U. S. SECURITIES AND EXCHANGE COMMISSION
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Washington, D.C. 20549
FORM 10 - KSB
(Mark One)
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 for the Fiscal Year Ended December 31, 1997.
__ TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 for the transition period from to .
Commission File No. 0-18122
ANTENNAS AMERICA, INC.
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(Name of small business issuer in its charter)
UTAH 87-0454148
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(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
4860 ROBB ST., SUITE 101, WHEAT RIDGE, COLORADO 80033-2163
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(Address of principal executive offices)
303-421-4063
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(Issuer's telephone number)
Securities registered pursuant to Section 12(b) of the Exchange Act:
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(None)
Securities registered pursuant to Section 12(g) of the Exchange Act:
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$.0005 par value common stock
Check whether the issuer (1) filed all reports required by Section 13 or 15(d)
of the Securities Exchange Act of 1934 during the past 12 months (or for such
shorter period that the registrant was required to file such reports) and (2)
has been subject to such filing requirements for past 90 days.
YES _X_ NO __
Check here if disclosure of delinquent filers in response to Item 405 of
Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. ___
Issuer's revenues for its most recent fiscal year: $3,012,266
As of March 12, 1998, the aggregate market value of the voting stock held by
non-affiliates of the issuer was approximately $6,965,000. This calculation is
based upon the average of the closing bid price of $.12 and ask price of $.14 of
the stock on March 12, 1998.
The number of shares of the Registrant's $.0005 par value common stock
outstanding as of March 12, 1998 was 73,839,422.
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PART I
Item 1. Business
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Business Development. Antennas America, Inc. (the "Company"), formerly
Westflag Corporation, which was formerly Westcliff Corporation, was organized
under the laws of the State of Utah on September 30, 1987 for the purpose of
acquiring one or more businesses. In January 1989, the Company completed its
initial public offering of 10,544,650 units at $.04 per unit resulting in net
proceeds to the Company of approximately $363,000. (The number of units and
price per unit have been adjusted to reflect the Company's one-for-four reverse
split in April 1989 that is described below). Each unit consisted of one share
of common stock, one Class A Warrant and one Class B Warrant. All the Class A
and Class B Warrants expired without exercise and no longer exist. In April
1989, the Company effected a one-for-four reverse split so that each four
outstanding shares of common stock prior to the reverse split became one share
after the reverse split. Unless otherwise indicated, all references in this
report to the number of shares of the Company's common stock have been adjusted
for the effect of the one-for-four reverse split.
On April 12, 1989, the Company merged with Antennas America, Inc. a
Colorado corporation ("Antennas Colorado") that had been formed in September
1988 and that had developed an antenna design technique that would permit the
building of flat (as compared to parabolic) antenna systems. Pursuant to the
merger, Antennas Colorado was merged into the Company, all the issued and
outstanding stock of Antennas Colorado was converted into 41,951,846 shares of
the Company's common stock, and the Company's name was changed to Antennas
America, Inc.
Business Of Issuer. The Company's operations consist of the design,
development, marketing and sale of a diversified line of antennas and related
wireless communication systems, including conformal and phased array antennas.
Principal Products
- ------------------ Conformal Antennas
------------------
A conformal antenna is one that is constructed so that it conforms
technically and physically to its product environment. The first product
introduced by the Company in this category was the disguised decal antenna,
which has been patented by the Company. This product, introduced in 1989
originally only for conventional automobile cellular phones, is an alternative
to the conventional wire type antenna and has been expanded to be used for
numerous mobile applications, including Cellular, UHF, VHF, ETACS, GSM, PCS,
SMR, Passive Repeaters and GPS. The antenna is approximately 3 1/2" x 3 1/2" and
typically installs on the inside of the vehicle so that it is not detectable
from the outside of the vehicle.
Several derivative products of this antenna design have been developed for
special applications and O.E.M. (original equipment manufacturer) customers. For
the fiscal year ended December 31, 1997, the patented decal antenna and other
conformal derivatives of the decal antenna accounted for approximately 60
percent of the Company's sales.
The Company began marketing several new conformal antenna systems in 1997,
including two off-air antennas to receive local TV broadcasts, a GPS (Global
Positioning Systems) antenna, and the Twinbooster passive repeater antenna
system to improve the performance of a cellular phone signal when used inside an
automobile.
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GPS Antennas
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The Company has developed a proprietary flat GPS system that integrates
with a GPS receiver. GPS receivers communicate with several globe-circling
satellites that will identify longitude and latitude coordinates of a location.
These satellite systems have been used for years by the military and more
recently for boats, planes surveying and even hikers. Accurate to within
approximately 100 yards, there are several types of GPS systems some of which
are the size of a car phone and are very easy to use. The Company anticipates
marketing its GPS antenna products on an O.E.M. basis for the purposes of fleet
management and in-vehicle mapping systems.
Flat Panel and Phased Array Antennas
------------------------------------
The flat panel and phased array antennas are flat antennas that typically
incorporate a group of constituent antennas all of which are equidistant from
the center point. These types of antennas are used to receive and/or transmit
data, voice and, in some cases, video from microwave transmitters or satellites.
The Company is currently developing and selling various versions of these
antennas to private, commercial and governmental entities. As described below,
the Company's three primary projects for this antenna design are (i) the
"off-air" antennas for local television reception with satellite and other TV,
(ii) the flat panel receive and transmit antennas for Micron Communications, a
subsidiary of Micron Technologies Inc. ("Micron"), and (iii) the MMDS phased
array antenna systems for the wireless cable market as described below.
Off-Air Antennas For Local Reception With Satellite And Other TV. Home
satellite television systems recently have become extremely popular and
affordable. The single biggest drawback to the 18" home TV satellite system is
that the viewer cannot receive local TV broadcasts from the satellite system.
U.S. federal law prohibits subscribers to satellite services from receiving
local channels or other network programming if those networks are available
using a VHF/UHF antenna. In order to receive local TV broadcasts, the viewer
must resort to installing outdated receive equipment which typically includes
"rabbit ears" or the conventional "yagi" roofmount antenna. In December 1996,
the Company introduced two new flat conformal antenna systems to provide local
TV reception where digital satellite systems are utilized. These antennas
combine the Company's conformal and phased array technology.
The Company's FREEDOM(TM) Antenna System is a flat VHF/UHF TV antenna that
provides local TV reception and attaches to the back of the satellite dish so
that it is virtually invisible when installed. Designed to be inconspicuous, the
FREEDOM(TM) Antenna is an ideal solution to the problem of local TV program
reception with the popular 18" dishes.
In July 1997 the Company was licensed by DIRECTV(R), a division of Hughes
Electronics Corporation, to use the DSS(R) trademark on the Company's new
FREEDOM(TM) Antenna system. Prior to issuing the license, DIRECTV(R) evaluated
the FREEDOM(TM) Antenna for performance. DIRECTV(R), which is the largest
provider of direct-to-home (DTH) digital programming, broadcasts directly from
satellites to the home via the popular, easily installed 18" satellite dish.
The WALLDO(TM) Antenna System is a flat VHF/UHF TV antenna, measuring 15
1/2"x 13" x 2", which attaches to the house or other structure and provides
local TV reception. This antenna is designed so that it conceals the fact that
an outdoor antenna has been installed. Both the FREEDOM(TM) and the WALLDO(TM)
antennas are omnidirectional and work in locations where a medium gain antenna
is required, which is generally within a 25 mile radius of the local TV
stations' transmitters. Because the WALLDO(TM) antennas can be attached to the
side of the
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house or to the other structures, the Company will market it as the solution to
the problem of antenna installations on rooftops where there may be limitations
due to zoning codes, covenants, or homeowner restrictions or where there is the
need for a more aesthetically pleasing solution. The Company has not applied to
DIRECTV(R) for licensing the WALLDO(TM) Antenna.
In March, 1998, the Company announced that it had agreed with Jasco
Products, Inc. ("Jasco") based in Oklahoma City, Oklahoma for Jasco to market
the Company's new local TV antennas. Under the arrangement, Jasco will market
the antennas to mass-market retail accounts within the United States under the
Emerson(R) name and will be responsible for the marketing and distribution of
the antennas, including product literature, in-store point of purchase displays,
and other related marketing services to these customers.
Flat Panel Antennas for Micron Communications. By modifying its existing
line of flat panel and phased array antenna designs, the Company has developed
and is in the process of submitting final prototype antennas for approval and
possible incorporation into Micron Communication's Microstamp(R) program.
Micron's Microstamp(R) product is a small remote intelligence device that can
store 256 bytes of data and communicate by remote antennas with a host computer
from up to 40 feet away. Typical applications for the Microstamp(R) product
include automatic fuel dispensing, airline baggage tracking, automated warehouse
solutions and personnel ID and access control.
MMDS Antennas For Wireless Cable. In 1995, the Company introduced three new
phased array antenna systems to the wireless cable market. Known in the industry
as MMDS (Multichannel, Multipoint Distribution Systems), these antenna systems
are direct competitors of cable TV and satellite TV. MMDS (wireless cable) is
similar to conventional cable with the exception that it uses a microwave
frequency to transmit the channels for home viewing. The signals can usually be
received approximately 30 miles from the transmitter by installing a receive
antenna on the subscriber's home.
As a result of the enactment of the U.S. 1996 Telecommunications Act,
telecommunications companies are now permitted to compete directly in the video
distribution market in the United States. This allows companies such as
BellSouth, Pacific Telesis, BellAtlantic and Nynex to use this technology to
deliver video programming to selected major markets.
The Company's MMDS antennas replace conventional grid antennas commonly
installed as the receiving antenna on customers' rooftops. The product offers
several features over conventional parabolic antennas in that it is flat, has a
higher efficiency allowing for a smaller size, and can be mounted in several
locations in the home such as windows, an eave or the chimney. Typically the
Company's phased array products perform on an equal basis to conventional
antennas with cost savings and substantial installation and maintenance savings
to the MMDS service provider. The Company sold over 1,000 of its MMDS antennas
through a distributor to BellSouth Corporation in 1997 for a test of BellSouth's
new digital MMDS system and is currently attempting to market its flat antenna
to other domestic and international wireless cable customers. The wireless cable
industry in general is experiencing delays in the roll out of the digital cable
systems. The Company is currently allocating few of its marketing and
manufacturing resources to this industry until it believes that there is a clear
direction with respect to wireless cable digital programming. At such time that
this trend reverses, the Company will aggressively market its existing products
to digital wireless cable providers.
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Other Antennas
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The Company is pursuing new business opportunities for the conformal and phased
array antennas by continuing to broaden and adapt its existing technologies.
Currently, the Company designs or manufactures antennas varying in frequency
from 27 MHz to 12 GHz. These antennas all use the Company's flat antenna design
to provide inconspicuous installation. All of the Company's antennas are
designed to be manufactured using existing design footprints. This allows the
Company to better use its engineering and technical staff, suppliers and
production staff. This also allows the Company, in some cases, to use existing
tools, dies and radomes for more than one product.
Marketing And Distribution
- --------------------------
The Company's commercial line of antennas is marketed by the Company directly to
distributors, installers and retailers of antenna accessories. Current
distribution consists of several domestic and international distributors,
including several hundred active retail dealers. The Company markets its
diversified proprietary designs to its existing and potential customers in the
commercial, government and retail market places. Potential customers are
identified through trade advertising, phone contacts, trade shows, and field
visits. The Company also provides individual catalog and specification brochures
describing existing products. The same brochures are utilized to demonstrate the
Company's capabilities to develop related products for O.E.M. and other
commercial customers. The Company introduced its web page, www.antennas.com, in
late 1997. This web page includes information about the Company's products and
background as well as financial and other stockholder-oriented information. The
web page, among other things, is designed to encourage both existing and
potential customers to view the Company as a potential source for diversified
antenna solutions. The Company expects to receive additional inquiries through
the web page in 1998 that will be pursued by the Company's in-house sales
personnel. To help customers get answers quickly about its products, the Company
has established a toll-free telephone number administered by our customer
service personnel from 8:00 am to 5:00 pm MST. All the Company's products are
currently made in the U.S.A., which the Company considers to be a marketing
advantage over most of its competitors. Many of the products developed by the
Company are currently being marketed internationally. The Company currently has
9 international distributors marketing its products in 12 countries.
Production
- ----------
The Company made many changes to its production operations in 1997. In
anticipation of continued growth, investments were made in manufacturing
equipment and facilities as well as personnel. The manufacturing of the
Company's products is now more under the control of the Company than ever
before. The Company now produces most of the customized items it uses to
manufacture its products excluding cable, connectors and other generic
components. It is anticipated that these changes will allow the Company to be
more efficient and more responsive to customers, will lower the overall cost of
production, and will better allow the Company to take advantage of more
opportunities in the wireless communications market.
Research And Development
- ------------------------
Research and development and software costs are charged to operations when
incurred and are included in operating expenses except when specifically
contracted by the Company's customers. Except for salaries of engineering
personnel involved in research and development, the Company's research and
development costs were not material in 1996 or 1997. The Company's research and
development personnel develop products to meet specific customer, industry and
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market needs that the Company believes will compete effectively against products
distributed by larger companies. Quality assurance programs are implemented into
each development and manufacturing project, and the Company enforces strict
quality requirements on components received from non-Company manufacturing
facilities. There can be no assurance that the Company's research and
development activities will lead to the successful introduction of new or
improved products or that the Company will not encounter delays or problems in
connection therewith. The cost of completing new technologies to satisfy minimum
specification requirements and/or quality and delivery expectations may exceed
original estimates that could adversely affect operating results during any
financial period.
Employees
- ---------
The Company currently has 47 full time employees including Randall P. Marx,
Chief Executive Officer and Treasurer, Kevin O. Shoemaker, Chairman of the Board
and Chief Scientist, and Richard L. Anderson, Vice President of Administration
and Secretary. Each of Messrs. Marx, Shoemaker and Anderson is a director of the
Company.
Competition
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The antenna and receiver industry is highly competitive, and the Company's
current and proposed products compete with products of larger companies that are
better financed, have established markets, and maintain larger sales
organizations and production capabilities. In marketing its products, the
Company has encountered competition from other companies, both domestic and
international, marketing more conventional antenna systems. Therefore, at the
present time the Company's market share of the overall antenna business is
small, but is significantly greater for the non-conventional antenna market. The
Company's antenna products are designed to be unique and in some cases are
patented. The Company's products normally compete with other products
principally in the areas of price and performance. However, the Company believes
that its unique antenna products work as well as conventional products in the
same design class of products, usually sell for approximately the same price or
less than competing antennas, are easier to install, and in most cases are more
desirable, primarily due to being less conspicuous.
Government Regulations
- ----------------------
The Company is subject to government regulation of its business operations in
general, and the telecommunications industry also is subject to regulation by
federal, state and local regulatory and governmental agencies. Under current
laws and the regulations administered by the Federal Communications Commission,
there are no federal requirements for licensing antennas that only receive (and
do not transmit) signals. Current laws and regulations are subject to change and
the Company's operations may become subject to additional regulation by
governmental authorities. A change in either statutes or rules may have a
significant effect on government regulation of the Company's business.
Patents
- -------
Kevin O. Shoemaker, the Company's Chief Scientist and Chairman of the Board, is
the record owner of a U.S. patent, subject to annual renewal fees, valid through
the year 2007, for microstrip antennas and multiple radiator array antennas. Mr.
Shoemaker also is the record owner of a U.S. patent for a serpentine planar
broadband antenna valid through the year 2011. This is the design that the
Company uses for some of its conformal antennas, including the vehicular
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disguised decal antennas, local broadcast antennas and other products. Mr.
Shoemaker and Randall P. Marx, the Company's Chief Executive Officer, have
jointly applied for additional patents which include the process used to
manufacture certain of the Company's flat planar antennas and conformal
antennas, the technology required for certain of the Company's conformal
antennas to function, and the design of certain of the Company's products. Mr.
Shoemaker and Mr. Marx each has permanently assigned to the Company all of the
rights in these and all other antennas that have been and will be developed
while employed by the Company. The Company seeks to protect its proprietary
products, information and technology through reliance on confidentiality
provisions and, when practical, the application of patent trademark or copyright
laws. There can be no assurance that such applications will result in the
issuance of patents, trademarks or copyrights of the Company's products,
information or technology.
Disclosure Regarding Forward-Looking Statements And Cautionary Statements
- -------------------------------------------------------------------------
Forward-Looking Statements. This Annual Report on Form 10-KSB includes
"forward-looking" statements within the meaning of Section 21E of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"). All statements other than
statements of historical facts included in this Annual Report, including without
limitation statements under "ITEM 1. DESCRIPTION OF BUSINESS-Principal
Products", "Marketing And Distribution", "Production", "Research And
Development", "Competition", "Governmental Regulations" and "Patents", and "ITEM
6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS", regarding the Company's financial position, business strategy, and
plans and objectives of management of the Company for future operations and
capital expenditures, and other matters, other than historical facts, are
forward-looking statements. Although the Company believes that the expectations
reflected in the forward-looking statements and the assumptions upon which the
forward-looking statements are based are reasonable, it can give no assurance
that such expectations and assumptions will prove to have been correct.
Additional statements concerning important factors that could cause actual
results to differ materially from the Company's expectations ("Cautionary
Statements") are disclosed below in the "Cautionary Statements" section and
elsewhere in this Annual Report. All written and oral forward-looking statements
attributable to the Company or persons acting on its behalf subsequent to the
date of this Annual Report are expressly qualified in their entirety by the
Cautionary Statements.
Cautionary Statements. In addition to the other information contained in
this Annual Report, the following Cautionary Statements should be considered
when evaluating the forward-looking statements contained in this Annual Report:
1. Operating History. From its inception in September 1987 through the
fiscal year ended December 31, 1992, the Company incurred losses from
operations. For the fiscal years ended December 31, 1993, 1994, 1995, 1996 and
1997, respectively, the Company operated at a profit. Although the Company
believes that it will be able to continue to operate profitably, as it has since
1993, there is no assurance that the operations of the Company will continue to
be profitable. See the financial statements included in Item 13 of this Annual
Report on Form 10-KSB.
2. Developments In Technology. The communications industry, and
particularly the microwave and satellite communications and antenna industries,
are characterized by rapidly developing technology. Changes in technology could
affect the market for the Company's products and necessitate additional
improvements and developments to the Company's products. There can be no
assurance that the Company's research and development activities will lead to
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the successful introduction of new or improved products or that the Company will
not encounter delays or problems in connection therewith. The cost of completing
new technologies to satisfy minimum specification requirements and/or quality
and delivery expectations may exceed original estimates that could adversely
affect operating results during any financial period.
3. Patents. Kevin O. Shoemaker, the Company's Chief Scientist and Chairman
of the Board, is the record owner of a U.S. patent, subject to annual renewal
fees, valid through the year 2007, for microstrip antennas and multiple radiator
array antennas. Mr. Shoemaker also is the record owner of a U.S. patent for a
serpentine planar broadband antenna valid through the year 2011. This is the
design that the Company uses for some of its conformal antennas, including the
vehicular disguised decal antennas and related products. Mr. Shoemaker and
Randall P. Marx, the Company's Chief Executive Officer, have jointly applied for
a patent for the process used to manufacture certain of the Company's flat
planar antennas. Mr. Shoemaker and Mr. Marx each has permanently assigned to the
Company all of the rights in these and all other antennas that have been and
will be developed while employed by the Company. Although, when practical, the
Company intends to file for patent protection on all the products or processes
that it feels are proprietary in nature, it may not be able to obtain patent
protection for all its products. The inability of the Company to be able to
patent all its products or processes may be an impediment to its capability to
exploit certain expanding markets. Even with patents granted, they may not
provide effective protection against competitors.
4. Limited Financial Resources. The Company has limited financial resources
available to it, and this may restrict the Company's ability to grow. Additional
capital from sources other than the Company's cash flow may be necessary to
develop new products, and there is no assurance that such financing will be
available from any source. Management believes that it can sustain its current
business without additional funding, but it may not be able to increase the
Company's business as desired without additional funding.
5. Competition. The communications industry is highly competitive, and the
Company competes with substantially larger companies in the production and sale
of antennas. In addition, these competitors have larger sales forces and more
highly developed marketing programs as well as larger administrative staffs and
more available service personnel. The larger competitors also will have greater
financial resources available to develop and market competitive products. The
presence of these competitors may be a significant impediment to any attempts by
the Company to develop its business. The Company believes, however, that it will
have certain advantages in attempting to develop and market its products
including a more cost-effective technology, the ability to undertake smaller
projects, and the ability to respond to customer requests more quickly than some
larger competitors. There is no assurance that these conclusions will prove
correct.
6. Availability Of Labor. The Company produces and assembles its products
at its own facility and is dependent on efficient workers for this function.
There is no assurance that efficient workers will continue to be available to
the Company at a cost consistent with the Company's budget.
7. Dependence On Key Personnel. The success of the Company is largely
dependent upon the efforts of its executive management, including Randall P.
Marx, the Chief Executive Officer of the Company. The loss of the services of
any of these persons could be detrimental to the Company as there is no
assurance that the Company could replace any of them adequately at an affordable
compensation level.
8. Government Regulation. The Company is subject to government regulation
of its business operations in general. Antennas that are designed only to
receive signals are not currently subject to regulation by the FCC, but certain
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of the Company's new products are subject to regulation by the FCC. There is no
assurance that subsequent changes in laws or regulations will not affect the
Company's operations.
Item 2. Properties
- ------------------
The Company is the tenant on a three year lease which expires May 31, 1999 on
5,100 square feet of office space and 17,500 square feet of production space in
Wheat Ridge, Colorado at a cost of $14,084.23 per month. The Company is
obligated to pay for all utilities, taxes and insurance on the production space.
The property is in good condition. The Company is currently looking for
additional warehouse and production space to support the continued growth of the
Company's operations.
Item 3. Legal Proceedings
- -------------------------
On February 9, 1998, Mega Circuits, Inc. ("MCI") filed suit against the
Company for payment of approximately $33,000 for components allegedly billed to
the Company, some of which were used for the Company's passive repeater antenna
system which the Company was forced to recall in 1996. In its answer, the
Company has denied any liability to MCI, asserted a number of defenses based on
MCI's failure to deliver proper products ordered by the Company, and has
asserted a counterclaim for damages for, among other things, the recall of
several thousand of the Company's passive repeater antennas in fiscal 1996. The
Company intends to vigorously defend the claim of MCI and to press its
counterclaim.
On August 6, 1997, the Company filed a lawsuit against a competitor, three
individuals, and another entity for false and/or misleading representations
regarding the Company's local TV antennas. The suit was filed in the United
States District Court for the Northern District of Illinois. The suit includes
related supplemental claims for consumer fraud under the Illinois Consumer Fraud
and Deceptive Trade Practices Act, deceptive trade practices under the Illinois
Deceptive Trade Practices Act, and tortious interference with prospective
economic advantage, unfair competition and trade disparagement under Illinois
common law. The lawsuit relates to a report which falsely disparages Antennas
America, Inc.'s local TV antennas. Two distributors of the Company's products,
Jasco Products Company, Inc. and MITO Corporation, joined the lawsuit as
plaintiffs. The defendants are in the process of answering the Complaint.
Item 4. Submission of Matters to a Vote of Security Holders
- ------------------------------------------------------------
No matters were submitted to a vote of security holders during the fourth
quarter of the fiscal year covered by this report.
Part II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters
- ------------------------------------------------------------------------------
Trading in the Company's securities is very limited. The Company's Common Stock
is traded in the over-the-counter market through the "pink sheets" and the OTC
Bulletin Board. The Company's securities are not quoted on any established stock
exchange or on the NASDAQ stock market. Because trading in the Company's
securities is so limited, prices are highly volatile. Quotations provided below
for the past two fiscal years are the inter-dealer quotations provided by the
National Quotations Bureau, without retail markup, markdown or commission, and
do not necessarily represent actual transactions.
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Common Stock
------------
Bid
---
Quarter Ended High Low
------------- ---- ---
March 31, 1996 .05 .02
June 30, 1996 .24 .04
September 30, 1996 .14 .03
December 31, 1996 .06 .03
March 31, 1997 .20 .06
June 30, 1997 .06 .04
September 30, 1997 .12 .03
December 31, 1997 .09 .04
As of March 12, 1998, the reported closing bid and ask prices for the Company's
common stock were $.12 and $.14 respectively. The Company had 341 shareholders
of record as of December 31, 1997. The Company has not declared or paid any cash
dividends on its Common Stock and it is not anticipated that dividends will be
paid in the foreseeable future.
Item 6. Management's Discussion and Analysis of Financial Condition and Results
- --------------------------------------------------------------------------------
of Operations
-------------
Liquidity and Capital Resources
-------------------------------
The following table sets forth certain selected financial data of the Company
for 1997 and 1996:
December 31,
------------
1997 1996
Components of Working Capital (deficit) ---- ----
- ---------------------------------------
Cash $ 61,642 $ 55,635
Accounts Receivable 327,685 166,411
Inventory 508,554 195,848
Deferred Tax Asset 102,000 0
Other Current Assets 72,469 33,475
Accounts Payable (415,377) (188,965)
Notes Payable (504,535) (224,484)
Other Current Liabilities (29,642) (22,934)
Total Working Capital 122,796 14,986
The Company had total assets of approximately $1,627,071 as of December 31,
1997 as compared with $944,232 as of December 31, 1996. Total liabilities were
$1,147,114 as of December 31, 1997 as compared with $613,775 as of December 31,
1996. The 72% increase in assets and 87% increase in liabilities is primarily
due to the increased sales and operations of the Company in 1997.
The Company's net worth was $479,957 as of December 31, 1997 as compared
with $330,457 as of December 31, 1996. This increase results primarily from the
Company's 1997 net income. As a result of past operations, the Company has an
income tax operating loss carryforward of $563,400. The Company has determined
the likelihood of continued profitability for the year ending December 31, 1998
and has recorded a $197,509 benefit for net operating loss carryforward as
provided for in FAS-109 that it reasonably expects to utilize.
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The Company's ability to generate sales revenues is dependent upon its
ability to pay for research and development and for materials and overhead
required in the production process. On May 23, 1997, the Company secured a
credit facility with Norwest Business Credit, Inc., a subsidiary of Norwest
Bank, Minneapolis, Minnesota. The credit facility is a $500,000 revolving loan
secured by the Company's accounts receivable, inventory and equipment which is
now scheduled to terminate May 31, 1999. The Company is using the proceeds from
the credit facility for working capital, capital expenditures associated with
its product development, and for general corporate purposes.
The Company's future capital requirements will depend upon many factors,
including the recruitment of key technical and management personnel, the need to
maintain adequate inventory levels to meet projected sales, the expansion of its
marketing and sales efforts, requirements of additional manufacturing equipment,
and the success of the Company's research and development efforts.
Results of Operations
---------------------
Fiscal Year Ended December 31, 1997 Compared To Fiscal Year Ended December 31,
- --------------------------------------------------------------------------------
1996
- ----
For the year ended December 31, 1997, the Company's total revenues were
$3,012,266 as compared with $1,975,184 for the prior year. The 53% increase in
revenues is primarily attributable to introduction of the Company's new
FREEDOM(TM) and WALLDO(TM) off-air antenna products and the increase in sales of
the Company's mobile line of antenna solutions.
The Company's net income increased to $134,500 from $9,346 in 1996. The
sales of the Company's FREEDOM(TM) and WALLDO(TM) antennas and the increase in
international sales of the mobile line of antenna solutions are the primary
contributing factors to this increase.
The increase in selling, general and administrative expenses to $1,081,386
in 1997 from $744,673 in 1996 is attributable to the Company's increase in
operations and personnel related to the increase in revenue and development
activity for fiscal 1997 and 1998, a decrease in the outsourcing of certain
production functions of the Company, adding production space and personnel to
production and administrative positions, and the related costs associated with
these positions.
Interest expense increased by $14,212 for fiscal 1997 over fiscal 1996. The
increase is primarily attributable to the costs associated with the Company's
increase in revenues, inventory and development activity in 1997 and the use of
the Company's line of credit to finance these activities.
Item 7. Financial Statements
- -----------------------------
The Financial Statements and schedules that constitute Item 7 of this
Annual Report on Form 10-KSB are included in Item 13 below.
Item 8. Changes In and Disagreements With Accountants On Accounting and
- --------------------------------------------------------------------------------
Financial Disclosure
--------------------
Not applicable.
11
<PAGE>
PART III
Item 9. Directors, Executive Officers, Promoters And Control Persons: Compliance
- --------------------------------------------------------------------------------
With Section 16(a) Of the Exchange Act
- --------------------------------------
The Officers and Directors of the Company are as follows:
Name Age Title
- ---- --- -----
Randall P. Marx 45 Chief Executive Officer;
Treasurer; and Director
Kevin O. Shoemaker 43 Chairman of the Board; Chief
Scientist; and Director
Richard L. Anderson 49 Vice President; Secretary; and
Director
Bruce Morosohk 39 Director
Sigmund A. Balaban 56 Director
James H. Shook 59 Director
Randall P. Marx has served as Chief Executive Officer since November 1991,
as a director since May 1990, and as Treasurer since December 1994. From May
1990 until November 1991, Mr. Marx advised the Company with respect to marketing
matters. From 1989 to 1991, Mr. Marx served as a consultant to three domestic
and international electronic companies. His responsibilities consisted primarily
of administration, finance, marketing and other matters. From 1983 until 1989
Mr. Marx served as President of THT Lloyd's Inc., Lloyd's Electronics Corp. and
Lloyd's Electronics Hong Kong Ltd., international consumer electronics
companies. THT Lloyd's Inc. purchased the Lloyd's Electronics business from
Bacardi Corp. in 1986. Prior to 1983, Mr. Marx owned a sales and marketing
company involved in the consumer electronics business.
Kevin O. Shoemaker has served as the Chairman of the Board of the Company
since the merger with Antennas Colorado in 1989. He also served as Executive
Vice President from May 1990 until November 1991 and as President from November
1991 until April 1994. Mr. Shoemaker held the positions of Chairman of the Board
and Chief Executive Officer with Antennas Colorado from its inception in 1988
until the merger. Mr. Shoemaker's employment prior to 1988 included serving as a
design engineer for Martin Marietta Aerospace, an aerospace defense contractor,
and as a technical specialist for Ball Aerospace Systems, an aerospace
contractor.
Richard L. Anderson has served as a director of the Company since December
1994. From March 1, 1995 until December 31, 1995, he served as a part-time
consultant to assist with the general operations of the Company. Since January
1, 1996, Mr. Anderson has served as Vice President of Administration for the
Company, and as of March 2, 1998 he has held the position of Secretary. From
1990 to 1995, Mr. Anderson served as an independent financial contractor
underwriting residential and commercial real estate first mortgage credit
packages. From October 1985 until March 1990, Mr. Anderson served as Senior Vice
12
<PAGE>
President, Administration of Westline Mortgage Corporation, a Denver, Colorado
based mortgage loan company that was a subsidiary of Bank Western Federal
Savings. Prior to October 1985, Mr. Anderson served as Vice President, Human
Resources for Midland Federal Savings.
Bruce Morosohk has served as a director of the Company since the merger
with Antennas Colorado in 1989 and has held this position since its inception in
1988, and Mr. Morosohk served as Secretary from 1988 until 1998. He also served
as Treasurer from November 1991 to December 1994. From 1980 until 1991, Mr.
Morosohk was employed by R. Greenberg and Associates, a private film production
firm, serving as a cameraman from 1981 to 1991, as manager of the Animation
Department from 1988 to 1989, and as Director of Animation from 1989 to 1991.
Sigmund A. Balaban has served as director of the Company since December
1994. Mr. Balaban has served as Vice President, Credit of Teknika Electronics of
Fairfield, New Jersey, since 1986 and as Senior Vice President and General
Manager of Teknika Electronics since 1992. Teknika Electronics is a subsidiary
of Fujitsu General, a Japanese multiline manufacturer.
James H. Shook has been a Director of the Company since May of 1990. From
May of 1990 until June of 1991, Mr. Shook also served as Chief Executive
Officer, President and Treasurer of the Company. At various times from 1973
through 1989 Mr. Shook was a business consultant to a number of companies.
Each of the Company's officers serves at the pleasure of the Company's
Board of Directors. There are no family relationships among the Company's
officers and directors except that Messrs. Shoemaker and Morosohk are
brothers-in-law.
Section 16(a) Beneficial Ownership Reporting Compliance
- -------------------------------------------------------
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires the Company's directors, executive officers and
holders of more than 10% of the Company's common stock to file with the
Securities and Exchange Commission initial reports of ownership and reports of
changes in ownership of common stock and other equity securities of the Company.
The Company believes that during the year ended December 31, 1997, its officers,
directors and holders of more than 10% of the Company's common stock complied
with all Section 16(a) filing requirements, except that Richard L. Anderson, a
Vice President and director of the Company, did not timely file a Form 4 or a
Form 5 with respect to the following transactions: (i) the receipt of a stock
bonus of 350,000 shares in March 1996, (ii) the receipt in March 1996 of options
to purchase up to 350,000 shares for $.05 per share for two years and the
purchase in April 1997 of 300,000 shares upon the exercise of that option, (iii)
the purchase of 29,500 shares for $.115 per share and 36,500 shares for $.13 per
share in January 1997 by Mr. Anderson's individual retirement account and by a
trust (the "Trust") for which Mr. Anderson serves as trustee, respectively, and
(iv) the purchase of 100,000 shares for $.067 per share in December 1997 by the
Trust. In making these statements, the Company has relied upon the written
representations of its directors and officers and the Company's review of the
monthly statements of changes filed with the Company by its officers and
directors.
13
<PAGE>
Item 10. Executive Compensation
- -------------------------------
Summary Compensation Table
- --------------------------
The following table sets forth in summary form the compensation received during
each of the Company's three successive completed fiscal years ended December 31,
1997 by the Chief Executive Officer and Chairman Of The Board of the Company. No
executive officer of the Company, including the Chief Executive Officer and the
Chairman Of The Board, received total salary and bonus exceeding $100,000 during
any of the three successive fiscal years ending December 31, 1997.
Summary Compensation Table
--------------------------
<TABLE>
<CAPTION>
Long Term Compensation
Annual Compensation Awards Payouts
Restricted
Other Annual Stock LTIP All other
Name and Principal Position Fiscal Salary Bonus Compensation Awards ($) Options Payouts Compensation
Year ($)(1) ($)(2) ($)(3) (#) ($)(4) ($)(5)
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Randall P. Marx 1997 $75,000 $10,100 -0- -0- -0- -0- -0-
Chief Executive Officer,
Treasurer and a Director 1996 75,000 -0- -0- -0- -0- -0- -0-
1995 75,000 10,030 -0- -0- -0- -0- -0-
Kevin O. Shoemaker 1997 $54,000 -0- -0- -0- -0- -0- -0-
Chairman Of The Board,
Chief Scientist, and a 1996 54,000 -0- -0- -0- -0- -0- -0-
Director
1995 54,000 -0- -0- -0- -0- -0- -0-
</TABLE>
- --------------------------
(1) The dollar value of base salary (cash and non-cash) received during the
year indicated.
(2) The dollar value of bonus (cash and non-cash) received during the year
indicated.
(3) During the period covered by the Summary Compensation Table, the
Company did not pay any other annual compensation not properly categorized as
salary or bonus, including perquisites and other personal benefits, securities
or property.
(4) The Company does not have in effect any plan that is intended to serve
as incentive for performance to occur over a period longer than one fiscal year
except for the Company's 1997 Stock Option And Compensation Plan.
(5) All other compensation received that the Company could not properly
report in any other column of the Summary Compensation Table including annual
Company contributions or other allocations to vested and unvested defined
contribution plans, and the dollar value of any insurance premiums paid by, or
on behalf of, the Company with respect to term life insurance for the benefit of
the named executive officer, and, the full dollar value of the remainder of the
premiums paid by, or on behalf of, the Company.
1997 Stock Option And Compensation Plan. In November 1997, the Board of
Directors approved the Company's 1997 Stock Option And Compensation Plan (the
"Plan"). Pursuant to the Plan, the Company may grant options to purchase an
aggregate of 5,000,000 shares of the Company's Common Stock to key employees,
directors, and other persons who have or are contributing to the success of the
Company. The options granted pursuant to the Plan may be incentive options
14
<PAGE>
qualifying for beneficial tax treatment for the recipient or they may be
non-qualified options. With respect to options granted to persons other than
directors of the Company who are not also employees of the Company ("Outside
Directors"), the Plan is administered by an option committee that determines the
terms of the options subject to the requirements of the Plan. The option
committee may be the entire Board or a committee of the Board. Outside Directors
automatically receive options to purchase 250,000 shares pursuant to the Plan at
the time of their election as an Outside Director. These options held by Outside
Directors are not exercisable at the time of grant, but options to purchase
50,000 shares become exercisable for each meeting of the Board of Directors
attended by each Outside Director following the date of grant of the options to
that Outside Director. The exercise price for options granted to Outside
Directors is equal to the fair market value of the Company's Common Stock on the
date of grant. All options granted to Outside Directors expire five years from
the date of grant. On the date that all of an Outside Director's options have
become exercisable, options to purchase an additional 250,000 shares, which are
not exercisable at the time of grant, shall be granted to that Outside Director.
The Plan also covers options previously granted to the Outside Directors
commencing in January 1995. The first options to purchase 250,000 shares granted
to Outside Directors in January 1995 provided an exercise price of $.05 per
share at a time that the closing bid price for the Common Stock was $.001 per
share. Grants of options pursuant to the Plan are conditioned upon the approval
of the Plan by the Company's shareholders on or before November 18, 1998. No
options granted under the Plan may be exercised until 60 days after shareholder
approval.
Compensation Of Outside Directors. Outside Directors are paid $250 for each
meeting of the Board of Directors that they attend. For meetings in excess of
four meetings per year, Outside Directors will receive $50 per meeting. Pursuant
to the Plan, Outside Directors may elect to receive payment of the meeting fee
in the form of the Company's restricted Common Stock at a rate per share equal
to the fair market value of the Company's Common Stock on the date of the
meeting by informing the Company's Secretary or President of that election on or
before the date of the meeting. Directors also will be reimbursed for expenses
incurred in attending meetings and for other expenses incurred on behalf of the
Company. In addition, each director who is not an employee automatically
receives options to purchase shares of Common Stock pursuant to the Plan. See
above, "- 1997 Stock Option And Compensation Plan".
Option Grants. In addition to the automatic grants of options to the
Outside Director described above under " -1997 Stock Option And Compensation
Plan", stock options have been granted pursuant to the Company's Plan on one
occasion in November 1997. Each of three employees were granted options to
purchase 100,000 shares, for an aggregate of 300,000 shares, at an exercise
price of $.10 per share, contingent upon certain corporate goals being met.
These options expire on November 19, 1999. These options are conditioned upon
the approval of the Plan by the Company's stockholders on or before November 18,
1998.
Employment Contracts And Termination of Employment And Change-In Control
- --------------------------------------------------------------------------------
Arrangements
- ------------
Effective as of March 19, 1998, the Company entered into an Employment
Agreement with Kevin O. Shoemaker, the Chairman of the Board and Chief Scientist
of the Company. The Employment Agreement provides for a two-year term at an
annual salary rate of not less than $66,000 per year. Also pursuant to the
Agreement, the Company agreed to increase Mr. Shoemaker's annual salary rate
pursuant to the Employment Agreement by $4,000 in 1999 and made Mr. Shoemaker
eligible for a bonus of $10,000, $20,000 and $30,000. The salary increase and
the bonus eligibility are based on certain personal performance criteria and
15
<PAGE>
1998 net profits of the Company amounting to $300,000, $600,000 and $900,000,
respectively. In connection with the Employment Agreement, Mr. Shoemaker agreed
not to dispose of any shares of Common Stock owned by him prior to December 31,
1999 without the prior written consent of the Company.
The Company does not have any written employment contracts with respect to
any of its other executive officers. However, the Company does anticipate
entering into a written employment agreement with Randall P. Marx, the Company's
Chief Executive Officer and Richard L. Anderson, Vice President, Administration.
Both Messrs. Marx and Anderson's employment contracts expired December 31, 1997.
The Company has no compensatory plan or arrangement that results or will result
from the resignation, retirement, or any other termination of an executive
officer's employment with the Company or from a change-in-control of the Company
or a change in an executive officer's responsibilities following a
change-in-control.
Item 11. Security Ownership Of Certain Beneficial Owners And Management
- ------------------------------------------------------------------------
The following table summarizes certain information as of March 12, 1998 with
respect to the beneficial ownership of the Company's Common Stock by the
Company's directors, by all officers and directors as a group, and by each
person known by the Company to be the owner of five percent or more of the
Company's common stock:
Name And Address Of Number Of Shares
Beneficial Owner Beneficially Owned Percent of Class
- ------------------- ------------------ ----------------
Richard L. Anderson 1,481,000 (1) 2.0
Antennas America Inc.
4860 Robb Street, Suite 101
Wheat Ridge, CO 80033
Sigmund A. Balaban 681,676 (2) 0.9
10 Grecian Street
Parsippany, NJ 07054
Randall P. Marx 7,005,000 (3) 9.5
Antennas America Inc.
4860 Robb Street, Suite 101
Wheat Ridge, CO 80033
Bruce Morosohk 5,491,117 (4) 7.4
Antennas America Inc.
4860 Robb Street, Suite 101
Wheat Ridge, CO 80033
Kevin O. Shoemaker 6,434,474 (5) 8.7
Antennas America Inc.
4860 Robb Street, Suite 101
Wheat Ridge, CO 80033
16
<PAGE>
Rocky Mountain Gastroenterology 4,500,000 6.1
P.C. Profit Sharing Trust
6550 West 38th Ave., Suite 300
Wheat Ridge, CO 80033
Millenium Holdings Group, Inc. 6,000,000 (6) 7.5
2200 Corporate Boulevard, N.W.
Suite 311, Boca Raton, FL 33431
All Officers and Directors 21,093,267 (1)(2) 28.2
as a group (five persons)
- --------------------
(1) Includes 636,500 shares owned by the Lloyd Anderson Marital Trust B Dated
June 21, 1990, for which Richard L. Anderson serves as trustee, 15,000 shares to
be issued under the Plan for Board meeting attendance fees at the time that Mr.
Anderson was an Outside Director, and options under the Plan to purchase 150,000
shares for $.05 per share that expire on January 3, 2000. The shares and options
under the Plan are contingent upon shareholder approval of the Plan on or before
November 18, 1998.
(2) Consists of 31,676 shares to be issued under the Plan for Board meeting
attendance fees as an Outside Director, options under the Plan to purchase
250,000 shares at $.05 per share until January 3, 2000, options under the Plan
to purchase 250,000 shares at $.0475 per share until December 26, 2001, and
options under the Plan to purchase 150,000 shares at $.08 per share until
November 19, 2002. The shares and options under the Plan are contingent upon
shareholder approval of the Plan on or before November 18, 1998.
(3) Includes 835,000 shares owned by the Harold and Theora Marx Living Trust, of
which Mr. Marx's parents are trustees. Mr. Marx disclaims beneficial ownership
of these shares.
(4) Does not include the following shares as to which Mr. Morosohk disclaims
beneficial ownership: (a) 6,434,474 shares owned by Kevin Shoemaker, Mr.
Morosohk's brother-in-law, and (b) an aggregate of 191,780 shares owned by Mr.
Morosohk's siblings and their respective spouses.
(5) Does not include 5,491,117 shares owned by Bruce Morosohk, Mr. Shoemaker's
brother-in-law, as to which shares Mr. Shoemaker disclaims beneficial ownership.
(6) Consists of currently exercisable options to purchase 2,000,000 shares for $
.06 per share until the earlier to occur of January 2, 2000 or 120 days after
the effective date of a registration statement covering the sale of the shares
underlying that option (the "Registration Statement"), 2,000,000 shares for $
.10 per share until the earlier to occur of January 2, 2002 or 365 days after
the effective date of the Registration Statement, and 2,000,000 shares for $ .30
per share until the earlier to occur of January 2, 2002 or 365 days after the
effective date of the Registration Statement.
Item 12. Certain Relationships And Related Transactions
- -------------------------------------------------------
Not applicable.
Item 13. Exhibits And Reports On Form 8-K
- ------------------------------------------
(a) Financial Statements And Financial Statement Schedules.
Index To Financial Statements And Financial Statement Schedules.
Independent Auditor's Report . . . . . . . . . . . . . . . . . . . . . .F-1
17
<PAGE>
Consolidated Balance Sheet At December 31, 1997 . . . . . . . . . . . . F-2
Consolidated Statements Of Income For The Years Ended
December 31, 1997 and 1996 . . . . . . . . . . . . . . . . . . . . . . F-3
Consolidated Statements Of Changes In Stockholders' Equity
For The Years Ended December 31, 1997 and 1996 . . . . . . . . . . . . F-4
Consolidated Statements Of Cash Flows For The Years Ended
December 31, 1997 and 1996 . . . . . . . . . . . . . . . . . . . F-5 - F-6
Notes To Consolidated Financial Statements . . . . . . . . . . . F-7 - F-12
(a)(2) Exhibits.
EXHIBIT INDEX
Exhibit
Number Description
- ------- -----------
3.1a Articles of Incorporation of Westcliff Corporation, now known as
Antennas America, Inc. (the "Company"), are incorporated herein by
reference from the Company's Form S-18 Registration Statement dated
December 1, 1987 (File No. 33-18854-D).
3.1b Articles of Amendment of the Company dated January 26, 1988 are
incorporated herein by reference from the Company's Post-Effective
Amendment No. 3 to From S-18 Registration Statement dated December 5,
1989 (File No. 33-18854-D)
3.1c Articles And Agreement Of Merger between the Company and Antennas
America, Inc. a Colorado corporation, dated March 22, 1989, are
incorporated herein by reference from the Company's Post-Effective
Amendment No. 3 to Form S-18 Registration Statement dated December 5,
1989 (File No. 33-18854-D).
3.2 Bylaws of the Company as amended and restated on March 25, 1998.
10.1a Industrial Lease dated April 20, 1995 between the Company and Five K
Investments.*
10.1b Office Lease dated May 8, 1995 between the Company and Five K
Investments.*
10.1c Industrial Lease dated December 12, 1995 between the Company and Five
K Investments.*
10.1d Industrial Lease dated April 29, 1996 between the Company and Five K
Investments.*
10.2 Employment Agreement dated as of March 19, 1998 between the Company
and Kevin O. Shoemaker.
27.1 Financial Data Schedule.
18
<PAGE>
- -------------
* Incorporated herein by reference from the Company's Form 10-KSB for the year
ended December 31, 1996.
(b) Reports On Form 8-K. During the last quarter of the fiscal year ended
December 31, 1997, the Company filed one report on Form 8-K for an event
occurring November 26, 1997.
19
<PAGE>
INDEPENDENT AUDITOR'S REPORT
Board of Directors and Stockholders
Antennas America, Inc.
We have audited the consolidated balance sheet of Antennas America, Inc. as of
December 31, 1997, and the related consolidated statements of income, changes in
stockholders' equity, and cash flows for each of the two years in the period
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 Antennas America,
Inc. as of December 31, 1997 and the results of its operations and cash flows
for each of the two years in the period then ended, in conformity with generally
accepted accounting principles.
James E. Scheifley & Associates, P.C.
Certified Public Accountants
Englewood, Colorado
March 6, 1998
F-1
<PAGE>
Antennas America, Inc.
Consolidated Balance Sheet
December 31, 1997
ASSETS
------
Current assets:
Cash $61,642
Accounts receivable, trade 327,685
Inventories 508,554
Prepaid expenses 72,469
Deferred tax asset 102,000
-------
Total current assets 1,072,350
Property and equipment, at cost, net of
accumulated depreciation of $163,272 407,355
Other assets:
Deferred tax asset, non-current 95,509
Intangible assets net of accumulated
amortization of $40,259 41,245
Deposits 10,612
------
$1,627,071
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current liabilities:
Note payable - bank $250,730
Notes payable - others 128,569
Current portion of long term debt 100,295
Current portion of leases payable 24,941
Accounts payable 415,377
Accrued expenses 29,642
------
Total current liabilities 949,554
Long term debt 3,127
Leases payable 57,328
Notes payable - officer 137,105
Commitments (Note 11)
Stockholders' equity:
Common stock, $.0005 par value,
250,000,000 shares authorized,
73,189,422 shares issued and outstanding 36,595
Additional paid-in capital 801,039
Common stock subscriptions 18,500
Accumulated deficit (376,177)
--------
Total stockholders' equity 479,957
-------
$1,627,071
==========
See accompanying notes to consolidated financial statements.
F-2
<PAGE>
Antennas America, Inc.
Consolidated Statements of Income
For The Years Ended December 31, 1997 and 1996
1997 1996
---------- ----------
Sales, net $3,012,266 $1,975,184
Cost of sales 1,660,552 1,223,287
---------- ----------
Gross profit 1,351,714 751,897
Selling, general and administrative expenses 1,080,641 744,673
---------- ----------
Income from operations 271,073 7,224
Other income and (expense):
Interest expense (72,230) (58,018)
Other income 3,810 917
---------- ----------
(68,420) (57,101)
---------- ----------
Net income before income taxes
and extraordinary item 202,653 (49,877)
Provision for income taxes (benefit) 68,153 (10,439)
---------- ----------
Net income before extraordinary item 134,500 (39,438)
Extraordinary item:
Gain from debt cancellation net of income
taxes of $12,667 - 48,784
---------- ----------
Net income $134,500 $9,346
========== ==========
Basic earnings per share
Net income before extraordinary item $0.00 $(0.00)
Extraordinary item - -
Net income $0.00 $0.00
Weighted average shares outstanding 73,189,422 73,135,255
See accompanying notes to consolidated financial statements.
F-3
<PAGE>
Antennas America, Inc.
Consolidated Statement of Changes in Stockholders' Equity
For The Years Ended December 31, 1997 and 1996
<TABLE>
<CAPTION>
Additional
Common Stock Paid-in Accumulated Stock
ACTIVITY Shares Amount Capital (Deficit) Subscriptions Total
- --------------------- ------------ -------- ---------- ----------- ------------- -----
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1995 71,139,422 $35,570 $616,090 $(520,023) $13,750 $145,387
Shares issued for:
Subscriptions 1,375,000 687 13,063 (13,750) -
Cash, net of $8,027 of costs 1,650,000 825 156,148 156,973
Exercise of warrants 1,025,000 513 44,738 45,251
Shares reacquired and cancelled (2,000,000) (1,000) (29,000) - (30,000)
Shares subscribed for services 3,500 3,500
Net income for the year - - - 9,346 - 9,346
---------- ------ ------- --------- -------- -------
Balance, December 31, 1996 73,189,422 36,595 801,039 (510,677) 3,500 330,457
Exercise of stock option 15,000 15,000
Net income for the year - - - 134,500 - 134,500
---------- ------ ------- --------- -------- -------
Balance, December 31, 1997 73,189,422 36,595 801,039 (376,177) 18,500 479,957
========== ====== ======= ========= ======== =======
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE>
Antennas America, Inc.
Consolidated Statements of Cash Flows
For The Years Ended December 31, 1997 and 1996
1997 1996
------------ ----------
Net income $134,500 $9,346
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 54,735 35,467
Gain from debt cancellation - (48,784)
Interest added to note payable 10,323 14,397
Subscriptions for services - 3,500
Changes in assets and liabilities:
(Increase) decrease in accounts receivable (161,274) 157,944
(Increase) decrease in inventory (312,705) (33,533)
(Increase) decrease in deferred tax asset 68,153 2,228
(Increase) decrease in prepaid expenses (38,996) (29,828)
(Increase) decrease in other assets 13,500 (2,037)
Increase (decrease) in accounts payable and
accrued expenses 233,120 (94,490)
---------- ----------
Total adjustments (133,144) 4,864
---------- ----------
Net cash provided by operating activities 1,356 14,210
---------- ----------
Cash flows from investing activities:
Patent acquisition costs (12,940) (8,996)
Acquisition of plant and equipment (245,315) (89,689)
---------- ----------
Net cash (used in) investing activities (258,255) (98,685)
---------- ----------
Cash flows from financing activities:
Stock issued for cash - 202,224
Common stock subscriptions 15,000 -
Cost of share cancellation - (30,000)
Repayment of officer loans (8,500) (14,745)
Proceeds from officer loan 9,500 -
Proceeds of new borrowing 293,330 36,000
Repayment of notes and leases payable (46,425) (69,279)
---------- ----------
Net cash provided by (used in)
financing activities 262,905 124,200
---------- ----------
F-5
<PAGE>
Increase (decrease) in cash 6,006 39,725
Cash and cash equivalents,
beginning of period 55,636 15,911
---------- ----------
Cash and cash equivalents,
end of period $61,642 $ 55,636
========== ==========
Supplemental cash flow information:
Cash paid for interest $61,907 $ 62,290
Cash paid for income taxes $ - $ -
Non-cash investing and financing activities:
Conversion of accounts payable to notes payable $ - $145,059
Abandonment of leasehold improvements $ - $ 1,677
See accompanying notes to consolidated financial statements.
F-6
<PAGE>
Antennas America, Inc.
Notes to Consolidated Financial Statements
Note 1. Organization and summary of significant accounting policies
Organization
The Company was incorporated in Colorado on September 6, 1988 and was
reorganized as a Utah corporation on April 12, 1989. The Company is engaged in
the business of manufacture and sale of antennas used for various purposes. The
consolidated financial statements include the accounts of the Company and its
wholly owned subsidiary, Antennas America Distributing Company. All significant
inter-company items have been eliminated.
Inventory
Inventory is valued at the lower of cost or market on a first-in, first-out
basis. Inventories are reviewed annually and items considered to be slow-moving
or obsolete are reduced to estimated net realizable value. Adjustments to reduce
inventories to net realizable value have not been significant. Inventory
consists of the following at December 31, 1997
Raw materials $282,308
Work in progress 156,936
Finished goods 69,310
--------
$508,554
Property and equipment
Property and equipment are stated at cost. Depreciation is provided for using
the straight line method over estimated useful lives of five to seven years.
When assets are retired or otherwise disposed of, the cost and the related
accumulated depreciation are removed from the accounts, and any resulting gain
or loss is recognized in operations for the period. The cost of repairs and
maintenance is charged to operations as incurred and significant renewals or
betterments are capitalized.
Patent costs
Patent costs are stated at cost and are amortized over ten years using the
straight-line method. Amortization expense amounted to $8,272 and $7,397 for the
years ended December 31, 1997 and 1996.
Research and development
Research and development costs are charged to expense as incurred. Such costs
were not material for the years ended December 31, 1997 and 1996.
Revenue
Revenue is recorded when goods are shipped. Sales returns and allowances are
recorded after returned goods are received and inspected. The Company has
several major commercial customers who incorporate its products into other
manufactured goods and returns therefrom have not been significant. The Company
began sales of consumer goods in 1997 and has provided currently for estimated
product returns arising therefrom.
F-7
<PAGE>
Income taxes
The Company records the income tax effect of transactions in the same year that
the transactions enter into the determination of income, regardless of when the
transactions are recognized for tax purposes. Income tax credits are used to
reduce the provision for income taxes in the year in which such credits are
allowed for tax purposes.
Deferred taxes are provided to reflect the income tax effects of amounts
included for financial purposes in different periods than for tax purposes,
principally accelerated depreciation for income tax purposes. Such amounts have
not been significant.
Cash
For purposes of the statement of cash flows, the Company considers all highly
liquid debt instruments purchased with a maturity of three months or less to be
cash equivalents.
Earnings per share
In February 1997, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 128, "Earnings Per Share." SFAS No. 128 supersedes and simplifies the
existing computational guidelines under Accounting Principles Board ("APB")
Opinion No. 15, "Earnings Per Share."
The statement is effective for financial statements issued for periods ending
after December 15, 1997. Among other changes, SFAS No. 128 eliminates the
presentation of primary earnings per share and replaces it with basic earnings
per share for which common stock equivalents are not considered in the
computation. It also revises the computation of diluted earnings per share. The
Company has adopted SFAS No. 128 and there is no material impact to the
Company's earnings per share, financial condition, or results of operations. The
Company's earnings per share have been restated for all periods presented to be
consistent with SFAS No. 128.
The basic income per share is computed by dividing the net loss for the period
by the weighted average number of common shares outstanding for the period. Loss
per share is unchanged on a diluted basis.
Earnings per share is computed using the weighted average number of shares
outstanding during the period.
Fair value of financial instruments
The Company's short-term financial instruments consist of cash and cash
equivalents, accounts and loans receivable, and accounts payable and accruals.
The carrying amounts of these financial instruments approximates fair value
because of their short-term maturities. Financial instruments that potentially
subject the Company to a concentration of credit risk consist principally of
cash and accounts receivable, trade.
During the year the Company did not maintain cash deposits at financial
institutions in excess of the $100,000 limit covered by the Federal Deposit
Insurance Corporation. The Company has several major customers, (see Note 8) the
loss of any one of which could have a material negative impact upon the Company.
Additionally, the Company maintains a line of credit with one financial
institution. The maintenance of a satisfactory relationship with this
institution is of significant importance to the Company. The Company does not
hold or issue financial instruments for trading purposes nor does it hold or
issue interest rate or leveraged derivative financial instruments.
F-8
<PAGE>
Estimates
The preparation of the Company's financial statements requires management to
make estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ from these
estimates. For the years ended December 31, 1997 and 1996 the Company made
estimates of the future utilization of its net operating loss carryforward.
These estimates account for the deferred tax asset of $197,509 at the balance
sheet date.
Advertising costs
Advertising costs are charged to operations when the advertising is first shown.
Advertising costs charged to operations were $40,940 and $39,713 in 1997 and
1996, respectively.
Stock-based Compensation
The Company adopted Statement of Financial Accounting Standard No. 123 (FAS
123), Accounting for Stock-Based Compensation beginning with the Company's first
quarter of 1996. Upon adoption of FAS 123, the Company continued to measure
compensation expense for its stock-based employee compensation plans using the
intrinsic value method prescribed by APB No. 25, Accounting for Stock Issued to
Employees, and has provided in Note 5 pro forma disclosures of the effect on net
income and earnings per share as if the fair value-based method prescribed by
FAS 123 had been applied in measuring compensation expense.
New Accounting Pronouncements
SFAS No. 130, "Reporting Comprehensive Income", establishes guidelines for all
items that are to be recognized under accounting standards as components of
comprehensive income to be reported in the financial statements. The statement
is effective for all periods beginning after December 15, 1997 and
reclassification of financial statements of financial statements for earlier
periods will be required for comparative purposes. To date, the Company has not
engaged in transactions which would result in any significant difference between
its reported net loss and comprehensive net loss as defined in the statement.
Note 2. Property and Equipment.
Property and equipment consist of the following at December 31, 1997:
Machinery and equipment $ 431,781
Furniture and fixtures 115,068
Leasehold improvements 23,778
----------
570,627
Accumulated depreciation 163,272
----------
$ 407,355
==========
Depreciation expense amounted to $49,934 and $28,070 respectively during the
years ended December 31, 1997 and 1996.
Substantially all of the Company's fixed assets secure debt described in Notes 3
and 4.
F-9
<PAGE>
Note 3. Notes payable and long-term debt
Notes payable to bank consists of a revolving credit line having a maximum
borrowing amount of $500,000. The line bears interest at prime plus 4.5% (13%)
at December 31, 1997, and is collateralized by accounts receivable, inventory
and otherwise unencumbered machinery and equipment. The line has $249,270 of
unused credit at December 31, 1997.
Notes payable to others at December 31, 1997 consist of uncollateralized
obligations to individuals and vendors as follows:
Amount due vendor with interest at 8% per annum
due on January 31, 1998 $108,690
Amount due vendor with interest at 10% per annum
due on demand 71,795
Amount due individual without interest
due on demand 13,236
Other 619
--------
$194,340
Long term debt consists of the following:
Note payable to an individual for prior salary
and expenses due in weekly installments of
$625 without interest $ 21,489
Note payable for equipment purchase, due in
monthly installments of $1,161 including
interest at 9.5% per annum 16,163
--------
37,652
Less Current portion 34,525
--------
$ 3,127
Maturities of long-term debt are as follows: 1998 - $3,127
Note 4. Leases payable
During 1997 the Company entered into financing type lease transactions with
leasing companies whereby the Company leased certain manufacturing equipment.
Scheduled maturities of the obligations as of December 31, 1997 are as follows:
Year Amount
1998 $ 34,329
1999 34,329
2000 30,700
---------
Minimum future lease payments 99,358
Less interest component (17,089)
Present value of future net ---------
minimum lease payments 82,269
Less current portion (24,941)
---------
Due after one year $ 57,328
F-10
<PAGE>
Property recorded under capital leases includes the following as of December 31,
1997:
Machinery and equipment $ 86,678
Less accumulated amortization (6,191)
---------
Net assets subject to capital leases $ 80,487
Note 5. Notes payable, officers
Notes payable to officers includes unpaid advances and salary accruals due to
two of the Company's officers including Randall P. Marx, the chief executive
officer, (see Note 9) who accounts for approximately 65% of the balance owed.
The advances accrue no interest and are not expected to be repaid in the
forthcoming year.
Note 6. Stockholders' equity
Effective January 1996, the Company authorized a stock bonus to one of its
officers for 350,000 shares of restricted common stock having a fair value of
$3,500. Additionally, the Company granted the officer an option to purchase
350,000 additional shares of restricted common stock at $.05 per share for a two
year period. The weighted average fair value at the date of grant for options
granted during 1996 was $.00 per option. The fair value of the options at the
date of grant was estimated using the Black-Scholes model with assumptions as
follows:
Market value $.01
Expected life 2
Interest rate 5.15%
Volatility .25%
Dividend yield 0.00%
No stock based compensation costs would be recorded by the Company as a result
of the foregoing.
During June and July of 1996, the Company sold 1,650,000 shares of its
restricted common stock to three individuals for cash aggregating $156,973 net
of associated costs of $8,027. Additionally during the year the Company issued
1,375,000 shares subscribed in the prior year and issued 1,025,000 shares
pursuant to option agreements entered into in prior years. Proceeds to the
Company for the option shares amounted to $45,250 or $.044 per share. During
June 1996 the Company purchased from an officer and retired 2,000,000 shares of
restricted common stock for $30,000 or $.015 per share.
During the year ended December 31, 1997, the Company accepted stock subscription
from an officer for 300,000 of its restricted common stock. The fair value of
the stock subscribed at the subscription date amounted to $.05 per share.
Note 7. Income taxes
The Company has not recorded a liability for federal income taxes payable
currently or deferred to future periods due to the existence of substantial net
operating loss carryforward amounts available to offset taxable income.
A reconciliation of federal income taxes computed by multiplying pre tax net
income by the statutory rate of 34% to the provision for income taxes is as
follows at December 31, 1997 and 1996:
F-11
<PAGE>
1997 1996
Tax computed at statutory rate $ 68,902 $ 3,935
State income tax 6,687 579
Surtax exemption (7,436) (2,286)
-------- -------
Provision for income taxes (benefit) $ 68,153 $ 2,228
The Company has a net operating loss carryforward of approximately $563,400 that
will expire in years beginning in 2004 as follows:
2004 $ 39,400
2005 336,000
2006 188,000
---------
$ 563,400
The Company has determined that the likelihood of continued profitability for
the year ended December 31, 1998 and beyond is reasonably possible and has
recorded the benefit of the carryforward ($197,509) as provided for in FAS-109.
The determination of the current portion of the deferred tax asset is based upon
the Company's estimate of the expected utilization of the operating loss
carryforward during the 1998 fiscal year.
Note 8. Sales to major customers
The Company made sales in excess of 10% of its net sales to unrelated parties
for the year ended December 31, 1997 to two companies aggregating $2,279,467
(76%) and in 1996 to one company aggregating $1,126,312 (57%). Additionally, the
Company had open uncollateralized accounts receivable from these customers
aggregating $144,377 and $87,295 at December 31, 1997 and 1996, respectively.
Note 9. Gain from debt extinguishment
During the year ended December 31, 1996 the Company settled an aggregate of
$61,451 of outstanding trade accounts payable, salary and expenses without cash
expenditure.
Note 10. Commitments
Operating leases
The Company leases its facilities under operating leases through May 31, 1999.
Minimum future rentals payable under the leases are as follows:
Year Amount
---- ------
1998 56,218
1999 12,000
------
$ 68,218
Additionally, the Company rents certain equipment pursuant to short-term leasing
arrangements.
Rent expense amounted to $190,217 and $173,763 for the years ended December 31,
1997 and 1996, respectively.
F-12
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
ANTENNAS AMERICA, INC.
Date: March 30, 1998 By: /s/ Randall P. Marx
-------------------- --------------------------------------------
Randall P. Marx, Chief Executive Officer and
Principal Financial Officer
In accordance with the Exchange Act, this report has been signed below
by the following persons on behalf of the registrant and in the capacities and
on the dates indicated.
Date: March 30, 1998 /s/ Richard L. Anderson
-------------------- --------------------------------------------
Richard L. Anderson, Director
Date: March 30, 1998 /s/ Sigmund A. Balaban
-------------------- --------------------------------------------
Sigmund A. Balaban, Director
Date: March 30, 1998 /s/ Randall P. Marx
-------------------- --------------------------------------------
Randall P. Marx, Director
Date: March 30, 1998 /s/ Bruce Morosohk
-------------------- --------------------------------------------
Bruce Morosohk, Director
Date: March 30, 1998 /s/ Kevin O. Shoemaker
-------------------- --------------------------------------------
Kevin O. Shoemaker, Director
Date:
-------------------- --------------------------------------------
James H. Shook, Director
20
BYLAWS
OF
ANTENNAS AMERICA, INC.
<PAGE>
TABLE OF CONTENTS
ARTICLE I Offices........................................................ 1
ARTICLE II Shareholders................................................... 1
ARTICLE III Board of Directors............................................. 7
ARTICLE IV Officers and Agents............................................ 10
ARTICLE V Stock.......................................................... 13
ARTICLE VI Indemnification of Certain Persons............................. 14
ARTICLE VII Provision of Insurance......................................... 16
ARTICLE VIII Miscellaneous.................................................. 17
<PAGE>
Effective: March 25, 1998
BYLAWS
OF
ANTENNAS AMERICA, INC.
ARTICLE I
---------
Offices
-------
The principal office of the corporation shall be designated from time to
time by the corporation and may be within or outside of Utah.
The corporation may have such other offices, either within or outside
Utah, as the board of directors may designate or as the business of the
corporation may require from time to time.
The registered office of the corporation required by the Utah Business
Corporation Act to be maintained in Utah may be, but need not be, identical with
the principal office, and the address of the registered office may be changed
from time to time by the board of directors.
ARTICLE II
----------
Shareholders
------------
Section 1. Annual Meeting. The annual meeting of the shareholders shall be
held at a time and date fixed by the board of directors of the corporation (or
by the chief executive officer in the absence of action by the board of
directors), for the purpose of electing directors and for the transaction of
such other business as may come before the meeting. If the election of directors
is not held on the day fixed as provided herein for any annual meeting of the
shareholders, or any adjournment thereof, the board of directors shall cause the
election to be held at a special meeting of the shareholders as soon thereafter
as it may conveniently be held.
A shareholder may apply to the district court in the county in Utah where
the corporation's principal office is located or, if the corporation has no
principal office in Utah, to the district court of the county in which the
corporation's registered office is located to seek an order that a shareholder
meeting be held (i) if an annual meeting was not held within fifteen months
after its last annual meeting, or (ii) if the shareholder participated in a
proper call of or proper demand for a special meeting and notice of the special
meeting was not given within sixty days after the date of the call or the date
the last of the demands necessary to require calling of the meeting was
delivered to the corporation pursuant to ss.16-10a-702(1)(b) of the Utah
Business Corporation Act, or the special meeting was not held in accordance with
the notice.
Section 2. Special Meetings. Unless otherwise prescribed by statute,
special meetings of the shareholders may be called for any purpose by the chief
executive officer or by the board of directors. The chief executive officer
shall call a special meeting of the shareholders if the corporation receives one
or more written demands for the meeting, stating the purpose or purposes for
which it is to be held, signed and dated by holders of shares representing at
least ten percent of all the votes entitled to be cast on any issue proposed to
be considered at the meeting.
1
<PAGE>
Section 3. Place of Meeting. The board of directors may designate any
place, either within or outside Utah, as the place for any annual meeting or any
special meeting called by the board of directors. A waiver of notice signed by
all shareholders entitled to vote at a meeting may designate any place, either
within or outside Utah, as the place for such meeting. If no designation is
made, or if a special meeting is called other than by the board, the place of
meeting shall be the principal office of the corporation.
Section 4. Notice of Meeting. Written notice stating the place, date, and
time of the meeting shall be given not less than ten nor more than sixty days
before the date of the meeting. The secretary shall be required to give such
notice only to shareholders entitled to vote at the meeting except as otherwise
required by Utah Business Corporation Act.
Notice of a special meeting shall include a description of the purpose or
purposes of the meeting. Notice of an annual meeting need not include a
description of the purpose or purposes of the meeting unless required by the
Utah Business Corporation Act or the corporation's articles of incorporation.
Notice shall be given personally or by mail, private carrier, telegraph,
teletype, electronically transmitted facsimile or other form of wire or wireless
communication by or at the direction of the chief executive officer, the
secretary, or the officer or persons calling the meeting, to each shareholder of
record entitled to vote at such meeting. If mailed and if in a comprehensive
form, such notice shall be deemed to be given and effective when deposited in
the United States mail, properly addressed to the shareholder at his address as
it appears in the corporation's current record of shareholders, with first class
postage prepaid. If notice is given other than by mail, and provided that such
notice is in a comprehensible form, the notice is given and effective on the
date received by the shareholder.
If requested by the person or persons lawfully calling such meeting, the
secretary shall give notice thereof at corporate expense. No notice need be sent
to any shareholder if (i) a notice of two consecutive annual meetings, and all
notices of meetings or of the taking of action by written consent without a
meeting during the period between the two consecutive annual meetings, have been
mailed, addressed to the shareholder at the shareholder's address as shown on
the records of the corporation, and have been returned undeliverable; or (ii) at
least two payments, if sent by first class mail, of dividends or interest on
securities during a twelve month period, have been mailed, addressed to the
shareholder at the shareholder's address as shown on the records of the
corporation, and have been returned undeliverable. In order to be entitled to
receive notice of any meeting, a shareholder shall advise the corporation in
writing of any change in such shareholder's mailing address as shown on the
corporation's books and records.
When a meeting is adjourned to another date, time or place, notice need
not be given of the new date, time or place if the new date, time or place of
such meeting is announced before adjournment at the meeting at which the
adjournment is taken. At the adjourned meeting, the corporation may transact any
business which may have been transacted at the original meeting. If the
adjournment is for more than 30 days, or if a new record date is fixed for the
adjourned meeting, a new notice of the adjourned meeting shall be given to each
shareholder of record entitled to vote at the meeting as of the new record date.
A shareholder may waive notice of a meeting before or after the time and
date of the meeting by a writing signed by such shareholder. Such waiver shall
be delivered to the corporation for filing with the corporate records. Further,
by attending a meeting either in person or by proxy, a shareholder waives
objection to lack of notice or defective notice of the meeting unless the
shareholder objects at the beginning of the meeting to the holding of the
meeting or the transaction of business at the meeting because of lack of notice
or defective notice. By attending the meeting, the shareholder also waives any
objection to consideration at the meeting of a particular matter not within the
purpose or purposes described in the meeting notice unless the shareholder
objects to considering the matter when it is presented.
2
<PAGE>
Section 5. Fixing of Record Date. For the purpose of determining
shareholders entitled to (i) notice of or vote at any meeting of shareholders or
any adjournment thereof, (ii) receive distributions or share dividends, (iii)
demand a special meeting, or (iv) make a determination of shareholders for any
other proper purpose, the board of directors may fix a future date as the record
date for any such determination of shareholders, such date in any case to be not
more than seventy days, and, in case of a meeting of shareholders, not less than
ten days, prior to the date on which the particular action requiring such
determination of shareholders is to be taken. If no record date is fixed by the
directors, the record date shall be the day before the notice of the meeting is
given to shareholders, or the date on which the resolution of the board of
directors providing for a distribution is adopted, as the case may be. When a
determination of shareholders entitled to vote at any meeting of shareholders is
made as provided in this section, such determination shall apply to any
adjournment thereof unless the board of directors fixes a new record date, which
it must do if the meeting is adjourned to a date more than 120 days after the
date fixed for the original meeting. Unless otherwise specified when the record
date is fixed, the time of day for such determination shall be as of the
corporation's close of business on the record date.
Notwithstanding the above, the record date for determining the
shareholders entitled to take action without a meeting or entitled to be given
notice of action so taken shall be the date a writing upon which the action is
taken is first received by the corporation. The record date for determining
shareholders entitled to demand a special meeting shall be the date of the
earliest of any of the demands pursuant to which the meeting is called.
Section 6. Voting Lists. After a record date is fixed for a shareholders'
meeting, the secretary shall make, at the earlier of ten days before such
meeting or two business days after notice of the meeting has been given, a
complete list of the shareholders entitled to be given notice of such meeting or
any adjournment thereof. The list shall be arranged by voting groups and within
each voting group by class or series of shares, shall be in alphabetical order
within each class or series, and shall show the address of and the number of
shares of each class or series held by each shareholder. For the period
beginning the earlier of ten days prior to the meeting or two business days
after notice of the meeting is given and continuing through the meeting and any
adjournment thereof, this list shall be kept on file at the principal office of
the corporation, or at a place (which shall be identified in the notice) in the
city where the meeting will be held. Such list shall be available for inspection
on written demand by any shareholder (including for the purpose of this Section
6 any holder of voting trust certificates) or the shareholder's agent or
attorney during regular business hours and during the period available for
inspection. The original stock transfer books shall be prima facie evidence as
to who are the shareholders entitled to examine such list or transfer books or
to vote at any meeting of shareholders.
Any shareholder, or the shareholder's agent or attorney may copy the list
during regular business hours and during the period it is available for
inspection, provided (i) the demand is made in good faith and for a purpose
reasonably related to the demanding shareholder's interest as a shareholder,
(ii) the shareholder describes with reasonable particularity the purpose and the
records the shareholder desires to inspect, and (iii) the shareholder pays a
reasonable charge covering the costs of labor and material for such copies, not
to exceed the estimated cost of production and reproduction.
Section 7. Recognition Procedure for Beneficial Owners. The board of
directors may adopt by resolution a procedure whereby a shareholder of the
corporation may certify in writing to the corporation that all or a portion of
the shares registered in the name of such shareholder are held for the account
of a specified person or persons. The resolution may set forth (i) the types of
nominees to which it applies, (ii) the rights or privileges that the corporation
will recognize in a beneficial owner, which may include rights and privileges
other than voting, (iii) the form of certification and the information to be
contained therein, (iv) if the certification is with respect to a record date,
3
<PAGE>
the time within which the certification must be received by the corporation, (v)
the period for which the nominee's use of the procedure is effective, and (vi)
such other provisions with respect to the procedure as the board deems necessary
or desirable. Upon receipt by the corporation of a certificate complying with
the procedure established by the board of directors, the persons specified in
the certification shall be deemed, for the purpose or purposes set forth in the
certification, to be the registered holders of the number of shares specified in
place of the shareholder making the certification.
Section 8. Quorum and Manner of Acting. A majority of the votes entitled
to be cast on a matter by a voting group represented in person or by proxy shall
constitute a quorum of that voting group for action on the matter. If less than
a majority of such votes are represented at a meeting, a majority of the votes
so represented may adjourn the meeting from time to time without further notice,
for a period not to exceed 120 days for any one adjournment. Once a share is
represented for any purpose at a meeting, including the purpose of determining
that a quorum exists, it is deemed present for quorum purposes for the remainder
of the meeting and for any adjournment of that meeting, unless a new record date
is or must be set for that adjourned meeting. The shareholders present at a duly
organized meeting may continue to transact business until adjournment,
notwithstanding the withdrawal of enough shareholders to leave less than a
quorum, unless the meeting is adjourned and a new record date is set for the
adjourned meeting.
If a quorum exists, action on a matter other than the election of
directors by a voting group is approved if the votes cast within the voting
group favoring the action exceed the votes cast within the voting group opposing
the action, unless the vote of a greater number or voting by classes is required
by law or the corporation's articles of incorporation.
Section 9. Proxies. At all meetings of shareholders, a shareholder may
vote by proxy by signing an appointment form or similar writing, either
personally or by his duly authorized attorney-in-fact. A shareholder may also
appoint a proxy by transmitting or authorizing the transmission of a telegram,
teletype, or other electronic transmission providing a written statement of the
appointment to the proxy, a proxy solicitor, proxy support service organization,
or other person duly authorized by the proxy to receive appointments as agent
for the proxy, or to the corporation. The transmitted appointment shall set
forth or be transmitted with written evidence from which it can be determined
that the shareholder transmitted or authorized the transmission of the
appointment. The proxy appointment form or similar writing shall be filed with
the secretary of the corporation before or at the time of the meeting. The
appointment of a proxy is effective when received by the corporation and is
valid for eleven months unless a longer period is expressly provided in the
appointment form or similar writing.
Any complete copy, including an electronically transmitted facsimile, of
an appointment of a proxy may be substituted for or used in lieu of the original
appointment for any purpose for which the original appointment could be used.
Revocation of a proxy does not affect the right of the corporation to
accept the proxy's authority unless (i) the corporation had notice that the
appointment was coupled with an interest and notice that such interest is
extinguished is received by the secretary or other officer or agent authorized
to tabulate votes before the proxy exercises his authority under the
appointment, or (ii) other notice of the revocation of the appointment is
received by the secretary or other officer or agent authorized to tabulate votes
before the proxy exercises his authority under the appointment. Other notice of
revocation may, in the discretion of the corporation, be deemed to include the
appearance at a shareholders' meeting of the shareholder who granted the proxy
and his voting in person on any matter subject to a vote at such meeting.
The death or incapacity of the shareholder appointing a proxy does not
affect the right of the corporation to accept the proxy's authority unless the
appointment is not irrevocable and coupled with an interest and notice of the
death or incapacity is received by the secretary or other officer or agent
authorized to tabulate votes before the proxy exercises his authority under the
appointment.
4
<PAGE>
The corporation shall not be required to recognize an appointment made
irrevocable if it has received a writing revoking the appointment signed by the
shareholder (including a shareholder who is a successor to the shareholder who
granted the proxy) either personally or by his attorney-in-fact, notwithstanding
that the revocation may be a breach of an obligation of the shareholder to
another person not to revoke the appointment.
Subject to Section 11 and any express limitation on the proxy's authority
appearing on the appointment form, the corporation is entitled to accept the
proxy's vote or other action as that of the shareholder making the appointment.
Section 10. Voting of Shares. Each outstanding share, regardless of class,
shall be entitled to one vote, except in the election of directors, and each
fractional share shall be entitled to a corresponding fractional vote on each
matter submitted to a vote at a meeting of shareholders, except to the extent
that the voting rights of the shares of any class or classes are limited or
denied by the articles of incorporation as permitted by the Utah Business
Corporation Act. Cumulative voting shall not be permitted in the election of
directors or for any other purpose. Each record holder of stock shall be
entitled to vote in the election of directors and shall have as many votes for
each of the shares owned by him as there are directors to be elected and for
whose election he has the right to vote.
At each election of directors, that number of candidates equaling the
number of directors to be elected, having the highest number of votes cast in
favor of their election, shall be elected to the board of directors.
Except as otherwise ordered by a court of competent jurisdiction upon a
finding that the purpose of this Section would not be violated in the
circumstances presented to the court, the shares of the corporation are not
entitled to be voted if they are owned, directly or indirectly, by a second
corporation, domestic or foreign, and the first corporation owns, directly or
indirectly, a majority of the shares entitled to vote for directors of the
second corporation except to the extent the second corporation holds the shares
in a fiduciary capacity.
Redeemable shares are not entitled to be voted after notice of redemption
is mailed to the holders and a sum sufficient to redeem the shares has been
deposited with a bank, trust company or other financial institution under an
irrevocable obligation to pay the holders the redemption price on surrender of
the shares.
Section 11. Corporation's Acceptance of Votes. If the name signed on a
vote, consent, waiver, proxy appointment, or proxy appointment revocation
corresponds to the name of a shareholder, the corporation, if acting in good
faith, is entitled to accept the vote, consent, waiver, proxy appointment or
proxy appointment revocation and give it effect as the act of the shareholder.
If the name signed on a vote, consent, waiver, proxy appointment or proxy
appointment revocation does not correspond to the name of a shareholder, the
corporation, if acting in good faith, is nevertheless entitled to accept the
vote, consent, waiver, proxy appointment or proxy appointment revocation and to
give it effect as the act of the shareholder if:
(i) the shareholder is an entity and the name signed purports to
be that of an officer or agent of the entity;
(ii) the name signed purports to be that of an administrator,
executor, guardian or conservator representing the shareholder and, if the
corporation requests, evidence of fiduciary status acceptable to the
corporation has been presented with respect to the vote, consent, waiver,
proxy appointment or proxy appointment revocation;
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(iii) the name signed purports to be that of a receiver or trustee
in bankruptcy of the shareholder and, if the corporation requests,
evidence of this status acceptable to the corporation has been presented
with respect to the vote, consent, waiver, proxy appointment or proxy
appointment revocation;
(iv) the name signed purports to be that of a pledgee, beneficial
owner or attorney-in-fact of the shareholder and, if the corporation
requests, evidence acceptable to the corporation of the signatory's
authority to sign for the shareholder has been presented with respect to
the vote, consent, waiver, proxy appointment or proxy appointment
revocation;
(v) two or more persons are the shareholder as co-tenants or
fiduciaries and the name signed purports to be the name of at least one of
the co-tenants or fiduciaries, and the person signing appears to be acting
on behalf of all the co-tenants or fiduciaries; or
(vi) the acceptance of the vote, consent, waiver, proxy appointment
or proxy appointment revocation is otherwise proper under rules
established by the corporation that are not inconsistent with this Section
11.
If shares are registered in the names of two or more persons, whether
fiduciaries, members of a partnership, co-tenants, husband and wife as community
property, voting trustees, persons entitled to vote under a shareholder voting
agreement or otherwise, or if two or more persons, including proxyholders, have
the same fiduciary relationship respecting the same shares, unless the secretary
of the corporation or other officer or agent entitled to tabulate votes is given
written notice to the contrary and is furnished with a copy of the instrument or
order appointing them or creating the relationship wherein it is so provided,
their acts with respect to voting shall have the following effect:
(i) if only one votes, the act binds all;
(ii) if more than one vote, the act of the majority so voting binds
all;
(iii) if more than one vote, but the vote is evenly split on any
particular matter, each faction may vote the securities in question
proportionately; or
(iv) if the instrument so filed or the registration of the shares
shows that any tenancy is held in unequal interests, a majority or even
split for the purpose of this section shall be a majority or even split in
interest.
The corporation is entitled to reject a vote, consent, waiver, proxy
appointment or proxy appointment revocation if the secretary or other officer or
agent authorized to tabulate votes, acting in good faith, has reasonable basis
for doubt about the validity of the signature on it or about the signatory's
authority to sign for the shareholder.
Neither the corporation nor its officers nor any agent who accepts or
rejects a vote, consent, waiver, proxy appointment or proxy appointment
revocation in good faith and in accordance with the standards of this Section is
liable in damages for the consequences of the acceptance or rejection.
Section 12. Informal Action by Shareholders. Any action required or
permitted to be taken at a meeting of the shareholders may be taken without a
meeting and without prior notice, if a written consent (or counterparts thereof)
that sets forth the action so taken is received by the corporation and signed by
the holders of outstanding shares having not less than the minimum number of
votes that would be necessary to authorize or take the action at a meeting at
which all shares entitled to vote thereon were present and voted. Action taken
under this Section 12 has the same effect as action taken at a meeting of
shareholders and may be so described in any document.
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Action taken pursuant to this Section 12 is not effective unless all
written consents on which the corporation relies for the taking of an action
pursuant to this Section 12 are received by the corporation within a sixty day
period and have not been revoked. Action taken pursuant to this Section 12 is
effective as of the date the last written consent necessary to effect the action
is received by the corporation, unless all of the written consents necessary to
effect the action specify a later date as the effective date of the action, in
which case the later date shall be the effective date of the action. If the
corporation has received written consents as contemplated by this Section 12
signed by all shareholders entitled to vote with respect to the action, the
effective date of the action may be any date that is specified in all the
written consents as the effective date of the action. The writing may be
received by the corporation by electronically transmitted facsimile or other
form of communication providing the corporation with a complete copy thereof,
including a copy of the signature thereto. If any shareholder revokes his
consent as provided for herein prior to what would otherwise be the effective
date, the action proposed in the consent shall be invalid. The record date for
determining shareholders entitled to take action without a meeting is the date
the first shareholder delivers to the corporation a writing upon which the
action is taken.
Unless the written consents of all shareholders entitled to vote have been
obtained, notice of any shareholder approval without a meeting shall be given at
least ten days before the consummation of the action authorized by the approval
to (i) those shareholders entitled to vote who have not consented in writing;
and (ii) those shareholders not entitled to vote and to whom the Utah Business
Corporation Act requires that notice of the proposed action be given. The notice
must contain or be accompanied by the same material that, under the Utah
Business Corporation Act, would have been required to be sent in a notice of
meeting at which the proposed action would have been submitted to the
shareholders for action.
Any shareholder who has signed a writing describing and consenting to
action taken pursuant to this Section 12 may revoke such consent by a writing
signed by the shareholder describing the action and stating that the
shareholder's prior consent thereto is revoked, if such writing is received by
the corporation before the effectiveness of the action.
Section 13. Meetings by Telecommunication. Any or all of the shareholders
may participate in an annual or special shareholders' meeting by, or the meeting
may be conducted through the use of, any means of communication by which all
persons participating in the meeting may hear each other during the meeting. A
shareholder participating in a meeting by this means is deemed to be present in
person at the meeting.
ARTICLE III
Board of Directors
Section 1. General Powers. All corporate powers shall be exercised by or
under the authority of, and the business and affairs of the corporation shall be
managed under the direction of its board of directors, except as otherwise
provided in the Utah Business Corporation Act or the corporation's articles of
incorporation.
Section 2. Number, Qualifications and Tenure. The number of directors of
the corporation shall be no less than three or more than nine, as determined by
the board of directors, but no decrease in the number of directors shall have
the effect of shortening the term of any incumbent director. A director shall be
a natural person. A director need not be a resident of Utah or a shareholder of
the corporation.
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Directors shall be elected at each annual meeting of shareholders. Each
director shall hold office until the next annual meeting of shareholders
following his election and thereafter until his successor shall have been
elected and qualified. Directors shall be removed in the manner provided by the
Utah Business Corporation Act. Any director may be removed by the shareholders
with or without cause, at a meeting called for that purpose. The notice of the
meeting shall state that the purpose or one of the purposes of the meeting is
removal of the director. A director may be removed only if the number of votes
cast in favor of removal exceeds the number of votes cast against removal.
Section 3. Vacancies. Any director may resign at any time by giving
written notice to the corporation. Such resignation shall take effect at the
time the notice is received by the corporation unless the notice specifies a
later effective date. Unless otherwise specified in the notice of resignation,
the corporation's acceptance of such resignation shall not be necessary to make
it effective. Any vacancy on the board of directors may be filled by the
affirmative vote of a majority of the shareholders at a special meeting called
for that purpose or by the board of directors. A director elected to fill a
vacancy created other than by an increase in the number of directors shall be
elected for the unexpired term of the director's predecessor in office, or for
any lesser period as may be prescribed by the board of directors. If the
directors remaining in office constitute fewer than a quorum of the board, the
directors may fill the vacancy by the affirmative vote of a majority of all
directors remaining in office. If a director is elected to fill a vacancy
created by reason of an increase in the number of directors, then the term of
the director so elected expires at the next shareholders' meeting at which
directors are elected, unless the vacancy is filled by a vote of the
shareholders, in which case the term shall expire on the later of (i) the next
meeting of shareholders at which directors are elected; or (ii) the term
designated for the director at the time of the creation of the position being
filled.
Section 4. Regular Meetings. A regular meeting of the board of directors
shall be held without notice immediately after and at the same place as the
annual meeting of shareholders. The board of directors may provide by resolution
the time and place, either within or outside Utah, for the holding of additional
regular meetings without other notice.
Section 5. Special Meetings. Special meetings of the board of directors
may be called by or at the request of the chief executive officer or any two
directors. The person or persons authorized to call special meetings of the
board of directors may fix any place, either within or outside Utah, as the
place for holding any special meeting of the board of directors called by them.
Section 6. Notice. Notice of the date, time and place of any special
meeting shall be given to each director at least two days prior to the meeting
by written notice either personally delivered or mailed to each director at his
business address, or by notice transmitted by private courier, telegraph, telex,
electronically transmitted facsimile or other form of wire or wireless
communications. If mailed, such notice shall be deemed to be given and to be
effective on the earlier of (i) five days after such notice is deposited in the
United States mail, properly addressed, with first class postage prepaid, or
(ii) the date shown on the return receipt, if mailed by registered or certified
mail return receipt requested, provided that the return receipt is signed by the
director to whom the notice is addressed. If notice is given by telex,
electronically transmitted facsimile or other similar form of wire or wireless
communication, such notice shall be deemed to be given and to be effective when
sent, and with respect to a telegram, such notice shall be deemed to be given
and to be effective when the telegram is delivered to the telegraph company. If
a director has designated in writing one or more reasonable addresses or
facsimile numbers for delivery of notice to him, notice sent by mail, telegraph,
telex, electronically transmitted facsimile or other form of wire or wireless
communication shall not be deemed to have been given or to be effective unless
sent to such addresses or facsimile numbers, as the case may be.
A director may waive notice of a meeting before or after the time and date
of the meeting by a writing signed by such director. Such waiver shall be
delivered to the corporation for filing with the corporate records, but delivery
and filing are not conditions to the effectiveness of the waiver. Further, a
director's attendance at or participation in a meeting waives any required
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notice to him of the meeting unless at the beginning of the meeting, or promptly
upon the director's arrival, the director objects to holding the meeting or
transacting business at the meeting because of lack of notice or defective
notice and does not thereafter vote for or assent to action taken at the
meeting. Neither the business to be transacted at, nor the purpose of, any
regular or special meeting of the board of directors need be specified in the
notice or waiver of notice of such meeting.
Section 7. Quorum. A majority of the number of directors fixed by the
board of directors pursuant to Article III, Section 2 or, if no number is fixed,
a majority of the number in office immediately before the meeting begins, shall
constitute a quorum for the transaction of business at any meeting of the board
of directors.
Section 8. Manner of Acting. The act of the majority of the directors
present at a meeting at which a quorum is present shall be the act of the board
of directors.
Section 9. Compensation. By resolution of the board of directors, any
director may be paid any one or more of the following: his expenses, if any, of
attendance at meetings, a fixed sum for attendance at each meeting, a stated
salary as director, or such other compensation as the corporation and the
director may reasonably agree upon. No such payment shall preclude any director
from serving the corporation in any other capacity and receiving compensation
therefor.
Section 10. Presumption of Assent. A director of the corporation who is
present at a meeting of the board of directors or committee of the board at
which action on any corporate matter is taken shall be presumed to have assented
to the action taken unless (i) the director objects at the beginning of the
meeting, or promptly upon the director's arrival, to the holding of the meeting
or the transaction of business at the meeting and does not thereafter vote for
or assent to any action taken at the meeting, (ii) the director
contemporaneously requests that the director's dissent or abstention as to any
specific action taken be entered in the minutes of the meeting, or (iii) the
director causes written notice of his dissent or abstention as to any specific
action to be received by the presiding officer of the meeting before adjournment
of the meeting or by the corporation promptly after the adjournment of the
meeting. A director may dissent to a specific action at a meeting, while
assenting to others. The right to dissent to a specific action taken at a
meeting of the board of directors or a committee of the board shall not be
available to a director who voted in favor of such action.
Section 11. Committees. By resolution adopted by a majority of all the
directors in office when the action is taken, the board of directors may
designate from among its members an executive committee and one or more other
committees, and appoint one or more members of the board of directors to serve
on them. To the extent provided in the resolution, each committee shall have all
the authority of the board of directors. The committee shall then have full
power within the limits set by the board of directors to adopt any final
resolution setting forth all preferences, limitations and relative rights of
such class or series and to authorize an amendment of the articles of
incorporation stating the preferences, limitations and relative rights of a
class or series for filing with the Secretary of State under the Utah Business
Corporation Act.
Sections 4, 5, 6, 7, 8 and 12 of Article III, which govern meetings,
notice, waiver of notice, quorum, voting requirements and action without a
meeting of the board of directors, shall apply to committees and their members
appointed under this Section 11.
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Neither the designation of any such committee, the delegation of authority
to such committee, nor any action by such committee pursuant to its authority
shall alone constitute compliance by any member of the board of directors or a
member of the committee in question with his responsibility to conform to the
standard of care set forth in Article III, Section 14 of these bylaws.
Section 12. Informal Action by Directors. Any action required or permitted
to be taken at a meeting of the directors or any committee designated by the
board of directors may be taken without a meeting if a written consent (or
counterparts thereof) that sets forth the action so taken is signed by all of
the directors entitled to vote with respect to the action taken. Such consent
shall have the same effect as action taken at a meeting of directors and may be
described as such in any document. Unless the consent specifies a different
effective date, action taken under this Section 12 is effective at the time the
last director signs a writing describing the action taken, unless, before such
time, any director has revoked that director's consent by a writing signed by
the director and received by the chief executive officer or the secretary of the
corporation.
Section 13. Telephonic Meetings. The board of directors may permit any
director (or any member of a committee designated by the board) to participate
in a regular or special meeting of the board of directors or a committee thereof
through the use of any means of communication by which all directors
participating in the meeting can hear each other during the meeting. A director
participating in a meeting in this manner is deemed to be present in person at
the meeting.
Section 14. Standard of Care. A director shall perform his duties as a
director, including, without limitation, his duties as a member of any committee
of the board, in good faith, in a manner the director reasonably believes to be
in the best interests of the corporation, and with the care an ordinarily
prudent person in a like position would exercise under similar circumstances. In
performing his duties, a director shall be entitled to rely on information,
opinions, reports or statements, including financial statements and other
financial data, in each case prepared or presented by the persons herein
designated. However, he shall not be considered to be acting in good faith if he
has knowledge concerning the matter in question that would cause such reliance
to be unwarranted. A director shall not be liable to the corporation, its
shareholders or any conservator or receiver, or any assignee or
successor-in-interest thereof, for any action taken or any failure to take any
action as a director unless: (i) the director has breached or failed to perform
the duties of the office in compliance with this Section 14; and (ii) the breach
or failure to perform constitutes gross negligence, willful misconduct, or
intentional infliction of harm on the corporation or the shareholders.
The designated persons on whom a director is entitled to rely are (i) one
or more officers or employees of the corporation whom the director reasonably
believes to be reliable and competent in the matters presented, (ii) legal
counsel, public accountant, or other person as to matters the director
reasonably believes to be within such person's professional or expert
competence, or (iii) a committee of the board of directors of which the director
is not a member if the director reasonably believes the committee merits
confidence.
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ARTICLE IV
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Officers and Agents
-------------------
Section 1. General. The officers of the corporation shall be a chairman of
the board, a chief executive officer, a president, one or more vice presidents,
a secretary and a treasurer, each of whom shall be a natural person. One person
may hold more than one office. The board of directors or an officer or officers
authorized by the board may appoint such other officers, assistant officers,
committees and agents, including a chairman of the board, assistant secretaries
and assistant treasurers, as they may consider necessary. Except as expressly
prescribed by these bylaws, the board of directors or the officer or officers
authorized by the board shall from time to time determine the procedure for the
appointment of officers, their authority, duties and their compensation,
provided that the board of directors may change the authority, duties and
compensation of any officer who is not appointed by the board.
Section 2. Appointment and Term of Office. The officers of the corporation
shall be appointed by the board of directors at each annual meeting of the board
held after each annual meeting of the shareholders or as otherwise determined by
the board of directors. If the appointment of officers is not made at such
meeting or if an officer or officers are to be appointed by another officer or
officers of the corporation, such appointments shall be made as determined by
the board of directors or the appointing person or persons. Each officer shall
hold office until the first of the following occurs: his successor shall have
been duly appointed and qualified, his death, his resignation, or his removal in
the manner provided in Section 3.
Section 3. Resignation and Removal. An officer may resign at any time by
giving written notice of resignation to the corporation. The resignation is
effective when the notice is received by the corporation unless the notice
specifies a later effective date.
Any officer or agent may be removed at any time with or without cause by
the board of directors or an officer or officers authorized by the board. Such
removal does not affect the contract rights, if any, with the corporation. An
officer's resignation does not affect the corporation's contract rights, if any,
with the officer. The appointment of an officer or agent shall not in itself
create contract rights.
Section 4. Vacancies. A vacancy in any office, however occurring, may be
filled by the board of directors, or by the officer or officers authorized by
the board, for the unexpired portion of the officer's term. If an officer
resigns and his resignation is made effective at a later date, the board of
directors, or officer or officers authorized by the board, may permit the
officer to remain in office until the effective date and may fill the pending
vacancy before the effective date if the board of directors or officer or
officers authorized by the board provide that the successor shall not take
office until the effective date. In the alternative, the board of directors, or
officer or officers authorized by the board of directors, may remove the officer
at any time prior to the effective date and may fill the resulting vacancy.
Section 5. Chairman Of The Board. The chairman of the board shall preside
at all meetings of the board of directors. The chairman of the board shall not
have the authority to act on behalf of the corporation, or otherwise commit or
bind the corporation, unless specifically authorized by the board of directors
in specific instances.
Section 6. Chief Executive Officer. The chief executive officer shall
preside at all meetings of shareholders. Subject to the direction and
supervision of the board of directors, the chief executive officer shall have
general and active control of its affairs and business and general supervision
of its officers, agents and employees. Unless otherwise directed by the board of
directors, the chief executive officer shall attend in person or by substitute
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appointed by him, or shall execute on behalf of the corporation written
instruments appointing a proxy or proxies to represent the corporation, at all
meetings of the shareholders of any other corporation in which the corporation
holds any stock. On behalf of the corporation, the chief executive officer may
in person or by substitute or by proxy execute written waivers of notice and
consents with respect to any such meetings. At all such meetings and otherwise,
the chief executive officer, in person or by substitute or proxy, may vote the
stock held by the corporation, execute written consents and other instruments
with respect to such stock, and exercise any and all rights and powers incident
to the ownership of said stock, subject to the instructions, if any, of the
board of directors. The chief executive officer shall have custody of the
treasurer's bond, if any. The chief executive officer shall have such additional
authority and duties as are appropriate and customary for the office of chief
executive officer, except as the same may be expanded or limited by the board of
directors from time to time.
Section 7. President. The president shall be the chief operating officer
of the corporation and shall report to and be subject to the direction and
supervision of the chief executive officer. In the absence of a chief executive
officer, the president shall have the powers and perform the duties of the chief
executive officer.
Section 8. Vice Presidents. The vice presidents shall assist the chief
executive officer and shall perform such duties as may be assigned to them by
the chief executive officer or by the board of directors. In the absence of the
president, the vice president, if any (or, if more than one, the vice presidents
in the order designated by the board of directors, or if the board makes no such
designation, then the vice president designated by the chief executive officer,
or if neither the board nor the chief executive officer makes any such
designation, the senior vice president as determined by first election to that
office), shall have the powers, and perform the duties, of the president.
Section 9. Secretary. The secretary shall (i) prepare and maintain as
permanent records the minutes of the proceedings of the shareholders and the
board of directors, a record of all actions taken by the shareholders or board
of directors without a meeting, a record of all actions taken by a committee of
the board of directors in place of the board of directors on behalf of the
corporation, and a record of all waivers of notice of meetings of shareholders
and of the board of directors or any committee thereof, (ii) see that all
notices are duly given in accordance with the provisions of these bylaws and as
required by law, (iii) serve as custodian of the corporate records and of the
seal of the corporation and affix the seal to all documents when authorized by
the board of directors, (iv) keep at the corporation's registered office or
principal place of business a record containing the names and addresses of all
shareholders in a form that permits preparation of a list of shareholders
arranged by voting group and by class or series of shares within each voting
group, that is alphabetical within each class or series and that shows the
address of, and the number of shares of each class or series held by, each
shareholder, unless such a record shall be kept at the office of the
corporation's transfer agent or registrar, (v) maintain at the corporation's
principal office the originals or copies of the corporation's articles of
incorporation, bylaws, minutes of all shareholders' meetings and records of all
action taken by shareholders without a meeting for the past three years, all
written communications within the past three years to shareholders as a group or
to the holders of any class or series of shares as a group, a list of the names
and business addresses of the current directors and officers, a copy of the
corporation's most recent corporate report filed with the Secretary of State,
and financial statements showing in reasonable detail the corporation's assets
and liabilities and results of operations for the last three years, (vi) have
general charge of the stock transfer books of the corporation, unless the
corporation has a transfer agent, (vii) authenticate records of the corporation,
and (viii) in general, perform all duties incident to the office of secretary
and such other duties as from time to time may be assigned to him by the chief
executive officer or by the board of directors. Assistant secretaries, if any,
shall have the same duties and powers, subject to supervision by the secretary.
The directors and/or shareholders may however respectively designate a person
other than the secretary or assistant secretary to keep the minutes of their
respective meetings.
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Any books, records, or minutes of the corporation may be in written form
or in any form capable of being converted into written form within a reasonable
time.
Section 10. Treasurer. The treasurer shall be the principal financial
officer of the corporation, shall have the care and custody of all funds,
securities, evidences of indebtedness and other personal property of the
corporation and shall deposit the same in accordance with the instructions of
the board of directors. Subject to the limits imposed by the board of directors,
he shall receive and give receipts and acquittances for money paid in on account
of the corporation, and shall pay out of the corporation's funds on hand all
bills, payrolls and other just debts of the corporation of whatever nature upon
maturity. He shall perform all other duties incident to the office of the
treasurer and, upon request of the board, shall make such reports to it as may
be required at any time. He shall, if required by the board, give the
corporation a bond in such sums and with such sureties as shall be satisfactory
to the board, conditioned upon the faithful performance of his duties and for
the restoration to the corporation of all books, papers, vouchers, money and
other property of whatever kind in his possession or under his control belonging
to the corporation. He shall have such other powers and perform such other
duties as may from time to time be prescribed by the board of directors or the
chief executive officer. The assistant treasurers, if any, shall have the same
powers and duties, subject to the supervision of the treasurer.
The treasurer shall also be the principal accounting officer of the
corporation. He shall prescribe and maintain the methods and systems of
accounting to be followed, keep complete books and records of account as
required by the Utah Business Corporation Act, prepare and file all local, state
and federal tax returns, prescribe and maintain an adequate system of internal
audit and prepare and furnish to the chief executive officer and the board of
directors statements of account showing the financial position of the
corporation and the results of its operations.
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ARTICLE V
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Stock
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Section 1. Certificates. The board of directors shall be authorized to
issue any of its classes of shares with or without certificates. The fact that
the shares are not represented by certificates shall have no effect on the
rights and obligations of shareholders. If the shares are represented by
certificates, such shares shall be represented by consecutively numbered
certificates signed, either manually or by facsimile, in the name of the
corporation by the chief executive officer and one other officer designated by
the board of directors. The signatures of the officers upon a certificate may be
facsimiles if the certificate is countersigned by a transfer agent, or
registered by a registrar, other than the corporation itself or an employee of
the corporation. In case any officer who has signed or whose facsimile signature
has been placed upon such certificate shall have ceased to be such officer
before such certificate is issued, such certificate may nonetheless be issued by
the corporation with the same effect as if he were such officer at the date of
its issue. All certificates shall be consecutively numbered and the names of the
owners, the number of shares, and the date of issue shall be entered on the
books of the corporation. Each certificate representing shares shall state upon
its face:
(i) That the corporation is organized under the laws of
Utah;
(ii) The name of the person to whom issued;
(iii) The number and class of the shares and the designation of the
series, if any, the certificate represents;
(iv) If the corporation is authorized to issue different classes of
shares or different series within a class, a summary on the front or the
back, of the designations, preferences, limitations, and relative rights
applicable to each class, the variations and preferences, limitations, and
relative rights determined for each series, and the authority of the board
of directors to determine variations for any existing or future classes or
series. Alternatively, a conspicuous statement, on the front or the back,
that the corporation will furnish to the shareholder, on request in
writing, and without charge, information concerning the designations,
preferences, limitations, and relative rights applicable to each class,
the variations in preferences, limitations, and relative rights determined
for each series, and the authority of the board of directors to determine
variations for any existing or future classes or series; and
(v) Any restrictions imposed by the corporation upon the transfer of
the shares represented by the certificate.
If shares are not represented by certificates, within a reasonable time
following the issue or transfer of such shares, the corporation shall send the
shareholder a complete written statement of all of the information required to
be provided to holders of uncertificated shares by the Utah Business Corporation
Act.
Section 2. Consideration for Shares. Certificated or uncertificated shares
shall not be issued until the shares represented thereby are fully paid. The
board of directors may authorize the issuance of shares for consideration
consisting of any tangible or intangible property or benefit to the corporation,
including cash, promissory notes, services performed, contracts or arrangements
for services to be performed, or other securities of the corporation. The terms
and conditions of any tangible or intangible property or benefit to be provided
in the future to the corporation, including contracts or arrangements for
services to be performed, shall be set forth in writing. However, the failure to
set forth the terms and conditions in writing does not affect the validity of
the issuance of any shares issued for any consideration, or their status as
fully paid and nonassessable shares.
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Section 3. Lost Certificates. In case of the alleged loss, destruction or
mutilation of a certificate of stock, the board of directors may direct the
issuance of a new certificate in lieu thereof upon such terms and conditions in
conformity with law as the board may prescribe. The board of directors may in
its discretion require an affidavit of lost certificate and/or a bond in such
form and amount and with such surety as it may determine before issuing a new
certificate.
Section 4. Transfer of Shares. Upon surrender to the corporation or to a
transfer agent of the corporation of a certificate of stock duly endorsed or
accompanied by proper evidence of succession, assignment or authority to
transfer, and receipt of such documentary stamps as may be required by law and
evidence of compliance with all applicable securities laws and other
restrictions, the corporation shall issue a new certificate to the person
entitled thereto, and cancel the old certificate. Every such transfer of stock
shall be entered on the stock books of the corporation which shall be kept at
its principal office or by the person and the place designated by the board of
directors.
Except as otherwise expressly provided in Article II, Sections 7 and 11,
and except for the assertion of dissenters' rights to the extent provided in
Part 13 of the Utah Business Corporation Act, the corporation shall be entitled
to treat the registered holder of any shares of the corporation as the owner
thereof for all purposes, and the corporation shall not be bound to recognize
any equitable or other claim to, or interest in, such shares or rights deriving
from such shares on the part of any person other than the registered holder,
including, without limitation, any purchaser, assignee or transferee of such
shares or rights deriving from such shares, unless and until such other person
becomes the registered holder of such shares, whether or not the corporation
shall have either actual or constructive notice of the claimed interest of such
other person.
Section 5. Transfer Agent, Registrars and Paying Agents. The board may, at
its discretion, appoint one or more transfer agents, registrars and agents for
making payment upon any class of stock, bond, debenture or other security of the
corporation. Such agents and registrars may be located either within or outside
Utah. They shall have such rights and duties and shall be entitled to such
compensation as may be agreed.
ARTICLE VI
----------
Indemnification of Certain Persons
----------------------------------
Section 1. Indemnification. For purposes of Article VI, a "Proper Person"
means any person (including the estate or personal representative of a director)
who was or is a party or is threatened to be made a party to any threatened,
pending, or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative, and whether formal or informal, by reason of
the fact that he is or was a director, officer, employee, fiduciary or agent of
the corporation, or is or was serving at the request of the corporation as a
director, officer, partner, trustee, employee, fiduciary or agent of another
foreign or domestic corporation or other person or of an employee benefit plan.
The corporation shall indemnify any Proper Person against reasonably incurred
expenses (including attorneys' fees), judgments, penalties, fines (including any
excise tax assessed with respect to an employee benefit plan) and amounts paid
in settlement reasonably incurred by him in connection with such action, suit or
proceeding if it is determined by the groups set forth in Section 4 of this
Article that (i) he conducted himself in good faith, (ii) he reasonably believed
that his conduct was in, or not opposed to, the corporation's best interests,
and (iii) in the case of any criminal proceeding, that he had no reasonable
cause to believe his conduct was unlawful.
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<PAGE>
A director's conduct with respect to an employee benefit plan for a
purpose the director reasonably believed to be in, or not opposed to, the
interests of the participants in and beneficiaries of the plan is conduct that
satisfies the requirement in (ii) of this Section 1.
No indemnification shall be made under this Article VI to a Proper Person
with respect to any claim, issue or matter in connection with a proceeding by or
in the right of a corporation in which the Proper Person was adjudged liable to
the corporation or in connection with any other proceeding charging that the
Proper Person derived an improper personal benefit, whether or not involving
action in an official capacity, in which he was adjudged liable on the basis
that he derived an improper personal benefit. Official capacity means, when used
with respect to a director, the office of director and, when used with respect
to any other Proper Person, the office in a corporation held by the officer, or
the employment, fiduciary or agency relationship undertaken by the employee,
fiduciary, or agent on behalf of the corporation. Official capacity does not
include service for any other domestic or foreign corporation or other person or
employee benefit plan. Further, indemnification under this Section in connection
with a proceeding brought by or in the right of the corporation shall be limited
to reasonable expenses, including attorneys' fees, incurred in connection with
the proceeding.
Section 2. Right to Indemnification. The corporation shall indemnify any
Proper Person who was wholly successful, on the merits or otherwise, in defense
of any proceeding, or in the defense of any claim, issue, or matter in the
proceeding, to which he was entitled to indemnification under Section 1 of this
Article VI against expenses (including attorneys' fees) reasonably incurred by
him in connection with the proceeding without the necessity of any action by the
corporation other than the determination in good faith that the defense has been
wholly successful.
Section 3. Effect of Termination of Action. The termination of any action,
suit or proceeding by judgment, order, settlement or conviction, or upon a plea
of nolo contendere or its equivalent is not, of itself, determinative that the
person seeking indemnification did not meet the standards of conduct described
in Section 1 of this Article VI. Entry of a judgment by consent as part of a
settlement shall not be deemed an adjudication of liability, as described in
Section 2 of this Article VI.
Section 4. Groups Authorized to Make Indemnification Determination. Except
where there is a right to indemnification as set forth in Sections 1 or 2 of
this Article VI or where indemnification is ordered by a court in Section 5, any
indemnification shall be made by the corporation only as determined in the
specific case by a proper group that indemnification of the Proper Person is
permissible under the circumstances because he has met the applicable standards
of conduct set forth in Section 1 of this Article VI. This determination shall
be made by (i) the board of directors by a majority vote of those present at a
meeting at which a quorum is present, which quorum shall consist of directors
not parties to the proceeding ("Quorum"); (ii) if a Quorum cannot be obtained,
the determination shall be made by a majority vote of a committee of the board
of directors designated by the board, which committee shall consist of two or
more directors not parties to the proceeding, except that directors who are
parties to the proceeding may participate in the designation of directors for
the committee; (iii) by special legal counsel selected by a vote of the board of
directors or the committee in the manner specified in this Section 4 or, if a
Quorum of the full board of directors cannot be obtained and a committee cannot
be designated, by special legal counsel selected by a majority vote of the full
board (including directors who are parties to the action); or (iv) by the
shareholders, by a majority of the votes entitled to be cast by holders of
qualified shares present in person or by proxy at a meeting.
Authorization of indemnification and advance of expenses shall be made in
the same manner as the determination that indemnification or advance of expenses
is permissible except that, if the determination that indemnification or advance
of expenses is permissible is made by special legal counsel, authorization of
indemnification and advance of expenses shall be made by the body that selected
such counsel.
16
<PAGE>
Section 5. Court-Ordered Indemnification. Any Proper Person may apply for
indemnification to the court conducting the proceeding or to another court of
competent jurisdiction for mandatory indemnification under Section 2 of this
Article VI, including indemnification for reasonable expenses incurred to obtain
court-ordered indemnification. If a court determines that the Proper Person is
entitled to indemnification under Section 2 of this Article VI, the court shall
order indemnification including the Proper Person's reasonable expenses incurred
to obtain court-ordered indemnification. If the court determines that such
Proper Person is fairly and reasonably entitled to indemnification in view of
all the relevant circumstances, whether or not he met the standards of conduct
set forth in Section 1 of this Article VI or was adjudged liable in the
proceeding, the court may order such indemnification as the court deems proper
except that in connection with a proceeding by or in the right of the
corporation in which the Proper Person was adjudged liable to the corporation,
or in connection with any other proceeding charging that the Proper Person
derived an improper personal benefit, whether or not involving action in his
official capacity, in which proceeding he was adjudged liable on the basis that
he derived an improper personal benefit, indemnification shall be limited to
reasonable expenses incurred.
Section 6. Advance of Expenses. Reasonable expenses (including attorneys'
fees) incurred in defending an action, suit or proceeding as described in
Section 1 may be paid by the corporation to any Proper Person in advance of the
final disposition of such action, suit or proceeding upon receipt of (i) a
written affirmation of such Proper Person's good faith belief that he has met
the standards of conduct prescribed by Section 1 of this Article VI, (ii) a
written undertaking, executed personally or on the Proper Person's behalf, to
repay such advances if it is ultimately determined that he did not meet the
prescribed standards of conduct (the undertaking shall be an unlimited general
obligation of the Proper Person but need not be secured and may be accepted
without reference to financial ability to make repayment), and (iii) a
determination is made by the proper group (as described in Section 4 of this
Article VI) that the facts as then known to the group would not preclude
indemnification. Determination and authorization of payments shall be made in
the same manner specified in Section 4 of this Article VI.
Section 7. Additional Indemnification to Certain Persons Other Than
Directors. In addition to the indemnification provided to officers, employees,
fiduciaries or agents because of their status as Proper Persons under this
Article, the corporation may also indemnify and advance expenses to them if they
are not directors of the corporation to a greater extent than is provided in
these bylaws, if not inconsistent with public policy, and if provided for in the
corporation's articles of incorporation, by general or specific action of its
board of directors, or by contract.
Section 8. Witness Expenses. The sections of this Article VI do not limit
the corporation's authority to pay or reimburse expenses incurred by a director
in connection with an appearance as a witness in a proceeding at a time when he
has not been made a named defendant or respondent in the proceeding.
17
<PAGE>
ARTICLE VII
-----------
Provision of Insurance
----------------------
By action of the board of directors, notwithstanding any interest of the
directors in the action, the corporation may purchase and maintain insurance, in
such scope and amounts as the board of directors deems appropriate, on behalf of
any person who is or was a director, officer, employee, fiduciary or agent of
the corporation, or who, while serving as a director, officer, employee,
fiduciary or agent of the corporation, is or was serving at the request of the
corporation as a director, officer, partner, trustee, employee, fiduciary or
agent of another foreign or domestic corporation or other person, or of an
employee benefit plan, against liability asserted against, or incurred by, him
in that capacity or arising out of his status as such, whether or not the
corporation would have the power to indemnify him against such liability under
the provisions of Article VI or applicable law. Any such insurance may be
procured from any insurance company designated by the board of directors of the
corporation, whether such insurance company is formed under the laws of Utah or
any other jurisdiction of the United States or elsewhere, including any
insurance company in which the corporation has an equity interest or any other
interest, through stock ownership or otherwise.
ARTICLE VIII
------------
Miscellaneous
-------------
Section 1. Seal. The board of directors may adopt a corporate seal, which
shall be circular in form and shall contain the name of the corporation and the
words, "Seal, Utah".
Section 2. Fiscal Year. The fiscal year of the corporation shall be as
established by the board of directors.
Section 3. Amendments. The board of directors shall have power, to the
maximum extent permitted by the Utah Business Corporation Act, to make, amend
and repeal the bylaws of the corporation at any regular or special meeting of
the board unless the shareholders, in making, amending or repealing a particular
bylaw, expressly provide that the directors may not amend or repeal such bylaw.
The shareholders also shall have the power to make, amend or repeal the bylaws
of the corporation at any annual meeting or at any special meeting called for
that purpose.
Section 4. Receipt Of Notices By The Corporation. Notices, shareholder
writings consenting to action, and other documents or writings shall be deemed
to have been received by the corporation when they are actually received: (i) at
the registered office of the corporation in Utah; (ii) at the principal office
of the corporation (as that office is designated in the most recent document
filed by the corporation with the secretary of state for Utah designating a
principal office) addressed to the attention of the secretary of the
corporation; (iii) by the secretary of the corporation wherever the secretary
may be found; or; (iv) by any other person authorized from time to time by the
board or directors or the chief executive officer to receive such writings,
wherever such person is found.
Section 5. Gender. The masculine gender is used in these bylaws as a matter
of convenience only and shall be interpreted to include the feminine and neuter
genders as the circumstances indicate.
Section 6. Conflicts. In the event of any irreconcilable conflict between
these bylaws and either the corporation's articles of incorporation or
applicable law, the latter shall control.
Section 7. Definitions. Except as otherwise specifically provided in these
bylaws, all terms used in these bylaws shall have the same definition as in the
Utah Business Corporation Act.
****************
EMPLOYMENT AGREEMENT
This Employment Agreement ("Agreement") is entered into as of March 19,
1998("Effective Date") between Kevin 0. Shoemaker ("Employee") and Antennas
America ,Inc., a Utah Corporation ("Company"). For purposes of this Agreement,
each of Employee and Company is individually referred to as a "Party", and
Employee and Company are referred to collectively as "Parties".
RECITALS
1. Company is in the business of developing, manufacturing and marketing
antennas and antenna systems.
2. Employee has been engaged in and represents that he has had a great deal of
experience in the above designated business.
3. Employee is willing to be employed by Company, and Company is willing to
employ Employee, on the terms, covenants, and conditions set forth in this
Agreement.
AGREEMENT
In consideration of the premises and of the mutual covenants included in this
Agreement, the Parties agree as follows:
1. Services: Company retains Employee and Employee shall perform services for
Company as set forth in this Agreement on behalf of Company for the period and
under the terms and conditions set forth in this Agreement.
2. Term: This Agreement shall be for a period ("Term") commencing on the
Effective Date and ending on December 31, 1999, subject, however, to review and
termination during the Term as provided herein, including Section 8 hereof.
3. Duties: Employee shall perform the following services for Company:
3.1. Employee shall serve as Chief Scientist and in that capacity shall
work with the Company to pursue Company's plans as directed by the Chief
Executive Officer. design and manufacture of Company's products and the
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<PAGE>
performance of consulting design activities on behalf of Company's customers,
subject to the direction of the Chief Executive Officer. Employee agrees not to
send any prototypes or any revisions of prototypes to customers prior to the
product review meeting that must include Employee and the Chief Executive
Officer and/or Vice President. Employee further agrees that the estimated or
final costs of the product must be agreed to in the product review meeting.
3.3. During the Term, Employee shall devote all of Employee's business time
to the performance of Employee's duties under this Agreement. Without limiting
the foregoing, Employee shall be on Company's premises between the hours of 8:30
a.m. and 5:00 p.m., performing services on behalf of Company or traveling, which
includes required off-premises testing, on behalf of Company for at least 40
hours per week and Employee shall be available at the request of Company at
other times, including weekends and holidays, to meet the needs and requests of
Company's customers.
3.4. During the Term, Employee shall not engage in any other activities or
undertake any other commitments that conflict with or take priority over
Employee's responsibilities and obligations to Company and Company's customers,
including without limitation those responsibilities and obligations incurred
pursuant to this Agreement.
3.5. Employee agrees to commit to exercise sound judgment when answering
customer inquiries regarding what Company can deliver for what price and by what
date. Any such responses shall be approved in advance by the Chief Executive
Officer.
3.6. Employee agrees to keep his work area organized and to maintain proper
documentation for each project.
3.7. Employee agrees to act in a responsible manner commensurate to that
for the Chief Scientist position.
4. Compensation: Company shall pay Employee for the performance of services
pursuant to this Agreement as follows:
4.1. Company shall pay Employee for the performance of services pursuant to
this Agreement a salary at the annual rate of not less than $66,000 for the
first twelve (12) months, effective as of March 19,1998, payable in at least
bi-weekly installments. If the bonus criteria described in Section 4.3 below are
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<PAGE>
met in 1998 pursuant to this Agreement, Company shall pay Employee as the result
of this performance a salary at the annual rate of not less than $70,000 per
year effective the first day after the Chief Executive Officer has determined
that the 1998 bonus criteria have been met.
4.2. Any payments that Company agrees to make to Employee under this
Agreement shall be reduced by (i) such amounts as are required to be withheld
with respect to those amounts under and for the purposes of any of the
applicable income tax and other applicable laws or regulations, and (ii) such
amounts as Employee may owe to Company at any time.
4.3 Employee shall be paid a bonus of $10,000 if the Company's annual net
income equals $300,000 to $599,000; $20,000 if the Company's annual net income
equals $600,000 to $899,999 and $30,000 if the Company's annual net income
equals or exceeds $900,000. Employee's bonus is subject, however, to Employee
contributing a reasonable amount of finished products to the Company's
assortment of existing products for the fiscal year that the bonus is payable.
New product projects will be reviewed by Employee and the Chief Executive
officer on a quarterly basis and at that time it will be determined (a) if a new
project should be added to the Company's business plan; (b) if an ongoing new
project is on schedule; (c) if specifications and objectives have been met. Any
new projects proposed by Employee and approved by the Chief Executive Officer
but not completed within a reasonable time will be subject to cancellation and
possible off-set of any successful new projects. However, Employee will have the
option to unilaterally cancel any new project within 90 days from the date of
the Chief Executive Officer's initial authorization to proceed. Current projects
subject to the bonus are the (a) Harpoon; (b) indoor off-air antenna and; (c)
off-air amplifier. Maintenance projects will not be considered as new projects
for bonus purposes, viz. Lojack, Norand, Intermec, Micron, mobile/GPS. A new
project will be considered successful only after the new product is included in
the Company's monthly production schedule. In the event that Employee and the
Chief Executive Officer can not come to agreement regarding the authorization or
prioritization of a new project, either party may call for an executive meeting
of the Board to arbitrate the dispute. It is further agreed that Employee will
prepare a written report at least quarterly describing the status of all new
projects.
3
<PAGE>
4.3.1. The bonus shall be based on the audited year-end financial
statements of Company and shall be payable on or before 30 business days after
the filing by the Company with the S.E.C. of Company's Annual Report on Form
10-KSB or Form 10-K, or the successor to either such Form, with respect to that
fiscal year.
4.4. Employee shall be eligible for participation in any present or future
incentive compensation, pension, retirement, or stock purchase plan of Company
of which other employees of Company are generally eligible. It is understood,
however, that entitlements which may accrue to Employee pursuant to such
arrangements may differ from those which accrue to other employees, such
differences being based on the discretion of the Board.
4.5. Employee agrees, upon execution of this Agreement not to offer, sell
or agree to sell, or otherwise dispose of directly or indirectly, prior to
December 31, 1999, any shares of Common Stock beneficially owned by Employee,
without the prior written consent of the Company. Employee agrees that the
Company may cause a restrictive legend describing the restrictions to be placed
on each of the respective undersigned's stock certificates representing shares
of Common Stock and that the Company may instruct the Company's stock transfer
agent not to allow the transfer of any of the undersigned's respective shares of
Common Stock. Employee further agrees that in the event his employment with the
Company is terminated for any reason by either himself or the Company, the terms
of this Section 4.5. will survive, and that the above referenced restrictions on
Employees stock will remain in force until at least December 31, 1999.
5. Reimbursement of Expenses: Employee shall be reimbursed for reasonable
pre-approved expenses incurred on behalf of Company in the performance of
Employee's duties and services pursuant to this Agreement. Employee shall
provide Company with an expense report containing a detailed description of
expenses incurred by the 30th day following the calendar month in which the
expenses were incurred on behalf of Company. The description of expenses shall
contain such information as may be required in order to permit such
reimbursements as proper deductions to Company under the Internal Revenue Code
as amended and the rules and regulations adopted pursuant thereto and in effect
at that time. Company shall make approved reimbursements within 30 days of
receipt of the expense report.
4
<PAGE>
6. Additional Benefits:
6.1. Employee shall be entitled to 10 days of paid vacation, 5 days of paid
sick leave, and 5 days of paid personal leave, each calendar year, during the
Term of this Agreement in accordance with the vacation policies and practices of
Company. Employee shall provide Company with at least one day notice prior to
Employee's use of personal leave days. Employee shall not be entitled to utilize
personal leave days on days on which Employee's services are required by Company
to meet the needs of Company's customers or where Employee's absence will
otherwise have a material effect on the operations or business of Company. The
use by Employee of a personal day in violation of the prior sentence shall be a
material breach of this Agreement. Employee shall be entitled to receive such
additional vacation, personal, and sick leave days as are provided to all other
managers or directors of Company.
6.2 Employee and his family, if any, shall be entitled to receive such
benefits from medical insurance plans, life and disability insurance and
otherwise, as are provided to all other salaried employees of Company.
7. Proprietary Information and Inventions Agreement: Employee agrees that his
employment with Company is contingent upon his signing and dating the
Proprietary Information and Inventions Agreement on the same day he signs and
dates this Agreement.
8. Termination: Employee's employment with Company will not be for a specified
term and may be terminated with cause by the Company at any time. Any contrary
representations or agreements which may have been made to Employee are
superseded by this Agreement.
8.1. This Agreement shall terminate upon the death of Employee or if
Employee becomes disabled. Employee shall be considered "disabled" if, and on
the date on which, Employee has been unable to perform a substantial and
material portion of Employee's services hereunder, for a period of 90 continuous
days, because of sickness, injury, or disability, as determined by a majority of
the Board.
8.2 In the event Employee's employment is terminated, then all unaccrued
salary and any bonus obligations of Company to Employee shall cease as of the
date of termination.
5
<PAGE>
9. Alternative Dispute Resolution: Employee agrees that any and all disputes
that Employee has with Company or with any of Company's employees, which arise
out of Employee's employment or under the terms of this Agreement shall be
resolved through final and binding arbitration, as specified herein. This shall
include, without limitation, disputes relating to this Agreement, Employee's
employment by Company or the termination thereof, claims for breach of contract
or breach of the covenant of good faith and fair dealing, and any claims of
discrimination or other claims under any federal, state or local law or
regulation now in existence or hereinafter enacted and as amended from time to
time concerning in any way the subject of Employee's employment with Company or
his termination. The only claims not covered by this Paragraph 9 are wage
claims, claims for benefits under the workers' compensation laws or claims for
unemployment insurance benefits, which will be resolved pursuant to those laws.
Binding arbitration will be conducted in either Arapahoe, Denver, or Jefferson
County, Colorado, in accordance with the rules and regulations of the American
Arbitration Association Employment Dispute Resolution Rules. Each Party will
split the cost of the arbitration filing and hearing fees, and the cost of the
arbitrator; each Party will bear its own attorneys' fees, unless otherwise
decided by the arbitrator. Employee understands and agrees that the arbitration
shall be instead of any civil litigation and that the arbitrator's decision
shall be final and binding to the fullest extent permitted by law and
enforceable by any court having jurisdiction thereof. Employee further
represents that he is making a voluntary and knowing waiver of his right to
pursue any and all employment-related claims in court and that he acknowledges
that he has been encouraged by Company to have this Agreement reviewed by his
legal counsel prior to his signing.
10. Non-compete: Employee acknowledges and recognizes the highly competitive
nature of Company's business and that Employee's duties hereunder justify
restricting Employee's future employment following any termination of employment
with Company. Employee agrees that so long as Employee is employed with Company,
and for a period of two years following the termination of employment with
Company, Employee, except when acting on behalf of or for the benefit of
Company, will not (i) induce customers, agents or other sources of distribution
6
<PAGE>
of Company's business under contract or doing business with Company to
terminate, reduce, alter or divert business with or from Company, or (ii)
compete, within the United States, with Company, or participate as an officer,
principal,employee, or consultant in any business that includes part or all of
the Company's Area of Business, as defined below. As used herein, the term
"compete, within the United States" shall include any competitive activity,
including any sale, distribution, marketing or manufacturing that occurs, or is
intended to occur, directly or indirectly, in the United States or with a person
or entity located in, operating in with respect to that activity or
headquartered in, the United States that involves products that directly
conflict with products introduced and developed by the Company. These products
include but are not limited to disguised vehicular antennas for the purpose of
tracking and locating vehicles, off-air antennas for the purpose of providing
clandestine Local home TV reception, flat panel antennas that include the use of
styrofoam and die-cut copper foil, any antenna product using the cable as a
receptor, and any product currently patented, a patent has been filed for or is
patent pending by the Company prior to or during the term of this Agreement.
Ownership by Employee, for investment purposes only, of less than five percent
of any class of securities of a corporation if said securities are listed on a
national securities exchange or registered under the Securities Exchange Act of
1934, as amended, shall not constitute a breach of the foregoing covenant.
Company's Area of Business includes the design, marketing, production and sale
of antennas and antenna systems.
11. Miscellaneous Provisions:
11.1. Notice: Any notice pursuant to this Agreement shall be validly given
or served if that notice is made in writing and delivered personally or sent by
certified mail, return receipt requested, postage prepaid, to the following
addresses:
To Company: Antennas America, Inc.
4860 Robb Street, Suite 101
Wheat Ridge, Colorado 80033
To Employee: Kevin O. Shoemaker
260 East Cornwall Court
Lafayette, CO 80026
7
<PAGE>
All notices so given shall be effective upon receipt. Either Party, by notice so
given, may change the address to which his or its future notices shall be sent.
11.2. Entire Agreement: This Agreement constitutes the entire agreement
between the Parties with respect to the subject matter of this Agreement and
supersedes all prior and contemporaneous agreements between the Parties with
respect to the subject matter of this Agreement.
11.3. Severability: Whenever possible, each provision of this Agreement
shall be interpreted in such a manner as to be effective and valid under
applicable law, and if any provision of this Agreement shall be or become
prohibited or invalid in whole or in part for any reason whatsoever, that
provision shall be ineffective only to the extent of such prohibition or
invalidity without invalidating the remaining portion of that provision or the
remaining provisions of this Agreement.
11.4. Non-waiver: The waiver of either Party of a breach or violation of
any provision of this Agreement shall not operate or be construed as a waiver of
any subsequent breach or violation of any provision of this Agreement.
11.5. Amendment: No amendment or modification of this Agreement shall be
deemed effective unless and until it has been executed in writing by the Parties
to this Agreement. No term or condition of this Agreement shall be deemed to
have been waived, nor shall there be any estoppel to enforce any provision of
this Agreement, except by a written instrument that has been executed by the
Party charged with such waiver or estoppel.
11.6. Inurement: This Agreement shall be binding upon Employee and Company
and its successors and/or assigns. This Agreement shall not be assignable by
Employee.
11.7. Headings: The headings in this Agreement are for convenience only;
they form no part of this Agreement and shall not affect its interpretation.
12. Representations and Warranties:
12.1. Company represents and warrants to Employee the following: (i)
Company has been duly formed as a corporation under the laws of the State of
Utah; and (ii) the execution of this Agreement has been duly authorized by
Company and does not require the consent of or notice to any party not
previously obtained or given.
8
<PAGE>
12.2. Employee represents and warrants to Company that the execution of
this Agreement and the performance of Employee's obligations hereunder does not
require the consent of or notice to any party not previously obtained or given,
and there is nothing that prohibits or restricts the execution by Employee of
this Agreement or his performance of the obligations hereunder.
13. Covenants: Each of Employee and Company covenants to diligently and
skillfully do and perform the acts and services required herein.
IN WITNESS WHEREOF and intending to be legally bound, the Parties to this
Agreement have executed this Agreement on the dates indicated below to be
effective as of the Effective Date.
Employee:
Date: March 19,1998
----------------------- ------------------------------------
Kevin O. Shoemaker
Company:
Antennas America, Inc.
By:
------------------------------------
Randall P. Marx
Chief Executive Officer
9
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