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As filed with the Securities and Exchange Commission on January 31, 2000
REGISTRATION NO. 333-87561
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------------
AMENDMENT NO. 3
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
-------------------------
VSI ENTERPRISES, INC.
(Exact name of Registrant as specified in its charter)
Delaware 84-1104448
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
5801 Goshen Springs Road
Norcross, Georgia 30071
(770) 242-7566
(Address, including zip code, and telephone number, including area code, of
Registrant's principal executive offices)
Richard E. Harrison, Chief Executive Officer
5801 Goshen Springs Road
Norcross, Georgia 30071
(770) 242-7566
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
Copy to:
ROBERT T. MOLINET, ESQ.
SMITH, GAMBRELL & RUSSELL, LLP
1230 PEACHTREE STREET, N.E., SUITE 3100
ATLANTA, GEORGIA 30309
(404) 815-3643
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As
soon as practicable after the effective date of this Registration Statement.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, other than securities offered only in connection with
dividend or interest reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. [ ]
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----------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE
OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
Set forth below are estimates of the fees and expenses payable by VSI
Enterprises in connection with the offer and sale of the common stock:
<TABLE>
<CAPTION>
<S> <C>
SEC registration fee.......................................... $ 701
Blue sky qualification fees and expenses...................... 1,500
Legal fees and expenses....................................... 10,000
Accounting fees and expenses.................................. 15,000
Transfer Agent fees........................................... 1,000
Printing, materials, and postage.............................. 1,500
Miscellaneous expenses........................................ 299
--------
Total................................................. $ 30,000
========
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
VSI Enterprises' Certificate of Incorporation provides that in actions
other than in the right of VSI Enterprises, VSI Enterprises indemnifies
directors and officers of VSI Enterprises against costs, charges and expenses,
which include attorney's fees, judgments, fines and amounts paid in settlement
actually and reasonably incurred by him in connection with any action, suit or
proceeding if he acted in good faith and in a manner which he reasonably
believed to be in or not opposed to the best interest of VSI Enterprises.
With respect to actions by or in the right of VSI Enterprises, VSI
Enterprises indemnifies directors and officers of VSI Enterprises against costs,
charges and expenses, which include attorneys' fees, actually and reasonably
incurred by him in connection with the defense or settlement of any action or
suit if he acted in good faith and in a manner he reasonably believed to be in
or not opposed to the best interest of VSI Enterprises; except that no
indemnification shall be made in respect to any claim, issue or matter as to
which such person shall have been adjudged to be liable to VSI Enterprises,
unless and only to the extent that the court in which such action or suit was
brought shall determine upon application that, despite the adjudication of
liability but in view of all the circumstances of the case, such person is
fairly and reasonably entitled to indemnity for such expense which the court
shall deem proper.
The indemnification provisions contained in VSI Enterprises' Certificate of
Incorporation are substantially coextensive with the provisions of Section 145
of the Delaware General Corporation Law, which sets forth the applicable terms,
conditions and limitations governing the indemnification of officers, directors
and other persons.
II-1
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ITEM 16. EXHIBITS.
The following exhibits are filed with this Registration Statement.
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF EXHIBIT
----------- ----------------------
<S> <C>
5.1 - Opinion of Smith, Gambrell & Russell, LLP (previously filed)
10.20 - License Agreement by and between ACIS, Inc. and the Company,
dated September 9, 1999.
10.21 - Strategic Investment Agreement by and between ACIS, Inc. and
the Company, dated September 9, 1999
23.1 - Consent of Grant Thornton LLP (previously filed)
23.2 - Consent of Arthur Andersen LLP (previously filed)
23.3 - Consent of Smith, Gambrell & Russell (contained in their opinion filed as
Exhibit - 5.1 hereto)
24.1 - Powers of Attorney (contained on signature page to
this Registration Statement)
</TABLE>
ITEM 17. UNDERTAKINGS
(a) The undersigned Registrant hereby undertakes:
(1) To include any material information with respect to the
plan of distribution not previously disclosed in the registration
statement or any material change to such information in the
registration statement;
(2) That, for the purpose of determining any liability under
the Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall
be deemed to be the initial bona fide offering thereof; and
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at
the termination of the offering.
(b) The undersigned Registrant hereby undertakes that, for
purposes of determining any liability under the Securities Act of 1933, each
filing of the Registrant's annual report under Section 13(a) or Section 15(d) of
the Securities Exchange Act of 1934, and, where applicable, each filing of an
employee benefit plan's annual report under Section 15(d) of the Securities
Exchange Act of 1934, that is incorporated by reference in the Registration
Statement shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the Registrant according to the provisions referred to in Item 15
above, or otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public policy
as expressed in the Act and is therefore unenforceable. In the event that a
claim for indemnification against such liabilities, other than the payment by
the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding, is asserted by such director, officer or controlling person
in connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question of whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
II-2
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SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this registration
statement amendment to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Norcross, State of Georgia, on the 31th day of
January, 2000.
VSI ENTERPRISES, INC.
By: /s/ Richard E. Harrison
-----------------------------------------
Richard E. Harrison, Chief Executive
Officer (Principal Executive Officer)
In accordance with the requirements of the Securities Act of 1933, this
registration statement amendment has been signed below by the following persons
in the following capacities on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Richard E. Harrison Chief Executive Officer January 31, 2000
- ---------------------------------------------
Richard E. Harrison
/s/ Karen T. Franklin Chief Financial Officer January 31, 2000
- --------------------------------------------- (Principal Financial and
Karen T. Franklin Accounting Officer)
* Director January 31, 2000
- ---------------------------------------------
Larry M. Carr
* Director January 31, 2000
- ---------------------------------------------
Harlan D. Platt
* Director January 31, 2000
- ---------------------------------------------
Julia B. North
* Director January 31, 2000
- --------------------------------------------
Edward S. Redstone
</TABLE>
*By: /s/ Richard E. Harrison
--------------------------------------------------
Richard E. Harrison, as Attorney-in-Fact
pursuant to power of attorney included on
the signature page to the Registration Statement
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EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF EXHIBIT
----------- ----------------------
<S> <C>
10.20 - License Agreement by and between ACIS, Inc. and the
Company, dated September 9, 1999
10.21 - Strategic Investment Agreement by and between
ACIS, Inc. and the Company, dated September 9, 1999
</TABLE>
<PAGE> 1
Exhibit 10.20
ACIS-VSI LICENSE AGREEMENT
This License Agreement is entered into by and between ACIS, Inc.
("ACIS"), a Texas corporation, 2700 NE Loop 410, Ste. 675, San Antonio, Texas
78217 and VSI Enterprises, Inc., ("VSI"), a Delaware corporation, and
Videoconferencing Systems, Inc., 5801 Goshen Springs Road, Norcross, Georgia
30071, sometimes simply referred to herein as the parties ("Parties").
WITNESSETH
WHEREAS, ACIS and Videoconferencing Systems, Inc., a subsidiary of VSI,
entered into that certain license agreement dated December 21, 1998 (the "Prior
License Agreement"), concerning certain software derived from a computer program
known as the Willie-event-kernel (TM); and
WHEREAS, the Willie-event-kernel (TM) is the subject of U.S. Patent
Application No. 08/268,201, entitled "Method for Enforcing a Hierarchical
Invocations Structure in Real Time Asynchronous Software Applications" (the
"Patent Application"); and
WHEREAS, ACIS and VSI desire to replace the Prior Agreement and enter
into this License Agreement ("Agreement"), as herein provided:
NOW, THEREFORE, in consideration of the premises and the mutual
agreements contained herein, and other good and valuable consideration, the
receipt, adequacy and sufficiency of which are hereby acknowledged, the parties
hereto agree as follows:
1. This License Agreement replaces the Prior License
Agreement.
2. Defined Terms
(a) For purposes of this License Agreement, the term "VSI
Licensed Kernel" shall mean that certain implementation of the
Willie-event-kernel(TM), known as a single stack, polling
kernel, as the same is utilized by VSI as of the date hereof,
together with any modifications or enhancements thereto that
are developed. It shall not include (1) a single stack,
non-polling kernel, or (2) a multiple stack, polling or
non-polling kernel. The VSI Licensed Kernel shall include any
related VSI documentation.
(b) The term "Video Conferencing Field" shall mean any and all
products and systems, the principal purpose of which is
devoted to facilitating video conferencing, through the
transmission of video in a compressed format between and among
remote locations.
(c) the term "ACIS Kernel" shall mean the implementation of
the Willie-event-kernel(TM) in either (1) a single stack,
non-polling kernel, and/or (2) a multiple stack, polling or
non-polling kernel, together with any modifications or
enhancements thereto that are developed. The ACIS Kernel shall
include any related documentation.
(d) The term "ACIS Server Kernel" shall mean the ACIS Kernel
developed under the Microsoft Windows NT platform, or any
successor platform released through the year 2002.
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(e) The term "ACIS Software" shall mean any implementation of
the Willie-event-kernel(TM) including the VSI Licensed Kernel,
the ACIS Kernel, and the ACIS Server Kernel. An implementation
shall include, but not be limited to, a preprocessor, a single
stack kernel, a multi-stack kernel, associated utilities,
i.e., any software developed by ACIS, or on behalf of ACIS by
others.
3. Grant of License.
(a) ACIS grants to VSI the perpetual, assignable right and
license to use, copy and distribute the VSI Licensed Kernel,
in either object code or source code form, for applications
and uses that are within the Video Conferencing Field. This
license shall be royalty free for all applications and uses
that are within the Video Conferencing Field.
(b) ACIS grants to VSI the perpetual, assignable right and
license to use, copy and distribute the VSI Licensed Kernel,
in either source code or object code form, for applications
and uses that are outside the Video Conferencing Field. There
shall be a license fee due and payable to ACIS, Inc. for any
and all applications and uses that are outside the Video
Conferencing Field, beginning October 1, 1998.
(c) ACIS grants to VSI a non-assignable right, and license to
use, copy and distribute the ACIS Server Kernel, in either
source code or object code form, for applications which VSI
develops. There shall be a license fee due and payable to
ACIS, Inc. for any and all implementations and uses of the
ACIS Server Kernel.
(d) No license is granted to VSI at this time to use, copy and
distribute the ACIS Kernel for any application or
implementation which does not use the Microsoft Windows NT
platform, or any successor platform to Microsoft Windows NT.
(e) VSI is specifically prohibited from developing, using or
distributing any operating systems using the ACIS Software.
4. License Fees. Subject to section 6 below, ACIS has the absolute,
unilateral right to determine any and all license fees for ACIS Software. ACIS
may increase or decrease any license fee at any time at its sole discretion,
including, without limitation, the amount, frequency, and scope of the fee. ACIS
has no obligation to set a commercially reasonable license fee, either now or in
the future.
5. Best Price. Notwithstanding section 4 above, ACIS agrees that VSI
will be guaranteed a price for the licensed use of any ACIS Software which is as
low as the lowest price offered to any other person or entity. VSI agrees that
if the price for any licensed use of ACIS Software is increased, then VSI's
price shall also be increased, as long as VSI's price remains as low as the
lowest price offered to any other person or entity.
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6. Current License Fees. The Parties agree that it is critical to ACIS
that this License Agreement not be available as a vehicle to exploit the value
of the Kernel without negotiating directly with ACIS. The Parties also agree
that it is critical to VSI to have a set license fee for the applications which
it has and which it plans to develop. If the ACIS Kernel is implemented on the
foundation of the Microsoft Windows NT platform or any successor platform
released through the year 2002, ACIS agrees that its license fees to VSI shall
be fixed as follows below under License Fees. If the Microsoft Windows NT
platform is replaced by a different underlying platform after the year 2002,
ACIS shall determine the appropriate ACIS Server Kernel license fees for such
alternate platform and grant VSI best pricing on said license fees.
LICENSE FEES
VSI Agrees to pay a one-time license fee to ACIS of $20.00 for each installed
copy of each product or application that includes or uses (a) the VSI Licensed
Kernel outside the Video Conferencing Field or (b) the ACIS Server Kernel that
is sold by, or on account of, VSI. [Beginning January 1, 2000, and continuing
January 1 of each year thereafter, the foregoing royalty shall be adjusted by a
percentage equal to the percentage change in the U.S. Consumer Price Index for
the twelve month period ending on November of the preceding year.]
7. Intellectual Property Rights. VSI agrees to release, and hereby
unconditionally releases, now and in the future, any and all claims of right or
ownership in and to ACIS Software. ACIS agrees to release, and hereby
unconditionally releases, any and all claims of right or ownership in and to VSI
patents on the Omega operating system, to VSI patents on VSI's video
conferencing system, and to VSI patents on VSI's new Voyager development. The
parties contemplate that VSI will code one or more parts of the ACIS Software.
VSI agrees that any ACIS Software shall be a "work made for hire." and that ACIS
shall own all the copyright rights in such work. IF AND TO THE EXTENT ANY SUCH
MATERIAL DOES NOT SATISFY THE LEGAL REQUIREMENTS TO CONSTITUTE A WORK MADE FOR
HIRE, VSI HEREBY ASSIGNS ALL ITS COPYRIGHT RIGHTS AND OTHER INTELLECTUAL
PROPERTY RIGHTS IN THE WORK TO ACIS.
8. Modifications or Enhancements. ACIS grants VSI the right to modify,
improve or enhance ACIS Software, and agrees that any change shall not modify
the Grant of License as provided herein.
9. Covenant Against Exceeding Scope of License. VSI is specifically
granted the right to use the ACIS Software pursuant to this license, but VSI
agrees that any use outside the scope of this license is prohibited, without
prior written agreement by ACIS, Inc.
10. Patent Notice. VSI agrees to label all of its products as "Patent
Pending, ACIS, Inc., 1999," until the patent is granted, and thereafter label
all of its products as "Patent No. XXXXX, ACIS, Inc. 1999," where XXXXX
represents the number actually assigned to the patent. In the event that the
required patent notice must have a different form, the Parties agree to modify
the notice appropriately.
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11. Ownership Warranty. ACIS represents and warrants that ACIS owns,
with the exception of VSI's rights under the License Agreement, all of the
property rights in the ACIS Software, and all rights necessary to grant VSI the
license and rights granted herein. ACIS further represents and warrants that the
ACIS Software has not been published under circumstances that have caused the
loss of the U.S. copyright therein. ACIS further represents and warrants that no
claim or action relating to the infringement of any copyright or other
intellectual property right has been made or is pending against ACIS. ACIS
further represents and warrants that the ACIS Software does not infringe any
copyright or other propriety right (including trade secrets) of any third party.
ACIS does not guarantee that the U.S. Patent and Trademark Office will issue a
patent on the Patent Application.
12. Litigation. In the event of litigation to determine the rights of
the parties hereto, the losing party agrees to pay the reasonable attorney's
fees, costs and expenses of the prevailing party.
13. Other documents. Each party agrees, upon the request of the other,
to execute such additional documents as may be reasonable necessary to confirm
the rights of the other party concerning the ACIS Software, or to carry out the
intent of this agreement.
14. Indemnification. VSI does hereby agree to indemnify, hold harmless
from and against any losses, liabilities, costs or expenses (including
attorney's fees) incurred with respect to or arising out of any claim by VSI to
any copyright, trademark, trade secret, or other intellectual property right of
ACIS concerning the ACIS Software.
15. Notices. All notices, requests, demands and other communications
required herein shall be in writing and shall be deemed to have been given when
delivered by hand, or mailed, first class certified mail with prepaid postage or
by overnight receipted courier service to:
ACIS, Inc. to: R.L. Mays, Jr., President
ACIS, Inc.
2700 NE Loop 410, Ste. 675
San Antonio, Texas 78217
VSI Enterprises, Inc. to Richard Harrison, Chief Executive Officer
VSI Enterprises, Inc.
5801 Goshen Springs Road
Norcross, Georgia 30071
or to such other person or address as either Party shall furnish by notice to
ACIS or VSI, respectively, in writing.
16. Governing Law. This License Agreement shall be governed by and
construed in accordance with the laws of the State of Texas, and venue for any
action shall be in Bexar County, Texas.
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17. Severability. If any provisions of this License Agreement is deemed
by a court of competent jurisdiction to be unenforceable or contrary to any
applicable law or regulation, such provision shall be considered deleted and the
remainder of this License Agreement shall continue in full force and effect.
18. Headings. The section headings are for reference purposes only and
shall not affect the meaning or interpretation of this License Agreement.
19. Parties in Interest. This License Agreement shall inure to the
benefit of, and be binding upon, the successors, assigns and personal
representatives of the parties hereto.
20. Entire Agreement. This License Agreement is one of four (4)
documents concurrently executed. The other three are the Strategic Investment
Agreement, the ACIS-VSI Warrant Agreement, and the Security Holders Agreement.
All four documents contain the entire understanding of the parties hereto with
respect to the matters contained herein, and may not be modified or amended
orally, but only through a written instrument signed by the party to be so
bound.
21. Counterparts. This License Agreement may be executed in two or more
counterparts, all of which taken together shall constitute one and the same
instrument.
IN WITNESS WHEREOF, ACIS and VSI execute this License Agreement on this
the 9th day of September, 1998.
ACIS, INC., a Texas Corporation
By: /s/ R.L. Mays, Jr.
-----------------------------------
R.L. Mays, Jr., President
VSI Enterprises, Inc., a Delaware
corporation
By: /s/ Richard Harrison
-----------------------------------
Richard Harrison
Chief Executive Officer
Videoconferencing Systems, Inc.,
a subsidiary of VSI Enterprises, Inc.
By: /s/ Rick Egan
----------------------------------
Rick Egan
President
5
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Exhibit 10.21
STRATEGIC INVESTMENT AGREEMENT
This Strategic Investment Agreement ("Agreement") is entered into by
and between ACIS, Inc. ("ACIS"), a Texas corporation, 2700 NE Loop 410, Ste.
675, San Antonio, Texas 78217 and VSI Enterprises, Inc., ("VSI"), a Delaware
corporation, 5801 Goshen Springs Road, Norcross, Georgia 30071, sometimes simply
referred to herein as the parties ("Parties").
WITNESSETH
WHEREAS, ACIS and VSI's subsidiary Videoconferencing Systems, Inc.,
entered into that certain license agreement dated December 21, 1998 (the "Prior
License Agreement"), concerning certain software derived from a computer program
known as the Willie-event-kernel(TM) ("Kernel"); and
WHEREAS, the Kernel is the subject of U.S. Patent Application No.
08/268,201, entitled "Method for Enforcing a Hierarchical Invocations Structure
in Real Time Asynchronous Software Applications" (the "Patent Application"); and
WHEREAS, ACIS and VSI desire to enter into this Strategic Investment
Agreement ("Strategic Investment Agreement"), because of the mutual benefits to
each, as herein provided:
NOW, THEREFORE, in consideration of the premises and the mutual
agreements contained herein, and other good and valuable consideration, the
receipt, adequacy and sufficiency of which are hereby acknowledged, the Parties
hereto agree as follows:
1. Defined Terms. For purposes of this Agreement, the following terms
shall have the following meanings:
"ACIS Common Stock" shall mean shares of common stock, no par value per
share of ACIS.
"ACIS Kernel" shall mean the implementation of the Willie-event-kernel
(TM) in either (1) a single stack, non-polling kernel, and/or (2) a multiple
stack, polling or non-polling kernel, together with any modifications or
enhancements thereto that are developed. The ACIS Kernel shall include any
related documentation.
"ACIS Software" shall mean any implementation of the Kernel including
the VSI Licensed Kernel, the ACIS Kernel, and the ACIS Server Kernel. An
implementation shall include, but not be limited to, a preprocessor, a single
stack kernel, a multi-stack kernel, associated utilities, i.e., any software
developed by ACIS, or on behalf of ACIS by others.
"VSI Common Stock" shall mean shares of common stock, par value $.001
per share,
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of VSI.
2. License Agreement. ACIS and VSI shall enter into a new license agreement
("ACIS-VSI License Agreement"), replacing the Prior License Agreement.
3. Development Agreement. ACIS shall have the right, at its own expense, to
secure a third party to develop ACIS Software. To the extent requested by ACIS,
VSI shall develop ACIS Software, in the manner and for the consideration as
follows:
VSI shall decide whether development will be performed by VSI
or a third party. VSI shall be responsible for paying the costs of such
development. ACIS shall issue to VSI shares of ACIS Common Stock at a
price of $1.00 per share equal to the amount paid by VSI for third
party development. In the event that VSI does the development of the
ACIS Kernel, ACIS shall issue to VSI Fifty Thousand (50,000) shares of
ACIS Common Stock for delivery of the developed ACIS Kernel. In the
event that VSI does the development of the ACIS Software preprocessor,
ACIS shall issue to VSI Fifty Thousand (50,000) shares of ACIS Common
Stock for delivery of the developed ACIS Software preprocessor.
In the event VSI develops one or more utilities for ACIS, ACIS
shall issue to VSI ten (10) shares of ACIS Common Stock for each line
of VSI developed code contained in such utilities.
ACIS shall deliver the certificates representing the appropriate number of duly
authorized, validly issued, fully paid and non-assessable shares of ACIS Common
Stock to VSI upon the delivery to ACIS of each developed product, including the
preprocessor, the ACIS Kernel, or the additional utilities.
4. Securities Matters. If necessary, VSI consents to ACIS obtaining shareholder
consent to an amendment to its Articles of Incorporation agreeing that each
shareholder shall be bound by a vote of 51% of the issued and outstanding shares
of ACIS Common Stock in the event of an opportunity to sell the Kernel, to merge
ACIS with another potential acquiring company, or to exchange shares of ACIS
Common Stock for an interested acquiring company.
ACIS shall not issue any equity securities that are senior in any
respect to the ACIS Common Stock. ACIS may issue not more than 635,000 shares of
ACIS Common Stock pursuant to options, warrants or otherwise at a price less
than $2.00 per share. ACIS shall not issue any shares of ACIS Common Stock or
securities convertible into shares of ACIS Common Stock, beyond the 635,000
shares, at an issuance or conversion price of $2.00 per share or less, without
the giving VSI right-of-first refusal to acquire said shares.
5. Share Exchange - ACIS shall issue 250,000 shares of ACIS Common
Stock for 500,000 shares of VSI Common Stock ("the Share Exchange"). The Share
Exchange shall occur on a date chosen by VSI (the "Exchange Date"), which date
shall be no later than 180 days following the date ACIS is granted a patent
(such date of grant being defined as the
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"Patent Date") by the U.S. Patent and Trademark Office on all or any portion of
the claims contained in the Patent Application. If an Exchange Date is not
established by VSI, the Exchange Date shall be the 180th day following the
Patent date. The Exchange Date shall be established by a letter in writing from
VSI to the President of ACIS at the address set forth in the first paragraph of
this Agreement. In the event of a stock split, reverse stock split, stock
dividend or other reclassification or other action that has the effect of
changing all of the outstanding shares of a party into a smaller or larger
number during the pendency of this provision, the number of shares subject to
the Share Exchange shall be adjusted pro-rata. Should ACIS receive an offer to
purchase the patent rights in the Kernel or any other right in or to the
intellectual property relating or pertaining to the Kernel (in either case a
"Sale Transaction"), prior to the exchange, the Share Exchange shall be
accelerated to be consummated on the day immediately prior to the date of the
sale of the patent rights. ACIS shall give VSI written notice of a Sale
Transaction at least twenty (20) days prior to the closing thereof. VSI agrees
to register with the Securities Exchange Commission the resale or distribution
by ACIS of the 500,000 shares of VSI Common Stock acquired by ACIS hereunder.
6. The Warrant- ACIS shall issue to VSI a warrant (the "Warrant"),
which Warrant is issued contemporaneously herewith, according to the terms,
conditions and rights as specified therein, the "ACIS-VSI Warrant Agreement."
7. Representations and Warranties.
(a) ACIS hereby represents and warrants to VSI as follows:
(i) ACIS, Inc. is a corporation, duly organized, validly existing and
in good standing under the laws of the State of Texas with full corporate power
and authority to conduct its business as it is now being conducted, and to own
or use the properties and assets that it purports to own or use, and to perform
all of its obligations hereunder.
(ii) This Agreement has been approved by all necessary corporate action
on the part of ACIS and has been duly executed and delivered by ACIS. This
agreement constitutes the legal valid and binding obligation of ACIS enforceable
against ACIS in accordance with its terms. Upon the execution and delivery by
ACIS of this Agreement and all agreements contemplated herein, such agreements
will constitute, the legal valid and binding obligation of ACIS, enforceable
against ACIS in accordance with their respective terms. ACIS has the absolute
and unrestricted right, power, authority, and capacity to execute and deliver
this Agreement and the agreements contemplated herein and to perform its
obligations under this Agreement and the agreements contemplated herein.
(iii) Neither the execution and delivery of this Agreement nor the
consummation or performance of any transactions contemplated herein will,
directly or indirectly (with or without notice or lapse of time):
(1) contravene, conflict with, or result in a violation of any
provision of the
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organizational documents of ACIS; or
(2) contravene, conflict with, or result in a violation or breach of
any provision of, or give any person the right to declare a default or
exercise any remedy under, or to accelerate the maturity or performance
of, or to cancel, terminate, or modify, any agreement or order to which
ACIS is a party.
(iv) ACIS will acquire shares of VSI Common Stock to be acquired
hereunder for its own account and not with a view to their distribution within
the meaning of Section 2(11) of the Securities Act of 1933, as amended (15
U.S.C.A. Sect. 77b(a)(11). ACIS engages in this securities transaction as an
exempted private offering transaction (15 U.S.C.A. Sect. 77d(2).
(v) The authorized equity securities of ACIS consists of 6,000,000
shares of common stock, no par value per share, of which 4,720,500 shares are
issued and outstanding. All of the shares have been duly authorized and validly
issued and are fully paid and non-assessable. ACIS has issued options for
285,000 shares, and reserves the right to issue up to an additional 350,000
shares, which may be issued at a price less than $2.00 per share. ACIS will
authorize and reserve for issuance a sufficient number of shares of ACIS Common
Stock for the development work, the Share Exchange and exercise of the Warrant.
(vi) There is no pending proceeding that has been commenced against
ACIS that challenges, or may have the effect of preventing, delaying making
illegal, or otherwise interfering with any of the transactions contemplated
herein. To ACIS' knowledge, no such proceeding has been threatened. An appeal
within the U.S. Patent and Trademark Office may be necessary, in the event of a
denial of one or more pending claims in the Patent Application. If the appeal
becomes necessary, the patent will be delayed, and additional costs will be
incurred.
(vii) ACIS owns all right, title and interest in, to and under the
Kernel, except for rights granted to VSI, and VSI alone, under ACIS-VSI License
Agreement of even date herewith. ACIS does not guarantee that the U.S.
Patent and Trademark Office will issue a patent on the Patent Application.
(viii) ACIS shall provide unaudited financial statements for the period
ended Sept. 8, 1999 to VSI at closing, which financial statements accurately
reflect the financial condition of ACIS as of such date.
(ix) ACIS is currently complying in its business operations, practices,
plants, structures and other property and all other aspects of its business,
with any applicable law, statute, rule, regulation, ordinance, requirement,
announcement or other binding action of or by any governmental, regulatory, or
administrative body, governmental agency, arbitrator, any court or judicial
authority, any public regulatory agency, whether international, national,
federal, state or local, having established jurisdiction and authority with
respect to the subject matter. The subject matter includes, but is not limited
to, the safe conduct of business, Environmental Laws, quality and labeling,
antitrust, taxes, consumer protection, employment, health,
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<PAGE> 5
sanitation, fire, zoning, building and occupational safety, where such failure
or failures would individually or in the aggregate have a material adverse
impact. "Environmental Laws" mean any law, statute, regulation, rule, order,
decree, judgment, consent decree, settlement agreement or governmental
requirement which relates to or otherwise imposes liability or standards of
conduct concerning discharges, emissions, releases or threatened releases of
noises, odors, or any pollutants, contaminants, chemicals, or hazardous
industrial or toxic wastes, substances or materials, whether as matter or
energy, into ambient air, surface or ground water, or land surface or subsurface
strata, or otherwise relating to the manufacture, processing, generation,
distribution, use, treatment, storage, disposal, cleanup, transport or handling
of pollutants, contaminants, industrial, toxic or hazardous wastes, substances
or materials, including but not limited to, the Comprehensive Environmental
Response Compensation and Liability Act of 1980, the Superfund Amendments and
Reauthorization Act of 1986, as amended, the Resource Conservation and Recovery
Act of 1976, as amended, the Toxic Substances Control Act of 1976, as amended,
the Federal Water Pollution Control Act Amendments of 1972, the Clean Water Act
of 1977, as amended, any so called "Super Lien" law, and any other similar
federal, state or local statutes. ACIS has not received any written notice of
any violation, or alleged violation, of any law in any area provided herein.
ACIS has complied with all applicable laws in the execution, delivery and
performance of this Agreement and the transactions contemplated hereby.
(b) VSI hereby represents and warrants to ACIS as follows:
(i) VSI is a corporation, duly organized, validly existing and in good
standing under the laws of the State of Delaware with full corporate power and
authority to conduct its business as it is now being conducted, and to own or
use the properties and assets that it purports to own or use, and to perform all
of its obligations hereunder.
(ii) This Agreement has been approved by all necessary corporate action
on the part of VSI and has been duly executed and delivered by VSI. This
agreement constitutes the legal valid and binding obligation of VSI enforceable
against VSI in accordance with its terms. Upon the execution and delivery by VSI
of this Agreement and all agreements contemplated herein, such agreements will
constitute, the legal valid and binding obligation of VSI, enforceable against
VSI in accordance with their respective terms. VSI has the absolute and
unrestricted right, power, authority, and capacity to execute and deliver this
Agreement and the agreements contemplated herein and to perform its obligations
under this Agreement and the agreements contemplated herein.
(iii) Neither the execution and delivery of this Agreement nor the
consummation or performance of any transactions contemplated herein will,
directly or indirectly (with or without notice or lapse of time):
(1) contravene, conflict with, or result in a violation of any
provision of the organizational documents of VSI; or
(2) contravene, conflict with, or result in a violation or breach of
any provision of, or give any person the right to declare a default or
exercise any remedy under, or to
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accelerate the maturity or performance of, or to cancel, terminate, or
modify, any agreement or order to which VSI is a party.
(iv) VSI will acquire shares of ACIS Common Stock to be acquired
hereunder for its own account and not with a view to their distribution within
the meaning of Section 2(11) of the Securities Act of 1933, as amended (15
U.S.C.A. Sect. 77b(a)(11).
(v) The authorized equity securities of VSI consists of 40,000,000
shares of common stock, $.001 par value per share, of which 12,300,144 shares
were issued and outstanding as of September 8, 1999 and 800,000 shares of
preferred stock, $.00025 par value, of which no shares are issued and
outstanding. All of the shares have been duly authorized and validly issued and
are fully paid and non-assessable. VSI has authorized and reserved for issuance
a sufficient number of shares of VSI Common Stock for the Share Exchange.
(vi) There is no pending proceeding that has been commenced against VSI
that challenges, or may have the effect of preventing, delaying making illegal,
or otherwise interfering with any of the transactions contemplated herein. To
VSI's knowledge, no such proceeding has been threatened.
(vii) VSI is currently complying in its business operations, practices,
plants, structures and other property and all other aspects of its business,
with any applicable law, statute, rule, regulation, ordinance, requirement,
announcement or other binding action of or by any governmental, regulatory, or
administrative body, governmental agency, arbitrator, any court or judicial
authority, any public regulatory agency, whether international, national,
federal, state or local, having established jurisdiction and authority with
respect to the subject matter. The subject matter includes, but is not limited
to, the safe conduct of business, Environmental Laws, quality and labeling,
antitrust, taxes, consumer protection, employment, health, sanitation, fire,
zoning, building and occupational safety, where such failure or failures would
individually or in the aggregate have a material adverse impact. "Environmental
Laws" mean any law, statute, regulation, rule, order, decree, judgment, consent
decree, settlement agreement or governmental requirement which relates to or
otherwise imposes liability or standards of conduct concerning discharges,
emissions, releases or threatened releases of noises, odors, or any pollutants,
contaminants, chemicals, or hazardous industrial or toxic wastes, substances or
materials, whether as matter or energy, into ambient air, surface or ground
water, or land surface or subsurface strata, or otherwise relating to the
manufacture, processing, generation, distribution, use, treatment, storage,
disposal, cleanup, transport or handling of pollutants, contaminants,
industrial, toxic or hazardous wastes, substances or materials, including, but
not limited to, the Comprehensive Environmental Response Compensation and
Liability Act of 1980, the Superfund Amendments and Reauthorization Act of 1986,
as amended, the Resource Conservation and Recovery Act of 1976, as amended, the
Toxic Substances Control Act of 1976, as amended, the Federal Water Pollution
Control Act Amendments of 1972, the Clean Water Act of 1977, as amended, any so
called "Super Lien" law, and any other similar federal, state or local statutes.
VSI has
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not received any written notice of any violation, or alleged violation, of any
law in any area provided herein. VSI has complied with all applicable laws in
the execution, delivery and performance of this Agreement and the transactions
contemplated hereby.
8. Investment Representations. The shares of common stock of ACIS being
acquired by VSI shall be for its own account for the purposes of investment. VSI
will refrain from transferring or otherwise disposing of any of the ACIS shares,
or any interest therein, in such manner as to cause ACIS to be in violation of
the registration requirements of applicable securities laws and regulations of
the Securities Exchange Commission. ACIS is not restricted in the shares of VSI
stock which it acquires pursuant to the Share Exchange. VSI represents that it
will undertake a common stock registration so that the VSI shares acquired by
ACIS in the Share Exchange shall be good and marketable and not restricted in
transferability.
9. Publicity. ACIS agrees to give VSI at least 24 hours prior written
notice of a public announcement of the grant of the patent on the Kernel. VSI
agrees that it will not make any public announcement regarding the grant of the
patent on the Kernel, or regarding the Warrant without the written consent of
ACIS, except as required by applicable law, or the rules of any exchange on
which any VSI Common Stock is listed, either before or after the grant of the
patent on the Kernel. VSI agrees that it shall notify ACIS at least 72 hours
prior to any legally required public disclosure. VSI agrees that ACIS controls
the right of publicity of the patent of the Kernel, except that VSI may
publicize the Kernel and the Warrant after the Share Exchange.
10. Right of Disclosure. ACIS has the right to disclose the existence
of this agreement, as well as its terms; provided that ACIS shall give VSI 72
hours prior written notice of any announcements regarding this Agreement, its
terms, or the relationship between the parties. VSI may disclose the existence
of this agreement to the extent that it is legally required to do so.
11. Expenses; Litigation. Each party shall bear its own expenses,
including applicable legal fees, incurred in connection with the transactions
contemplated herein. Notwithstanding the foregoing, in the event of litigation
to determine the rights of the parties herein, the losing party shall pay the
reasonable attorney's fees, costs and expenses of the prevailing party.
12. Other documents. Each party agrees, upon the request of the other,
to execute such additional documents as may be reasonably necessary to confirm
the rights of the other party concerning the Kernel, or to carry out the intent
of this Agreement.
13. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Texas, and venue for any action shall
be in Bexar County, Texas.
14. Severability. If any provision of this Agreement is deemed by a
court of competent jurisdiction to be unenforceable or contrary to any
applicable law or regulation, such provision shall be considered deleted and the
remainder of this Agreement shall continue in full force and effect. Any
provision of this Agreement held invalid or unenforceable only in part or degree
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will remain in full force and effect to the extent not held invalid or
unenforceable.
15. Survival. Notwithstanding any investigation heretofore or hereafter
made for any Party, all of the representations, and for a period of two years,
warranties contained herein shall survive the termination of this Agreement.
16. Headings. The section headings are for reference purposes only and
shall not affect the meaning or interpretation of this Agreement.
17. Notices. All notices, consents, waivers and other communications
under this Agreement must be in writing and will be deemed to have been dully
given when (a) delivered by hand (with written confirmation of receipt), (b)
sent by certified mail, return receipt requested, or (c) when received by
addressee, if sent by a nationally recognized overnight delivery service
(receipt requested), in each case to the appropriate addresses set forth in the
introductory paragraph hereof, or to such other person or address as a party
shall designate by notice to the other party.
18. No Assignment; Parties in Interest. This Agreement may not be
assigned by either party without the written consent of the other party, and, if
assigned, shall inure to the benefit of, and be binding upon, the successors,
and assigns of the parties hereto.
19. Entire Agreement. This Agreement is one of four (4) documents
concurrently executed. The other three are the ACIS-VSI License Agreement, the
ACIS-VSI Warrant Agreement and the Security Holders Agreement. All four
documents contain the entire understanding of the parties hereto with respect to
the matters contained herein. They supersede all prior agreements between the
parties with respect to the subject matter and contain the entire understanding
of the parties hereto with respect to the matters contained herein, and may not
be modified or amended orally, but only through a written instrument signed by
the party to be so bound.
20. Counterparts. This Agreement may be executed in two or more
counterparts, all of which taken together shall constitute one and the same
instrument.
IN WITNESS WHEREOF, ACIS and VSI execute this agreement on this the 9th
day of September, 1999.
ACIS, Inc., a Texas corporation
By: /s/ R.L. Mays, Jr.
--------------------------------
R.L. Mays, Jr., President
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VSI Enterprises, Inc., a Delaware
corporation
By: /s/ Richard Harrison
---------------------------------
Richard Harrison, Chief Executive
Officer
9
