securities to the underwriters;
(j) use its best efforts to cause the Registrable Securities covered
by the applicable Registration Statement to be registered with or approved by
such other governmental agencies or authorities within the United States as may
be necessary to enable the seller or sellers thereof or the underwriters, if
any, to consummate the disposition of such Registrable Securities;
(k) upon the occurrence of any event contemplated by Section
6.3(c)(vi) above, prepare a supplement or post-effective amendment to the
applicable Registration Statement or related Prospectus or any document
incorporated therein by reference or file any other required document so that,
as thereafter delivered to the purchasers of the Registrable Securities being
sold thereunder, such Prospectus will not contain an untrue statement of a
material fact or omit to state any material fact necessary to make the
statements therein not misleading;
(l) with respect to each issue or class, of Registrable Securities,
use its best efforts to cause all Registrable Securities covered by the
Registration Statements to be listed on each securities exchange, if any, on
which similar securities issued by the Company are then listed if requested by
the Holders of a majority of such issue or class of Registrable Securities;
(m) enter into such agreements (including an underwriting agreement)
and take all such other action reasonably required in connection therewith in
order to expedite or facilitate the disposition of such Registrable Securities
and in such connection, if the registration is in connection with an
underwritten offering (i) make such representations and warranties to the
underwriters, in such form, substance and scope as are customarily made by
issuers to underwriters in underwritten offering and confirm the same if and
when requested; (ii) obtain opinions of counsel to the Company and updates
thereof (which counsel and opinions in form, scope and substance shall be
reasonably satisfactory to the underwriters) addressed to the underwriters
covering the matters customarily covered in opinions requested in underwritten
offerings and such other matters as may be reasonably requested by such
underwriters; (iii) obtain "cold comfort" letters and updates thereof from the
Company's accountants addressed to the underwriters, such letters to be in
customary form and covering matters of the type customarily covered in "cold
comfort" letters by underwriters in connection with underwritten offerings;
(iv) set forth in full in any underwriting agreement entered into the
indemnification provisions and procedures of Section 6.4 hereof with respect to
all parties to be indemnified pursuant to said Section; and (v) deliver such
documents and certificates as may be reasonably requested by the underwriters
to evidence compliance with clause (i) above and with any customary conditions
contained in
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the underwriting agreement or other agreement entered into by the Company; the
above shall be done at each closing under such underwriting or similar
agreement or as and to the extent required hereunder;
(n) make available for inspection by one or more representatives of
the Holders of Registrable Securities being sold, any underwriter participating
in any disposition pursuant to such registration, and any attorney or
accountant retained by such Holders or underwriter, all financial and other
records, pertinent corporate documents and properties of the Company, and cause
the Company's officers, directors and employees to supply all information
reasonably requested by any such representatives, in connection with such; and
(o) otherwise use its best efforts to comply with all applicable
Federal and state regulations; and take such other action as may be reasonably
necessary to or advisable to enable each such Holder and each such underwriter
to consummate the sale or disposition in such jurisdiction or jurisdiction in
which any such Holder or underwriter shall have requested that the Registrable
Securities be sold.
Except as otherwise provided in this Agreement, the Company shall have
sole control in connection with the preparation, filing, withdrawal, amendment
or supplementing of each Registration Statement, the selection of underwriters,
and the distribution of any preliminary prospectus included in the Registration
Statement, and may include within the coverage thereof additional shares of
Common Stock or other securities for its own account or for the account of one
or more of its other security holders.
The Company may require each seller of Registrable Securities as to
which any registration is being effected to furnish to the Company such
information regarding the distribution of such securities and such other
information as may otherwise be required by the Securities Act to be included
in such Registration Statement.
6.4 Indemnification.
(a) Indemnification by Company. In connection with each Registration
Statement relating to disposition of Registrable Securities, the Company shall
indemnify and hold harmless each Holder and each underwriter of Registrable
Securities and each Person, if any, who controls such Holder or underwriter
(within the meaning of Section 15 of the Securities Act or Section 20 of the
Exchange Act) against any and all losses, claims, damages and liabilities,
joint or several (including any reasonable investigation, legal and other
expenses incurred in connection with, and any amount paid in settlement of any
action, suit or proceeding or any claim asserted), to which they, or any of
them, may become subject under the Securities Act, the Exchange Act or other
Federal or state law or regulation, at common law or otherwise, insofar as such
losses, claims, damages or liabilities arise out of or are based upon any
untrue statement or alleged untrue statement of a material fact contained in
any Registration Statement, Prospectus or preliminary prospectus or any
amendment thereof or supplement thereto, or arise out of or are based upon any
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading;
provided, however, that such indemnity shall not inure to the benefit of any
Holder or underwriter (or any person controlling such Holder or underwriter
within the meaning of Section 15 of the Securities Act or Section 20 of the
Exchange Act) on account of any losses, claims, damages or liabilities arising
from the sale of the Registrable Securities if such untrue statement or
omission or alleged untrue statement or omission was made in such Registration
Statement, Prospectus or preliminary prospectus, or such amendment or
supplement, in reliance upon and in conformity with information furnished in
writing to the Company by such Holder or underwriter specifically for use
therein. The Company shall also indemnify selling brokers, dealer managers and
similar securities industry professionals participating in the distribution,
their officers and directors and each Person who controls such Persons (within
the meaning of Section 15 of the Securities Act or Section 20 of the Exchange
Act) to the same extent as provided above
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with respect to the indemnification of the Holders of Registrable Securities,
if requested. This indemnity agreement shall be in addition to any liability
which the Company may otherwise have.
(b) Indemnification by Holder. In connection with each Registration
Statement, each Holder shall indemnify, to the same extent as the
indemnification provided by the Company in Section 6.4(a), the Company, its
directors and each officer who signs the Registration Statement, each other
Holder, each underwriter of Registrable Securities, and each Person who
controls the Company, such other Holder or underwriter (within the meaning of
Section 15 of the Securities Act and Section 20 of the Exchange Act), but only
insofar as such losses, claims, damages and liabilities arise out of or are
based upon any untrue statement or omission or alleged untrue statement or
omission which was made in the Registration Statement, the Prospectus or
preliminary prospectus or any amendment thereof or supplement thereto, in
reliance upon and in conformity with information furnished in writing by such
Holder to the Company specifically for use therein. The Company shall be
entitled to receive indemnities from underwriters, selling brokers, dealer
managers and similar securities industry professionals participating in the
distribution, to the same extent as provided above, with respect to information
so furnished in writing by such Persons specifically for inclusion in any
Prospectus, Registration Statement or preliminary prospectus or any amendment
thereof or supplement thereto.
(c) Conduct of Indemnification Procedure. Any party that proposes to
assert the right to be indemnified hereunder will, promptly after receipt of
notice of commencement of any action, suit or proceeding against such party in
respect of which a claim is to be made against an indemnifying party or parties
under this Section, notify each such indemnifying party of the commencement of
such action, suit or proceeding, enclosing a copy of all papers served. No
indemnification provided for in Section 6.4(a) or 6.4(b) shall be available to
any party who shall fail to give notice as provided in this Section 6.4(c) if
the party to whom notice was not given was unaware of the proceeding to which
such notice would have related and was prejudiced by the failure to give such
notice, but the omission so to notify such indemnifying party of any such
action, suit or proceeding shall not relieve it from any liability that it may
have to any indemnified party for contribution otherwise than under this
Section. In case any such action, suit or proceeding shall be brought against
any indemnified party and it shall notify the indemnifying party of the
commencement thereof, the indemnifying party shall be entitled to participate
in, and, to the extent that it shall wish, jointly with any other indemnifying
party similarly notified, to assume the defense thereof, with counsel
reasonably satisfactory to such indemnified party, and after notice from the
indemnifying party to such indemnified party of its election so to assume the
defense thereof and the approval by the indemnified party of such counsel, the
indemnifying party shall not be liable to such indemnified party for any legal
or other expenses, except as provided below. The indemnified party shall have
the right to employ its counsel in any such action, but the fees and expenses
of such counsel shall be at the expense of such indemnified party unless (i)
the employment of counsel by such indemnified party has been authorized in
writing by the indemnifying parties, (ii) it shall have been reasonably
concluded that there may be a conflict of interest between the indemnifying
parties and the indemnified party in the conduct of the defense of such action
(in which case the indemnifying parties shall not have the right to direct the
defense of such action on behalf of the indemnified party; it being understood,
however, that the Company shall not be liable for the fees and expenses of more
than one separate counsel representing the indemnified parties) or (iii) the
indemnifying parties shall not have employed counsel to assume the defense of
such action within a reasonable time after notice of the commencement thereof,
in each of which cases the fees and expenses of counsel shall be at the expense
of the indemnifying parties. An indemnified party shall not be liable for any
settlement of any action, suit, proceeding or claim effected without its
written consent.
(d) Contribution. In connection with each Registration Statement
relating to the disposition of Registrable Securities, if the indemnification
provided for in subsection (a) hereof is unavailable to an indemnified party
thereunder in respect to any losses, claims, damages or liabilities referred
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to therein, then the indemnifying party shall contribute to the amount paid or
payable by such indemnified party as a result of the losses, claims, damages or
liabilities referred to in subsections (a) or (b) of this Section 6.4 in such
proportion as is appropriate to reflect the relative fault of the indemnifying
party on the one hand and of the indemnified party on the other in connection
with the statements or omissions that resulted in such losses, claims, damages
or liabilities, or actions in respect thereof, as well as any other relevant
equitable considerations. Relative fault shall be determined by reference to,
among other things, whether the untrue or alleged untrue statement of a
material fact or the omission or alleged omission to state a material fact
relates to information supplied by the indemnifying party or the indemnified
party and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such untrue statement or omission.
(e) Specific Performance. The Company and the Holder acknowledge that
remedies at law for the enforcement of this Section 6.4 may be inadequate and
intend that this Section 6.4 shall be specifically enforceable.
ARTICLE 7
OTHER MATTERS
7.1 Binding Effect; Benefits. This Warrant shall be binding upon and inure
to the benefit of the Company and its successors and assigns and the Holders
from time to time of the Warrants. Nothing in this Warrant is intended or
shall be construed to confer upon any Person, other than the Company and the
Holders of the Warrant, any right, remedy or claim under or by reason of this
Warrant or any part hereof.
7.2 Integration/Entire Agreement. This Warrant is intended by the parties
as a final expression of their agreement and intended to be a complete and
exclusive statement of the agreement and understanding of the parties hereto in
respect of the subject matter contained herein. This Warrant supersedes all
prior agreements and understandings between the parties with respect to such
subject matter.
7.3 Amendments and Waivers. The provisions of this Warrant, including the
provisions of this sentence, may not be amended, modified or supplemented, and
waiver or consents to departures from the provisions hereof may not be given
unless the Company has obtained the written consent of holders of at least a
majority of the outstanding Registrable Securities. Holders shall be bound by
any consent authorized by this Section whether or not certificates representing
such Registrable Securities have been marked to indicate such consent.
7.4 Counterparts. This Warrant may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
so executed shall be deemed to be an original and all of which taken together
shall constitute one and the same agreement.
7.5 Governing Law. This Warrant shall be governed by and construed in
accordance with the laws of the State of Texas.
7.6 Severability. In the event that any one of more of the provisions
contained herein, or the application thereof in any circumstances, is held
invalid, illegal or unenforceable, the validity, legality and enforceability of
any such provisions in every other respect and of the remaining provisions
contained herein shall not be affected or impaired thereby.
7.7 Attorneys' Fees. In any action or proceeding brought to enforce any
provisions of this Warrant, or where any provision hereof is validly asserted
as a defense, the successful party shall be entitled
14
<PAGE> 15
to recover reasonable attorneys' fees and disbursements in addition to its
costs and expenses and any other available remedy.
7.8 Computations of Consent. Whenever the consent or approval of Holders
of a specified percentage of Registrable Securities is required hereunder,
Registrable Securities held by the Company or its affiliates (other than the
Warrantholder or subsequent Holders if they are deemed to be such affiliates
solely by reason of their holdings of such Registrable Securities) shall not be
counted in determining whether such consent or approval was given by the
Holders of such required percentage.
7.9 Notice. Any notices or certificates by the Company to the Holder and
by the Holder to the Company shall be deemed delivered if in writing and
delivered in person or by registered mail (return receipt requested) to the
Holder addressed to it at: 13750 U.S. 281 North, Suite 660, San Antonio, Texas
78232 or, if the Holder has designated, by notice in writing to the Company,
any other address, to such other address, and if to the Company, addressed to
it at: 270 Upper 4th Street, Milton Keynes Bucks MK9 1DP or if the Company has
designated, by notice in writing to the Holder, any (other address, to such
other address.
The Company may change its address by written notice to the Holder and
the Holder may change its address by written notice to the Company.
IN WITNESS WHEREOF, this Warrant has been duly executed by the Company
effective the 5th day of February, 1996.
MSU CORPORATION
KEITH CHARLES HALL
--------------------------------------
BY: Keith Charles Hall
-----------------------------------
TITLE: President
--------------------------------
ATTEST:
W.D. SNOWDON
- ------------------------------
Secretary
15
<PAGE> 16
ASSIGNMENT
(To be executed only upon assignment of Warrant)
For value received, ________________________________________________
___________________, hereby sells, assigns and transfers unto __________
________________________________________________________ the within Warrant,
together with all right, title and interest therein, and does hereby
irrevocably constitute and appoint __________________________________
attorney, to transfer said Warrant on the books of the within-named Company
with respect to the number of Warrant Shares set forth below, with full power
of substitution in the premises:
<TABLE>
<S> <C> <C>
Name(s) of
Assignee(s) Address No. of Warrant Shares
----------- ------- ---------------------
</TABLE>
And if said number of Warrant Shares shall not be all the Warrant Shares
represented by the Warrant, a new Warrant is to be issued in the name of said
undersigned for the balance remaining of the Warrant Shares registered by said
Warrant.
Dated: Signature:
---------------------- -------------------------------
Note: The above signature should
correspond exactly with the name
on the face of this Warrant
16
<PAGE> 17
SUBSCRIPTION FORM
(To be executed upon exercise of Warrant)
MSU CORPORATION:
The undersigned hereby irrevocably elects to exercise the right of
purchaser represented by the within Warrant, to purchase Warrant Shares and
herewith tenders payment of the purchase price in full for _________ of the
Warrant Shares in the form of cash or a certified or official bank check to the
order of MSU Corporation in the amount of $_______________ in accordance with
the terms of this Warrant.
Please issue a certificate or certificates for such Common Stock in the
name of, and pay any cash for any fractional share to:
Name
------------------------------------------------
------------------------------------------------
------------------------------------------------
(Please print Name, Address and Social Security No.)
Signature
-------------------------------------------
Note: The above signature should correspond
exactly with the name on the first page of
this Warrant Certificate or with the name
of the assignee appearing in the
assignment form.
17
<PAGE> 1
EXHIBIT 10.1
SERVICE AGREEMENT
Date: 1st September 1994
PARTIES
1. "The Company": MSU PUBLIC LIMITED COMPANY having it's place of
business at 270, Upper 4th Street Witan Gate West
Central Milton Keynes Bucks MK9 1DP
2. "The Executive" WYNFORD PETER HOLLOWAY Temple Lodge Sibford Gower Nr.
Banbury Oxon OPX15 5RX
OPERATIVE PROVISIONS:
1. INTERPRETATION
1.1 The headings and marginal headings to the clauses in this
agreement are for convenience only and have no legal effect.
1.2 Any reference in this agreement to any Act or delegated
legislation includes any statutory modification or re-
enactment thereof or the provisions referred to.
1.3 In this agreement:
'THE BOARD' means the board of directors of the Company and
includes any committee of the Board duly appointed by it.
'GROUP COMPANY' means any company which for the time being is
a company having an ordinary share capital (as defined in
s.832 Income and Corporation Taxes Act 1988) of which not less
than 25 per cent is owned directly or indirectly by the
Company or it's holding company applying the provisions of
s.838 Income and Corporation Taxes Act 1988 in the
determination of ownership.
'MANAGING DIRECTOR' means any person or persons jointly
holding such office of the Company from time to time and
includes any person(s) exercising substantially the functions
of a managing director or chief executive officer of the
Company.
'RECOGNISED INVESTMENT EXCHANGE' means any body of persons
which is for the time being a Recognised Investment Exchange
for the purposes of the Financial Services Act 1986.
1
<PAGE> 2
2. APPOINTMENT AND DURATION
2.1 The Company appoints the Executive and the Executive agrees to
serve as the Company Chairman. The Executive accepts that the Company
may reasonably require him to perform other duties or tasks not within
the scope of his normal duties and the Executive agrees to perform
those duties or undertake those tasks as if they were specifically
required under this Agreement.
2.2 The appointment commenced on 22 March 1992 and shall continue
(subject to earlier termination as provided in this Agreement) for a
fixed period of 36 months from the date of this Agreement until 31st
August 1997 provided that on each anniversary of the commencement, the
then unexpired period shall be automatically renewed for a further
period of 36 months (in place of the then unexpired period) unless
either party shall prior to any such renewal date give notice to the
other party that the period will not be renewed whereupon the
Agreement will expire at the end of the then current fixed period.
2.3 The Executive warrants that by virtue of entering into this
Agreement he will not be in breach of any express or implied terms of
any contract with or of any other obligation to any third party
binding on him.
3. DUTIES OF THE EXECUTIVE
3.1 The Executive shall at all times during the period of this
Agreement:
3.1.1 devote so much of his time attention and ability to
the duties of his appointment as the Board reasonably
consider necessary;
3.1.2 faithfully and diligently perform those duties and
exercise such powers consistent with them which are
from time to time assigned to or vested in him;
3.1.3 obey all lawful and reasonable directions of the
Board;
3.1.4 use his best endeavours to promote the interests of
the Company and it's Group Companies;
3.1.5 keep the Board promptly and fully informed (in
writing if so requested) of his conduct of the
business or affairs of the Company and it's Group
Companies and provide such explanations as the Board
may require;
3.1.6 not at any time to make any untrue or misleading
statement to the Company or any Group Company.
3.2 The Executive shall if and for so long as the Company
reasonably require during the period of this Agreement;
3.2.1 carry out duties on behalf of any Group Company:
3.2.2 act as an officer of any Group Company or hold any
other appointment or
2
<PAGE> 3
office as nominee or representative of the Company or
any Group Company:
3.2.3 Carry out the duties and the duties attendant upon
any such appointment as if they were duties
to be performed by him on behalf of the Company.
4. PLACE OF WORK
4.1 The Executive shall perform his duties at the Head Office of
the Company from time to time and/or such other places of
business as the Company requires, including occasional visits
outside the United Kingdom in the ordinary course of his
duties.
5. PAY
5.1 During his appointment the Company shall pay to the Executive:
5.1.1 a basic salary of L.120,000 per year which shall
accrue day to day and be payable by equal monthly
instalments in arrears on or about the 26th day of
each month;
5.1.2 a bonus in each year of this Agreement in accordance
with the Company's executive bonus scheme as
determined from time to time by the Board.
5.2 The Executive's salary shall be reviewed by the Board on 30th
June in each year and the rate of salary may be increased by
the Company with effect from that date by such amount if any
as it shall think fit.
5.3 The Company shall cover the cost of membership for the
Executive and his immediate family of an approved private
patients medical plan with a reputable medical expenses
insurance company.
5.4 The Executive will be a member of the Company's proposed life
assurance scheme (when implemented) designed to give benefits
equal to four times his annual salary from time to time and
the Company will pay promptly all contributions due in respect
of his membership of the scheme.
6. CAR ALLOWANCE
6.1 The Company shall provide the Executive with:
6.1.1 a car use allowance of L.1500 per month or at his
option:
6.1.2 for his sole business and private use a car
of model and specification selected by the Company
which in the reasonable opinion of the Board is
commensurate with the status of the Executive and the
image of the Company.
3
<PAGE> 4
6.2 In such latter case the Company shall bear all running costs
and expenses of the car and shall replace the car with the
same or an equivalent model when it has travelled 45,000 miles
or on the third anniversary of the date of it's purchase by
the Company.
6.3 The Executive shall always comply with all regulations laid
down by the Company from time to time with respect to company
cars (where appropriate) and shall forthwith notify the
Company of any accidents involving his Company car and of any
charges of driving offences which are brought against him and
on the termination of his employment for any reason whether
lawful or not shall forthwith return his company car to the
Company at it's Head Office.
7. EXPENSES
7.1 The Company shall reimburse to the Executive all travelling
hotel entertainment and other expenses reasonably incurred by
him in the proper performance of his duties subject to the
Executive complying with such guidelines or regulations issued
by the Company from time to time in his respect and to the
production to the Company of such vouchers or receipts or
other evidence of payment as it shall reasonably require.
7.2 Where the Company issues a Company sponsored credit or charge
card to the Executive he shall use such credit or charge card
only for expenses reimbursable under clause 7.1 above and
shall return it to the Company forthwith on the termination of
his employment.
8. HOLIDAY
8.1 In addition to public holidays the Executive is entitled to 25
working days paid holiday in each year from January 1 to
December 31 to be taken at such time or times as are agreed
with the Board. The Executive shall not without the consent
of the Board carry forward any unused part of his holiday
entitlement to a subsequent year.
8.2 On the termination of his employment for whatever reason the
Executive shall entitled to pay in lieu of outstanding holiday
entitlement and shall be required to pay the Company any
salary received for holiday taken in excess of his actual
entitlement. The basis of payment and repayment shall be
1/253 of the Executive's annual salary for each day.
9. INCAPACITY
9.1 If the Executive is unavailable because of sickness (including
mental disorder) or
4
<PAGE> 5
injury he shall report this fact forthwith to the Company
Secretary's office.
9.2 If at any time during the period of his appointment the
Executive shall be unavailable for work for a period of 28
days in any 12 month period he shall upon request and at the
expense of the Company permit himself to be examined by a
registered medical practitioner to be selected by the Company
and shall authorise such medical practitioner to disclose to
and discuss with the Company's medical adviser the results of
such examination and any matters which arise from it in order
that the Company's medical adviser can notify the Company of
any matters which, in his opinion, might hinder or prevent the
Executive (if during a period of incapacity) from returning to
work for any period or (in other circumstances) from properly
performing any duties of his appointment at any time.
10. INTELLECTUAL PROPERTY RIGHTS/CONFIDENTIALITY
10.1 The Executive agrees that any rights relating to confidential
information, documents, intellectual property rights, patent
rights, copyright works and or invention originated or
developed by the Executive during the course of this Agreement
shall rest in the Company solely and absolutely.
10.2 Forthwith following the conception origination or making of an
invention by the Executive during the course of his
employment the Executive shall disclose full details of such
invention to the Company. Further forthwith following the
origination or development of any confidential information
during the course of his employment the Executive shall
disclose and make available such confidential information to
the Company.
10.3 The Company shall in it's sole discretion be entitled to apply
for patent rights in respect of any invention conceived or
originated or made by the Executive and shall be responsible
for the maintenance and renewal of the patent rights.
10.4 The Executive agrees to assign to the Company all right title
and interest in and to any inventions or confidential
information made originated or developed during the course of
his employment together with any other intellectual property
rights arising and further agrees to assist the Company at the
Company's expense with any application for patent rights and
to do all such reasonable acts and things at the Company's
expense as the Company's legal advisors may advise are
necessary or desirable in connection with any such assignment
or assistance. The Executive appoints the Company to be his
attorney or agent in his name and on his behalf and to do all
such acts and things and to sign all deeds and documents as
may be necessary in order to give the Company the full benefit
of the provisions of these clauses.
5
<PAGE> 6
10.5 The Executive assigns to the Company by way of future
assignment of copyright the copyright existing in the documents
originated by the Executive for all classes of act which may by
virtue of the Copyright Designs and Patent Act 1988 he as the
owner of the copyright has the exclusive right to do throughout
the world and for the whole period for which the copyright is
to subsist.
10.6 The Executive agrees to keep the confidential information, the
documents and all matters arising or coming to his attention
in connection with his employment, secret and confidential and
not at any time for any reason whatsoever to disclose them or
permit them to be disclosed to any party except to enable the
Executive to fulfill his employment conditions.
10.7 The Executive agrees to keep secret and confidential and not
at any time for any reason to disclose or permit to be
disclosed to any person or persons or otherwise make use of or
permit to be disclosed to any person or persons or otherwise
make use of or permit to be made use of any information
relating to the Company's technology technical processes
business affairs or finances or any such information relating
to any Group Company, suppliers or customers of the Company
where knowledge or details of the information was received
during the period of this Agreement
10.8 The obligations of the parties under this clause shall survive
the expiry or the termination of this Agreement for whatever
reason.
11. TERMINATION OF AGREEMENT
11.1 Automatic Termination: This Agreement shall automatically
terminate upon the Executive reaching his 65th birthday.
11.2 Suspension: In order to investigate a complaint against the
Executive of misconduct the Company is entitled to suspend the
Executive on full pay for a period not exceeding 28 days to
carry out a proper investigation and hold a disciplinary
hearing.
11.3 Immediate Dismissal: The Company may with immediate effect
terminate this Agreement if the Executive:
11.3.1 commits any act of gross misconduct or repeats or
continues (after written warning) any other material
or serious breach of his obligations under this
Agreement; or
11.3.2 is guilty of any conduct which in the reasonable
opinion of the Board brings him or the Company
or any Group Company into serious disrepute; or
11.3.3 is convicted of any criminal offence punishable with
6 months or more
6
<PAGE> 7
imprisonment (excluding an offence under the road
traffic legislation in the United Kingdom or
elsewhere for which he is not sentenced to any term
of imprisonment whether immediate or suspended); or
11.3.4 commits any act of dishonesty relating to the Company
or any Group Company any of it's or their employees
or otherwise; or
11.3.5 is in the reasonable opinion of the Board incompetent
in the performance of his duties.
11.4 Pay in lieu: On serving notice for any reason to terminate
this Agreement or at any time thereafter during the currency
of the notice the Company shall be entitled to pay the
Executive his basic salary at the rate then payable under
clause 5 hereof for the unexpired portion of the duration of
his appointment or entitlement to notice as may be.
11.5 Miscellaneous: On termination of this Agreement for any
reason, the Executive shall at the request of the Company
resign (without prejudice to any claims which the executive
may have against the Company arising out of this Agreement or
the termination thereof) from all and any offices which he
holds as a director of the Company or of any Group Company and
from all other appointments and offices which he holds as a
nominee or representative of the Company or any Group Company
and if he shall fail to do so within seven days the Company is
hereby irrevocably authorised to appoint some person in his
name and on his behalf to sign any documents or do any things
necessary or requisite to effect such resignation(s) or
transfer(s).
11.6 The Executive shall not directly or indirectly for a period of
12 months after termination for whatever reason of this
Agreement:
11.6.1 Hold any material interest in any person firm or
company which is or shall be wholly or partly in
competition with the actual or contemplated business
of any Group Company or which might require him to
disclose or make use of any confidential business
information in order to properly discharge his duties
to or further his interest in such person firm or
Company.
11.6.2 Seek or receive in any capacity whatsoever any
business orders or custom for any products or
services produced marketed sold or provided by any
Group Company in the ordinary course of business of
the Group Company.
11.6.3 Solicit or entice away from any Group Company any
person who is or was six months prior to termination
employed by any Group Company to work in any capacity
in which that person has had any material involvement
in the business of any Group Company as a director,
technical operator or salesperson.
12. GENERAL
7
<PAGE> 8
12.1 Statutory Particulars
The further particulars of employment not contained in the
body of this Agreement which must be given to the Executive in
compliance with Part 1 Employment Protection (Consolidation)
Act 1978 as given in Schedule I.
12.2 Accrued rights
The expiration or termination of this Agreement however
arising shall not operate to affect such of the provisions of
this Agreement as are expressed to operate or have effect
after then and shall be without prejudice to any accrued
rights or remedies of the parties
12.3 Proper Law
The validity construction and performance of this Agreement
shall be governed by the Laws of England and Wales.
12.4 Acceptance of Jurisdiction
All disputes claims or proceedings between the parties
relating to the validity construction or performance of this
Agreement shall be subject to the non-exclusive jurisdiction
of the High Court of Justice in England and Wales to which the
parties irrevocably submit.
12.5 Notices
Any notices to be given by a party under this agreement must
be given by delivery at or sending first class post or other
faster postal service or telex facsimile transmission or other
means of telecommunication in permanent written form to the
last known postal address or relevant telecommunications
number of the other party. Where notice is given sending in a
prescribed manner it shall be deemed to have been received
when in the ordinary course of the transmission it would have
been received by the addressee. To prove the giving of a
notice it shall be sufficient to show it was despatched. A
notice shall have effect from the sooner of it's actual or
deemed receipt by the addressee.
12.6 Each provision of this deed is independent and severable from
the remaining provisions and enforceable accordingly. If any
provision of this deed shall be unenforceable for any reason
but would be enforceable if part of the wording therefor were
deleted, it shall apply with such deletions as may be
necessary to make it enforceable.
SCHEDULE 1
PART 1 EMPLOYMENT (CONSOLIDATION) ACT 1978 ACT
The following information is given supplemental to the information given in the
body of this Agreement in order to comply with the requirements of Part 1 of
the Act
1 The Executives employment with the Company commenced on 22nd March
1992
2 There are no normal hours of work. The Executive shall fulfill
such hours of work as may be necessary so as to properly fulfil his
duties.
3 No contracting out certificate pursuant to the provisions of the
Social Security pension
8
<PAGE> 9
Act 1975 is held by the Company in respect of the Executives
employment.
4 The Executive is subject to the Company's Disciplinary Rules and
Procedures which will be in accordance with ACAS code of practise.
5 If the Executive has any grievance relating to his employment (other
than one relating to a disciplinary decision) he should refer such
grievance to the Chairman of the Board and if the grievance is not
resolved by discussion with him it will be referred to the Board for
resolution.
IN WITNESS WHEREOF THE COMPANY AND THE EXECUTIVE HAVE EXECUTED THIS DOCUMENT AS
A DEED THE DAY AND YEAR FIRST BEFORE WRITTEN
Signed by the Executive )
and delivered as a Deed ) W.P. HOLLOWAY in the presence of:
) ------------------------------------------
C. ARMSTRONG
- -----------------------------------------
Signed and delivered as )
a deed by ) K.C. HALL
(Director) and by ) ------------------------------------------
(Director/Secretary) )
for and on behalf of the ) W.D. SNOWDON
Company in the presence of: ) ------------------------------------------
C. ARMSTRONG
- -----------------------------------------
Witness
9
<PAGE> 1
EXHIBIT 10.2
SERVICE AGREEMENT
Date: 1st day of September 1994
PARTIES
1. "The Company": MSU PUBLIC LIMITED COMPANY having it's place of
business at 270, Upper 4th Street Witan Gate West
Central Milton Keynes Bucks MK9 1DP
2. "The Executive" KEITH CHARLES HALL 1, Bulstrode Cottages, Bulstrode
Lane, Feltham, Herts HP3 0BP
OPERATIVE PROVISIONS:
1. INTERPRETATION
1.1 The headings and marginal headings to the clauses in this
agreement are for convenience only and have no legal effect.
1.2 Any reference in this agreement to any Act or delegated
legislation includes any statutory modification or re- enactment
thereof or the provisions referred to.
1.3 In this agreement:
'THE BOARD' means the board of directors of the Company and
includes any committee of the Board duly appointed by it.
'GROUP COMPANY' means any company which for the time being is a
company having an ordinary share capital (as defined in s.832
Income and Corporation Taxes Act 1988) of which not less than 25
per cent is owned directly or indirectly by the Company or it's
holding company applying the provisions of s.838 Income and
Corporation Taxes Act 1988 in the determination of ownership.
'MANAGING DIRECTOR' means any person or persons jointly holding
such office of the Company from time to time and includes any
person(s) exercising substantially the functions of a managing
director or chief executive officer of the Company.
'RECOGNISED INVESTMENT EXCHANGE' means any body of persons which
is for the time being a Recognised Investment Exchange for the
purposes of the Financial Services Act 1986.
1
<PAGE> 2
2. APPOINTMENT AND DURATION
2.1 The Company appoints the Executive and the Executive agrees to
serve as the Managing Director. The Executive accepts that the Company
may reasonably require him to perform other duties or tasks not within
the scope of his normal duties and the Executive agrees to perform those
duties or undertake those tasks as if they were specifically required
under this Agreement.
2.2 The appointment commenced on 1st July 1993 and shall continue
(subject to earlier termination as provided in this Agreement) for a
fixed period of 36 months from the date of this Agreement until 31st
August 1997 provided that on each anniversary of the commencement, the
then unexpired period shall be automatically renewed for a further
period of 36 months (in place of the then unexpired period) unless
either party shall prior to any such renewal date give notice to the
other party that the period will not be renewed whereupon the Agreement
will expire at the end of the then current fixed period.
2.3 The Executive warrants that by virtue of entering into this
Agreement he will not be in breach of any express or implied terms of
any contract with or of any other obligation to any third party binding
on him.
3. DUTIES OF THE EXECUTIVE
3.1 The Executive shall at all times during the period of this
Agreement:
3.1.1 devote so much of his time attention and ability to the
duties of his appointment;
3.1.2 faithfully and diligently perform those duties and
exercise such powers consistent with them which are from
time to time assigned to or vested in him;
3.1.3 obey all lawful and reasonable directions of the Board;
3.1.4 use his best endeavours to promote the interests of the
Company and it's Group Companies;
3.1.5 keep the Board promptly and fully informed (in writing if
so requested) of his conduct of the business or affairs of
the Company and it's Group Companies and provide such
explanations as the Board may require;
3.1.6 not at any time to make any untrue or misleading statement
to the Company or any Group Company.
3.2 The Executive shall if and for so long as the Company reasonably
require during the period of this Agreement;
3.2.1 carry out duties on behalf of any Group Company:
3.2.2 act as an officer of any Group Company or hold any other
appointment or
2
<PAGE> 3
office as nominee or representative of the Company or any
Group Company:
3.2.3 Carry out the duties and the duties attendant upon any
such appointment as if they were duties to be performed by
him on behalf of the Company.
4. PLACE OF WORK
4.1 The Executive shall perform his duties at the Head Office of the
Company from time to time and/or such other places of business as
the Company requires, including occasional visits outside the
United Kingdom in the ordinary course of his duties.
5. PAY
5.1 During his appointment the Company shall pay to the Executive:
5.1.1 a basic salary of L.80,000 per year which shall accrue day
to day and be payable by equal monthly instalments in
arrears on or about the 26th day of each month;
5.1.2 a bonus in each year of this Agreement in accordance with
the Company's executive bonus scheme as determined from
time to time by the Board.
5.2 The Executive's salary shall be reviewed by the Board on 30th
June in each year and the rate of salary may be increased by the
Company with effect from that date by such amount if any as it
shall think fit.
5.3 The Company shall cover the cost of membership for the Executive
and his immediate family of an approved private patients medical
plan with a reputable medical expenses insurance company.
5.4 The Executive will be a member of the Company's proposed life
assurance scheme (when implemented) designed to give benefits
equal to four times his annual salary from time to time and the
Company will pay promptly all contributions due in respect of his
membership of the scheme.
6. CAR ALLOWANCE
6.1 The Company shall provide the Executive with:
6.1.1 a car use allowance of L. per month or
at his option;
6.1.2 for his sole business and private use a car of model and
specification selected by the Company which in the
reasonable opinion of the Board is commensurate with the
status of the Executive and the image of the Company.
3
<PAGE> 4
6.2 In such latter case the Company shall bear all running costs and
expenses of the car and shall replace the car with the same or an
equivalent model when it has travelled 45,000 miles or on the
third anniversary of the date of it's purchase by the Company.
6.3 The Executive shall always comply with all regulations laid down
by the Company from time to time with respect to company cars
(where appropriate) and shall forthwith notify the Company of any
accidents involving his Company car and of any charges of driving
offences which are brought against him and on the termination of
his employment for any reason whether lawful or not shall
forthwith return his company car to the Company at it's Head
Office.
7. EXPENSES
7.1 The Company shall reimburse to the Executive all travelling
hotel entertainment and other expenses reasonably incurred by him
in the proper performance of his duties subject to the Executive
complying with such guidelines or regulations issued by the
Company from time to time in this respect and to the production
to the Company of such vouchers or receipts or other evidence of
payment as it shall reasonably require.
7.2 Where the Company issues a Company sponsored credit or charge
card to the Executive he shall use such credit or charge card
only for expenses reimbursable under clause 7.1 above and shall
return it to the Company forthwith on the termination of his
employment.
8. HOLIDAY
8.1 In addition to public holidays the Executive is entitled to 25
working days paid holiday in each year from January 1 to December
31 to be taken at such time or times as are agreed with the
Board. The Executive shall not without the consent of the Board
carry forward any unused part of his holiday entitlement to a
subsequent year.
8.2 On the termination of his employment for whatever reason the
Executive shall entitled to pay in lieu of outstanding holiday
entitlement and shall be required to pay the Company any salary
received for holiday taken in excess of his actual entitlement.
The basis of payment and repayment shall be 1/253 of the
Executive's annual salary for each day.
9. INCAPACITY
9.1 If the Executive is unavailable because of sickness (including
mental disorder) or
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<PAGE> 5
injury he shall report this fact forthwith to the Company
Secretary's office.
9.2 If at any time during the period of his appointment the Executive
shall be unavailable for work for a period of 28 days in any 12
month period he shall upon request and at the expense of the
Company permit himself to be examined by a registered medical
practitioner to be selected by the Company and shall authorise
such medical practitioner to disclose to and discuss with the
Company's medical adviser the results of such examination and any
matters which arise from it in order that the Company's medical
adviser can notify the Company of any matters which, in his
opinion, might hinder or prevent the Executive (if during a
period of incapacity) from returning to work for any period or
(in other circumstances) from properly performing any duties of
his appointment at any time.
10. INTELLECTUAL PROPERTY RIGHTS/CONFIDENTIALITY
10.1 The Executive agrees that any rights relating to confidential
information, documents, intellectual property rights, patent
rights, copyright works and or invention originated or developed
by the Executive during the course of this Agreement shall rest
in the Company solely and absolutely.
10.2 Forthwith following the conception origination or making of an
invention by the Executive during the course of his employment
the Executive shall disclose full details of such invention to
the Company. Further forthwith following the origination or
development of any confidential information during the course of
his employment the Executive shall disclose and make available
such confidential information to the Company.
10.3 The Company shall in it's sole discretion be entitled to apply
for patent rights in respect of any invention conceived or
originated or made by the Executive and shall be responsible for
the maintenance and renewal of the patent rights.
10.4 The Executive agrees to assign to the Company all right title and
interest in and to any inventions or confidential information
made originated or developed during the course of his employment
together with any other intellectual property rights arising and
further agrees to assist the Company at the Company's expense
with any application for patent rights and to do all such
reasonable acts and things at the Company's expense as the
Company's legal advisors may advise are necessary or desirable in
connection with any such assignment or assistance. The Executive
appoints the Company to be his attorney or agent in his name and
on his behalf and to do all such acts and things and to sign all
deeds and documents as may be necessary in order to give the
Company the full benefit of the provisions of these clauses.
5
<PAGE> 6
10.5 The Executive assigns to the Company by way of future assignment
of copyright the copyright existing in the documents originated
by the Executive for all classes of act which may by virtue of
the Copyright Designs and Patent Act 1988 he as the owner of the
copyright has the exclusive right to do throughout the world and
for the whole period for which the copyright is to subsist.
10.6 The Executive agrees to keep the confidential information, the
documents and all matters arising or coming to his attention in
connection with his employment, secret and confidential and not
at any time for any reason whatsoever to disclose them or permit
them to be disclosed to any party except to enable the Executive
to fulfill his employment conditions.
10.7 The Executive agrees to keep secret and confidential and not at
any time for any reason to disclose or permit to be disclosed to
any person or persons or otherwise make use of or permit to be
disclosed to any person or persons or otherwise make use of or
permit to be made use of any information relating to the
Company's technology technical processes business affairs or
finances or any such information relating to any Group Company,
suppliers or customers of the Company where knowledge or details
of the information was received during the period of this
Agreement
10.8 The obligations of the parties under this clause shall survive
the expiry or the termination of this Agreement for whatever
reason.
11. TERMINATION OF AGREEMENT
11.1 Automatic Termination: This Agreement shall automatically
terminate upon the Executive reaching his 65th birthday.
11.2 Suspension: In order to investigate a complaint against the
Executive of misconduct the Company is entitled to suspend the
Executive on full pay for a period not exceeding 28 days to carry
out a proper investigation and hold a disciplinary hearing.
11.3 Immediate Dismissal: The Company may with immediate effect
terminate this Agreement if the Executive:
11.3.1 commits any act of gross misconduct or repeats or
continues (after written warning) any other material or
serious breach of his obligations under this Agreement; or
11.3.2 is guilty of any conduct which in the reasonable opinion
of the Board brings him or the Company or any Group
Company into serious disrepute; or
6
<PAGE> 7
11.3.3 is convicted of any criminal offence punishable with 6
months or more imprisonment (excluding an offence under
the road traffic legislation in the United Kingdom or
elsewhere for which he is not sentenced to any term of
imprisonment whether immediate or suspended); or
11.3.4 commits any act of dishonesty relating to the Company or
any Group Company any of it's or their employees or
otherwise; or
11.3.5 becomes bankrupt or makes any composition with his
creditors or otherwise; or
11.3.6 is in the reasonable opinion of the Board incompetent in
the performance of his duties.
11.4 Pay in lieu: On serving notice for any reason to terminate this
Agreement or at any time thereafter during the currency of the
notice the Company shall be entitled to pay the Executive his
basic salary at the rate then payable under clause 5 hereof for
the unexpired portion of the duration of his appointment or
entitlement to notice as may be.
11.5 Miscellaneous: On termination of this Agreement for any reason,
the Executive shall at the request of the Company resign (without
prejudice to any claims which the executive may have against the
Company arising out of this Agreement or the termination thereof)
from all and any offices which he holds as a director of the
Company or of any Group Company and from all other appointments
and offices which he holds as a nominee or representative of the
Company or any Group Company and if he shall fail to do so within
seven days the Company is hereby irrevocably authorised to
appoint some person in his name and on his behalf to sign any
documents or do any things necessary or requisite to effect such
resignation(s) or transfer(s).
11.6 The Executive shall not directly or indirectly for a period of 12
months after termination for whatever reason of this Agreement:
11.6.1 Hold any material interest in any person firm or company
which is or shall be wholly or partly in competition with
the actual or contemplated business of any Group Company
or which might require him to disclose or make use of any
confidential business information in order to properly
discharge his duties to or further his interest in such
person firm or Company.
11.6.2 Seek or receive in any capacity whatsoever any business
orders or custom for any products or services produced
marketed sold or provided by any Group Company in the
ordinary course of business of the Group Company.
11.6.3 Solicit or entice away from any Group Company any person
who is or was six months prior to termination employed by
any Group Company to work in any capacity in which that
person has had any material involvement in the business of
any Group Company as a director, technical operator or
7
<PAGE> 8
salesperson.
12. GENERAL
12.1 Statutory Particulars
The further particulars of employment not contained in the body
of this Agreement which must be given to the Executive in
compliance with Part 1 Employment Protection (Consolidation) Act
1978 as given in Schedule I.
12.2 Accrued rights
The expiration or termination of this Agreement however arising
shall not operate to affect such of the provisions of this
Agreement as are expressed to operate or have effect after then
and shall be without prejudice to any accrued rights or remedies
of the parties
12.3 Proper Law
The validity construction and performance of this Agreement shall
be governed by the Laws of England and Wales.
12.4 Acceptance of Jurisdiction
All disputes claims or proceedings between the parties relating
to the validity construction or performance of this Agreement
shall be subject to the non-exclusive jurisdiction of the High
Court of Justice in England and Wales to which the parties
irrevocably submit.
12.5 Notices
Any notices to be given by a party under this agreement must be
given by delivery at or sending first class post or other faster
postal service or telex facsimile transmission or other means of
telecommunication in permanent written form to the last known
postal address or relevant telecommunications number of the other
party. Where notice is given sending in a prescribed manner it
shall be deemed to have been received when in the ordinary course
of the transmission it would have been received by the addressee.
To prove the giving of a notice it shall be sufficient to show it
was despatched. A notice shall have effect from the sooner of
it's actual or deemed receipt by the addressee.
12.6 Each provision of this deed is independent and severable from the
remaining provisions and enforceable accordingly. If any
provision of this deed shall be unenforceable for any reason but
would be enforceable if part of the wording therefor were
deleted, it shall apply with such deletions as may be necessary
to make it enforceable.
SCHEDULE 1
PART 1 EMPLOYMENT (CONSOLIDATION) ACT 1978 ACT
The following information is given supplemental to the information given in the
body of this Agreement in order to comply with the requirements of Part 1 of
the Act
1 The Executives employment with the Company commenced on 1st July 1993
8
<PAGE> 9
2 There are no normal hours of work. The Executive shall fulfill such
hours of work as may be necessary so as to properly fulfil his duties.
3 No contracting out certificate pursuant to the provisions of the Social
Security pension Act 1975 is held by the Company in respect of the
Executives employment.
4 The Executive is subject to the Company's Disciplinary Rules and
Procedures which will be in accordance with ACAS code of practise.
5 If the Executive has any grievance relating to his employment (other
than one relating to a disciplinary decision) he should refer such
grievance to the Chairman of the Board and if the grievance is not
resolved by discussion with him it will be referred to the Board for
resolution.
IN WITNESS WHEREOF THE COMPANY AND THE EXECUTIVE HAVE EXECUTED THIS DOCUMENT AS
A DEED THE DAY AND YEAR FIRST BEFORE WRITTEN
Signed by the Executive ) K.C. HALL
and delivered as a Deed )----------------------------------------
in the presence of: )
C. ARMSTRONG
- -------------------------------
Signed and delivered as ) W.P. HOLLOWAY
a deed by )----------------------------------------
(Director) and by )
(Director/Secretary) ) W.D. SNOWDON
for and on behalf of the )----------------------------------------
Company in the presence of: )
C. ARMSTRONG
- -------------------------------
Witness
9
<PAGE> 1
EXHIBIT 10.3
SERVICE AGREEMENT
Date: 1st September 1994
PARTIES
1. "The Company": MSU PUBLIC LIMITED COMPANY having it's place of
business at 270, Upper 4th Street Witan Gate West
Central Milton Keynes Bucks MK9 1DP
2. "The Executive" WILLIAM DEREK SNOWDON 41 Herbert March Close Llandaff
Cardiff CF5 2TD
OPERATIVE PROVISIONS:
1. INTERPRETATION
1.1 The headings and marginal headings to the clauses in this
agreement are for convenience only and have no legal effect.
1.2 Any reference in this agreement to any Act or delegated
legislation includes any statutory modification or re-
enactment thereof or the provisions referred to.
1.3 In this agreement:
'THE BOARD' means the board of directors of the Company and
includes any committee of the Board duly appointed by it.
'GROUP COMPANY' means any company which for the time being is
a company having an ordinary share capital (as defined in
s.832 Income and Corporation Taxes Act 1988) of which not less
than 25 per cent is owned directly or indirectly by the
Company or it's holding company applying the provisions of
s.838 Income and Corporation Taxes Act 1988 in the
determination of ownership.
'MANAGING DIRECTOR' means any person or persons jointly
holding such office of the Company from time to time and
includes any person(s) exercising substantially the functions
of a managing director or chief executive officer of the
Company.
'RECOGNISED INVESTMENT EXCHANGE' means any body of persons
which is for the time being a Recognised Investment Exchange
for the purposes of the Financial Services Act 1986.
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<PAGE> 2
2. APPOINTMENT AND DURATION
2.1 The Company appoints the Executive and the Executive agrees to
serve as the Company Secretary. The Executive accepts that the
Company may reasonably require him to perform other duties or tasks
not within the scope of his normal duties and the Executive agrees to
perform those duties or undertake those tasks as if they were
specifically required under this Agreement.
2.2 The appointment commenced on 1st September 1994 and shall
continue (subject to earlier termination as provided in this
Agreement) for a fixed period of 36 months from the date of this
Agreement until 1st September 1997 provided that on each anniversary
of the commencement, the then unexpired period shall be automatically
renewed for a further period of 36 months (in place of the then
unexpired period) unless either party shall prior to any such renewal
date give notice to the other party that the period will not be
renewed whereupon the Agreement will expire at the end of the then
current fixed period.
2.3 The Executive warrants that by virtue of entering into this
Agreement he will not be in breach of any express or implied terms of
any contract with or of any other obligation to any third party
binding on him.
3. DUTIES OF THE EXECUTIVE
3.1 The Executive shall at all times during the period of this
Agreement:
3.1.1 devote so much of his time attention and ability to
the duties of his appointment as the Board reasonably
consider necessary;
3.1.2 faithfully and diligently perform those duties and
exercise such powers consistent with them which are
from time to time assigned to or vested in him;
3.1.3 obey all lawful and reasonable directions of the
Board;
3.1.4 use his best endeavours to promote the interests of
the Company and it's Group Companies;
3.1.5 keep the Board promptly and fully informed (in
writing if so requested) of his conduct of the
business or affairs of the Company and it's Group
Companies and provide such explanations as the Board
may require;
3.1.6 not at any time to make any untrue or misleading
statement to the Company or any Group Company.
3.2 The Executive shall if and for so long as the Company
reasonably require during the period of this Agreement;
3.2.1 carry out duties on behalf of any Group Company:
3.2.2 act as an officer of any Group Company or hold any
other appointment or
2
<PAGE> 3
office as nominee or representative of the Company or
any Group Company:
3.2.3 Carry out the duties and the duties attendant upon
any such appointment as if they were duties to be
performed by him on behalf of the Company.
4. PLACE OF WORK
4.1 The Executive shall perform his duties at the his own offices
from time to time and/or such other places of business as the
Company requires, including occasional visits outside the
United Kingdom in the ordinary course of his duties.
5. PAY
5.1 During his appointment the Company shall pay to the Executive:
5.1.1 a basic salary of L.20,000 per year which shall
accrue day to day and be payable by equal monthly
instalments in arrears on or about the 26th day of
each month;
5.1.2 a bonus in each year of this Agreement in accordance
with the Company's executive bonus scheme as
determined from time to time by the Board.
5.2 The Executive's salary shall be reviewed by the Board on 30th
June in each year and the rate of salary may be increased by
the Company with effect from that date by such amount if any
as it shall think fit.
5.3 The Company shall cover the cost of membership for the
Executive and his immediate family of an approved private
patients medical plan with a reputable medical expenses
insurance company.
5.4 The Executive will be a member of the Company's proposed life
assurance scheme (when implemented) designed to give benefits
equal to four times his annual salary from time to time and
the Company will pay promptly all contributions due in respect
of his membership of the scheme.
6. CAR ALLOWANCE
6.1 The Company may in it's sole discretion provide the Executive
with:
6.1.1 a monthly car user allowance or at it's option;
6.1.2 for his sole business and private use a car of model
and specification selected by the Company which in
the reasonable opinion of the Board is commensurate
with the status of the Executive and the image of the
Company.
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<PAGE> 4
6.2 In such latter case the Company shall bear all running costs
and expenses of the car and shall replace the car with the
same or an equivalent model when it has travelled 45,000 miles
or on the third anniversary of the date of it's purchase by
the Company.
6.3 The Executive shall always comply with all regulations laid
down by the Company from time to time with respect to company
cars (where appropriate) and shall forthwith notify the
Company of any accidents involving his Company car and of any
charges of driving offences which are brought against him and
on the termination of his employment for any reason whether
lawful or not shall forthwith return his company car to the
Company at it's Head Office.
7. EXPENSES
7.1 The Company shall reimburse to the Executive all travelling
hotel entertainment and other expenses reasonably incurred by
him in the proper performance of his duties subject to the
Executive complying with such guidelines or regulations issued
by the Company from time to time in his respect and to the
production to the Company of such vouchers or receipts or
other evidence of payment as it shall reasonably require.
7.2 Where the Company issues a Company sponsored credit or charge
card to the Executive he shall use such credit or charge card
only for expenses reimbursable under clause 7.1 above and
shall return it to the Company forthwith on the termination of
his employment.
8. INCAPACITY
8.1 If the Executive is unavailable because of sickness (including
mental disorder) or injury he shall report this fact forthwith
to the Company Secretary's office.
8.2 If at any time during the period of his appointment the
Executive shall be unavailable for work for a period of 28
days in any 12 month period he shall upon request and at the
expense of the Company permit himself to be examined by a
registered medical practitioner to be selected by the Company
and shall authorise such medical practitioner to disclose to
and discuss with the Company's medical adviser the results of
such examination and any matters which arise from it in order
that the Company's medical adviser can notify the Company of
any matters which, in his opinion, might hinder or prevent the
Executive (if during a period of incapacity) from returning to
work for any period or (in other circumstances) from properly
performing any duties of his appointment at any time.
9. INTELLECTUAL PROPERTY RIGHTS/CONFIDENTIALITY
4
<PAGE> 5
9.1 The Executive agrees that any rights relating to confidential
information, documents, intellectual property rights, patent
rights, copyright works and or invention originated or
developed by the Executive during the course of this Agreement
shall rest in the Company solely and absolutely.
9.2 Forthwith following the conception origination or making of an
invention by the Executive during the course of his
employment the Executive shall disclose full details of such
invention to the Company. Further forthwith following the
origination or development of any confidential information
during the course of his employment the Executive shall
disclose and make available such confidential information to
the Company.
9.3 The Company shall in it's sole discretion be entitled to apply
for patent rights in respect of any invention conceived or
originated or made by the Executive and shall be responsible
for the maintenance and renewal of the patent rights.
9.4 The Executive agrees to assign to the Company all right title
and interest in and to any inventions or confidential
information made originated or developed during the course of
his employment together with any other intellectual property
rights arising and further agrees to assist the Company at the
Company's expense with any application for patent rights and
to do all such reasonable acts and things at the Company's
expense as the Company's legal advisors may advise are
necessary or desirable in connection with any such assignment
or assistance. The Executive appoints the Company to be his
attorney or agent in his name and on his behalf and to do all
such acts and things and to sign all deeds and documents as
may be necessary in order to give the Company the full benefit
of the provisions of these clauses.
9.5 The Executive assigns to the Company by way of future
assignment of copyright the copyright existing in the
documents originated by the Executive for all classes of act
which may by virtue of the Copyright Designs and Patent Act
1988 he as the owner of the copyright has the exclusive right
to do throughout the world and for the whole period for which
the copyright is to subsist.
9.6 The Executive agrees to keep the confidential information, the
documents and all matters arising or coming to his attention
in connection with his employment, secret and confidential and
not at any time for any reason whatsoever to disclose them or
permit them to be disclosed to any party except to enable the
Executive to fulfill his employment conditions.
9.7 The Executive agrees to keep secret and confidential and not
at any time for any reason to disclose or permit to be
disclosed to any person or persons or otherwise make use of or
permit to be disclosed to any person or persons or otherwise
make
5
<PAGE> 6
use of or permit to be made use of any information relating to
the Company's technology technical processes business affairs
or finances or any such in formation relating to any Group
Company, suppliers or customers of the Company where knowledge
or details of the information was received during the period
of this Agreement
9.8 The obligations of the parties under this clause shall survive
the expiry or the termination of this Agreement for whatever
reason.
10. TERMINATION OF AGREEMENT
10.1 Automatic Termination: This Agreement shall automatically
terminate upon the Executive reaching his 65th birthday.
10.2 Suspension: In order to investigate a complaint against the
Executive of misconduct the Company is entitled to suspend the
Executive on full pay for a period not exceeding 28 days to
carry out a proper investigation and hold a disciplinary
hearing.
10.3 Immediate Dismissal: The Company may with immediate effect
terminate this Agreement if the Executive:
10.3.1 commits any act of gross misconduct or repeats or
continues (after written warning) any other material
or serious breach of his obligations under this
Agreement; or
10.3.2 is guilty of any conduct which in the reasonable
opinion of the Board brings him or the Company or
any Group Company into serious disrepute; or
10.3.3 is convicted of any criminal offence punishable with 6
months or more imprisonment (excluding an offence
under the road traffic legislation in the United
Kingdom or elsewhere for which he is not sentenced to
any term of imprisonment whether immediate or
suspended); or
10.3.4 commits any act of dishonesty relating to the
Company or any Group Company any of it's or their
employees or otherwise; or
10.3.5 is in the reasonable opinion of the Board
incompetent in the performance of his duties.
10.4 Pay in lieu: On serving notice for any reason to terminate
this Agreement or at any time thereafter during the currency
of the notice the Company shall be entitled to pay the
Executive his basic salary at the rate then payable under
clause 5 hereof for the unexpired portion of the duration of
his appointment or entitlement to notice as may be.
6
<PAGE> 7
10.5 Miscellaneous: On termination of this Agreement for any
reason, the Executive shall at the request of the Company
resign (without prejudice to any claims which the executive
may have against the Company arising out of this Agreement or
the termination thereof) from all and any offices which he
holds as a director of the Company or of any Group Company and
from all other appointments and offices which he holds as a
nominee or representative of the Company or any Group Company
and if he shall fail to do so within seven days the Company is
hereby irrevocably authorised to appoint some person in his
name and on his behalf to sign any documents or do any things
necessary or requisite to effect such resignation(s) or
transfer(s).
10.6 The Executive shall not directly or indirectly for a period of
12 months after termination for whatever reason of this
Agreement:
10.6.1 Hold any material interest in any person firm or
company which is or shall be wholly or partly in
competition with the actual or contemplated business
of any Group Company or which might require him to
disclose or make use of any confidential business
information in order to properly discharge his duties
to or further his interest in such person firm or
Company.
10.6.2 Seek or receive in any capacity whatsoever any
business orders or custom for any products or
services produced marketed sold or provided by any
Group Company in the ordinary course of business of
the Group Company.
10.6.3 Solicit or entice away from any Group Company any
person who is or was six months prior to termination
employed by any Group Company to work in any capacity
in which that person has had any material involvement
in the business of any Group Company as a director,
technical operator or salesperson.
11. GENERAL
11.1 Statutory Particulars
The further particulars of employment not contained in the body
of this Agreement which must be given to the Executive in
compliance with Part 1 Employment Protection (Consolidation)
Act 1978 as given in Schedule I.
11.2 Accrued rights
The expiration or termination of this Agreement however arising
shall not operate to affect such of the provisions of this
Agreement as are expressed to operate or have effect after then
and shall be without prejudice to any accrued rights or
remedies of the parties
11.3 Proper Law
The validity construction and performance of this Agreement
shall be governed by the Laws of England and Wales.
11.4 Acceptance of Jurisdiction
7
<PAGE> 8
All disputes claims or proceedings between the parties
relating to the validity construction or performance of this
Agreement shall be subject to the non-exclusive jurisdiction
of the High Court of Justice in England and Wales to which the
parties irrevocably submit.
11.5 Notices
Any notices to be given by a party under this agreement must be
given by delivery at or sending first class post or other
faster postal service or telex facsimile transmission or other
means of telecommunication in permanent written form to the
last known postal address or relevant telecommunications number
of the other party. Where notice is given sending in a
prescribed manner it shall be deemed to have been received when
in the ordinary course of the transmission it would have been
received by the addressee. To prove the giving of a notice it
shall be sufficient to show it was despatched. A notice shall
have effect from the sooner of it's actual or deemed receipt by
the addressee.
SCHEDULE 1
PART 1 EMPLOYMENT (CONSOLIDATION) ACT 1978 ACT
The following information is given supplemental to the information given in the
body of this Agreement in order to comply with the requirements of Part 1 of
the Act
1 The Executives employment with the Company commenced on 1st September
1994
2 There are no normal hours of work. The Executive shall fulfill such
hours of work as may be necessary so as to properly fulfil his duties.
3 No contracting out certificate pursuant to the provisions of the
Social Security pension Act 1975 is held by the Company in respect of
the Executives employment.
4 The Executive is subject to the Company's Disciplinary Rules and
Procedures which will be in accordance with ACAS code of practise.
5 If the Executive has any grievance relating to his employment (other
than one relating to a disciplinary decision) he should refer such
grievance to the Chairman of the Board and if the grievance is not
resolved by discussion with him it will be referred to the Board for
resolution.
8
<PAGE> 9
IN WITNESS WHEREOF THE COMPANY AND THE EXECUTIVE HAVE EXECUTED THIS DOCUMENT AS
A DEED THE DAY AND YEAR FIRST BEFORE WRITTEN
Signed by the Executive )
and delivered as a Deed ) W.D. SNOWDON
in the presence of: )----------------------------------------
J. BRADFORD
- ----------------------------------
WITNESS
Signed and delivered as )
a deed by ) K.C. HALL
--------------------------------
(Director) and by )
(Director/Secretary) )
for and on behalf of the ) W.P. HOLLOWAY
Company in the presence of: )--------------------------------
C. ARMSTRONG
- ----------------------------------
Witness
9
<PAGE> 1
EXHIBIT 10.4
Millport Limited
Seaton House - Suite 2
17-19 Seaton Place
St. Heller, Jersey JE2 3QL
Channel Islands
London Phone 071 919-4793 NY Phone
0101 516 759 3047
September 8, 1994
MSU PLC
270 Upper 4th Street
Witan Gate West
Central Milton Keynes, MK9 1DP
England
Gentlemen:
We hereby agree to act as placement agent and place, on your behalf,
securities of the Company with foreign investors pursuant to Reg S which shall
result in gross proceeds to your company of not less than $5,000,000, and net
proceeds of not less than $4,500,000. We shall place these securities on the
basis of a discount from the quoted market price of your shares of not less
than 40% and not more than 50%. As a condition of this commitment, you hereby
agree as follows:
1. MSU or its successor shall be a U.S. publicly traded company
or a subsidiary of a publicly traded company, and shall be in
compliance with all of the reporting requirements of Rule 12G.
In the event you are a subsidiary of a publicly traded
company, then as used herein "you" shall refer to such
corporation and shares shall refer to shares of such
corporation;
2. We shall have the right to designate, subject to your
reasonable approval, one director to your board of directors;
3. All the present shareholders of your Corporation shall be
subject to the restrictions contained in this paragraph 3.
Such shareholders shall agree not to sell any shares pursuant
to Reg S or otherwise for a period of two (2) years from
completion of the offering. This requirement shall be waived
to the extent provided below, provided that the Company
achieves pre-tax profits of $4,000,000 in the fiscal year
ending June 30, 1995 or in the alternative, $6,000,000 in
aggregate net profits from the period July 1, 1994 through
June 30, 1996. In the event such results are achieved, the
principal shareholders your corporation, namely, Wyn Holloway,
-1-
<PAGE> 2
TXC, and The Employee Trust shall have the right to sell up to
$1,000,000 each through us pursuant to Reg S under the same
conditions as the placement contemplated herein, provided that
the discount shall be negotiated between the parties at the
time of sale and shall be based upon the prevailing Reg S
discounts directed to purchasers not acquiring for short term
sale. Any acquisition agreement shall require the other
stockholders of your Corporation to agree to the same
restrictions except that the maximum dollar amount such
shareholders may sell (as provided above) shall be $1,000,000
collectively, on a pro rata basis.
You hereby agree not to transact any other Reg S placement or provide
any registration rights without our prior written consent (such consent not to
be unreasonably withheld or delayed), prior to October 1, 1996.
You will allocate, out of the proceeds of the Reg S, 900,000 pounds
sterling or $1,400,000 U.S. (at your option) for payment to TXC or its nominee.
You hereby agree to allocate out of the proceeds of this Reg S
financing an amount equal to $150,000 to be spent by the Company in the
furtherance of its corporate finance public relations enhancement as we may
reasonably direct, including but not limited to such subscriptions as Research,
Inc. In addition, you hereby agree to make the principal officers of the
Company, namely Wyn Holloway or Keith Hall, reasonably available to us for the
purpose of meeting with the U.S. investment banking and brokerage community for
the purpose of assisting in the preparation of research reports on the Company
and analysts and brokers meeting for the purpose of acquainting the financial
community with the Company and its management. Additionally, you agree to
cooperate with us to increase the number of market makers in the Company's
shares and to cooperate with said market makers.
You further agree to continue to comply with all of the reporting
requirements of Regulation 12G or such other regulations as may be in effect,
and further, to expeditiously filing an application for listing on NASDAQ and
to apply for a trading facility under Rule 4.2 of the International Stock
Exchange of the United Kingdom and Eire Ltd. and to comply with all of the
applicable rules of said exchanges.
In the event that Regulation S is abolished or modified, then you
shall then request expeditious filing of a registration statement under the
applicable rules of an S-3 or its equivalent.
We agree to conclude this placement no later than December 31, 1994
but shall endeavor to complete at least $2,000,000 of said placement by October
15, 1994. In connection therewith, we may ask you to accept some short term
notes from us payable on October 15, 1994.
We shall have the right to substitute or participate with another
placement agent if we determine the same to be in the best interest of your
Company.
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<PAGE> 3
You further agree to reimburse us for any reasonable out-of-pocket
expenses we incur in connection with financial public relations activities on
behalf of your Company.
You shall further grant to us an option to purchase or find purchasers
for up to 500,000 shares of your common stock for a per share price equal to
the market price of your shares at the time of completion of the offering.
Said option to be for a period of two (2) years and shall contain provisions
that are reasonably acceptable to us. We acknowledge that the acquisition
agreement will contain an option to your present shareholders to purchase such
additional number of shares to maintain their percentage interest in the
Company as of the acquisition date. Such option shall have an exercise price
equal to our option and shall be exercisable proportionately to the extent we
exercise our option.
If you are acquired by a public corporation, or are merged into a
public corporation, such corporation shall execute this letter.
If the foregoing meets with your understanding and approval, kindly
execute the copy of this letter and return the same to us.
Very truly yours,
MILLPORT, LTD.
By: R. Harman, President
---------------------
ACCEPTED AND AGREED:
MSU PLC
By: W.P. Holloway
----------------------
WYN HOLLOWAY
L. KO
- -------------------------
TXC
V.G. BINES
- -------------------------
The Employee Trust
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<PAGE> 4
MILLPORT LIMITED
Evershade
Suite No. 2
Seaton House
17-19 Seaton Place
St. Heller
Jersey
Channel Islands
As of June 19, 1995
MSU Corporation
270 Upper 4th Street
Witan Gates West
Central Milton Keynes
MK9 1DP
Confirmation of Exclusive Placement Agency
This letter serves to confirm our mutual agreement with respect to our
engagement as your sole and Exclusive Placement Agent (the "Agent") to act on
your behalf in connection with the offer and sale of an aggregate of 2,200,000
shares of your common stock, par value $0.01 per share (collectively, the
"Shares"), to various non United States persons located outside of the United
States in accordance with the letter Agreement dated September 13, 1994
("commitment letter"). This exclusive agency engagement shall be for a term
ending July 31, 1995 provided subscriptions may be presented and payment
completed from time to time. You agree during the term hereof not to offer or
solicit the sale of any additional Shares under Regulation S. No one
beneficial owner will purchase more than 4.9% of the issued and outstanding
Shares. The gross purchase price to be paid to you for the Shares shall be
fixed at $2.50 per share.
With the delivery of the Subscription Agreement, in form annexed to the
Confidential Offering Memorandum hereto and made a part hereof, you shall cause
to be delivered to Evershade ("Escrow Agent") certificates representing the
Shares purchased by Purchasers or, in lieu of such Escrow, you will place a
stop order against transfer of such shares, all in accordance herewith and the
Subscription Agreements hereinafter delivered to you.
<PAGE> 5
Subject to the Certificates being delivered free from any restrictive legend,
and with respect to shares to remain in escrow, the Escrow Agent will deliver
Shares to the Purchasers only upon receipt of executed letter attached to
Subscription Agreement.
We represent, warrant and agree that any purchaser of Shares will be qualified
to purchase the Shares under the laws of the jurisdiction in which such
purchaser resides and that the offer and sale of Shares will not violate the
securities or other laws of such jurisdiction. The Agent understands that the
Shares have not been registered under the United States Securities Act of 1933,
and may not be offered or sold within the United States or to, or for the
account or benefit of, U.S. persons except in accordance with Regulation S
("Regulation S") under the Securities Act 1933, or pursuant to an exemption
from the registration requirements of the Securities Act. The Agent agrees to
obtain from each Buyer an executed copy of the Subscription Agreement, in form
annexed hereto and made a part thereof (fax execution shall be deemed
acceptable). The Agent is not obliged to carry out any due diligence
whatsoever regarding the Buyers and may rely on the fact that the Buyer has
executed a fax of the Subscription Agreement as sufficient evidence that the
Buyer is not a U.S. citizen or resident and has agreed to and complies with all
securities regulations and understands the terms and restrictions of the
offering. We shall be entitled to purchase Shares for our own account and for
the account of related companies and persons.
The Agent agrees that all offers and sales of the Shares made by the Agent
prior to expiration of the registered period specified in Rule 903(o)(2) shall
be made only in accordance with the provisions of Rule 903 or Rule 904,
pursuant to registration of the Shares under the Securities Act of 1933, or
pursuant to an available exemption from registration requirements of the
Securities Act of 1933. The Agent further agrees that all offering materials
and documents used in connection with offers and sales of the Shares including
Agreements with distribution prior to the expiration of the aforementioned
restricted period shall include statements to the effect that the Shares have
not been registered under the Securities Act of 1933, and may not be offered or
sold in the United States or to "U.S. persons" (other than distributors) as
defined in Regulation S unless the Shares are registered under the Securities
Act of 1933, or an exemption from the registration requirements of the
Securities Act of 1933 is available. This agreement shall be governed by the
laws of the State of New York. In the event of any conflict between the
commitment letter and this Agreement the terms of the commitment letter shall
govern.
<PAGE> 6
If the foregoing correctly states our agreement, please so indicate by signing,
dating and returning a signed original to:
MILLPORT LIMITED
c/o Evershade
Suite No. 2,
Seaton House,
17-19, Seaton Place,
St. Heller,
Jersey,
Channel Islands
Yours very truly,
MILLPORT LTD.
By: R. HARMAN , President
------------------------
Agreed and accepted as of this
26th June 1995
MSU CORPORATION
By: W.D. SNOWDON , Secretary
-------------------
<PAGE> 1
EXHIBIT 10.5
THIS SETTLEMENT is made the 24th day of May One thousand nine hundred and
ninety four
B E T W E E N
(1) WYNFORD PETER HOLLOWAY of Temple Lodge Sibford Gower near Banbury
Oxfordshire ("the Settlor")
(2) PETER BRIAN WEBER and VIVIAN GEORGE BINES both of 48 The Parade
Cardiff ("the Trustees" which expression shall where the context so
admits include the trustees or trustee for the time being of this
Settlement)
W H E R E A S
(A) THE SETTLOR wishes to make this Settlement and has transferred or
delivered to the Trustees or otherwise placed under their control the
property specified in the Second Schedule and from time to time
further monies investments or other property may be paid or
transferred to the Trustees by way of addition
(B) IT IS intended that this Settlement shall be irrevocable
NOW THIS DEED IRREVOCABLY WITNESSES AS FOLLOWS
1. Definitions
(a) "the Trust Fund" shall mean
(i) the property specified in the Second Schedule and
(ii) all money investments or other property paid or transferred by
any person or persons to or so as to be under the control of and (in
either case) accepted by the Trustees as additions and
(iii) all accumulations (if any) of income directed to be held as an
accretion to capital and
(iv) the money investments and property from time to time
representing the said money investments property additions and
accumulations
(b) "the Trust Period" shall mean the period ending on the earlier of:
(i) the last day of the period of 80 years from the date of this
Settlement which period (and no other) shall be the applicable
perpetuity period or
(ii) such date as the Trustees shall by deed at any time or times
specify (not being a date earlier than the date of execution of any
such deed or later than a date previously specified)
(c) "the Accumulation Period" shall mean the period of 21 years from the
date of this Settlement or the Trust Period if shorter
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(d) "the Beneficiaries" shall mean the following objects or persons
(whether or not such objects or persons are now in existence or come into
existence during the Trust Period):
All employees past present and future of the companies MSU Limited and
MSU PLC and any subsequent companies and their spouses children and
remoter issue.
2. Trust for sale
THE TRUSTEES shall hold the Trust Fund UPON TRUST as to investments or property
other than money in their absolute discretion to sell call in or convert into
money all or any of such investments or property but with power to postpone
such sale calling in or conversion and to permit the same to remain as invested
and upon trust as to money with the like discretion to invest the same in their
names or under their control in any of the investments authorized by this
settlement or by law with power at the like discretion from time to time to
vary or transpose any such investments for others so authorised
3. Power to add or remove the beneficiaries
(a) THE Trustees may at any time or times during the Trust Period add to
or remove such one or more objects or persons as The Trustees shall (subject to
the application (if any) of the rule against perpetuities) determine
(b) Any such addition shall be made by deed
(i) naming or describing the objects or persons to be added and
(ii) specifying the date or the happening of the event (not being
earlier than the date of execution of the deed but before the end of
the Trust Period) upon which the addition shall take effect
4. Trusts of added property
THE Trustees shall hold the Trust Fund UPON WITH AND SUBJECT TO the trusts
powers and provisions of this Settlement and the Trustees shall have the right
at any time or times during the Trust Period to accept such additional money
investments or other property as may be paid or transferred to them UPON these
trusts by the Settlor or any other person either personally or by testamentary
act or disposition (including property of an onerous nature the acceptance of
which the Trustees consider to be beneficial)
5. Power of appointment
(a) THE Trustees shall hold the capital and income of the Trust Fund UPON
such trusts in favour or for the benefit of all or such one or more of the
Beneficiaries exclusive of the other or others of them in such shares or
proportions if more than one and with and subject to such powers and provisions
for their respective maintenance education or other benefit or for the
accumulation of
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<PAGE> 3
income (including administrative powers and provisions and discretionary trusts
and powers to be executed or exercised by any persons or person whether or not
being or including the Trustees or any of them) and so that the exercise of
this power of appointment may be delegated to any extent and in such manner
generally as the Trustees (subject to the application (if any) of the rule
against perpetuities) by any deed or deeds revocable during the Trust Period or
irrevocable and executed during the Trust Period shall (with the written
consent of the Settlor during the Settlor's lifetime but otherwise in their
absolute discretion) appoint Provided always that no exercise of this power
shall invalidate any prior payment or application of all or any part or parts
of the capital or income of the Trust Fund made under any other power or powers
conferred by this Settlement or by law
(b) Notwithstanding Clause 12 of the First Schedule the Trustees may not
release or restrict this power during the Settlor's lifetime without the
Settlor's written consent
6. Trusts in default of appointment
UNTIL and subject to and in default of any appointment under Clause 5
(a) The Trustees shall pay or apply the income of the Trust Fund to or for
the benefit of all or such one or more of the Beneficiaries exclusive of the
other or others of them as shall for the time being be in existence and in such
shares if more than one and in such manner generally as the Trustees shall in
their absolute discretion from time to time think fit.
(b) Notwithstanding the provisions of subclause (a) the Trustees may at
any time or times during the Accumulation Period in their absolute discretion
instead of applying all or any part or parts of the income accumulate the same
in the way of compound interest by investing or otherwise applying it and its
resulting income from time to time in any applications or investments
authorised by this deed or by law and subject to subclause (c) shall hold such
accumulations as an accretion to capital
(c) The Trustees may at any time or times during the accumulation Period
apply the whole or any part or parts of the income accumulated under subclause
(b) as if it were income arising in the then current year
(d) Notwithstanding the trusts powers and provisions declared and
contained in this clause the Trustees may
(i) at any time or times during the Trust Period pay or apply the
whole or any part or parts of the capital of the Trust Fund to
or for the benefit of all or such one or more of the
Beneficiaries exclusive of the other or others of them in such
shares if more than one and in such manner generally as the
Trustees shall in their absolute discretion think fit
(ii) (subject to the application (if any) of the rule against
perpetuities) pay or transfer any income or capital of the
Trust Fund to the trustees of any other trust wherever
established or existing under which all or any one or more of
the Beneficiaries is or are interested (whether or not all or
such one or more of the Beneficiaries is or are the
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<PAGE> 4
only objects or persons interested or capable of benefiting
under such other trust) if the Trustees shall in their
absolute discretion consider such payment or transfer to be
for the benefit of all or such one or more of the
Beneficiaries
7. Administrative powers
THE Trustees shall in addition and without prejudice to all statutory powers
have the powers and immunities set out in the First Schedule provided that the
Trustees shall not exercise any of their powers so as to conflict with the
beneficial provisions of this Settlement.
8. Extended power of maintenance
SECTION 31 of the Trustee Act 1925 shall be deemed to apply as if the words
'may in all the circumstances be reasonable' had been omitted from paragraph
(i) of subsection (1) and in substitution there had been inserted the words
'the Trustees may think fit' and as if the proviso at the end of subsection (1)
had been omitted
9. Extended power of advancement
SECTION 32 of the Trustee Act 1925 shall be deemed to apply as if the proviso
(a) of subsection (1) had been omitted
10. Power to purchase company shares
(a) The trustees shall (unless they see reason for doing otherwise) apply
any moneys forming part of or added to the Trust Fund in purchasing shares in
the Companies set out in clause 1(d) hereof to be held as part of the Trust
Fund (and in making such purchases shall not be obliged to have regard to the
need to diversify the investments of the Trust Fund) in order to encourage and
facilitate the holding of shares or debentures in the Companies by or for the
benefit of the bona fide employees or former employees of the Companies whether
by means of a sale (whether or not for full consideration) to or the grant of
options over shares in the company pursuant to the provisions of an employee
share scheme ("a Scheme") or the exercise of the power of appointment in Clause
5 in favour of, any Beneficiary.
PROVIDED THAT
(i) at any time when the Trust Fund comprises shares in the Companies the
Trustees shall on receipt of a written notice from the Companies grant options
(in such form as the Companies shall prescribe) to such persons (being
Beneficiaries) and in respect of such number of shares in the Companies as the
Companies shall specify in its said notice whereafter and in the event and to
the extent that such options are exercised the Trustees shall effect all
necessary and appropriate transfers of shares to the persons concerned within
the time prescribed by the rules of the Scheme which said transfers shall take
effect freed from the trusts herein declared respecting such shares.
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<PAGE> 5
(ii) the Companies may at any time and from time to time by notice in
writing direct that the Trustees make purchases of shares in the Companies with
moneys paid or transferred to the Trustees for that purpose to the intent that
any shares to purchased shall be used for the purpose of a Scheme.
11. Trustee charging clause
a) ANY Trustee which shall be a trust corporation or company authorised
to undertake trust business shall be entitled in addition to reimbursement of
its proper expenses to remuneration for its services in accordance with its
published terms and conditions for trust business in force from time to time
and in the absence of any such published terms and conditions in accordance
with such trustee and the Settlor or (if the Settlor is unfit unable or
unwilling to act) the person or persons by whom the power of appointing new
trustees is for the time being exercisable
b) Any trustee who is a solicitor or other person engaged in a profession
or business shall be entitled to charge and be paid all normal professional or
other charges for business done services rendered or time spent personally or
by such trustee's firm in the administration of these trusts including acts
which a trustee not engaged in any profession or business could have done
personally
c) Any trustee shall be entitled to retain any brokerage or other
commission which may be received personally or by such trustee's firm in
respect of any transaction carried out on behalf of this Settlement for which
such trustee or trustee's firm is in the normal course of business allowed
brokerage or other commission notwithstanding that the receipt of such
brokerage or commission was procured by an exercise by such trustee or the
Trustee of powers over the Trust Fund
12. Appointment of new trustees
(a) DURING the lifetime of the Settlor the power of appointing new
trustees shall be vested in the Settlor.
(b) A person may be appointed to be a trustee notwithstanding that such
person is not resident in the United Kingdom and remaining out of the United
Kingdom for more than twelve months shall not be a ground for the removal of a
trustee
13. Clause headings
THE clause headings are included for reference only and do not affect the
interpretation of this settlement
14. Proper law forum and place of administration
(a) THE proper law of this Settlement shall be that of England and Wales
and all rights under this settlement and its construction and effect shall be
subject to the jurisdiction of and construed according to the laws of England
and Wales
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<PAGE> 6
(b) The courts of England and Wales shall be the forum for the
administration of these trusts
(c) Notwithstanding the provisions of subclauses (a) and (b)
(i) The Trustees shall have power (subject to the application (if
any) of the rule against perpetuities) to carry on the general
administration of these trusts in any jurisdiction in the world
whether or not such jurisdiction is for the time being the proper law
of this Settlement or the courts of such jurisdiction are for the time
being the forum for the administration of these trusts and whether or
not the Trustees or any of them are for the time being resident or
domiciled in or otherwise connected with such jurisdiction
(ii) The Trustees may at any time declare in writing that from the
date of such declaration the proper law of this Settlement shall be
that of any specified jurisdiction (not being a jurisdiction under the
law of which this Settlement would be capable of revocation) and that
all rights under this settlement and its construction and effect shall
be subject to and construed according to the laws of that jurisdiction
(iii) The Trustees may at any time declare in writing that from the
date of such declaration the forum for the administration of these
trusts shall be the courts of any specified jurisdiction
15. Stamp duty certificate
It is hereby certified that this instrument falls within Category L in the
Schedule to the Stamp Duty (exempt Instruments) Regulations 1987
IN WITNESS whereof this deed has been executed the day and year first before
written
THE FIRST SCHEDULE
Administrative powers
1. POWER OF INVESTMENT
(a) SUBJECT as provided below any monies requiring investment may
be invested in or upon any investments of whatever nature and wherever situate
whether producing income or not or whether involving liability or not
(including the purchase of any immovable or movable property or any interest in
such property and including purchases made for the purpose of enabling all or
any one or more of the Beneficiaries to have the occupation use or enjoyment in
specie of the asset purchased or other purpose which the Trustees consider to
be in the interests of any one or more of the Beneficiaries) as the Trustees
shall in their absolute discretion think fit so that the Trustees shall have
the same full and unrestricted powers of making and changing investments of
such monies as if they
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<PAGE> 7
were absolutely and beneficially entitled to such monies and without prejudice
to the generality of the above the Trustees shall not be under any obligation
to diversify their investment of such monies
(b) The acquisition of any such reversionary interest or any
policy of insurance or assurance sinking fund policy or other policy of
whatever nature or any annuity or securities or other investments not producing
income or of a wasting nature or for any other reason not within the meaning of
the word 'investment' strictly construed shall be deemed to be an authorised
investment of trust monies if the Trustees shall consider the same to be for
the benefit of any one or more of the Beneficiaries
(c) Where any such reversionary interest policy security or investment as
is described in subclause (b) is comprised in the Trust Fund or where any other
security or investment is sold with the right to receive the dividend or
interest accrued or accruing no part of any accretion to the value or of any
premium or bonus or other sum (whether in respect of arrears of or prospective
dividend or interest or income or otherwise) which accrues or is payable when
the same falls into possession or is redeemed or matures or on repayment of the
capital monies so secured or when any sale or disposal is made shall be
apportionable to or be treated as income
(d) The Trustees shall have power to exchange property for other property
of a like or different nature and for such consideration and on such conditions
as they in their absolute discretion think fit
2. POWER TO LEND AND TO GIVE GUARANTEES
(a) THE Trustees shall have power to lend money or property with or
without security to a of any one or more of the Beneficiaries either free of
interest or on such terms as to payment of interest and generally as the
Trustees shall in their absolute discretion think fit
(b) The Trustees shall have power to guarantee the payment of money and
the performance of obligations in respect of any existing or future borrowings
by any one or more of the Beneficiaries from third parties or guarantees
indemnities or other commitments of like nature given to third parties by any
one or more of the Beneficiaries including without prejudice to the generality
of the above the power to pledge the whole or part of the assets comprising the
Trust Fund in support of any such guarantee given as above by the Trustees and
to enter into such indemnities as they shall in their absolute discretion think
fit in connection with any such guarantee
3. POWER TO PERMIT OCCUPATION OF PROPERTY AND ENJOYMENT OF CHATTELS
THE Trustees shall have power to permit any one or more of the Beneficiaries to
occupy or reside in or upon any real or immovable property or to have the
enjoyment and use of chattels or other movable property for the time being held
upon these trusts on such terms as to payment of rent rates taxes and other
expenses and outgoings and as to insurance repair and decoration and generally
upon such terms as the Trustees shall in their absolute discretion think fit
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<PAGE> 8
4. POWER TO EFFECT INSURANCE POLICIES AND TO BORROW
THE Trustees shall have power to effect and maintain insurance policies on the
life of any person (and pay any premium or premiums out of the Trust Fund) and
shall have power to borrow and raise money on the security of the Trust Fund
for any purpose (including the investment of the monies so raised as part of
the Trust Fund) and to mortgage charge or pledge any part of the Trust Fund as
security for any monies so raised and to guarantee the payment of money and the
performance of obligations in respect of borrowings by any company fully or
partly owned by the Trustees and in connection with such guarantees to enter
into such indemnities as the Trustees shall in their absolute discretion think
fit
5. POWERS IN RELATION TO REAL PROPERTY
WHERE the Trust Fund for the time being includes any real or immovable property
(in this clause referred to as 'the land')
(a) The Trustees may lease all or any part of the land for any purpose and
whether involving waste or not and for any term and either wholly or partly in
consideration of a rent (whether fixed or variable) or fine or premium or the
erection improvement or repair or any agreement to erect improve or repair
buildings or other structures on the land and may accept (with or without
consideration) surrender of any lease of all or any part of the land
(b) The Trustees may in executing any trust or power of sale sell all or
any part of the land either wholly or partly in consideration of an annual sum
payable either in perpetuity or for any term (whether definite or indefinite)
and being either reserved out of the land sold or secured in such other manner
as the Trustees shall in their absolute discretion think fit
(c) The Trustees may in executing any trust or power of sale or leasing:
(i) sell or lease all or any part of the land whether the division
is horizontal or vertical or made in any other way
(ii) sell or lease or reserve any easement or right or privilege
over all or any part of the land
(iii) sell or lease or except or reserve any timber or mines or
minerals on or in or under all or any part of the land together with
any easements rights or privileges of curring or working and carrying
away the same or otherwise incidental to or connected with forestry or
mining purposes
(iv) impose and make binding for the benefit of all or any part of
the land sold or leased any restrictions or stipulations as to user or
otherwise affecting any part of the land retained
(v) accept in exchange for all or any part of the land to be sold
or leased (either with or without any money paid or received for
equality of exchange) any other real or immovable property or any lease
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<PAGE> 9
(vi) enter into any contract or grant any option for the sale or
leasing of all or any part of the land or otherwise for the exercise
by the Trustees of any of their above powers
(d) The Trustees shall not be bound to see to nor be liable or accountable
for omitting or neglecting to see to the repair or insurance of any buildings
or other structures on the land or to the payment or any outgoings or otherwise
as to the maintenance of the land or any buildings or other structures on the
land but may maintain repair or insure the same in such manner and to such
extent as they shall in their absolute discretion think fit.
(e) The Trustees may from time to time expend monies altering or improving
the land or any buildings or other structures on the land (including erecting
demolishing or rebuilding the same) to such extent and in such a manner as they
shall in their absolute discretion think fit and any certificate in writing of
any architect or surveyor employed by the Trustees to the effect that any work
specified in such certificate is or includes an alteration or an improvement to
the land or any such building or other structure shall be conclusive as between
the Trustees and the Beneficiaries that any money expended on such work was
properly expended in exercise of this power
6. POWERS IN RELATION TO CHATTELS
WHERE the Trust Fund for the time being includes any chattels (in this clause
referred to as "the chattels")
(a) The Trustees may sell lease hire deposit store other otherwise deal
with the chattels upon such terms as they shall in their absolute discretion
think fit.
(b) The Trustees shall not be bound to see to nor be liable or accountable
for omitting or neglecting to see to the repair or insurance of the chattels
but may repair and insure the chattels in such a manner and to such an extent
as they shall in their absolute discretion think fit.
7. POWER TO TRADE
(a) THE Trustees shall have power to trade or take part in any venture in
the nature of trade whether solely or jointly with any other person and whether
or not by way of partnership (limited or general) and for these purposes make
such arrangements as they shall in their absolute discretion think fit and may
delegate any exercise of this power to any one or more of their number or to a
company or partnership formed for this purpose.
(b) Any power vested in the Trustees under this Settlement shall (where
applicable) extend to any arrangements in connection with any such trade or
venture and in particular but without prejudice to the generality of the above
the Trustees' powers of borrowing and charging shall extend to any borrowing
arrangements made in connection with such trade or venture and whether made
severally or jointly with others or with unequal liability and the Trustees
shall be entitled to be fully indemnified
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out of the Trust Fund against all personal liability to which they may become
in any manner subject in connection with any such trade or venture.
8. POWER TO GIVE INDEMNITIES
(a) THE Trustees shall have power to enter into any indemnity in favour of
any former trustee or any other person in respect of any fiscal imposition or
other liability of any nature prospectively payable in respect of the Trust
Fund or otherwise in connection with this Settlement and to charge or deposit
the whole or any part of the Trust Fund as security for any such indemnity in
such manner in all respects as they shall in their absolute discretion think
fit.
(b) The Trustees shall have power to give or enter into any indemnify
warranty guarantee undertaking or covenant or enter into any type of agreement
that they shall in their absolute discretion think fit relating to the transfer
or sale of a business or private company shareholding held or owed for the time
being by the Trustees whether relating to the business or company itself its
assets liabilities shares or employees or any other aspect of the business or
company in favour of any transferee purchaser or other relevant party and
including any limitation or restriction on value or otherwise as the Trustees
shall in their absolute discretion think fit.
9. EXCLUSION OF APPORTIONMENT
THE statutory and equitable rules of apportionment shall not apply to this
Settlement and the Trustees shall be permitted to treat all dividends and other
payments in the nature of income received by them as income at the date of
receipt irrespective of the period for which the dividends or other income is
payable.
10. POWER TO DEAL WITH INSURANCE POLICIES
THE Trustees shall in addition and without prejudice to all statutory and other
powers conferred upon them have the following powers in relation to any
insurance policy ('the policy') from time to time comprised in the Trust Fund
(a) To borrow on the security of the policy for any purpose
(b) To convert the policy into a fully paid-up policy for a
reduced sum assured free from payment of future premiums
(c) To surrender the policy wholly or any part or any bonus
attaching to the policy for its cash surrender value
(d) To sell the policy or any substituted policy on such terms as
the Trustees shall in their absolute discretion think fit
-10-
<PAGE> 11
(e) To exercise any of the powers conferred by the policy or with
the consent of the insurer to alter the amount or occasion of the payment of
the sum assured or to increase or decrease the amount of the periodic premiums
(if any) payable under the policy or to alter the period during which the
premiums are payable and to do any of these things notwithstanding that the sum
assured may be reduced always to production of evidence of insurability
satisfactory to the insurer
11. POWER TO VARY ADMINISTRATIVE PROVISIONS
THE Trustees shall have power at any time or times during the Trust Period by
deed or deeds to revoke or vary any of the administrative provisions of this
Settlement or to add any further administrative provisions as the Trustees may
consider expedient for the purposes of this Settlement and without prejudice to
the generality of the above for ensuring that at all times there should be a
trustee of this Settlement and that the Trust fund shall be fully and
effectively vested in or under the control of such trustee and that the funds
of this Settlement shall be enforceable by the Beneficiaries provided always
that the power conferred by this clause shall only be exercisable if the
Trustees shall be advised in writing by a lawyer of at least 10 years' standing
qualified in the law of the jurisdiction which for the time being is the proper
law of this Settlement that it would be expedient for the purposes of this
Settlement that the administrative provisions be revoked varied or added to in
the manner specified in such written advice and that such power shall be
exercisable only by the Trustees executing a deed in a form appropriate to
carry such advice into effect
12. RELEASE OF POWERS
THE Trustees may by deed or deeds and so as to bind their successors as
trustees release or restrict the future exercise of all or any of the powers by
this Settlement or by law conferred on them either wholly or to the extent
specified in any such deed or deeds notwithstanding the fiduciary nature of any
such powers
13. POWER OF APPROPRIATION
THE Trustees shall have power in their absolute discretion to appropriate any
part of the Trust Fund in its then actual condition or state of investment in
or towards satisfaction of any interest or share in the Trust fund as may in
all the circumstances appear to them to be just and reasonable and for the
above purposes from time to time to place such value on any or all investments
or other property as they shall in their absolute discretion think fit.
14. POWER TO VOTE AND TO EMPLOY NOMINEES AND CUSTODIANS
IN respect of any property comprised in the Trust Fund the Trustees shall have
power
-11-
<PAGE> 12
(a) To vote upon or in respect of any shares securities bonds
notes or other evidence of interest in or obligation of any corporation trust
association or concern whether or not affecting the security or the apparent
security of the Trust Fund or the purchase or sale or lease of the assets of
any such corporation trust association or concern.
(b) To deposit any such shares securities or property in any
voting trust or with any depository designated under such a voting trust
(c) To give proxies or powers of attorney with or without power of
substitution for voting or acting on behalf of the Trustees as the owners of
any such property
(d) To hold any or all securities or other property in bearer form
or in the names of the Trustees or any one or more of them or in the name of
some other person or partnership or in the name or names of nominees without
disclosing the fiduciary relationship created by this Settlement and to deposit
the said securities and any title deeds or other documents belonging or
relating to the Trust Fund in any part of the world with any bank firm trust
company or other company that undertakes the safe custody of securities as part
of its business without being responsible for the default of such bank firm
trust company or other company or for any consequent loss
15. POWER TO DELEGATE MANAGEMENT OF INVESTMENTS
(a) THE Trustees shall have power to engage the services of such
investments adviser or advisers as the Trustees may from time to time think fit
('the investment adviser') to advise the Trustees in respect of the investment
and reinvestment of the Trust Fund with power for the Trustees without being
liable for any consequent loss to delegate to the investment adviser discretion
to manage all or any part of the Trust Fund within the limits and for the
period stipulated by the Trustees and the Trustees shall settle the terms and
conditions for the remuneration of the investment adviser and the reimbursement
of the investment adviser's expenses as the Trustees shall in their absolute
discretion think fit and such remuneration and expenses shall be paid by the
Trustees from the Trust Fund
(b) The Trustees shall not be bound to enquire into nor be in any
manner responsible for any changes in the legal status of the investment
adviser
(c) The Trustees shall incur no liability for any action taken
pursuant to or for otherwise following the advice of the investment adviser
however communicated
16. POWER TO RECEIVE REMUNERATION
NO trustee shall be liable to account for any remuneration or other profit
received by such trustee in consequence of such trustee acting as or being
appointed to be a director or other officer or employee of any company
notwithstanding that such appointment was procured by an exercise by such
trustee or by the Trustees of voting rights attached to securities comprised in
the Trust Fund
-12-
<PAGE> 13
17. POWER TO PROMOTE COMPANIES
THE Trustees may (without prejudice to the generality of their powers of
investment) promote to join with any other person or persons in promoting or
incorporating any company in any part of the world or subscribe for or acquire
any of the shares or stock or debentures or debenture stock or loan capital of
any company with a view to or in consideration of:
(i) the establishment and carrying on by such company of a
business of any kind which the Trustees are for the time being
authorised to carry on themselves and the acquisition of any
of the assets comprised in the Trust Fund which may be
required for the purposes of such business
(ii) the acquisition of the assets and undertaking of any business
being carried on by the Trustees under the above power
(iii) the acquisition of all or any of the assets comprised in the
Trust Fund to be held as investments of the company acquiring
the same
18. TRUSTEES NOT BOUND TO INTERFERE IN BUSINESS OF COMPANY IN WHICH THE
SETTLEMENT IS INTERESTED
THE Trustees shall not be bound or required to interfere in the management or
conduct of the business of any company wherever resident or incorporated in
which the Settlement shall be interested although holding the whole or a
majority of the shares carrying the control of the company but so long as the
Trustees shall have no notice of any act of dishonesty or misappropriation of
monies on the part of the directors having the management of such company the
Trustees shall be at liberty to leave the conduct of its business (including
the payment or non-payment of dividends) wholly to the directors and the
Beneficiaries shall not be entitled to require the distribution of any dividend
by any such company or require the Trustees to exercise any powers they may
have of compelling any such distribution
19. POWER TO INSURE PROPERTY
THE Trustees shall have power to insure against any loss or damage from any
peril any property for the time being comprised in the Trust Fund for any
amount and to pay the premiums out of the Trust Fund
20. POWER TO APPOINT AGENTS
THE Trustees shall have power instead of acting personally to employ and pay at
the expense of the Trust Fund any agent in any part of the world whether
attorneys solicitors accountants brokers banks trust companies or other agents
without being responsible for the default of any agent if employed in good
faith to transact any business or act as nominee or do any act in the execution
of these trusts including without prejudice to the generality of the above the
receipt and payment of monies and the execution of documents
-13-
<PAGE> 14
21. POWER TO PERMIT SELF-DEALING
THE Trustees shall have power to enter into any transaction concerning the
Trust Fund notwithstanding that one or more of the Trustees may be interested
in the transaction other than as one of the Trustees and without any trustee
who is so interested being liable to account for any reasonable incidental
profit provided that at least one of the Trustees who is not interested in the
transaction other than as a trustee approves the transaction
22. INDEMNITY
IN the execution of these trusts no trustee
(a) shall be liable for any loss to the Trust Fund arising by
reason of any improper investment made or retained in good faith or for the
negligence or fraud of any agent employed by such trustee or by any of the
Trustees although the employment of such agent was not strictly necessary or
expedient or by reason of any mistake or omission made in good faith by such
trustee or by any of the Trustees or by reason of any matter or thing except
wilful or individual fraud or dishonesty on the part of the trustee who is
sought to be made liable
(b) shall be obliged to ascertain before distributing amongst the
Beneficiaries the whole or any part of the Trust Fund whether any person whose
parents are not married to each other at the time of birth or who claim through
such a person is or may be entitled to an interest in the Trust Fund nor shall
a trustee be liable to any such person of whose existence the trustee has no
notice or who claims through such a person
23. DELEGATION OF POWERS
(a) THE Trustees may delegate to any one or more of their number
the operation of any bank account in their names
(b) Any Trustee shall have power at any time (notwithstanding any
rule of law to the contrary) by deed or deeds revocable during the Trust Period
or irrevocable and executed during the Trust Period to delegate to any person
(including in cases where there is more than one trustee to any other or others
of the Trustees) the exercise of all or any powers conferred on such trustee
notwithstanding the fiduciary nature of such power or powers
-14-
<PAGE> 15
THE SECOND SCHEDULE
The initial trust fund
699,771 Shares in MSU Limited
SIGNED AS A DEED AND DELIVERED )
BY WYNFORD PETER HOLLOWAY in the ) /s/
presence of: ) ------------------------------
/s/
------------------
SIGNED AS A DEED AND DELIVERED )
BY PETER BRIAN WEBER in the ) /s/
presence of: ) ------------------------------
/s/
------------------
SIGNED AS A DEED AND DELIVERED )
BY VIVIAN GEORGE BINES in the ) /s/
presence of: ) ------------------------------
/s/
------------------
-15-
<PAGE> 1
EXHIBIT 10.6
DATED 18th April 1996
- --------------------------------------------------------------------------------
Brixton Estate plc (1)
- and -
MSU (UK) Limited (2)
- --------------------------------------------------------------------------------
L E A S E
- of -
Premises known as 526 528 and 534 Elder Gate on part of the
Second floor of Elder House Milton Keynes Buckinghamshire
- --------------------------------------------------------------------------------
Lovell White Durrant
65 Holborn Viaduct
London EC1A 2DY
Ref: P1/FMH/ASL/100944-1
<PAGE> 2
THIS LEASE is made the 18th day of April 1996
BETWEEN:
(1) BRIXTON ESTATE PLC (registered in England No. 202342) whose registered
office is at 22-24 Ely Place London EC1N 6TQ (hereinafter called "the
Landlord" which expression where the context so admits shall include
the reversioner for the time being immediately expectant upon the term
hereby granted) and
(2) MSU (UK) LIMITED (registered in England No. 2587301) whose registered
office is at 270 Upper Fourth Street Witan Gate West Central Milton
Keynes MK9 1DP (hereinafter called "the Tenant" which expression where
the context so admits shall include the person or persons in whom the
term hereby granted may from time to time be vested)
WITNESSES as follows:
1. The Landlord HEREBY DEMISES to the Tenant the premises known as 526
528 and 534 Elder Gate Elder House Milton Keynes Buckinghamshire
shown edged red on the attached plan and including the following:
(1) The internal plaster and other surfaces of the structural load bearing
walls and columns within the Premises and of the walls dividing the
Premises from other parts of the building
(2) The screed or other surfaces of the floor down to the structural load
bearing parts of the floor. The trunking system and carpet or other
finishes to the floor
(3) The plaster or other surfaces of the ceilings including the whole of
any suspended or false ceilings within the premises and any void
between the suspended or false ceilings and the actual ceiling
(4) The frames and internal surfaces of the glass and the equipment and
fittings comprising the external windows. The doors and door frames
equipment and fittings exclusively serving the Premises
(5) All non load bearing walls and partitions including the doors, glass
and fittings within the Premises
(6) All the landlord's fixtures and fittings including all heating,
electrical, gas, water, apparatus, sewers and drains exclusively
serving the Premises
(7) All conducting media exclusively serving the Premises
(hereinafter called "the Premises") as the same forms part of the
second floor of the Landlord's Building known as Elder House Elder
Gate Milton Keynes Buckinghamshire (hereinafter called "the Building")
TOGETHER WITH the rights set out in the First
<PAGE> 3
2
Schedule hereto EXCEPTING AND RESERVING to the Landlord and all others
for the time being entitled thereto the rights set out in the Second
Schedule hereto TO HOLD the Premises unto the Tenant for a term of
five years beginning on and including the 22nd day March 1996 and
ending on and including the 21st day of March 2001 (hereinafter called
"the Term" which expression shall include the period of any
continuation holding over or extension thereof) PAYING therefor clear
of all deductions the rents first secondly thirdly fourthly and
fifthly hereby reserved as follows:
FIRST:
(i) From and including the 22nd day of March 1996 until and
including the 21st day of June 1996 the rent of a peppercorn
(if demanded)
(ii) From and including the 22nd day of June 1996 and for the
remainder of the Term the yearly rent of L.27,550 (twenty
seven thousand five hundred and fifty pounds)
which said rent first herein reserved shall in each case be paid by
four equal quarterly payments in advance on 1 January 1 April 1 July
and 1 October in each year the first payment in respect of the period
from the date hereof until the quarter day next following to be made
on the date hereof
SECONDLY: the Insurance Rent to be paid at the times and in the manner
set out in clause 2(5) hereof
THIRDLY: the Interim Charge and the Service Charge to be paid at the
times and in the manner set out in clause 2(6) hereof
FOURTHLY: all other sums payable by the Tenant to the Landlord under
the terms of this Lease
FIFTHLY: all Value Added Tax (or any tax of a similar nature) payable
in respect of the aforesaid rents hereby reserved
2. The Tenant HEREBY COVENANTS with the Landlord as follows:
(1) The Tenant will pay the yearly rent first herein reserved without
deduction set off or counterclaim at the times and in the manner
aforesaid and if required by the Landlord the Tenant will pay such
rent by banker's standing order or by credit transfer to such bank
account in England as the Landlord may nominate
(2) Without prejudice to any other right remedy or power of the Landlord
if any rent or other sum of money due hereunder shall have become due
but shall remain unpaid to pay on demand to the Landlord interest
thereon at a rate equal to 3% above the base rate from
<PAGE> 4
3
time to time to National Westminster Bank plc being calculated on a
day to day basis from the date upon which such rent or other sum of
money became payable down to the date of payment and the aggregate
amount for the time being so payable shall at the option of the
Landlord be recoverable by action or as rent in arrear
(3) The Tenant will also pay and discharge all rates taxes charges
assessments impositions and outgoings whatsoever whether parliamentary
parochial local or of any other description which are now or may at
any time hereafter be assessed charged or imposed upon the said rent
on the Premises or the owner or occupier hereof or the car parking
spaces referred to in the First Schedule hereto Provided Always that
the Tenant shall not be liable for the payment of any income or
corporation tax chargeable in respect of the rents herein reserved or
for any sum chargeable in respect of any dealing by the Landlord with
its reversionary interest
(4) The Tenants will also pay for all electricity (including any standing
charges) consumed at the Premises and where the cost of such
electricity is charged in the first instance to the Landlord the
Tenants will promptly on demand pay such cost to the Landlord
(5) The Tenant will also pay to the Landlord on demand from time to time
by way of further rent a sum or sums of money (hereinafter called "the
Insurance Rent") equal to a fair proportion of the premiums (including
any tax charged on such premiums) which the Landlord may pay:
(a) for insuring the Building (including any Landlord's fixtures
and fittings therein but excluding the boundary walls gates
and fences of the Building so far as the risk of damage by
storm tempest or flood is concerned) in their full rebuilding
value (including the cost of demolition site clearance and
related matters and also including architects' and other
professional fees and Value Added Tax) against loss or damage
by fire aircraft and things dropped therefrom riot explosion
lightning storm flood tempest civil commotion malicious damage
and impact by vehicles and
(b) for insuring against three years' loss of the rents payable
hereunder; and
(c) for insuring against such other risks as the Landlord may from
time to time consider it necessary or proper to cover
ALL WHICH RISKS mentioned in subclauses (a) and (c) of this subclause
2(5) are hereinafter together called "the Insured Risks" and the
Tenant shall also reimburse the Landlord on demand (made not more
often than once in any period of 12 months) a proportion of the cost
to the Landlord of valuing the Building for insurance purposes
<PAGE> 5
4
(6) The Tenant will also pay to the Landlord by way of further rent the
Interim Charge and the Service Charge (as defined in the Fourth
Schedule hereto) in accordance with the provisions contained in the
Fourth Schedule hereto
(7) The Tenant will once during the last quarter of the last year of the
Term (however determined) paint or otherwise redecorate as appropriate
all the inside walls ceilings wood and metalwork and other previously
painted or decorated inside parts of the Premises and all additions
thereto with two coats of good quality paint or other materials as
appropriate and in the case of redecoration in the last quarter of the
last year of the Term in a colour previously approved in writing by
the Landlord (such approval not to be unreasonably withheld or
delayed) in a proper and workmanlike manner to the reasonable
satisfaction of the Landlord and with every such inside painting the
Tenant will clean and treat the inside of all aluminum doors and
windows and grain varnish and colour the inside wood of the Premises
previously so grained varnished and coloured (damage or destruction by
the Insured Risks excepted unless the insurance monies shall be
irrevocable through any act or omission of the Tenant)
(8)(a) The Tenant will at all times during the Term at its own cost well and
substantially repair replace renew clean decorate and keep in good and
substantial repair and condition the whole of the Premises (including
without prejudice to the generality of the foregoing all partitions
fixtures and fittings and glass in the Premises and all sanitary
heating electrical gas water apparatus air-conditioning sewers and
drains (the "conduits") exclusively serving the Premises and all walls
within or forming part of the Premises) (save to the extent that it is
the Landlord's responsibility to make good damage or destruction by
any of the Insured Risks pursuant to clause 3(3) of this Lease)
(b) The Tenant shall at the end of the Term (however determined) replace
all the carpeting within the Premises with new carpeting of a quality
design and colour similar to the quality design and colour of the
carpeting supplied by the Landlord at the beginning of the Term and
first approved by the Landlord whose approval shall not be
unreasonably withheld or delayed
(9)(a) Immediately prior to the expiration or sooner determination of the
Term and at the Tenant's expense:
(i) to replace any landlord's fixtures and fittings which shall be
missing broken damaged beyond repair or destroyed with others
of equivalent quality and value and if reasonably appropriate
in the opinion of the Landlord to repair those fixtures and
fittings where otherwise broken or damaged
(ii) to remove every sign writing or notice which the Landlord
shall require to be removed and (unless the Landlord shall
agree otherwise) to remove all tenant's
<PAGE> 6
5
fixtures and fittings furniture and effects from the Premises
making good to the reasonable satisfaction of the Landlord all
damage caused thereby
(iii) to reinstate or remove all alterations or additions made to
the Premises at any time during the Term which the Landlord
shall require to be reinstated or removed making good to the
satisfaction of the Landlord all damage caused thereby
(b) At the expiration or sooner determination of the Term quietly to yield
up to the Landlord the Premises in such repair and condition as shall
comply with the Tenant's obligations herein contained
(10) The Tenant will keep the Premises clean and tidy and clean the
internal surface of windows of the Premises at least once in each
month
(11) The Tenant will permit the Landlord and its agents to enter the
Premises (with or without workmen) at all reasonable times in business
hours during the Term on the giving of at least 24 hours written
notice (except in the case of emergency) in order to enable the
Landlord and its agents to view the state of repair decoration
maintenance and condition of the Premises (including any garden or
landscaped areas) and to give or leave on the Premises notice in
writing to the Tenant of all defects and wants of repair decoration or
maintenance then and there found and for which the Tenant is liable
under this Lease and the Tenant will within two calendar months after
the giving of such notice (and sooner if requisite) commence and
thereafter proceed diligently to repair decorate maintain and clean
the Premises in accordance with the Tenant's covenants in that behalf
hereinbefore contained
(12) If the Tenant shall at any time fail to keep in repair or to decorate
or to clean or maintain the Premises in accordance with the Tenant's
said covenants the Landlord shall be entitled (but without prejudice
to the Landlord's right of re-entry hereinafter contained) to enter
the Premises and repair decorate clean or maintain the Premises and
the expense to the Landlord of carrying out such repairs or of
decorating or maintaining or cleaning the Premises shall be paid by
the Tenant to the Landlord promptly on demand and such sums shall be
recoverable by the Landlord by distress (as rent in arrear) as well as
by action
(13) To pay to the Landlord on an indemnity basis all proper costs charges
and expenses (including without prejudice to the generality of the
foregoing the Landlord's own proper management costs) properly
incurred by the Landlord for the purpose of or incidental to or in
contemplation of:
(a) the recovery of arrears of rent or the preparation and service
of a notice under Section 146 or Section 147 of the Law of
Property Act 1925 requiring the Tenant to remedy a breach of
any of the covenants in this Lease and/or any proceedings
<PAGE> 7
6
pursuant to such a notice (even if forfeiture for such breach
is avoided otherwise than by relief granted by the Court)
(b) the preparation and service of a Schedule of Dilapidations or
(c) any other action taken by the Landlord in respect of any
breach of any obligation of the Tenant under this Lease
(14) The Tenants will not at any time during the Term put up on the
Premises or affix to any of the windows or to the doors leading into
the Premises any notice advertisement signboard or other thing
whatsoever and the Tenants will not paint polish or in any other way
treat the exterior surfaces of the door or doors leading into the
Premises.
(15) The Tenant will not use or allow the Premises to be used otherwise
than as high class offices within Class B1 of the Schedule to the Town
and Country Planning (Use Classes) Order 1987
(16) (a) The Tenant will not at any time use or permit the Premises to
be used for any noisy dangerous or offensive trade manufacture
business pursuit or occupation or illegal or immoral purpose
nor will the Tenant allow any sale by auction to be held at
the Premises nor will the Tenant do (or allow to be done) at
the Premises anything which could be a nuisance damage or
inconvenience to the Public Local or any other authorities or
to the Landlord or to the owners or occupiers of any other
premises
(b) The Tenant will not bring into or keep on the Premises any
material or liquid which is or is likely to become of a
dangerous corrosive combustible radioactive volatile unstable
or offensive nature or which might in any way injure by
percolation corrosion or otherwise the Premises or the
Building or the service media serving the same or the keeping
or use of which may contravene any statute order regulation or
bye-law
(c) The Tenant will not obstruct in any way or permit oil or
grease or other deleterious liquid or matter to enter by any
means the drains or other service media and in the event of
such obstruction or entry forthwith to remedy the same and
make good all damage to the reasonable satisfaction of the
Landlord
(d) The Tenant will not deposit or permit to be deposited on any
part of the Building (other than in receptacles provided for
the disposal of rubbish) any rubbish refuse cases cartons
by-products or other chattels or effects of any kind
whatsoever nor place or permit to be placed in or on the
Premises any thing the weight of which might damage or
endanger the structure or stability of the Premises or the
Building
<PAGE> 8
7
nor will the Tenant reside or sleep or permit anyone to
reside or sleep at the Premises or the Building
(e) The Tenant will at all times observe and perform any
reasonable regulations made by the Landlord in connection with
the security management and use of the Building and/or the
common parts of the Building and shall pay to the Landlord on
an indemnity basis all costs claims and expenses incurred by
the Landlord (including without prejudice to the generality of
the foregoing the Landlord's own management costs) in making
good any uninsured damage caused to the common parts of the
Building by the Tenant (notwithstanding the ability of the
Landlord otherwise to recover the same through the Interim
Charge and/or the Service Charge)
(17) At all times during the Term at the expense of the Tenant to comply
with all requirements from time to time of the fire authority and the
Insurers in relation to fire precautions affecting the Premises and
the Building and to keep sufficient fire fighting and extinguishing
apparatus in and about the Premises installed in compliance with such
requirements and open to inspection and maintained to the satisfaction
of the Landlord and not to obstruct the access or means of working the
same or any means of escape from the Premises
(18) The Tenant will not do or omit to do or suffer to be done or omitted
anything which may render any increased or extra premium payable for
the insurance of the Premises or the Building or any adjoining
premises or which may make void or voidable any policy for such
insurance and will repay to the Landlord all sums paid by way of
increased premiums and all expenses incurred by it in connection with
any renewal of such policy rendered necessary by a breach of this
covenant
(19) The Tenant will at all times and at its own expense comply with any
lawful requirements of the Landlord's insurers
(20) (a) If the payment of any insurance money is refused owing to some
act or default of the Tenant or any undertenant or their
respective servants agents or licensees the Tenant shall pay
to the Landlord:
(i) if the payment of the insurance money is refused
solely due to the default of the Tenant or any
undertenant and their respective servants agents or
licensees then the whole of the amount refused; or
(ii) if the payment of the insurance money is refused only
in part due to the act or default of the Tenant or
any undertenant or their respective servants agents
or licensees then only such proportion of the amount
so refused as is
<PAGE> 9
8
reasonably and fairly attributable to the Tenant or
undertenant or their respective servants agents or
licensees contributory act or default
(b) If any excess to which any policy of insurance relating to the
Building shall be subject becomes applicable the Tenant shall
pay to the Landlord on demand a fair proportion of the amount
of such excess
(21) At all times and at the Tenant's own expense to observe and perform
all the requirements of any Acts of Parliament local Acts or bye-laws
(including any regulations or conditions or consents made or granted
thereunder) for the time being in force and of any public local or any
other competent authority in respect of the Premises and any additions
made thereto or any part thereof or any user thereof whether required
of the owner landlord tenant or occupier thereof and at all times to
indemnify and keep indemnified the Landlord against all claims
expenses liability in respect of all matters the subject of this
subclause
(22) (a) Not to carry out or make any alterations or additions
whatsoever to the structure of the Premises
(b) Not to carry out or make any alterations or additions which
affect the external appearance of the Premises
(c) Not to carry out or make any other alterations or additions to
the Premises without the previous written consent of the
Landlord (such consent not to be unreasonably withheld or
delayed) and on the making of any application for such consent
the Tenant shall supply the Landlord with detailed drawings
and a specification showing the proposed alterations and the
Tenant shall (if reasonably required to by the Landlord)
employ at the Tenant's expense such consultants as the
Landlord may nominate for the purpose of considering and
(should such be the case) confirming their approval of the
proposed alterations
(d) Notwithstanding the foregoing provisions of this subclause
2(21) the Landlord shall under no circumstances be obliged to
consent to the making of any alterations or additions to the
Premises which in the reasonable opinion of the Landlord
would not conform in style or character with the remainder of
the Building or which in the reasonable opinion of the
Landlord would be or would be likely to be prejudicial to its
interest in the Premises or in any other part of the Building
whether during the Term or following the expiration thereof
(23) (a) Not to hold the whole or any part of the Premises on trust for
another
(b) Not to assign underlet charge part with or share the
possession or occupation of part only (as opposed to the
whole) of the Premises
<PAGE> 10
9
(c) Not to assign underlet charge or part with or share the
possession or occupation of the whole of the Premises without
the previous written consent of the Landlord (such consent not
to be unreasonably withheld or delayed) provided that the
Landlord may (for the purposes of Section 19(1A) of the
Landlord and Tenant Act 1927 (as amended) (the "Act"))
withhold such consent in any one or more of the following
circumstances:
(i) If there is a breach of covenant by the Tenant which
in the reasonable opinion of the Landlord reduces the
value of the Landlord's reversionary interest in the
Premises
(ii) If the proposed assignee does not at the Relevant
Date have Satisfactory Assets and Satisfactory
Profits and for the purposes of this paragraph:
(aa) "Relevant Date" means the date on which the
Landlord receives an application for consent
(bb) "Satisfactory Assets" means net assets
(excluding any amount in respect of deferred
tax) which at the Relevant Date and after
consolidation (real or notional) with the net
assets (again excluding any amount in respect
of deferred tax) of any subsidiary company
(as defined by section 736 of the Companies
Act 1985) exceed an amount equal to the
yearly rent first reserved and payable under
this Lease at the Relevant Date multiplied by
three as evidenced by properly audited
accounts the latest set of which was
published not earlier than six months before
the Relevant Date and a letter confirming
that fact to the Landlord from the auditors
who prepared the most recent set of published
accounts for the proposed assignee
(cc) "Satisfactory Profits" means annual profits
before tax in the three complete trading
years immediately preceding the Relevant Date
which in each year (averaged over the three
years) and after consolidation in each such
year with the annual profits before tax of
any subsidiary company (defined as aforesaid)
exceed an amount equal to the yearly rent
first reserved and payable under this Lease
at the Relevant Date multiplied by three as
evidenced by properly audited accounts the
least set of which was published not earlier
than six months before the Relevant Date and
a letter confirming that fact to the landlord
from the auditors who prepared the most
recent set of published accounts for the
proposed assignee
<PAGE> 11
10
and provided also that the Landlord may for the purposes of
the Act give such consent subject to any one or more of the
following conditions:
(i) That the Tenant enters into an authorised guarantee
agreement (as defined in section 16 of the Landlord
and Tenant (Covenants) Act 1995 in such form as the
Landlord may reasonably require and including the
provisions set out in subsection (5) of such section
(ii) That the Tenant's solicitors undertake to pay all the
reasonable and proper costs and disbursements of the
Landlord's solicitors the Landlord's Surveyors and
any reasonable management fee in connection with the
proposed assignment
(iii) That the proposed assignee deposits with the Landlord
a sum equal to one quarter of the annual rent first
reserved and from time to time payable under this
Lease such sum to be held on the terms of a rent
deposit deed to be prepared by the Landlord and
approved by the Tenant (such approval not to be
unreasonably withheld or delayed)
(iv) That the proposed assignee being a limited company
provides a surety or guarantee of a covenant
acceptable to the Landlord to covenant with the
Landlord in the terms of the covenant contained in
the Fifth Schedule hereof
(d) Not to underlet the whole of the Premises save in accordance
with the following conditions:
(i) Prior to the grant of any underlease the undertenant
shall execute a deed containing a direct covenant
with the Landlord to perform and observe the
obligations of the undertenant to be contained in the
underlease and the obligations of the Tenant herein
contained (other than the obligation to pay the rents
hereby reserved and except where inapplicable to the
Premises underlet)
(ii) Prior to the grant of any underlease to produce to
the Landlord a copy of the underlease in its agreed
form
(iii) The rent payable under any underlease shall be the
highest rent reasonably obtainable for the Premises
in the open market without taking any fine or premium
or the rent from time to time payable hereunder
whichever is the higher
<PAGE> 12
11
(iv) No monetary consideration by way of fine or
premium or otherwise shall be paid and no
reduction of the rent payable by the underlessee shall
at any time be allowed
(v) Every underlease shall contain covenants on the part
of the Tenant thereunder and conditions similar
(mutatis mutandis and so far as is appropriate) to
the covenants on the part of the Tenant and the
conditions herein contained and without prejudice to
the generality of the foregoing every underlease
shall contain an absolute prohibition against
assigning or underletting part only (as opposed to
the whole) of the premises thereby demised and a
prohibition against assigning or underletting the
premises thereby demised without first obtaining the
written consent (which shall not be unreasonably
withheld) of the Landlord under this Lease
(vi) Every underlease shall contain or have endorsed on it
an agreement excluding Sections 24 to 28 of the
Landlord and Tenant Act 1954 authorised by an order
of the court under Section 38(4) of that Act
(e) Not without the consent of the Landlord under this Lease to
vary the terms of any underlease and to take all reasonable
steps to enforce the due performance and observance by the
lessee under any underlease of the covenants on its part and
the conditions therein contained
(f) From time to time on demand during the Term to give to the
Landlord full particulars of all derivative interests of or in
the Premises or any part thereof howsoever remote or inferior
including particulars of the identity of the persons owning
such derivative interests in rents payable thereunder and any
such further particulars as the Landlord may require
(g) To send to the Landlord a certified copy of any permitted
assignment or underlease of the Premises within seven days of
the date of its execution and to pay to the Landlord a
registration fee of L.25 plus Value Added Tax thereon
(24) To allow the Landlord and its agents to enter the Premises at any
reasonable time during business hours during the last six months of
the Term upon 24 hours prior written notice and to affix upon any
suitable part of the Premises a notice board for reletting or selling
the Premises and the Tenant will not remove or obscure the same
(provided that such notice board shall not interfere with the Tenant's
trade or business) and the Tenant will permit all persons by order in
writing of the Landlord or its agents to view the Premises at
reasonable hours in the daytime without interruption upon a reasonable
prior appointment being made with the Tenant for that purpose PROVIDED
ALWAYS that such viewing shall not materially interfere with the
Tenant's trade or business
<PAGE> 13
12
(25) The Tenant will not knowingly permit or knowingly suffer and
will take all reasonably necessary steps to prevent the
acquisition by the public or anybody else of any rights of way or
other easements or rights in relation to the Premises and the Tenant
shall forthwith give to the Landlord notification in writing of any
act or matter or thing that is likely to lead to the acquisition
thereof
(26) Upon the receipt of any notice order direction or other thing from any
competent authority affecting or likely to affect the Premises
(including without prejudice to the generality of the foregoing any
proposal for alteration of the Valuation List or valuation under the
Local Government Finance Act 1988 in respect of the Premises) the
Tenant will so far as such notice order direction or other thing or
the Act Regulations or other instrument under or by virtue of which it
is issued or the provisions hereof require it so to do and so far (if
at all) as it is liable so to do under the provisions of this Lease
comply therewith at its own expense and will within seven days deliver
to the Landlord a copy of such notice order direction or other thing
(27) The Tenant will not allow any vehicles or motor-bicycles belonging to
itself its servants agents employees customers or visitors to be
parked on any part of the land adjacent to the Building (other than
on the car parking spaces referred to in the First Schedule hereto)
and will not obstruct other users of the Building or any emergency
fire exits and the Tenant will itself observe and procure that its
servants agents employees customers and visitors observe all
reasonable regulations made by the Landlord from time to time in
connection with the use of the roads yards and access ways of the
Building
(28) The Tenant will upon demand supply to the Landlord copies of all
agreements and guarantees relating to the Premises (including without
prejudice to the generality of the foregoing all security employment
or other agreements for the provision of services at or to the
Premises or for maintenance of any landlord's fixtures fittings plant
and equipment situated on the Premises)
(29) In relation to "the Planning Acts" which in this Lease means the Town
and Country Planning Act 1990 the Planning (Listed Buildings and
Conservation Areas) Act 1990 the Planning (Hazardous Substances) Act
1990 the Planning (Consequential Provisions) Act 1990 and the Planning
and Compensation Act 1991 and any statutory modification or
re-enactment thereof for the time being in force and any regulations
or orders made thereunder:
(a) The Tenant will at all times comply in all respects with the
provisions and requirements of the Planning Acts so far as
they relate to or affect the Premises or any operations works
acts or things hereafter to be carried out executed done or
omitted thereon
<PAGE> 14
13
(b) So often as occasion shall require at the expense in
all respects of the Tenant to obtain from either the
local Planning Authority or the Secretary of State for the
Environment (as appropriate) all such consents (if any) as may
be required for the carrying out by the Tenant of any
operations at the Premises or the institution or continuance
by the Tenant at the Premises of any use thereof which may
constitute development within the meaning of the Planning Acts
but so that the Tenant shall not make any application for
planning permission without the previous written consent of
the Landlord which consent shall not be unreasonably withheld
or delayed and shall keep the Landlord fully informed of any
such application and its result
(c) To pay and satisfy any charge that may be imposed
under the Planning Acts in respect of the carrying out or
maintenance by the Tenant of any such operations or the
institution or continuance by the Tenant of any such use as
aforesaid
(d) Notwithstanding any consent which may be granted by
the Landlord under this Lease not to carry out or make
any alteration or addition to the Premises or any change of
use thereof (being an alteration or addition or change of use
which is prohibited by or for which the Landlord's consent is
required to be obtained under this Lease and for which a
planning permission needs to be obtained) unless a planning
permission (if required) therefor has also been obtained
(e) Unless the Landlord shall otherwise direct to carry
out before the expiration or sooner determination of
the Term any works stipulated to be carried out to the
Premises a date subsequent to such expiration as a condition
of any planning permission which may have been implemented by
the Tenant during the Term
(f) If and when called upon so to do to produce to the
Landlord all such plans documents and other evidence as
the Landlord may reasonably require in order to satisfy itself
that the provisions of this covenant have been complied with
in all respects
(30) To indemnify and keep indemnified the Landlord from and against legal
liability in respect of all actions proceedings claims demands losses
costs expenses damages and liability in respect of any injury to or
the death of any person or damage to any property movable or immovable
by reason of or arising in any way directly or indirectly out of the
non-compliance by the Tenant with its obligations under this Lease or
any alteration to the Premises or the user of the Premises and from
all proceedings costs claims and demands of whatsoever nature in
respect of any such liability or alleged liability and (without
prejudice to the Tenant's liability hereunder) to notify the Landlord
forthwith upon becoming aware of the same of all such as shall have
arisen in respect of any defects in the repair or condition of the
Premises
<PAGE> 15
14
(31) To give to the Landlord at least 2 weeks' prior notice in
writing of any creditors' meeting intended to be held for the
purpose of considering or implementing any compromise or proposal
under the provisions of the Insolvency Act 1986
(32) To pay all the reasonable costs (including Value Added Tax) incurred
by the Landlord arising out of any application made by the Tenant for
consent to assign or underlet or to carry out alterations or to do
anything requiring the consent of the Landlord (including without
prejudice to the generality of the foregoing the Landlord's own
reasonable management costs as well as the reasonable and proper costs
of the Landlord's solicitors and surveyors
(33) Where by virtue of any of the provisions of this Lease the Tenant is
required to pay or repay to the Landlord or to any other person any
cost fee charge expense or other sum in respect of the supply of any
goods or services by the Landlord or any other person the Tenant shall
also pay and indemnify the Landlord against the amount of any Value
Added Tax chargeable in respect of such supply
3. The Landlord HEREBY COVENANTS with the Tenant as follows:
(1) That the Tenant paying the rent and other moneys hereby reserved and
performing and observing the several covenants conditions and
agreements herein contained and on its part to be performed and
observed shall and may peaceably and quietly hold and enjoy the
Premises during the Term without any lawful interruption or
disturbance from or by the Landlord or any person or persons claiming
through under or in trust for it
(2) To insure and (unless the insurance so effected shall become void or
voidable through or by reason of any act neglect or default of the
Tenant) to keep insured the Building against loss or damage by the
Insured Risks in some insurance office or with underwriters of repute
and to provide the Tenant at the Tenant's expense upon request with a
copy of a summary of the policy
(3) If the Premises shall be damaged or destroyed by the Insured Risks or
any of them then (unless payment of any insurance moneys shall be
refused either in whole or in part by reason of any act neglect or
default of the Tenant) the Landlord shall (subject to obtaining all
necessary consents from any statutory or other authority and subject
also to the Tenant paying a fair proportion of any excess pursuant to
clause 2(20)(b) hereof) as soon as reasonably possible after the
occurrence of such damage or destruction rebuild or reinstate the
Premises to the same design as their original design (so far as is
practicable) or to such new design as may be agreed between the
Landlord and the Tenant
(4) Subject to the payment by the Tenant of the Interim Charge and the
Service Charge to carry out (or procure the carrying out of) the
services referred to in the Third Schedule hereto Provided Always that
the Landlord shall be deemed not to be in breach of this
<PAGE> 16
15
covenant if the Landlord's failure to carry out (or to procure the
carrying out of) any of the said services is attributable to matters
outside the Landlord's control or results from building works being
carried out to the Building
4. PROVIDED ALWAYS AND IT IS HEREBY AGREED as follows:
(1) If and whenever:
(a) the said rents herein reserved or any of them or any part
thereof shall be in arrears for 21 days after the same shall
have become due (whether legally demanded or not) or
(b) the Tenant shall at any time fail or neglect to perform or
observe any of the covenants conditions or agreements herein
contained and on its part to be performed and observed or
(c) the Tenant and/or the Surety (if any) (being a body corporate)
is unable to pay its debts (as defined in Section 123 of the
Insolvency Act 1986) or has a winding-up petition or petition
for an administration order presented against it or passes a
winding-up resolution (other than in connection with a
member's voluntary winding-up for the purposes of an
amalgamation or reconstruction which has the prior written
approval of the Landlord) or calls a meeting of its creditors
to consider a resolution that it be wound up voluntarily or
resolves to present its own winding-up petition or is wound up
(whether in England or elsewhere) or the directors or
shareholders of the Tenant or the Surety resolve to present a
petition for an administration order in respect of the Tenant
or the Surety (as the case may be) or an administrative
receiver or a receiver and manager is appointed in respect of
the property or any part thereof of the Tenant or Surety or
(d) the Tenant and/or the Surety (if any) (being a body corporate)
calls or a nominee calls on its behalf a meeting of its
creditors or any of them or makes an application to the court
under Section 425 of the Companies Act 1985 or submits to its
creditors or any of them a proposal pursuant to Part I of the
Insolvency Act 1986 or enters into any arrangement scheme
compromise moratorium or composition with its creditors or any
of them (whether pursuant to Part I of the Insolvency Act 1986
or otherwise) or
(e) the Tenant and/or the Surety (if any) (being an individual)
makes an application to the court for an interim order under
Part VIII of the Insolvency Act 1986 or convenes a meeting of
his creditors or any of them or enters into any arrangement
scheme compromise moratorium or composition with his creditors
or any of them (whether pursuant to Part VIII of the
Insolvency Act 1986 or otherwise) or has a
<PAGE> 17
16
bankruptcy petition presented against him or is adjudged
bankrupt (whether in England or elsewhere)
then and in any such case it shall be lawful for the Landlord or any
person or persons duly authorised by the Landlord in that behalf
(notwithstanding the waiver of any previous breach of covenant) to
enter upon the Premises or any part thereof in the name of the whole
and thenceforth peaceably to hold and enjoy the Premises as if this
Lease had not been made but without prejudice to any right of action
or remedy of either party in respect of any antecedent breach of any
of the covenants by the other herein contained
(2) If the Premises or any part thereof shall at any time be destroyed or
so damaged by the Insured Risks or any of them as to be unfit for
occupation or use then and in such case (save to the extent that the
insurance of the Premises shall have been forfeited or vitiated by the
act default neglect or omission of the Tenant) the rents hereby
reserved or a fair and just proportion thereof according to the nature
and extent of the damage sustained shall forthwith be suspended and
cease to be payable until either such date as shall be three years
from the date on which the Premises became damaged or destroyed as
aforesaid or such date as the Premises shall have been rebuilt or
reinstated and made fit for occupation or use whichever date shall be
the earlier and in case any dispute shall arise it shall be referred
to an arbitrator to be appointed by agreement between the parties (or
in default of agreement to be appointed upon the application of either
party by the President for the time being of The Royal Institution of
Chartered Surveyors) pursuant to and subject to the provisions of the
Arbitration Acts 1950 and 1979 or any statutory modification or
re-enactment thereof for the time being in force and the decision of
such arbitrator shall be final and binding on the parties
(3) The demand or acceptance of any rent by the Landlord shall not operate
as a waiver by the Landlord of any breach of covenant by the Tenant
(4) The Landlord gives no express or implied warranty that the permitted
user of the Premises under this Lease is or will be or remain a lawful
or authorised user under the Planning Acts or otherwise
(5) So far as the law shall allow the right of the Tenant (or any
undertenant) to compensation on quitting the Premises is excluded
5. This Lease is granted subject to the rights conferred by or referred
to in the documents brief particulars of which are set out in the
Sixth Schedule hereto and the Tenant shall observe and perform the
provisions of such documents in all respects so far as they relate to
the Premises and shall keep the Landlord fully and effectively
indemnified against all costs damages claims and demands arising out
of any breach or non-observance thereof
6. This Lease shall be governed by and interpreted in accordance with
English Law
<PAGE> 18
17
7. This Lease shall incorporate the regulations as to Notices contained
in Section 196 of the Law of Property Act 1925 as amended
8. It is hereby certified that there is no Agreement for Lease to which
this Lease gives effect
9. Pursuant to an order of the Mayor's and City of London Court dated
18th April 1996 it is hereby agreed that Sections 24-28 inclusive of
the Landlord and Tenant Act 1954 (as amended) shall not apply to the
tenancy created by this Lease
10. So far as the law allows the Landlord shall have no further liability
to the Tenant under this Lease (save for antecedent breach) after it
shall have disposed of the reversion immediately expectant on the
determination of the Term and the Tenant hereby releases the Landlord
from all such liability
11. This Lease is a new tenancy for the purposes of the Landlord and
Tenant (Covenants) Act 1995
IN WITNESS whereof this Lease has been executed as a Deed
THE FIRST SCHEDULE
(RIGHTS GRANTED TO THE TENANT)
1. The right of access to and egress from the Premises during normal
office hours through and along the common parts of the Building
2. The right to use any communal toilets and washroom accommodation in
the Building
3. The right to park ten private motor vehicles in such positions in the
car park at the rear of the Building as the Landlord may from time to
time designate
4. The right of access in case of emergency through all such parts of the
Building as may be necessary
5. The right to use all common pipes wires drains sewers or other
conducting media in the Building
<PAGE> 19
18
THE SECOND SCHEDULE
(RIGHTS EXCEPTED AND RESERVED TO THE LANDLORD
AND ALL OTHERS ENTITLED THERETO)
1. The free and uninterrupted passage and running of gas water waste
electricity and telecommunications through any existing or future
pipes wires drains sewers and other conducting media within the
Premises from and to all other parts of the Building
2. The rights to enter upon the Premises at all times in case of
emergency and otherwise at reasonable times upon reasonable notice for
the purpose of inspecting maintaining cleansing repairing altering
testing renewing and replacing laying and making connections to all
service media and all connections in over or under the Premises the
persons exercising such rights causing as little damage as possible
and making good all damage occasioned thereby
3. The right to build upon alter or vary any other parts of the Building
and adjoining land of the Landlord in any such manner as the Landlord
may think fit provided that reasonable means of access to the Premises
is available at all times
THE THIRD SCHEDULE
(MATTERS IN RESPECT OF WHICH THE LANDLORD MAY INCUR
COSTS TOWARDS WHICH THE TENANT SHALL CONTRIBUTE BY
PAYMENT OF THE INTERIM CHARGE AND THE SERVICE CHARGE)
1. Heating and supplying hot water to the Building at such times as the
Landlord shall reasonably consider appropriate
2. Cleaning lighting repairing renewing maintaining and decorating the
common parts of the Building and repairing renewing and decorating the
doors leading into the Premises and the doors leading into other
separately demised premises in the Building
3. The carpeting re-carpeting or otherwise covering of the floors in the
common parts of the Building
4. The supplying of toiletries to any communal toilets in the Building
5. Providing maintaining and renewing refuse receptacles including hire
charges electricity and other running costs together with the costs of
refuse collection and storage of refuse
6. Providing and maintaining nameboards directional signs and other
notices
<PAGE> 20
19
7. Inspecting maintaining servicing cleaning repairing improving and
renewing any lifts boilers heating ventilating and air-conditioning
equipment hot and cold water systems window cleaning hoists and tracks
electric gas and water systems or services and all other plant and
equipment in or serving the Building together with a fair proportion
of such amount as the Landlord may reasonably estimate as being the
future replacement cost of any of the items mentioned in this
Paragraph 7
8. Effecting insurance and/or maintenance contracts in respect of the
lifts boilers and any other equipment mentioned in Paragraph 7 above
9. Caretaking and commissionaire services (if provided) including the
salaries paid to and any other costs to the Landlord arising out of
the employment of any caretakers and commissionaires including without
prejudice to the generality of the foregoing the cost of providing and
cleaning uniforms for such caretakers and commissionaires
10. Inspecting providing maintaining servicing repairing and renewing any
fire alarm or fire detection systems and fire prevention and fire
fighting equipment including sprinklers and sprinkler systems
11. Any rates payable by the Landlord in respect of the car park at the
rear of the Building or in respect of the common parts or any other
parts of the building used for the purposes of providing any of the
services set out in this Schedule and any charges payable for any
water fuel and electricity used or supplied in connection with such
services
12. Inspecting maintaining repairing renewing and decorating the exterior
the roofs and any structural parts of the Building and any boundary
gates walls and fences (including any party walls ceilings floors
foundations gutters drainpipes sewers drains roads and pavement)
together with a fair proportion of such amount as the Landlord may
reasonably estimate as being the future replacement cost of any of the
items mentioned in this Paragraph 12
13. Maintaining and providing horticultural plants (if any)
14. Cleaning the windows of the Building
15. Providing residential accommodation for any caretaker including the
cost of repairing maintaining heating and lighting the same and the
rates payable in respect thereof
16. Providing security services for the Building and its car park
including the provision of access control equipment and security
cameras
17. Employing or retaining any solicitor accountant surveyor valuer
architect engineer managing agent or management company or other
professional consultant or adviser in
<PAGE> 21
20
connection with the management administration repair and maintenance
of the Building including the preparation of any account giving any
certificate and calculating the Service Charge (and if the Landlord
fulfils the duties normally carried out by a managing agent payment of
a management fee to the Landlord)
18. The general maintenance (including the cleaning and lighting) of the
car park roadways and landscaped areas at the rear of the Building
19. The fees of any accountant or surveyor employed to determine the Total
Expenditure (as defined in the Fourth Schedule hereto) and the amount
payable in respect thereof by the Tenant
20. Providing such other services and carrying out such other works as the
Landlord in its absolute discretion may deem desirable or necessary
for the benefit of the Building or any part thereof or the tenants or
occupiers thereof or for securing or enhancing any amenity of or
within the Building or in the interests of good estate management and
the generality of this paragraph shall not be restricted by any other
provisions of this Schedule
21. Provided that the Landlord may at his option include the Insurance
Rent as costs towards which the Tenant shall contribute by payment of
the Interim Charge and the Service Charge.
THE FOURTH SCHEDULE
(PROVISIONS RELATING TO THE PAYMENT
OF THE INTERIM CHARGE AND THE SERVICE CHARGE)
1. In this Schedule the following expressions shall have the following
meanings:
(a) "Total Expenditure" means the total expenditure reasonably
incurred by the Landlord in any Accounting Period (as
hereinafter defined) in respect of the various matters set out
in the Third Schedule hereto
(b) "the Service Charge" means such sum of money as shall be equal
to a fair and proper proportion (as determined by the Landlord
acting reasonably) of Total Expenditure
(c) "the Interim Charge" means such sum to be paid on account of
the Service Charge in respect of each Accounting Period as the
Landlord shall specify and for the Accounting Period during
which this Lease is executed the Interim Charge shall be at
the rate of L.6,400 per annum and thereafter the Interim
Charge shall be based on the anticipated Total Expenditure for
the relevant Accounting Period
<PAGE> 22
21
(d) "Accounting Period" shall mean a period commencing on the
first day of January and ending on the thirty-first day of
December in any year (or such other 12 monthly period as the
Landlord shall in its absolute discretion choose)
2. The first payment o the Interim Charge in respect of the period from
and including the 22nd March 1996 until and including 31st March 1996
shall be made on the execution hereof and thereafter the Interim
Charge shall be paid to the Landlord on demand by 4 equal payments in
advance each year in respect of the 4 periods of 3 months beginning on
1st January 1st April 1st July and 1st October in each year
3. If the Interim Charge paid by the Tenant in respect of any Accounting
Period exceeds the Service Charge for that period such excess shall be
carried forward by the Landlord and credited to the account of the
Tenant in computing the Service Charge for the next Accounting Period
4. If the Service Charge in respect of any Accounting Period exceeds the
Interim Charge paid by the Tenant in respect of that Accounting Period
then the Tenant shall pay such excess to the Landlord within fourteen
days of service upon the Tenant of the Certificate referred to in the
following paragraph and in case of default the same shall be
recoverable from the Tenants as rent in arrear
5. As soon as practicable after the expiration of each Accounting Period
there shall be served upon the Tenant by the Landlord a Certificate
containing the following information in respect of that Accounting
Period:
(a) The amount of the Total Expenditure
(b) The amount of the Interim Charge paid by the Tenants
(c) The amount of the Service Charge
(d) The amount of any excess due to the Landlord or to be credited
to the account of the Tenants as the case may be
6. The said Certificate shall be final and binding on the Tenants but the
Tenants shall be entitled at their own expense at any time within one
month after service of such Certificate to inspect (or at the Tenant's
expense to be supplied with copies of) the receipts and vouchers
relating to payment of the Total Expenditure
<PAGE> 23
22
THE FIFTH SCHEDULE
(COVENANTS TO BE GIVEN BY A SURETY (IF SO REQUESTED BY
THE LANDLORD PURSUANT TO CLAUSE 2(22)(c)(v)
HEREOF UPON AN ASSIGNMENT OF THIS LEASE)
The Surety in consideration of this License having been granted at its request
HEREBY COVENANTS with the Landlord as a primary obligation:
(1) That the Assignee will pay the rents reserved by the Lease on the days
and in manner specified in the Lease and will perform and observe all
the Tenant's covenants therein contained and that in case of default
in such payment of rents or in the performance or observance of such
covenants as aforesaid the Surety will pay and make good to the
Landlord on demand all losses damages costs and expenses thereby
arising or incurred by the Landlord PROVIDED ALWAYS and it is hereby
agreed that any neglect or forbearance of the Landlord in endeavoring
to obtain payment of the said rents when the same become payable or to
enforce performance of the several stipulations on the Tenant's part
contained in the Lease and any time which may be given to the Tenant
by the Landlord shall not release or exonerate or in any way affect
the liability of the Surety under this covenant; and
(2) That if any Liquidator or Trustee in bankruptcy shall disclaim the
Lease the Surety will if the Landlord shall by notice in writing
within three months after such disclaimer so require take from the
Landlord a new lease of the Premises for a term commensurate with the
residue of the term originally granted which would have remained had
there been no disclaimer at the same rent payable at the time of such
disclaimer and subject to the same covenants and conditions as are
reserved by and contained in the Lease the said new lease to take
effect from the date of the said disclaimer and in such case the
Surety shall pay the costs of such new lease and execute and deliver
to the landlord a counterpart thereof.
(3) That if the Landlord shall not require the Surety to take a new lease
of the Premises pursuant to subclause (2) above the Surety shall
nevertheless upon demand pay to the Landlord a sum equal to the rents
that would have been payable under the Lease but for the disclaimer in
respect of the period from the date of the said disclaimer until the
expiration of six months therefrom or until the Premises shall have
been relet by the Landlord whichever shall first occur.
<PAGE> 24
23
THE SIXTH SCHEDULE
(DOCUMENTS TO WHICH THE PREMISES ARE SUBJECT)
The matters set out in the Property and Charges Registers of Title Number BM
159736
(EXECUTED as a deed by the affixing
(of the Common Seal of BRIXTON
(ESTATE PLC in the presence of
/s/
-------------------------------------
Director
SEAL
/s/
-------------------------------------
Secretary
<PAGE> 1
EXHIBIT 10.7
MANUFACTURING, DISTRIBUTION
AND JOINT VENTURE AGREEMENT
REDACTED
MANUFACTURING, DISTRIBUTION AND JOINT VENTURE AGREEMENT
This Agreement made the 7th day of May, 1996, by and between MSU (UK)
LIMITED ("MSU"), an English corporation with a principal place of business at
526-528 Elder Gate, Central Milton Keynes MK9 1LR, England, and AMERICAN
INTERACTIVE MEDIA, INC. ("AIMI"), a Nevada corporation with its principal
place of business at 39 Union Street, Medford, New Jersey 08055 USA.
1. DEFINITIONS.
a. "Accessor" means an internet access and utilization
device designed and developed by MSU to specifications of AIMI, as more
particularly described in the Specification Sheet and Bill of Materials
attached hereto as Exhibits "A" and "B", respectively.
b. "Accessor Chip" means the ISP/4 Internet Service
Processor chipset used in the Accessor and any future generations, improvements
to and variations of such chipset.
c. "Confidential Information" shall mean without
limitation (i) all know how, experience, drawings, designs, circuit diagrams,
computer programs and all other technical information; (ii) all copyright and
rights in the nature of copyrights which MSU may now or subsequently become
entitled to in respect of drawings or other documents or articles containing
technical information; (iii) all improvements, modifications or adaptations to
any part of the technical information relating to the Accessor, the Accessor
Chip or Netbox which may from time to time come into the possession of AIMI,
its employees, contractors, agents or licensees.
d. "Joint Venture Corp." means a corporation to be
formed pursuant to this Agreement to carry on the business activities described
in Section 4 below.
e. "Netbox" means any internet access and utilization
device designed, developed, licensed or sold by MSU other than the Accessor.
f. "Products" means and includes the Accessor and all
hardware, software, processes and technology now in existence and hereinafter
developed and used or intended for use with the Accessor.
g. "Product Development Costs" mean direct costs
incurred by MSU in developing the Accessor.
h. "Provider Commissions" mean fees or any other
compensation of any kind paid to AIMI, MSU, any of their respective affiliates,
directly or indirectly, by an Internet access provider, on a one time or
periodic basis, in respect of Internet access provided to Accessor or Netbox
customers through or utilising Joint Venture Corp. For the purpose hereof, the
term "indirectly" in reference to the payment of Provider Commissions shall
include compensation paid to AIMI, MSU or any of their respective affiliates,
however characterized, by any Accessor or Netbox customer through or utilising
Joint Venture Corp., reseller or licensee which is measured
1
<PAGE> 2
*CONFIDENTIAL PORTION HAS BEEN OMITTED
AND FILED SEPARATELY WITH THE COMMISSION
by or attributable to such customer's, reseller's or licensee's receipt of, or
right to receive, payments from an Internet access provider in respect of
Internet access provided to any user of any Accessor or Netbox.
i. "Value Added Services" means hardware and software
upgrades, enhancements, features and add-ons designed for or used by the
installed base of Accessor and/or Netbox customers, as more specifically
described on Exhibit "C" hereto.
2. GRANT OF LICENSES.
a. MSU hereby grants to AIMI the exclusive right to
manufacture, sell and otherwise distribute the Accessor, and further agrees to
provide to AIMI and grants to AIMI a nonexclusive right and license to use (i)
all know how, experience, drawings, designs, circuit diagrams, computer
programs and all other technical information, (ii) all copyright and rights in
the nature of copyrights which MSU may now or subsequently become entitled to
in respect of drawings or other documents or articles containing technical
information, (iii) all improvements, modifications or adaptations to any part
of the technical information relating to the Accessor and the Accessor Chip
required for the manufacture and service of the Accessor, at no cost to AIMI
except as expressly set forth herein, subject to the terms and conditions set
forth in this Agreement.
b. In consideration for the rights granted to it by MSU
herein, AIMI agrees to pay a Development Fee of $ * to MSU as follows:
i. $ * presently being held in escrow by
MSU's attorneys shall be released from escrow and paid over to MSU upon the
execution of this Agreement;
*CONFIDENTIAL PORTION HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE COMMISSION.
ii. $ * shall be paid on delivery to AIMI
of final Accessor hardware design and specifications reasonably satisfactory to
AIMI ("production ready hardware"), which delivery the parties anticipate will
occur on or before June 15, 1996; and
iii. $ * shall be paid on delivery to AIMI
of final Accessor software reasonably satisfactory to AIMI ("production ready
software"), which delivery the parties anticipate will occur on or before June
30, 1996.
c. Failure by AIMI to make any of the payments due to
MSU under the terms of Section 2(b) within seven days of due date for payment
shall release MSU from any further obligations under this Agreement. This
Agreement shall become unconditional only upon the receipt by MSU of the monies
referred to in Section 2(b)(i) hereof.
d. Unless otherwise agreed, (i) the Development Fee will
be used only to pay Product Development Costs, and (ii) all payments on account
of the Development Fee will be paid to MSU by wire transfer to * .
*CONFIDENTIAL PORTION HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE COMMISSION.
2
<PAGE> 3
*CONFIDENTIAL PORTION HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION.
e. In further consideration of the rights to distribute
and manufacture the Accessor granted herein, AIMI agrees to purchase its
requirements of Accessor Chips from MSU during the term of this Agreement.
f. MSU will * the Development Fee to AIMI by
allowing a * to AIMI of $ * per Accessor Chip on the first
* Accessor Chips sold to AIMI or its licensee pursuant to Section 5(d)
below.
*CONFIDENTIAL PORTION HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION.
3. TERMS OF AGREEMENT. This Agreement shall expire
on December 31, 2006, provided, however, that this
Agreement shall renew automatically as of December 31, 2006, and each
subsequent December 31, without the necessity of any action by AIMI, MSU unless
MSU or AIMI gives notice of termination of the Agreement within three (3)
months prior to the scheduled termination date.
4. JOINT VENTURE CORPORATION.
a. Promptly following the execution of this Agreement by
all parties, AIMI will form Joint Venture Corp. in the State of New Jersey
using a corporate name to be mutually agreed by the parties, and will cause one
thousand shares of Joint Venture Corp. common stock to be issued at par as
follows: * shares to AIMI and * shares to MSU Corporation.
*CONFIDENTIAL PORTION HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION.
b. AIMI agrees that it will use its best efforts to have
all Accessor customers obtain Value Added Services through Joint Venture Corp.
c. MSU agrees that it will use its best efforts to have
all Netbox customers obtain Value Added Services from Joint Venture Corp.
d. MSU and AIMI each assigns to Joint Venture Corp. all
of its right to receive or direct the payment of all Provider Commissions.
e. MSU will use its best efforts to provide to Joint
Venture Corp. the technical support required by Joint Venture Corp. to develop
and provide Value Added Services, and in particular software applications.
Joint Venture Corp. shall reimburse to MSU costs that MSU incurs in developing
software applications and any other Value Added Services for Joint Venture
Corp.
f. AIMI will provide the management infrastructure for
Joint Venture Corp., and will provide the financing for all organizational,
administrative and pre-operating expenses, at its cost.
*CONFIDENTIAL PORTION HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION.
g. MSU shall have the right to increase its ownership of
Joint Venture Corp. from * % to * % based upon performance criteria
relating to the level of revenues paid to Joint Venture Corp. by Netbox
customers utilizing Value Added Services, as set forth on Exhibit "D" hereto.
Except as set forth in Section 4(a) above, and in accordance with Exhibit "D"
hereto, no shares of Joint Venture Corp. will be issued to any person or entity
except with the written consent of AIMI and MSU.
3
<PAGE> 4
*CONFIDENTIAL PORTION HAS BEEN OMITTED
AND FILED SEPARATELY WITH THE COMMISSION
5. MSU OBLIGATIONS.
a. MSU will produce and deliver to AIMI five (5)
Accessor "beta" units on or before May 15, 1996, at a cost not to exceed
US$750.00 per unit, to be paid by AIMI in advance in accordance with the
provisions of Section 2(d) above. These units will be used by focus groups
organized by AIMI to confirm the market for the Accessor and to test customer
response to specific Accessor features. MSU will provide the services of Keith
Goodyear, at MSU's cost except that AIMI shall be responsible for Mr.
Goodyear's reasonable travel expenses, on a part-time basis, to work with AIMI
representatives in servicing the focus group/test market installations.
b. MSU will complete the design and development of the
Accessor on the following time scales:
i. Delivery of production ready hardware by June
15, 1996; and
ii. Delivery of production ready software by June
30, 1996.
MSU shall not be deemed to be in breach of its obligations arising under this
Section 5(b) by reason of any failure to meet a specified delivery date if such
delay is the result of any change in the specifications of the Accessor made
after the date of this Agreement.
c. MSU will liaise with Mitac and other potential
manufacturers of the Accessor selected by AIMI, with a view toward, among other
things, obtaining the lowest cost bill of materials for the Accessor. MSU will
provide technical support and assistance as reasonably required by the
manufacturer of the Accessor to initiate and maintain production, at MSU's
cost, except that AIMI shall be responsible for reasonable travel expenses
incurred by MSU employees.
d. During the term of this Agreement and any renewal
hereof, MSU will sell or cause to be sold to AIMI or AIMI' s limited licensees
pursuant to Section 7 below all of AIMI's requirements for Accessor Chips at a
price not to exceed the lesser of (i) a price determined in accordance with
Exhibit "E" hereto, or (ii) * .
*CONFIDENTIAL PORTION HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE COMMISSION.
e. MSU undertakes and agrees to consult and cooperate
with AIMI's technical and marketing personnel with a view to creating,
developing and producing Products and Value Added Services: (i) that are
feasible, given the state of Internet Access art; (ii) that will come to market
on an agreed timetable so as to permit AIMI to develop marketing plans and
strategies to introduce and distribute such Products and Value Added Services;
and (iii) for which AIMI and MSU agree that a market exists at the cost and
price criteria agreed upon by AIMI and MSU.
f. Notwithstanding anything to the contrary in Section
5(e) above, MSU shall have no obligation to develop any Product other than the
Accessor in the absence of an agreement
4
<PAGE> 5
*CONFIDENTIAL PORTION HAS BEEN OMITTED
AND FILED SEPARATELY WITH THE COMMISSION
acceptable to AIMI and MSU as to the specifications, pricing, timetable for
availability to AIMI, and the manner in which MSU will recover its development
costs, if any.
6. AIMI OBLIGATIONS.
a. During the term of this Agreement and any extensions
thereof AIMI agrees to use reasonable efforts to distribute and/or otherwise to
commercially exploit the Products. To that end, and to support the operations
and infrastructure of Joint Venture Corp., as described below, AIMI will use
its best efforts to raise not less than $ * of additional equity or long
term debt financing on or before June 30, 1996.
*CONFIDENTIAL PORTION HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE COMMISSION.
b. AIMI will design the Accessor packaging utilized in
the focus group/test marketing program referred to in Section 5(a) above.
c. AIMI will select and contract with a manufacturer to
produce the Accessor, and shall be solely responsible for all commercial and
financial relationships with such manufacturer, except as otherwise expressly
set forth herein.
d. AIMI further agrees:
i. not to use any name, trademark, trade name,
insignia or slogan owned or adopted by MSU in a manner which is not consistent
with any reasonable guidelines and procedures adopted by MSU;
ii. not to contest MSU's title to its patents,
trademarks, copyrights and registrations and not to take any action to the
detriment of MSU's interest therein; and
iii. not to use Confidential Information other
than for the purposes and uses contemplated by this Agreement;
iv. not to disclose or authorize the disclosure
of Confidential Information to third parties, except that AIMI may disclose
Confidential Information (A) to a sublicensee for the purpose of exercising its
rights under a sublicense granted pursuant to Section 7 below, and only to the
extent required for such purpose, (B) to such of its employees, agents,
contractors and sublicensees as need to know the same for the purposes set out
in this Agreement, (C) with the prior consent of MSU; provided that, in all
cases, the individual or entity to whom such disclosure is made shall first
enter into appropriate agreements pursuant to which such person or entity shall
agree, on terms substantially the same as provided herein and which grant to
MSU the right to enforce the same, to keep all such Information in confidence
and to make no further disclosure or use of such Confidential Information.
v. to enforce the obligations of confidentiality
imposed upon its employees, agents, contractors, and sublicensees in accordance
with Section 6(d)(iv) above insofar as they relate to a disclosure of
Confidential Information by such employees, agents, contractors or
sublicensees;
5
<PAGE> 6
vi. to prevent the disclosure of Confidential
Information and the access of unauthorized persons to Confidential Information,
and, to that end, to arrange proper and secure storage for Confidential
Information in the form of documents, papers, computer disks, magnetic tapes or
any other material, and take other reasonable precautions to prevent such
unauthorized disclosure and access;
vii. all subcontractors and licensees must be
approved by MSU prior to the disclosure of Confidential Information, which
approval shall not be withheld unreasonably;
viii. AIMI agrees that Confidential Information
should not be copied or reproduced by it without the express permission of MSU,
which permission shall not be withheld unreasonably, except for such copies as
may be reasonably required for purposes of this Agreement.
e. The restrictions and obligations imposed under
Sections 6(i) to 6(viii) inclusive shall not apply to Confidential Information
if the same:
i. was in the public domain at the time it was
disclosed or thereafter shall fall into the public domain except through the
default of AIMI, its employees, agents, contractors or licensees;
ii. was known to and recorded by AIMI prior to
its disclosure to AIMI by MSU;
iii. was disclosed after the express prior
authorization of MSU;
iv. becomes known to AIMI from a source other
than MSU without breach of this Agreement by AIMI;
v. was independently developed by AIMI without
the benefit of any of the Confidential Information by employees of AIMI who had
no access to any of the Confidential Information; or
vi. is disclosed six years from the time of
receipt hereof;
provided, however, if only a portion of the Confidential Information falls
within any one of the exceptions under Section 6(d)(vi) above, the remainder
shall continue to be subject to the prohibitions and restrictions of Sections
6(i) through 6(viii);
f. No license or conveyance of any rights to AIMI under
any discoveries, inventions or patents or to use the Confidential Information
other than for the purposes of this Agreement is granted or implied by the
transmission of the Confidential Information to AIMI under this Agreement.
g. Notwithstanding anything contained elsewhere in this
Agreement, the provisions of confidentiality shall survive termination or
expiry of this Agreement.
6
<PAGE> 7
h. AIMI shall introduce MSU to CompuServe, etc. for the
purpose of discussing CompuServe's participation in the commercial exploitation
of the Accessor, the Netbox and other Products, and shall use its best efforts
to obtain a mutually satisfactory agreement for the payment of Provider
Commissions by CompuServe.
7. LIMITED LICENSE TO MANUFACTURE.
a. AIMI shall have the right to initiate and carry on
manufacture of the Accessor and any other Products at its own cost and expense,
and shall be and in such event hereby is licensed and authorized, on a non-
exclusive basis, to employ and use for that purpose, and, subject to the
limitations hereof AIMI shall have the right to sublicense others to employ and
use for that purpose, all patents, trademarks, copyrights and other technical
and proprietary property, rights and information which MSU owns or has the
right to use, including (i) all know how, experience, drawings, designs,
circuit diagrams, computer programs and all other technical information, (ii)
all copyright and rights in the nature of copyrights which MSU may now or
subsequently become entitled to in respect of drawings or other documents or
articles containing technical information, (iii) all improvements,
modifications or adaptations to any part of the technical information relating
to the Accessor and the Accessor Chip required for the manufacture and service
of the Accessor.
b. MSU agrees to deliver to AIMI, upon AIMI's request,
such written assignments, licenses and other similar documentation as may be
required by AIMI to evidence its rights hereunder, including documents in form
for recording in the U.S. Patent and Trademark Office.
8. GENERAL WARRANTIES OF MSU.
MSU represents and warrants to and agrees with AIMI as
follows:
a. MSU is a corporation duly organized under the laws of
England, and is in good standing, has the authority to enter into and perform
this Agreement, and has taken all corporate action necessary, and obtained all
approvals from third parties necessary, to execute and perform this Agreement.
b. MSU owns or has the exclusive right to use all
patents and technical and other proprietary information needed to manufacture
and sell the Products and to license AIMI to manufacture and sell the Products
as contemplated hereby, and will indemnify and hold harmless AIMI from any loss
or liability (including the cost of defense in any action claiming
infringement) incurred by reason of a breach of this warranty.
9. GENERAL WARRANTIES OF AIMI.
AIMI represents and warrants to and agrees with MSU as
follows:
a. AIMI is duly organized under the laws of Nevada and
is in good standing, has the authority to enter into and perform this
Agreement, and has taken all corporate action
7
<PAGE> 8
necessary, and obtained all approvals from third parties necessary, to execute
and perform this Agreement.
b. AIMI is not a party to or subject to any agreement
which would prevent or limit its full commercial exploitation of the Accessor.
10. RESOLUTION OF DISPUTES.
Any controversy or claim arising out of or relating to this
Agreement or the breach thereof, including without limitation a claim for
declaratory relief, shall be settled by arbitration in New York City, New York,
by an arbitrator selected by AIMI and MSU. If AIMI and MSU cannot agree on the
appointment of an arbitrator within ten (10) days after a request for
arbitration, then a panel of three arbitrators shall be selected in accordance
with procedures established and implemented by the American Arbitration
Association. The arbitration shall be conducted in accordance with the rules
of the American Arbitration Association, except as otherwise provided in this
paragraph 10. Each party shall bear its own costs of the arbitration unless
the arbitrator or arbitration panel (hereinafter the "arbitrator") shall find
that a party's position in the disputed matter was without substantial merit,
in which case the prevailing party may be awarded recovery of its costs,
including attorney's fees and expenses, expenses of expert witnesses and any
and all other costs the arbitrator may award. Judgment upon any award rendered
by the arbitrator may be entered in any court. Any award of the arbitrator may
include interest at a rate or rates considered just under the circumstances by
the arbitrator.
11. FORCE MAJEURE.
Neither party shall be liable to the other for any failure to
perform or delay in performance of its obligations hereunder (other than an
obligation to pay monies) caused by:
a. act of God;
b. outbreak of hostilities, riots, civil disturbance,
acts of terrorism;
c. the act of any Government or Authority (including
revocation of any license or consent), fire, explosion, flood, fog or bad
weather;
d. default of suppliers or subcontractors;
e. theft, malicious damage, strike, lock out or
industrial action of any kind;
f. any cause or circumstance whatsoever beyond its
reasonable control.
12. NOTICES.
a. Any notice and any permission, consent, license,
approval or other authorization to be served upon or given or communicated to
one party hereto by the other (in
8
<PAGE> 9
this clause called a communication) should be in the form of a document in
writing including a cable but not a facsimile.
b. All communication should be made to MSU at the
following address:
526-528 Elder Gate
Elder House
Central Milton Keynes
MK9 1LR
England
For the attention of the Chairman;
and to AIMI at the following address:
39 Union Street
Medford
New Jersey 08055 USA
Attn: David R. Rahn, Executive Vice President
c. All communications shall be delivered by hand during
all business hours or sent by cable, by Federal Express, DHL or other
commercial courier service agreed to by the parties, or by registered post
(where possible by Air Mail).
d. Communications shall have effect for the purposes of
this Agreement and shall be deemed to have been received by the party to whom
it was made:
i. if delivery by hand upon receipt by the
relevant person for whose attention it should be addressed under Section 12(b)
or upon receipt by any other person upon the premises at the relevant address
who reasonably appears to be authorized to receive post or other messages on
behalf of the relevant party; and
ii. if by cable, on the earlier of (A)
forty-eight (48) hours after the text of the cable has been given to the
relevant Telegraph Company or other authority for transmission, or (B) the time
of actual delivery; and
iii. if sent by registered post or commercial
courier, on the date of delivery set forth on the registration receipt provided
by the relevant postal authority or commercial courier.
e. Either party may change the address information set
forth in Section 12(b) above by notice to the other given in accordance with
this Section 12, and upon the receipt of such notice, the information shall
then be deemed to have been amended accordingly.
13. GENERAL CONDITIONS.
The following general conditions apply to this Agreement:
9
<PAGE> 10
a. This Agreement is made between parties entirely
independent from each other and, except as expressly set forth in Section 4
hereof, does not create or contemplate a partnership, agency or joint venture
among them.
b. Each party acknowledges that no representation or
statements have been made to it which would modify or tend to modify any of the
provisions of this Agreement in any way. All understandings between the
parties are contained in this Agreement which supersedes and terminates all
sales agreements previously entered into by the parties pertaining to the
Products or Shares.
c. This Agreement and AIMI' s rights hereunder are
assignable in whole or in part by AIMI to any wholly-owned or majority-owned
subsidiary of AIMI, and all rights shall inure to the benefit of and be binding
upon the successors and assigns of AIMI, provided that:
i. AIMI shall give MSU notice of any assignment
no later than thirty (30) days prior to the effective date thereof;
ii. The exercise of rights arising under this
Agreement by any such Assignee shall be subject to limitations and other terms
and conditions set forth herein; and
iii. No such assignment shall relieve AIMI of any
indebtedness to MSU arising prior to the effective date of such assignment.
d. If any provision or part hereof or the application of
such provision or part is held illegal or unenforceable under any of the laws
of any jurisdiction, only such provision or part shall be ineffective without
invalidating the remaining provisions or parts of the Agreement.
e. Failure of either party at any time to require
performance of any provision of this Agreement shall not affect the right to
require performance thereof at any time thereafter, and the waiver by either
party of a breach of any such provision shall not constitute a waiver of any
subsequent breach thereof, nor nullify the validity of such provision.
f. This Agreement may be executed in any number of
counterparts and by different parties in separate counterparts. Each
counterpart so executed shall be deemed to be an original and all of which
together shall constitute one and the same agreement. Notwithstanding any
evidentiary or substantive law to the contrary, copies (including telecopier
facsimile copies) may be substituted for originals in any proceeding relating
to this Agreement.
g. This Agreement shall be construed in accordance with
the laws of the State of New York, including without limiting the generality of
the foregoing, the Uniform Commercial Code as enacted in New York and amended
from time to time. Any suit arising hereunder involving any aspect of the
purchase or sale of Products or any right or claim arising under this Agreement
may be brought in the courts of the State of New York having venue over such
action or in the United States District Court for the Southern District of New
York, and each of the parties consents to the personal jurisdiction of any such
court over it in any such action and to service of process upon it in
accordance with the rules of such court.
10
<PAGE> 11
IN WITNESS WHEREOF, the parties hereto, intending to be legally bound
hereby, have caused this Agreement to be executed this 7th day of May, 1996.
AMERICAN INTERACTIVE MEDIA, INC.
ATTEST: DAVID N. RHAN BY: MICHAEL SALAMAN
------------------- ----------------------------------
MSU (UK) LIMITED
ATTEST: P.B. WEBER BY: W.D. SNOWDON
------------------- ----------------------------------
11
<PAGE> 12
EXHIBIT "A"
ACCESSOR SPECIFICATIONS
HARDWARE
Modem Chipset inc. AFE&DAA/14,400 bps
Internet Service Processor / ISP4
CPU / 1376-PX
DRAM / ZX256X16
ROM / ZX256X16
PAL / NTSC Encoder
PCB / Misc
PSU / external
Mechanical Housing
Remote control / Keyboard handset
SOFTWARE
HTML3 World Wide Web Browser
P0P3 E-Mail Client or Service Provider E-Mail Client
Generic Printer Driver
12
<PAGE> 13
*CONFIDENTIAL PORTION HAS BEEN OMITTED
AND FILED SEPARATELY WITH THE COMMISSION
EXHIBIT "B"
ACCESSOR BILL OF MATERIALS
<TABLE>
<CAPTION>
DESCRIPTION PRICE US$
- -------------------------------------------------------------------------------------
<S> <C>
Modem chipset inc. AFE&DAA $ *
Internet Service Processor *
CPU 1376-PX *
DRAM 2X256X16 *
ROM 2X2256X16 CONFIDENTIAL PORTION HAS BEEN OMITTED *
AND FILED SEPARATELY WITH THE COMMISSION
PAL / NTSC Encoder *
PCB / Misc. *
PSU - external *
Mechanical Housing *
Remote control / Keyboard handset *
All Software *
TOTAL $ *
</TABLE>
13
<PAGE> 14
EXHIBIT "C"
VALUE ADDED SERVICES
Joint Venture Corp. will be established to provide
the following Value Added Services to the Accessor
and NetBox (Non-Accessor) users:
* Software Enhancements/Applets
* Content for Products and Service
* Customer Service
14
<PAGE> 15
*CONFIDENTIAL PORTION HAS BEEN OMITTED
AND FILED SEPARATELY WITH THE COMMISSION
EXHIBIT 'D'
PERFORMANCE CRITERIA - VALUE ADDED SERVICES
*CONFIDENTIAL PORTION HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE COMMISSION
MSU shall have the right to increase its ownership
of Joint Venture Corp. from * % to * % based
upon bringing NetBox customers to Joint Venture
Corp. solely through MSU's Non- Accessor licensee
relationships. The performance criteria relates
to the level of revenues paid to Joint Venture
Corp. by Netbox customers utilizing Joint Venture
Corp.'s Value Added Services as follows:
<TABLE>
<CAPTION>
Net Revenues Generated
From Non-Accessor
Customers Brought To Ownership
Joint Venture Corp. by MSU Percentage
- ----------------------------------------- ----------
<S> <C> <C>
Less than $ * *CONFIDENTIAL PORTION HAS * %
$ * - $ * BEEN OMITTED AND FILED * %
$ * - $ * SEPARATELY WITH THE * %
$ * + COMMISSION * %
</TABLE>
"Net Revenues shall be defined as revenues the Joint Venture Corp. receives
from providing Value Added Services to Non- Accessor customers less costs
incurred by Joint Venture Corp. in developing these Value Added Services.
15
<PAGE> 16
*CONFIDENTIAL PORTION HAS BEEN OMITTED
AND FILED SEPARATELY WITH THE COMMISSION
EXHIBIT "E"
INTERNET SERVICE PROCESSOR / ISP4
<TABLE>
<CAPTION>
Price (US$ Per Chip
# ISP Chips Ordered Before $ * )
- ------------------- ------------------------
<S> <C> <C> <C>
Less than * $ *
* - * $ *
* - * *CONFIDENTIAL PORTION HAS BEEN $ *
OMITTED AND FILED SEPARATELY WITH
* - * THE COMMISSION $ *
* + $ *
</TABLE>
This relates to Paragraph 5(d)
16
<PAGE> 17
EXHIBIT "F"
PROJECTED CHIP DEMAND
SEPTEMBER 1, 1996 THROUGH DECEMBER 31, 1998
<TABLE>
<CAPTION>
PROJECTED # OF
PERIOD CHIPS ORDERED BY AIMI
- ------ ---------------------
<S> <C>
Sept. '96 - Dec. '96 11,000
Q1 '97 15,000
Q2 '97 15,000
Q3 '97 30,000
Q4 '97 60,000
Q1 '98 30,000
Q2 '98 45,000
Q3 '98 45,000
Q4 '98 90,000
</TABLE>
These projections assume the initial delivery of Accessor units in September,
1996, and shall in no circumstance, commit AIMI to the ordering of these
quantities.
On a quarterly basis, AIMI will supply MSU with a recalculated projection of
its ordering quantities for chips in the following six month period.
17
<PAGE> 1
EXHIBIT 10.8
MCLAUGHLIN INTERNATIONAL, INC.
13750 U.S. 281 NORTH, SUITE 600
SAN ANTONIO, TEXAS 78232
November 8, 1995
Mr. Keith Hall
Managing Director
MSU
270 Upper 4th Street
Witan Gate West
Central Milton Keynes MK9 1DP
England
Dear Mr. Hall:
This engagement letter (the "Agreement") confirms that MSU (the
"Company") has engaged McLaughlin International, Inc. ("Consultant") to act as
the Company's consultant (other than the circumstance named in Exhibit A) with
respect to certain strategic transactions undertaken by the Company during the
next 6 months, and during any extension thereof by mutual agreement of the
parties (the "Engagement Period").
1. Description of Services. During the Engagement Period, Consultant
will perform such of the following services as the Company may reasonably
request:
(a) Consultant will familiarize itself to the extent it deems
appropriate and feasible with the business, operations, properties,
financial condition, prospects and plans of the Company.
(b) Consultant shall endeavor to introduce the Company to one or
more persons capable of marketing or distributing the Company's
products or technology (collectively, the "Products" ) . In the event
a marketing or distribution arrangement is consummated with a
strategic partner, Consultant shall continue to assist the Company in
its dealings with such strategic partner. In particular, Consultant
shall act as intermediary between the Company and the strategic
partner, and if any controversy arises between the Company and the
strategic partner, Consultant shall assist the Company in its efforts
to settle such controversy. During
<PAGE> 2
the Engagement Period, the Company shall not contact any person in
Japan or its affiliates (wherever located) concerning potential
strategic transactions regarding the sale or supply of MSU Products
other than through Consultant. During the Engagement Period, the
Company shall refer to Consultant any inquiries regarding such a
possible strategic partnership or marketing and distribution
arrangement involving any persons in Japan or their affiliates
(wherever located).
2. Compensation for Services.
(a) If, during the Engagement Period or during the 12 month period
immediately after termination of the Engagement Period, the Company has
revenues from the marketing or distribution of Products by a person in Japan or
its affiliates (wherever located) first contacted by Consultant with respect to
such an arrangement (or a person in Japan or its affiliates introduced to the
Company, directly or indirectly, by Consultant), then the Company shall pay to
Consultant a fee equal to 5% of such revenues or 10% of the Company's
royalties, whichever applicable, up to but less than $1,000,000 (annually) and
6% of such revenues or 12% of the Company's royalties, whichever applicable,
equal to or greater than $1,000,000 (annually) for the 7 year period beginning
on the first month in which said revenues accrue. Additionally, if during the
Engagement Period or during the 12 month period immediately after termination
of the Engagement Period, the Company has received fees from up-front research
and development payments (including joint venture or collaboration payments),
relating to the Products to be distributed or marketed into Japan or its
affiliates (wherever located) first contacted by Consultant with respect to
such an arrangement (or a person in Japan or its affiliates introduced to the
Company, directly or indirectly, by Consultant), the Company shall pay
Consultant a fee equal to 7.5% of the receipt of all such up-front fees.
Furthermore, if during the Engagement Period or during the 12 month period
immediately after termination of the Engagement Period, the Company has
received fees from licensing (or outright sale), relating to the Products to be
distributed or marketed into Japan or its affiliates (wherever located) first
contacted by Consultant with respect to such an arrangement (or a person in
Japan or its affiliates introduced to the Company, directly or indirectly, by
Consultant), the Company shall pay Consultant a fee equal to 10% of the receipt
of all such fees. In each and every case, all aforementioned fees/revenues
shall be payable on a monthly basis within the thirty day period following the
end of the month in which the revenues accrue. It is the intention of the
parties that Consultant be compensated in the event the Company receives fees
and/or revenue as a direct or indirect consequence of Consultant's efforts.
Consultant's obligation to provide services pursuant to Section 1 is contingent
upon timely payment of the fees described in Section 2. Consultant will have
the right to audit, no more than once per 12-month period, the Company's books
and records to confirm the accuracy of the compensation or fees payable
hereunder. The out-of-pocket expenses of such audit shall be borne by
Consultant unless such
<PAGE> 3
audit identifies a discrepancy of at least 5% between the amount actually paid
to Consultant hereunder and the amount which should have been paid hereunder,
in which case the expenses of such audit shall be borne by the Company.
(b) During the first two and a half (2.5) years of the Engagement
Period, at the closing of the first Transaction(s) that results in the payment
or cumulative payment of revenues/fees pursuant to Section 2(a), the Company
shall issue to Consultant transferable warrants ("Warrants") which only entitle
the holder thereof to purchase 75,000 shares of common stock of the Company per
$1,000,000 of revenues/fees (i.e. 150,000 shares for $2,000,000, 225,000 shares
for $3,000,000 etc.), up to a maximum of 750,000 shares for $10,000,000 of
revenues/fees. Additionally, the Company shall issue to Consultant another
250,000 warrants as a bonus (for a total issuance of 1,000,000 warrants) in the
event of $20,000,000 of revenues/fees. For only as long as the Company is a
research and development concern, and not a manufacturing business, then the
revenues/fees will be defined as follows: a) Product Sales; revenues are based
on gross margin (gross margin is revenue from product sales less cost of
sales), and b) All Other Revenues/Fees (i.e. Licensing, Research and
Development Projects, Royalties, etc.); revenues/fees are based on the actual
revenues/fees. All of the aforementioned warrants shall be issued by the
Company, to Consultant, after giving effect to the consummation of such
Transaction(s), on a fully-diluted basis (assuming the issuance of the maximum
number of shares of common stock issuable upon the exercise of warrants issued
hereunder, the exercise of outstanding warrants, options and other rights to
purchase common stock, and the conversion or exchange of outstanding securities
convertible into or exchangeable for, common stock). The Warrants shall be
exercisable, in whole or in part, at any time during the 5 year period
following the closing of such Transaction(s), at a per share exercise price
equal to the LESSER OF 50% of the market price of the Company's common stock at
that time OR $10 per share (subject to appropriate adjustment for stock splits,
stock dividends and other similar capital changes, and all other customary
weighted average anti-dilution adjustments). The Warrants and shares issuable
upon exercise of the Warrants shall carry normal, full registration rights.
3. Expenses/Retainer. The Company shall pay to Consultant a
non-accountable expense allowance in the amount of $2,500 per month payable
beginning on the first day of the third monthly period of the Engagement Period
and on the first day of each monthly period during the Engagement Period
thereafter.
4. Use of Information About the Company.
(a) Consultant is authorized to transmit to any of the Exclusive
Contacts a copy or copies of any business plan, forms of agreements and any
other documentation supplied to Consultant
<PAGE> 4
expressly for transmission to any of the Exclusive Contacts by or on behalf of
the Company. Except in connection with its services hereunder, Consultant
shall not make use of the Information and shall keep the Information
confidential except to the extent that: (i) the Information is or becomes
publicly available (otherwise than through disclosure by Consultant), (ii)
disclosure is required by law or requested by any governmental agency or
regulatory body, or (iii) the Information is disclosed to Consultant by a
source other than the Company or its agents.
(b) Confidential information means all unpatented designs,
drawings, data specifications, manufacturing processes, testing procedures and
all other technical business and similar information relating to the Company
and its products including all readable computer or other machine readable data
logic, logic diagrams, flow charts, coding, listings, test data or routines,
diagnostic programs or other material relating to or comprising software or
hardware, together with all patent rights and applications, copyrights and
design rights registerable or otherwise. The Consultant acknowledges that it
will have access to commercially sensitive information of the Company which is
confidential and proprietary to the Company. The Consultant agrees to keep and
to ensure that its personnel shall keep the confidential information and all
other matters arising or coming to its attention in connection with the
confidential information secret and confidential and not at any time for any
reason whatsoever to disclose it or permit it to be disclosed to any third
party except that is permitted hereunder to enable the Consultant to carry out
its duties and obligations.
5. Conditions of Transaction. Consultant's services to be
performed hereunder are subject to certain conditions, including (i)
satisfactory completion of due diligence by Consultant, (ii) the form and
terms of the strategic partnership being mutually acceptable to the Company and
Consultant, and (iii) the absence of a material adverse change in the
condition of the Company.
6. Press Announcements. At any time after the consummation or
public announcement of a strategic partnership, and with the prior written
approval of the Company (which approval shall not be unreasonably withheld or
delayed), Consultant may place an announcement in such newspapers and
publications as it may choose, stating that Consultant has acted as consultant
in connection with the transaction.
7. Indemnification. The Company agrees to indemnify and hold
harmless Consultant and its affiliates, and their directors, employees, and
agents, and their respective successors, legal representatives an assigns
(Consultant and each such person, including their successors, legal
representatives and assigns, being referred to herein as an "Indemnified
Person"), from and against all claims, liabilities, losses and damages related
to or arising out of (i) actions taken or omitted to be taken (including
statements made or omitted to be made in any materials regarding the Company)
<PAGE> 5
by the Company or an affiliate of the Company or a director, employee, agent
or representative thereof (other than an Indemnified Person) or (ii) the breach
of any representation or warranty of the Company contained in the Engagement
Letter; and the Company will reimburse each Indemnified Person for all
expenses (including reasonable attorneys' fees) as they are incurred in
connection with the investigation, preparation, and defense of any such claim
or action, whether or not the Indemnified Person is or is threatened to be a
party thereto. No Indemnified Person shall have any liability to the Company,
or a director, employee, agent or representative thereof in connection with the
services rendered pursuant to the Engagement Letter except for claims,
liabilities, losses, damages and expenses which arise from the Consultant's
failure to fulfill its obligations pursuant to the terms of the Engagement
Letter.
8. Representations and Warranties of the Company. The Company
represents and warrants to Consultant that this Agreement has been duly
authorized, executed and delivered by the Company, does not conflict with any
other agreement to which the Company is a party, and constitutes a legal, valid
and binding agreement of the Company, enforceable against the Company in
accordance with its terms. The Company represents that, to the best of its
knowledge, the Information (including any offering materials) will not, when
delivered and at the closing of the Transaction, contain any untrue statement
of a material fact or omit to state a material fact necessary to make the
statements therein not misleading in light of the circumstances under which
they were made. The Company agrees to advise Consultant promptly of the
occurrence of any event or any other change prior to the closing known to it
which results in the Information containing any untrue statement of a material
fact or omitting to state any material fact necessary to make the statements
contained therein not misleading in light of the circumstances under which they
were made.
9. Termination. The Engagement Period may be terminated by
either party for any reason (prior to the termination of the period set forth
in the introductory paragraph hereof) upon written notice to the other party.
10. Survival of Certain Provisions. The Company's obligations
under Sections 2, and 7, and the Company's representations under Section 8,
shall remain in full force and effect and shall not be affected by (i) any
investigation made by or on behalf of Consultant, (ii) consummation of a
strategic partnership, or (iii) termination of this Agreement. The Company's
obligations under Section 3 shall remain in full force and effect and shall not
be affected by (i) any investigation made by or on behalf of Consultant, or
(ii) consummation of a strategic partnership. Mutual obligations of both the
Company and the Consultant under Section 4 shall remain in full force and
effect and shall not be affected by (i) any investigation made by or on behalf
of either the Company or Consultant, or (ii) consummation of a strategic
partnership, or (iii) termination of this Agreement.
<PAGE> 6
11. General. This Agreement may be amended only by the written
agreement of each party hereto. The parties acknowledge and agree that
Consultant is an independent contractor of the Company and is not an affiliate,
partner, joint venturer or agent of the Company. This Agreement may not be
assigned by the Company and may be assigned by Consultant only with prior
written consent of the Company (which would not be unreasonably withheld) and
only to Advisor's affiliates or another entity organized or acquired by Mark
McLaughlin for the purpose of providing consulting services. Subject to the
restrictions on assignment contained herein, the provisions of this Agreement
shall be binding on and inure to the benefit of each party hereto, and such
party's successors, personal representatives and assigns. This Agreement sets
forth the entire understanding between the parties hereto concerning the
subject matter contained herein, and supersedes all prior discussions and
agreements. In the event that any provision of this Agreement is held to be
unenforceable or invalid by any court of competent jurisdiction, the validity
and enforceability of the remaining provisions shall not be affected thereby.
As used herein, the term "person" shall include all natural persons,
corporations, trusts, partnerships, joint ventures, associations and other
entities. This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original, but all of which shall constitute one and
the same instrument. This Agreement shall be governed by the laws of the State
of Texas.
Please sign and return one copy of this letter to the undersigned to
indicate your acceptance of the terms set forth herein, whereupon this letter
shall constitute a binding agreement between you and the undersigned as of the
date first above written.
Sincerely,
McLAUGHLIN INTERNATIONAL, INC.
By: /s/ MARK McLAUGHLIN
-----------------------------------------
Mark McLaughlin, President
Accepted and Agreed:
MSU
By: /s/ KEITH HALL
-----------------------------------
Keith Hall, Managing Director
<PAGE> 7
EXHIBIT A
1). Matsushita with specific regard to the "Envoy" chip ONLY.
2). Fujitsu with specific regard to the "Minstrel" product discussions via
ICL.
<PAGE> 8
February 5, 1996
Mr. Keith Hall
Managing Director
MSU
270 Upper 4th Street
Witan Gate West
Central Milton Keynes MK9 1DP
England
Dear Mr. Hall:
Pursuant to the Engagement Letter dated November 8, 1995 (the "Engagement
Letter) between McLaughlin International, Inc. ("Consultant") and MSU (the
"Company"), The Company has engaged Consultant to act as the Company's
consultant in connection with certain strategic transactions. The purpose of
this letter is to amend certain provisions of the Engagement Letter as follows:
ITEM 1
In order to correct an inadvertent limitation contained in Section 2(b) of the
Engagement Letter, the words "the first" which appear in the second line of the
first sentence of such section are hereby deleted (so that there is no
misunderstanding that the number of Warrants to received by Consultant shall be
based on the cumulative revenues/fees received from all Transactions during
each year), and the reference to Section 2(b) appearing the third line of that
sentence is hereby changed to Section 2(a).
ITEM 2
The word "Advisor's" appearing in the third sentence of Section 11 of the
Engagement Letter is hereby changed to the term "Consultant (in order to be
made consistent with the other provisions of the Engagement Letter).
All other terms of the Engagement Letter are hereby ratified and affirmed. To
the extent that any term contained in this Amendment is inconsistent with the
Engagement Letter, this Amendment shall control and the Engagement Letter shall
be deemed modified.
<PAGE> 9
Please sign and return one copy of this letter to the undersigned to indicate
your acceptance of the terms set forth herein, whereupon this letter shall
constitute a binding amendment to the Engagement Letter as of the date first
above written.
Sincerely,
McLAUGHLIN INTERNATIONAL, INC.
By: /S/ MARK McLAUGHLIN
----------------------------------------
Mark McLaughlin, President
Accepted and Agreed:
MSU
By: /S/ KEITH HALL
- --------------------------------------
Keith Hall, Managing Director
<PAGE> 10
May 8, 1996
Mr. Wynford Holloway
Chairman
MSU
526-528 Elder Gate
Central Milton Keynes, Bucks
MK9 1LR
England
Dear Mr. Holloway:
Pursuant to the Engagement Letter dated November 8, 1995, Amendment Number 1
dated February 5, 1996, Amendment Number 2 dated February 8, 1996, and
Amendment Number 3 dated March 28, 1996 (the "Engagement Letter) between
McLaughlin International, Inc. ("Consultant") and MSU (the "Company"), The
Company has engaged Consultant to act as the Company's consultant in connection
with certain strategic transactions. The purpose of this Fourth Amendment to
the Engagement Letter ("Amendment") is to extend the term of the Engagement
Period and nullify Amendment Number 2 dated February 8, 1996 and Amendment
Number 3 dated March 28, 1996. Capitalized terms used, but not defined, in
this Amendment, shall have the meanings assigned to them in the Engagement
Letter.
THE ENGAGEMENT LETTER IS HEREBY AMENDED AS FOLLOWS:
ITEM 1
The Company and Consultant hereby mutually agree to extend the term
Engagement letter dated November 8, 1996, as amended, for an
additional period of 6 months, and during any extension thereof by
mutual agreement of the parties.
ITEM 2
Amendment Number 2 dated February 8, 1996 and Amendment Number 3 dated
March 28, 1996 are hereby rescinded as part of the Engagement Letter
dated November 8, 1995.
All other terms of the Engagement Letter are hereby ratified and affirmed. To
the extent that any term contained in this Amendment is inconsistent with the
Engagement Letter, this Amendment shall control and the Engagement Letter shall
be deemed modified.
<PAGE> 11
Please sign and return one copy of this letter to the undersigned to indicate
your acceptance of the terms set forth herein, whereupon this letter shall
constitute a binding amendment to the Engagement Letter as of the date first
above written.
Sincerely,
McLAUGHLIN INTERNATIONAL, INC.
By: /s/ MARK McLAUGHLIN
-----------------------------------------
Mark McLaughlin, President
Accepted and Agreed:
MSU
By: /S/ WYNFORD HOLLOWAY
--------------------------------
Wynford Holloway, Chairman
<PAGE> 1
EXHIBIT 10.9
May 17, 1996
Mr. Wynford Holloway
Chairman
MSU
526-528 Elder Gate
Central Milton Keynes, Bucks
MK9 1LR
England
Dear Mr. Holloway:
This engagement letter (the "Agreement") confirms that MSU (the
"Company") has engaged McLaughlin International, Inc. ("Consultant") to act as
the Company's consultant and representative with companies and/or persons named
in the attached Exhibit 1 with respect to certain strategic transactions
undertaken by the Company during the next 6 months, and during any extension
thereof by mutual agreement of the parties (the "Engagement Period").
1. Description of Services. During the Engagement Period,
Consultant will perform such of the following services as the Company may
reasonably request:
(a) Consultant will familiarize itself to the extent it deems
appropriate and feasible with the business, operations, properties, financial
condition, prospects and plans of the Company.
(b) Consultant shall endeavor to introduce the Company to one or
more companies and/or persons, named in the attached Exhibit 1, capable of
forming strategic transactions and alliances involving the Company's products
or technology (collectively, the "Products"). In the event a strategic
transaction or alliance is consummated with a company(ies) and/or person(s)
named in Exhibit 1, Consultant shall continue to assist the Company in its
dealings with such strategic partner. In particular, Consultant shall act as
intermediary between the Company and the strategic partner, and if any
controversy arises between the Company and the strategic partner, Consultant
shall assist the Company in its efforts to settle such controversy.
2. Compensation for Services. If, during the Engagement Period
or during the 12 month period immediately after termination of the Engagement
Period, the Company has received fees from up-front research and development
payments (including joint venture or collaboration payments), relating to the
Products to be distributed or marketed with a company(ies) and/or person(s)
named in Exhibit 1, the Company shall pay Consultant a fee equal to 7.5% of the
receipt of all such up-front fees. Additionally, if during the Engagement
Period or during the 12 month period immediately after termination of the
Engagement Period, the Company has received monies through an equity placement
by a company(ies) and/or person(s) named
<PAGE> 2
in Exhibit 1, the Company shall pay Consultant a finders fee equal to 7.5% of
the proceeds received by the Company. In the event the Company receives fees
from up-front research and development payments (including joint venture or
collaboration payments), relating to the Products to be distributed or marketed
with a company(ies) and/or person(s) named in Exhibit 1, that constitutes an
exchange for equity in the Company, then the Consultant shall only be
compensated once with respect to such transaction. Furthermore, if during the
Engagement Period or during the 12 month period immediately after termination
of the Engagement Period, the Company has received Service Provider
revenues/fees (as defined below), relating to Internet access and services with
a company(ies) and/or person(s) named in Exhibit 1, then the Company shall pay
to Consultant a percentage fee of all Service Provider revenues/fees in
connection with such transaction(s). The fee payable to the Consultant by the
Company, whether by shares of stock or revenues/fees (whichever applicable),
shall be expressed as a percentage of the ratio of 5:1 (for every six shares of
stock or six dollars received by the Company, the Company receives five shares
of stock or five dollars and the Consultant receives one share of stock or one
dollar) of the total Service Provider revenue/fees, inclusive in the Company's
percentage fee payable by the company(ies) and/or person(s) named in Exhibit 1.
With respect to fees payable under Service Provider revenues/fees involving a
strategic transaction with a company(ies) and/or person(s) named in Exhibit 1,
the Consultant shall only be compensated with either shares of stock or dollars
(whichever applicable), not both, with respect to such transaction. For
example:
<TABLE>
<CAPTION>
TOTAL
TOTAL SUM VALUE COMPANY'S CONSULTANT'S PERCENTAGE
SERVICE PROVIDER STRATEGIC PARTNER'S PERCENTAGE PERCENTAGE COLLECTED BY
REVENUES/FEES PERCENTAGE SHARE SHARE SHARE COMPANY
<S> <C> <C> <C> <C>
100% 76% 20% 4% 24%
100% 65% 25% 5% 35%
100% 64% 30% 6% 36%
100% 62% 35% 7% 42%
100% 52% 40% 8% 48%
</TABLE>
Service Provider revenues/fees are defined as the total sum value of access
provider revenues, content provider revenues, and any and all monthly service
revenues/fees associated with such strategic transactions. The Company and
Consultant shall make a best effort to direct Service Provider business, with a
company(ies) and/or person(s) named in Exhibit 1, through the Joint Venture
Corporation created by the Company and American Interactive Media, Inc. (AIM).
Additionally, if during the Engagement Period or during the 12 month period
immediately after termination of the Engagement Period, the Company has
received revenues from chip sales, relating to the Products, EXCLUDING NETBOX,
to be distributed or marketed with a company(ies) and/or person(s) named in
Exhibit 1, the Company shall pay Consultant a fee equal to 5% of the receipt of
all such payments. All of the aforementioned revenues/fees described herein
associated with a company(ies) and/or person(s) named in Exhibit 1, shall be
payable on a monthly basis within the thirty day period following the end of
the month in which the revenues are received by the Company. It is the
intention of the parties that Consultant be compensated
<PAGE> 3
in the event the Company receives fees and/or revenue as a direct or indirect
consequence of Consultant's efforts. Additionally, all of the aforementioned
revenues/fees are payable to the Consultant for the perpetual life of the
relationship between the Company and a company(ies) and/or person(s) named in
Exhibit 1. Consultant shall not be entitled to compensation from expenses
incurred by the Company for software upgrades, designs, and enhancements paid
for by a company(ies) and/or person(s) named in Exhibit 1. Consultant's
obligation to provide services pursuant to Section 1 is contingent upon timely
payment of the fees described in Section 2. Consultant will have the right to
audit, no more than once per 12-month period, the Company's books and records
to confirm the accuracy of the compensation or fees payable hereunder. The
out-of-pocket expenses of such audit shall be borne by Consultant unless such
audit identifies a discrepancy of at least 5% between the amount actually paid
to Consultant hereunder and the amount which should have been paid hereunder,
in which case the expenses of such audit shall be borne by the Company.
3. Expenses/Retainer. The Company shall pay to Consultant a
non-accountable expense allowance in the amount of $5,000 per month payable
beginning on the first day of the first month following the execution of this
Agreement. The Company understands that this retainer is in addition to any
other retainer covered in other agreements between the Company and Consultant.
4. Share/Option Pool. The Company hereby establishes a
pool of 100,000 shares/options, exercisable at $8.00 per share, exclusively for
awarding performance based results in pursuit of companies and/or persons named
in Exhibit 1. The overseeing and awarding of these shares/options shall be by
committee consisting of the following individuals: Wynford Holloway, Keith
Hall, Bill Snowden, and Mark McLaughlin. None of the aforementioned
individuals are eligible to received any portion this pool's shares/options.
Shares/options are to be distributed to individuals who help the Company
achieve objective results with companies and/or persons named in Exhibit 1.
5. Use of Information About the Company.
(a) Consultant is authorized to transmit to copy or copies of any
business plan, forms of agreements and any other documentation supplied to
Consultant expressly for transmission to any of the U.S. contacts by or on
behalf of the Company. Except in connection with its services hereunder,
Consultant shall not make use of the Information and shall keep the Information
confidential except to the extent that: (i) the Information is or becomes
publicly available (otherwise than through disclosure by Consultant), (ii)
disclosure is required by law or requested by any governmental agency or
regulatory body, or (iii) the Information is disclosed to Consultant by a
source other than the Company or its agents.
(b) Confidential information means all unpatented designs,
drawings, data specifications, manufacturing processes, testing procedures and
all other technical business and similar information relating to the Company
and its products including all readable computer or other machine readable data
logic, logic diagrams, flow charts, coding, listings, test data or routines,
diagnostic programs or other material relating to or comprising software or
hardware, together with all patent rights and applications, copyrights and
design rights registerable or otherwise. The Consultant acknowledges that it
will have access to commercially sensitive information of the Company which is
confidential and proprietary to the Company. The Consultant agrees to keep and
to ensure that its personnel shall keep the confidential information and all
other matters arising or
<PAGE> 4
coming to its attention in connection with the confidential information secret
and confidential and not at any time for any reason whatsoever to disclose it
or permit it to be disclosed to any third party except that is permitted
hereunder to enable the Consultant to carry out its duties and obligations.
6. Conditions of Transaction. Consultant's services to be
performed hereunder are subject to certain conditions, including (i)
satisfactory completion of due diligence by Consultant, (ii) the form and
terms of the strategic partnership being mutually acceptable to the Company and
Consultant, and (iii) the absence of a material adverse change in the
condition of the Company.
7. Indemnification. The Company agrees to indemnify and hold
harmless Consultant and its affiliates, and their directors, employees, and
agents, and their respective successors, legal representatives an assigns
(Consultant and each such person, including their successors, legal
representatives and assigns, being referred to herein as an "Indemnified
Person"), from and against all claims, liabilities, losses and damages related
to or arising out of (i) actions taken or omitted to be taken (including
statements made or omitted to be made in any materials regarding the Company)
by the Company or an affiliate of the Company or a director, employee, agent
or representative thereof (other than an Indemnified Person) or (ii) the breach
of any representation or warranty of the Company contained in the Engagement
Letter; and the Company will reimburse each Indemnified Person for all
expenses (including reasonable attorneys' fees) as they are incurred in
connection with the investigation, preparation, and defense of any such claim
or action, whether or not the Indemnified Person is or is threatened to be a
party thereto. No Indemnified Person shall have any liability to the Company,
or a director, employee, agent or representative thereof in connection with the
services rendered pursuant to the Engagement Letter except for claims,
liabilities, losses, damages and expenses which arise from the Consultant's
failure to fulfill its obligations pursuant to the terms of the Engagement
Letter.
8. Representations and Warranties of the Company. The Company
represents and warrants to Consultant that this Agreement has been duly
authorized, executed and delivered by the Company, does not conflict with any
other agreement to which the Company is a party, and constitutes a legal, valid
and binding agreement of the Company, enforceable against the Company in
accordance with its terms. The Company represents that, to the best of its
knowledge, the Information (including any offering materials) will not, when
delivered and at the closing of a strategic transaction, contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements therein not misleading in light of the circumstances under which
they were made. The Company agrees to advise Consultant promptly of the
occurrence of any event or any other change prior to the closing known to it
which results in the Information containing any untrue statement of a material
fact or omitting to state any material fact necessary to make the statements
contained therein not misleading in light of the circumstances under which they
were made.
9. Termination. The Engagement Period may be terminated by
either party for any reason (prior to the termination of the period set forth
in the introductory paragraph hereof) upon written notice to the other party.
10. Survival of Certain Provisions. The Company's obligations
under Sections 2, 3, 4, and 7, and the Company's representations under Section
8, shall remain in full force and effect and shall not be affected by (i) any
investigation made by or on behalf of Consultant, (ii) consummation of a
strategic partnership, or (iii)
<PAGE> 5
termination of this Agreement. Mutual obligations of both the Company and the
Consultant under Section 5 shall remain in full force and effect and shall not
be affected by (i) any investigation made by or on behalf of either the Company
or Consultant, or (ii) consummation of a strategic partnership, or (iii)
termination of this Agreement.
11. General. This Agreement may be amended only by the written
agreement of each party hereto. The parties acknowledge and agree that
Consultant is an independent contractor of the Company and is not an affiliate,
partner, joint venturer or agent of the Company. This Agreement may not be
assigned by the Company and may be assigned by Consultant only with prior
written consent of the Company (which would not be unreasonably withheld) and
only to Advisor's affiliates or another entity organized or acquired by Mark
McLaughlin for the purpose of providing consulting services. Subject to the
restrictions on assignment contained herein, the provisions of this Agreement
shall be binding on and inure to the benefit of each party hereto, and such
party's successors, personal representatives and assigns. This Agreement sets
forth the entire understanding between the parties hereto concerning the
subject matter contained herein, and supersedes all prior discussions and
agreements. In the event that any provision of this Agreement is held to be
unenforceable or invalid by any court of competent jurisdiction, the validity
and enforceability of the remaining provisions shall not be affected thereby.
As used herein, the term "person" shall include all natural persons,
corporations, trusts, partnerships, joint ventures, associations and other
entities. This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original, but all of which shall constitute one and
the same instrument. This Agreement shall be governed by the laws of the State
of Texas.
Please sign and return one copy of this letter to the undersigned to
indicate your acceptance of the terms set forth herein, whereupon this letter
shall constitute a binding agreement between you and the undersigned as of the
date first above written.
Sincerely,
McLAUGHLIN INTERNATIONAL, INC.
By: /S/ MARK McLAUGHLIN
-------------------------------
Mark McLaughlin, President
Accepted and Agreed:
MSU
By: /S/ WYNFORD HOLLOWAY
--------------------------------
Wynford Holloway, Chairman
<PAGE> 6
EXHIBIT 1
AT&T
Lucent Technologies
Tandy
Bell Atlantic
SBC Communication, Inc.
Bell South
GTE
MCI Communications
Sprint
America On-Line
Prodigy
Microsoft
Netscape
Tele-Communications, Inc.
Cisco Systems
MFS Communications
PSINet
Netcom Communications Services
Global Network Navigator
Apple
Viacom
Turner
Lin Broadcasting
Time Warner
Bell Canada
Telmex
Disney
General Electric
Westinghouse
AST Research
Peter Conner and/or Conner Group
Westell
Amati Communications
Sourcecom
Walmart
Northern Telecom
IDT Corporation
Compaq
<PAGE> 1
EXHIBIT 10.10
MSU CORPORATION
DIRECTOR STOCK OPTION AGREEMENT
CERTIFICATE NO.: D-1
NAME OF OPTIONEE: W.D. Snowdon
NUMBER OF OPTION SHARES: One Hundred Thousand (100,000)
OPTION PRICE PER SHARE: $5.00 (equal to 80% of current fair market
value)
DATE OF GRANT: June 7, 1996
EXPIRATION DATE: Close of business on the business day next
preceding the 5th anniversary of the Date of
Grant.
THIS STOCK OPTION AGREEMENT is granted on the above date (the "Date of
Grant") by MSU Corporation, a Florida corporation (the "Company"), to the
person named above (the "Optionee"), upon the following terms and conditions.
1. GRANT OF OPTION. The Company grants to the Optionee an option
to purchase, on the terms and conditions hereinafter set forth, the number of
shares specified above (the "Option Shares") of the Company's Common Stock, par
value $0.01 per share, at the option price per share specified above.
2. PERIOD OF OPTION. This Option will expire at the close of
business on the Expiration Date.
3. EXERCISE. Subject to the other provisions of this Option, the
Optionee's right to exercise this Option shall accrue upon the first
anniversary of the Date of Grant.
4. CERTAIN LIMITATIONS ON EXERCISE. No fractional shares may be
purchased hereunder.
5. DIRECTOR STATUS NOT REQUIRED. In the event Optionee ceases to
serve as a Director of the Company, this Option shall remain exercisable until
the Expiration Date.
6. METHOD OF EXERCISE OF OPTION. During the term of this option,
Optionee may exercise his option, from time to time, to the extent then
exercisable, by written notice directed to the Company at its principal place
of business. Such written notice shall specify the number of Option Shares he
is purchasing pursuant to this Agreement and the method of payment for such
shares, and shall be accompanied by the original of this Agreement so that an
appropriate endorsement can be made hereto to reflect the Option Shares so
purchased and to reduce
1
<PAGE> 2
accordingly the number of Option Shares thereafter to be subject to the terms
hereof. The Option Price for the number of Option Shares being purchased shall
be payable as follows: (a) in cash, (b) by delivery of certificates
representing shares of Common Stock having an equivalent fair market value or
by arranging with the Company and Optionee's broker to deliver the appropriate
Option Price from the concurrent market sale of the acquired shares, or (c) a
combination of any of the foregoing. Upon receipt of such written notice, the
original hereof, and full payment of the Option Price for the number of Option
Shares being purchased, the Company shall make delivery of a certificate
representing the number of such shares purchased as promptly as possible
thereafter, provided that, if any law or regulation requires the Company to
take any action with respect to such shares specified in such notice before the
issuance thereof, then the sale, issuance and delivery of such shares shall be
deferred for the period necessary to take such action.
7. NON-TRANSFERABILITY OF OPTION. This Option shall not be
transferable by the Optionee otherwise than by Will or the laws of descent and
distribution, and it shall be exercisable, during the lifetime of the Optionee,
only by him.
8. SERVICE AS DIRECTOR. This Option confers no right upon the
Optionee with respect to his continuation as a director of the Company.
9. ADJUSTMENT UPON THE OCCURRENCE OF CERTAIN EVENTS. The number
of shares subject to this Option and the exercise price per share are subject
to appropriate adjustment in the event of stock splits, stock dividends,
recapitalizations or similar events which would change the capital structure of
the Company. No adjustment, however, shall result in or entitle the Optionee
to the issuance of fractional shares.
10. NOTICES, ETC. Any notice hereunder by the Optionee shall be
given to the Company in writing and such notice and any payment by the Optionee
hereunder shall be deemed duly given or made only upon receipt thereof at the
Company's office at Elder House, 526-528 Elder Gate, Central Milton Keynes, MK9
1LR, United Kingdom, or at such other address as the Company may designate by
notice to the Optionee. Any notice or other communication to the Optionee
hereunder shall be in writing and any communication and any delivery to the
Optionee hereunder shall be deemed duly given or made if mailed, delivered or
made to the Optionee at such address as the Optionee may have on file with the
Company or in care of the Company at its principal office in Central Milton
Keynes, United Kingdom.
11. CONSTRUCTION. The construction of this Option is vested in
the Board of Directors of the Company or a Compensation and Stock Option
Committee of the Company, if and once established and if the Board shall have
delegated such responsibility to such Committee, whose construction shall be
final and conclusive.
12. RESTRICTIONS ON TRANSFER. Optionee agrees, by acceptance of
this Option, that, upon issuance of any shares hereunder, that, unless such
shares are then registered under applicable federal and state securities laws,
(i) acquisition of such shares will be for investment and not with a view to
the distribution thereof, and (ii) the Company may require an investment letter
from Optionee in such form as may be recommended by Company counsel.
2
<PAGE> 3
IN WITNESS WHEREOF, the Company has caused this Option to be executed
by its proper corporate officers thereunto duly authorized.
MSU CORPORATION
BY: /S/ KEITH HALL
----------------------
KEITH HALL, PRESIDENT
ATTEST:
/S/ WYNFORD PETER HOLLOWAY
- --------------------------
WYNFORD PETER HOLLOWAY,
CHIEF EXECUTIVE OFFICER
ACCEPTED AND AGREED TO:
/S/ W.D. SNOWDON
- --------------------------
OPTIONEE
3
<PAGE> 1
EXHIBIT 10.11
*CONFIDENTIAL PORTION HAS BEEN OMITTED
AND FILED SEPARATELY WITH THE COMMISSION
MSU (UK) LTD DEVELOPMENT AND LICENSING AGREEMENT.
THIS AGREEMENT IS MADE ON THE 22ND DAY OF JULY 1994
BETWEEN:
1) MSU (UK) LIMITED, a United Kingdom registered company whose registered
office is situated at 270, Upper 4th Street, Witan Gate West, Central Milton
Keynes, MK9 1DP, United Kingdom ("MSU") : AND
2) TXC CORPORATION. 5F, No.16, SEC.2 Chung Yang S Road, Peitou, Taipei, Taiwan
R.O.C. (THE "CLIENT")
WHEREAS:
A) MSU is inter alia a computer and ASIC design and development company and
Client are manufacturers and distributors of computer based products.
B) MSU is the beneficial owner of the intellectual property rights in the
Chipset design and has agreed to grant to Client a license of that technology.
C) MSU has agreed to develop for Client a Video CD Player as defined and to
supply on an on going basis the Chipset as defined.
D) MSU has agreed to develop an Upgrade as defined in the form of a Module that
can be connected to the Video CD Player.
OPERATIVE PROVISIONS.
1) DEFINITIONS.
*CONFIDENTIAL PORTION HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE COMMISSION
1.1.1: "BANK" shall mean MSU bankers, *
1.1.2: "CHIPSET" shall mean MSU's Trademark Chipset known as
Wynpeg, full particulars of which are set ut for
identification purposes only in the First Schedule
attached hereto entitled "Wynpeg Chipset."
1.1.3: "VCD COMPLETION DATE" shall mean the earlier of the
delivery and acceptance of the production ready Video
Cd Player of the 1994.
1.1.4: "UPGRADE COMPLETION DATE" shall mean the earlier of
the delivery and acceptance of the production ready
Upgrade Module unit or the 1994.
<PAGE> 2
(2)
*CONFIDENTIAL PORTION HAS BEEN OMITTED
AND FILED SEPARATELY WITH THE COMMISSION
1.1.5: "FINAL PAYMENT" shall mean the sum of pounds
sterling due to MSU on the Upgrade Completion Date.
1.1.6: "FIXED ORDER SCHEDULE" shall mean the 3 month Fixed
Order Schedule of the 6 month rolling forecast to be
provided by Client to MSU.
1.1.7: "VIDEO CD PLAYER" shall mean a multi functional CD
based machine full details of which are set out in
Schedule 2 hereto entitled "Description of the
Generic Compact Disc System.
1.1.8: "UPGRADE" shall mean an Upgrade Module to the Video
CD Player full details of which are set out in
Schedule 3 hereto entitled "Generic CD Multimedia &
games Upgrade Cartridge."
1.1.9: "NET SELLING PRICE" shall mean US $ * for
orders of 1,000 units or greater of the Chipset.
*CONFIDENTIAL PORTION HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE COMMISSION.
1.1.10: "PRICE" shall be the price per unit of the Chipset
calculated as to the Net Selling Price plus the
Royalty.
1.1.11: "PRODUCT" shall mean the product developed and built
to the Specification.
1.1.12: "TRADEMARK" shall mean the Trademark "Wynpeg" of which
MSU is the beneficial owner.
*CONFIDENTIAL PORTION HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE COMMISSION.
1.1.13: "ROYALTY" shall mean the royalty of US$ * per unit
of the Chipset.
1.1.14: "SPECIFICATION" shall mean the Specification of the
Product to be developed by MSU as detailed in
Schedule 2 hereto attached.
1.1.15: "SPECIFICATION CHANGES" shall mean any changes to the
Specification requested by clienT.
1.2: Any reference in this agreement includes telex, cable, facsimile
transmission or any comparable means.
1.3: The headings in this agreement are for convenience only and shall not
affect its interpretation.
<PAGE> 3
(3)
*CONFIDENTIAL PORTION HAS BEEN OMITTED
AND FILED SEPARATELY WITH THE COMMISSION
PART 1
PRODUCT DEVELOPMENT
2. DEVELOPMENT CHARGES
In consideration of MSU designing, developing and delivering to Client
a production ready unit of the Video CD Player by the VCD Completion
Date, Client will pay to MSU the sum of * pounds sterling
upon the following dates:
*CONFIDENTIAL PORTION HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE COMMISSION
2.1: Upon execution of this agreement the sum of *
pounds sterling.
2.2: Upon the VCD Completion Date the sum of *
pounds sterling.
In consideration of MSU designing, developing and delivering to Client
a production ready unit of the Upgrade Module by the Upgrade
Completion Date, Client will pay to MSU the sum of *
pounds sterling upon the following dates:
*CONFIDENTIAL PORTION HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE COMMISSION
2.3: Upon commencement of the Upgrade Module Development
the sum of * pounds sterling.
2.4: Upon the Upgrade Completion date the sum of *
pounds sterling.
The development will be carried out according to the Milestones in
Schedule 5 attached.
*CONFIDENTIAL PORTION HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE COMMISSION
3) THE FINAL PAYMENT of * pounds sterling referred to in
clause 2.4 shall be paid to MSU by the Client upon the Upgrade Completion Date.
In the event of any Specification Changes being requested by the Client prior
to the Completion Date, the parties shall agree what further period and costs
may reasonably be required for the development and implementation of any such
changes. If such an agreement cannot be achieved, MSU shall have no
obligations beyond those provided for by this agreement.
4) DESIGN QUALITY STANDARDS.
The developed unit will comply in all respects with the Specification, shall be
of a standard of quality and reliability for mass production, and capable of
obtaining FCC/EMI and UL approval.
<PAGE> 4
(4)
5) TECHNICAL SUPPORT.
MSU will provide a telephone support line for hardware related technical
problems for a period of 6 months following Completion Date. MSU will supply
the services of suitably qualified personnel to visit the Client for technical
support purposes at Client's cost and expense.
6) PRODUCTION SUPPORT.
MSU will supply free of charge to the Client functional test software for
production purposes.
PART 2
7) CHIPSET TERMS.
7.1: MSU agrees to sell and the Client agrees to buy the Chipset
on the terms set out in this agreement. The Video CD Player
shall incorporate the Chipset which is proprietary to MSU and
protected inter alia by the Trademark.
7.2: The Price shall include the Royalty for each Chipset supplied
for use in the Video CD Player over and above the Net Selling
Price.
7.3: In the event of any increase in Chipset manufacturing costs to
MSU, the Net Selling Price shall increase by a like amount.
8) CHIPSET LICENCE.
8.1: TXC will be and hereby are licensed to sell the Chipset for
incorporation in the Video CD Player, subject to all chip
supplies for use by TXC and its sub-licencees being made via
MSU or its authorised chip fabrication plants.
8.2: In the event that TXC is able to obtain an upfront licence
fee from any of its sub-licencees for the Video CD Player
incorporating the Chipset, such upfront licence fees shall be
shared equally between TXC and MSU after deduction of
relevant TXC expenses.
8.3: Where a TXC sub-licencee of the Video CD Player requires any
further development to the base products or Chipset, such
development work will be carried out by MSU. TXC may choose
to add a margin to any agreed development fee quoted by MSU
for the work.
<PAGE> 5
(5)
8.4: For the purposes of clarification, TXC is granted a
non-exclusive licence to sell the Chipset only to
sub-licencees for use in a Video CD Player based product. TXC
shall provide MSU with the names of all sub-licencees to whom
the Chipset is supplied to enable MSU to comply with its own
licencing restrictions.
9) CHIPSET USE.
The Client will not, without the prior written consent of MSU, by itself, its
servants, or agents or licencees or otherwise, incorporate the Chipset into any
Product or range of products other than the Video CD Player.
10) GUARANTEE.
MSU guarantee that all Chipsets supplied to the client will be defect free and
100% functional in the Video CD Player. MSU agrees to accept return of the
defective Chipsets from the Client for replacement, provided that these
Chipsets have been tested and identified as failed prior to board insertion.
11) IMPROVEMENTS.
11.1: If MSU shall at any time after the date of this agreement
make any material improvement to the Chipset, it will
forthwith notify the Client of the nature of such improvement.
11.2: If the improvement can be incorporated without any increase
in manufacturing base cost to MSU, the Client shall be
granted a licence to those improvements which shall be
incorporated into the Chipset.
11.3: If such improvement can only be incorporated by an increase
in manufacturing base cost to MSU, the Client shall be given
the option to negotiate and agree a revised Net Selling Price
in relation to the improved Chipset.
12) PAYMENT TERMS AND INVOICING.
Payment by the Client of development fees pursuant to clause 2 of this
agreement shall be made by telegraphic transfer on the due date to the
Bank. Payment for the supply of the Chipset shall be by irrevocable
transferable documentary credit opened against the Fixed Order
Schedule payable on sight and drawn up in terms acceptable to MSU.
13) ORDERS AND DELIVERY.
13.1: The Client will supply MSU, on a monthly basis, with a rolling
6 month forecast of Client's requirements of the Chipset.
During the first 3 months of such forecast, the
<PAGE> 6
(6)
*CONFIDENTIAL PORTION HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE COMMISSION
Fixed Order Schedule shall be firm as to volume. In the
event of the Client from time to time requiring an accelerated
lead time and/or Chipsets in excess of the Fixed Order
Schedule, MSU shall provide such services upon mutually agreed
terms and conditions.
13.2: The Client may order Chipsets in quantities of 1,000 units per
single order at a Net Selling Price of US$ * . The Client
estimates annual volumes of units.
*CONFIDENTIAL PORTION HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE COMMISSION
13.3: Delivery dates or periods specified in orders accepted by MSU
shall be firm, provided that MSU is in possession of all
information and documentation necessary to fulfill such orders
in a timely manner and without interruption.
13.4: MSU anticipates a delivery lead time of 16 weeks from Fixed
Order Schedule, however exact delivery times may vary.
13.5: Delivery of the Chipset shall be ex-works. Title and risk in
the Chipset shall pass to the Client on delivery.
13.6: MSU will make every effort to source the Intel 870376PX Chip
and include this in the Chipsets to be supplied to the Client
at a price to be agreed.
14) INTEREST.
In the event that either party fails to make any payment to the other
on the due date, then, without prejudice to any other claims that the
parties may have against each other, the sum due shall bear interest
from the due date until payment is made in full at 2% per annum above
the London base rate of Barclays Bank Plc.
15) FORCE MAJEURE.
15.1: If either party wishes to claim force majeure, it shall
promptly notify the other party in writing of its nature.
15.2: Notwithstanding any other provision of this agreement, neither
party shall be deemed to be in breach of this agreement or
otherwise be liable to the other for delay in performance or
the non-performance of any of its obligations to the extent
that the delay or non-performance is due to any circumstance
beyond its reasonable control, including, but not limited to,
acts of God, war, riots, embargo, failure of suppliers, labour
stoppages, act of civil and military authority, fire, floods,
earthquakes and accidents.
<PAGE> 7
(7)
*CONFIDENTIAL PORTION HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE COMMISSION
16) PROPRIETARY INFORMATION.
All proprietary information and any copies thereof are and will remain
the property of the disclosing party.
17) LIMITATION OF LIABILITY.
17.1: The following provisions set out MSU's entire liability
(including any liability for the acts and omissions of its
employees) to the Client in respect of:
17.1.1: any breach of its contractual obligations relating to
the performance of this agreement.
17.1.2.: any representation, statement of tortious act or
omission, including negligence arising under or in
connection with the performance of this agreement.
17.2: Any act or omission on the part of MSU falling within clause
16.1 above shall for the purpose of this clause be known as an
"Event of Default".
17.3 MSU's liability to the Client for death or injury resulting
from its own or that of its employees' negligence shall *
.
*CONFIDENTIAL PORTION HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE COMMISSION
17.4: Subject to the limit set out in clause 17.5 below, MSU shall
accept liability to the Client in respect of damage to the
tangible property of the Client resulting from the negligence
of MSU or its employees.
17.5: Subject to the provisions of clause 17.3, MSU's entire
liability in respect of any Event of Default shall be limited
to damages of an amount equal to:
*CONFIDENTIAL PORTION HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE COMMISSION
17.5.1: US$ * in the case of an Event of Default
falling within clause 17.4 and;
71.5.2: US$ * in the case of any other Event of
Default.
17.6 Subject to clause 16.3 above, MSU shall not be liable to the
Client in respect of any Event of Default of loss of profits,
goodwill or any type of special indirect or consequential loss
(including loss or damage suffered by the Client as a result of
an action brought by a third party) even if such loss was
reasonably foreseeable or MSU has been advised of the Client
incurring the same.
17.7: If a number of Events of Default give rise substantially to the
same loss, then they shall be regarded as giving rise to only
one claim under this agreement.
<PAGE> 8
(8)
17.8: Nothing in his clause 16 shall confer any right or remedy upon
the Client to which it would not otherwise be legally
entitled.
18) TERM.
18.1: This agreement shall come into force on the date of the
signature and subject to the following provisions of this
clause, shall continue in force for a period of 2 years certain
and thereafter until terminated on not less than 3 months prior
written notice by either party to the other taking effect not
earlier than the end of the said term certain.
18.2: Either party shall be entitled forthwith to terminate this
agreement by written notice to the other if:
18.2.1: that other commits any continuing or material breach
of any of the provision of this agreement and in the
case of such a breach which is capable of remedy,
fails to remedy the same within 28 days after receipt
of written notice from the other party giving full
particulars of the breach and requiring it to be
remedied or;
18.2.2: anyone takes legal possession or a receiver is
appointed over any of the property or assets of that
other or;
18.2.3: that the other makes any voluntary arrangement with
its creditors or becomes subject to an Administration
Order or;
18.2.4: that any party goes into liquidation (other than a
voluntary liquidation) for the purpose of an
amalgamation, re construction or other reorganisation
and in such a manner that the company resulting from
the reorganisation effectively agrees to be bound by
or to assume the obligations imposed on that other
under this agreement or;
18.2.5: that the other ceases or threatens to cease to carry
on business;
18.2.6: the party wishing to rely on any of the above events
reasonably apprehends that any of the above events is
about to occur in relation to the other and notifies
the other accordingly.
18.3: Any waiver by either party of a breach of any provision of this
agreement shall not be considered a waiver of any subsequent
breach of the same or any other provision.
<PAGE> 9
(9)
18.4: The right to terminate this agreement given by this clause
shall not prejudice any other right or remedy of either party
in respect of the breach concerned (if any) or any other
breach.
18.5: Upon termination of this agreement for any reason, subject as
otherwise provided in this agreement, and to any rights or
obligations which have accrued prior to termination, neither
party shall have any further obligation to the other under this
agreement.
18.6: In the event of termination or expiration of this agreement,
the provisions of sections 9, 17 and 20 shall survive and
continue in full force and effect.
19) NATURE OF THE AGREEMENT.
19.1: This agreement is personal to the parties and neither of them
may without the written consent of the other, assign, mortgage,
charge (other than by floating charge), or dispose of any of
its rights or obligations under this agreement.
19.2: Nothing in this agreement shall create or be deemed to create a
partnership between the parties.
19.3: This agreement contains the entire agreement between the
parties with respect to its subject matter and may not be
modified, except by an instrument in writing signed by the
parties or their duly authorised representatives.
19.4: This agreement shall be governed by and construed in all
respects in accordance with the laws of England and Wales and
the parties submit to the exclusive jurisdiction of the English
courts.
20) NOTICE AND SERVICE.
20.1: Any notice required to be given by any of the parties under
this agreement may be left at or sent by prepaid first class
post to the registered office from time to time of the
addressee or the address of the addressee as set out in this
agreement or such other address as the addressee may from time
to time have notified in writing for the purpose of this clause
and each of the parties shall within 7 days of any change of
address notify the other thereof in writing.
20.2: Any notice shall have been deemed to have been received at the
time that it was so left.
20.3: Any notice sent by post shall be deemed to have been received
10 days after the date upon the registration receipt provided
by the relevant postal authority.
<PAGE> 10
(10)
20.4: Any notice may also be sent by telex or facsimile transmission
and any such transmission shall be deemed to have been received
1 hour after the time of transmission if transmitted before 4pm
on a working day, but otherwise at 9am on the next working day.
20.5: For the purpose of this clause, working day means any other day
other than a Saturday, Sunday or public holiday.
21) AUTHORITY TO EXECUTE.
Each individual executing this agreement on behalf of either party
hereby represents and warrants that he has been fully empowered to
execute this agreement and that all necessary action to authorise the
execution of this agreement has taken place.
SIGNED ON THE 22ND DAY OF JULY 1994 BY THE DULY AUTHORISED SIGNATORIES OF BOTH
PARTIES HERETO:
/S/
- -------------------------------------
FOR AND ON BEHALF OF MSU (UK) LTD.
/S/
- -------------------------------------
FOR AND ON BEHALF OF TXC CORPORATION.
<PAGE> 1
EXHIBIT 10.12
AGREEMENT
REDACTED
THIS AGREEMENT is made the 11th day of October, 1996
B E T W E E N:
1. MSU (UK) Limited, a United Kingdom Company having its registered
office at Elder House, 525 to 528 Elder Gate, Central Milton Keynes,
MK9 1LR, England ("MSU") and
2. Mitac Inc., a Republic of China Corporation, having its principal
place of business at 8F, No 77, Sec 3, Ming Sheng Road, Taipei,
Taiwan, Republic of China ("Mitac").
RECITALS
(a) MSU is the owner of the Intellectual Property Rights in the ISP Chip
Set and the Product.
(b) MSU desires to purchase in a fully manufactured form the Product from
Mitac.
(c) Mitac desires to license and MSU agrees to grant a license on a
non-exclusive basis to;
(i) manufacture the Product whether by itself or authorised agents
or on behalf of MSU and to
(ii) distribute the Product on a non-exclusive basis whether by
itself or authorised agents or OEM customers.
(d) The Parties agree to share net revenue from sales of the Product
whether by MSU or its OEM customers or by Mitac or its authorised
agents or OEM customers upon the basis set out in this Agreement.
(e) To facilitate early production of the product by Mitac both parties
agree to complete the further actions contemplated by this Agreement
without delay.
(f) The Parties have agreed to enter into the commitments of this
Agreement and regulate their rights in the manner appearing below.
IT IS AGREED as follows:
1. Interpretation
1.1 "Base Cost" shall mean the cost of manufacture of the Product
according to the bill of materials and direct labours and the
overhead direct related to the Product mutually agreed by both
Parties hereto as may be varied from time to time by the Sub
Group. Save for the Royalty set out below neither party shall
attribute any share of its own over head costs to the Base
Cost.
1.2 "Intellectual Property Rights" (IPR's) shall mean industrial
and other rights in the Product and ISP Chip Set including but
not limited to copyright, confidential
1
<PAGE> 2
information, patents and the right to apply for patents,
protected designs (whether registered or not) semi conductor
and topography rights and technical know-how.
1.3 "ISP Chip Set" shall mean the MSU proprietary Internet
Services Processor as described in the ISP Chip Set reference
manual.
1.4 "Know-how" shall mean:
1.4.1 Pre-production drawings for the Product;
1.4.2 Layout and other documents for manufacturing
assembling and testing the product
1.4.3 Purchasing specifications for components of the
Product;
1.4.4 Test specifications for manufactured items;
1.4.5 Documents relating to installation, maintenance,
factory operations, data testing and training;
1.4.6 Drawing specifications and information for the
manufacture or procurement of all production tools,
gauges, inspection equipment and accessories required
for the manufacture of the Product;
1.4.7 Specifications of machine tools and accessories
required for the manufacture of the Product together
with written advice on their ordering selection and
procurement;
1.4.8 Technical assistance and training in the
implementation of all of the foregoing in accordance
with an agreed detailed program.
1.5 "Product" shall mean the MSU proprietary Internet Access
Device incorporating the ISP Chip Set and Software.
1.6 "Selling Price" shall mean the notional Selling Price of the
Product mutually agreed by both Parties, after review by the
Sub Group.
1.7 "Software" shall mean MSU proprietary Internet Access Device
software including, Browser, E-Mail, printer driver and
enhancements.
1.8 "The Sub Group" shall mean a Group which unless otherwise
agreed by the parties shall consist of three number
representatives of each Party. The Parties agree that the Sub
Group shall meet at least four number times a year during the
term of this Agreement at a venue to be agreed between the
Parties.
1.8.1 The Sub Group's responsibilities shall be in relation
to:
2
<PAGE> 3
*CONFIDENTIAL PORTION HAS BEEN OMITTED
AND FILED SEPARATELY WITH THE COMMISSION
1.8.1.1 The review and determination on an Open Book
manufacturing basis of the Base Cost from
time to time to be determined in the light of
then existing component costs and global
market conditions;
1.8.1.2 The review and determination of the Selling
Price from time to time to be determined in
the light of then existing component costs
and global market conditions.
18.2 The Sub Group shall have a right of access to all
information concerning sourcing and cost of
components used in the manufacture of the Product,
and alternative quotations or quotes regarding
alternative sourcing of components and this decision
shall be made in the light of the then existing
component costs and global market conditions.
1.9 "Open Book Manufacturing" shall mean the manufacture of the
product by Mitac at the Base Cost giving full access to MSU
and/or the Sub Group to all component sourcing quotation and
pricing details.
*CONFIDENTIAL PORTION HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE COMMISSION.
1.10 "The Royalty" shall mean the sum of US $ * per unit to be
incorporated into the Base Cost. The Royalty shall be in
relation to software and shall be paid to MSU at the end of
the month in which a unit of the Product is shipped.
1.11 "Technical Information" shall mean technical knowledge and
data specifications of materials and the manufacturing
techniques and other information of a secret and confidential
nature in existence at the date of this Agreement which are
necessary to enable Mitac to manufacture the Product properly
and efficiently in reasonable quantities of a standard and
quality required by this Agreement.
2. Commencement Date and Term
2.1 This Agreement shall be effective upon execution by the
authorised representative of both Parties on the date first
above shown.
2.2 The term of this Agreement shall be for an initial period of
eighteen months from the commencement date and shall renew for
further periods of one year unless three months prior notice
in writing of termination is given by either Party.
3. Grant of License
3.1 MSU hereby grants Mitac a non-exclusive license to make and
have made and/or distribute and sell the Product during the
continuance of this Agreement using for this purpose (but not
further or otherwise) the ISP Chip Set the Software the
Intellectual Property Rights and the Know-How.
3
<PAGE> 4
3.2 Engagement by Mitac of component suppliers, manufacturing
sub-contractors and agents who will have access to Technical
Information shall be subject to the prior approval of MSU.
Such approval shall not be unreasonably withheld provided the
provisions of Clause 3.3 herein are complied with.
3.3 Mitac shall ensure that all component suppliers, manufacturing
sub-contractors and agents who will have access to Technical
Information shall enter into direct covenants of
confidentiality with MSU in the form of the Confidentiality
and Trust Agreement set out in Schedule A hereto.
4. Improvements
4.1 It is anticipated that MSU will continue to develop the
Product. Improvements arising from the developments carried
on by MSU shall remain it's exclusive property.
4.2 MSU shall forthwith disclose to Mitac in confidence and in
sufficient detail to allow evaluation, all improvements that
it might develop during the term of this agreement that may
materially enhance the commercial value or potential of the
Product.
4.3 In the event of any MSU improvements being adopted by Mitac in
the manufacture of the Product where royalties or license fees
are payable to third parties, such additional payments shall
be reimbursed to MSU or added to the Base Cost as appropriate.
5. Manufacture (General)
5.1 It is the intention of the Parties that the Product will be
manufactured to the agreed specification by Mitac for the
supply to both Parties and their OEM customers.
5.2 Mitac may sub-contract the whole or any part of the
manufacturing process but always subject to Clause 3.2 and
3.3.
5.3 Suppliers and Subcontractors.
5.3.1 Mitac shall use all necessary efforts to ensure that
any component supplier, sub-contractor or
manufacturing agent with access to the Product, the
ISP Chip Set, the Software, IPR's or Technical
Information will not modify, reverse, engineer,
decompile, and or disassemble the Product.
5.3.2 Mitac shall not mask, modify or suppress any
copyright notices or any other proprietary right
notices. Furthermore Mitac shall not unload, decode,
password any part of the Product or render any part
of the Product to any third party for unauthorised
use or reverse engineering.
4
<PAGE> 5
*CONFIDENTIAL PORTION HAS BEEN OMITTED
AND FILED SEPARATELY WITH THE COMMISSION
5.4 Technical Support
5.4.1 MSU shall support Mitac. MSU shall provide technical
support in relation to the Technical Information
* provided that Mitac shall treat such
information as trade secrets and shall not disclose
such information to any third party without prior
written consent of MSU or pursuant to the terms of
clause 3.3 above.
5.4.2 Mitac shall return to MSU all of the Technical
Information provided with all copies or duplicate
documentation on the expiry or termination date of
this Agreement.
*CONFIDENTIAL PORTION HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE COMMISSION.
5.4.3 MSU agrees to provide the ISP Chip Set to Mitac
* during the contract period.
6. Manufacture for MSU / OEM customers
6.1 Mitac shall undertake MSU and/or MSU customers reasonable
obligations in relation to quality control.
6.2 Payment and Price.
6.2.1 Mitac shall supply the product to MSU and its OEM
customers finished and packaged FOB Taiwan as defined
by Incoterms 1990 Edition, issued by the
International Chamber of Commerce at the Selling
Price.
6.2.2 Payment. MSU shall make payment for supply of
Product to MSU or its OEM customers by either:
(I) irrevocable letter of credit in favour of
Mitac. Payment shall be made in an amount
for each purchase order which shall be net of
the Royalty and the share of profit referred
to in clause 9.1.1, or;
(ii) where ISP Chip Sets or other components used
in the manufacture of the Product are
supplied by MSU to Mitac, MSU may at it's
option add the costs of the Royalty and MSU's
share of profit referred to in clause 9.1.1
to the invoice for such component supply.
6.2.3 MSU shall pay all taxes relating to Royalty. Mitac
may deduct such taxes from the amount owed to MSU and
pay them to the appropriate tax authority, provided,
however, that Mitac shall promptly secure and deliver
to MSU an official receipt for such taxes withheld or
other documents necessary.
5
<PAGE> 6
*CONFIDENTIAL PORTION HAS BEEN OMITTED
AND FILED SEPARATELY WITH THE COMMISSION
7. Confidentiality
7.1 Each Party will enter into a Trust and Confidence Agreement in
the form set out in Schedule A regulating to the fullest
extent allowed by the law the respective responsibilities and
duties of confidentiality governing the ISP Chip Set, the
Software, IPR's, Know-How and Technical Information, the
subject of this Agreement.
7.2 Mitac undertakes to ensure that all employees, suppliers,
sub-contractors, sub-licensees and any other persons or
organizations who it is reasonable to contemplate having
access to the IPR's, Know-How or Technical Information will
covenant directly with MSU in the same terms as the Trust and
Confidence Agreement.
8. Royalty
8.1 MSU shall be paid by Mitac a Royalty of $ * (US) for each
unit of the Product manufactured and shipped.
*CONFIDENTIAL PORTION HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE COMMISSION.
8.2 For the avoidance of doubt:
8.2.1 The Royalty shall remain at $* (US) throughout the
term of this Agreement and any extension thereof and
shall be included as one of the costs to be taken
account of by the Sub Group in the calculation of the
Base Cost.
8.2.2 As the Royalty will be included in the Base Cost the
Royalty shall also be payable in relation to orders
of product from MSU and/or its OEM customers.
8.3 Mitac agrees to keep true and accurate records and books of
account containing all the data necessary for the
determination of the Royalty payable under Clause 8.1 which
records and books of account shall upon reasonable notice of
MSU be open at all reasonable times during business hours for
inspection by MSU or an independent accountant selected by MSU
and acceptable to Mitac (which acceptance should not be
unreasonably withheld) for the purpose of verifying the
accuracy of Mitac's report hereunder. MSU shall be solely
responsible for the costs of the accountant unless the
accountant certifies that any reports are inaccurate in any
material respect in which even Mitac shall reimburse MSU for
its costs.
8.4 Mitac shall submit to MSU within fourteen days of the end of
each calendar month a statement setting forth with respect to
its operations hereunder during that period setting out in
particular:
8.4.1 The quantity of Product made;
6
<PAGE> 7
*CONFIDENTIAL PORTION HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE COMMISSION
8.4.2 The quantity of Product shipped;
8.4.3 The sequential serial numbers of all items made or
shipped.
8.5 Mitac agrees to maintain confidential all financial
information received with respect to MSU's operations pursuant
to this Agreement and in particular the sub clauses of this
Clause 8.
9. Division of Profit
9.1 Profit shall be calculated after the deduction of the Base
Cost from the Selling Price. The profit shall be divided as
to MSU * % ( * per cent) Mitac * % ( * per
cent)
*CONFIDENTIAL PORTION HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE COMMISSION.
9.2 Inter Parte accounts will be prepared upon a monthly basis by
an international firm of accountants to be nominated and
agreed between the Parties. The calculations shall be
monitored by the Sub-Group.
9.3 The accountants appointed pursuant to Clause 9.2 above shall
certify the payment due by one Party to the other. Such
payments shall be made within fourteen days of the date of the
certificate of the accountants.
9.4 Sales to third parties will be made at a minimum of the
Selling Price. In the event that either party agrees to sales
being made at less than the Selling Price the whole of the
difference between the Selling Price and the lower sale price
then agreed shall be a charge against the share of profit of
the Party that has agreed sales at less than the Selling Price
and its share of profits shall be reduced accordingly unless
otherwise agreed by the other Party in writing.
9.5 Each Party shall use its best endeavours to promote sales of
the Product and to make sure that its OEM customers will have
the Product manufactured in the manner contemplated by this
Agreement.
9.6 MSU contemplate that Mitac may introduce the Product to other
third party companies who may wish to OEM manufacture subject
to license from MSU. Where a license to manufacture is
granted by MSU to such third party company, MSU shall pay to
Mitac a commission calculated at the rate of * % ( * per
cent) of the selling amount for each ISP Chip Set supplied to
such third party.
*CONFIDENTIAL PORTION HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE COMMISSION.
10. Marks
10.1 It is anticipated that from time to time the Product will
carry a distinctive mark or logo together with an
acknowledgement of MSU design and ownership of rights. Such
marks will be carried on the packaging of the Product.
7
<PAGE> 8
*CONFIDENTIAL PORTION HAS BEEN OMITTED
AND FILED SEPARATELY WITH THE COMMISSION
10.2 Mitac shall leave in position and not cover or erase any
notices or other marks (including without limitation details
of patents or trademark or copyright relating to the Product
or its ownership by MSU which MSU may reasonably insist are
placed or fixed to the Product or their packaging supplied
pursuant to this Agreement).
11. MSU Obligations
11.1 MSU shall forthwith supply * :
11.1.1 One engineering prototype sample;
*CONFIDENTIAL PORTION HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE COMMISSION.
11.1.2 * samples of its proprietary ISP Chip
Set * for the purposes of the development of
prototypes by Mitac pursuant to Clause 12.1.1 herein.
11.2 MSU will supply at * , assistance in design and supplying
services of one engineer to assist in the setting up of the
manufacturing process.
12. Obligations of Mitac
12.1 Mitac shall:
12.1.1 Develop * prototypes of the product free of
charge as soon as commercially possible.
*CONFIDENTIAL PORTION HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE COMMISSION.
12.1.2 Make * of the prototypes available to MSU.
12.2 In consideration of the premises of this Agreement Mitac will
set up at its own cost production of the Product including all
tooling production facilities, packaging and art work.
12.3 Prior to setting up for volume production Mitac will entertain
a commitment to orders from MSU for the first production units
for delivery after two months of receipt of an irrevocable
letter of credit.
12.4 Priority shall be given to the manufacture of MSU orders over
manufacture of Mitac or Mitac's OEM customer orders.
13. Interest
13.1 All sums due from either of the Parties to the other which are
not paid on the due date shall bear interest from day to day
at the annual rate of 1.5% (three per cent) over the current
National Westminster Bank Plc daily base rate with a minimum
of 8% (ten per cent) per annum.
8
<PAGE> 9
*CONFIDENTIAL PORTION HAS BEEN OMITTED
AND FILED SEPARATELY WITH THE COMMISSION
14. Warranty
14.1 Mitac warrants that the Product hardware will conform to the
agreed specification and will be free from all defects in
material and workmanship for a period of 14 months commencing
from the date of manufacture.
14.2 Provided MSU notifies Mitac promptly in writing of any defect
or nonconformity. Mitac shall, at Mitac's expense, promptly
repair or replace such defective Product in Mitac facilities.
14.3 MSU warrants that the Product's software conform to the
specification contained in the Product's documentation. If
the Product software fails to conform to the specification,
Mitac may report such deviations to MSU in writing, then MSU
shall correct such deviation within thirty (30) days and
update the software for customer at * .
*CONFIDENTIAL PORTION HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE COMMISSION.
15. Indemnities
15.1 MSU shall indemnify and hold harmless Mitac against claims,
costs and expenses that Mitac or its OEM customers may incur
in connection with any claim of infringement of the third
party IPR's caused by or arising out of the manufacture,
importation, possession, sale or use of the Product.
15.2 Mitac shall fully indemnify and hold harmless MSU against any
claims or actions brought by third parties against MSU due to
defects in the Product. This indemnity shall include all
costs and expenses of refuting defending or setting any claims
as well as any damage or compensation ordered to any third
party by any Court.
15.3 Mitac shall have no liability for any claim or suit where:
(i) Infringement is primarily attributable to Mitac's
incorporation of MSU supplied designs into the
Product;
(ii) such claim or suit would have been avoided but for
the combination, operation or use of the Product with
devices, parts or software not supplied by Mitac or
its subcontractors;
(iii) such claim or suit would have been avoided but for
the modification or alteration of the Product by MSU
or a third party.
16. Termination
16.1 Notwithstanding the provisions of clause 2, either party may
by notice in writing to the other terminate this Agreement
immediately upon the happening of any one of the following
events:
9
<PAGE> 10
If either party shall become bankrupt or be wound up or make
any arrangement or composition with its creditors.
16.2 If Mitac attempts or purports to assign or transfer this
Agreement without MSU's prior written consent.
16.3 If either Party's ability to carry out its obligations
hereunder is prevented or substantially interfered with for
any reason whatsoever (whether or not within the control of
that Party) including without limitation by reason of any
regulation, law, decree or any act of state or other action of
a government.
17. Limitation of Liabilities
17.1 Force Majeure. Neither party shall be liable to the other for
any delay, loss, damage or injury caused by acts of God,
governmental order or regulation, restraining imposed by
governmental action, national strikes, commotion, riots, war,
war like situations, hostilities, governmental disposal,
mobilisation, blockage, embargo, custody, revolution, fire,
earthquake, tornado, explosion, storm, flood or for any other
cause beyond its reasonable control (hereinafter referred to
as Force Majeure).
17.1.1 Notification of such delay arising solely from
circumstances attributable to the Force Majeure shall
be given as soon as possible and followed in writing
to the other party within seven days of the
occurrence of such an event.
17.1.2 Should any failure of performance persist for more
than forty-five days MSU may by written notice to
Mitac forthwith cancel the particular order or part
thereof of effected and such cancellation shall be
without any liability on the part of MSU to pay for
any costs or cancellation charge arising from such
cancellation.
17.2 If any section or sub section of this Agreement is found by
competent authority to be void, voidable, illegal or otherwise
unenforceable, the remaining provisions of this Agreement
shall remain in full force and effect.
17.3 No agency or Partnership. The Parties are not partners or
joint venturers nor is one Party entitled to act as the agent
of the other (unless specifically authorised in writing) nor
shall either Party be liable in respect of any representation,
act or omission of the other Party of whatever nature.
17.4 Whole Agreement. This Agreement contains the whole agreement
between the Parties and supersedes any prior written or oral
agreements between them in relation to its subject matter and
the Parties confirm that they have not entered into this
Agreement on the basis of any representations that are not
expressly incorporated into this Agreement.
10
<PAGE> 11
17.5 No Modification. This Agreement may not be modified except by
an instrument in writing signed by both of the Parties or
their duly authorised representatives.
17.6 Survival of Terms. The warranties and indemnities and
obligations of confidentiality contained in this Agreement and
the provision for payment of and accounting in respect of
continuing fees and other sums due to either party under this
Agreement shall survive the termination or expiry of this
Agreement.
17.7 Governing Law. Where either Party has any complaint of the
other under this Agreement it may at it's option commence
proceedings in any Court of competent jurisdiction in either
London or Taipei.
SIGNED /S/ SIGNED /S/
--------------------------- ---------------------------
AUTHORISED REPRESENTATIVE AUTHORISED REPRESENTATIVE
OF MSU (UK) LIMITED OF MITAC INC
11
<PAGE> 12
SCHEDULE A
TRUST AND CONFIDENCE AGREEMENT
This Trust and Confidence Agreement is made the Day of 199
BETWEEN
(1) MSU (UK) Limited whose registered office is at Elder House, 526 to 528
Elder Gate, Central Milton Keynes, United Kingdom ("MSU").
(2) a corporation organized under the laws of
whose principal place of business is at
(the "Recipient").
RECITALS
(a) MSU has developed a product for accessing the Internet incorporating
its Proprietary Internet Services Processor, Chip Set, and software
(the "Product") and is the owner of confidential information relating
to the product and of intellectual property rights therein.
(b) To enable the Recipient to evaluate the product with a view to taking
a license to either:
(i) component supply, or;
(ii) manufacture, and/or;
(iii) sell the same
MSU is willing to disclose information relating to the product to the
Recipient under conditions of confidentiality.
OPERATIVE PROVISIONS
1. INTERPRETATION
1.1 For the purposes of this Agreement Proprietary Information
means any and all information which is now or at any time
hereafter in the possession of MSU and which relates to the
Product, including without limitation data, know-how, formula,
processes, designs, photographs, drawings, specifications,
software programs and samples and any other material bearing
or incorporating any information relating to the Product.
2. UNDERTAKINGS OF THE RECIPIENT
2.1 In consideration of MSU disclosing information relating to the
Product to the Recipient, the Recipient hereby undertakes
<PAGE> 13
2.1.1 to use all Proprietary Information so disclosed
exclusively for the purpose of evaluation or any
license granted in respect of the Product, and;
2.1.2 to maintain confidential or Proprietary Information
that it may require in any manner;
and it will accordingly not directly or indirectly use or
disclose any of the Proprietary Information in whole or in
part save for the purposes of and in accordance with this
Agreement.
3. EXCEPTIONS
3.1 The foregoing restrictions on the Recipient shall not apply to
any Proprietary Information which:
3.1.1 the Recipient can prove by documentary evidence
produced to MSU within 28 days of disclosure that
such Proprietary Information was already in the
possession of the Recipient and at its free disposal
before the disclosure to the Recipient;
3.1.2 is hereafter disclosed to the Recipient without any
obligations of confidence by a third party who has
not derived it directly or indirectly from MSU;
3.1.3 is or becomes generally available to the public in
printed publications in general circulation through
no act or default on the part of the Recipient or the
Recipient's agents or employees.
4. INCLUSIONS
4.1 Without prejudice to the generality of clause 3.1.3
information shall not be deemed to be generally available to
the public by reason only that it is known to only a few of
those people to whom it might be of commercial interest, and a
combination of two or more portions of the Proprietary
Information shall not be deemed to be generally available to
the public by reason only of each separation being so
available.
5. CONFIDENTIALITY MEASURES
5.1 To secure the confidentiality attaching to the Proprietary
Information the Recipient shall:
5.1.1 keep separate all Proprietary Information and all
information generated by the Recipient based thereon
from all documents and other records of the
Recipient;
<PAGE> 14
5.1.2 keep all documents and other materials bearing or
incorporating any of the Proprietary Information at
the usual place of business of the Recipient, namely
5.1.3 not use, reproduce, transform, or store any of the
Proprietary Information in any externally accessible
computer or electronic information retrieval system
or transmit it in any form or by any means whatsoever
outside of its usual place of business;
5.1.4 allow access to the proprietary exclusively to those
employees of the Recipient who have reasonable need
to see and use it for the purposes of its evaluation
by the Recipient and shall inform each of the said
employees of the confidential nature of the
Proprietary Information and of the obligations on the
Recipient in respect thereof;
5.1.5 wherever reasonably practicable obtain a written
statement from each of its employees having access to
the Proprietary Information undertaking to maintain
the same confidential and shall take such steps as
may be reasonably desirable to enforce such
obligations.
5.1.6 make copies of the Proprietary Information only to
the extent that the same is strictly required for the
purposes of any license granted to the Recipient;
5.1.7 on request of MSU made at any time shall deliver up
to MSU all documents and other material in the
possession custody or control of the Recipient that
bear or incorporate any part of the Proprietary
Information.
6. GOVERNING LAW
6.1 The construction validity and performance of this Agreement
shall be governed by English law.
SIGNED
-------------------------------------
SIGNED
-------------------------------------
MSU (UK) LIMITED
<PAGE> 1
EXHIBIT 16
<PAGE> 2
November 22, 1996
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
We have read the statements made by MSU Corporation (copy attached), which we
understand will be filed with the Commission, pursuant to Item 9 of the
Company's Annual Report on Form 10-K for the year ended June 30, 1995. We agree
with the statements concerning our Firm in such Form 10-K.
Very truly yours,
/s/ COOPERS & LYBRAND L.L.P.
Coopers & Lybrand L.L.P.
<PAGE> 1
LIST OF SUBSIDIARIES
MSU Public Limited Company
MSU (UK) Limited
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET AND THE CONSOLIDATED STATEMENT OF INCOME FILED AS
PART OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH ANNUAL REPORT ON FORM 10-K.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1995
<PERIOD-START> JUL-01-1994
<PERIOD-END> JUN-30-1995
<CASH> 227,818
<SECURITIES> 0
<RECEIVABLES> 49,441
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 321,426
<PP&E> 96,533
<DEPRECIATION> 55,227
<TOTAL-ASSETS> 362,732
<CURRENT-LIABILITIES> 2,982,991
<BONDS> 0
0
0
<COMMON> 129,347
<OTHER-SE> (2,749,606)
<TOTAL-LIABILITY-AND-EQUITY> 362,732
<SALES> 1,595,856
<TOTAL-REVENUES> 1,599,255
<CGS> 604,058
<TOTAL-COSTS> 2,477,674
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 35,050
<INCOME-PRETAX> (878,419)
<INCOME-TAX> 0
<INCOME-CONTINUING> (878,419)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (878,419)
<EPS-PRIMARY> (0.07)
<EPS-DILUTED> (0.07)
</TABLE>
