AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 4, 1996
REGISTRATION NO. 333-09935
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO. 1
TO
FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
MULTIMEDIA ACCESS CORPORATION
(Name of Small Business Issuer In Its Charter)
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<S> <C> <C>
Delaware 3661 75-2528700
(State or Other Jurisdiction Primary Standard (IRS Employer
of Incorporation or Organization) Classification Code Number Identification Number)
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2665 VILLA CREEK DRIVE, SUITE 200, DALLAS, TEXAS 75234
972-488-7200
------------------
(Address of principal executive offices and place of business and
telephone number)
------------------
GLENN A. NOREM
CHIEF EXECUTIVE OFFICER
MULTIMEDIA ACCESS CORPORATION
2665 VILLA CREEK DRIVE, SUITE 200, DALLAS, TEXAS 75234
972-488-7200
(NAME, ADDRESS AND TELEPHONE NUMBER OF AGENT FOR SERVICE)
Copies to:
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John S. Stoppelman, Esq. Jay Kaplowitz, Esq. Lawrence B. Fisher, Esq.
The Stoppelman Law Firm, P.C. Gersten, Savage, Kaplowitz, Curtin, L.L.P. Orrick, Herrington & Sutcliffe, L.L.P.
1749 Old Meadow Road, Suite 610 575 Lexington Avenue 666 Fifth Avenue
McLean, Virginia 22102-4310 New York, NY 10022-6102 New York, NY 10103
Telephone: (703) 827-7450 Telephone: (212) 752-9700 Telephone: (212) 506-5000
Telecopier: (703) 827-7455 Telecopier: (212) 752-9713 Telecopier: (212) 506-5151
</TABLE>
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Approximate date of proposed sale to the public: As soon as practicable
after the Registration Statement becomes effective
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 the delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. [X]
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, check the following box: [X]
CALCULATION OF REGISTRATION FEE
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Title of each class Proposed maximum Proposed maximum
of securities to be Amount to be offering price aggregate Amount of
registered registered per share(1) offering price registration fee
- ----------------------------------------------------------------------------------------------------------------
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Common Stock, $.0001 par value......... 2,540,649(2)(3) $6.00 $15,243,894 $ 5,257
Redeemable Common Stock Purchase
Warrants ("Public Warrants")........... 2,540,649(4)(5) $0.10 254,065 $ 88
Common Stock issuable upon exercise of
Public Warrants........................ 2,540,649 $8.40 21,341,452 $ 7,359
TOTAL REGISTRATION FEE....................................................................... $ 12,704
Paid......................................................................................... $ 9,599
Due.......................................................................................... $ 3,105
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Estimated solely for purposes of calculating the registration fee.
(2) Includes 270,000 Shares which the Representatives have the option to
purchase to cover over-allotments, if any.
(3) Includes 470,649 shares to be sold by Selling Securityholders.
(4) Includes 270,000 Public Warrants which the Representatives have the
option to purchase to cover over-allotments, if any.
(5) Includes 470,649 Public Warrants to be sold by Selling
Securityholders.
------------------
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.
<PAGE>
MULTIMEDIA ACCESS CORPORATION
-------------------------------------
CROSS-REFERENCE SHEET SHOWING LOCATION IN PROSPECTUS
OF INFORMATION REQUIRED BY ITEMS OF FORM SB-2
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Form SB-2 Registration Statement Item and Heading Location in Prospectus
- ------------------------------------------------- ----------------------
1. Front of Registration Statement and Outside
Front Cover of Prospectus........................ Outside Front Cover Page of Prospectus
2. Inside Front and Outside Back Cover Pages of
Prospectus....................................... Inside Front and Outside Back Cover Pages of
Prospectus
3. Summary Information and Risk Factors............. Prospectus Summary; Risk Factors
4. Use of Proceeds.................................. Use of Proceeds
5. Determination of Offering Price.................. Underwriting
6. Dilution......................................... Dilution
7. Selling Security Holders ........................ *
8. Plan of Distribution............................. Outside Front Cover Page of Prospectus; Underwriting
9. Legal Proceedings................................ Legal Proceedings
10. Directors, Executive Officers, Promoters and
Control Persons ................................. Management; Principal Stockholders; Certain
Transactions
11. Security Ownership of Certain Beneficial Owners
and Management................................... Management
12. Description of Securities ....................... Description of Securities; Underwriting
13. Interests of Named Experts and Counsel .......... Interest of Named Experts and Counsel
14. Disclosure of Commission Position on
Indemnification for Securities Act Liabilities . Management
15. Organization Within Last Five Years.............. Prospectus Summary
16. Description of Business ......................... Prospectus Summary; Risk Factors; Management's
Discussion and Analysis of Financial Condition and
Results of Operations; Business; Management; Certain
Transactions; Principal Securityholders;
Consolidated Financial Statements
17. Management's Discussion and Analysis or Plan of
Operations ...................................... Management's Discussion and Analysis of Financial
Condition and Results of Operations
18. Description of Property ......................... Business
19. Certain Relationships and Related Transactions .. Certain Transactions
20. Market for Common Equity and Related Stockholder
Matters.......................................... Front Cover Page; Description of Securities
21. Executive Compensation........................... Management
22. Financial Statements............................. Consolidated Financial Statements
23. Change in and Disagreements with Accountants on Experts
Accounting and Financial Disclosure..............
</TABLE>
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* See Explanatory Note
<PAGE>
EXPLANATORY NOTE
Two forms of Prospectus are included in this Registration Statement. The
first Prospectus will be used in connection with an underwritten offering of
securities by the Company (the "Company Prospectus"). The second Prospectus will
be used in connection with the sale of securities by certain selling
securityholders from time to time in open market transactions (the "Selling
Securityholders Prospectus"). The Company Prospectus and the Selling
Securityholders Prospectus are substantially identical, except for the alternate
pages for the Selling Securityholders Prospectus included herein which are
labeled "Alternate Page for Selling Securityholders Prospectus." In addition,
what is referred to as "the offering" in the Company Prospectus will be changed
to "the Company Offering" throughout the Selling Securityholders Prospectus.
After this Registration Statement becomes effective, both Prospectuses will
be used in their entirety in connection with the offer and sale of the
respective securities referenced therein.
<PAGE>
SUBJECT TO COMPLETION, DATED OCTOBER 4, 1996
PROSPECTUS
MULTIMEDIA ACCESS CORPORATION
1,800,000 SHARES OF COMMON STOCK
1,800,000 REDEEMABLE COMMON STOCK PURCHASE WARRANTS
MultiMedia Access Corporation (the "Company") hereby offers 1,800,000 shares
of Common Stock, $.0001 par value per share (the "Common Stock"), and 1,800,000
Redeemable Common Stock Purchase Warrants ("Public Warrants"). The shares of
Common Stock and the Public Warrants (together, the "Securities") must be
purchased on the basis of one Public Warrant for each share of Common Stock
purchased and will be separately transferable immediately upon issuance. Each
Public Warrant entitles the holder to purchase one (1) share of Common Stock at
$ per share (120% of the price offered to the public), subject to
adjustment under certain circumstances, at any time commencing six months from
the date of this Prospectus through and including five years from the date of
this Prospectus. The Public Warrants are redeemable by the Company, at any time
commencing eighteen (18) months from the date of this Prospectus, upon notice of
not less than thirty (30) days, at a price of $.10 per Public Warrant, provided
that the closing price or bid price of the Common Stock for any twenty (20)
trading days within a period of thirty (30) consecutive trading days ending on
the fifth (5th) day prior to the day on which the Company gives notice of
redemption has been at least 250% (currently $ , subject to adjustment)
of the then effective exercise price of the Public Warrants. It is currently
anticipated that the initial public offering price of the Common Stock will be
$5.00 to $6.00 and $.10 per Public Warrant. See "Description of Securities."
Prior to this offering, there has been no public market for the Common Stock
or Public Warrants and there can be no assurance that any such market will
develop. It is anticipated that the Common Stock and the Public Warrants will be
quoted on the NASDAQ Small-Cap Market ("NASDAQ") under the symbols "MMAC" and
"MMACW" respectively. For a discussion of the factors considered in determining
the offering prices of the Common Stock and Public Warrants, see "Underwriting."
Concurrently with this offering, the Company is registering 470,649 shares of
Common Stock (the "Selling Securityholder Shares"), 470,649 Public Warrants and
470,649 shares underlying the Public Warrants to be sold by Selling
Securityholders in a debt retirement and debt for equity exchange which
securities are the subject of two year "lock-up" agreements. The Company will
not receive any of the proceeds of the sale of Common Stock by the Selling
Securityholders, but will receive the proceeds of the exercise of the Public
Warrants by the Selling Securityholders. See "Concurrent Registration of
Securities."
------------------
THE SECURITIES OFFERED HEREBY ARE SPECULATIVE AND INVOLVE A HIGH DEGREE OF
RISK AND IMMEDIATE DILUTION AND SHOULD NOT BE PURCHASED BY INVESTORS
WHO CANNOT AFFORD THE LOSS OF THEIR ENTIRE INVESTMENT. SEE "RISK
FACTORS" AND "DILUTION."
------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
------------------
================================================================================
Underwriting
Price Discounts and Proceeds to
to Public Commissions(1) Company(2)
- --------------------------------------------------------------------------------
Per Share .................. $-- $ -- $ --
- --------------------------------------------------------------------------------
Per Warrant ................ $-- $ -- $ --
- --------------------------------------------------------------------------------
Total(3) ................... $-- $ -- $ --
================================================================================
(1) In addition, the Company has agreed to pay to the Representatives a 3%
nonaccountable expense allowance and to sell to the Representatives, for
nominal consideration, warrants to purchase up to 180,000 shares of Common
Stock and up to 180,000 Public Warrants. The Company has agreed to
indemnify the Representatives against certain liabilities, including
liabilities under the Securities Act. See "Underwriting."
(2) Before deducting expenses, estimated at $ , payable by the Company
including the Representatives' nonaccountable expense allowance. The
Selling Securityholders will not bear any of the expenses of this offering.
(3) The Company has granted the Representatives an option, exercisable within
45 days from the date of this Prospectus, to purchase up to 270,000
additional shares of Common Stock and/or 270,000 additional Public Warrants
on the same terms and conditions as set forth above, solely for the purpose
of covering over-allotments. If such option is exercised in full, the Price
to Public, Underwriting Discounts and Commissions and Proceeds to Company
will be $ , $ and $ , respectively. See "Underwriting."
------------------
The Common Stock and Public Warrants are being offered, subject to prior
sale, when, as and if delivered and accepted by the several Underwriters and
subject to the approval of certain legal matters by counsel and to certain other
conditions. The Underwriters reserve the right to withdraw, cancel or modify the
offering and to reject any order in whole or in part. It is expected that
delivery of certificates representing the Common Stock and Public Warrants
contained therein, will be made against payment therefor at the offices of
National Securities Corporation on or about , 1996.
NATIONAL SECURITIES CORPORATION NETWORK 1 FINANCIAL SECURITIES, INC.
The date of this Prospectus is , 1996
<PAGE>
[MARKETING DISPLAY]
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICES OF THE COMPANY'S
COMMON STOCK AND PUBLIC WARRANTS AT LEVELS ABOVE THOSE WHICH MIGHT OTHERWISE
PREVAIL IN THE OPEN MARKET. SUCH TRANSACTIONS MAY BE EFFECTED IN THE NASDAQ
SMALL CAP MARKET OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE
DISCONTINUED AT ANY TIME.
<PAGE>
SUMMARY
The following summary is qualified in its entirety by the other information
and consolidated financial statements appearing elsewhere in this Prospectus.
Each prospective investor is urged to read this Prospectus in its entirety.
Unless otherwise indicated all per share data and information in this Prospectus
relating to the number of shares of Common Stock outstanding assumes that the
Representatives' over-allotment option will not be exercised. For an explanation
of certain technical terms used in this Prospectus, see "Glossary."
THE COMPANY
MultiMedia Access Corporation (the "Company") develops and markets advanced
video communications products for the personal computer ("PC") and workstation
marketplaces. Applications include desktop videoconferencing ("DVC"), Internet
and Intranet video communications, video-based training, video surveillance,
distance learning and high quality workgroup video communications. While the
Company sells its core video compression-decompression ("Codec") and video
switching technologies to resellers and systems integrators, its primary
strategy is to develop and market video communications applications using its
technologies.
The Company, in September 1996, entered into a reseller agreement with Unisys
Corporation ("Unisys"), a nationwide systems integrator and reseller, to
purchase and resell the Company's Viewpoint VBX (Trademark). The Viewpoint
VBX(Trademark) is a PC-based video switch which provides workgroup video
communications over existing telephone or network wiring commonly found
throughout office buildings. Unlike commercially available competitive products,
the Viewpoint VBX(Trademark) connects over 100 users per switch and distributes
full-motion video at distances up to 3,500 feet via existing unshielded twisted
pair ("UTP") wiring.
The Company entered into a licensing agreement with Boca Research Inc.
("Boca"), a major modem and PC peripheral supplier, to manufacture and market
the Company's FamilyFone(Trademark) and its ISDN videoconferencing upgrades in
January 1996, and delivered its first video surveillance system to Alcatel
Network Systems Inc. ("Alcatel"), a major communications systems integration
company, in the first quarter of 1996. The Company believes it sells the only
currently available standards-based, multi-algorithm video and audio Codec
product for WindowsNT and is developing a multi-algorithm Codec for Sun
Microsystem ("Sun") workstations.
According to industry sources, the video communications industry is forecast
to be $3.6 billion by 1999 and the emerging desktop segment of that industry is
forecast to exceed $1.2 billion by 1999. The PC dominates the desktop computing
market with 1995 sales of over 57 million units worldwide and an estimated 100
million new PCs projected to be sold annually by 1999. Industry sources estimate
that over 30% of the new PCs sold in 1996 (principally multimedia capable PCs)
will be purchased by consumers for use in the home. The Company believes it has
developed products which position it to benefit from the growth of these markets
and which will have functions, performance and cost to successfully compete in
the rapidly-emerging desktop video communications industry.
PRODUCT FAMILY
The Company currently offers a variety of products with differing video
quality levels: NTSC TV quality with the Viewpoint VBX (Trademark) video switch,
business quality with Osprey-1000 (Trademark) using ISDN lines and consumer
quality video with Family Fone (Trademark) using modems over ordinary telephone
lines. The resolution and framerate of the video varies with the bandwith of the
communications connection.
Corporate Intranet Video. The Company's Viewpoint-PRO(Trademark) product
enables users to engage in real-time, full-color, full-motion video over their
existing computer networks. The Viewpoint-PRO(Trademark) supports point-to-point
and up to five site multipoint videoconferences. Unlike many currently available
ISDN-based products, the Viewpoint PRO(Trademark) does not require expensive
multipoint control units, which can cost as much as $20,000, to complete a
multipoint videoconference. Viewpoint PRO(Trademark) also comes equipped with
ViewCast(Trademark), a one-to-many broadcasting capability that permits "live"
broadcasts or pre-recorded content to be multicast over an existing corporate
data network. Viewpoint PRO(Trademark), combined with optional third-party
software, offers videoconference
3
<PAGE>
participants the ability to share a whiteboard or a PC application. Viewpoint
PRO(Trademark) was the first commercial product offering video multicast using
both FTP Software Inc.'s and Microsoft Corporation's TCP/IP-Multicast PC
software.
Consumer Video. The Company believes its FamilyFone(Trademark) product
provides affordable, good quality video communications capabilities to consumers
and small businesses. This product, which operates on standard telephone lines
and 28.8 Kbps (kilobits per second) modems, was introduced by Boca as the
BocaPRO Video Phone Elite in August 1996 at a suggested retail price of $399.
The cost of the product does not include the price of cameras and speakers.
Video Codecs. The Company develops and markets standards-based video and
audio Codec products that enable multimedia applications for PCs and
workstations. The Company's Osprey Codecs capture, digitize, compress, transmit,
receive, decompress and display full-motion video. The Osprey 1000(Trademark) is
compatible with multiple video and audio compression formats for both PCs and
workstations that are equipped with the standard PCI-bus and supports the
Windows NT, Windows 3.1, Windows95, Solaris and UNIX operating systems. The
Company believes the Osprey 1000(Trademark) is the only currently available
standards-based, multi-algorithm video and audio Codec product for the Windows
NT operating system.
The Company is currently developing a version of the Osprey Codec for Sun
workstations equipped with the S-bus. The Company has also developed
SLIC-Video(Trademark), a video capture product that enables Sun workstation
users to view uncompressed, high-quality video and to capture full-motion video
frames. SLIC-Video(Trademark) is compatible with a wide variety of video
applications on existing Sun workstations.
Video Switching Hub and UTP Video Distribution. The Company's Viewpoint
VBX(Trademark) product provides high-quality workgroup video communications with
shared gateways to Wide Area Networks ("WANs") and existing video
teleconferencing room systems. The Viewpoint VBX(Trademark) operates on a
PC-based WindowsNT system and employs a switched architecture to distribute
uncompressed, full-motion video within a building or campus using existing UTP
wiring. The switching architecture can support hundreds of users and allows
point-to-point, multipoint and broadcast modes of operation. The Viewpoint
VBX(Trademark) is compatible with standard NTSC cameras, audio components,
speakerphones, PC video peripherals and other videoconferencing products
produced by third-party manufacturers.
Internet Video. The Company is currently developing and plans to market three
Internet video products and their software players to capitalize on the growing
popularity of the World Wide Web (the "Web"). Subscribers to the Web have sought
improved Internet access capabilities, which has resulted in increased usage of
28.8 Kbps modems, ISDN adapters and cable modems. Improvements in video and
audio compression technology, standards and Internet access have made possible
new forms of motion-video content for Internet publishers and their target
audiences. The Company's products are being designed to take advantage of these
technological developments and target the rapidly- emerging market for Internet
video publishing, Internet video broadcasts and Internet video call centers by
enhancing Internet web pages with audio and motion-video.
Video Surveillance. The Company believes that commercial and residential
video surveillance products represent another strong business opportunity. The
Company delivered its first video surveillance system to Alcatel in the first
quarter of 1996. This industrial surveillance system integrates standard alarm
and sensory devices and allows a central operator to monitor and inspect
hundreds of remote sites over the customer's existing frame relay computer
network. The Company intends to enter into relationships and collaborative
projects with communication system integrators, security system resellers,
distributors and suppliers to capitalize on this market.
The Company believes that the convergence of multimedia PCs, new
standards-based audio and video technologies and increased interest in the
Internet and corporate Intranets combined with PC price levels for such
capabilities will generate a rapid adoption of video communications products and
services. The Company's enabling technologies provide for economical solutions
for adapting existing and new PCs with video communication capabilities.
The Company was incorporated in Delaware in February 1994 and acquired all of
the issued and outstanding capital stock of its affiliate, Viewpoint Systems,
Inc. ("Viewpoint") in May 1994. Unless otherwise indicated, references in this
Prospectus to the Company include its wholly-owned
4
<PAGE>
subsidiaries, Viewpoint, Videoware, Inc. ("VideoWare"), and Osprey Technologies,
Inc. ("Osprey"), all Delaware corporations. The Company's principal executive
offices are located at 2665 Villa Creek Drive, Suite 200, Dallas, Texas 75234,
its telephone number is (972) 488-7200, its fax number is (972) 488-7299 and its
Internet address is www.mmac.com.
5
<PAGE>
THE OFFERING
Securities Offered .................. 1,800,000 shares of Common Stock and
1,800,000 Public Warrants to
purchase one (1) share of Common
Stock at $ (120% of price offered to
the public). The shares of Common
Stock and the Public Warrants must
be purchased on the basis of one
Public Warrant for each share of
Common Stock purchased and will be
separately transferable immediately
upon issuance. See "Risk Factors --
Warrants Redeemable at Nominal
Price" and "Description of
Securities."
Common Stock to be Outstanding after
the Offering(1).................... 7,324,963
Warrants to be Outstanding after the
Offering........................... 4,944,054
Terms of the Public Warrants ........ Each Public Warrant is exercisable
at any time commencing six months
from the date of this Prospectus and
entitles the holder thereof to
purchase one share of Common Stock
at a price of $ per share (120% of
the price offered to the public),
subject to adjustment in certain
circumstances, at any time until
five years after the date of this
Prospectus. The Public Warrants are
redeemable by the Company, at any
time commencing eighteen months
after the date of this Prospectus,
at a price of $.10 per Public
Warrant, upon not less than 30 days
prior written notice to the
registered holders of the Public
Warrants, provided that the closing
price or bid price of the Common
Stock equals or exceeds 250% of the
exercise price (currently $ ,
subject to adjustment) of the Public
Warrants for any 20 trading days
within a period of 30 consecutive
trading days ending on the fifth day
prior to the day on which the
Company gives notice of redemption.
See "Description of Securities --
Warrants."
Use of Proceeds ..................... The Company intends to use the net
proceeds of this offering for
repayment of outstanding accounts
payable and indebtedness (including
amounts due to affiliates of the
Company); marketing and sales
activities; research and
development; and the balance for
working capital and general
corporate purposes. See "Use of
Proceeds."
Risk Factors ........................ The securities offered hereby are
speculative and involve a high
degree of risk and immediate
substantial dilution and should not
be purchased by investors who cannot
afford the loss of their entire
investment. See "Risk Factors" and
"Dilution."
Proposed Nasdaq Symbols ............. Common Stock -- MMAC
Public Warrants -- MMACW
- ----
(1) Includes 470,649 shares of Common Stock issued on the date of this
Prospectus upon the conversion of $2,330,300 principal amount of
Convertible Debt and approximately $305,362 of accrued interest at the
offering price of the Common Stock and Public Warrants (based on an
assumed offering price of $5.50 per share and $.10 per Public Warrant).
Does not include (i) 1,392,505 shares of Common Stock reserved for
issuance upon exercise of outstanding warrants to purchase common stock,
(ii) 180,000 shares of Common Stock reserved for issuance upon exercise of
the Representative's Warrants, (iii) 180,000 shares of Common Stock
reserved for issuance upon exercise of Representative's Public Warrants
issuable upon exercise of Representative's Warrants, (iv) 935,975 shares
of Common Stock reserved for issuance upon exercise of options available
for future grant under the 1995 Option Plan, (v) 1,064,025 shares of
Common Stock reserved for issuance upon exercise of options granted under
the 1995 Option Plan, (vi) 928,516 shares of Common Stock reserved for
issuance upon exercise of options granted under the 1994 Option Plan,
(vii) 103,549 shares of Common Stock reserved for issuance upon exercise
of options granted under the 1993 Option Plan, (viii) 25,000 shares of
Common Stock reserved for issuance upon exercise of options granted under
the 1995 Directors Stock Option Plan, (ix) 225,000 shares of Common Stock
reserved for issuance upon exercise of options available for future grant
under the 1995 Directors Stock Option Plan, (x) 250,000 shares of Common
Stock reserved for issuance under the Employee Stock Purchase Plan, (xi)
1,280,900 shares of Common Stock reserved for issuance upon exercise of
the Convertible Debt Warrants, (xii) 1,800,000 shares of Common Stock
reserved for issuance upon exercise of the Public Warrants, and (xiii)
470,649 shares of Common Stock reserved for issuance upon exercise of
Public Warrants issued on the date of this Prospectus upon conversion of
$2,330,300 principal amount of Convertible Debt and approximately $305,362
of accrued interest at the offering price of Common Stock and Public
Warrants based on an assumed offering price of $5.50 per share and $.10
per Public Warrant. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations," "Management -- Employee Stock
Plans," "Description of Securities" and "Underwriting."
6
<PAGE>
SUMMARY CONSOLIDATED FINANCIAL INFORMATION
The following summary financial data as of December 31, 1994, December 31,
1995 and June 30, 1996 and for each of the periods ended December 31, 1994 and
1995 and June 30, 1995 and 1996 is derived from the Company's consolidated
financial statements. The following data should be read in conjunction with the
consolidated financial statements of the Company, including the notes thereto
included elsewhere herein. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and "Consolidated Financial
Statements."
CONSOLIDATED STATEMENT OF OPERATIONS DATA:
<TABLE>
<CAPTION>
Cumulative
from Inception
(Nov. 19, 1992)
Year Ended December 31, Six Months Ended June 30, to June 30,
----------------------- ------------------------- -----------
1994 1995 1995 1996 1996
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net sales........................... $ 127,531 $ 285,354 $ 177,819 $ 676,719 $ 1,153,680
Cost of goods sold.................. 64,363 136,381 70,553 265,380 497,937
Gross profit........................ 63,168 148,973 107,266 411,339 655,743
Operating expenses ................. 2,740,692 4,720,559 2,253,017 2,240,709 10,369,364
Other expense (principally
interest)........................... (39,897) (843,292) (274,902) (228,787) (1,124,965)
Net loss(1)......................... (2,717,421) (5,414,878) (2,420,653) (2,058,157) (10,838,586)
Net loss per share.................. $ (0.53) $ (0.98) $ (0.45) $ (0.34)
Common and common equivalent shares
outstanding......................... 5,157,932 5,542,184 5,392,087 6,141,635
</TABLE>
CONSOLIDATED BALANCE SHEET DATA:
<TABLE>
<CAPTION>
December 31, June 30, 1996
--------------------------- ------------------------------------------------
1994 1995
---- ----
Pro Forma
Actual Pro Forma(2) As Adjusted(2)(3)
------ ------------ -----------------
<S> <C> <C> <C> <C> <C>
Working capital (deficit) .... $ (209,143) $(3,891,602) $(4,483,604) $(3,763,603) $ 7,241,658
Total assets.................. 1,781,055 1,244,766 1,242,009 2,962,009 9,651,183
Total liabilities............. 3,180,807 4,497,330 5,097,031 6,597,031 2,280,943
Stockholders' equity
(deficit)..................... (1,399,752) (3,252,564) (3,855,022) (3,635,022) 7,370,240
</TABLE>
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(1) From Viewpoint's inception through its acquisition by the Company on May
11, 1994, Viewpoint elected to be treated as an S Corporation for federal
income tax purposes and, accordingly, its taxable income or loss was
included in the income tax returns of its shareholders. Viewpoint's status
as an S Corporation was terminated on May 11, 1994.
(2) Gives pro forma effect to transactions subsequent to June 30, 1996 but
prior to the date of this Prospectus consisting of (i) receipt of stock
subscription receivable of $220,000, (ii) issuance of Convertible Debt II
of $1,000,000 and (iii) issuance of Bridge Debt of $500,000. See
"Description of Securities" and "Certain Transactions."
(3) Gives effect, on an as adjusted basis, to the sale of the 1,800,000 shares
of Common Stock and 1,800,000 Public Warrants offered hereby and the
initial application of the estimated net proceeds therefrom. Also gives
effect to the conversion of $2,330,300 of Convertible Debt and accrued
interest of approximately $305,362 to Common Stock at the estimated initial
public offering price of $5.50 per share and $.10 per Public Warrant. See
"'Use of Proceeds," "Certain Transactions" and "Desciption of Securities."
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RISK FACTORS
The securities offered hereby are speculative and involve a high degree of
risk. Each prospective investor should carefully consider the following risk
factors inherent in and affecting the business of the Company and this offering
before making an investment decision.
Development Stage Company; Limited Operating History; Going Concern
Qualification in Independent Auditor's Report. The Company is a development
stage company and has commenced limited marketing of its products. Accordingly,
the Company has a limited operating history upon which an evaluation of its
prospects can be made. Such prospects must be considered in light of the risks,
expense, delays, problems and difficulties frequently encountered in the
establishment of a new business in an industry characterized by intense
competition, as well as risks encountered in the shift from development to
commercialization of new products based on innovative technologies. The
Company's prospects are dependent upon the successful commercialization of its
products. There can be no assurance that the Company will be able to implement
its business plan or that unanticipated expenses, problems or difficulties,
technical or otherwise, will not result in material delays in its
implementation. The Company's independent auditors have included a going concern
qualification in their audit report on the Company's consolidated financial
statements stating that such financial statements have been prepared assuming
that the Company will continue as a going concern and that, among other things,
the Company's financial condition and losses from operations since inception
raise substantial doubt about the ability of the Company to continue as a going
concern. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations," "Business" and Note 1 of "Notes to Consolidated
Financial Statements."
Limited Revenue; Significant Losses; Accumulated Deficit. Since inception,
the Company has generated limited revenue, including revenues of $127,531,
$285,354, and $676,719 and incurred significant losses, including losses of
$2,717,421, $5,414,878 and $2,058,157 for the years ended December 31, 1994 and
1995, and the six months ended June 30, 1996, respectively, and has continued to
incur significant additional losses to date. At June 30, 1996, the Company had
an accumulated deficit of $10,036,220. Inasmuch as the Company intends to
increase its level of activities following consummation of this offering and
will be required to make significant expenditures in connection with marketing
and product development activities, the Company anticipates that losses will
continue for the foreseeable future and until such time as the Company is able
to build an effective marketing and sales organization, develop a network of
independent resellers and achieve market acceptance of its products. In
addition, the Company's future performance will be subject to a number of
business factors beyond the Company's control, such as technological changes and
developments by others and unfavorable general economic conditions, including
downturns in the economy or a decline in the DVC or PC industries or in targeted
commercial markets, which would result in a reduction or deferral of capital
expenditures by prospective customers. There can be no assurance that the
Company will be able to successfully implement its marketing strategy, generate
significant revenues or achieve profitable operations. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
"Consolidated Financial Statements."
Significant Capital Requirements; Dependence on Offering Proceeds; Possible
Need for Additional Financing. The Company's capital requirements in connection
with the design, development and commercialization of its products have been and
will continue to be significant. To date, the Company has been substantially
dependent upon loans from its principal stockholders, as well as private
placements of its debt and equity securities, to finance its working capital
requirements. The Company is dependent on the proceeds of this offering to
commence full-scale marketing activities in connection with its products, to
complete the development of additional product and software applications, and to
fund the Company's working capital requirements. The Company anticipates, based
on currently proposed plans and assumptions relating to its operations, that the
proceeds of this offering will be sufficient to satisfy its contemplated cash
requirements for at least twelve months following the consummation of this
offering. In the event that the Company's plans change or prove to be inaccurate
or if the proceeds of this offering prove to be insufficient to fund operations,
the Company could be required to seek additional financing sooner than currently
anticipated or could be required to curtail its activities. The Company has no
current arrangements with respect to, or sources of, additional financing, and
there can be no assurance that existing stockholders will provide any portion of
the Company's future financing require
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ments. There can be no assurance that any additional financing will be available
to the Company on acceptable terms, or at all. Additional equity financing may
involve substantial dilution to the interests of the Company's then existing
stockholders. See "Use of Proceeds" and "Certain Transactions."
Technological Factors; Uncertainty of Product Development and
Commercialization. The Company has only recently commenced limited
commercialization of its products for a limited number of users. Accordingly,
there can be no assurance that, upon widespread commercial use, if any, these
products will satisfactorily perform all of the functions for which they have
been designed or that they will operate satisfactorily. The Company intends to
use a portion of the proceeds of this offering in connection with product
refinement and enhancement and the development of additional products. Product
development, commercialization and continued system refinement and enhancement
efforts remain subject to all of the risks inherent in development of new
products based on innovative technologies, including unanticipated delays,
expenses and technical problems or difficulties, as well as the possible
insufficiency of funds to implement development efforts, which could result in
abandonment or substantial change in product commercialization. The Company's
success will be largely dependent upon its products meeting targeted cost and
performance objectives of large-scale production, the Company's ability to adapt
its products to satisfy industry standards and the timely introduction of its
products into the marketplace, among other things. There can be no assurance
that, upon wide-scale commercial introduction, the Company's products and
software applications will satisfy current price or performance objectives, that
unanticipated technical or other problems which would result in increased costs
or material delays in introduction and commercialization will not occur, or that
the Company's products will prove to be sufficiently reliable or durable under
actual operating conditions or otherwise be commercially viable. Software and
other technologies as complex as those incorporated into the Company's systems
may contain errors which become apparent subsequent to widespread commercial
use. Remedying such errors could delay the Company's plans and cause it to incur
additional costs, having a material adverse impact on the Company. See "Business
- -- Products" and "-- Marketing and Sales."
Concentration of Revenue; Dependence on Key Customers. A substantial portion
of the Company's sales are made to a small number of customers, generally on an
open account basis with no collateral required. There can be no assurance that
these customers will maintain their volume of business with the Company. A loss
of the Company's sales to these customers could have a material adverse effect
on the Company's results of operations unless other customers were found to
provide the Company with similar revenues. The Company performs ongoing credit
evaluation of its customers and maintains reserves for potential credit losses.
Although such losses in the aggregate have not exceeded management's
expectations, there can be no assurance that potential credit losses will not
exceed reserves in the future. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
Uncertainty of Market Acceptance. The DVC industry is characterized by
emerging and evolving markets and an increasing number of market entrants who
have introduced or are developing an array of new DVC systems. Each of these
entrants is seeking to establish its products as the preferred solution for
desktop video applications. As is typical in the case of emerging and evolving
markets, demand and market acceptance for newly introduced products and services
is subject to a high level of uncertainty. The Company has not yet commenced
significant marketing activities relating to product commercialization and
currently has limited marketing experience and limited financial, personnel and
other resources to undertake extensive marketing activities. The Company has not
conducted and does not intend to conduct formal market or concept feasibility
studies for its proposed products. The relatively high cost and less than
television broadcast quality video of DVC systems have, to date, limited the
market acceptance of DVC systems. Consequently, potential customers may elect to
utilize other products which they believe to be more efficient or have other
advantages over the Company's products, or may otherwise be reluctant to
purchase the Company's products. Achieving market acceptance for the Company's
products will require substantial marketing efforts and expenditure of
significant funds to create awareness and demand by potential consumers as to
the perceived benefits and distinctive characteristics of the Company's
products. There can be no assurance that the Company will have available funds
or other resources necessary to achieve such acceptance. See "Business --
Marketing and Sales."
Limited Marketing Capabilities and Experience; Dependence Upon Third-Party
Resellers. The Company has limited marketing experience and has conducted only
limited marketing activities. Although the Company expects to continue to market
directly to certain accounts, the Company intends to use a portion of the
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proceeds of this offering to establish a network of resellers, consisting
primarily of value-added resellers ("VARs"), systems integrators and original
equipment manufacturers ("OEMs") with established distribution channels to
market the Company's products and to educate potential resellers to install and
service its systems. The Company's prospects will be significantly affected by
its ability to successfully develop relationships with VARs, systems integrators
and OEMs and upon the marketing efforts of such resellers. While the Company
believes that independent resellers with which it enters into such arrangements
will have an economic motivation to market the Company's products, the time and
resources devoted to these activities generally will be controlled by such
entities and not by the Company. The Company will also be dependent upon such
resellers to provide installation and support services. A decline in the
financial prospects of particular resellers or any of their customers, or
inadequate installation and support services by resellers, could have a material
adverse effect on the Company. In addition, such resellers will likely market
various product lines, including, in some cases, products directly competitive
with the Company's products. The Company has entered into agreements with a
limited number of resellers to distribute its products and has recently entered
into a licensing agreement with Boca to manufacture and market
FamilyFone(Trademark) and related upgrades. There can be no assurance that the
Company will be able, for financial or other reasons, to finalize any additional
third-party distribution or marketing arrangements or that such arrangements, if
finalized, will result in further commercialization of any of the Company's
products. See "Use of Proceeds," "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and "Business -- Marketing and
Sales."
Competition. The market for DVC systems is highly competitive and
characterized by the frequent introduction of new products based upon innovative
technologies. The Company competes with numerous well-established manufacturers
and suppliers of videoconferencing, networking, telecommunications and
multimedia equipment and products, certain of which dominate the existing
video-conferencing market for such products. In addition, the Company is aware
of others that are developing, and in some cases have introduced, new DVC
systems. Most of the Company's competitors possess substantially greater
financial, marketing, personnel and other resources than the Company, have
established reputations relating to product design, development, manufacture,
marketing and service of networking, telecommunications and video products and
have significant budgets to permit them to implement extensive advertising and
promotional campaigns to market new products in response to competitors. Among
the Company's direct competitors are Target Technologies, Inc., VIVO Software,
Inc., Zydacron, Inc., VCON, Ltd., Corel Corporation and Video LAN Technologies,
Inc. See "Business -- Competition."
Technological Obsolescence; Need to Conform to Industry Standards. The
markets for the Company's products are characterized by rapidly changing
technology and evolving industry standards, often resulting in product
obsolescence or short product lifecycles. Accordingly, the Company's ability to
compete will depend in large part on its ability to introduce its products in a
timely manner, to continually enhance and improve its system and software
products and to maintain development capabilities to anticipate or adapt to
technological changes and advances in the DVC and PC industries, including
ensuring continuing compatibility with evolving industry standards and
technological advances. There can be no assurance that the Company will be able
to compete successfully, that competitors will not develop technologies or
products that render the Company's products obsolete or less marketable, or that
the Company will be able to keep pace with the technological demands of the
marketplace or successfully enhance and adapt its products to be compatible with
newly developed PC and networking products and technologies or software
products, or satisfy industry standards and the needs of its consumers and
potential consumers. Industry standards covering the Company's products are
being established by, among others, the International Telecommunications Union.
Such standards will provide for acceptable product performance levels and
interoperability and compatibility standards. If such standards, when adopted,
differ from the proposed standards, or are changed after adoption, customer
confidence in, and the market for, the applicable product could be adversely
affected. There can be no assurance that such standards will remain the same,
and if changed, that the Company will be able to comply with any changed
standards. If any product does not comply with the applicable standards the
Company may have to discontinue sales of such product until such time, if ever,
as it is able to modify or redesign its technology. In addition, the
establishment of standards adverse to the Company's system could provide
substantial competitive advantages to manufacturers of other videoconferencing
systems.
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In particular, the Company's compressed packet video Codec utilized in the
current version of the Viewpoint-PRO(Trademark) system does not meet the newly
proposed applicable standards and the Company will have to modify or redesign
the non-conforming portion of the product. The project to upgrade the
Viewpoint-PRO to the new industry standards will involve the development of a
new product based on a technology derivative of the Company's Osprey-1000 Codec.
The Company estimates that the project will take 8 man-months to complete at a
cost of approximately $70,000. The Company projects that the upgraded
Viewpoint-PRO will be available during 1997. The Research and Development
portion of the Use of Proceeds includes the cost of this project. See "Business
- -- Competition."
Dependence Upon Third-Party Manufacturers and Suppliers. The Company has, to
date, engaged small contract manufacturers to supply its products in limited
quantities pursuant to purchase orders. There can be no assurance that its
products can be manufactured reliably on a large-scale basis on commercially
reasonable terms, or at all. In addition, the Company has been and will continue
to be dependent on third parties for the supply and manufacture of all of its
component and electronic parts, including standard and custom-designed
components. The Company generally does not maintain supply agreements with such
third parties but instead purchases components and electronic parts pursuant to
purchase orders in the ordinary course of business. The Company is substantially
dependent on the ability of its third-party manufacturers and suppliers to,
among other things, meet the Company's design, performance and quality
specifications.
Failure by the Company's third-party manufacturers and suppliers to comply
with these and other requirements could have a material adverse effect on the
Company. There can be no assurance that the Company's third-party manufacturers
and suppliers will dedicate sufficient production capacity to meet the Company's
scheduled delivery requirements or that the Company's suppliers or manufacturers
will have sufficient production capacity to satisfy the Company's requirements
during any period of sustained demand. Moreover, the electronics industry from
time to time experiences short supplies of certain high demand components, which
may adversely affect the Company's ability to meet its production schedules.
Furthermore, although the Company owns the designs and dies for its custom
designed components and believes that alternative sources of supply are
available, the Company currently purchases all of its specially designed
components and certain high demand components from sole source suppliers.
Failure of manufacturers or suppliers to supply, or delays in supplying, the
Company with systems or components, or allocations in the supply of certain high
demand components could materially adversely affect the Company's operations and
ability to meet its own delivery schedules on a timely and competitive basis.
See "Business -- Production and Supply."
Broad Discretion in Application of Proceeds. Approximately $3,104,600 (37.1%)
of the estimated net proceeds from this offering has been allocated to working
capital and general corporate purposes. Accordingly, the Company will have broad
discretion as to the application of such proceeds. "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Liquidity" and
"Description of Securities."
Proceeds to Repay Indebtedness; Benefit to Related Parties. The Company will
use a portion of the proceeds of this offering to (i) repay $222,548 principal
amount of Secured and Demand Notes, including $200,000 payable to Glenn A.
Norem, CEO of the Company or G. A. Norem I, LP, a partnership he controls, plus
accrued interest of approximately $2,229 on the Secured and Demand Notes, (ii)
repayment of $347,250 principal amount of Convertible Debt plus accrued interest
of approximately $87,295 and, (iii) payment of accrued expenses and trade
accounts payable of approximately $420,000 (iv) repayment of $500,000 principal
amount of Convertible Debt II plus accrued interest of approximately $20,000 and
(v) repayment of $500,000 principal amount of Bridge Debt plus accrued interest
of approximately $3,333. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Liquidity" and "Description of
Securities."
Patents, Trademarks and Proprietary Information. The Company holds a United
States patent covering certain fundamental aspects of the compressed packet
video Codec incorporated into the Viewpoint-PRO(Trademark) system. The Company
may apply for additional patents relating to other aspects of its products and
has applied for trademark registration for the Viewpoint-PRO(Trademark),
ViewCast(Trademark), Osprey-1000(Trademark), SLIC-Video(Trademark),
FamilyFone(Trademark), and WorkFone(Trademark) names, among others. There can be
no assurance as to the breadth or
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degree of protection which existing or future patents, if any, may afford the
Company, that any patent applications will result in issued patents, that the
Company's patents or trademarks will be upheld, if challenged, or that
competitors will not develop similar or superior methods or products outside the
protection of any patent issued to the Company. Although the Company believes
that its patent and trademarks and the Company's products do not and will not
infringe patents or trademarks or violate the proprietary rights of others, it
is possible that the Company's existing patent or trademark rights may not be
valid or that infringement of existing or future patents, trademarks or
proprietary rights may occur. In the event the Company's products infringe
patents or proprietary rights of others, the Company may be required to modify
the design of its products, change the name of its products or obtain a license
for certain technology. There can be no assurance that the Company will be able
to do so in a timely manner, upon acceptable terms and conditions, or at all.
Failure to do any of the foregoing could have a material adverse effect upon the
Company. In addition, there can be no assurance that the Company will have the
financial or other resources necessary to enforce or defend a patent
infringement or proprietary rights violation action which may be brought against
it. Moreover, if the Company's products infringe patents, trademarks or
proprietary rights of others, the Company could, under certain circumstances,
become liable for damages, which also could have a material adverse effect on
the Company.
The Company also relies on confidentiality agreements with its directors,
employees, consultants and manufacturers and employs various methods to protect
the source codes, concepts, ideas, proprietary know-how and documentation of its
proprietary technology. However, such methods may not afford complete protection
and there can be no assurance that others will not independently develop similar
know-how or obtain access to the Company's know-how or software codes, concepts,
ideas and documentation. Furthermore, although the Company has and expects to
continue to have confidentiality agreements with its directors, employees,
consultants, manufacturers and appropriate vendors, there can be no assurance
that such arrangements will adequately protect the Company's trade secrets. See
"Business -- Patents, Trademarks and Proprietary Information."
Risks Relating to Proposed Expansion; Risks Relating to Foreign Operations.
The Company intends to use the proceeds of this offering to seek to expand its
current level of operations. Successful expansion of the Company's operations
will be dependent, among other things, on the Company's ability to achieve
significant market acceptance for its products, hire and retain skilled
management, marketing, technical and other personnel, establish an effective
sales organization and enter into satisfactory marketing arrangements, secure
adequate sources of supply on a timely basis and on commercially reasonable
terms, and successfully manage growth (including monitoring operations,
controlling costs and maintaining effective quality controls). Although the
Company, as of the date of the Prospectus, has no agreements, understandings or
commitments and is not engaged in any negotiations relating thereto, the Company
could also seek to expand its operations through acquisitions. In such an event,
investors in this offering would not have an opportunity to evaluate the
specific merits or risks of any potential acquisition. In addition, to the
extent the Company enters into foreign markets, the Company will be subject to
all of the risks inherent in foreign trade, including trade restrictions, export
duties and tariffs, fluctuations in foreign currencies and international
political, regulatory and economic developments affecting foreign trade. There
can be no assurance that the Company will be able to successfully expand its
operations or that the Company will not remain largely dependent on
non-recurring system sales to a limited customer base, which sales will
constitute all or a significant portion of the Company's revenue. See "Use of
Proceeds" and "Business -- Government Regulation."
Possible Fluctuations in Operating Results. The Company's operating results
could vary from period to period as a result of the length of the Company's
sales cycle, as well as from purchasing patterns of potential customers, the
timing of introduction of new products, software applications and product
enhancements by the Company and its competitors, technological factors,
variations in sales by distribution channels, competitive pricing, and generally
nonrecurring system sales. The Company's sales order cycle, which generally
commences at a time a prospective user demonstrates an interest in purchasing
one of the Company's products and ends upon execution of a purchase order with
that customer, could range from one to eighteen months. The period from the
execution of a purchase order until delivery of system components to the
Company, assembly and shipment, at which time the Company recognizes revenue,
may range from approximately one to four months.
Although the Company intends to use a
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portion of the proceeds of this offering to purchase additional component parts,
which the Company believes may reduce the length of its production and delivery
cycle, there can be no assurance that such factors will not cause significant
fluctuations in operating results in the future. Additionally, the Company
anticipates that upon entering into agreements with resellers for distribution
of the Company's products, of which there can be no assurance, such distributors
may place initial stocking orders for systems, component parts and software
programs, which could also result in material fluctuations in the Company's
operating results. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and "Business -- Production and Supply."
Limitations on Use of Net Operating Loss Carry Forwards. At December 31,
1995, the Company had substantial net operating loss carry forwards for federal
tax purposes available to offset future taxable income. Under Section 382 of the
Internal Revenue Code of 1986, as amended, utilization of prior net operating
loss carry forwards is limited after an ownership change, as defined in Section
382. There can be no assurance that the Company will not in the future be
subject to further significant limitations on the use of its net operating loss
carry forwards. In the event the Company achieves profitable operations, any
significant limitation on the utilization of net operating loss carry forwards
would have the effect of increasing the Company's tax liability and reducing net
income and available cash resources. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations -- Liquidity."
Government Regulation. The Company is subject to regulations relating to
electromagnetic radiation from its products, which impose compliance burdens on
the Company. In the event the Company redesigns or otherwise modifies its
products or completes the development of new products, it will be required to
comply with Federal Communications Commission regulations with respect to such
products prior to their commercialization. There can be no assurance that the
Company will be able to comply with such regulations. In addition, new
legislation and regulations, as well as revisions to existing laws and
regulations at the federal, state and local levels may be proposed in the future
affecting the video communications industries. Such proposals could affect the
Company's operations, result in material capital expenditures, affect the
marketability of its products and limit opportunities for the Company with
respect to modifications of its products or with respect to new or proposed
products or technologies. Expansion into foreign markets may also require the
Company to comply with additional regulatory requirements. The technology
contained in the Company's products may be subject to U.S. export controls.
There can be no assurance that such export controls, either in their current
form or as may be subsequently enacted, will not delay introduction of new
products or limit the Company's ability to distribute products outside of the
United States. Further, various countries may regulate the import of certain
technologies contained in the Company's products. Any such export or import
restrictions, new legislation or regulation or government enforcement of
existing regulations could have a material adverse effect on the Company's
business, operating results and/or financial condition. There can be no
assurance that the Company will be able to comply with additional applicable
laws and regulations without excessive cost or business interruption, if at all,
and failure to comply could have a material adverse effect on the Company. See
"Business -- Government Regulation."
Dependence on Key Personnel. The success of the Company will be largely
dependent on the personal efforts of Glenn A. Norem, its Chief Executive
Officer, and other key personnel. The Company entered into a five-year
employment agreement with Mr. Norem in February 1994. All other key personnel,
including Philip M. Colquhoun, President of the Company, William S. Leftwich,
Chief Financial Officer of the Company, David T. Stoner, Vice President of
Operations of the Company, Neal S. Page, Vice President and General Manager of
Osprey, A. David Boomstein, Vice President of Business Development of the
Company and Daniel W. Dodson, Vice President of Marketing of the Comapny, are
"at-will" employees by terms of their employment agreements. The employment of
each such key employee may therefore be terminated by the officer or the Company
at any time, for any reason or no reason. The loss of the services of Mr. Norem
or certain other key employees could have a material adverse effect on the
Company's business and prospects. The Company plans to obtain "key-man" life
insurance on the life of Mr. Norem in the amount of $1,000,000. The success of
the Company is also dependent upon its ability to hire and retain qualified
operational, financial, technical, marketing, sales and other personnel. There
can be no assurance that the Company will be able to hire or retain such
necessary personnel. See "Business -- Employees" and "Management."
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Control by Current Principal Stockholders. Upon the consummation of this
offering, the officers, directors and existing stockholders of the Company will
beneficially own approximately 75.4% of the Company's outstanding Common Stock
(72.8% if the Representatives' over-allotment option is exercised in full).
While these persons will not individually control a majority of the shares of
Common Stock of the Company, they may be able to effectively control the
decisions on matters including election of all of the Company's directors,
increasing the authorized capital stock, dissolution, merger or sale of the
assets of the Company and generally may be able to direct the affairs of the
Company. See "Management," "Principal Stockholders" and "Certain Transactions."
Significant Outstanding Options and Warrants. As of June 30, 1996 there were
outstanding stock options to purchase an aggregate of approximately 2,100,074
shares of Common Stock at exercise prices ranging from $.04 to $3.30 per share
and warrants to purchase an aggregate of approximately 1,217,500 shares of
Common Stock at prices ranging from $1.00 to $3.00 per share. To the extent that
outstanding options and warrants are exercised, dilution to the Company's
stockholders will occur. Moreover, the terms upon which the Company will be able
to obtain additional equity capital may be adversely affected because the
holders of outstanding options and warrants can be expected to exercise them at
a time when the Company would, in all likelihood, be able to obtain any needed
capital on terms more favorable to the Company than the exercise terms provided
by such outstanding securities. See "Management -- Employee Stock Plans" and
"Certain Transactions."
Immediate and Substantial Dilution. Assuming all 1,800,000 shares of Common
Stock offered hereby are sold at an assumed initial public offering price of
$5.50 per share and $0.10 per Public Warrant, this offering will involve an
immediate and substantial dilution of $4.52 (82.2%) per share between the pro
forma net tangible book value per share of Common Stock and the offering price.
The Company believes that the net proceeds of this offering together with
available cash will be sufficient to meet the Company's operating expenses and
capital requirements for at least the next twelve months. The Company
anticipates that additional funding will be required after the use of the net
proceeds of this offering. Such additional funding will likely result in further
dilution to the Company's stockholders.
See "Dilution."
No Dividends. The Company has not paid any cash dividends on its Common Stock
and does not expect to declare or pay any cash dividends in the foreseeable
future. Certain of the Company's debt instruments include covenants precluding
the payment of cash dividends until after such debt instruments are repaid. See
"Dividends."
Authorization and Discretionary Issuance of Preferred Stock. The Company's
Certificate of Incorporation authorizes the issuance of "blank check" preferred
stock with such designations, rights and preferences as may be determined from
time to time by the Board of Directors. Accordingly, the Board of Directors is
empowered, without stockholder approval, to issue preferred stock with dividend,
liquidation, conversion, voting or other rights which could adversely affect the
voting power or other rights of the holders of the Company's Common Stock. In
the event of issuance, the preferred stock could be utilized, under certain
circumstances, as a method of discouraging, delaying or preventing a change in
control of the Company. Although the Company has no present intention to issue
any shares of its preferred stock, there can be no assurance that the Company
will not do so in the future. See "Description of Securities -- Preferred
Stock."
Limitation on Monetary Liability of Officers and Directors to Stockholders.
Section 145 of the General Corporation Law of the State of Delaware contains
provisions entitling directors and officers of the Company to indemnification
from judgments, fines, amounts paid in settlement and reasonable expenses,
including attorney's fees, as the result of an action or proceeding in which
they may be involved by reason of being or having been a director or officer of
the Company provided said officers or directors acted in good faith. Articles
Seven and Ten of the Company's Certificate of Incorporation contain provisions
indemnifying officers and directors of the Company to the fullest extent
permitted by Delaware law. These provisions provide, among other things, that a
director of the Company shall not be liable either to the Company or its
stockholders for monetary damages for breach of fiduciary duty as a director.
The Company has also entered into indemnification agreements with Messrs. Norem,
Leftwich, Colquhoun, Stoner, Dodson, Boomstein, Page, Jobe, and Culp which
provide for indemnification to the
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fullest extent allowable under the laws of the State of Delaware. These
provisions may limit the ability of the Company's stockholders to collect on any
monetary liability owed to them by an officer or director of the Company.
Arbitrary Determination of Offering Price. The initial public offering price
of the Common Stock and the exercise price and terms of the Public Warrants have
been determined arbitrarily by negotiations between the Company and the
Representatives. Factors considered in such negotiations, in addition to
prevailing market conditions, included the history and prospects for the
industry in which the Company competes, an assessment of the Company's
management, the prospects of the Company, its capital structure and certain
other factors deemed relevant. Therefore, the public offering price of the
Common Stock and the exercise price and terms of the Public Warrants do not
necessarily bear any relationship to established valuation criteria and may not
be indicative of prices that may prevail at any time or from time to time in the
public market for the Common Stock. See "Underwriting."
Shares Eligible for Future Sale; Registration Rights. Upon the consummation
of this offering, the Company will have 7,324,963 shares of Common Stock
outstanding (7,594,963 shares if the Representatives' over-allotment option is
exercised in full)(assuming no exercise of outstanding options and warrants). Of
these shares, the 1,800,000 shares sold in this offering (2,070,000 shares if
the Representatives' over-allotment option is exercised in full) and the 470,649
shares of Common Stock registered concurrently with this Prospectus being
offered pursuant to the Selling Securityholder Prospectus included in the
Registration Statement of which this Prospectus forms a part will be freely
tradeable, subject to "lock-up" agreements (see "Shares Eligible for Future
Sale"), under the Securities Act, except for any shares purchased by an
"affiliate" of the Company (in general, a person who has a control relationship
with the Company), which shares will be subject to the resale limitations of
Rule 144 adopted under the Securities Act. The remaining 5,054,314 shares are
deemed to be "restricted securities," as that term is defined under Rule 144
promulgated under the Securities Act, in that such shares were issued and sold
by the Company in private transactions not involving a public offering and are
not currently part of an effective registration. Except for "lock-up"
agreements, such shares are eligible for sale under Rule 144, or will become so
eligible at various times through October 1996. In addition, the Company has
granted the Representatives demand and piggyback registration rights with
respect to the securities issuable upon exercise of the Representatives'
Warrants.
Under Rule 144, a stockholder who has beneficially owned Restricted Shares
for at least two (2) years (including persons who may be deemed to be
"affiliates" of the Company under Rule 144) may sell within any three (3) month
period a number of shares that does not exceed the greater of: a) one percent
(1%) of the then outstanding shares of a particular class of the Company's
Common Stock as reported on its 10-Q filing, or b) the average weekly volume on
NASDAQ during the four (4) calendar weeks preceding such sale and may only sell
such shares through unsolicited brokers' transactions. A stockholder who is not
deemed to have been an "affiliate" of the Company for at least ninety (90) days
and who has beneficially owned his shares for at least three (3) years would be
entitled to sell such shares under Rule 144 without regard to the volume
limitations described above.
There has been no public market for the securities of the Company. Sales of
substantial amounts of shares of the Company's Common Stock, pursuant to Rule
144 or otherwise, could adversely affect the market price of the Common Stock,
and consequently make it more difficult for the Company to sell equity
securities in the future at a time and price which the Company deems
appropriate. See "Shares Eligible for Future Sale," "Underwriting," and
"Concurrent Registration of Securities."
NASDAQ Maintenance Requirements; Possible Delisting of Securities from NASDAQ
System; Risks of Low-Priced Stocks. If the Company is unable to satisfy NASDAQ's
maintenance criteria in the future, its securities will be subject to being
delisted, and trading, if any, would thereafter be conducted in the
over-the-counter market in the so-called "pink sheets" or the "Electronic
Bulletin Board" of the National Association of Securities Dealers, Inc.
("NASD"). As a consequence of such delisting, an investor could find it more
difficult to dispose of, or to obtain accurate quotations as to the price of,
the Company's securities.
The Securities Enforcement and Penny Stock Reform Act of 1990 requires
additional disclosure relating to the market for penny stocks in connection with
trades in any stock defined as a penny stock.
15
<PAGE>
The SEC has adopted regulations that generally define a penny stock to be any
equity security that has a market price of less than $5.00 per share, subject to
certain exceptions. Such exceptions include any equity security listed on NASDAQ
and any equity security issued by an issuer that has (i) net tangible assets of
at least $2,000,000, if such issuer has been in continuous operation for three
years, (ii) net tangible assets of at least $5,000,000, if such issuer has been
in continuous operation for less than three years, or (iii) average annual
revenue of at least $6,000,000 if such issuer has been in continuous operation
for less than three years. Unless an exception is available, the regulations
require the delivery, prior to any transaction involving a penny stock, of a
disclosure schedule explaining the penny stock market and the risks associated
therewith.
In addition, if the Company's securities are not quoted on NASDAQ, or the
Company does not have $2,000,000 in net tangible assets, trading in the Common
Stock would be covered by Rule 15g-9 promulgated under the Securities Exchange
Act of 1934, as amended, (the "Exchange Act") for non-NASDAQ and non-exchange
listed securities. Under such rule, broker/dealers who recommend such securities
to persons other than established customers and accredited investors must make a
special written suitability determination for the purchaser and receive the
purchaser's written agreement to a transaction prior to sale. Securities also
are exempt from this rule if the market price is at least $5.00 per share.
The Company's Common Stock, as of the date of this Prospectus, is not
technically within the definitional scope of a penny stock, and is expected to
be exempt from the definition of penny stock by operation of law because it will
be listed on NASDAQ. However, in the event that the Common Stock were
subsequently to become characterized as a penny stock, the market liquidity for
the Company's securities could be severely affected. In such an event, the
regulations on penny stocks could effectively limit the ability of
broker/dealers to sell the Company's securities and thus the ability of
purchasers of the Company's securities to sell their securities in the secondary
market.
Warrants Redeemable at Nominal Price. The Public Warrants are redeemable by
the Company at any time commencing eighteen months from the date of this
Prospectus, for $.10 per Public Warrant upon thirty (30) days prior written
notice, provided that the average closing price or bid price of the Common Stock
for any twenty (20) trading days within the thirty (30) consecutive trading days
ending on the fifth day prior to notice of redemption equals or exceeds $ (250%
of the then effective exercise price of the Public Warrants. Redemption of the
Public Warrants by the Company could force the holders to exercise the Public
Warrants and pay the exercise price at a time when it may be disadvantageous for
the holders to do so, to sell the Public Warrants at the then current market
price when they might otherwise wish to hold the Public Warrants, or to accept
the redemption price, which is likely to be substantially less than the market
value of the Public Warrants at the time of redemption. In the event of the
exercise of a substantial number of Public Warrants within a reasonably short
period of time after the right to exercise commences, the resulting increase in
the amount of Common Stock of the Company in the trading market could
substantially affect the market price of the Common Stock. See "Description of
Securities -- Warrants."
Legal Restrictions on Sales of Shares Underlying the Warrants. The Public
Warrants are not exercisable unless, at the time of the exercise, the Company
has a current prospectus covering the shares of Common Stock issuable upon
exercise of the Public Warrants, and such shares have been registered, qualified
or deemed to be exempt under the securities laws of the state of residence of
the exercising holder of the Public Warrants. Although the Company has agreed to
keep a registration statement covering the shares of Common Stock issuable upon
the exercise of the Public Warrants effective for the term of the Public
Warrants, if it fails to do so for any reason, the Public Warrants may be
deprived of value.
The Common Stock and Public Warrants are separately transferable immediately
upon issuance. Purchasers may buy Public Warrants in the aftermarket in, or may
move to, jurisdictions in which the shares underlying the Public Warrants are
not so registered or qualified during the period that the Public Warrants are
exercisable. In this event, the Company would be unable to issue shares to those
persons desiring to exercise their Public Warrants, and holders of Public
Warrants would have no choice but to attempt to sell the Public Warrants in a
jurisdiction where such sale is permissible or allow them to expire unexercised.
See "Description of Securities."
16
<PAGE>
USE OF PROCEEDS
Assuming the sale of the securities offered hereby (based on an assumed
offering price of $5.50 per Share and $.10 per Public Warrant), the net proceeds
to the Company, after deducting estimated underwriting discounts and commissions
and expenses payable by the Company in connection with this offering, are
estimated to be approximately $8,369,600 ($9,685,040 if the Representatives'
over-allotment option is exercised in full). The Company expects to use such
proceeds as follows:
<TABLE>
<CAPTION>
Approximate
Application of Net Proceeds Dollar Amount % of Proceeds
<S> <C> <C>
Repayment of outstanding accounts payable and
indebtedness(1)............................................. $2,105,000 25.2
Research and development(2) ................................ 1,960,000 23.4
Marketing and sales(3) ..................................... 1,200,000 14.3
Working capital and general corporate purposes(4) ......... 3,104,600 37.1
Total ................................................... $8,369,600 100.0
========== =====
</TABLE>
- ----------
(1) Represents (i) the repayment of $222,548 principal amount of Secured Notes
and Demand Notes plus accrued interest of approximately $2,229, including
$200,000 principal amount of Secured Notes and Demand Notes payable to
Glenn A. Norem, CEO of the Company or G.A. Norem I, LP, a partnership he
controls; (ii) repayment of $347,250 principal amount of Convertible Debt
plus accrued interest of $87,295, (iii) payment of accrued expenses and
trade accounts payable of approximately $420,000, (iv) repayment of
$500,000 principal amount of Convertible Debt II plus accrued interest of
approximately $20,000 and (v) repayment of $500,000 principal amount of
Bridge Debt plus accrued interest of approximately $3,333. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity" and "Description of Securities."
(2) Includes amounts associated with continued refinement and enhancement of
the Company's products and amounts associated with the development of
additional products.
(3) Represents anticipated costs associated with marketing and sales
activities, including approximately $250,000 for the cost of print media,
participation in trade shows and direct mailings and approximately $400,000
for the salaries of four additional marketing and sales personnel and three
additional customer support personnel.
(4) Includes amounts for the payment of salaries of executive officers
anticipated to be approximately $385,000 over the 12 months following
consummation of this offering. See "Management," "Certain Transactions" and
"Business -- Production and Supply."
In the event that the Company's plans change or its assumptions change or
prove to be inaccurate or if the proceeds of this offering prove insufficient to
fund operations (due to unanticipated expenses or difficulties or otherwise),
the Company may find it necessary or advisable to reallocate some of the
proceeds within the above-described categories or to use portions thereof for
other purposes or may be required to seek additional financing or curtail its
operations. Future events, including changes in economic or industry conditions
or the Company's planned operations, may require the Company to use proceeds
allocated to working capital for marketing and sales or reallocate proceeds
among the various intended uses if it is determined at a later date that an
increase in such expenditures or reallocation of proceeds is necessary or
desirable. Any such determination would be based on, among other things, whether
and to what extent revenue from systems sales is sufficient to offset operating
expenses and the capital requirements associated with maintaining an inventory
of system components. Alternatively, the Company may use less of the proceeds
for marketing and sales in the event that such initial efforts prove more
successful than anticipated or the Company generates sufficient cash flow from
operations to otherwise fund such efforts.
The Company may, if and when the opportunity arises, use a portion of the
proceeds of this offering allocated to working capital, together with the
issuance of debt or equity securities, to acquire rights to technology and/or
products or to acquire existing companies in businesses the Company believes are
compatible with its business. Any decision to make such an acquisition will be
based upon a variety of factors, including, among others, the purchase price and
other financial terms of the transaction, the business prospects and competitive
position of, and technology or products provided by, the acquisition
17
<PAGE>
candidate and the extent to which any technology or business would enhance the
Company's prospects. Potential acquisition candidates may include companies with
products or technologies that are compatible with the Company's products, or
that the Company believes would provide the Company with additional distribution
channels. As of the date of this Prospectus, the Company has no agreements,
understandings or arrangements with respect to any such acquisition. There can
be no assurance that the Company will be able to successfully consummate any
acquisition or successfully integrate any acquired business into its operations.
Investors in this offering will not have an opportunity to evaluate the specific
merits or risks of any acquisition.
The Company believes that the net proceeds of this offering together with
available cash will be sufficient to meet the Company's operating expenses and
capital requirements for at least the next twelve months. The Company
anticipates that additional funding will be required after the use of the net
proceeds of the offering. No assurance can be given that such additional
financing will be available when needed on terms acceptable to the Company, if
at all. See "Risk Factors -- Significant Capital Requirements; Dependence on
Offering Proceeds; Possible Need for Additional Financing."
Proceeds not immediately required for the purposes set forth above will be
invested in short-term, investment-grade, interest-bearing securities.
DIVIDENDS
The Company has never paid cash dividends on its Common Stock. The Board of
Directors does not anticipate paying cash dividends in the foreseeable future as
it intends to retain future earnings to finance the growth of the business. The
payment of future cash dividends will depend on such factors as earnings levels,
anticipated capital requirements, the operating and financial condition of the
Company and other factors deemed relevant by the Board of Directors.
Certain of the Company's debt instruments include covenants precluding
payment of cash dividends until after such debt instruments are repaid.
18
<PAGE>
DILUTION
The difference between the offering price per share of Common Stock and the
pro forma as adjusted net tangible book value per share of Common Stock after
this offering constitutes the dilution to investors in this offering. Net
tangible book value per share on any given date is determined by dividing the
net tangible book value (total tangible assets less total liabilities) of the
Company on such date by the number of shares of Common Stock outstanding on such
date.
After giving effect to the pro forma adjustments (see Footnote (2) to
"Prospectus Summary -- Summary Consolidated Financial Information"), the pro
forma net tangible book value of the Company at June 30, 1996 was $(3,822,612),
or $(.76) per share of Common Stock. After giving effect to (i) the sale of
1,800,000 shares of Common Stock and 1,800,000 Public Warrants offered by the
Company hereby (based on an assumed offering price of $5.50 per share and $.10
per Public Warrant) (less underwriting discounts and commissions and estimated
expenses of this offering) and (ii) the issuance of 470,649 shares of Common
Stock issued on the date of this Prospectus upon the conversion of $2,330,300
principal amount of Convertible Debt and approximately $305,362 accrued interest
(based on an assumed offering price of $5.50 per share and $.10 per Public
Warrant), the pro forma as adjusted net tangible book value of the Company at
June 30, 1996 would have been $7,182,650 or $.98 per share, representing an
immediate increase in pro forma as adjusted net tangible book value of $1.74 per
share to existing stockholders and an immediate dilution of $4.52 per share
(82.2%) to investors. The following table illustrates the foregoing information
with respect to dilution to new investors on a per share basis:
Assumed public offering price(1)........................... $5.50
Pro Forma net tangible book value before offering..... $(.76)
Increase attribute to new investors................... 1.74
Pro Forma as adjusted net tangible book value after
offering................................................. .98
Dilution to new investors(2)............................... $4.52
=====
(1) Offering price before deduction of estimated expenses of the offering and
underwriting discounts and commissions and exclusive of the purchase price
of $.10 per Public Warrant.
(2) Assumes no exercise of the Representatives' over-allotment option. The pro
forma net tangible book value of Common Stock after the offering and the
Dilution to new investors, assuming the Representatives' overallotment
option is exercised in full, would be approximately $1.12 and $4.38 per
share, respectively.
The following table sets forth a comparison of the number of shares of Common
Stock acquired from the Company by the Company's stockholders as of June 30,
1996 on a pro forma basis and by investors in this offering, the percentage
ownership of such shares, the total consideration paid, the percentage of total
consideration paid, and the average price per share:
Shares Purchased Total Consideration
---------------- -------------------
Average Price
Number Percent Amount Percent Per Share
------ ------- ------ ------- ---------
Existing
stockholders......... 5,054,314 73.7 $ 7,662,498 43.6 $ 1.52
New investors ....... 1,800,000 26.3 9,900,000 56.4 $ 5.50
Total............ 6,854,314 100.0 $17,562,498 100.0
========= ===== =========== =====
The above table assumes no exercise of the Representatives' over-allotment
option. If the Representatives' over-allotment option is exercised in full, the
new investors will have paid $11,385,000 for 2,070,000 shares of Common Stock,
representing approximately 59.8% of the total consideration, for 29.1% of the
total number of shares of Common Stock outstanding.
19
<PAGE>
The foregoing table also assumes no exercise of outstanding stock options or
warrants or conversion of convertible debt. As of the date of this Prospectus,
there were (i) outstanding stock options to purchase 51,100 shares of Common
Stock at $.04 per share, 70,000 shares of Common Stock at $.10 per share, 52,449
shares of Common Stock at $.20 per share, 222,633 shares of Common Stock at
$2.20 per share, 130,000 shares of Common Stock at $2.42 per share, 1,308,908
shares of Common Stock at $3.00 per share, 160,000 shares of Common Stock at
$3.30 per share and 126,000 shares of Common Stock at $4.00 per share, (ii)
935,975 shares of Common Stock reserved for issuance upon exercise of options
available for future grant under the 1995 Option Plan, (iii) 1,280,900
Convertible Debt Warrants, (iv) warrants to purchase 1,392,505 shares of common
stock and (v) 2,270,649 Public Warrants. To the extent that these options and
warrants are exercised, there will be further dilution to new investors. See
"Management -- Employee Stock Plans," "Description of Securities" and
"Underwriting."
20
<PAGE>
CAPITALIZATION
The following sets forth the capitalization of the Company as of June 30,
1996 (A) on an actual basis, (B) pro forma to reflect transactions occurring
after June 30, 1996 but before the date of this Prospectus consisting of 1)
receipt of stock subscription receivable of $220,000, 2) issuance of $1,000,000
aggregate principal amount of Convertible Debt II and 3) issuance of $500,000
aggregate principal amount of Bridge Debt and (C) pro forma as adjusted to
reflect the issuance and sale of shares of Common Stock and Public Warrants
offered hereby (based on an assumed offering price of $5.50 per share and $.10
per Public Warrant) and the initial application of estimated net proceeds
therefrom.
<TABLE>
<CAPTION>
June 30, 1996
-------------
Pro Forma
Actual Pro Forma As Adjusted(1)
------ --------- --------------
<S> <C> <C> <C>
Short-term debt.......................................... $ 3,293,775 $ 4,293,775 $ 393,677
Long-term debt........................................... $ 3,780 $ 503,780 $ 503,780
Stockholders' equity:
Preferred stock, $.0001 par value, 5,000,000 shares
authorized, none issued or outstanding................. -- -- --
Common Stock, $.0001 par value, 20,000,000 shares
authorized; 5,315,811 shares issued (actual), 5,315,811
shares issued (pro forma) and 7,586,460 shares issued
(pro forma as adjusted)................................ 532 532 759
Additional paid-in capital.............................. 6,192,572 6,412,572 17,417,607
Accumulated deficit..................................... (10,036,220) (10,036,220) (10,036,220)
Treasury stock, 261,497 shares, at cost................. (11,906) (11,906) (11,906)
Total stockholders' equity (deficit)..................... (3,855,022) (3,635,022) 7,370,240
Total capitalization..................................... $ (3,851,242) $ (3,131,242) $ 7,874,020
</TABLE>
- ----------
(1) Includes 470,649 shares of Common Stock and 470,649 Public Warrants issued
on the date of this Prospectus upon the conversion of $2,330,300 principal
amount of Convertible Debt and approximately $305,362 of accrued interest
(based on an assumed offering price of $5.50 per share and $.10 per Public
Warrant). Does not include (i) 1,392,505 shares of Common Stock reserved
for issuance upon exercise of outstanding warrants to purchase common
stock, (ii) 180,000 shares of Common Stock reserved for issuance upon
exercise of the Representatives' Warrants, (iii) 180,000 shares of Common
Stock reserved for issuance upon exercise of Representative's Public
Warrants issuable upon exercise of Representatives' Warrants, (iv) 935,975
shares of Common Stock reserved for issuance upon exercise of options
available for future grant under the 1995 Option Plan, (v) 1,064,025 shares
of Common Stock reserved for issuance upon exercise of options granted
under the 1995 Option Plan, (vi) 928,516 shares of Common Stock reserved
for issuance upon exercise of options granted under the 1994 Option Plan,
(vii) 103,549 shares of Common Stock reserved for issuance upon exercise of
options granted under the 1993 Option Plan, (viii) 25,000 shares of Common
Stock reserved for issuance upon exercise of options granted under the 1995
Directors Stock Option Plan, (ix) 225,000 shares of Common Stock reserved
for issuance upon exercise of options available for future grant under the
1995 Directors Stock Option Plan, (x) 250,000 shares of Common Stock
reserved for issuance under the Employee Stock Purchase Plan, (xi)
1,280,900 shares of Common Stock reserved for issuance upon exercise of the
Convertible Debt Warrants, and (xii) 1,800,000 shares of Common Stock
reserved for issuance upon exercise of the Public Warrants. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," "Management -- Employee Stock Plans," "Description of
Securities" and "Underwriting."
21
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The following selected consolidated financial data have been derived from the
Company's consolidated financial statements. The audited consolidated balance
sheets as of December 31, 1994 and 1995 and the related consolidated statements
of operations, stockholders' equity (deficit) and cash flows for each of the two
years in the period ended December 31, 1995 and the notes thereto appear
elsewhere in this Prospectus. The selected consolidated financial data set forth
below at June 30, 1996 and for the six months ended June 30, 1995 and 1996 are
derived from unaudited consolidated financial statements which appear elsewhere
in this Prospectus and in management's opinion include all adjustments
(consisting only of normal recurring adjustments) necessary for a fair
presentation of financial position and results of operations. The results of
operations for the six months ended June 30, 1996 are not necessarily indicative
of results of operations to be expected for the full year. The following data
should be read in conjunction with such consolidated financial statements and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
CONSOLIDATED STATEMENT OF OPERATIONS DATA:
<TABLE>
<CAPTION>
Cumulative
from Inception
(Nov. 19, 1992)
Year Ended December 31, Six Months Ended June 30, to June 30,
----------------------- ------------------------- -----------
1994 1995 1995 1996 1996
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net sales.......................... $ 127,531 $ 285,354 $ 177,819 $ 676,719 $ 1,153,680
Cost of goods sold................. 64,363 136,381 70,553 265,380 497,937
Gross profit....................... 63,168 148,973 107,266 411,339 655,743
Operating expenses:
Selling, general and
administrative................... 1,795,485 2,297,497 1,377,650 1,129,548 5,737,066
Research and development.......... 864,847 1,983,310 758,508 1,009,854 3,979,854
Depreciation and amortization..... 80,360 439,752 116,859 101,307 652,444
Total operating expenses......... 2,740,692 4,720,559 2,253,017 2,240,709 10,369,364
Other expense (principally
interest)......................... (39,897) (843,292) (274,902) (228,787) (1,124,965)
Net loss(1)........................ $(2,717,421) $(5,414,878) $(2,420,653) $(2,058,157) $(10,838,586)
Net loss per share................. $ (0.53) $ (0.98) $ (0.45) $ (0.34)
Common and common equivalent
shares outstanding................ 5,157,932 5,542,184 5,392,087 6,141,635
</TABLE>
CONSOLIDATED BALANCE SHEET DATA:
December 31,
--------------------------
1994 1995 June 30, 1996
---- ---- -------------
Working capital (deficit) .... $ (209,143) $(3,891,602) $(4,483,604)
Total assets.................. 1,781,055 1,244,766 1,242,009
Total liabilities............. 3,180,807 4,497,330 5,097,031
Stockholders' equity
(deficit)..................... (1,399,752) (3,252,564) (3,855,022)
- ----------
(1) From Viewpoint's inception through its acquisition by the Company on May
11, 1994, Viewpoint elected to be treated as an S Corporation for federal
income tax purposes and, accordingly, its taxable income or loss was
included in the income tax returns of its shareholders. Viewpoint's status
as an S Corporation was terminated on May 11, 1994.
22
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
MultiMedia Access Corporation, a development stage company, develops and
markets advanced video communications products. The Company delivers
high-performance, low-cost products that integrate video capabilities into
existing desktop computers, applications and networks. The Company delivers
standards-based video solutions to the PC and workstation marketplace. See "Risk
Factors -- Possible Fluctuations in Operating Results."
RESULTS OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1996 COMPARED TO SIX MONTHS ENDED JUNE 30, 1995
Net Sales. Net sales for the six months ended June 30, 1996 increased to
$676,719 from $177,819 reported for the same period last year. This increase is
the result of an increase in system and product sales for the period,
particularly the Osprey-1000(Trademark) and the Viewpoint VBX(Trademark),
neither of which were available during the first half of 1995. A substantial
portion of the Company's sales are made to a small number of customers,
generally on an open account basis with no collateral required. The Company
performs ongoing credit evaluations of its customers and maintains reserves for
potential credit losses. Such losses in the aggregate have not exceeded
management's expectations.
Cost of Goods Sold. Cost of goods sold increased $194,827 to $265,380 for the
six months ended June 30, 1996, an increase that primarily is the result of
increased product and system sales. The Company realized an overall gross margin
percentage for the first half of 1996 of 60.8% which is essentially unchanged
from the same period in 1995.
Selling, General and Administrative Expense. Selling, general and
administrative ("SG&A") expense decreased $248,102 to $1,129,548 for the six
months ended June 30, 1996 from the same period in 1995, primarily due to a
$250,587 decrease in sales and marketing expense between the periods. The
decrease reflects a reduction in sales and sales management personnel after the
first quarter of 1995.
Research and Development Expense. Research and Development expenses increased
$251,346 to $1,009,854 for the six months ended June 30, 1996 over the same
period in 1995, primarily due to an increase in salary expense, third party
consulting services, facility costs of the Company's North Carolina development
office and an increase in salary expense of its Viewpoint subsidiary. In
general, the increase reflects the expanded development effort required to
expand the Company's product lines. See "Business -- Research and Development."
Other Income (Expense). During the first half of 1996, other expense
decreased approximately $46,115 to $228,787 compared to the same period in 1995.
This decrease is primarily the result of decreased interest expense, reflecting
an overall decrease in outstanding borrowings at a slightly higher blended
interest rate. See "Certain Transactions."
YEAR ENDED DECEMBER 31, 1995 COMPARED TO YEAR ENDED DECEMBER 31, 1994
Net Sales. Net sales increased $157,823 in 1995 over the prior year to
$285,354 for the year ended December 31, 1995. This increase is primarily
attributed to increased unit sales of the Company's Viewpoint VBX(Trademark) and
Osprey-1000(Trademark) products.
Cost of Goods Sold. Cost of goods sold increased $72,018 to $136,381 for the
year ended December 31, 1995, an increase that primarily reflects the increase
in sales. Over the same periods, the Company's gross profit margin percentage
increased from 49.5% for 1994 to 52.2% for 1995. This increase is the result of
sales of higher margined product and a slight increase in the sales of
consulting and custom programming services.
23
<PAGE>
Selling, General and Administrative Expense. Selling, general and
administrative expense increased $502,012 to $2,297,497 for the year ended
December 31, 1995. This 28.0% increase over the prior year can be attributed to
increases in employees and consultants, higher occupancy costs and increased
business development, sales and marketing related expenses corresponding to the
introduction of the Viewpoint-PRO(Trademark), Viewpoint VBX(Trademark) and
Osprey-1000(Trademark) product lines in 1995.
Research and Development Expense. The Company's research and development
expense increased $1,118,463 to $1,983,310 in 1995 primarily due to the
establishment of the Company's North Carolina development office. Expenses
related to this office included salaries for newly hired engineers and support
staff and the cost of the office facility and equipment. During 1995, this
development office was engaged in the development of the SLIC-Video(Trademark)
and Osprey-1000(Trademark) products which were introduced in mid-1995 and
late-1995, respectively.
Other Income (Expense). For the year ended December 31, 1995, other expense
increased to $843,292 for the year compared to $39,897 for the year ended
December 31, 1994. This increase was primarily the result of an approximate
$766,402 increase in interest expense for 1995 over 1994, as a result of
additional borrowings pursuant to the Convertible Debt and borrowings pursuant
to the Secured Notes and Demand Notes. See "Certain Transactions."
LIQUIDITY
At June 30, 1996, the Company had a working capital deficit of $(4,483,604).
To date, the Company has been dependent upon loans from its principal
stockholders, as well as private placements of its debt and equity securities,
to finance its working capital requirements.
Net cash used in operating activities for the six months ended June 30, 1996
was $1,399,250. Increases in inventory and accounts payable were a result of an
increase in production levels to meet anticipated sales.
Cash used in investing activities for the six months ended June 30, 1996
consisted of $85,901 of capital expenditures. As of the date of this Prospectus,
the Company does not have any material commitments for capital expenditures.
Cash provided by financing activities for the six months ended June 30, 1996
was primarily a result of the receipt of the proceeds of the Secured Notes II in
January through February 1996 and the private placement of Common Stock during
the second quarter of 1996. At June 30, 1996, the Company had cash of $54,072.
The Company currently has no plans or agreements to seek loan financing. The
Company may choose to seek additional financing to provide additional working
capital at some time in the future. Such financing may include loans or lines of
credit and could include factoring agreements. However, the Company believes
that the proceeds of the initial public offering will be sufficient to meet its
capital requirements for at least the next twelve months.
The Company's independent auditors have included an explanatory paragraph in
their audit report on the Company's consolidated financial statements stating
that certain factors raise substantial doubt about the Company's ability to
continue as a going concern. This offering is an integral part of the Company's
plan to continue as a going concern. In the event that the Company's plans
change or its assumptions change or prove to be inaccurate or if the proceeds of
this offering prove to be insufficient to fund operations (due to unanticipated
expenses or difficulties or otherwise), the Company may be required to seek
additional financing sooner than currently anticipated. The Company has no
current arrangements with respect to, or sources of, additional financing. There
can be no assurance that existing stockholders will provide any portion of the
Company's future financing requirements. There can be no assurance that any
additional financing will be available to the Company on acceptable terms, or at
all. Additional equity financing may involve substantial dilution to the
Company's then existing stockholders.
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From Viewpoint's inception in November 1992 through December 31, 1993, the
operations of the Company were principally limited to conducting research and
development, limited production operations and marketing of prototype products.
From Viewpoint's inception through its acquisition by the Company on May 11,
1994, Viewpoint elected to be treated as an S Corporation for federal income tax
purposes and, accordingly, its taxable income or loss was included in the income
tax returns of its shareholders. Viewpoint's status as an S Corporation was
terminated on May 11, 1994.
At December 31, 1995, the Company had net operating loss carry forwards for
federal tax purposes of $7,730,000 available to offset future taxable income.
Under Section 382 of the Internal Revenue Code of 1986, as amended, utilization
of prior net operating loss carry forwards is limited after an ownership change,
as defined in Section 382, to an annual amount equal to the value of the loss
corporation's outstanding stock immediately before the date of the ownership
change multiplied by the federal long-term tax-exempt rate. Beginning with 1994,
approximately $790,000 of the carry forward is limited to utilization at a rate
of approximately $300,000 per year. The Company may in the future be subject to
further significant limitations on the use of its net operating loss carry
forwards. In the event the Company achieves profitable operations, any
significant limitation on the utilization of net operating loss carry forwards
would have the effect of increasing the Company's tax liability and reducing net
income and available cash resources. Moreover, Viewpoint terminated its status
as an S Corporation in May 1994, and net operating losses incurred by Viewpoint
prior to such termination will not be available to offset future taxable income
of the Company. See Note 8 of Notes to Consolidated Financial Statements.
CAPITAL RESOURCES
In January 1993, Viewpoint issued to five individuals an aggregate of
$200,000 principal amount of 5% convertible promissory notes ("Notes") due in
January 1994. In connection with the issuance of these notes, Viewpoint issued
warrants to purchase an aggregate of 51,100 shares of Common Stock at an
exercise price of approximately $.02 per share. In June 1993, Viewpoint issued
to one individual an additional $25,000 principal amount 5% convertible
promissory note due June 1994 and warrants to purchase 6,388 shares of Common
Stock at an exercise price of approximately $.50 per share.
In January 1994, holders of $100,000 principal amount of the Notes agreed to
exchange such notes (plus accrued interest of approximately $4,891) for $104,891
aggregate principal amount of 5% convertible promissory notes due January 1995
and warrants to purchase an aggregate of 25,550 shares of Common Stock at an
exercise price of approximately $.50 per share. In April 1994, Viewpoint repaid
the remaining $100,000 principal amount of the 5% convertible promissory notes
issued in January 1993, together with accrued interest thereon.
During 1993, Glenn A. Norem, Chief Executive Officer of the Company, loaned
Viewpoint an aggregate of $90,700 at an annual interest rate of 8%. These loans
were repaid by the Company in November 1994. In connection with these loans,
Viewpoint issued warrants to Mr. Norem to purchase an aggregate of 11,587 shares
of Common Stock at an exercise price of approximately $0.20 per share. Mr. Norem
exercised these warrants in May 1994. In addition, during 1993, G.A. Norem I,
L.P., of which Mr. Norem is the sole general partner, loaned Viewpoint an
aggregate of $35,500 at an annual interest rate of 8%. Viewpoint repaid these
loans in June 1994. In connection with these loans, Viewpoint granted G.A. Norem
I, L.P. a security interest in all of its assets and issued to G.A. Norem I,
L.P. warrants to purchase 4,536 shares of Common Stock at an exercise price of
$.10 per share. G.A. Norem I, L.P. exercised these warrants in May 1994.
In March 1994, the Company issued an aggregate of 996,364 shares of Common
Stock at a price of $2.20 per share, for which it received net proceeds of
$1,917,141.
In September 1994 through January 1995, the Company issued promissory notes
(the "Convertible Debt") in the aggregate principal amount of $2,677,550 (the
"Convertible Debt Financing"). The Convertible Debt bears interest at the rate
of 8% per annum and is, at the option of the holder, (i) due on the earlier of
the closing of an initial public offering of the Company's equity securities in
excess of $2,000,000 or 18 months from the date of issuance or (ii) convertible
into shares of the securities sold in an initial public offering registered
under the Securities Act of 1933, as amended, (the "Securities Act").
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In addition, pursuant to the terms of the Convertible Debt Financing, investors
electing to convert their Convertible Debt into shares of the securities offered
in an initial public offering will receive one Convertible Debt Warrant for each
$2.00 principal amount of Convertible Debt that is converted and investors
electing repayment of the Convertible Debt will receive one Convertible Debt
Warrant for each $3.00 principal amount of Convertible Debt surrendered for
repayment. The Convertible Debt Warrants are exercisable at an exercise price of
$3.00 per share during a three-year period commencing on the date of the closing
of such initial public offering. The Company used the proceeds of the
Convertible Debt Financing for working capital and general corporate purposes.
Holders of $2,330,300 principal amount of Convertible Debt have elected to
convert into the securities offered hereby and holders of $347,250 principal
amount have elected to be repaid from the proceeds of this offering.
In October 1994, the holder of the $25,000 principal amount note issued in
June 1993 agreed to exchange such note (plus accrued interest of approximately
$1,654) and an additional $346 in cash (a total of $27,000) in the Convertible
Debt Financing. In January 1995, the holders of the remaining $104,891 principal
amount of 5% convertible promissory notes issued in January 1994 agreed to
exchange such notes (plus accrued interest of approximately $5,359) in the
Convertible Debt Financing.
From February through April 1995, the Company received gross proceeds of
$1,100,000 in connection with the issuance and sale of $1,100,000 aggregate
principal amount of short-term secured notes (the "Secured Notes"). The Secured
Notes bear interest at the rate of 15% per annum and were due at the earlier of
the closing of an initial public offering by the Company or 90 days from
issuance. As of December 31, 1995, Secured Notes totalling $791,000, plus
accrued interest, were exchanged for equity in the company by issuing one share
of Common Stock for each $3.00 of debt. In addition, pursuant to the exchange,
each consenting holder received a warrant to purchase one share of Common Stock
for each $2.00 exchanged. The warrants are exercisable at $1.00 per share for
three years. Also at December 31, 1995, the remaining holders of the Secured
Notes agreed to exchange their notes for Demand Notes. In return, each such
holder received a warrant to purchase one share of Common Stock for each $3.33
exchanged to Demand Notes. The warrants are exercisable at $1.00 per share for
three years. The Secured Notes are secured by a lien on all then unencumbered
assets of the Company. The Company used the proceeds of the Secured Notes for
working capital and general corporate purposes.
In June and July 1995, the Company received gross proceeds of $310,000 in
connection with the issuance and sale of $310,000 aggregate principal amount of
short-term demand notes (the "Demand Notes"). The Demand Notes bear interest at
the rate of 15% per annum. Pursuant to the terms of the Demand Notes, investors
received one warrant to purchase a share of Company Common Stock for each $4.00
of principal. The warrants are exercisable at an exercise price of $1.00 per
share for three years from the date of issuance. As of December 31, 1995, Demand
Notes totalling $250,000, plus accrued interest, were exchanged for equity in
the Company by issuing one share of Common Stock for each $3.00 of debt.
Pursuant to this exchange, each exchanging holder received a warrant to purchase
one share of Common Stock for each $2.00 exchanged. These warrants are
exercisable at $1.00 per share for three years. Also at December 31, 1995, the
remaining holders of the Demand Notes received an additional warrant to purchase
one share of Common Stock for each $3.33 invested as additional compensation for
extension of demand notes. These warrants are exercisable at $1.00 per share for
three years. The Company used the proceeds of the Demand Notes for working
capital and general corporate purposes.
In August and September 1995, the Company issued an aggregate of 833,333
shares of Common Stock at a price of $3.00 per share, for which it received
gross proceeds of $2,500,000.
In January and February 1996, the Company received gross proceeds of $650,000
in connection with the issuance and sale of $650,000 aggregate principal amount
of a second series of short-term secured notes (the "Secured Notes II"). The
Secured Notes II bear interest at a rate of 8-10% per annum and were due 180
days from issuance. Pursuant to the terms of the Secured Notes II, the investor
was granted warrants to purchase 65,000 shares of Common Stock of the Company at
$3.00 per share for three (3) years from the date of issuance. As of March 31,
1996, the Secured Notes II, plus accrued interest, were converted into equity in
the Company by issuing one share of Common Stock for each $3.00 of debt.
In April through June 1996, the Company issued an aggregate of 304,016 shares
of Common Stock at a price of $3.00 per share, for which it received gross
proceeds of $912,054.
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In July 1996, the Company received gross proceeds of $1,000,000 in connection
with the issuance and sale of $1,000,000 aggregate principal amount of a
convertible note (the "Convertible Debt II"). The Convertible Debt II bears
interest at the rate of 8% per annum and $500,000 is due the earlier of ten days
after the completion of an initial public offering by the Company or 180 days
from issuance, while the balance of $500,000 is due eighteen months from
issuance. Pursuant to the terms of the Convertible Debt II, the investor
received a warrant to purchase 100,000 shares of Common Stock of the Company.
The warrant is exercisable at a price of $3.00 per share for three years from
the date of issuance. In addition, should the investor elect to convert, the
investor will receive an additional warrant to purchase 100,000 shares of Common
Stock at $3.00 per share for three years from the date of conversion.
In September 1996, the Company received gross proceeds of $500,000 in
connection with the issuance and sale of $500,000 aggregate principal amount of
a bridge loan (the "Bridge Debt") to an unaffiliated individual. The Bridge Debt
bears interest at the rate of 8% per annum and is due the earlier of ten days
after the completion of an initial public offering by the Company or 180 days
from issuance. The holder of the Bridge Debt received a warrant to purchase
50,000 shares of Common Stock of the Company exercisable at a price of $3.00 per
share for three years from the date of issuance pursuant to the terms of the
Bridge Debt.
In September 1996, Glenn A. Norem, Chief Executive Officer of the Company,
agreed to exchange $50,000 principal amount of Convertible Debt, $364,154
principal amount of Secured and Demand Notes, accrued interest of $43,934 and
accrued salary and bonuses of $127,781 for $585,869 aggregate principal amount
of a 15% term loan. Principal in the amount of $250,000 is payable ten days
after the completion of an initial public offering by the Company, while the
balance is due in December 1997. Interest is payable quarterly.
The Company believes that the net proceeds of this offering together with
available cash will be sufficient to meet the Company's operating expenses and
capital requirements for at least the next twelve months.
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BUSINESS
MultiMedia Access Corporation develops and markets advanced video
communications products for the PC and workstation marketplaces. Applications
include desktop videoconferencing, Internet and Intranet video communications,
video-based training, video surveillance, distance learning and high quality
workgroup video communications. While the Company sells its core video Codec and
video switching technologies to resellers and systems integrators, its primary
strategy is to develop and market video communications applications using its
technologies.
The Company, in September 1996, entered into a reseller agreement with
Unisys, a nationwide systems integrator and reseller, to purchase and resell the
Company's Viewpoint VBX (Trademark). The Viewpoint VBX (Trademark) is a PC-based
video switch which provides workgroup video communications over existing
telephone or network wiring commonly found throughout office buildings. Unlike
commercially available competitive products, the Viewpoint VBX(Trademark)
connects over 100 users per switch and distributes full-motion video at
distances up to 3,500 feet via existing UTP wiring.
The Company entered into a licensing agreement with Boca, a major modem and
PC peripheral supplier, to manufacture and market the Company's
FamilyFone(Trademark) and its ISDN videoconferencing upgrades in January 1996
and delivered its first video surveillance system to Alcatel, a major
communications systems integration company, in the first quarter of 1996. The
Company believes it sells the only currently available standards-based,
multi-algorithm video and audio Codec product for WindowsNT and is developing a
multi-algorithm Codec for Sun workstations.
INDUSTRY BACKGROUND
Videoconferencing was introduced in the late 1970s with the establishment of
videoconferencing room systems. To transmit "live" video images (which may
contain over 90 million bits per second of data) over telecommunications lines,
the video data must be digitized and significantly compressed to fit the
capacity of data networks and telephone lines (as low as 28,800 bits per
second). As video data is compressed, redundant data is eliminated. After
transmission, the video image is reconstructed for display at the receiving end.
The quality of the reconstructed image is a function of (1) the
sophistication of the video and audio compression algorithms, (2) the amount of
real-time data which can be transmitted over networks, (3) the power of the
video and audio coder-decoder hardware, and (4) the speed and power of PCs and
workstations.
The Company believes low-cost videoconferencing and other video network
services are now attainable because the performance and capabilities of these
four key elements have recently improved significantly, making video
communications available at reasonable cost.
Videoconferencing room systems use expensive digital lines and permit
communication only between compatible facilities. These systems currently cost
between $20,000 and $100,000 and are typically used by large corporations
primarily for intra-company communication between different locations. The
Company believes that the high cost of videoconferencing room systems and the
logistical problem of scheduling and availability have limited their use to
large corporations.
According to industry sources, the video communications industry is forecast
to be $3.6 billion by 1999 and the emerging desktop segment of that industry is
forecast to exceed $1.2 billion by 1999. The PC dominates the desktop computing
market with 1995 sales of over 57 million units worldwide and an estimated 100
million new PCs projected to be sold annually by 1999. Industry sources estimate
that over 30% of the new PCs sold in 1996 (principally multimedia capable PCs)
will be purchased by consumers for use in the home. The Company believes it has
developed products which position it to benefit from the growth of these markets
and which will have functions, performance and cost to successfully compete in
the rapidly emerging desktop video communications industry.
The Company currently offers a variety of products with differing video
quality levels: NTSC TV quality with the Viewpoint VBX (Trademark) video switch,
business quality with Osprey-1000 (Trademark) using ISDN lines and consumer
quality video with Family Fone (Trademark) using modems over ordinary telephone
lines. The resolution and framerate of the video varies with the bandwith of the
communications connection. The
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Company has designed its products in response to the increasing demand for
low-cost desktop videoconferencing and for real-time collaborative computing
applications using telephone and computer networks. The Company is also
preparing to market video products for the Internet and corporate Intranets.
CORPORATE INTRANET VIDEO
The Company first demonstrated its packet (TCP/IP-based) network video
technologies on the Internet's MBONE and on corporate Intranets in 1993. The
Company introduced its first commercial product, Viewpoint-PRO(Trademark), one
of the first TCP/IP-based videoconferencing systems designed specifically for
LAN and WAN applications in 1994. This system enables users to engage in
real-time, full-color, full-motion video over their existing computer networks.
Viewpoint-PRO(Trademark) provides both point-to-point and up to five site
multipoint videoconferences. The system does not require expensive MCUs, which
typically cost $20,000 or more, that ISDN-based products require to complete a
multipoint video- conference. Viewpoint-PRO(Trademark) also includes a
one-to-many broadcasting capability called ViewCast(Trademark). With
ViewCast(Trademark), "live" broadcasts, such as corporate briefings or news
broadcasts, or pre-recorded content, such as training videos and product and
services information, can be multicast over an existing corporate data network.
Viewpoint-PRO(Trademark) was the first commercial product offering video
multicast using both FTP Software, Inc.'s and Microsoft Corporation's
TCP/IP-multicast PC software. Each Viewpoint-PRO(Trademark) includes software to
enable a Windows PC with a sound card to receive and display a
ViewCast(Trademark). Viewpoint-PRO(Trademark) bundles, as an option, third-party
collaborative computing software which allows videoconference participants to
share a whiteboard or a PC application.
CONSUMER VIDEO
The Company's FamilyFone(Trademark) and WorkFone(Trademark) products are
expected to provide affordable, good quality video communications capabilities
to consumers, small businesses and corporations over standard telephone lines
with 28.8 Kbps modems and over the Internet. Examples of FamilyFone(Trademark)
uses might include: families and grandparents exchanging "live" video birthday
greetings with each other, college students videoconferencing with their parents
or small office/home office business owners accessing video training courses
over the Internet.
In January 1996, the Company signed a licensing agreement with Boca. In this
multi-year contract, the Company licensed its hardware and related firmware and
application software for videoconferencing over standard telephone lines and
over the Internet. Pursuant to the licensing agreement, the Company receives
license fees for the design and on-going royalties for its firmware and its
videoconferencing applications with every shipment of the BocaPRO Video Phone
Elite, which was introduced by Boca in August 1996 at a suggested retail price
of $399. The Company's prospects will be significantly affected by Boca's
ability to market the product and upon the marketing efforts of Boca's
resellers.
VIDEO CODECS
The Company develops and markets standards-based video and audio Codec
products that enable multimedia applications for both PCs and workstations. The
Osprey Codec captures, digitizes, compresses, transmits, receives, decompresses
and displays full-motion video. The Osprey-1000(Trademark) product line supports
multiple video and audio compression formats for both PCs and workstations which
are equipped with the now standard PCI-bus. The Company is developing the
Osprey-1100(Trademark) multi-algorithm Codec for the existing workstations from
Sun that are equipped with the S-bus. The Company believes it is the only
company currently providing standards-based, multi-algorithm Codec products for
WindowsNT. The Osprey Codecs also support Windows 3.1, Windows95, Solaris and
UNIX operating systems.
SLIC-Video(Trademark) is a video capture product that enables Sun workstation
users to view uncompressed, high-quality video and to capture full-motion video
frames. SLIC-Video(Trademark) software also provides access to closed caption
data which allows key words to act as filters and thereby control video
displayed on the screen. SLIC-Video's(Trademark) compatibility with standard Sun
products allows this product to support a wide variety of video applications on
existing Sun workstations.
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The Company intends to continue to establish strategic product development
alliances with companies whose products and technologies complement the
Company's strategic direction. With rapidly evolving technologies in the areas
of video, audio and networks, the Company intends to engage in strategic
alliances that offer expanding access to key new technologies that can be part
of current and future products.
VIDEO SWITCHING HUB AND UTP VIDEO DISTRIBUTION
The Company's Viewpoint VBX(Trademark) product provides high-quality
workgroup video communications with shared gateways to WANs and legacy video
teleconferencing room systems. The Viewpoint VBX(Trademark), a PC-based video
switch, employs a switched architecture to distribute uncompressed, full-motion
video within a building or campus via existing UTP wiring. Shared wide area
gateways allow other Viewpoint VBX(Trademark) networks to be interconnected and
enable connection to standards-based room or desktop videoconferencing products
from third-party manufacturers. The switching architecture employed by Viewpoint
VBX(Trademark) allows point-to-point, multipoint and broadcast modes of
operation to be supported. Both small workgroups and large building or campus
networks of hundreds of users can be supported.
The Viewpoint VBX(Trademark) product line includes a multimedia switch, WAN
interfaces and desktop components. The multimedia switch utilizes standard PC
components and the Company's video switching technology and software to provide
an expandable solution for video communications within an office building or
campus. Video and audio are distributed with NTSC quality by utilizing the
Company's UTP transceiver technology to send video over existing wiring at
distances of up to 3,500 feet. An existing LAN or telephone system is used only
for non-video communications (control signals) between the multimedia switch and
each user, eliminating overload of the computer network as workgroups are
video-enabled.
The Viewpoint VBX(Trademark) also provides shared-resource access to video
sources and storage devices located anywhere within the network. VCRs, videodisk
players, broadcast or cable TV and Direct Broadcast Satellite (DBS) programming
sources may be connected to the switch over unshielded twisted pair or coaxial
cabling and distributed on-demand to any equipped desktop or room.
Desktop PCs, TV monitors and room audio and video system connections are
accommodated using the UTP transceivers which connect standard NTSC video and
audio devices to existing building wiring systems. Viewpoint VBX(Trademark) is
compatible with standard NTSC cameras, audio components, speakerphones and PC
video peripherals to form a complete solution. The Viewpoint VBX(Trademark)
client software allows users to place calls through a personal or system-wide
dialing directory, to originate and subscribe to "live" video broadcasts, to
access pre-recorded video content or to establish a multipoint videoconference.
INTERNET VIDEO
The Company is developing and plans to market a variety of Internet video
products that take advantage of the growing popularity of the World Wide Web.
The popularity of the Web has resulted in subscribers seeking to improve their
Internet access capabilities which in turn has driven growth in the installed
base of 28.8 Kbps modems, ISDN adapters and cable modems. These improvements in
access along with advances in video and audio compression technology and
standards make possible new forms of motion-video content for Internet
publishers and their target audiences.
The Internet has taken on new dimensions including real-time communication
and entertainment. In both cases, the Company believes video communication
products and technologies will play an important role. While certain types of
information on an Internet Web page can be conveyed with graphics, animation and
static images, others require or are enhanced by audio and motion-video.
The Company is currently developing and plans to market three new Internet
video products and software players (downloaded freely to end-users). Each
product is an enhancement of or modification to existing Company designs, but
incorporates new software and firmware modules. These products address the
rapid-growth, emerging market opportunity for the Internet video publishing,
Internet video broadcasting and Internet video call center applications which
are described below.
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INTERNET VIDEO PUBLISHING
Internet video publishing (or video-on-demand) is currently the most
widespread implementation of video on the Internet. Video publishing refers to
stored-video content, designed to be played back to a user's system in
real-time. The Company believes video publishing is becoming popular because it
is far less technically demanding than "live" video production and transmission.
Internet video publishing entails compressing a video "clip" and storing it
on a server. The user is connected to the server by accessing a Web page that
holds the address for the target video server and then establishing a direct
connection to that server. The Company's video Codec technologies will be
utilized with Internet publishing software applications currently under
development by the Company.
INTERNET VIDEO BROADCASTING
Video broadcasting has recently come to the Internet and is characterized by
one-way "live" audio and motion-video. Video broadcasting presents technical
challenges such as the limited bandwidth and multi-cast capabilities of most Web
sites. However, Internet video broadcasting is well suited to delivering video
to the office (without additional hardware), to distance learning sites and to
special interest broadcast recipients. The Company's proposed products are being
designed to work in conjunction with Web server software to establish
connections between multiple users and a broadcast source.
INTERNET VIDEO CALL CENTER
The Internet video call center is a new concept to the Internet, allowing
one-way "live" video and two-way audio across the Internet. The term "call
center" is used because the technology is well suited to replacing existing call
centers such as help desks, catalog ordering centers, reservation systems
(hotels, airlines) and corporate receptionists. The Company believes that the
entertainment possibilities are also significant. The Internet video call center
has the potential to increase on-line purchases over the Internet. The Company
believes its core technologies can be used in video call center applications and
is in the early stages of product development.
VIDEO SURVEILLANCE
The Company believes that commercial and residential video-based surveillance
products represent another strong business opportunity. The Company is creating
effective solutions for customers that are unique in the marketplace. In the
Company's opinion, today's expensive closed circuit surveillance systems can be
replaced with systems that include more functionality at lower cost. The Company
intends to develop alliances with communication system integrators and security
resellers, distributors and/or suppliers to address this market.
The Company has delivered its first video surveillance system to Alcatel, a
major communications systems integration company in Richardson, Texas. This
industrial surveillance system integrates standard alarm and sensing devices
(e.g. door magnets, motion detectors, cameras, etc.), and allows a central
operator to monitor and inspect hundreds of remote sites over the customer's
existing frame relay computer network.
Following an alarm, the surveillance system selects the appropriate camera
and one of its preset positions and captures 10 frames of full resolution NTSC
video. The system also sends an alarm signal to a central monitoring computer
via a frame relay packet network. The security personnel at the central
monitoring station can then observe the remote alarmed location, via the
network, using the camera's remote pan, tilt and zoom features. The Company
believes that high quality video images will assist security personnel in
verifying the accuracy of alarms and in prosecuting intruders.
The surveillance system delivered to Alcatel is based upon existing
Viewpoint-PRO(Trademark) technology. Another version of the system designed to
operate over phone lines is scheduled to be available in early 1997.
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MARKETING AND SALES
The Company will market its products primarily via third-party resellers
including, but not limited to, OEMs, VARs and system integrators. In addition,
the Company plans to enter into strategic alliances with carriers,
telecommunications suppliers and information providers.
For mass market and high volume products the Company will depend on its major
OEM customers who provide access to significant marketing channels. These OEMs
have established relationships with manufacturers and resellers and will pay
licensing fees and royalties to bring new leading edge products to market. The
Company also intends to establish distribution relationships with resellers and
integrators who service corporate, institutional and government customers. These
relationships are expected to be non-exclusive and may require that these
partners participate in the marketing, advertising and technical support of the
Company's products.
The Company believes its Viewpoint VBX(Trademark) product will have an appeal
to resellers such as PBX suppliers, carriers (including cable companies) and
network equipment suppliers. The Company additionally intends to form strategic
alliances with resellers outside the US, where it is especially important to
partner with entrenched suppliers.
The Company intends to expand its marketing activities over the Internet. The
Company believes its products enable new and inventive ways to sell products
over the Internet. The Company intends to use its own products to increase sales
productivity and to pursue alternate low cost selling strategies. The Company
plans to continue modest trade show participation and advertising in trade
publications.
The Company's Internet related products will be marketed primarily to Web
designers and early sales will be conducted primarily through the Company's Web
page with minimal sales support. The Company plans to bundle its products with
other popular Web development products and/or license its subsystems to
resellers to integrate with their Web development products. Such strategic
business alliances are expected to provide Web developers with a rich array of
innovative capabilities with the familiarity of existing tools.
TARGET MARKETS
The Company's target markets can be defined broadly to be anywhere video
communications can be added as a peripheral to installed desktop computers, or
to narrower vertical markets in distance learning, video-based training,
multimedia authoring, Internet and Intranet broadcasting and surveillance. The
Company believes that the growth of video communications during the late 1990s
will be as significant as the growth of LANs in the 1980s. The Company's
strategy is to provide video communications products which will connect to
available networks, including standard telephone lines, data networks and the
Internet. The Company believes that its video communications products will
enhance the increasing demand for connectivity between today's homes and
offices.
Strategic alliances with large OEMs, communication-oriented system
integrators and other resellers should enhance the Company's ability to supply
video communication products to Fortune 1000 companies, federal and state
governments, PC manufacturers, peripheral suppliers and Internet service
providers.
PRODUCTION AND SUPPLY
The Company builds its current products in small quantities using contract
manufacturers in Texas and North Carolina. The operations personnel in Dallas
are responsible for parts planning, procurement and final test and inspection to
quality standards. While the Company believes its products are not difficult to
manufacture, there can be no assurance that the Company's products can be
manufactured on a wide-scale basis on commercially reasonable terms, or at all.
The Company plans for most high- volume production to be handled through large
OEMs or contract manufacturers.
The Company has been and will continue to be dependent on third parties for
the supply and manufacture of its components and electronic parts, including
standard and custom-designed components. The Company generally does not maintain
supply agreements with such third parties but instead
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purchases components and electronic parts pursuant to purchase orders in the
ordinary course of business. The Company is substantially dependent on the
ability of its third-party manufacturers and suppliers to, among other things,
meet the Company's design, performance and quality specifications.
The electronics industry from time to time experiences short supplies of
certain high demand components, which may adversely affect the Company's ability
to meet its production schedules. Failure of manufacturers or suppliers to
supply, or delays in supplying, the Company with components, or allocations in
the supply of certain high-demand components could adversely affect the
Company's operations and ability to meet delivery schedules on a timely and
competitive basis.
INSTALLATION, SERVICE AND MAINTENANCE
Many of the Company's new products will be customer installable. The Company
plans to contract with independent third parties to provide field installation
and support. The Company also plans to maintain a small technical support group
and will also depend on its resellers to install and service its products.
The Company offers 12 to 36 month limited warranties covering workmanship and
materials, during which period the Company or its resellers will replace parts
or make repairs. The Company also maintains an in-house staff of engineering
personnel and offers telephone support to assist resellers and end-users during
normal business hours.
RESEARCH AND DEVELOPMENT
The Company's development efforts during 1995 were devoted to the design and
development of the Osprey-1000(Trademark) PCI-based multi-algorithm video Codec,
the SLIC-Video(Trademark) video capture card, enhancements to the
Viewpoint-PRO(Trademark), design and integration of the surveillance system
delivered to Alcatel, and the development of the Viewpoint VBX(Trademark) video
switching hub.
Total research and development expense for 1995 was approximately $2.0
million. The 1996 research and development plan calls for approximately $1.9
million in development costs. For the six months ended June 30, 1996, the
Company incurred approximately $1,010,000 in research and development costs.
The Company utilizes its core technologies to create multiple products aimed
at different markets. Software modularity is a major strategy which allows the
Company to develop different vertical applications using modules and components
previously developed for other products. The Company's products are
characterized by rapidly changing technology and evolving standards, often
resulting in product obsolescence or short product life cycles. Accordingly, the
Company's ability to compete will depend in large part on its ability to
introduce its products in a timely manner, to continually enhance and improve
its hardware and software products and to maintain development capabilities to
adapt to technological changes and advances in the video communications
marketplace. There can be no assurance that competitors will not develop
technologies or products that render the Company's systems obsolete or less
marketable, or that the Company will be able to keep pace with the technological
demands of the marketplace or successfully enhance and adapt its products to be
compatible with newly developed products, technologies and software, or satisfy
industry standards and the needs of its consumers and potential consumers.
COMPETITION
The market for DVC systems is highly competitive and characterized by the
frequent introduction of new products based upon rapidly changing technologies.
The Company competes with numerous well-established manufacturers and suppliers
of videoconferencing, networking, telecommunications and multimedia equipment
and products, some of which dominate certain market segments. In addition, the
Company is aware of others that are developing, and in some cases have
introduced, new DVC systems. Most of the Company's competitors possess
substantially greater financial, marketing, personnel and other resources than
the Company, have established reputations relating to product design, develop
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<PAGE>
ment, manufacture, marketing and service of networking, telecommunications and
video products and have significant budgets to permit them to implement
extensive advertising and promotional campaigns to market new products in
response to competitors. Among the Company's direct competitors are Target
Technologies, Inc., VIVO Software, Inc., Zydacron, Inc., VCON, Ltd., Corel
Corporation and VideoLAN Technologies, Inc. In addition, electronics
manufacturers such as Intel actively compete for business in this market.
PATENTS, TRADEMARKS AND PROPRIETARY INFORMATION
The Company holds a United States patent covering certain fundamental aspects
of the compressed packet video Codec incorporated into the
Viewpoint-PRO(Trademark) system. The Company may apply for additional patents
relating to other aspects of its products. There can be no assurance as to the
breadth or degree of protection which existing or future patents, if any, may
afford the Company, that any patent applications will result in issued patents,
that the Company's patents will be upheld, if challenged, or that competitors
will not develop similar or superior methods or products outside the protection
of any patent issued to the Company.
The Company believes that product recognition is an important competitive
factor and, accordingly, the Company promotes the Viewpoint-PRO(Trademark),
ViewCast(Trademark), MultiView(Trademark), Osprey-1000(Trademark),
SLIC-Video(Trademark), Viewpoint-VBX(Trademark), FamilyFone(Trademark) and
WorkFone(Trademark) names, among others, in connection with its marketing
activities, and has applied for trademark registration for such names. The
Company's use of those marks may be subject to challenge by others, which, if
successful, could have a material adverse effect on the Company.
The Company also relies on confidentiality agreements with its directors,
employees, consultants and manufacturers and employs various methods to protect
the source codes, concepts, ideas, proprietary know-how and documentation of its
proprietary technology. However, such methods may not afford the Company
complete protection, and there can be no assurance that others will not
independently develop similar know-how or obtain access to the Company's
know-how or software codes, concepts, ideas and documentation. Furthermore,
although the Company has and expects to continue to have confidentiality
agreements with its directors, employees, consultants, manufacturers, and
appropriate vendors, there can be no assurance that such arrangements will
adequately protect the Company's trade secrets.
The Company purchases certain components that are incorporated into its
products from third- party suppliers and relies on their assurances that such
components do not infringe on the patents of others. A successful claim against
any components used in the Company's products could affect the ability of the
Company to manufacture, supply and support its products. The Company uses its
best efforts to ensure third party supplied components are non-infringing, but
there can be no assurances against future claims.
GOVERNMENT REGULATION
The Company is subject to regulations relating to electromagnetic radiation
from its products, which impose compliance burdens on the Company. In the event
the Company redesigns or otherwise modifies its products or completes the
development of new products, it will be required to comply with Federal
Communications Commission regulations with respect to such products, of which
there can be no assurance prior to their commercialization. In addition, new
legislation and regulations, as well as revisions to existing laws and
regulations, at the federal, state and local levels may be proposed in the
future affecting the video communications industries. Such proposals could
affect the Company's operations, result in material capital expenditures, affect
the marketability of its products and limit opportunities for the Company with
respect to modifications of its products or with respect to new or proposed
products or technologies. Expansion into foreign markets may also require the
Company to comply with additional regulatory requirements. The technology
contained in the Company's products may be subject to U.S. export controls.
There can be no assurance that such export controls, either in their current
form or as may be subsequently enacted, will not delay introduction of new
products or limit the Company's ability to distribute products outside of the
United States. Further, various countries may
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<PAGE>
regulate the import of certain technologies contained in the Company's products.
Any such export or import restrictions, new legislation or regulation or
government enforcement of existing regulations could have a material adverse
effect on the Company's business, operating results and/or financial condition.
There can be no assurance that the Company will be able to comply with
additional applicable laws and regulations without excessive cost or business
interruption, if at all, and failure to comply could have a material adverse
effect on the Company.
EMPLOYEES
As of June 30, 1996, the Company had 37 employees, 3 of whom are in executive
positions, 21 of whom are engaged in engineering, research and development, 6 of
whom are engaged in marketing and sales activities and 7 of whom are in
administration. None of the Company's employees is represented by a labor union.
The Company considers its employee relations to be satisfactory.
FACILITIES
The Company's executive offices and assembly operations and some of its
design and development activities are located in approximately 16,159 square
feet of leased space in Dallas, Texas. The lease expires in September of 1997
and provides for a base annual rent of $143,110. Osprey's design and development
activities are located in approximately 2,783 square feet of leased space in
Cary, North Carolina. The lease expires in December of 1997 and provides for a
base annual rent of $38,334. The Company leases an office suite in Burlingame,
California of approximately 100 square feet on a month-to-month basis for a base
annual rent of $4,800. The Company believes that its facilities are adequate for
its current and reasonably foreseeable future needs and its current facilities
can accommodate expansion, if required.
LEGAL PROCEEDINGS
The Company is not currently a party to any litigation that it believes could
have a material adverse effect on the Company or its business.
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MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The directors and executive officers of the Company are as follows:
Name Age Position
- ---------------------------- -- --------------------------------------
Glenn A. Norem ............. 44 Chief Executive Officer and Director
Philip M ...................
Colquhoun .................. 55 President and Chief Operating Officer
David T. Stoner ............ 40 Vice-President of Operations
William S .................. Chief Financial Officer and Assistant
Leftwich ................... 47 Secretary
Neal S. Page ............... 38 Vice President & General Manager
A. David
Boomstein .................. 41 Vice President of Business Development
Daniel W. Dodson ........... 34 Vice President of Marketing
William D. Jobe ............ 59 Chairman of the Board of Directors
Joe C. Culp ................ 62 Director
- ----------
Glenn A. Norem has been Chief Executive Officer and a director of the Company
since its inception in February 1994. Mr. Norem has been Chief Executive Officer
of each of the Company's subsidiaries since their respective inceptions. Mr.
Norem has also been Chairman and Chief Executive Officer of Catalyst Financial
Corporation ("Catalyst"), an investment and business advisory firm to
development stage companies in the computer and communications industries, since
its inception in January 1990. From March 1984 to December 1989, Mr. Norem was a
general partner of Berry Cash Southwest Partnership, L.P., a venture capital
partnership. From May 1985 to December 1989, Mr. Norem was a general partner of
InterWest III, L.P., a venture capital partnership and, from 1983 to 1984, he
was Corporate Strategic Business Development Manager at Texas Instruments, Inc.
Mr. Norem began his career with IBM Corporation's System Communications Division
R & D Laboratory. Mr. Norem received a B.S. degree in Electrical
Engineering/Systems Engineering from Southern Illinois University and an M.B.A.
(Finance and Marketing) from the University of Chicago.
Philip M. Colquhoun was appointed President and Chief Operating Officer of
the Company in April 1996. He had been President of Viewpoint Systems, Inc. and
Osprey Technologies, Inc., both subsidiaries of the Company, since November
1995. From August 1994 to October 1995, Mr. Colquhoun was President of the
Connectworks Division of Connectware Inc., a wholly owned subsidiary of AMP Inc.
From September 1991 to August 1994, Mr. Colquhoun served as President and Chief
Executive Officer of Visual Information Technologies Inc., a manufacturer of PC
video, graphics and imaging products, which was sold to Connectware Inc. From
February 1990 to September 1991, he was Senior Vice President of Visual
Information Technologies Inc. From August 1984 to February 1990, Mr. Colquhoun
served Recognition Equipment Inc. in various capacities, including Vice
President Manufacturing, Vice President and General Manager, Special Products
Division and President, Postalogic Division. Mr. Colquhoun was the Vice
President of Finance and Administration for Nixdorf Computer Corporation from
1981 to 1984 and was employed by IBM Corporation from 1961 to 1981 in various
engineering, finance and manufacturing positions.
David T. Stoner joined the Company as Vice President of Operations in August
1996. From August 1994 to August 1996, Mr. Stoner was Vice President of
Engineering for the Connectworks Division of Connectware, Inc., a wholly owned
subsidiary of AMP Inc. From July 1986 to August 1994, Mr. Stoner was employed by
Visual Information Technologies, Inc. ("VITec"), a manufacturer of video,
imaging, and graphics products, which was purchased by Connectware, Inc. At
VITec, Mr. Stoner was responsible for the development of hardware and software
products, and served in various positions including Vice President of
Engineering. From January 1979 to July 1986, Mr. Stoner served in various
engineering positions at Texas Instruments, Inc. Mr. Stoner received his B.S.
degree in Electrical Engineering from the University of Kansas.
William S. Leftwich has been Chief Financial Officer of the Company since
March 1995. From January 1993 to March 1995, Mr. Leftwich served as Chief
Financial Officer, Treasurer and Secretary of Integrated Security Systems, Inc.,
a manufacturer, developer, and distributor of integrated security so
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lutions. From August 1992 to December 1992, Mr. Leftwich served as Controller of
Thomas Group Holding Company, an affiliate of Integrated Security Systems, Inc.
Mr. Leftwich was self-employed as a financial consultant from January 1992 to
July 1992. From January 1989 to December 1991, Mr. Leftwich served as the Chief
Financial Officer of OKC Limited Partnership, an oil and gas exploration
company. For approximately seven years prior to joining OKC Limited Partnership,
Mr. Leftwich served as Vice President -- Finance for Endevco, Inc., a natural
gas transportation and processing company. Mr. Leftwich is a C.P.A. and received
a B.B.A. from Texas A&M University.
Neal S. Page has been Vice President and General Manager of the Osprey
division of the Company since January 1995. From October 1994 to December 1994,
Mr. Page served as Director of Product Development of the Company. From April
1988 to September 1994, Mr. Page was employed by Sun Microsystems where he held
management positions directing development and strategic relationships for
multimedia technology products. Mr. Page developed advanced graphics and imaging
products at General Electric from 1984 to 1988 and at Data General from 1983 to
1984. Mr. Page holds B.S. and M.S. degrees in Electrical and Computer
Engineering from North Carolina State University.
A. David Boomstein has been Vice President of Business Development since
February 1995. From January 1994 to January 1995, Mr. Boomstein was Vice
President for Desktop Programs at Applied Business Telecommunications, a
consulting and research firm focusing on teleconferencing and multimedia
applications. From January 1989 to December 1993, Mr. Boomstein worked with
Boeing Computer Support Services, Inc. on a mission services contract to the
National Aeronautics and Space Administration designing and installing
videoconferencing systems among NASA's world-wide partners. From December 1984
to December 1988, Mr. Boomstein was Product Marketing Manager for Compression
Labs, Inc.'s Rembrandt Video System. From June 1980 to November 1984, Mr.
Boomstein managed the development and deployment of Citicorp N.A.'s satellite
videoconferencing system. Mr. Boomstein received a B.F.A. in Communication Arts
from the New York Institute of Technology and an M.P.S. in Interactive
Telecommunications from New York University.
Daniel W. Dodson joined the Company as Vice President of Marketing in
February 1996. From October 1994 to February 1996, Mr. Dodson was Director of
Marketing for the Connectworks Division of Connectware, Inc., a wholly owned
subsidiary of AMP Inc. While at Connectware Mr. Dodson was responsible for the
market introduction of hardware and software communications products. From 1983
to October 1994, Mr. Dodson was employed by NorTel (formerly Northern Telecom) a
major manufacturer of telecommunications equipment. At NorTel, Mr. Dodson served
in various positions including marketing manager for desktop videoconferencing
products and senior software designer for digital switching products. Mr. Dodson
received his MBA from Harvard University and his B.S. degree in Computer Science
from North Carolina State University.
William D. Jobe has been Chairman of the Board of the Company since November
1994. Since July 1991, Mr. Jobe has been a private venture capitalist and
computer industry advisor. From June 1990 to July 1991, Mr. Jobe was President
of MIPS Technology Development, a subsidiary of MIPS Computer Systems, Inc., a
supplier of reduced instruction set computing products and technology. From
September 1987 to June 1990, Mr. Jobe was Executive Vice President for Sales,
Marketing and Service of MIPS Computer Systems, Inc. From 1993 through 1995, Mr.
Jobe was Chairman and a director of Great Bear Technology, Inc., a
publicly-traded supplier of interactive multimedia software. Mr. Jobe received a
B.S.M.E. and a M.S.M.E. from Texas A & M University and a P.M.D. from Harvard
Business School.
Joe C. Culp has been a director of the Company since November 1995. Since
1990, Mr. Culp has served as President of Culp Communications Associates,
engaging in senior level consulting in the telecommunications industry. From
1989 to 1990, Mr. Culp was Executive Vice President of Communications
Transmission, Inc., a telecommunications provider. From 1988 to 1989, Mr. Culp
served as President and Chief Executive Officer of LIGHTNET, a fiber optic
telecommunications carrier jointly owned by CSX Corporation and Southern New
England Telecommunications. From 1982 to 1988, Mr. Culp was President,
Telecommunications for Rockwell International. Since 1994, Mr. Culp has served
on the Chairman's Advisory Board of Newbridge Networks a publicly-traded company
and since 1996, has served as a director of IXC Communications, a public
company. Mr. Culp received a B.S.E.E. from the University of Arkansas.
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All directors hold office until the next annual meeting of the stockholders
and the election and qualification of their successors. Executive officers are
elected by the Board of Directors annually and serve at the discretion of the
Board.
Messrs. Norem, Jobe and Culp are members of the Audit Committee of the Board
of Directors.
Messrs. Norem and Jobe are members of the Compensation Committee of the Board
of Directors.
DIRECTOR COMPENSATION
Directors currently receive no cash compensation for serving on the Board of
Directors other than reimbursement of reasonable expenses incurred in attending
meetings. In June 1993, Mr. Jobe was granted an option to purchase 5,110 shares
of Common Stock under the 1993 Stock Option Plan at an exercise price of $0.20
per share. This option is fully vested. In November 1994, Mr. Jobe was granted
an option to purchase 125,000 shares of Common Stock under the 1994 Option Plan,
at an exercise price of $3.00 per share. The option vests as to one quarter of
the shares subject to the option one year from the date of grant and one quarter
of the shares subject to the option each year thereafter subject to acceleration
based on the Company's performance. In November 1995, Mr. Jobe and Mr. Culp were
each granted options to purchase 40,000 shares of Common Stock exercisable $3.00
per share under the 1995 Option Plan for consulting activity in addition to
their director responsibilities. These options vest over a three (3) year
period.
In May 1995, the Company adopted a 1995 Director Option Plan (the "Director
Plan") under which only outside directors are eligible to receive stock options.
The Director Plan provides for the grant of nonstatutory stock options to
directors who are not employees of the Company. A total of 250,000 shares of
Common Stock have been authorized for issuance under the Director Plan. As of
June 30, 1996, options to purchase an aggregate of 25,000 shares at an exercise
price of $3.00 per share had been granted under the Director Plan. Each
non-employee director who joins the Board after May 1, 1995 will automatically
be granted a nonstatutory option to purchase 15,000 shares of Common Stock on
the date upon which such person first becomes a director. In addition, each such
non-employee director will automatically be granted a nonstatutory option to
purchase 10,000 shares of Common Stock upon annual re-election to the Board,
provided the director has been a member of the Board for at least six months
upon the date of re-election. The exercise price of each option granted under
the Director Plan is equal to the fair market value of the Common Stock on the
date of grant. Each initial 15,000 share grant vests at the rate of 25% of the
option shares upon the first anniversary of the date of grant and one
forty-eighth of the option shares per month thereafter, and each annual 10,000
share grant vests at the rate of 25% of the option shares upon the first
anniversary of the date of grant and one forty-eighth of the options shares per
month thereafter, in each case unless terminated sooner upon termination of the
optionee's status as a director or otherwise pursuant to the Director Plan. In
the event of a merger of the Company with or into another corporation or a
consolidation, acquisition of assets or other change in control transaction
involving the Company, each option becomes exercisable unless assumed or an
equivalent option substituted by the successor corporation. Unless terminated
sooner, the Director Plan will terminate in 2005. The Director Plan is currently
administered by the Board of Directors. The Board has authority to amend or
terminate the Director Plan, provided that no such action may impair the rights
of any optionee without the optionee's consent.
EXECUTIVE COMPENSATION
The following table sets forth the cash compensation paid or accrued by the
Company to the Company's Chief Executive Officer and the Company's other
executive officers whose compensation exceeded $100,000 for the fiscal years
ended December 31, 1995, 1994 and 1993.
No other officer received cash compensation in excess of $100,000 in 1993,
1994, or 1995.
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SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Long Term
Annual Compensation Compensation
------------------- ------------
Name and Options
Principal Position Fiscal Year Salary Bonus (in shares)
- ------------------ ----------- ------ ----- -----------
Glenn A. Norem 1995 $ 90,000 $45,000(4) --(1)
Chief Executive Officer....... 1994 91,875(2) 45,000(4) 130,000
1993 135,000(3) -- 51,100
William S. Leftwich 1995 90,000(5) 15,000(6) 60,000
Chief Financial Officer....... 1994 -- -- --
1993 -- -- --
Philip M. Colquhoun 1995 90,000(7) 3,500 200,000
President and Chief Operating 1994 -- -- --
Officer....................... 1993 -- -- --
</TABLE>
- ----------
(1) Does not include warrants to purchase 118,500 shares of Common Stock of the
Company granted to Mr. Norem and Norem I, L.P. in connection with financing
transactions. See "Certain Transactions".
(2) $22,500 of such amount was accrued as of December 31, 1994, of which
$11,250 was paid in 1995. The remaining $11,250 was accrued as of December
31, 1995.
(3) Represents Mr. Norem's salary as President and CEO of Viewpoint prior to
its acquisition by the Company. All of such amount was accrued as of
December 31, 1993; $70,871 of such amount was paid during 1994 and the
remaining $64,129 was accrued as of December 31, 1995.
(4) In September 1996 this amount was exchanged into a note payable to Mr.
Norem due in December 1997.
(5) Represents Mr. Leftwich's annual salary. He assumed his duties with the
Company on March 29, 1995 and earned $67,268 in salary during 1995.
(6) Amount was accrued as of December 31, 1995 and will be paid from the
proceeds of this offering.
(7) Represents Mr. Colquhoun's annual salary. He assumed his duties as
President of the Viewpoint and Osprey subsidiaries on November 1, 1995 and
earned $14,880 in salary during 1995. Mr. Colquhoun assumed the duties of
President and Chief Operating Officer of the Company in April 1996.
The following table provides information concerning options granted to the
executive officers of the Company in 1995.
OPTION GRANTS IN LAST FISCAL YEAR
% of Total
Options Granted Exercise or
Options to Employees in Base Expiration
Name Granted Fiscal Year Price/Share Date
- ---- ------- --------------- ----------- ----------
Glenn A. Norem...... -- -- -- --
William S.Leftwich.. 60,000(1) 11.0 $ 3.00 3/26/05
Phillip M.Colquhoun. 200,000(2) 36.7 3.00 10/31/05
- ----------
(1) 30,000 of these options are currently exercisable. All options will become
immediately exercisable upon a "change in control" of the Company.
(2) None of these options are currently exercisable. All options will become
immediately exercisable upon a "change in control" of the Company.
EMPLOYMENT AGREEMENTS
The Company has entered into a five-year employment agreement with Glenn A.
Norem, effective February 7, 1994, which provides for his employment as Chief
Executive Officer. The employment agreement provides for an annual base
compensation of $90,000, subject to increases upon review by the Board of
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Directors, and annual bonuses at the discretion of the Board of Directors. In
the event the employment agreement is terminated, (other than "for cause" by the
Company) including for "good reason" by Mr. Norem including in the event of a
"change of control" as defined in the agreement, then Mr. Norem will receive (i)
all accrued salary, bonuses and benefits through the date of such termination;
and (ii) a sum equal in the aggregate to the full amount, discounted by three
percent (3%), of (a) the salary and benefits which Mr. Norem would have
received, at the average rate or rates in effect during the six-month period
immediately prior to termination, and (b) the annual bonus or bonuses which Mr.
Norem would have received, at the rate of his annual bonus for the last full
fiscal year of the Company ending prior to termination, had, with respect to
both (a) and (b), Mr. Norem's employment under the agreement continued through
the full term of the agreement. The employment agreement also contains
provisions granting Mr. Norem certain piggyback and demand registration rights
that require the Company to register under the Securities Act any or all shares
of the Company's Common Stock held by Mr. Norem, or issuable upon exercise of
stock options held by Mr. Norem. The employment agreement is automatically
renewed for successive one year terms unless the Company or Mr. Norem elects not
to renew.
In January 1996, Mr. Norem's employment agreement was amended to increase his
annual base compensation to $135,000 and provide for a minimum bonus of $15,000
per year. Concurrent with the amendment, the Board of Directors granted Mr.
Norem a bonus of $45,000 per year for 1994 and 1995 to be paid only upon the
authorization of the Board of Directors. In September 1996, Mr. Norem's
employment agreement was amended to include a non-compete, non-solicitation, and
non-circumvention agreement with the Company for the duration of his employment
and through the two years immediately following the termination of his
employment with the Company.
Pursuant to the consulting agreement with Catalyst, of which Mr. Norem is
Chairman of the Board and principal stockholder, Catalyst may, in specific cases
approved by the Company's Board of Directors, receive fees in connection with a
merger with or the acquisition of another company previously introduced to the
Company by Catalyst and expressly named in the agreement. Catalyst will be paid
3% of the fair market value of each transaction actually consummated plus has
the right to purchase for $1.00, a three year option to purchase Common Stock of
the Company. The number of shares that this option can purchase will be equal to
3% of the fair market value of the transaction divided by the average fair
market price of the Common Stock of the Company during the one week period
preceding the announcement of the transaction. The Consulting Agreement with
Catalyst was terminated by the Company on September 27, 1996. Despite the
termination, Catalyst remains entitled to receive fees if the Company enters
into a merger or acquisition transaction as described above. The Company has no
plans to enter into such a transaction at this time or for the foreseeable
future.
The Company has also entered into employment agreements with its six other
executive officers: Messrs. Colquhoun, Leftwich, Stoner, Dodson, Boomstein and
Page. These employment agreements provide (i) for annual base compensation of
$90,000, $90,000, $120,000, $85,000, $75,000 and $90,000 respectively; (ii) that
the officer is eligible to participate in the Company's Employee Stock Option
Plans and Executive Bonus Plans; and (iii) that the employment of each officer
with the Company is "at will" and may be terminated by the officer or the
Company at any time, for any reason or no reason.
EMPLOYEE STOCK PLANS
1995 Stock Plan
The 1995 Stock Plan (the "1995 Option Plan") provides for the grant to
employees of the Company of incentive stock options within the meaning of
Section 422 of the Internal Revenue Code of 1986, as amended (the "Code") and
for the grant to employees and consultants of the company of nonstatutory stock
options and stock purchase rights. A total of 2,000,000 shares of Common Stock
have been reserved for issuance under the 1995 Option Plan. As of June 30, 1996,
options had been granted to purchase an aggregate of 798,025 shares at an
exercise price of $3.00 per share and 160,000 shares at an exercise price of
$3.30 per share. The 1995 Option Plan may be administered by the Board or a
committee approved by the Board in a manner that complies with Rule 16b-3
promulgated under the Securities Act. Currently, the 1995 Option Plan is
administered by the Board of Directors, which determines the terms of options
and rights granted, exercise price, number of shares subject to the option or
right and the exercisability thereof. Options and rights
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<PAGE>
granted under the 1995 Option Plan are not transferable other than by will or
the laws of descent or distribution, and each option or right is exercisable
during the lifetime of the recipient only by such person. Options that are
outstanding under the 1995 Option Plan will remain outstanding until they are
exercised or they expire in accordance with the terms of each option. The
exercise price of all incentive stock options granted under the 1995 Option Plan
must be at least equal to the fair market value of the shares of Common Stock on
the date of grant. With respect to any participant who owns stock possessing
more than 10% of the voting power of all classes of stock of the Company, the
exercise price of any incentive stock option granted must equal at least 110% of
the fair market value on the grant date and the maximum term of the option must
not exceed five years. The term of all other options granted under the 1995
Option Plan may not exceed ten years. In the event of certain changes in control
of the Company, the 1995 Option Plan permits each outstanding option and right
to become exercisable in full or assumed or an equivalent option to be
substituted by the successor corporation. Included are options to purchase
160,000 shares at $3.30 per share granted to Mr. Norem in January 1996, options
to purchase 40,000 shares at $3.00 per share granted to each of Mr. Jobe and Mr.
Culp in November 1995, options to purchase 200,000 shares at $3.00 per share and
50,000 shares at $3.00 per share granted to Mr. Colquhoun in November 1995 and
April 1996, respectively, and options to purchase 60,000 shares at $3.00 per
share and 30,000 shares at $3.00 per share granted to Mr. Leftwich in March 1995
and January 1996, respectively. The options granted to Messrs. Norem, Colquhoun,
and Leftwich vest over a five year period. The options granted to Messrs. Jobe
and Culp vest over a three year period. See "Executive Compensation" and
"Principal Stockholders".
1994 Stock Option Plan
In February 1994, the Board of Directors and stockholders approved the
Company's 1994 Stock Option Plan (the "1994 Option Plan") pursuant to which an
aggregate of 2,000,000 shares of Common Stock were reserved for issuance in
connection with the stock options ("Options") available for grant. The Options
may be granted in either or both of the following: (i) Incentive Stock Options
or (ii) Non-Qualified Stock Options. Non-Qualified Stock Options may be granted
to employees, directors and consultants of the Company.
The 1994 Option Plan was administered by the Board of Directors or, at their
discretion, by a committee which was appointed by the Board to perform such
function. The Board or such committee, as the case may be, within the
limitations of the 1994 Option Plan, determined, among other things, when to
grant Options, the persons to whom Options were to be granted, the number of
shares for each Option, whether Options granted were intended to be Incentive
Stock Options or Non-Qualified Stock Options, the duration and rate of exercise
of each Option, the share purchase price and the manner of exercise, and whether
restrictions such as repurchase rights by the Company were to be imposed on
shares subject to Options.
In connection with Incentive Stock Options the exercise price of each
Incentive Stock Options may not be less than 100% of the fair market value of
the Common Stock on the date of grant (or 110% of fair market value in the case
of an employee holding 10% or more of the outstanding stock of the Company). The
aggregate fair market value of shares for which Incentive Stock Options granted
to any employee are exercisable for the first time by such employee during any
calendar year (pursuant to all stock option plans of the Company and any related
corporation) may not exceed $100,000. Non-qualified Stock Options may be granted
at a price determined by the Board or Committee, but not at less than the par
value of the Common Stock. Stock options granted pursuant to the 1994 Option
Plan will expire not more than ten years from the date of grant (five years in
the case of the Incentive Stock Options granted to persons holding 10% or more
of the voting stock of the Company).
As of June 30, 1996, options had been granted to purchase an aggregate of
1,013,500 shares as follows: 70,000 shares at an exercise price of $0.10;
252,900 shares at an exercise price of $2.20; 130,000 shares at an exercise
price of $2.42; and 560,600 shares at an exercise price of $3.00. Included are
options to purchase 130,000 and 125,000 shares at a price of $2.42 and $3.00 per
share, respectively, granted to Messrs. Norem and Jobe in May 1994 and November
1994, respectively, all of which expire in May 1999 and November 1999 and vest
at the rate of 20% per year as to Mr. Norem and 25% per year as to Mr. Jobe
commencing in May 1995 and November 1995, respectively, subject to certain
acceleration provisions. In April 1995, the Board of Directors voted to grant no
further options under the 1994 Option Plan. See "Executive Compensation" and
"Principal Stockholders."
41
<PAGE>
1993 Stock Option Plan
In May 1994, pursuant to the terms of the acquisition of Viewpoint, the
Company assumed the obligations of Viewpoint's 1993 Stock Option Plan (the "1993
Option Plan"). Stock options to purchase 287,564 shares of Common Stock were
assumed by the Company. Accordingly, the Company reserved 287,564 shares of
Common Stock for issuance pursuant to these outstanding stock options.
Since the assumption of the 1993 Option Plan, stock options to purchase an
aggregate of 178,427 shares have been exercised and stock options to purchase
5,588 shares have been cancelled. Of the remaining options to purchase 103,549
shares of Common Stock, options to purchase 51,100 shares at a price of $.04 per
share were granted to Mr. Norem. These options are fully exercisable and expire
in November 1998. In early 1995, the Board of Directors voted to grant no
further options under the 1993 Option Plan. See "Executive Compensation" and
"Principal Stockholders."
1995 Employee Stock Purchase Plan
In May 1995 the Company established an Employee Stock Purchase Plan (the
"ESPP") to provide employees of the Company with an opportunity to purchase
Common Stock through payroll deductions. Under the ESPP, up to 250,000 shares of
Common Stock have been reserved for issuance, subject to certain antidilution
adjustments. The ESPP, by its terms, becomes effective at the time of this
offering. The ESPP is intended to qualify as an employee stock purchase plan
within the meaning of Section 423 of the Internal Revenue Code.
Each offering period will be for a period of six months except the first
offering period under the ESPP will be from the date of this Prospectus through
October 31, 1996. The ESPP terminates in April, 2005. Eligible employees may
participate in the ESPP by authorizing payroll deductions during an offering
period within a percentage range determined by the Board of Directors.
Initially, the amount of authorized payroll deductions will be not more than 10%
of an employee's cash compensation during an offering period, but not more than
$25,000 per year. Amounts withheld from payroll are applied at the end of each
offering period to purchase shares of Common Stock. Participants may withdraw
their contributions at any time before stock is purchased, and in the event of
withdrawal such contributions will be returned to the participants. The purchase
price of the Common Stock is equal to 85% of the lower of (i) the market price
of Common Stock immediately before the beginning of the applicable offering
period or (ii) the market price of Common Stock at the end of each offering
period. All expenses incurred in connection with the implementation and
administration of the ESPP will be paid by the Company.
Director Stock Option Plan
In May 1995, the Company adopted the Director Plan under which outside
directors only are eligible to receive stock options. The Director Plan provides
for the grant of nonstatutory stock options to directors who are not employees
of the Company. See "Management -- Director Compensation."
LIMITATION OF LIABILITY AND INDEMNIFICATION MATTERS
As permitted by the Delaware General Corporation Law, the Company has
included in its Certificate of Incorporation a provision to eliminate the
personal liability of its directors for monetary damages for breach or alleged
breach of their fiduciary duties as directors, subject to certain exceptions. In
addition, the bylaws of the Company provide that the Company is required to
indemnify its officers and directors, employees and agents under certain
circumstances, including those circumstances in which indemnification would
otherwise be discretionary, and the Company is required to advance expenses to
its officers and directors as incurred in connection with proceedings against
them for which they may be indemnified. The bylaws provide that the Company,
among other things, will indemnify such officers and directors, employees and
agents against certain liabilities that may arise by reason of their status or
service as directors, officers, or employees (other than liabilities arising
from willful misconduct of a culpable nature), and to advance their expenses
incurred as a result of any proceeding against them as to which they could be
indemnified. At present, the Company is not aware of any pending or threatened
litigation or proceeding involving a director, officer, employee or agent of the
Company in which indemnification would be required or permitted. The Company
believes that its charter provisions and indemnification agreements are
necessary to attract and retain qualified persons as directors and officers.
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<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth information as of June 30, 1996 and as
adjusted to reflect the sale of Common Stock offered by the Company hereby,
based on information obtained from the persons named below, with respect to the
beneficial ownership of shares of Common Stock by (i) each person or a group
known by the Company to be the owner of more than 5% of the outstanding shares
of Common Stock, (ii) each director, (iii) each executive officer named in the
Summary Compensation Table under the caption "Management", and (iv) all officers
and directors as a group.
<TABLE>
<CAPTION>
Amount and Percentage of Outstanding
Nature of Shares Owned(2)(3)
Name and Address Beneficial ---------------------------
of Beneficial Owner(1) Ownership(2) Prior to
- ---------------------- ------------ Offering After Offering
-------- --------------
<S> <C> <C> <C>
Fred Kassner ................... 1,369,831(4) 15.3 12.8
69 Spring Street
Ramsey, NJ 07446
Robert Moody, Jr. .............. 1,067,736(5) 12.0 9.9
601 Moody National Bank Bldg.
Galveston, TX 77550 ...........
H.T. Ardinger, Jr. ............. 1,021,808(6) 11.4 9.5
9040 Governors Row
Dallas, TX 75247
Glenn A. Norem ................. 839,339(7) 9.4 7.8
M. Douglas Adkins............... 678,334(8) 7.6 6.3
1601 Elm Street, #3000
Dallas, TX 75201
Robert Sterling Trust .......... 498,726(9)(10) 5.6 4.6
c/o Thomas E. Brown
1715 West 35th Street
Pine Bluff, AR 71603
Robert Bernardi Trust........... 430,394(11) 4.8 4.0
c/o Richard Bernardi
440 Wood Crest Road
Stratford, PA 19087
William D. Jobe................. 50,387(12) * *
William S. Leftwich ............ 30,000(13) * *
Joe C. Culp .................... 11,111(14) * *
Philip M. Colquhoun............. --(15) * *
David T. Stoner................. --(16) * *
All officers and directors as a
group (nine persons)........... 1,015,971(7)(12)(13)(14)(15)(16)(17) 11.4 9.5
</TABLE>
Messrs. Sterling and Bernardi may be deemed to be "founders" of the
Company, as such term is defined under the federal securities laws.
- ----------
* Less than 1%
(1) Unless otherwise indicated, the address of each individual is c/o the
Company, 2665 Villa Creek Drive, Dallas, Texas 75234.
(2) A person is deemed to be the beneficial owner of securities that can be
acquired by such person within 60 days from the date of this Prospectus
upon the exercise of warrants or options. Each beneficial owner's
percentage ownership is determined by assuming that options or warrants
that are held by such person (but not those held by any other person) and
which are exercisable within 60 days from the date of this Prospectus have
been exercised. Unless otherwise indicated, the Company believes that all
persons named in the table have sole voting and investment power with
respect to all shares of Common Stock beneficially owned by them.
(3) Based on a total of (i) 5,054,314 shares issued and outstanding, (ii)
470,649 shares of Common Stock issued on the date of this Prospectus upon
the conversion of $2,330,300 principal amount of Convertible Debt and
approximately $305,362 accrued interest (based on an assumed offering price
of $5.50 per share and $.10 per Public Warrant), (iii) 1,392,505 shares of
Common Stock reserved for issuance upon exercise of outstanding warrants to
purchase common stock, (iv) 1,280,900 shares
43
<PAGE>
of Common Stock reserved for issuance upon exercise of the Convertible Debt
Warrants and (v) 739,455 shares of Common Stock reserved for issuance upon
exercise of vested stock options as of June 30, 1996. Does not include (i)
180,000 shares of Common Stock reserved for issuance upon exercise of the
Underwriters' Warrants, and 180,000 shares of Common Stock reserved for
issuance upon exercise of Underwriters' Public Warrants. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations,"
"Management -- Employee Stock Plans," "Description of Securities" and
"Underwriting."
(4) Includes (i) 30,303 shares issuable upon the conversion of Convertible Debt
to equity, (ii) 100,000 shares issuable at $3.00 per share upon exercise of
warrants issued in connection with the conversion of Convertible Debt to
equity, (iii) 65,000 shares issuable at $3.00 per share upon exercise of
warrants issued in connection with the conversion of Secured Notes II to
equity, (iv) 100,000 shares issuable at $3.00 per share upon exercise of
warrants issued in connection with the Convertible Debt II.
(5) Includes (i) 250,000 shares beneficially owned by Moody Insurance Group,
Inc., of which Mr. Moody is Chairman, President and the sole stockholder,
(ii) warrants to purchase 200,000 shares at $1.00 per share issued in
connection with the exchange of a Secured Note for equity, (iii) 95,485
shares issuable upon the conversion of Convertible Debt and accrued
interest to equity, and (iv) warrants to purchase 275,000 shares at $3.00
per share issued in connection with the conversion of Convertible Debt to
equity.
(6) Includes (i) 54,501 shares owned by Mr. Ardinger's wife, (ii) warrants to
purchase 120,000 shares at $1.00 per share issued in connection with the
exchange of a Secured Note and a Demand Note for equity, held by either Mr.
Ardinger or his wife, (iii) warrants to purchase 375,000 shares at $3.00
per share issued in connection with the conversion of Convertible Debt to
equity, (iv) 130,306 shares issuable upon the conversion of Convertible
Debt and accrued interest to equity, and (v) 37,500 shares issuable at
$1.00 per share granted for the issuance of a Demand Note.
(7) Includes (i) 51,100 shares issuable at $.04 per share upon the exercise of
options issued under the 1993 Option Plan, (ii) 86,666 shares issuable at
$2.42 per share upon exercise of options issued under the 1994 Option Plan,
(iii) 75,000 shares issuable at $1.00 per share upon exercise of warrants
granted for the exchange of a Secured Note for a Demand Note, and (iv)
16,667 shares issuable at $3.00 per share upon exercise of warrants issued
for the repayment of Convertible Debt.
(8) Includes (i) 25,000 shares issuable at $1.00 per share upon the exercise of
warrants granted for the issuance of a Demand Note, (ii) 145,500 shares
issuable at $1.00 per share upon the exercise of warrants in connection
with the exchange of a Secured Note for equity, (iii) 50,000 shares
issuable at $1.00 per share upon exercise of warrants in connection with
the exchange of a Demand Note for equity, (iv) 52,963 shares issuable upon
the conversion of Convertible Debt and accrued interest to equity and (v)
152,500 shares issuable at $3.00 per share upon the exercise of warrants in
connection with the conversion of Convertible Debt to equity.
(9) Shares subject to the control of Thomas E. Brown, as voting trustee of the
Robert Sterling Trust. On January 24, 1995, Robert M. Sterling, Jr. and
Thomas E. Brown, as voting trustee, entered into a Voting Trust Agreement
covering all capital stock beneficially owned by Mr. Sterling as of January
24, 1995 or subsequently acquired. The voting trustee is entitled,in his
discretion, to vote the shares deposited therewith and also has exclusive
investment control of said shares. The Voting Trust Agreement is
irrevocable and expires on January 20, 1998. Mr. Sterling is the sole
beneficiary of the Voting Trust Agreement.
(10) Includes (i) 51,666 shares issuable at $2.20 per share upon exercise of
options issued under the 1994 Option Plan and (ii) 16,667 shares issuable
at $3.00 per share for the exercise of warrants in connection with the
repayment of Convertible Debt.
(11) Shares subject to the control of Richard Bernardi, as voting trustee of the
Robert Bernardi Trust. On January 20, 1995, Robert P. Bernardi and Richard
Bernardi, as voting trustee, entered into a Voting Trust Agreement covering
all capital stock beneficially owned by Mr. Bernardi as of January 20, 1995
or subsequently acquired. The voting trustee is entitled,in his discretion,
to vote the shares deposited therewith and also has exclusive investment
control of said shares. The Voting Trust Agreement is irrevocable and
expires on January 20, 1998. Mr. Bernardi is the sole beneficiary of the
Voting Trust Agreement.
(12) Includes (i) 34,166 shares issuable at $3.00 per share upon the exercise of
options granted under the 1994 Option Plan and (ii) 11,111 shares issuable
at $3.00 per share upon exercise of options granted under the 1995 Option
Plan, and (iii) 5,110 shares issuable at $.20 per share upon exercise of
options granted under the 1993 Plan.
(13) Includes 30,000 shares issuable at $3.00 per share upon the exercise of
options issued under the 1994 Option Plan.
(14) Includes 11,111 shares issuable at $3.00 per share upon exercise of options
granted under the 1995 Option Plan.
(15) None of the 250,000 options to purchase Common Stock of the Company at
$3.00 per share have vested as of the date of this Prospectus.
(16) None of the 100,000 options to purchase Common Stock of the Company at
$4.00 per share have vested as of the date of this Prospectus.
(17) Includes 67,990 and 17,144 shares issuable at $3.00 per share to Mr. Page
and Mr. Boomstein, respectively, upon exercise of options granted under the
1994 Option Plan.
44
<PAGE>
CERTAIN TRANSACTIONS
In December 1992, Viewpoint issued 102,200 shares of Common Stock to Glenn A.
Norem, Chief Executive Officer of the Company, in consideration of $200 and
issued warrants to purchase 511,000 shares of Common Stock at an exercise price
of $.001 per share to Glenn A. Norem as assignee for Catalyst, of which Mr.
Norem was the Chairman, Chief Executive Officer, and sole stockholder, in
consideration for services rendered by Catalyst. Mr. Norem exercised these
warrants in June 1993.
During 1993, Mr. Norem loaned Viewpoint an aggregate of $90,700 at an annual
interest rate of 8%. These loans were repaid by the Company in November 1994. In
connection with these loans Viewpoint issued warrants to Mr. Norem to purchase
an aggregate of 11,587 shares of Common Stock at an exercise price of $0.20 per
share. Mr. Norem exercised these warrants in May 1994.
During 1993 and 1994, G.A. Norem I, L.P., of which Mr. Norem is the sole
general partner, loaned Viewpoint an aggregate of $35,500 at an annual interest
rate of 8%. The Company repaid these loans in June 1994. In connection with
these loans, Viewpoint granted G.A. Norem I, L.P. a security interest on all of
its assets and issued to G.A. Norem I, L.P. warrants to purchase 4,536 shares of
Common Stock at $.10 per share. G.A. Norem I, L.P. exercised these warrants in
May 1994.
In February 1994, the Company issued 650,000 shares of Common Stock to each
of Messrs. Bernardi and Sterling, the Company's founders, for aggregate
consideration of $130. In January 1995, Messrs. Bernardi and Sterling each sold
back to the Company 127,940 shares of Common Stock for aggregate consideration
of $25.58.
In February 1994, the Company entered into five-year consulting agreements
with each of SCG and BCG, each of which agreements provides for annual
compensation of $60,000, subject to increases and annual bonuses at the
discretion of the Board of Directors, and options to purchase 100,000 shares.
The SCG agreement also provided that, at the sole discretion of the Board of
Directors, the Company may pay a fee, not to exceed 6% of the transaction value,
in connection with any acquisition transaction consummated. Mr. Sterling, a
principal stockholder of the Company, is the sole stockholder of SCG, and Mr.
Bernardi, a principal stockholder of the Company, is the sole proprietor of BCG.
The consulting agreements also contain provisions granting Messrs. Sterling and
Bernardi certain piggyback and demand registration rights exercisable at any
time during the term of the consulting agreement. The consulting agreement with
BCG was voluntarily terminated by Mr. Bernardi effective March 15, 1995.
In June 1996, accrued but unpaid consulting fees of $80,000 payable through
April 1996 to SCG pursuant to the consulting agreement were exchanged for Common
Stock of the Company at $3.00 per share. In addition, consulting fees due from
May 1996 through the date of this Prospectus were waived by Mr. Sterling.
Pursuant to the consulting agreement, in July 1996 SCG was issued a warrant to
purchase 75,000 shares of Common Stock of the Company exercisable at $3.00 per
share.
In March 1994, the Company entered into an agreement with Catalyst. Pursuant
to this agreement, the Company agreed to pay Catalyst a monthly fee of $10,000
for Catalyst's services in seeking suitable acquisition candidates for the
Company. The agreement also provides for a fee in connection with any
transaction consummated pursuant to the agreement. The agreement was terminated,
with respect to the monthly fee, on September 30, 1994 and $11,692 remains
unpaid as of the date of this Prospectus.
In May 1994, the Company acquired all of the outstanding stock and options of
Viewpoint in exchange for 1,100,004 shares of Common Stock and options to
purchase Common Stock. Mr. Norem was President and Chief Executive Officer of
Viewpoint at the time of the acquisition and exchanged his shares and options of
Viewpoint for shares of Common Stock and options of the Company on the same
terms as the other Viewpoint security holders. Of the 198,758 option shares
received by Mr. Norem in May 1994, 68,758 were returned to the Company in
October 1994 at the request of the Company's Board of Directors.
In July and October 1994, the Company sold certain videoconferencing
equipment and software enhancements to Network Imaging Corporation ("NIC") for
$58,260. Mr. Sterling is a former Chairman of NIC and Mr. Bernardi is currently
Chairman of NIC and formerly served as President and Chief Executive Officer of
NIC. Such sales were made on the same terms and conditions and at the same
prices as sales made to disinterested parties during the period in which the
sales occurred.
45
<PAGE>
From September 1994 through January 1995, in connection with the Convertible
Debt Financing, the Company issued to each of Mr. Norem and Mrs. Elizabeth
Sterling, the wife of Mr. Sterling, $50,000 principal amount of Convertible Debt
and to Messrs. M. Douglas Adkins, Robert Moody, Jr., Fred Kassner and H. T.
Ardinger, each a principal stockholder of the Company, $205,000, $550,000,
$200,000 and $750,000 principal amount of Convertible Debt, respectively. All
issuances were on the same terms and conditions as the other investors in the
Convertible Debt Financing. In addition, the Company issued to the Adkins Family
Partnership, Ltd. $100,000 principal amount of Convertible Debt. Mr. Adkins and
Driftwood Corporation, of which Mr. Adkins is President, are the general
partners of the Adkins Family Partnership, Ltd.
In January 1995, Messrs. Bernardi and Sterling each entered into a Memorandum
of Understanding with the Company in which each agreed to sell to the Company at
par 127,940 shares of the Company's Common Stock as a condition imposed by the
Company's prior underwriter for its participation in the initial filing of the
Company's public offering. Messrs. Sterling and Bernardi also agreed to an
increase in the exercise price of options to purchase 100,000 shares of Common
Stock of the Company from $.10 per share to $2.20 per share for similar
consideration. Mr. Bernardi voluntarily terminated his consulting agreement in
March 1995.
In February through April 1995, in connection with the issuance of Secured
Notes, the Company issued to Messrs. Norem, Moody, Adkins, Ardinger, Mrs. Mary
Ardinger, wife of Mr. Ardinger and G.A. Norem I, L.P., each a principal
stockholder of the Company $254,000, $400,000, $291,000, $45,000, $45,000 and
$35,000 principal amount of Secured Notes, respectively. All issuances were on
the same terms and conditions as the other investors in the Secured Notes. As of
December 31, 1995, Messrs. Moody, Adkins, Ardinger and Mrs. Ardinger exchanged
their respective Secured Notes for Common Stock of the Company at $3.00 per
share. As an incentive to exchange the Secured Notes for equity, Messrs. Moody,
Adkins, Ardinger and Mrs. Ardinger were granted 200,000, 145,500, 22,500 and
22,500 warrants, respectively, to purchase Company Common Stock at $1.00 per
share for three (3) years. Mr. Norem received 85,000 Warrants to exchange his
Secured Notes for a Demand Note. Mr. Norem's Warrants are also priced at $1.00
per share for three (3) years.
In June and July 1995, in connection with the Demand Notes, the Company
issued to Messrs. Ardinger, Adkins, Mrs. Ardinger and Mr. Norem, each a
principal stockholder of the Company, $75,000, $100,000, $75,000 and $60,000
principal amount of Demand Notes, respectively. As an incentive to advance the
Demand Notes, Messrs. Ardinger, Adkins, Mrs. Ardinger and Mr. Norem were granted
18,750, 25,000, 18,750 and 15,000 warrants, respectively, to purchase Company
Common Stock at $1.00 per share for three (3) years. As of December 31, 1995,
Messrs. Ardinger, Adkins and Mrs. Ardinger exchanged their respective Demand
Notes for Common Stock of the Company at $3.00 per share. As an incentive to
exchange the Demand Notes for equity, Messrs. Ardinger, Adkins and Mrs. Ardinger
were granted 37,500, 50,000 and 37,500 Warrants, respectively, to purchase
Company Common Stock at $1.00 per share for three (3) years. Mr. Norem received
18,000 Warrants to purchase Company Common Stock as additional compensation for
extending his Demand Note. Mr. Norem's Warrants are also priced at $1.00 per
share for three (3) years.
In August 1995, the Company authorized a private placement for the issuance
and sale of up to 2,666,667 shares of the Common Stock of the Company at $3.00
per share (the "Regulation D Offering"). For its services as placement agent for
the Regulation D Offering, Network 1 Financial Securities, Inc., one of the
Representatives in this offering, received a commission in the amount of eight
percent (8%) of the gross proceeds of the Regulation D Offering. The gross
proceeds of the Regulation D Offering were $5,425,755 and Network 1 earned
$397,400 in commissions on such proceeds.
In January and February 1996, in connection with the Secured Notes II, the
Company issued to Mr. Fred Kassner, a principal stockholder of the Company,
$650,000 principal amount of Secured Notes II. As an incentive to advance the
Secured Notes II, Mr. Kassner was granted warrants to purchase 65,000 shares of
Common Stock at $3.00 per share for three (3) years. As of March 31, 1996, Mr.
Kassner converted his Secured Notes II to Common Stock of the Company at $3.00
per share.
46
<PAGE>
In January 1996, Messrs. Norem, Colquhoun and Leftwich received options to
purchase 160,000, 50,000 and 30,000 shares of Common Stock, respectively, under
the 1995 Employee Stock Option Plan, exercisable at $3.30, $3.00 and $3.00 per
share, respectively, vesting over a five-year period subject to acceleration.
In July 1996, the Company received gross proceeds of $1,000,000 in connection
with the issuance and sale of $1,000,000 aggregate principal amount of a
convertible note to Mr. Fred Kassner, a principal shareholder of the Company
(the "Convertible Debt II"). Pursuant to the terms of the Convertible Debt II,
Mr. Kassner received a warrant to purchase 100,000 shares of Common Stock of the
Company. The warrant is exercisable at a price of $3.00 per share for three
years from the date of issuance. In addition, should Mr. Kassner elect to
convert, he will receive an additional warrant to purchase 100,000 shares of
Common Stock at $3.00 per share for three years from the date of conversion.
In September 1996, the Company received gross proceeds of $500,000 in
connection with the issuance and sale of $500,000 aggregate principal amount of
Bridge Debt to an unaffiliated individual. The holder of the Bridge Debt
received a warrant to purchase 50,000 shares of Common Stock of the Company
exercisable at a price of $3.00 per share for three years from the date of
issuance pursuant to the terms of the Bridge Debt.
In September 1996, Glenn A. Norem, Chief Executive Officer of the Company,
agreed to exchange $50,000 principal amount of Convertible Debt, $364,154
principal amount of Secured and Demand Notes, accrued interest of $43,934 and
accrued salary and bonuses of $127,781 for $585,869 aggregate principal amount
of a 15% term loan. Principal in the amount of $250,000 is payable ten days
after the completion of an initial public offering by the Company, while the
balance is due in December 1997. Interest is payable quarterly.
All future transactions between the Company and its officers, directors or 5%
stockholders will be on terms no less favorable than could be obtained from
unaffiliated third parties and will be approved by a majority of the independent
disinterested Directors of the Company.
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<PAGE>
DESCRIPTION OF SECURITIES
The Company is authorized to issue 20,000,000 shares of Common Stock, $.0001
par value per share and 5,000,000 shares of preferred stock, par value $.0001
per share. As of the date of this Prospectus, the 5,054,314 shares of Common
Stock outstanding are held by 70 holders of record, and no shares of preferred
stock are outstanding.
COMMON STOCK
The holders of Common Stock are entitled to one vote for each share held of
record on all matters to be voted on by stockholders. There is no cumulative
voting with respect to the election of directors, with the result that the
holders of more than 50% of the shares voting for the election of directors can
elect all of the directors. The current shareholders of the Company (including
officers and directors) will continue to own more than 75.4% (or more if they
purchase any of the shares offered hereby) of the shares of Common Stock after
the offering and, accordingly, may be able to effectively elect all of the
Company's directors and control corporate policy. Holders of shares of Common
Stock are entitled to receive dividends when, as and if declared by the Board of
Directors in its discretion, out of funds legally available therefor. In the
event of liquidation, dissolution or winding up of the Company, the holders of
Common Stock are entitled to share ratably in the assets of the Company, if any,
legally available for distribution to them after payment of debts and
liabilities of the Company and after provision has been made for each class of
stock, if any, having liquidation preference over the Common Stock. Holders of
shares of Common Stock have no conversion, preemptive or other subscription
rights, and there are no redemption or sinking fund provisions applicable to the
Common Stock. All of the outstanding shares of Common Stock are, and the shares
of Common Stock offered will be, when issued upon payment of the consideration
set forth in this Prospectus, fully paid and non-assessable.
PREFERRED STOCK
The Company is authorized to issue preferred stock with such designations,
rights and preferences as may be determined from time to time by the Board of
Directors. Accordingly, the Board of Directors is empowered, without stockholder
approval, to issue preferred stock with dividend, liquidation, conversion,
voting or other rights which could adversely affect the voting power or other
rights of the holders of the Company's Common Stock. In the event of issuance,
the preferred stock could be utilized, under certain circumstances, as a method
of discouraging, delaying or preventing a change in control of the Company. The
Company has no present intention to issue any shares of its preferred stock.
WARRANTS
The following is a brief summary of certain provisions of the Public
Warrants, but such summary does not purport to be complete and is qualified in
all respects by reference to the actual text of the warrant agreement (the
"Warrant Agreement") among the Company, the Representatives, and Continental
Stock Transfer & Trust Co. (the "Warrant Agent"). A copy of the Warrant
Agreement has been filed as an exhibit to the Registration Statement of which
this Prospectus is a part. As of the date hereof, there are no Public Warrants
outstanding. See "Additional Information."
Exercise Price and Terms. Each Public Warrant entitles the registered holder
thereof to purchase, at any time over a fifty-four month period commencing six
(6) months after the date of this Prospectus, one share of Common Stock at a
price of 120% of the initial public offering price per share, subject to
adjustment in accordance with the anti-dilution and other provisions referred to
below. The holder of any Public Warrant may exercise such Public Warrant by
surrendering the certificate representing the Public Warant to the Warrant
Agent, with the subscription form thereon properly completed and executed,
together with payment of the exercise price. The Public Warrants may be
exercised at any time in whole or in part at the applicable exercise price until
expiration of the Public Warrants. No fractional shares will be issued upon the
exercise of the Public Warrants.
The exercise price of the Public Warrants bears no relationship to any
objective criteria of value and should in no event be regarded as an indication
of any future market price of the securities offered hereby.
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Adjustments. The holders of the Public Warrants are protected against
dilution of their interests by adjustments, as set forth in the Warrant
Agreement, of the exercise price and the number of shares of Common Stock
purchasable upon the exercise of the Public Warrants upon the occurrence of
certain events, including stock dividends, stock splits, combinations or
reclassification of the Common Stock, or sale by the Company of shares of its
Common Stock or other securities convertible into Common Stock at a price below
the then-applicable exercise price of the Public Warrants. Additionally, an
adjustment would be made in the case of a reclassification or exchange of Common
Stock, consolidation or merger of the Company with or into another corporation
(other than a consolidation or merger in which the Company is the surviving
corporation) or sale of all or substantially all of the assets of the Company in
order to enable warrantholders to acquire the kind and number of shares of stock
or other securities or property receivable in such event by holder of the number
of shares of Common Stock that might otherwise have been purchased upon the
exercise of the Public Warrant.
Redemption Provisions. Commencing eighteen (18) months after the date of this
Prospectus, all, but not less than all, of the Public Warrants are subject to
redemption at $0.10 per Public Warrant on not less than thirty (30) days' prior
written notice to the holders of the Public Warrants provided the per share
closing price or bid quotation of the Common Stock as reported on Nasdaq equals
or exceeds $ [250% of the initial public offering price per Share] for any
twenty (20) trading days within a period of thirty (30) consecutive trading days
ending on the fifth trading day prior to the date on which the Company gives
notice of redemption. The Public Warrants will be exercisable until the close of
business on the day immediately preceding the date fixed for redemption in such
notice. If any Public Warrant called for redemption is not exercised by such
time, it will cease to be exercisable and the holder will be entitled only to
the redemption price.
Transfer, Exchange and Exercise. The Public Warrants are in registered form
and may be presented to the Warrant Agent for transfer, exchange or exercise at
any time on or prior to their expiration date five (5) years from the date of
this Prospectus, at which time the Public Warrants become wholly void and of no
value. If a market for the Public Warrants develops, the holder may sell the
Public Warrants instead of exercising them. There can be no assurance, however,
that a market for the Public Warrants will develop or continue.
The Public Warrants are not exercisable unless, at the time of the exercise,
the Company has a current prospectus covering the shares of Common Stock
issuable upon exercise of the Public Warrants, and such shares have been
registered, qualified or deemed to be exempt under the securities laws of the
state of residence of the exercising holder of the Public Warrants. Although the
Company will use its best efforts to have all the shares of Common Stock
issuable upon exercise of the Public Warrants registered or qualified on or
before the exercise date and to maintain a current prospectus relating thereto
until the expiration of the Public Warrants, there can be assurance that it will
be able to do so.
The Public Warrants are separately transferable immediately upon issuance.
Although the Public Warrants will not knowingly be sold to purchasers in
jurisdictions in which the Public Warrants are not registered or otherwise
qualified for sale or exemption, purchasers may buy Public Warrants in the
after-market in, or may move to, jurisdictions in which Public Warrants and the
Common Stock underlying the Public Warrants are not so registered or qualified
or exempt. In this event, the Company would be unable lawfully to issue Common
Stock to those persons desiring to exercise their Public Warrants (and the
Public Warrants would not be exercisable by those persons) unless and until the
Public Warrants and the underlying Common Stock are registered, or qualified for
sale in jurisdictions in which such purchasers reside, or any exemption from
registration or qualification exists in such jurisdiction.
Warrantholder Not a Stockholder. The Public Warrants do not confer upon
holders any voting, dividend or other rights as stockholders of the Company.
Modification of Public Warrants. The Company and the Warrant Agent may make
such modifications to the Public Warrants as they deem necessary and desirable
that do not adversely affect the interests of the warrantholders. The Company
may, in its sole discretion, lower the exercise price of the Public Warrants for
a period of not less than thirty (30) days on not less than thirty (30) days'
prior written notice to the warrantholders and the Representative. Modification
of the number of securites
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purchasable upon the exercise of any Public Warrant, the exercise price and the
expiration date with respect to any Public Warrant requires the consent of
two-thirds of the warrantholders. No other modifications may be made to the
Public Warrants, without the consent of two-thirds of the warrantholders.
DELAWARE LAW WITH RESPECT TO BUSINESS COMBINATIONS
As of the date of this Prospectus, the Company will be subject to the State
of Delaware's "business combination" statute, Section 203 of the Delaware
General Corporation Law. In general, such statute prohibits a publicly held
Delaware corporation from engaging in a "business combination" with a person who
is an "interested stockholder" for a period of three years after the date of the
transaction in which that person became an interested stockholder, unless the
business combination is approved in a prescribed manner. A "business
combination" includes a merger, asset sale or other transaction resulting in a
financial benefit to the interested stockholder. An "interested stockholder" is
a person who, together with affiliates, owns (or, within three years prior to
the proposed business combination, did own) 15% or more of the Delaware
corporation's voting stock. The statute could prohibit or delay mergers or other
takeover or change in control attempts with respect to the Company and,
accordingly, may discourage attempts to acquire the Company.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the Common Stock is Continental Stock
Transfer and Trust Company, 2 Broadway, New York, New York 10004.
REPORTS TO STOCKHOLDERS
The Company intends to furnish its stockholders with annual reports
containing audited financial statements and such other periodic reports as the
Company may determine to be appropriate or as may be required by law.
As of the date of this Prospectus, the Company has registered its Common
Stock and Warrants under the provisions of Section 12(g) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and the Company has
agreed that it will use its best efforts to continue to maintain such
registration for a minimum of five years from the date of this Prospectus. Such
registration will require the Company to comply with periodic reporting, proxy
solicitation and certain other requirements of the Exchange Act.
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SHARES ELIGIBLE FOR FUTURE SALE
Upon the consummation of this offering, the Company will have 7,324,963
shares of Common Stock outstanding (7,594,963 shares if the Representatives'
over-allotment option is exercised in full)(assuming no exercise of outstanding
options and warrants). Of these shares, the 1,800,000 shares sold in this
offering (2,070,000 shares if the Representatives' over-allotment option is
exercised in full) and the 470,649 shares of Common Stock registered
concurrently with this Prospectus (the "Selling Securityholders Shares") being
offered pursuant to the Selling Securityholder Prospectus included in the
Registration Statement of which this Prospectus forms a part will be freely
tradeable subject to "lock-up" agreements described below under the Securities
Act, except for any shares purchased by an "affiliate" of the Company (in
general, a person who has a control relationship with the Company), which shares
will be subject to the resale limitations of Rule 144 adopted under the
Securities Act. The remaining 5,054,314 shares are deemed to be "restricted
securities," as that term is defined under Rule 144 promulgated under the
Securities Act, in that such shares were issued and sold by the Company in
private transactions not involving a public offering and are not currently part
of an effective registration. Except for the "lock-up" agreement described
below, such shares are eligible for sale under Rule 144, or will become so
eligible at various times through October 1996. In addition, the Company has
granted the Representatives demand and piggyback registration rights with
respect to the securities issuable upon exercise of the Representatives'
Warrants. No prediction can be made as to the effect, if any, that sales of
shares of Common Stock or even the availability of such shares for sale will
have on the market prices prevailing from time to time. If the holders of the
shares eligible for registration so choose they could require the Company to
register all of said shares at any time.
In general, under Rule 144 as currently in effect, subject to the
satisfaction of certain other conditions, a person, including an affiliate of
the Company (or other persons whose shares are aggregated), who has owned
restricted shares of Common Stock beneficially for at least two years is
entitled to sell, within any three-month period, a number of shares that does
not exceed the greater of 1% of the total number of outstanding shares of the
same class or, if the Common Stock is quoted on NASDAQ, the average weekly
trading volume during the four calendar weeks preceding the sale. A person who
has not been an affiliate of the Company for at least the three months
immediately preceding the sale and who has beneficially owned shares of Common
Stock for at least three years is entitled to sell such shares under Rule 144
without regard to any of the limitations described above.
Except upon the consent of both Representatives during the first twelve (12)
months of the term of the lock-up period and thereafter upon the consent of one
of the Representatives, all executive officers, all directors and holders of
substantially all of the outstanding stock of the Company and substantally all
holders of any options, warrants or other securities convertible, exercisable or
exchangeable for shares of Common Stock have agreed not to, directly or
indirectly, issue, offer, agree or offer to sell, sell, transfer, assign,
encumber, grant an option for the purchase or sale of, pledge, hypothecate or
otherwise dispose of any beneficial interest in such securities for a period of
twenty-four (24) months following the effective date of the Registration
Statement. Holders of of the "restricted securities" have not agreed not to sell
such shares, all of which will be eligible for sale under, and subject to, Rule
144 within three months following the date of this Prospectus. For a period of
two years from the date of this Prospectus, the Company has also agreed not to
file any registration statement relating to the offering or sale of the
Company's securities (not including any registration statement on Form S-8)
without the consent of the Representatives.
Prior to this offering, there has been no market for the Common Stock and no
prediction can be made as to the effect, if any, that market sales of shares of
Common Stock or the availability of such shares for sale will have on the market
prices prevailing from time to time. Nevertheless, the possibility that
substantial amounts of Common Stock may be sold in the public market may
adversely affect prevailing market prices for the Common Stock and could impair
the Company's ability to raise capital through the sale of its equity
securities.
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UNDERWRITING
The Underwriters named below (the "Underwriters"), for whom National
Securities Corporation and Network 1 Financial Securities, Inc. are acting as
representatives (in such capacity, the "Representatives"), have severally
agreed, subject to the terms and conditions of the Underwriting Agreement (the
"Underwriting Agreement") to purchase from the Company and the Company has
agreed to sell to the Underwriters on a firm commitment basis, the respective
number of Securities set forth opposite their names:
Number of
Underwriter Securities
----------- ----------
National Securities Corporation........
Network 1 Financial Securities, Inc.... ----------
Total ...................... 1,800,000
The Underwriters are committed to purchase all the shares of Common Stock and
Public Warrants offered hereby, if any of such securities are purchased. The
Underwriting Agreement provides that the obligations of the several Underwriters
are subject to conditions precedent specified therein.
The Company has been advised by the Representatives that the Underwriters
propose initially to offer the Securities to the public at the initial public
offering prices set forth on the cover page of this Prospectus and to certain
dealers at such prices less concessions not in excess of $____ per share and
$____ per Public Warrant. Such dealers may reallow a concession not in excess of
$____ per share and $____ per Public Warrant to certain other dealers. After the
commencement of the offering, the public offering prices, concession and
reallowance may be changed by the Representatives.
The Representatives have informed the Company that they do not expect sales
to discretionary accounts by the Underwriters to exceed five percent of the
securities offered hereby.
The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act, or to contribute to
payments that the Underwriters may be required to make. The Company has also
agreed to pay to the Representatives a non-accountable expense allowance equal
to 3% of the gross proceeds derived from the sale of the Securities
underwritten, of which $25,000 has been paid to date.
The Company has granted to the Underwriters an over-allotment option,
exercisable during the forty-five (45) day period from the date of this
Prospectus, to purchase up to an additional 270,000 shares of Common Stock
and/or 270,000 Public Warrants at the initial public offering price per share
and Public Warrant, respectively, offered hereby, less underwriting discounts
and the non-accountable expense allowance. Such option may be exercised only for
the purpose of covering over-allotments, if any, incurred in the sale of the
securities offered hereby. To the extent such option is exercised in whole or in
part, each Underwriter will have a firm commitment, subject to certain
conditions, to purchase the number of the additional securities proportionate to
its initial commitment.
In connection with this offering, the Company has agreed to sell to the
Representatives, for nominal consideration, warrants to purchase from the
Company up to 180,000 shares of Common Stock and/or 180,000 Public Warrants (the
"Representatives' Warrants"). The Representatives' Warrants are initially
exercisable at a price of $___ per share of Common Stock [120% of the initial
public offering price per Share] and $_______ per Public Warrant [120% of the
initial public offering price per Public Warrant] for a period of four (4)
years, commencing at the beginning of the second year after their issuance and
sale. The Representatives' Warrants are restricted from sale, transfer,
assignment or hypothecation for a period of twelve (12) months from the date
hereof, except to officers of the Representatives. The Representatives' Warrants
provide for adjustment in the number of shares of Common Stock and Public
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Warrants issuable upon the exercise thereof and in the exercise price of the
Representatives' Warrants as a result of certain events, including subdivisions
and combinations of the Common Stock. The Representatives' Warrants grant to the
holders thereof certain rights of registration for the securities issuable upon
exercise thereof.
Except upon the consent of both Representatives during the first twelve (12)
months of the term of the lock-up period and thereafter upon the consent of one
of the Representatives, all executive officers, all directors and holders of
substantially all of the outstanding stock of the Company and substantially all
holders of any options, warrants or other securities convertible, exercisable or
exchangeable for shares of Common Stock have agreed not to, directly or
indirectly, issue, offer, agree or offer to sell, sell, transfer, assign,
encumber, grant an option for the purchase or sale of, pledge, hypothecate or
otherwise dispose of any beneficial interest in such securities for a period of
twenty-four (24) months following the effective date of the Registration
Statement. An appropriate legend shall be marked on the face of certificates
representing all such securities. In addition, without the consent of both
Representatives and except pursuant to the exercise of the Public Warrants and
the Representatives' Warrants, the Company has agreed that it, its subsidiaries
and affiliates shall not sell or offer for sale any of their securities
commencing the effective date of the Registration Statement of which this
Prospectus is a part for a period of twelve (12) months thereafter, except
pursuant to (i) options outstanding or available for grant under the Company's
option plans existing on the date hereof (and subject to their issuance at the
greater of fair market value and the initial public offering price per share of
Common Stock on the date of grant) and (ii) the ESPP. The Company has further
agreed for a period of twenty-four (24) months following the effective date of
the Registration Statement of which this Prospectus is a part, not to file a
registration statement covering any of its securities without the prior written
consent of National Securities Corporation, except (i) a registration statement
covering a maximum of 470,649 shares and warrants to purchase an additional
470,649 shares and (ii) a registration statement on Form S-8 relating to the
Company's stock option plans described in the Registration Statement; provided
in each of the foregoing cases, all such securityholders deliver a lock-up
agreement to National as described above.
The Company has agreed that National Securities Corporation may nominate for
election one person to the Company's Board of Directors (which person shall be
reasonably acceptable to the Company) for a period of three (3) years from the
effective date of the Registration Statement and that certain of the Company's
officers, directors and stockholders have agreed to vote their shares of common
stock in favor of such designee. In the event National Securities Corporation
elects not to exercise the right, then National Securities Corporation may
designate one person to attend meetings of the Company's Board of Directors as a
non-voting advisor (which person shall be reasonably acceptable to the Company).
Such designee shall be entitled to attend all such meetings of the Company's
Board of Directors and to receive all notices and other correspondence and
communications sent by the Company to members of its Board of Directors. The
Company has agreed to reimburse designees of National Securities Corporation for
their out-of-pocket expenses incurred in connection with their attendance of
meetings of the Company's Board of Directors.
Prior to this offering, there has been no public market for the Common Stock
or the Public Warrants. Consequently, the initial public offering prices of the
securities has been determined by negotiation between the Company and the
Representatives and does not necessarily bear any relationship to the Company's
asset value, net worth or other established criteria of value. The factors
considered in such negotiations, in addition to prevailing market conditions,
included the history of and prospects for the industry in which the Company
competes, an assessment of the Company's management, the prospects of the
Company, its capital structure, the market for initial public offerings and
certain other factors as were deemed relevant.
Upon the exercise of any Public Warrants more than one year after the date of
this Prospectus, which exercise was solicited by a Representative, and to the
extent not inconsistent with the guidelines of the NASD and the Rules and
Regulations of the Commission, the Company has agreed to pay such Representative
a commission which shall not exceed five percent (5%) of the aggregate exercise
price of such Public Warrants in connection with bona fide services provided by
such Representative relating to any warrant solicitation undertaken by such
Representative. In addition, the individual must designate
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the firm entitled to payment of such warrant solicitation fee. However, no
compensation will be paid to the Representative in connection with the exercise
of the Public Warrants if (a) the market price of the Common Stock is lower than
the exercise price, (b) the Public Warrants were held in a discretionary
account, or (c) the exercise of the Public Warrants is not solicited by the
Representative. Unless granted an exemption by the Commission from its Rule
10b-6 under the Exchange Act, the Representatives will be prohibited from
engaging in any market-making activities with regard to the Company's securities
for the period from nine (9) business days (or other such applicable periods as
Rule 10b-6 may provide) prior to any solicitation of the exercise of the Public
Warrants until the later of the termination of such solicitation activity or the
termination (by waiver or otherwise) of any right the Representatives may have
to receive a fee. As a result, the Representatives may be unable to continue to
provide a market for the Common Stock or Public Warrants during certain periods
while the Public Warrants are exercisable. If a Representative has engaged in
any of the activities prohibited by Rule 10b-6 during the periods described
above, such Representative undertakes to waive unconditionally its rights to
receive a commission on the exercise of such Public Warrants.
The foregoing is a summary of the principal terms of the agreements described
above and does not purport to be complete. Reference is made to a copy of each
such agreement which are filed as exhibits to the Registration Statement. See
"Additional Information."
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CONCURRENT REGISTRATION OF SECURITIES
Concurrently with this offering, 470,649 shares of Common Stock (the "Selling
Securityholders' Shares") 470,649 Public Warrants (the "Selling Securityholders'
Warrants") and 470,649 shares underlying the Selling Securityholders' Warrants
have been registered by the Company under the Securities Act on behalf of
certain of its securityholders (the "Selling Securityholders"), pursuant to a
Selling Securityholders' Prospectus included within the Registration Statement
of which this Prospectus forms a part. The Selling Securityholders' Shares, the
Selling Securityholders Warrants, and the shares underlying the Selling
Securityholders Warrants are not part of this underwritten offering and all of
these shares and warrants may not be sold prior to 24 months from the date of
this Prospectus, in each case, without the prior written consent of the
Representatives. The Company will not receive any of the proceeds from the sale
of the Selling Securityholders' Shares, the Selling Securityholders' Warrants,
or the shares underlying the Selling Securityholders' Warrants, but will receive
proceeds from the exercise of the Selling Securityholders' Warrants.
INTEREST OF NAMED EXPERTS AND COUNSEL
John S. Stoppelman, a principal of The Stoppelman Law Firm, P.C., counsel to
the Company owns 42,666 shares of Common Stock of the Company, or less than one
percent (1.0%) of the shares outstanding before this offering.
LEGAL MATTERS
The legality of the securities offered hereby will be passed upon for the
Company by The Stoppelman Law Firm, P.C., McLean, Virginia. Orrick, Herrington &
Sutcliffe L.L.P., New York, NY has acted as special counsel to National in
connection with this offering. Gersten, Savage, Kaplowitz, & Curtin, L.L.P., New
York, NY has acted as counsel for the several underwriters in connection with
this offering.
EXPERTS
The consolidated financial statements of the Company and its subsidiaries
(companies in the development stage) at December 31, 1995 and for the year ended
December 31, 1995, appearing in this Prospectus and Registration Statement have
been audited by Ernst & Young LLP, independent auditors, as set forth in their
report thereon appearing elsewhere herein, and are included in reliance upon
such report given upon the authority of such firm as experts in accounting and
auditing.
The consolidated financial statements of the Company and its subsidiaries
(companies in the development stage) at December 31, 1994 and for the year ended
December 31, 1994, appearing in this Prospectus and Registration Statement have
been audited by Hoffman, Morrison & Fitzgerald, P.C. ("Hoffman"), independent
auditors, as set forth in their report thereon appearing elsewhere herein, and
are included in reliance upon such report given upon the authority of such firm
as experts in accounting and auditing.
The former independent auditor for the Company, Hoffman, Morrison &
Fitzgerald, P.C., was dismissed by the Company on November 3, 1995. Hoffman's
report on the financial statements for the fiscal year ended December 31, 1994
did not contain an adverse opinion or disclaimer of opinion, and, except for an
emphasis paragraph describing substantial doubt about the Company's ability to
continue as a going concern, was not modified as to uncertainty, audit scope or
accounting principles. Management is not aware of any disagreements with Hoffman
on any matter of accounting principles or practices, financial statement
disclosure or auditing scope or procedure through the date of dismissal, which,
if not resolved to Hoffman's satisfaction, would have caused Hoffman to make
reference to the subject matter of the disagreement in connection with its
report.
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ADDITIONAL INFORMATION
The Company has filed with the Commission a registration statement on Form
SB-2 (the "Registration Statement") under the Securities Act with respect to the
Common Stock and Public Warrants offered by this Prospectus. This Prospectus
does not contain all of the information set forth in the Registration Statement,
certain parts of which are omitted in accordance with the rules and regulations
of the Commission. For further information with respect to the Company and this
offering, reference is made to the Registration Statement, including the
exhibits filed therewith, which may be inspected without charge at the
Commission's principal office at 450 Fifth Street, N.W., Washington, D.C. 20549;
at the New York Regional Office, 7 World Trade Center, New York, New York 10048
and at the Midwest Regional Office, Citicorp Center, 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661. Copies of the Registration Statement may be
obtained from the Commission at its principal office and regional office upon
payment of prescribed fees and over the Internet at www.sec.gov. Statements
contained in this Prospectus as to the contents of any contract or other
document are not necessarily complete and, where the contract or other document
has been filed as an exhibit to the Registration Statement, each statement is
qualified in all respects by reference to the applicable document filed with the
Commission.
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GLOSSARY
Algorithm:A step-by-step problem solving or mathematical procedure.
Asynchronous:That which takes place in different time frames and is accessed at
the user's convenience.
Bandwidth:The amount of information that can be transmitted across an
information channel.
Frame Relay:Packet data protocol with less error correction to speed up
communication over high quality connections.
Intranet:A private Internet.
Internet:A network of computer networks using TCP/IP protocol.
ISDN:(Integrated Services Digital Network) -- digital network that provides
seamless communication of voice, video and text.
Kilobits:A thousand bits; a measure of the rate of data transmission.
LAN:(Local Area Network) -- a private computer network connecting computers in
the same building or campus using coaxial cable, twisted pair or multimode
fiber.
MBONE:A portion of the Internet with multimedia broadcast capability.
Multimedia:A combination of multiple digitized data types: text, sound,
computer-generated graphics and animations, photographs and video.
NTSC:The standard for scanning television signals in the US, Canada and Japan.
Packet:A grouping of data, typically from one to 512 characters in size, which
usually represents one transaction.
PCI-Bus:A fast 32 bit peripheral interface for PC's and workstations.
Protocol:A set of rules for data communications; a set of rules and procedures
for establishing and controlling the exchange of data between computers.
S-Bus:A proprietary high speed peripheral interface for Sun workstations.
Standards-basedA product which is designed to comply with standards promulgated
by a recognized industry organization.
Switched Architecture:Any network or device in which switching is present and is
used to direct messages from the sender to the ultimate recipient.
TCP/IP:(Transmission Control Protocol/Internet Protocol) -- the protocol used
for packet oriented communication between networked computers.
UTP:(Unshielded Twisted Pair) -- standard building wiring currently used to
transmit voice (telephone) and data throughout an office or building.
WAN:(Wide Area Network) -- a voice, data and/or video network covering a
geographic area larger than a campus, generally linking multiple smaller
networks.
Whiteboard:A shared drawing or graphics session or capability between two remote
computers.
World Wide Web:A very large collection of linked Internet servers using a
standard linking and display language.
i
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MULTIMEDIA ACCESS CORPORATION AND SUBSIDIARIES
(A Development Stage Company)
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
<S> <C>
Reports of Independent Auditors ................................................................ F-2
Consolidated Balance Sheets at December 31, 1994 and 1995 and June 30, 1996 (Unaudited) ........ F-4
Consolidated Statements of Operations for the years ended December 31, 1994 and 1995, the
six months ended June 30, 1995 and 1996 (Unaudited) and Cumulative from Inception (November
19, 1992) to June 30, 1996 (Unaudited)....................................................... F-5
Consolidated Statements of Stockholders' Equity (Deficit) from Inception (November 19, 1992)
to December 31, 1995 and the six months ended June 30, 1996 (Unaudited)...................... F-6
Consolidated Statements of Cash Flows for the years ended December 31, 1994 and 1995, the
six months ended June 30, 1995 and 1996 (Unaudited) and Cumulative from Inception (November
19, 1992) to June 30, 1996 (Unaudited)....................................................... F-8
Notes to Consolidated Financial Statements...................................................... F-9
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Board of Directors
MultiMedia Access Corporation
We have audited the accompanying consolidated balance sheet of MultiMedia Access
Corporation and subsidiaries (a development stage company) as of December 31,
1995, and the related consolidated statements of operations, stockholders'
equity (deficit) and cash flows for the year 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 audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the 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 audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
MultiMedia Access Corporation and subsidiaries at December 31, 1995, and the
consolidated results of its operations and its cash flows for the year then
ended in conformity with generally accepted accounting principles.
The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern which contemplates the
realization of assets and liquidation of liabilities in the normal course of
business. As more fully described in Note 1, the Company is dependent upon the
proceeds from an initial public offering of its common stock or other
alternative financing, has incurred recurring losses from operations and has a
substantial working capital deficiency. These conditions raise substantial doubt
about the Company's ability to continue as a going concern. The consolidated
financial statements do not include any adjustments to reflect the possible
future effects on the recoverability and classification of assets or the amounts
and classification of liabilities that may result from the outcome of this
uncertainty.
Dallas, Texas ERNST & YOUNG LLP
April 5, 1996, except for Note 12,
as to which the date is July 2, 1996
F-2
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors
MultiMedia Access Corporation and Subsidiaries
Dallas, TX
We have audited the accompanying consolidated balance sheets of MultiMedia
Access Corporation and Subsidiaries (a development stage company) as of December
31, 1994, and the related consolidated statements of operations, stockholders'
equity (deficit) and cash flows for the year then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated statements based
on our audits.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the consolidated financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the consolidated financial statements.
An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of MultiMedia Access
Corporation and Subsidiaries as of December 31, 1994, and the results of its
operations and its cash flows for the year then ended, in conformity with
generally accepted accounting principles.
The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern which contemplates the
realization of assets and liquidation of liabilities in the normal course of
business. As more fully described in Note 1, the Company is dependent upon the
proceeds from an initial public offering of its common stock or other
alternative financing, has incurred recurring losses from operations and has a
substantial working capital deficiency. These conditions raise substantial doubt
about the Company's ability to continue as a going concern. The consolidated
financial statements do not include any adjustments to reflect the possible
future effects on the recoverability and classification of assets or the amounts
and classification of liabilities that may result from the outcome of this
uncertainty.
HOFFMAN, DYKES & FITZGERALD, P.C.
March 17, 1995, except for Note 12,
which is as of May 8, 1995
Vienna, Virginia
F-3
<PAGE>
MULTIMEDIA ACCESS CORPORATION AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31, June 30,
------------
1994 1995 1996
---- ---- ----
ASSETS (Unaudited)
<S> <C> <C> <C>
Current assets:
Cash and cash equivalents........................................ $ 31,360 $ 16,605 $ 54,072
Accounts receivable, less allowance for doubtful accounts (none
at December 31, 1994, $29,647 and $39,330 at December 31, 1995
and June 30, 1996 (unaudited), respectively).................... 36,581 4,564 101,028
Inventory, less reserve (none at December 31, 1994, $220,000 at
December 31, 1995 and $215,000 at June 30, 1996 (unaudited)).... 365,103 197,469 345,997
Prepaid expenses................................................. 36,331 18,971 39,351
Due from debt holder............................................. -- 315,300 --
Deferred charges................................................. 307,115 44,165 69,199
------- ------ ------
Total current assets........................................... 776,490 597,074 609,647
Property and equipment, net....................................... 534,031 485,700 495,699
Software development costs, net................................... 210,256 143,795 118,391
Deferred charges, net............................................. 151,772 -- --
Deposits.......................................................... 17,829 18,197 18,272
Patent, net....................................................... 90,677 -- --
------ ------ ------
Total assets................................................... $ 1,781,055 $ 1,244,766 $ 1,242,009
=========== =========== ============
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable................................................. $ 432,623 $ 580,160 $ 821,531
Accrued compensation............................................. 253,755 354,268 272,979
Deferred revenue................................................. 17,471 75,513 15,591
Other accrued liabilities........................................ 273,513 370,398 689,375
Short-term debt, officer......................................... -- 364,154 364,154
Short-term debt, other........................................... 8,271 66,633 252,071
Current portion of long-term debt................................ -- 2,677,550 2,677,550
------- --------- ---------
Total current liabilities...................................... 985,633 4,488,676 5,093,251
Long-term debt.................................................... 2,195,174 8,654 3,780
Commitments and contingencies
Stockholders' equity (deficit):
Preferred stock, $.0001 par value:
Authorized shares - 5,000,000
Issued shares - none............................................ -- -- --
Common stock, $.0001 par value:
Authorized shares - 20,000,000
Issued and outstanding shares - 3,507,231 at December 31, 1994,
4,721,268 at December 31, 1995 and 5,315,811 at June 30, 1996
(unaudited).................................................... 350 472 532
Additional paid-in capital....................................... 1,163,274 4,736,933 6,412,572
Stock subscription receivable.................................... (191) -- (220,000)
Deficit accumulated during the development stage................. (2,563,185) (7,978,063) (10,036,220)
Treasury stock, 261,497 shares at December 31, 1995 and June 30,
1996 (unaudited)................................................ -- (11,906) (11,906)
---- -------- ------- -------
Total stockholders' equity (deficit)........................... (1,399,752) (3,252,564) (3,855,022)
---------- ---------- ----------
Total liabilities and stockholders' equity (deficit)........... $ 1,781,055 $ 1,244,766 $ 1,242,009
=========== =========== ============
</TABLE>
See accompanying notes.
F-4
<PAGE>
MULTIMEDIA ACCESS CORPORATION AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Cumulative
For the six months from
Year ended December 31, ended June 30, Inception
----------------------- -------------- (November 19,
1992)
1994 1995 1995 1996 to June 30, 1996
---- ---- ---- ---- ----------------
(Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C> <C> <C>
Net sales.......................... $ 127,531 $ 285,354 $ 177,819 $ 676,719 $ 1,153,680
Cost of goods sold................. 64,363 136,381 70,553 265,380 497,937
------ ------- ------ ------- -------
Gross profit....................... 63,168 148,973 107,266 411,339 655,743
Operating expenses:
Selling, general and
administrative................... 1,795,485 2,297,497 1,377,650 1,129,548 5,737,066
Research and development.......... 864,847 1,983,310 758,508 1,009,854 3,979,854
Depreciation and amortization..... 80,360 439,752 116,859 101,307 652,444
------ ------- ------- ------- -------
Total operating expenses......... 2,740,692 4,720,559 2,253,017 2,240,709 10,369,364
--------- --------- --------- --------- ----------
Operating loss..................... (2,677,524) (4,571,586) (2,145,751) (1,829,370) (9,713,621)
Other income (expense):
Dividend and interest income...... 29,215 5,372 180 59 34,646
Interest expense.................. (81,503) (847,905) (274,310) (228,846) (1,171,243)
Other............................. 12,391 (759) (772) -- 11,632
------ ---- ---- ------
Total other income (expense)..... (39,897) (843,292) (274,902) (228,787) (1,124,965)
------- -------- -------- -------- ----------
Net loss........................... $(2,717,421) $(5,414,878) $ (2,420,653) $(2,058,157) $(10,838,586)
=========== =========== ============ =========== ============
Net loss per share................. $ (0.53) $ (0.98) $ (0.45) (0.34)
=========== =========== ============ =====
Weighted average number of common
and common equivalent shares
outstanding....................... 5,157,932 5,542,184 5,392,087 6,141,635
========= ========= ========= =========
</TABLE>
See accompanying notes.
F-5
<PAGE>
MULTIMEDIA ACCESS CORPORATION AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
FROM INCEPTION (NOVEMBER 19, 1992) TO DECEMBER 31, 1995
AND THE SIX MONTHS ENDED JUNE 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
Accumulated Accumulated
Common Stock Additional Stock Deficit Deficit Total
------------------ Paid-in Subscriptions as an S as a C Treasury Stockholders'
Shares Par Value Capital Receivable Corporation Corporation Stock Equity (Deficit)
------ --------- ------- ---------- ----------- ----------- ----- ----------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net loss from inception
(November 19, 1992) to
December 31, 1992........ -- $ -- $ -- $ -- $ (53,925) $ -- $ -- $ (53,925)
------- ------ --------- ------ --------- ------- ---- -----------
Balance, December 31,
1992 -- -- -- -- (53,925) -- -- (53,925)
Exercise of options...... 194,180 19 361 (342) -- -- -- 38
Exercise of warrants .... 511,000 51 949 (900) -- -- -- 100
Net loss................. -- -- -- -- (594,205) -- -- (594,205)
------- ------ --------- ------ --------- ------- ---- -----------
Balance, December 31,
1993 705,180 70 1,310 (1,242) (648,130) -- -- (647,992)
Sale of common stock,
February 1994............ 1,510,000 151 -- -- -- -- -- 151
Sale of common stock,
March 1994............... 996,364 100 1,917,141 -- -- -- -- 1,917,241
Exercise of options...... 25,126 2 535 -- -- -- -- 537
Net loss as an S
Corporation January 1,
1994 to May 10, 1994 .... -- -- -- -- (154,236) -- -- (154,236)
Reclassification of S
Corporation losses upon
merger with Viewpoint ... -- -- (802,366) -- 802,366 -- -- --
Common stock issued,
June 1994................ 10,000 1 21,999 -- -- -- -- 22,000
Exercise of warrants .... 107,261 11 21,670 (844) -- -- -- 20,837
Exercise of options...... 153,300 15 2,985 -- -- -- -- 3,000
Payment of stock
subscriptions............ -- -- -- 1,895 -- -- -- 1,895
Net loss................. -- -- -- -- -- (2,563,185) -- (2,563,185)
------- ------ --------- ------ --------- ------- ---- -----------
Balance, December 31,
1994 3,507,231 350 1,163,274 (191) -- (2,563,185) -- (1,399,752)
</TABLE>
F-6
<PAGE>
MULTIMEDIA ACCESS CORPORATION AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT) (CONTINUED)
FROM INCEPTION (NOVEMBER 19, 1992) TO DECEMBER 31, 1995
AND THE SIX MONTHS ENDED JUNE 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
Accumulated Accumulated
Common Stock Additional Stock Deficit Deficit Total
------------------ Paid-in Subscriptions as an S as a C Treasury Stockholders'
Shares Par Value Capital Receivable Corporation Corporation Stock Equity (Deficit)
------ --------- ------- ---------- ----------- ----------- ----- ----------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31,
1994 3,507,231 $350 $1,163,274 $ (191) $ -- $ (2,563,185) $ -- $(1,399,752)
Payment of stock
subscriptions........... -- -- -- 191 -- -- -- 191
Repurchase of 255,880
shares of common stock
at par.................. -- -- -- -- -- -- (26) (26)
Sale of common stock,
net of expenses,
September 1995.......... 833,333 83 2,166,811 -- -- -- -- 2,166,894
Satisfaction of trade
receivable for 5,617
shares of common stock . -- -- -- -- -- -- (11,880) (11,880)
Exchange of short-term
debt for common stock,
December 1995........... 380,704 39 1,406,848 -- -- -- -- 1,406,887
Net loss................ -- -- -- -- -- (5,414,878) -- (5,414,878)
------- ------ --------- ------ ------ ----------- -------- ------------
Balance, December 31,
1995 4,721,268 472 4,736,933 -- -- (7,978,063) (11,906) (3,252,564)
Exchange of short-term
debt for common stock,
net of expenses
(unaudited)............. 221,195 22 571,167 -- -- -- -- 571,189
Sales of common stock,
net of expenses
(unaudited) ............ 304,016 31 896,481 (220,000) -- -- -- 676,512
------- ------ --------- ------ ------ ----------- -------- ------------
Exchange of trade
payables for common
stock (unaudited)....... 69,332 7 207,991 -- -- -- -- 207,998
------- ------ --------- ------ ------ ----------- -------- ------------
Net loss (unaudited) ... -- -- -- -- -- (2,058,157) -- (2,058,157)
------- ------ --------- ------ ------ ----------- -------- ------------
Balance, June 30, 1996
(unaudited) 5,315,811 $532 $6,412,572 $(220,000) $ -- $(10,036,220) $(11,906) $(3,855,022)
========= ==== ========== ========= ====== ============ ======== ===========
</TABLE>
See accompanying notes.
F-7
<PAGE>
MULTIMEDIA ACCESS CORPORATION AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
For the six months Cumulative
Year ended December 31, ended June 30, from
----------------------- -------------- Inception
(November 19,
1992)
1994 1995 1995 1996 to June 30, 1996
---- ---- ---- ---- ----------------
(Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C> <C> <C>
Operating activities:
Net loss..................................... $(2,717,421) $(5,414,878) $(2,420,653) $(2,058,157 $(10,838,586)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation of fixed assets................ 50,109 126,443 62,572 75,902 253,279
Amortization of software development........ 0 222,632 39,365 25,404 248,036
Amortization of patent...................... 30,251 90,677 15,113 -- 151,129
Loss on asset dispositions.................. -- 1,955 -- -- 1,955
Non-cash charges to interest expense........ -- 264,777 -- -- 264,777
Common stock issued in lieu of cash for
consulting services........................ 22,000 -- -- -- 22,000
Inventory reserve adjustment................ -- 220,000 -- -- 220,000
Write off of deferred charges............... -- 376,633 306,633 -- 376,633
Changes in operating assets and liabilities:
Accounts receivable........................ (19,120) 32,208 (17,845) (96,464) (100,837)
Inventory.................................. (365,103) (52,366) (19,766) (148,528) (565,997)
Prepaid expenses........................... (36,331) 17,360 (5,449) (20,380) (39,351)
Due from debt holder....................... -- (315,300) -- 315,300 --
Deferred charges........................... (458,887) 38,089 (158,721) (132,976) (553,774)
Deposits................................... (17,829) (368) 221 (75) (18,272)
Accounts payable........................... 336,723 147,537 404,263 449,369 1,029,529
Accrued compensation....................... (50,836) 100,513 205,232 (81,289) 272,979
Deferred revenue........................... 1,880 58,042 -- (59,922) 15,591
Other accrued liabilities.................. 200,461 219,696 83,091 332,566 825,775
------- ------- ------ ------- -------
Net cash used in operating activities..... (3,024,103) (3,866,350) (1,505,944) (1,399,250) (8,435,134)
---------- ---------- ---------- ---------- ----------
Investing activities:
Purchase of property and equipment........... (532,871) (108,143) (5,544) (85,901) (739,502)
Software development costs................... (210,256) (156,171) (196,192) -- (366,427)
Purchase of patent........................... -- -- -- -- (151,129)
Other........................................ -- 28,076 15,583 -- 28,076
------- ------ ------ ------- ------
Net cash used in investing activities..... (743,127) (236,238) (186,153) (85,901) (1,228,982)
-------- -------- -------- ------- ----------
Financing activities:
Net proceeds from issuance (repayment) of
short-term debt............................. (100,000) 1,096,000 819,325 835,000 2,056,000
Net proceeds from issuance (repayment) of
short-term debt- officer.................... (87,000) 345,000 349,000 -- 345,000
Other........................................ (1,210) (8,270) (4,038) (4,436) (13,916)
Proceeds from issuance of long-term debt..... 2,040,300 500,115 500,115 -- 2,540,415
Proceeds from exercise of stock options and
warrants.................................... 26,268 -- -- -- 26,406
Purchase of treasury stock................... -- (11,906) (26) -- (11,906)
Net proceeds from sale of common stock....... 1,917,241 2,166,894 -- 692,054 4,776,189
--------- --------- ------- ---------
Net cash provided by financing activities. 3,795,599 4,087,833 1,664,376 1,522,618 9,718,188
--------- --------- --------- --------- ---------
Net increase (decrease) in cash and cash
equivalents.................................. 28,369 (14,755) (27,721) 37,467 54,072
Cash and cash equivalents, beginning of
period....................................... 2,991 31,360 31,360 16,605 --
----- ------ ------ ------
Cash and cash equivalents, end of period ..... $ 31,360 $ 16,605 $ 3,639 $ 54,072 $ 54,072
=========== =========== =========== =========== ===========
</TABLE>
See accompanying notes.
F-8
<PAGE>
MULTIMEDIA ACCESS CORPORATION AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(INFORMATION WITH RESPECT TO JUNE 30, 1996 AND THE SIX MONTH PERIODS
ENDED JUNE 30, 1995 AND 1996 IS UNAUDITED.)
1. THE COMPANY AND GOING CONCERN CONSIDERATIONS
The accompanying consolidated financial statements include the accounts of
MultiMedia Access Corporation (MMAC), and its wholly-owned subsidiaries,
Viewpoint Systems, Inc. (Viewpoint), VideoWare, Inc. (VideoWare) and Osprey
Technologies, Inc. (Osprey) (collectively, the Company). MMAC, Viewpoint,
VideoWare and Osprey were incorporated in Delaware in February 1994, November
1992, September 1994 and September 1995, respectively. The Company is a
development stage company engaged in developing and marketing advanced video
communications products that integrate video capabilities into existing desktop
computers, applications and networks. The Company markets its products directly
to end-users, through value-added resellers and computer system integrators,
primarily in the continental United States.
The Company's capital requirements in connection with the design, development
and commercialization of its products have been and will continue to be
significant. To date, the Company has been substantially dependent upon loans
from its principal stockholders, as well as private placements of its debt and
equity securities, to finance its working capital requirements. The Company is
dependent on the proceeds of this offering to commence full-scale marketing
activities in connection with its products, to complete the development of
additional product and software applications and to fund its working capital
requirements. In the event that the Company's plans change or prove to be
inaccurate or if the proceeds of this offering prove to be insufficient to fund
operations, the Company could be required to seek additional financing sooner
than currently anticipated or could be required to curtail or cease its
activities. The Company has no current arrangements with respect to, or sources
of, additional financing and there can be no assurance that existing
stockholders will provide any portion of the Company's future financing
requirements. There can be no assurance that any additional financing will be
available to the Company on acceptable terms, or at all.
Inasmuch as the Company intends to increase its level of activities following
consummation of this offering and will be required to make significant
expenditures in connection with marketing and product development activities,
the Company anticipates that losses will continue for the foreseeable future and
until such time as the Company is able to build an effective marketing and sales
organization, develop a network of independent resellers and achieve market
acceptance of its products.
There can be no assurance that the Company will be able to successfully
implement its marketing strategy, generate significant revenues or achieve
profitable operations.
The accompanying consolidated financial statements have been prepared
assuming that the Company will continue as a going concern. As reflected in the
accompanying consolidated financial statements, the Company incurred significant
losses of $2,717,421 and $5,414,878 during the years ended December 31, 1994 and
1995, respectively, and $2,058,157 during the six months ended June 30, 1996
(unaudited). These losses, in conjunction with the matters discussed above,
raise substantial doubt about the Company's ability to continue as a going
concern. The consolidated financial statements do not include any adjustments
which might be necessary should the Company be unable to continue as a going
concern.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
In May 1994 the Company acquired Viewpoint in a transaction accounted for as
a pooling of interests (see Note 3). The accompanying consolidated financial
statements include the financial position, results of operations and cash flows
of Viewpoint, as adjusted retroactively to give effect to the pooling of
interests. All material intercompany transactions have been eliminated. No
changes in accounting policies were adopted as a result of the pooling of
interests.
F-9
<PAGE>
MULTIMEDIA ACCESS CORPORATION AND SUBSIDIARIES
(A Development Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments purchased with an initial
maturity of three months or less to be cash equivalents.
INVENTORY
Inventory consists primarily of purchased electronic components and computer
system products, along with the related documentation manuals and packaging
materials. Inventory is carried at the lower of cost or market. Effective
January 1, 1995, the Company changed its method of costing inventory from the
first-in, first-out method to the standard cost method, which approximates
average cost. This change did not result in any material change in the valuation
of inventory.
PROPERTY AND EQUIPMENT
Property and equipment is recorded at cost. Depreciation is determined using
the straight-line method over the estimated useful lives, generally five years,
of the related assets. Leasehold improvements are amortized over the lives of
the related leases. Expenditures for repairs and maintenance are charged to
operations as incurred; renewals and betterments are capitalized.
SOFTWARE DEVELOPMENT COSTS
Costs of developing new software products and substantial enhancements to
existing software products are expensed as incurred until technological
feasibility has been established, after which time additional costs incurred are
capitalized in accordance with Statement of Financial Accounting Standards No.
86, "Accounting for the Costs of Computer Software to be Sold, Leased, or
Otherwise Marketed." Amortization of capitalized software development costs
begins when products are available for general release to customers, and is
computed using the straight-line method over a period not to exceed three years.
No amount was charged to amortization expense through December 31, 1994, and
$222,632 (including $155,597 to fully amortize remaining costs of the Viewpoint
product line) and $25,404 was charged to amortization expense during the year
ended December 31, 1995 and the six months ended June 30, 1996 (unaudited),
respectively.
PATENT
The Company holds a patent related to its proprietary technology and trade
secrets. The costs associated with obtaining and defending the patent are
amortized on the straight-line basis over its estimated remaining life, not to
exceed five years. During 1995, the Company fully amortized its patent. Total
accumulated amortization of patent costs was $60,452 at December 31, 1994.
REVENUE RECOGNITION
Revenue from the sale of video communication systems and licensing of the
related software is recognized upon shipment to customers. With pre-approval by
a return merchandise authorization, a customer may return undamaged product to
the Company, subject to a 30-day money back guarantee. The Company maintains an
accrued warranty reserve for products which are returned defective during the
warranty period.
NET LOSS PER SHARE
Net loss per share is computed based on the weighted average number of common
and common equivalent shares outstanding. The Company has computed common and
common equivalent shares in determining the number of shares used in calculating
earnings per share for all periods presented pur
F-10
<PAGE>
MULTIMEDIA ACCESS CORPORATION AND SUBSIDIARIES
(A Development Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
suant to the Securities and Exchange Commission Staff Accounting Bulletin (SAB)
No. 83. SAB No. 83 requires the Company to include all common shares and all
common share equivalents issued in the 12 month period preceding the filing date
of the initial public offering in its calculation of the number of shares used
to determine earnings per share as if the shares had been outstanding for all
periods presented. Options and warrants issued more than 12 months prior to the
initial public offering have been excluded since their effect is antidilutive.
Supplemental loss per share is $.95 for the year ended December 31, 1995 and
$.32 for the six months ended June 30, 1996 (unaudited) assuming (1) issuance of
the securities offered by the Company hereby, receipt by the Company of the net
proceeds thereof and use of the proceeds to repay $257,548 and $442,548
principal amount of secured and demand notes at December 31, 1995 and June 30,
1996 (unaudited), respectively, and to repay approximately $347,250 principal
amount of convertible debt and (2) weighted average common and common equivalent
shares of 5,652,147 and 6,285,235 for the year ended December 31, 1995 and the
six months ended June 30, 1996 (unaudited), respectively.
DEFERRED CHARGES AND OTHER ASSETS
Deferred charges at December 31, 1994 consisted of legal, accounting and
other expenses associated with the private placement of 8% promissory notes,
which were amortized using the straight-line method over the term of the notes.
During 1995, the Company incurred $333,106 of additional legal, accounting and
underwriting costs in connection with a private placement of common stock which
have been charged against the proceeds from the sale of the common stock. During
1995, the Company wrote off deferred charges consisting of legal, accounting,
underwriting and printing costs incurred in connection with a canceled initial
public offering of common stock which resulted in a charge against income of
$376,633. Deferred charges at June 30, 1996 consist of legal, accounting and
other expenses associated with the impending initial public offering.
During September 1995 the Company advanced a debt holder of the Company
$315,300 which was repaid in the first quarter of 1996.
CONCENTRATION OF CREDIT RISK
The Company invests its cash with financial institutions that include a Texas
commercial bank and a commercial brokerage firm. The brokerage firm maintains
accounts in several banks throughout the country and in government securities.
Cash balances at the Texas commercial bank are insured by the Federal Deposit
Insurance Corporation up to $100,000. The Company believes it has no significant
concentration of credit risk.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and accompanying notes.
Actual results could differ from those estimates.
INCOME TAXES
The Company utilizes the liability method of accounting for income taxes as
set forth in Statement of Financial Accounting Standards No. 109, "Accounting
for Income Taxes." Under this method, deferred tax assets and liabilities are
determined based upon the differences between the financial statement and tax
bases of assets and liabilities, as measured by the enacted tax rates expected
to be in effect when these differences reverse.
F-11
<PAGE>
MULTIMEDIA ACCESS CORPORATION AND SUBSIDIARIES
(A Development Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
FAIR VALUE OF FINANCIAL INSTRUMENTS
Management expects its pending initial public offering to result in the
conversion to common stock or settlement in cash of its outstanding short-term
and long-term debt. However, as a result of the uncertainties described in Note
1, management is unable to estimate the fair values at December 31, 1995 of its
short-term and long-term debt.
INTERIM FINANCIAL INFORMATION
The consolidated financial statements as of June 30, 1996 and for the six
months ended June 30, 1995 and 1996 are unaudited and include, in the opinion of
management, all adjustments, consisting of only normal recurring adjustments,
which the Company considers necessary to present fairly the financial position,
results of operations and cash flows of the Company for those interim periods.
The operating results for the six months ended June 30, 1996 are not necessarily
indicative of the results that may be expected for the full fiscal year.
3. ACQUISITION OF VIEWPOINT
In May 1994, the Company acquired Viewpoint in a transaction accounted for as
a pooling of interests. The Company acquired all of the outstanding common stock
and options to purchase common stock of Viewpoint in exchange for 812,440 shares
of common stock, resulting from the exercise of 194,180 options and 511,000
warrants exercised in 1993 and 107,261 warrants exercised in 1994, and 287,564
stock options to purchase the Company's common stock. This represents an
exchange ratio of .511 of the Company's common shares for each share of
Viewpoint. The options issued in exchange for the Viewpoint options have
exercise prices ranging from $.02 to $.20 a share and expire between September
2003 and May 2004.
A summary of the results of operations of MMAC and Viewpoint for the period
February 1994 through May 1994 and January 1994 through May 1994, respectively,
is as follows:
MMAC VIEWPOINT
---- ---------
Sales............... $ -- $ 16,077
========= ==========
Net loss ........... $(148,634) $ (154,236)
========= ==========
4. INVENTORY
Inventory consists of the following:
December 31,
------------ June 30,
1994 1995 1996
---- ---- ----
(Unaudited)
Purchased
materials.......... $ 229,019 $144,986 $ 304,105
Finished goods..... 136,084 52,483 41,892
------- ------ ------
$ 365,103 $197,469 $ 345,997
========= ======== ===========
Results of operations for 1995 reflect a charge of $220,000 for technological
obsolescence of component parts and finished goods associated with one of the
Company's early-developed product lines. Inventory at December 31, 1995 and June
30, 1996 (unaudited) is presented net of a $220,000 and $215,000 reserve,
respectively.
F-12
<PAGE>
MULTIMEDIA ACCESS CORPORATION AND SUBSIDIARIES
(A Development Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
5. PROPERTY AND EQUIPMENT
Property and equipment, at cost, consists of the following:
<TABLE>
<CAPTION>
December 31,
------------------- June 30,
1994 1995 1996
---- ---- ----
(Unaudited)
<S> <C> <C> <C>
Computer equipment............................. $ 432,275 $ 455,055 $ 496,127
Software....................................... 39,756 79,552 121,841
Leasehold improvements......................... 36,985 36,985 36,985
Office furniture and equipment................. 75,949 85,090 87,630
------ ------ ------
584,965 656,682 742,583
Less accumulated depreciation and amortization (50,934) (170,982) (2 46,884)
------- -------- -- ------
$ 534,031 $ 485,700 $ 495,699
========= ========= ===========
</TABLE>
6. SHORT-TERM DEBT
Short-term debt consists of the following:
<TABLE>
<CAPTION>
December 31,
--------------- June 30,
1994 1995 1996
---- ---- ----
(Unaudited)
<S> <C> <C> <C>
Officer:
Secured note payable to an officer and affiliate
of the Company, due on demand with interest at
15%. Collateralized by all assets of the
Company........................................ $ -- $364,154 $ 364,154
====== ======== =========
Other:
Secured note payable to an individual investor,
due on demand with interest at 15%.
Collateralized by all assets of the Company.... $ -- 22,548 22,548
Unsecured, non-interest bearing note payable to
one of the Company's underwriters ............. -- 35,000 220,000
Other........................................... 8,271 9,085 9,523
----- ----- -----
Total short-term debt, other ................... $ 8,271 $ 66,633 $ 252,071
------- -------- ---------
</TABLE>
Between February and May 1995, the Company issued $1,096,000 of 15% 90-day
secured notes to existing stockholders, an officer and director of the Company
and two individual investors. The secured notes were collateralized by all
assets of the Company. As an incentive to lend the secured debt to the Company,
an officer and director, and two former directors of the Company (all three
founders and significant stockholders of the Company), sold 202,750 of their
common shares to the lenders at par value. The excess of the fair market value
of the shares of $.50 per share as determined by independent appraisal sold to
the note holders over their purchase price, was charged to expense over the term
of the notes as additional interest expense.
During June and July 1995, $310,000 of 15% unsecured demand notes were issued
to existing stockholders, note holders and an officer and director of the
Company. As an incentive to lend the unsecured debt to the Company, the Company
issued 77,500 three-year warrants to purchase common stock at $1.00 per share to
the lenders. The fair market value of the warrants of $.50 as determined by
independent appraisal, was charged to interest expense over the term of the
notes.
F-13
<PAGE>
MULTIMEDIA ACCESS CORPORATION AND SUBSIDIARIES
(A Development Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
In December 1995, $791,000 of the secured notes and $250,000 of the unsecured
notes, along with accrued interest of $101,109, were exchanged for 380,704
shares of common stock plus 520,500 three-year warrants to purchase common stock
at $1.00 per share. As determined by independent appraisal, the fair market
value of the equity instruments exchanged equaled the carrying value of the debt
and accrued interest and, accordingly, no gain or loss was recorded.
Additionally, in December 1995, in connection with the exchange of secured
notes for demand notes, the Company issued 109,500 three-year warrants to
purchase common stock at $1.00 per share to the holders of the secured and
unsecured notes remaining outstanding. 103,500 of these warrants were issued to
the Company's Chief Executive Officer. Based on an independent appraisal, the
fair market value of these warrants of $.60 per share was charged to interest
expense.
In January and February 1996, the Company issued $650,000 of 10% 90-day
secured notes to an existing stockholder of the Company. As an incentive to
advance these notes, the stockholder was granted the right to receive 65,000
three-year warrants to purchase Company stock at $3.00 per share. Based on an
independent appraisal, the fair market value of these warrants of $.50 per share
was charged to interest expense over the term of the notes.
Interest paid was $11,377, $23,811 and $750 for the year ended December 31,
1994 and 1995 and the six months ended June 30, 1996 (unaudited), respectively.
7. LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
December 31,
------------------ June 30,
1994 1995 1996
---- ---- ----
(Unaudited)
<S> <C> <C> <C>
Convertible notes.............................. $2,067,300 $2,567,300 $ 2,567,300
Short-term notes converted to convertible
notes.......................................... 110,135 110,250 110,250
Other.......................................... 17,739 8,654 3,780
------ ----- -----
2,195,174 2,686,204 2,681,330
Less: current portion of convertible notes ... -- 2,677,550 2,677,550
--------- --------- ---------
$2,195,174 $ 8,654 $ 3,780
========== ========== ===========
</TABLE>
In September 1994 the Company began a private placement of convertible debt
(the Agreements) and through March 31, 1995, received $2,567,300. The unsecured
convertible promissory notes, which were sold in units of $10,000, bear interest
at 8% and mature between March 1996 and July 1996. As of December 31, 1995 and
June 30, 1996 all of the convertible notes are scheduled to mature within twelve
months and, therefore, have been classified as a current liability.
The Agreements allow convertible note holders, upon a proposed public
offering of the Company's equity securities with proceeds exceeding $2,000,000,
the right to convert their notes to registered equity securities of the Company
at the public offering price and receive 5,000 three-year warrants to purchase
the Company's common stock at $3.00 per share for each $10,000 unit.
Alternatively, the convertible note holders may elect to request repayment of
their notes from the proceeds of the proposed public offering and receive 3,334
three-year warrants to purchase the Company's common stock at $3.00 for each
$10,000 unit. In June of 1996, holders of $2,330,300 principal amount of the
convertible notes elected to convert into Common Stock and Public Warrants and
holders of $347,250 principal amount elected to be repaid from the proceeds of
this offering. In addition, by virtue of the aforementioned elections,
convertible notes in the amount of $2,067,300, which originally matured between
March and June of 1996, were extended to the closing date of the initial public
offering.
F-14
<PAGE>
MULTIMEDIA ACCESS CORPORATION AND SUBSIDIARIES
(A Development Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
Effective December 1994, certain short-term debt holders converted their
promissory notes including accrued interest to $110,250 of convertible notes.
8. INCOME TAXES
Prior to the pooling with the Company which was consummated in May 1994,
Viewpoint had elected to be treated as an S Corporation for federal income tax
purposes. As an S Corporation, the tax effect of Viewpoint's revenues and
expenses were attributed directly to its stockholders on a pass-through basis.
Accordingly, the accompanying consolidated financial statements do not reflect a
provision for income taxes for Viewpoint for any tax reporting period ended
prior to May 1994. Net operating losses and any tax credits generated by
Viewpoint while it was an S Corporation are not available to the Company to
offset taxable income, if any, generated after the change to C Corporation
status. Accordingly, accumulated deficits of $802,366 generated by Viewpoint as
an S Corporation from November 19, 1992 through May 10, 1994, have been
reclassified to additional paid-in capital. Viewpoint's S Corporation election
was terminated effective with the pooling of interests discussed in Note 3.
MMAC, VideoWare and Osprey have been classified as C Corporations since their
inception in February 1994, September 1994 and September 1995, respectively.
Accordingly, the Company has accounted for income taxes for these entities since
their respective dates of inception, and for Viewpoint since May 1994, in
accordance with Statement of Financial Accounting Standards (SFAS) No. 109,
"Accounting for Income Taxes." SFAS No. 109 requires a valuation allowance to be
recorded when it is "more likely than not that some portion or all of the
deferred tax assets will not be realized." In the opinion of management,
realization of the Company's net operating loss carryforward is not reasonably
assured, and a valuation allowance of $1,076,000, $2,966,000 and $3,803,000 has
been provided against deferred tax assets in excess of deferred tax liabilities
in the accompanying consolidated financial statements at December 31, 1994 and
1995 and June 30, 1996 (unaudited), respectively.
The components of the Company's net deferred taxes are as follows:
<TABLE>
<CAPTION>
December 31,
---------------------- June 30,
1994 1995 1996
---- ---- ----
(Unaudited)
<S> <C> <C> <C>
Deferred tax assets:
Net operating loss carryforward........................ $ 997,000 $ 2,860,000 $ 3,610,000
Excess of tax over financial statement basis of patent 13,000 45,000 42,000
Accruals deductible for tax purposes when paid......... 160,000 156,000 240,000
------- ------- -------
Total deferred tax assets ........................... 1,170,000 3,061,000 3,892,000
Less: valuation allowance............................... (1,076,000) (2,966,000) (3,803,000)
---------- ---------- ----------
94,000 95,000 89,000
Deferred tax liabilities:
Excess of financial statement over tax basis of
property and equipment................................ 16,000 42,000 45,000
Excess of financial statement over tax basis of
software development costs............................ 78,000 53,000 44,000
------ ------ ------
Total deferred tax liabilities....................... 94,000 95,000 89,000
------ ------ ------
Net deferred taxes...................................... $ -- $ -- $ --
=========== ========= ==========
</TABLE>
F-15
<PAGE>
MULTIMEDIA ACCESS CORPORATION AND SUBSIDIARIES
(A Development Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
A reconciliation between the federal income tax benefit calculated by
applying U.S. federal statutory rates to net loss and the absence of a tax
benefit reported in the accompanying consolidated financial statements is as
follows:
<TABLE>
<CAPTION>
December 31,
------------------- June 30,
1994 1995 1996
---- ---- ----
(Unaudited)
<S> <C> <C> <C>
U.S. federal statutory rate applied to pretax loss ... $(924,000) $(1,841,000) $ (700,000)
Accrued compensation and other accruals................ 33,000 2,500 (9,500)
Amortization of patent................................. 6,000 27,500 (2,000)
Depreciation of property and equipment................. (14,500) (27,000) (2,000)
Software development costs for financial reporting
purposes............................................... (71,500) (29,000) 8,500
Viewpoint 1994 S-Corporation loss...................... 48,000 -- --
Net operating loss carryforward not recognized for
financial reporting purposes........................... 918,000 1,714,000 690,000
Inventory and doubtful account reserves ............... -- 50,500 1,500
Non-deductible interest expenses....................... -- 90,000 12,000
Other.................................................. 5,000 12,500 1,500
----- ------ -----
$ -- $ -- $ --
======= ======== =========
</TABLE>
The Company has a federal income tax net operating loss carryforward of
approximately $7,730,000 at December 31, 1995. Approximately $2,700,000 of the
carryforward will expire in 2009 and $5,030,000 will expire in 2010. The Company
is subject to limitations existing under Internal Revenue Code Section 382
(Change of Control) relating to the availability of the operating loss
carryforward. Beginning with 1994, approximately $790,000 of the carryforward
that will expire in 2009 is limited to utilization at a rate of approximately
$300,000 per year.
9. STOCKHOLDERS' EQUITY (DEFICIT)
COMMON STOCK
In March 1994 the Company sold 996,364 shares of common stock at a price of
$2.20 per share in a private placement to certain qualified investors. Proceeds
to the Company were $1,917,241 net of related offering costs of $274,759. These
offering costs have been charged against additional paid-in capital in the
accompanying consolidated financial statements.
In September 1995, the Company began a second private placement of up to
2,666,667 shares of common stock to qualified investors. In September 1995, the
Company sold 833,333 shares to an existing stockholder at $3.00 per share.
Proceeds to the Company were $2,166,894 net of related offering costs of
$333,106. The offering costs have been charged against additional paid-in
capital. As described in Note 6, in December 1995 and March 1996, certain
secured and demand note holders of the Company exchanged $1,805,698 of notes and
accrued interest for 601,899 shares of common stock and 520,500 warrants in the
offering. In April through June of 1996, the Company sold 304,016 shares of the
offering to individual investors at $3.00 per share. Gross proceeds to the
Company were $692,054, including of $220,000 of stock subscriptions receivable
which were subsequently collected in July of 1996. Additionally, in May and June
of 1996, the Company converted approximately $208,000 of accounts payable into
69,332 shares of the offering at $3.00 per share.
F-16
<PAGE>
MULTIMEDIA ACCESS CORPORATION AND SUBSIDIARIES
(A Development Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
STOCK OPTION PLAN
In April 1995, the Company adopted its 1995 Stock Plan (1995 Stock Option
Plan) under which 2,000,000 shares of the Company's common stock are reserved
for issuance to officers, key employees and consultants of the Company. The
objectives of the stock plan are to attract and retain qualified personnel for
positions of substantial responsibility, and to provide additional incentives to
employees and consultants to promote the success of the Company's business.
Options granted under the plan may be incentive stock options or non-qualified
stock options. The plan is administered by the Board of Directors. The options
are granted at the discretion of the Board of Directors at an option price per
share not less than fair market value, as determined by the Board of Directors,
at the date of grant.
In April 1995, the Company also adopted the 1995 Director Option Plan under
which 250,000 shares of the Company's common stock are reserved for issuance to
outside directors of the Company. The objective of the director plan is to
attract and retain qualified personnel for service as outside directors of the
Company, and to encourage their continued service to the Board. Only
non-qualified stock options may be granted. Grants under the plan are automatic
and nondiscretionary, and are issued at an option price per share not less than
fair market value, as determined the Board of Directors, at the date of grant.
In February 1994 the Company adopted its 1994 Stock Option Plan under which
2,000,000 shares of the Company's common stock were reserved for issuance to
officers, key employees, non-employee directors and consultants of the Company,
pursuant to incentive and non-qualified stock options. Upon the adoption of the
1995 Stock Option Plan, the 1994 Stock Option Plan was terminated as to any
future issuance of options.
Upon the consummation of the pooling of interests between Viewpoint and MMAC
in May 1994, all outstanding stock options of Viewpoint were converted to stock
options of the Company at the pooling exchange ratio of .511 of the Company's
common shares for each share of Viewpoint. The following is a summary of stock
option activity from December 31, 1993 through June 30, 1996. All stock options
issued by Viewpoint have been restated to give effect to the pooling of
interests transaction described in Note 3.
<TABLE>
<CAPTION>
Non-qualified Stock Options Incentive Stock Options
--------------------------- ------------------------
Number Price Per Number Price Per
of Shares Share of Shares Share
--------- ----- --------- -----
<S> <C> <C> <C> <C> <C>
Outstanding at December 31, 1993 ... 58,293 $ .20 332,917 $ .02-.04
Granted............................. 510,000 .10-3.00 1,127,158 2.20-3.00
Exercised........................... 256 .20 178,171 .02
Canceled............................ -- -- 224,405 .02-2.42
------- --------- ------- --------
Outstanding at December 31, 1994 ... 568,037 .10-3.00 1,057,499 .04-3.00
Granted............................. 143,458 3.00 549,800 3.00
Exercised .......................... -- -- -- --
Canceled ........................... 160,588 2.20-3.00 346,432 2.20-3.00
------- --------- ------- ---------
Outstanding at December 31, 1995 .. 550,907 .10-3.00 1,260,867 .04-3.00
Granted (unaudited)................. -- 639,400 3.00-3.30
Exercised (unaudited) .............. -- --
Canceled (unaudited)................ 35,833 3.00 315,267 2.20-3.00
------ ---- ------- ---------
Outstanding at June 30, 1996
(unaudited) ........................ 515,074 $.10-3.00 1,585,000 $.04-3.30
======= ========= ========= =========
</TABLE>
F-17
<PAGE>
MULTIMEDIA ACCESS CORPORATION AND SUBSIDIARIES
(A Development Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
At December 31, 1995, 176,820 non-qualified stock options at prices ranging
from $.20 to $3.00 and 390,256 incentive stock options at prices ranging from
$.04 to $3.00 were exercisable.
WARRANTS
The Company has issued warrants to purchase common stock of the Company in
connection with certain notes payable (as described in Note 6) and as
compensation for services rendered by various consultants, and a financial
consulting firm controlled by an officer, director, and stockholder of the
Company. All warrants issued prior to 1995 have been exercised with the
exception of the rights available to convertible debt holders as described in
Note 7. The following is a summary of warrant activity from December 31, 1993
through June 30, 1996. All warrants issued by Viewpoint have been restated to
reflect the pooling of interests transaction described in Note 3.
Warrants
-------------------------------
Number of Price Per
Shares Shares
------ ------
Outstanding at December 31, 1993 ............ 74,041 $ .02-.50
Granted...................................... 33,220 .20-.50
Exercised.................................... 107,261 .02-.50
-------
Outstanding at December 31, 1994 ............ --
Granted...................................... 1,147,500 1.00-3.00
Exercised.................................... -- --
Outstanding at December 31, 1995...... ...... 1,147,500 1.00-3.00
Granted (unaudited).......................... 70,005 3.00
Exercised (unaudited)........................ --
Outstanding at June 30, 1996 (unaudited)..... 1,217,505 $1.00-3.00
All warrants outstanding at December 31, 1995 were exercisable.
10. COMMITMENTS AND CONTINGENCIES
The Company leases office facilities under non-cancelable operating leases
extending through 1998 with an average monthly rental of $15,432. The landlords
pay all operating costs and real estate taxes associated with the office lease,
which is subject to cost escalation not to exceed 4% annually. The Company is
amortizing the total rent payments over the lease term on a straight-line basis.
Prior to September 1994, the Company leased office facilities under a
month-to-month operating lease with monthly payments ranging from $1,300 to
$2,500. The Company also leases certain office and computer equipment under
non-cancelable operating leases.
Operating
Leases
------
Year ended December 31:
1996.......................................... $210,169
1997.......................................... 165,030
1998.......................................... 14,842
------
Total minimum lease payments................... $390,041
========
Rent expense was $59,495 and $233,305 for the years ended December 31, 1994
and 1995, respectively, and $120,176 for the six months ended June 30, 1996
(unaudited).
F-18
<PAGE>
MULTIMEDIA ACCESS CORPORATION AND SUBSIDIARIES
(A Development Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
The Company has entered into an employment contract with its President and
Chief Executive Officer through February 1999 that provides for a minimum annual
salary and incentives based generally on the Company's performance. The total
compensation, including incentives, which was accrued and included in accrued
compensation in the accompanying consolidated financial statements was $120,428,
$112,929 and $109,179 at December 31, 1994 and 1995 and June 30, 1996
(unaudited), respectively.
11. RELATED PARTY TRANSACTIONS AND OTHER MATTERS
During 1994 the Company sold certain desktop videoconferencing equipment to a
company which has two directors who are former directors of the Company for
$58,260. Direct product costs associated with the sale aggregated $43,521.
In February 1994 the Company entered into two five-year consulting agreements
with two of its former directors, pursuant to which the Company agreed to pay
monthly consulting fees of $5,000 to each individual. In March 1995 one of these
consulting agreements was canceled with no further liability to the Company. The
Company paid $110,000 in such consulting fees for the year ended December 31,
1994 and $72,500 and $12,500 in consulting fees remained accrued at December 31,
1995 and June 30, 1996 (unaudited), respectively. Consulting fees charged to
expense with respect to the aforementioned agreements were $110,000, $72,500,
and $20,000 for the years ended December 31, 1994 and 1995 and the six months
ended June 30, 1996 (unaudited), respectively. In June of 1996, the Company
converted $80,000 of accounts payable owed on the remaining consulting agreement
into 26,666 shares of common stock at $3.00 per share. By mutual agreement,
effective May 1, 1996 consulting fees from the remaining consulting contract
were suspended until the effective date of the initial public offering.
In March 1994 the Company entered into a consulting agreement with a company
which is owned by the Chief Executive Officer of the Company. The retainer
portion of this agreement was terminated effective December 31, 1994. Consulting
fees of $35,000, $11,692 and $11,692 were accrued at December 31, 1994 and 1995
and June 30, 1996 (unaudited), respectively. Consulting fees charged to expense
during the year ended December 31, 1994 with respect to this agreement were
$35,000. No amounts were charged to expense during 1995 and $2,503 was charged
to expense during the six months ended June 30, 1996 (unaudited). Additionally,
$12,500 was paid by the Company in 1995 for services rendered during 1994. In
May of 1996, the Company issued 5,005 three-year warrants to purchase Company
stock at $3.00 per share as consideration for consulting services rendered
during 1996. The fair market value of the warrants of $.50 per share was
determined by independent appraisal.
From October 1994 through January 1995 the Company issued to four principal
stockholders, a principal stockholder and director of the Company and the spouse
of another principal stockholder and former director, convertible debt totaling
$1,905,000 under the terms described in Note 7. Upon completion of the initial
public offering, holders of $1,805,000 principal amount of this convertible debt
have elected to convert their debt into common stock of the Company at the
initial offering price per share and holders of $100,000 principal amount have
elected to be repaid from the proceeds of the offering.
From February through April 1995, the Company issued to five principal
stockholders of the Company secured notes totaling $1,070,000 under the terms
described in Note 6. During December 1995, $781,000 of these secured notes were
exchanged for equity securities of the Company under the terms described in Note
6.
During June and July 1995, the Company issued to three principal stockholders
of the Company demand notes totaling $310,000 under the terms described in Note
6. During December 1995, $250,000 of these secured notes were exchanged for
equity securities of the Company under the terms described in Note 6.
F-19
<PAGE>
MULTIMEDIA ACCESS CORPORATION AND SUBSIDIARIES
(A Development Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
In January and February 1996, the Company issued to a principal stockholder
of the Company, secured notes totaling $650,000 under the terms as described in
Note 6. During March 1996, these secured notes were exchanged for equity
securities of the Company under the terms described in Note 6.
12. SUBSEQUENT EVENTS
During July 1996, the Company issued $1,000,000 of secured convertible debt
to a principal stockholder of the Company. The convertible debt bears interest
at 8% and $500,000 of the convertible debt matures in 180 days and the balance
matures in 18 months. As an incentive to advance the debt, the stockholder was
issued 100,000 three-year warrants to purchase Company stock at $3.00 per share.
F-20
<PAGE>
================================================================================
No dealer, salesperson or any other person has been authorized to give any
information or to make any representations other than those contained in this
Prospectus, and, if given or made, such information or representations must not
be relied on as having been authorized by the Company or the Representative.
This Prospectus does not constitute an offer to sell or the solicitation of an
offer to buy any security other than the securities offered by this Prospectus,
or an offer to sell or a solicitation of an offer to buy any security by any
person in any jurisdiction in which such offer or solicitation would be
unlawful. Neither the delivery of this Prospectus nor any sale made hereunder
shall, under any circumstances, imply that the information in this Prospectus is
correct as of any time subsequent to the date of this Prospectus.
--------------------
TABLE OF CONTENTS
Page
----
Prospectus Summary ......................... 3
Risk Factors ............................... 8
Use of Proceeds ............................ 17
Dividends................................... 18
Dilution ................................... 19
Capitalization ............................. 21
Selected Consolidated Financial Data ...... 22
Management's Discussion and Analysis of
Financial Condition and Results of
Operations ................................. 23
Business ................................... 28
Management ................................. 36
Principal Stockholders ..................... 43
Certain Transactions ....................... 45
Description of Securities .................. 48
Shares Eligible for Future Sale ............ 51
Underwriting ............................... 52
Concurrent Registration of Securities ..... 55
Interest of Named Experts and Counsel ...... 55
Legal Matters .............................. 55
Experts .................................... 55
Additional Information ..................... 56
Glossary ................................... i
Index to Consolidated Financial Statements F-1
Until --, 1996 (25 days after the date of this Prospectus), all dealers
effecting transactions in the registered securities, whether or not
participating in this distribution, may be required to deliver a Prospectus.
This is in addition to the obligation of dealers to deliver a Prospectus when
acting as underwriters and with respect to their unsold allotments or
subscriptions.
================================================================================
<PAGE>
================================================================================
MULTIMEDIA ACCESS
CORPORATION
1,800,000 SHARES
OF COMMON STOCK AND
1,800,000 REDEEMABLE
COMMON STOCK
PURCHASE WARRANTS
---------------
PROSPECTUS
---------------
National Securities Corporation
Network 1 Financial Securities
, 1996
================================================================================
<PAGE>
[Alternate Page For Selling Securityholders Prospectus]
SUBJECT TO COMPLETION, DATED OCTOBER 4, 1996
PROSPECTUS
- ----------
[LOGO]
MULTIMEDIA ACCESS CORPORATION
-----------------------------
470,649 SHARES OF COMMON STOCK
470,649 REDEEMABLE COMMON STOCK PURCHASE WARRANTS
This Prospectus relates to the offer and sale by certain persons (the
"Selling Securityholders") of up to 470,649 shares of Common Stock, $.0001 par
value per share (the "Common Stock"), 470,649 redeemable common stock purchase
warrants to purchase one (1) share of Common Stock (the "Public Warrants") and
the 470,649 shares underlying the Public Warrants of Multimedia Access
Corporation (the "Company"), hereinafter referred to as the "Offering". The
shares offered hereby were issued in connection with a debt retirement and debt
for equity exchange. Each Public Warrant entitles the holder to purchase one (1)
share of Common Stock at $ per share (120% of the price offered to the public),
subject to adjustment under certain circumstances, at any time commencing one
year from the date of this Prospectus through and including five years from the
date of this Prospectus. The Public Warrants are redeemable by the Company, at
any time commencing eighteen (18) months from the date of this Prospectus, upon
notice of not less than thirty (30) days, at a price of $.10 per Public Warrant,
provided that the closing price or bid price of the Common Stock for any twenty
(20) trading days within a period of thirty (30) consecutive trading days ending
on the fifth (5th) day prior to the day on which the Company gives notice of
redemption has been at least 250% (currently $ , subject to adjustment) of the
then effective exercise price of the Public Warrants. The Company will not
receive any of the proceeds from the sale of such shares of Common Stock and
Public Warrants, and the shares of Common Stock underlying the Public Warrants.
To the extent the Public Warrants and Selling Securityholders Warrants are
exercised, the Company will receive proceeds represented by the exercise price
of such Warrants. See "Selling Securityholders and Plan of Distribution."
Prior to this Offering, there has been no public market for the Common Stock
or Public Warrants and there can be no assurance that any such market will
develop. It is anticipated that the Common Stock and the Public Warrants will be
quoted on the NASDAQ Small-Cap Market ("NASDAQ") under the symbols "MMAC" and
"MMACW" respectively. For a discussion of the factors considered in determining
the offering prices of the Common Stock and Public Warrants, see "Selling
Securityholders and Plan of Distribution."
Concurrently with this Offering, the Company is offering by separate
prospectus 1,800,000 shares of Common Stock (the "Company Offered Shares") and
redeemable warrants to purchase 1,800,000 shares of Common Stock (the "Company
Offered Public Warrants") (the "Company Offering"). See "Concurrent Registation
of Securities."
----------
THE SECURITIES OFFERED HEREBY ARE SPECULATIVE AND INVOLVE A HIGH DEGREE OF
RISK AND IMMEDIATE DILUTION AND SHOULD NOT BE PURCHASED BY INVESTORS
WHO CANNOT AFFORD THE LOSS OF THEIR ENTIRE INVESTMENT. SEE "RISK
FACTORS" AND "DILUTION."
----------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this Prospectus is October , 1996
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of securities in any
State in which such offer, solicitation or sale would be unlawful prior to
registration or qualification under the securities laws of any such State.
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[Alternate Page For Selling Securityholders Prospectus]
THE OFFERING
Securities Offered 470,649 shares of Common Stock, 470,649 Public
Warrants to purchase one (1) share of Common
Stock at $ (120% of price offered to the
public) and the 470,649 shares underlying the
Public Warrants. See "Risk Factors -- Warrants
Redeemable at Nominal Price" and "Description
of Securities."
Common Stock to be Outstand-
ing after the Offering(1) 7,324,963
Warrants to be Outstanding
after the Offering 4,944,054
Terms of the Public Warrants Each Public Warrant is exercisable at any time
commencing one year from the date of this
Prospectus and entitles the holder thereof to
purchase one share of Common Stock at a price
of $ per share (120% of the price offered to
the public), subject to adjustment in certain
circumstances, at any time until five years
after the date of this Prospectus. The Public
Warrants are redeemable by the Company, at any
time commencing eighteen months after the date
of this Prospectus, at a price of $.10 per
Public Warrant, upon not less than 30 days
prior written notice to the registered holders
of the Public Warrants, provided that the
closing price or bid price of the Common Stock
equals or exceeds 250% of the exercise price
(currently $ , subject to adjustment) of the
Public Warrants for any 20 trading days within
a period of 30 consecutive trading days ending
on the fifth day prior to the day on which the
Company gives notice of redemption. See
"Description of Securities -- Warrants."
Risk Factors The securities offered hereby are speculative
and involve a high degree of risk and immediate
substantial dilution and should not be
purchased by investors who cannot afford the
loss of their entire investment. See "Risk
Proposed Nasdaq Symbols Common Stock -- MMAC
Public Warrants -- MMACW
- ----------
(1) Includes 470,649 shares of Common Stock issued on the date of this
Prospectus upon the conversion of $2,330,300 principal amount of
Convertible Debt and approximately $305,362 of accrued interest at the
offering price of the Common Stock and Public Warrants (based on an
assumed offering price of $5.50 per share and $.10 per Public Warrant).
Does not include (i) 1,392,505 shares of Common Stock reserved for
issuance upon exercise of outstanding warrants to purchase common stock,
(ii) 180,000 shares of Common Stock reserved for issuance upon exercise
of the Representative's Warrants, (iii) 180,000 shares of Common Stock
reserved for issuance upon exercise of Representative's Public Warrants
issuable upon exercise of Representative's Warrants, (iv) 935,975 shares
of Common Stock reserved for issuance upon exercise of options available
for future grant under the 1995 Option Plan, (v) 1,064,025 shares of
Common Stock reserved for issuance upon exercise of options granted under
the 1995 Option Plan, (vi) 928,516 shares of Common Stock reserved for
issuance upon exercise of options granted under the 1994 Option Plan,
(vii) 103,549 shares of Common Stock reserved for issuance upon exercise
of options granted under the 1993 Option Plan, (viii) 25,000 shares of
Common Stock reserved for issuance upon exercise of options granted under
the 1995 Directors Stock Option Plan, (ix) 225,000 shares of Common Stock
reserved for issuance upon exercise of options available for future grant
under the 1995 Directors Stock Option Plan, (x) 250,000 shares of Common
Stock reserved for issuance under the Employee Stock Purchase Plan, (xi)
1,280,900 shares of Common Stock reserved for issuance upon exercise of
the Convertible Debt Warrants, (xii) 1,800,000 shares of Common Stock
reserved for issuance upon exercise of the Public Warrants, and (xiii)
470,649 shares of Common Stock reserved for issuance upon exercise of
Public Warrants issued on the date of this Prospectus upon conversion of
$2,330,300 principal amount of Convertible Debt and approximately
$305,362 of accrued interest at the offering price of Common Stock and
Public Warrants based on an assumed offering price of $5.50 per share and
$.10 per Public Warrant. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations," "Management -- Stock
Option Plans," "Description of Securities -- Convertible Debt Financing"
and "Selling Securityholders and Plan Distribution."
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[Alternate Page For Selling Securityholders Prospectus]
RISK FACTORS
The securities offered hereby are speculative and involve a high degree of
risk. Each prospective investor should carefully consider the following risk
factors inherent in and affecting the business of the Company and this offering
before making an investment decision.
Development Stage Company; Limited Operating History; Going Concern
Qualification in Independent Auditor's Report. The Company is a development
stage company and has commenced limited marketing of its products. Accordingly,
the Company has a limited operating history upon which an evaluation of its
prospects can be made. Such prospects must be considered in light of the risks,
expense, delays, problems and difficulties frequently encountered in the
establishment of a new business in an industry characterized by intense
competition, as well as risks encountered in the shift from development to
commercialization of new products based on innovative technologies. The
Company's prospects are dependent upon the successful commercialization of its
products. There can be no assurance that the Company will be able to implement
its business plan or that unanticipated expenses, problems or difficulties,
technical or otherwise, will not result in material delays in its
implementation. The Company's independent auditors have included a going concern
qualification in their audit report on the Company's consolidated financial
statements stating that such financial statements have been prepared assuming
that the Company will continue as a going concern and that, among other things,
the Company's financial condition and losses from operations since inception
raise substantial doubt about the ability of the Company to continue as a going
concern. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations," "Business" and Note 1 of "Notes to Consolidated
Financial Statements."
Limited Revenue; Significant Losses; Accumulated Deficit. Since inception,
the Company has generated limited revenue, including revenues of $127,531,
$285,354, and $676,719 and incurred significant losses, including losses of
$2,717,421, $5,414,878 and $2,058,157 for the years ended December 31, 1994 and
1995, and the six months ended June 30, 1996, respectively, and has continued to
incur significant additional losses to date. At June 30, 1996, the Company had
an accumulated deficit of $10,036,220. Inasmuch as the Company intends to
increase its level of activities following consummation of this offering and
will be required to make significant expenditures in connection with marketing
and product development activities, the Company anticipates that losses will
continue for the foreseeable future and until such time as the Company is able
to build an effective marketing and sales organization, develop a network of
independent resellers and achieve market acceptance of its products. In
addition, the Company's future performance will be subject to a number of
business factors beyond the Company's control, such as technological changes and
developments by others and unfavorable general economic conditions, including
downturns in the economy or a decline in the DVC or PC industries or in targeted
commercial markets, which would result in a reduction or deferral of capital
expenditures by prospective customers. There can be no assurance that the
Company will be able to successfully implement its marketing strategy, generate
significant revenues or achieve profitable operations. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
"Consolidated Financial Statements."
Significant Capital Requirements; Dependence on Offering Proceeds; Possible
Need for Additional Financing. The Company's capital requirements in connection
with the design, development and commercialization of its products have been and
will continue to be significant. To date, the Company has been substantially
dependent upon loans from its principal stockholders, as well as private
placements of its debt and equity securities, to finance its working capital
requirements. The Company is dependent on the proceeds of the Company Offering
to commence full-scale marketing activities in connection with its products, to
complete the development of additional product and software applications, and to
fund the Company's working capital requirements. The Company anticipates, based
on currently proposed plans and assumptions relating to its operations, that the
proceeds of the Company Offering will be sufficient to satisfy its contemplated
cash requirements for at least twelve months following the consummation of this
offering. In the event that the Company's plans change or prove to be inaccurate
or if the proceeds of this offering prove to be insufficient to fund operations,
the Company could be required to seek additional financing sooner than currently
anticipated or could be required to curtail its activities. The Company has no
current arrangements with respect to, or sources of, additional financing, and
there can be no assurance that existing stockholders will provide any portion of
the Company's future financing
8
<PAGE>
[Alternate Page For Selling Securityholders Prospectus]
requirements. There can be no assurance that any additional financing will be
available to the Company on acceptable terms, or at all. Additional equity
financing may involve substantial dilution to the interests of the Company's
then existing stockholders. See "Use of Proceeds" and "Certain Transactions."
Technological Factors; Uncertainty of Product Development and
Commercialization. The Company has only recently commenced limited
commercialization of its products for a limited number of users. Accordingly,
there can be no assurance that, upon widespread commercial use, if any, these
products will satisfactorily perform all of the functions for which they have
been designed or that they will operate satisfactorily. The Company intends to
use a portion of the proceeds of this offering in connection with product
refinement and enhancement and the development of additional products. Product
development, commercialization and continued system refinement and enhancement
efforts remain subject to all of the risks inherent in development of new
products based on innovative technologies, including unanticipated delays,
expenses and technical problems or difficulties, as well as the possible
insufficiency of funds to implement development efforts, which could result in
abandonment or substantial change in product commercialization. The Company's
success will be largely dependent upon its products meeting targeted cost and
performance objectives of large-scale production, the Company's ability to adapt
its products to satisfy industry standards and the timely introduction of its
products into the marketplace, among other things. There can be no assurance
that, upon wide-scale commercial introduction, the Company's products and
software applications will satisfy current price or performance objectives, that
unanticipated technical or other problems which would result in increased costs
or material delays in introduction and commercialization will not occur, or that
the Company's products will prove to be sufficiently reliable or durable under
actual operating conditions or otherwise be commercially viable. Software and
other technologies as complex as those incorporated into the Company's systems
may contain errors which become apparent subsequent to widespread commercial
use. Remedying such errors could delay the Company's plans and cause it to incur
additional costs, having a material adverse impact on the Company. See "Business
- -- Products" and "-- Marketing and Sales."
Concentration of Revenue; Dependence on Key Customers. A substantial portion
of the Company's sales are made to a small number of customers, generally on an
open account basis with no collateral required. There can be no assurance that
these customers will maintain their volume of business with the Company. A loss
of the Company's sales to these customers could have a material adverse effect
on the Company's results of operations unless other customers were found to
provide the Company with similar revenues. The Company performs ongoing credit
evaluation of its customers and maintains reserves for potential credit losses.
Although such losses in the aggregate have not exceeded management's
expectations, there can be no assurance that potential credit losses will not
exceed reserves in the future. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
Uncertainty of Market Acceptance. The DVC industry is characterized by
emerging and evolving markets and an increasing number of market entrants who
have introduced or are developing an array of new DVC systems. Each of these
entrants is seeking to establish its products as the preferred solution for
desktop video applications. As is typical in the case of emerging and evolving
markets, demand and market acceptance for newly introduced products and services
is subject to a high level of uncertainty. The Company has not yet commenced
significant marketing activities relating to product commercialization and
currently has limited marketing experience and limited financial, personnel and
other resources to undertake extensive marketing activities. The Company has not
conducted and does not intend to conduct formal market or concept feasibility
studies for its proposed products. The relatively high cost and less than
television broadcast quality video of DVC systems have, to date, limited the
market acceptance of DVC systems. Consequently, potential customers may elect to
utilize other products which they believe to be more efficient or have other
advantages over the Company's products, or may otherwise be reluctant to
purchase the Company's products. Achieving market acceptance for the Company's
products will require substantial marketing efforts and expenditure of
significant funds to create awareness and demand by potential consumers as to
the perceived benefits and distinctive characteristics of the Company's
products. There can be no assurance that the Company will have available funds
or other resources necessary to achieve such acceptance. See "Business --
Marketing and Sales."
Limited Marketing Capabilities and Experience; Dependence Upon Third-Party
Resellers. The Company has limited marketing experience and has conducted only
limited marketing activities. Although the Company expects to continue to market
directly to certain accounts, the Company intends to use a portion of the
9
<PAGE>
[Alternate Page For Selling Securityholders Prospectus]
In particular, the Company's compressed packet video Codec utilized in the
current version of the Viewpoint-PRO(Trademark) system does not meet the newly
proposed applicable standards and the Company will have to modify or redesign
the non-conforming portion of the product. The project to upgrade the
Viewpoint-PRO to the new industry standards will involve the development of a
new product based on a technology derivative of the Company's Osprey-1000 Codec.
The Company estimates that the project will take 8 man-months to complete at a
cost of approximately $70,000. The Company projects that the upgraded
Viewpoint-PRO will be available during 1997. The Research and Development
portion of the Use of Proceeds includes the cost of this project. See "Business
- -- Competition."
Dependence Upon Third-Party Manufacturers and Suppliers. The Company has, to
date, engaged small contract manufacturers to supply its products in limited
quantities pursuant to purchase orders. There can be no assurance that its
products can be manufactured reliably on a large-scale basis on commercially
reasonable terms, or at all. In addition, the Company has been and will continue
to be dependent on third parties for the supply and manufacture of all of its
component and electronic parts, including standard and custom-designed
components. The Company generally does not maintain supply agreements with such
third parties but instead purchases components and electronic parts pursuant to
purchase orders in the ordinary course of business. The Company is substantially
dependent on the ability of its third-party manufacturers and suppliers to,
among other things, meet the Company's design, performance and quality
specifications.
Failure by the Company's third-party manufacturers and suppliers to comply
with these and other requirements could have a material adverse effect on the
Company. There can be no assurance that the Company's third-party manufacturers
and suppliers will dedicate sufficient production capacity to meet the Company's
scheduled delivery requirements or that the Company's suppliers or manufacturers
will have sufficient production capacity to satisfy the Company's requirements
during any period of sustained demand. Moreover, the electronics industry from
time to time experiences short supplies of certain high demand components, which
may adversely affect the Company's ability to meet its production schedules.
Furthermore, although the Company owns the designs and dies for its custom
designed components and believes that alternative sources of supply are
available, the Company currently purchases all of its specially designed
components and certain high demand components from sole source suppliers.
Failure of manufacturers or suppliers to supply, or delays in supplying, the
Company with systems or components, or allocations in the supply of certain high
demand components could materially adversely affect the Company's operations and
ability to meet its own delivery schedules on a timely and competitive basis.
See "Business -- Production and Supply."
Broad Discretion in Application of Proceeds. Approximately $3,104,600 (37.1%)
of the estimated net proceeds from the Company Offering has been allocated to
working capital and general corporate purposes. Accordingly, the Company will
have broad discretion as to the application of such proceeds. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations --
Liquidity" and "Description of Securities."
Proceeds to Repay Indebtedness; Benefit to Related Parties. The Company will
use a portion of the proceeds of the Company Offering to (i) repay $222,548
principal amount of Secured and Demand Notes, including $200,000 payable to
Glenn A. Norem, CEO of the Company or G. A. Norem I, LP, a partnership he
controls, plus accrued interest of approximately $2,229 on the Secured and
Demand Notes, (ii) repayment of $347,250 principal amount of Convertible Debt
plus accrued interest of approximately $87,295 (iii) payment of accrued expenses
and trade accounts payable of approximately $420,000 (iv) repayment of $500,000
principal amount of convertible Debt II plus accrued interest of approxmiately
$30,000 and (v) repayment of $500,000 principal amount of Bridge Debt plus
accrued interest of approximately $3,333. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Liquidity" and
"Description of Securities."
Patents, Trademarks and Proprietary Information. The Company holds a United
States patent covering certain fundamental aspects of the compressed packet
video Codec incorporated into the Viewpoint-PRO(Trademark) system. The Company
may apply for additional patents relating to other aspects of its products and
has applied for trademark registration for the Viewpoint-PRO(Trademark),
ViewCast(Trademark), Osprey-1000(Trademark), SLIC-Video(Trademark),
FamilyFone(Trademark), and WorkFone(Trademark) names, among others. There can be
no assurance as to the breadth or
11
<PAGE>
[Alternate Page For Selling Securityholders Prospectus]
portion of the proceeds of the Company Offering to purchase additional component
parts, which the Company believes may reduce the length of its production and
delivery cycle, there can be no assurance that such factors will not cause
significant fluctuations in operating results in the future. Additionally, the
Company anticipates that upon entering into agreements with resellers for
distribution of the Company's products, of which there can be no assurance, such
distributors may place initial stocking orders for systems, component parts and
software programs, which could also result in material fluctuations in the
Company's operating results. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and "Business -- Production and
Supply."
Limitations on Use of Net Operating Loss Carry Forwards. At December 31,
1995, the Company had substantial net operating loss carry forwards for federal
tax purposes available to offset future taxable income. Under Section 382 of the
Internal Revenue Code of 1986, as amended, utilization of prior net operating
loss carry forwards is limited after an ownership change, as defined in Section
382. There can be no assurance that the Company will not in the future be
subject to further significant limitations on the use of its net operating loss
carry forwards. In the event the Company achieves profitable operations, any
significant limitation on the utilization of net operating loss carry forwards
would have the effect of increasing the Company's tax liability and reducing net
income and available cash resources. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations -- Liquidity."
Government Regulation. The Company is subject to regulations relating to
electromagnetic radiation from its products, which impose compliance burdens on
the Company. In the event the Company redesigns or otherwise modifies its
products or completes the development of new products, it will be required to
comply with Federal Communications Commission regulations with respect to such
products prior to their commercialization. There can be no assurance that the
Company will be able to comply with such regulations. In addition, new
legislation and regulations, as well as revisions to existing laws and
regulations at the federal, state and local levels may be proposed in the future
affecting the video communications industries. Such proposals could affect the
Company's operations, result in material capital expenditures, affect the
marketability of its products and limit opportunities for the Company with
respect to modifications of its products or with respect to new or proposed
products or technologies. Expansion into foreign markets may also require the
Company to comply with additional regulatory requirements. The technology
contained in the Company's products may be subject such products to U.S. export
controls. There can be no assurance that such export controls, either in their
current form or as may be subsequently enacted, will not delay introduction of
new products or limit the Company's ability to distribute products outside of
the United States. Further, various countries may regulate the import of certain
technologies contained in the Company's products. Any such export or import
restrictions, new legislation or regulation or government enforcement of
existing regulations could have a material adverse effect on the Company's
business, operating results and/or financial condition. There can be no
assurance that the Company will be able to comply with additional applicable
laws and regulations without excessive cost or business interruption, if at all,
and failure to comply could have a material adverse effect on the Company. See
"Business -- Government Regulation."
Dependence on Key Personnel. The success of the Company will be largely
dependent on the personal efforts of Glenn A. Norem, its Chief Executive
Officer, and other key personnel. The Company entered into a five-year
employment agreement with Mr. Norem in February 1994. All other key personnel,
including Philip M. Colquhoun, President of the Company, William S. Leftwich,
Chief Financial Officer of the Company, David T. Stoner, Vice President of
Operations of the Company, Neal S. Page, Vice President and General Manager of
Osprey, A. David Boomstein, Vice President of Business Development of the
Company and Daniel W. Dodson, Vice President of Marketing of the Company, are
"at-will" employees by terms of their employment agreements. The employment of
each such key employee may therefore be terminated by the officer or the Company
at any time, for any reason or no reason. The loss of the services of Mr. Norem
or certain other key employees could have a material adverse effect on the
Company's business and prospects. The Company plans to obtain "key-man" life
insurance on the life of Mr. Norem in the amount of $1,000,000. The success of
the Company is also dependent upon its ability to hire and retain qualified
operational, financial, technical, marketing, sales and other personnel. There
can be no assurance that the Company will be able to hire or retain such
necessary personnel. See "Business -- Employees" and "Management."
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Control by Current Principal Stockholders. Upon the consummation of this
offering, the officers, directors and existing stockholders of the Company will
beneficially own approximately 75.4% of the Company's outstanding Common Stock
(72.8% if the Representatives' over-allotment option is exercised in full).
While these persons will not individually control a majority of the shares of
Common Stock of the Company, they may be able to effectively control the
decisions on matters including election of all of the Company's directors,
increasing the authorized capital stock, dissolution, merger or sale of the
assets of the Company and generally may be able to direct the affairs of the
Company. See "Management," "Principal Stockholders" and "Certain Transactions."
Significant Outstanding Options and Warrants. As of June 30, 1996 there were
outstanding stock options to purchase an aggregate of approximately 2,100,074
shares of Common Stock at exercise prices ranging from $.04 to $3.30 per share
and warrants to purchase an aggregate of approximately 1,217,500 shares of
Common Stock at prices ranging from $1.00 to $3.00 per share. To the extent that
outstanding options and warrants are exercised, dilution to the Company's
stockholders will occur. Moreover, the terms upon which the Company will be able
to obtain additional equity capital may be adversely affected because the
holders of outstanding options and warrants can be expected to exercise them at
a time when the Company would, in all likelihood, be able to obtain any needed
capital on terms more favorable to the Company than the exercise terms provided
by such outstanding securities. See "Management -- Employee Stock Plans" and
"Certain Transactions."
Immediate and Substantial Dilution. Assuming all 1,800,000 shares of Common
Stock offered in the Company Offering are sold at an assumed initial public
offering price of $5.50 per share and $0.10 per Public Warrant, this offering
will involve an immediate and substantial dilution of $4.52 (82.2%) per share
between the pro forma net tangible book value per share of Common Stock and the
offering price. The Company believes that the net proceeds of the Company
Offering together with available cash will be sufficient to meet the Company's
operating expenses and capital requirements for at least the next twelve months.
The Company anticipates that additional funding will be required after the use
of the net proceeds of the Company Offering. Such additional funding will likely
result in further dilution to the Company's stockholders. See "Dilution."
No Dividends. The Company has not paid any cash dividends on its Common Stock
and does not expect to declare or pay any cash dividends in the foreseeable
future. Certain of the Company's debt instruments include covenants precluding
the payment of cash dividends until after such debt instruments are repaid. See
"Dividends."
Authorization and Discretionary Issuance of Preferred Stock. The Company's
Certificate of Incorporation authorizes the issuance of "blank check" preferred
stock with such designations, rights and preferences as may be determined from
time to time by the Board of Directors. Accordingly, the Board of Directors is
empowered, without stockholder approval, to issue preferred stock with dividend,
liquidation, conversion, voting or other rights which could adversely affect the
voting power or other rights of the holders of the Company's Common Stock. In
the event of issuance, the preferred stock could be utilized, under certain
circumstances, as a method of discouraging, delaying or preventing a change in
control of the Company. Although the Company has no present intention to issue
any shares of its preferred stock, there can be no assurance that the Company
will not do so in the future. See "Description of Securities -- Preferred
Stock."
Limitation on Monetary Liability of Officers and Directors to Stockholders.
Section 145 of the General Corporation Law of the State of Delaware contains
provisions entitling directors and officers of the Company to indemnification
from judgments, fines, amounts paid in settlement and reasonable expenses,
including attorney's fees, as the result of an action or proceeding in which
they may be involved by reason of being or having been a director or officer of
the Company provided said officers or directors acted in good faith. Articles
Seven and Ten of the Company's Certificate of Incorporation contain provisions
indemnifying officers and directors of the Company to the fullest extent
permitted by Delaware law. These provisions provide, among other things, that a
director of the Company shall not be liable either to the Company or its
stockholders for monetary damages for breach of fiduciary duty as a director.
The Company has also entered into indemnification agreements with Messrs. Norem,
Leftwich,
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[Alternate Page For Selling Securityholders Prospectus]
Colquhoun, Stoner, Dodson, Boomstein, Page, Jobe, and Culp which provide for
indemnification to the fullest extent allowable under the laws of the State of
Delaware. These provisions may limit the ability of the Company's stockholders
to collect on any monetary liability owed to them by an officer or director of
the Company.
Arbitrary Determination of Offering Price. The initial public offering price
of the Common Stock and the exercise price and terms of the Public Warrants have
been determined arbitrarily by negotiations between the Company and the
Representatives. Factors considered in such negotiations, in addition to
prevailing market conditions, included the history and prospects for the
industry in which the Company competes, an assessment of the Company's
management, the prospects of the Company, its capital structure and certain
other factors deemed relevant. Therefore, the public offering price of the
Common Stock and the exercise price and terms of the Public Warrants do not
necessarily bear any relationship to established valuation criteria and may not
be indicative of prices that may prevail at any time or from time to time in the
public market for the Common Stock. See "Underwriting."
Shares Eligible for Future Sale; Registration Rights. Upon the consummation
of this offering, the Company will have 7,324,963 shares of Common Stock
outstanding (7,594,963 shares if the Representatives' over-allotment option is
exercised in full)(assuming no exercise of outstanding options and warrants). Of
these shares, the 1,800,000 shares sold in the Company Offering (2,070,000
shares if the Representatives' over-allotment option is exercised in full) and
the 470,649 shares of Common Stock being offered hereby will be freely
tradeable, subject to "lock-up" agreements (see "Shares Eligible for Future
Sale"), under the Securities Act, except for any shares purchased by an
"affiliate" of the Company (in general, a person who has a control relationship
with the Company), which shares will be subject to the resale limitations of
Rule 144 adopted under the Securities Act. The remaining 5,054,314 shares are
deemed to be "restricted securities," as that term is defined under Rule 144
promulgated under the Securities Act, in that such shares were issued and sold
by the Company in private transactions not involving a public offering and are
not currently part of an effective registration. Except for "lock-up"
agreements, such shares are eligible for sale under Rule 144, or will become so
eligible at various times through October 1996. In addition, the Company has
granted the Representatives demand and piggyback registration rights with
respect to the securities issuable upon exercise of the Representatives'
Warrants.
Under Rule 144, a stockholder who has beneficially owned Restricted Shares
for at least two (2) years (including persons who may be deemed to be
"affiliates" of the Company under Rule 144) may sell within any three (3) month
period a number of shares that does not exceed the greater of: a) one percent
(1%) of the then outstanding shares of a particular class of the Company's
Common Stock as reported on its 10-Q filing, or b) the average weekly volume on
NASDAQ during the four (4) calendar weeks preceding such sale and may only sell
such shares through unsolicited brokers' transactions. A stockholder who is not
deemed to have been an "affiliate" of the Company for at least ninety (90) days
and who has beneficially owned his shares for at least three (3) years would be
entitled to sell such shares under Rule 144 without regard to the volume
limitations described above.
There has been no public market for the securities of the Company. Sales of
substantial amounts of shares of the Company's Common Stock, pursuant to Rule
144 or otherwise, could adversely affect the market price of the Common Stock,
and consequently make it more difficult for the Company to sell equity
securities in the future at a time and price which the Company deems
appropriate. See "Shares Eligible for Future Sale," "Underwriting," and
"Concurrent Registration of Securities."
NASDAQ Maintenance Requirements; Possible Delisting of Securities from NASDAQ
System; Risks of Low-Priced Stocks. If the Company is unable to satisfy NASDAQ's
maintenance criteria in the future, its securities will be subject to being
delisted, and trading, if any, would thereafter be conducted in the
over-the-counter market in the so-called "pink sheets" or the "Electronic
Bulletin Board" of the National Association of Securities Dealers, Inc.
("NASD"). As a consequence of such delisting, an investor could find it more
difficult to dispose of, or to obtain accurate quotations as to the price of,
the Company's securities.
The Securities Enforcement and Penny Stock Reform Act of 1990 requires
additional disclosure relating to the market for penny stocks in connection with
trades in any stock defined as a penny stock.
15
<PAGE>
[Alternate Page For Selling Securityholders Prospectus]
The SEC has adopted regulations that generally define a penny stock to be any
equity security that has a market price of less than $5.00 per share, subject to
certain exceptions. Such exceptions include any equity security listed on NASDAQ
and any equity security issued by an issuer that has (i) net tangible assets of
at least $2,000,000, if such issuer has been in continuous operation for three
years, (ii) net tangible assets of at least $5,000,000, if such issuer has been
in continuous operation for less than three years, or (iii) average annual
revenue of at least $6,000,000 if such issuer has been in continuous operation
for less than three years. Unless an exception is available, the regulations
require the delivery, prior to any transaction involving a penny stock, of a
disclosure schedule explaining the penny stock market and the risks associated
therewith.
In addition, if the Company's securities are not quoted on NASDAQ, or the
Company does not have $2,000,000 in net tangible assets, trading in the Common
Stock would be covered by Rule 15g-9 promulgated under the Securities Exchange
Act of 1934, as amended, (the "Exchange Act") for non-NASDAQ and non-exchange
listed securities. Under such rule, broker/dealers who recommend such securities
to persons other than established customers and accredited investors must make a
special written suitability determination for the purchaser and receive the
purchaser's written agreement to a transaction prior to sale. Securities also
are exempt from this rule if the market price is at least $5.00 per share.
The Company's Common Stock, as of the date of this Prospectus, is not
technically within the definitional scope of a penny stock, and is expected to
be exempt from the definition of penny stock by operation of law because it will
be listed on NASDAQ. However, in the event that the Common Stock were
subsequently to become characterized as a penny stock, the market liquidity for
the Company's securities could be severely affected. In such an event, the
regulations on penny stocks could effectively limit the ability of
broker/dealers to sell the Company's securities and thus the ability of
purchasers of the Company's securities to sell their securities in the secondary
market.
Warrants Redeemable at Nominal Price. The Public Warrants are redeemable by
the Company at any time commencing eighteen months from the date of this
Prospectus, for $.10 per Public Warrant upon thirty (30) days prior written
notice, provided that the average closing price or bid price of the Common Stock
for any twenty (20) trading days within the thirty (30) consecutive trading days
ending on the fifth day prior to notice of redemption equals or exceeds $ (250%
of the then effective exercise price of the Public Warrants. Redemption of the
Public Warrants by the Company could force the holders to exercise the Public
Warrants and pay the exercise price at a time when it may be disadvantageous for
the holders to do so, to sell the Public Warrants at the then current market
price when they might otherwise wish to hold the Public Warrants, or to accept
the redemption price, which is likely to be substantially less than the market
value of the Public Warrants at the time of redemption. In the event of the
exercise of a substantial number of Public Warrants within a reasonably short
period of time after the right to exercise commences, the resulting increase in
the amount of Common Stock of the Company in the trading market could
substantially affect the market price of the Common Stock. See "Description of
Securities -- Warrants."
Legal Restrictions on Sales of Shares Underlying the Warrants. The Public
Warrants are not exercisable unless, at the time of the exercise, the Company
has a current prospectus covering the shares of Common Stock issuable upon
exercise of the Public Warrants, and such shares have been registered, qualified
or deemed to be exempt under the securities laws of the state of residence of
the exercising holder of the Public Warrants. Although the Company has agreed to
keep a registration statement covering the shares of Common Stock issuable upon
the exercise of the Public Warrants effective for the term of the Public
Warrants, if it fails to do so for any reason, the Public Warrants may be
deprived of value.
The Common Stock and Public Warrants are separately transferable immediately
upon issuance. Purchasers may buy Public Warrants in the aftermarket in, or may
move to, jurisdictions in which the shares underlying the Public Warrants are
not so registered or qualified during the period that the Public Warrants are
exercisable. In this event, the Company would be unable to issue shares to those
persons desiring to exercise their Public Warrants, and holders of Public
Warrants would have no choice but to attempt to sell the Public Warrants in a
jurisdiction where such sale is permissible or allow them to expire unexercised.
See "Description of Securities."
16
<PAGE>
[Alternate Page For Selling Securityholders Prospectus]
USE OF PROCEEDS
The Company will not receive any of the proceeds from the sale of the Shares
of Common Stock and Public Warrants by the Selling Securityholders. To the
extent that the Public Warrants are exercised, the Company will receive proceeds
represented by the exercise price of the Public Warrants. In addition, to the
extent that the Public Warrants are exercised, the Company will receive proceeds
represented by the exercise price of the Public Warrants. Any such proceeds will
be added to the Company's working capital. The net proceeds to the Company from
the sale of the 1,800,000 shares of Common Stock and 1,800,000 Public Warrants
offered pursuant to the Company Offering (based on an assumed offering price of
$5.50 per share of Common Stock and $.10 per Public Warrant) are estimated to be
approximately $8,369,600 ($9,685,040 if the over-allotment option granted to the
Underwriter of the Company Offering is exercised in full). The Company expects
to use such proceeds (assuming no exercise of the over-allotment option granted
to the Representatives of the Company Offering) as follows:
<TABLE>
<CAPTION>
APPROXIMATE
APPLICATION OF NET PROCEEDS DOLLAR AMOUNT % OF PROCEEDS
--------------------------- -------------- -------------
<S> <C> <C>
Repayment of outstanding accounts payable and
indebtedness(1)............................................. $2,105,000 25.2
Research and development(2) ................................ 1,960,000 23.4
Marketing and sales(3) ..................................... 1,200,000 14.3
Working capital and general corporate purposes(4) ......... 3,104,600 37.1
--------- ----
Total ................................................... $8,369,600 100.0
========== ======
- ----------
</TABLE>
(1) Represents (i) the repayment of $222,548 principal amount of Secured
Notes and Demand Notes plus accrued interest of approximately $2,229,
including $200,000 principal amount of Secured Notes and Demand Notes
payable to Glenn A. Norem, CEO of the Company or G.A. Norem I, LP, a
partnership he controls; (ii) repayment of $347,250 principal amount of
Convertible Debt plus accrued interest of $87,295, (iii) payment of
accrued expenses and trade accounts payable of approximately $420,000,
(iv) repayment of $500,000 principal amount of Convertible Debt II plus
accrued interest of approximately $20,000 and (v) repayment of $500,000
principal amount of Bridge Debt plus accrued interest of approximately
$3,333. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations -- Liquidity" and "Description of Securities."
(2) Includes amounts associated with continued refinement and enhancement of
the Company's products and amounts associated with the development of
additional products.
(3) Represents anticipated costs associated with marketing and sales
activities, including approximately $250,000 for the cost of print media,
participation in trade shows and direct mailings and approximately
$400,000 for the salaries of four additional marketing and sales
personnel and three additional customer support personnel.
(4) Includes amounts for the payment of salaries of executive officers
anticipated to be approximately $385,000 over the 12 months following
consummation of this offering. See "Management," "Certain Transactions"
and "Business -- Production and Supply."
In the event that the Company's plans change or its assumptions change or
prove to be inaccurate or if the proceeds of the Company Offering prove
insufficient to fund operations (due to unanticipated expenses or difficulties
or otherwise), the Company may find it necessary or advisable to reallocate some
of the proceeds within the above-described categories or to use portions thereof
for other purposes or may be required to seek additional financing or curtail
its operations. Future events, including changes in economic or industry
conditions or the Company's planned operations, may require the Company to use
proceeds allocated to working capital for marketing and sales or reallocate
proceeds among the various intended uses if it is determined at a later date
that an increase in such expenditures or reallocation of proceeds is necessary
or desirable. Any such determination would be based on, among other things,
whether and to what extent revenue from systems sales is sufficient to offset
operating expenses and the capital requirements associated with maintaining an
inventory of system components. Alternatively, the Company may use less of the
proceeds for marketing and sales in the event that such initial efforts prove
more successful than anticipated or the Company generates sufficient cash flow
from operations to otherwise fund such efforts.
17
<PAGE>
[Alternate Page For Selling Securityholders Prospectus]
The Company may, if and when the opportunity arises, use a portion of the
proceeds of the Company Offering allocated to working capital, together with the
issuance of debt or equity securities, to acquire rights to technology and/or
products or to acquire existing companies in businesses the Company believes are
compatible with its business. Any decision to make such an acquisition will be
based upon a variety of factors, including, among others, the purchase price and
other financial terms of the transaction, the business prospects and competitive
position of, and technology or products provided by, the acquisition candidate
and the extent to which any technology or business would enhance the Company's
prospects. Potential acquisition candidates may include companies with products
or technologies that are compatible with the Company's products, or that the
Company believes would provide the Company with additional distribution
channels. As of the date of this Prospectus, the Company has no agreements,
understandings or arrangements with respect to any such acquisition. There can
be no assurance that the Company will be able to successfully consummate any
acquisition or successfully integrate any acquired business into its operations.
Investors in this offering will not have an opportunity to evaluate the specific
merits or risks of any acquisition.
The Company believes that the net proceeds of the Company Offering together
with available cash will be sufficient to meet the Company's operating expenses
and capital requirements for at least the next twelve months. The Company
anticipates that additional funding will be required after the use of the net
proceeds of the offering. No assurance can be given that such additional
financing will be available when needed on terms acceptable to the Company, if
at all. See "Risk Factors -- Significant Capital Requirements; Dependence on
Offering Proceeds; Possible Need for Additional Financing."
Proceeds not immediately required for the purposes set forth above will be
invested in short-term, investment-grade, interest-bearing securities.
DIVIDENDS
The Company has never paid cash dividends on its Common Stock. The Board of
Directors does not anticipate paying cash dividends in the foreseeable future as
it intends to retain future earnings to finance the growth of the business. The
payment of future cash dividends will depend on such factors as earnings levels,
anticipated capital requirements, the operating and financial condition of the
Company and other factors deemed relevant by the Board of Directors.
Certain of the Company's debt instruments include covenants precluding
payment of cash dividends until after such debt instruments are repaid.
18
<PAGE>
[Alternate Page For Selling Securityholders Prospectus]
[This Page Intentionally Left Blank]
19
<PAGE>
[Alternate Page For Selling Securityholders Prospectus]
[This Page Intentionally Left Blank]
20
<PAGE>
[Alternate Page For Selling Securityholders Prospectus]
CAPITALIZATION
The following sets forth the capitalization of the Company as of June 30,
1996 (A) on an actual basis, (B) pro forma to reflect transactions occurring
after June 30, 1996 but before the date of this Prospectus consisting of 1)
receipt of stock subscription receivable of $220,000, 2) issuance of $1,000,000
aggregate principal amount of Convertible Debt II and (3) issuance of $500,000
aggregate principal amount of Bridge Debt and (C) pro forma as adjusted to
reflect the issuance and sale of shares of Common Stock and Public Warrants
offered pursuant to the Company Offering (based on an assumed offering price of
$5.50 per share and $.10 per Public Warrant); and the initial application of
estimated net proceeds therefrom.
<TABLE>
<CAPTION>
JUNE 30, 1996
--------------------------------------------
PRO FORMA
AS
ACTUAL PRO FORMA ADJUSTED(1)
-------------- -------------- --------------
<S> <C> <C> <C>
Short-term debt.......................................... $ 3,293,775 $ 4,293,775 $ 393,677
============== ============== ==============
Long-term debt........................................... $ 3,780 $ 503,780 $ 503,780
-------------- -------------- --------------
Stockholders' equity:
Preferred stock, $.0001 par value, 5,000,000 shares
authorized, none issued or outstanding.............. -- -- --
Common Stock, $.0001 par value, 20,000,000 shares
authorized; 5,315,811 shares issued (actual),
5,315,811 shares issued (pro forma) and 7,586,460
shares issued pro forma as adjusted)................ 532 532 759
Additional paid-in capital............................ 6,192,572 6,412,572 17,417,607
Accumulated deficit................................... (10,036,220) (10,036,220) (10,036,220)
Treasury stock, 261,497 shares, at cost............... (11,906) (11,906) (11,906)
-------------- -------------- --------------
Total stockholders' equity (deficit)..................... (3,855,022) (3,635,022) 7,370,240
-------------- -------------- --------------
Total capitalization..................................... $ (3,851,242) $ (3,131,242) $ 7,874,020
============== ============== ==============
</TABLE>
- ----------
(1) Includes 470,649 shares of Common Stock and 470,649 Public Warrants
issued on the date of this Prospectus upon the conversion of $2,330,300
principal amount of Convertible Debt and approximately $305,362 of
accrued interest (based on an assumed offering price of $5.50 per share
and $.10 per Public Warrant). Does not include (i) 1,392,505 shares of
Common Stock reserved for issuance upon exercise of outstanding warrants
to purchase common stock, (ii) 180,000 shares of Common Stock reserved
for issuance upon exercise of the Representative's Warrants, (iii)
180,000 shares of Common Stock reserved for issuance upon exercise of
Representative's Public Warrants issuable upon exercise of
Representatives' Warrants, (iv) 935,975 shares of Common Stock reserved
for issuance upon exercise of options available for future grant under
the 1995 Option Plan, (v) 1,064,025 shares of Common Stock reserved for
issuance upon exercise of options granted under the 1995 Option Plan,
(vi) 928,516 shares of Common Stock reserved for issuance upon exercise
of options granted under the 1994 Option Plan, (vii) 103,549 shares of
Common Stock reserved for issuance upon exercise of options granted under
the 1993 Option Plan, (viii) 25,000 shares of Common Stock reserved for
issuance upon exercise of options granted under the 1995 Directors Stock
Option Plan, (ix) 225,000 shares of Common Stock reserved for issuance
upon exercise of options available for future grant under the 1995
Directors Stock Option Plan, (x) 250,000 shares of Common Stock reserved
for issuance under the Employee Stock Purchase Plan, (xi) 1,280,900
shares of Common Stock reserved for issuance upon exercise of the
Convertible Debt Warrants, and (xii) 1,800,000 shares of Common Stock
reserved for issuance upon exercise of the Public Warrants. See
"Management's Discussion and Analysis of Financial Condition and Results
of Operations," "Management -- Employee Stock Plans," "Description of
Securities -- Convertible Debt Financing" and "Underwriting."
21
<PAGE>
[Alternate Page For Selling Securityholders Prospectus]
Selling, General and Administrative Expense. Selling, general and
administrative expense increased $502,012 to $2,297,497 for the year ended
December 31, 1995. This 28.0% increase over the prior year can be attributed to
increases in employees and consultants, higher occupancy costs and increased
business development, sales and marketing related expenses corresponding to the
introduction of the Viewpoint-PRO(Trademark), Viewpoint VBX(Trademark) and
Osprey-1000(Trademark) product lines in 1995. The Viewpoint VBX(Trademark) and
Osprey-1000(Trademark) products were still undergoing customer evaluation at the
end of 1995.
Research and Development Expense. The Company's research and development
expense increased $1,118,463 to $1,983,310 in 1995 primarily due the
establishment of the Company's North Carolina development office. Expenses
related to this office included salaries for newly hired engineers and support
staff and the cost of office facility and equipment. During 1995, this
development office was engaged in the development of the Osprey-1000(Trademark)
and SLIC-Video(Trademark) products introduced in late-1995 and mid-1995,
respectively.
Other Income (Expense). For the year ended December 31, 1995, other income
(expense) increased to ($843,292) for the year compared to ($39,897) for the
year ended December 31, 1994. This increase was primarily the result of an
approximate $766,402 increase in interest expense for 1995 over 1994, as a
result of additional borrowings pursuant to the Convertible Debt and borrowings
pursuant to the Secured Notes and Demand Notes. See "Certain Transactions."
LIQUIDITY
At June 30, 1996, the Company had a working capital deficit of $(4,483,604).
To date, the Company has been dependent upon loans from its principal
stockholders, as well as private placements of its debt and equity securities,
to finance its working capital requirements.
Net cash used in operating activities for the six months ended June 30, 1996
was $1,399,250. Increases in inventory and accounts payable were a result of an
increase in production levels to meet anticipated sales.
Cash used in investing activities for the six months ended June 30, 1996
consisted of $85,901 of capital expenditures. As of the date of this Prospectus,
the Company does not have any material commitments for capital expenditures.
Cash provided by financing activities for the six months ended June 30, 1996
was primarily a result of the receipt of the proceeds of the Secured Notes II in
January through February 1996 and the private placement of Common Stock during
the second quarter of 1996. At June 30, 1996, the Company had cash of $54,072
The Company currently has no plans or agreements to seek loan financing. The
Company may choose to seek additional financing to provide additional working
capital at sometime in the future. Such financing may include loans or lines of
credit and could include factoring agreements. However, the Company believes
that the proceeds of the initial public offering will be sufficient to meet its
capital requirements for the next twelve months.
The Company's independent auditors have included an explanatory paragraph in
their audit report on the Company's consolidated financial statements stating
that certain factors raise substantial doubt about the Company's ability to
continue as a going concern. The Company Offering is an integral part of the
Company's plan to continue as a going concern. In the event that the Company's
plans change or its assumptions change or prove to be inaccurate or if the
proceeds of the Company Offering prove to be insufficient to fund operations
(due to unanticipated expenses or difficulties or otherwise), the Company may be
required to seek additional financing sooner than currently anticipated. The
Company has no current arrangements with respect to, or sources of, additional
financing. There can be no assurance that existing stockholders will provide any
portion of the Company's future financing requirements. There can be no
assurance that any additional financing will be available to the Company on
acceptable terms, or at all. Additional equity financing may involve substantial
dilution to the Company's then existing stockholders.
24
<PAGE>
[Alternate Page For Selling Securityholders Prospectus]
PRINCIPAL STOCKHOLDERS
The following table sets forth information as of June 30, 1996 and as
adjusted to reflect the sale of Common Stock offered by the Company pursuant to
the Company Offering, based on information obtained from the persons named
below, with respect to the beneficial ownership of shares of Common Stock by (i)
each person or a group known by the Company to be the owner of more than 5% of
the outstanding shares of Common Stock, (ii) each director, (iii) each executive
officer named in the Summary Compensation Table under the caption "Management",
and (iv) all officers and directors as a group.
<TABLE>
<CAPTION>
AMOUNT AND PERCENTAGE OF OUTSTANDING
NATURE OF SHARES OWNED(2)(3)
NAME AND ADDRESS BENEFICIAL PRIOR TO
OF BENEFICIAL OWNER(1) OWNERSHIP(2) OFFERING AFTER OFFERING
------------------------ -------------- -------- --------------
<S> <C> <C> <C>
Fred Kassner ................... 1,369,831(4) 15.3 12.8
69 Spring Street
Ramsey, NJ 07446
Robert Moody, Jr. .............. 1,067,736(5) 12.0 9.9
601 Moody National Bank Bldg.
Galveston, TX 77550 ...........
H.T. Ardinger, Jr. ............. 1,021,808(6) 11.4 9.5
9040 Governors Row
Dallas, TX 75247
Glenn A. Norem ................. 839,339(7) 9.4 7.8
M. Douglas Adkins............... 678,334(8) 7.6 6.3
1601 Elm Street, #3000
Dallas, TX 75201
Robert Sterling Trust .......... 498,726(9)(10) 5.6 4.6
c/o Thomas E. Brown
1715 West 35th Street
Pine Bluff, AR 71603
Robert Bernardi Trust........... 430,394(11) 4.8 4.0
c/o Richard Bernardi
440 Wood Crest Road
Stratford, PA 19087
William D. Jobe................. 50,387(12) * *
William S. Leftwich ............ 30,000(13) * *
Joe C. Culp .................... 11,111(14) * *
Philip M. Colquhoun............. -- (15) * *
David T. Stoner................. -- (16) * *
All officers and directors as a
group (nine persons)........... 1,015,971(7)(12)(13)(14)(15)(16)(17) 11.4 9.5
</TABLE>
Messrs. Sterling and Bernardi may be deemed to be "founders" of the Company,
as such term is defined under the federal securities laws.
- ----------
* Less than 1%
(1) Unless otherwise indicated, the address of each individual is c/o the
Company, 2665 Villa Creek Drive, Dallas, Texas 75234.
(2) A person is deemed to be the beneficial owner of securities that can be
acquired by such person within 60 days from the date of this Prospectus
upon the exercise of warrants or options. Each beneficial owner's
percentage ownership is determined by assuming that options or warrants
that are held by such person (but not those held by any other person) and
which are exercisable within 60 days from the date of this Prospectus
have been exercised. Unless otherwise indicated, the Company believes
that all persons named in the table have sole voting and investment power
with respect to all shares of Common Stock beneficially owned by them.
(3) Based on a total of (i) 5,054,314 shares issued and outstanding, (ii)
470,649 shares of Common Stock issued on the date of this Prospectus upon
the conversion of $2,330,300 principal amount of Convertible Debt and
approximately $305,362 accrued interest (based on an assumed offering
price of $5.50 per share and $.10 per Public Warrant), (iii) 1,392,505
shares of Common Stock reserved for issuance upon exercise of outstanding
warrants to purchase common stock, (iv) 1,280,900 shares
43
<PAGE>
[Alternate Page For Selling Securityholders Prospectus]
of Common Stock reserved for issuance upon exercise of the Convertible
Debt Warrants and (v) 739,455 shares of Common Stock reserved for
issuance upon exercise of vested stock options as of June 30, 1996. Does
not include (i) 180,000 shares of Common Stock reserved for issuance upon
exercise of the Underwriters' Warrants, and 180,000 shares of Common
Stock reserved for issuance upon exercise of Underwriters' Public
Warrants. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations," "Management -- Employee Stock
Plans," "Description of Securities" and "Underwriting."
(4) Includes (i) 30,303 shares issuable upon the conversion of Convertible
Debt to equity, (ii) 100,000 shares issuable at $3.00 per share upon
exercise of warrants issued in connection with the conversion of
Convertible Debt to equity, (iii) 65,000 shares issuable at $3.00 per
share upon exercise of warrants issued in connection with the conversion
of Secured Notes II to equity, (iv) 100,000 shares issuable at $3.00 per
share upon exercise of warrants issued in connection with the Convertible
Debt II.
(5) Includes (i) 250,000 shares beneficially owned by Moody Insurance Group,
Inc., of which Mr. Moody is Chairman, President and the sole stockholder,
(ii) warrants to purchase 200,000 shares at $1.00 per share issued in
connection with the exchange of a Secured Note for equity, (iii) 95,485
shares issuable upon the conversion of Convertible Debt and accrued
interest to equity, and (iv) warrants to purchase 275,000 shares at $3.00
per share issued in connection with the conversion of Convertible Debt to
equity.
(6) Includes (i) 54,501 shares owned by Mr. Ardinger's wife, (ii) warrants to
purchase 120,000 shares at $1.00 per share issued in connection with the
exchange of a Secured Note and a Demand Note for equity, held by either
Mr. Ardinger or his wife, (iii) warrants to purchase 375,000 shares at
$3.00 per share issued in connection with the conversion of Convertible
Debt to equity, (iv) 130,306 shares issuable upon the conversion of
Convertible Debt and accrued interest to equity, and (v) 37,500 shares
issuable at $1.00 per share granted for the issuance of a Demand Note.
(7) Includes (i) 51,100 shares issuable at $.04 per share upon the exercise
of options issued under the 1993 Option Plan, (ii) 86,666 shares issuable
at $2.42 per share upon exercise of options issued under the 1994 Option
Plan, (iii) 75,000 shares issuable at $1.00 per share upon exercise of
warrants granted for the exchange of a Secured Note for a Demand Note,
and (iv) 16,667 shares issuable at $3.00 per share upon exercise of
warrants issued for the repayment of Convertible Debt.
(8) Includes (i) 25,000 shares issuable at $1.00 per share upon the exercise
of warrants granted for the issuance of a Demand Note, (ii) 145,500
shares issuable at $1.00 per share upon the exercise of warrants in
connection with the exchange of a Secured Note for equity, (iii) 50,000
shares issuable at $1.00 per share upon exercise of warrants in
connection with the exchange of a Demand Note for equity, (iv) 52,963
shares issuable upon the conversion of Convertible Debt and accrued
interest to equity and (v) 152,500 shares issuable at $3.00 per share
upon the exercise of warrants in connection with the conversion of
Convertible Debt to equity.
(9) Shares subject to the control of Thomas E. Brown, as voting trustee of
the Robert Sterling Trust. On January 24, 1995, Robert M. Sterling, Jr.
and Thomas E. Brown, as voting trustee, entered into a Voting Trust
Agreement covering all capital stock beneficially owned by Mr. Sterling
as of January 24, 1995 or subsequently acquired. The voting trustee is
entitled,in his discretion, to vote the shares deposited therewith and
also has exclusive investment control of said shares. The Voting Trust
Agreement is irrevocable and expires on January 20, 1998. Mr. Sterling is
the sole beneficiary of the Voting Trust Agreement.
(10)Includes (i) 51,666 shares issuable at $2.20 per share upon exercise of
options issued under the 1994 Option Plan and (ii) 16,667 shares issuable
at $3.00 per share for the exercise of warrants in connection with the
repayment of Convertible Debt.
(11)Shares subject to the control of Richard Bernardi, as voting trustee of
the Robert Bernardi Trust. On January 20, 1995, Robert P. Bernardi and
Richard Bernardi, as voting trustee, entered into a Voting Trust
Agreement covering all capital stock beneficially owned by Mr. Bernardi
as of January 20, 1995 or subsequently acquired. The voting trustee is
entitled,in his discretion, to vote the shares deposited therewith and
also has exclusive investment control of said shares. The Voting Trust
Agreement is irrevocable and expires on January 20, 1998. Mr. Bernardi is
the sole beneficiary of the Voting Trust Agreement.
(12)Includes (i) 34,166 shares issuable at $3.00 per share upon the exercise
of options granted under the 1994 Option Plan and (ii) 11,111 shares
issuable at $3.00 per share upon exercise of options granted under the
1995 Option Plan, and (iii) 5,110 shares issuable at $.20 per share upon
exercise of options granted under the 1993 Plan.
(13)Includes 30,000 shares issuable at $3.00 per share upon the exercise of
options issued under the 1994 Option Plan.
(14)Includes 11,111 shares issuable at $3.00 per share upon exercise of
options granted under the 1995 Option Plan.
(15)None of the 250,000 options to purchase Common Stock of the Company at
$3.00 per share have vested as of the date of this Prospectus.
(16)None of the 100,000 options to purchase Common Stock of the Company at
$4.00 per share have vested as of the date of this Prospectus.
(17)Includes 67,990 and 17,144 shares issuable at $3.00 per share to Mr.
Page and Mr. Boomstein, respectively, upon exercise of options granted
under the 1994 Option Plan.
44
<PAGE>
[Alternate Page For Selling Securityholders Prospectus]
SHARES ELIGIBLE FOR FUTURE SALE
Upon the consummation of the Company Offering, the Company will have
7,324,963 shares of Common Stock outstanding (7,594,963 shares if the
Representatives' over-allotment option is exercised in full)(assuming no
exercise of outstanding options and warrants). Of these shares, the 1,800,000
shares sold in the Company Offering (2,070,000 shares if the Representatives'
over-allotment option is exercised in full) and the 470,649 shares of Common
Stock registered concurrently with this Prospectus (the "Selling Securityholders
Shares") offered hereby will be freely tradeable subject to "lock-up" agreements
described below under the Securities Act, except for any shares purchased by an
"affiliate" of the Company (in general, a person who has a control relationship
with the Company), which shares will be subject to the resale limitations of
Rule 144 adopted under the Securities Act. The remaining 5,054,314 shares are
deemed to be "restricted securities," as that term is defined under Rule 144
promulgated under the Securities Act, in that such shares were issued and sold
by the Company in private transactions not involving a public offering and are
not currently part of an effective registration. Except for the "lock-up"
agreement described below, such shares are eligible for sale under Rule 144, or
will become so eligible at various times through October 1996. In addition, the
Company has granted the Representatives demand and piggyback registration rights
with respect to the securities issuable upon exercise of the Representatives'
Warrants. No prediction can be made as to the effect, if any, that sales of
shares of Common Stock or even the availability of such shares for sale will
have on the market prices prevailing from time to time. If the holders of the
shares eligible for registration so choose they could require the Company to
register all of said shares at any time.
In general, under Rule 144 as currently in effect, subject to the
satisfaction of certain other conditions, a person, including an affiliate of
the Company (or other persons whose shares are aggregated), who has owned
restricted shares of Common Stock beneficially for at least two years is
entitled to sell, within any three-month period, a number of shares that does
not exceed the greater of 1% of the total number of outstanding shares of the
same class or, if the Common Stock is quoted on NASDAQ, the average weekly
trading volume during the four calendar weeks preceding the sale. A person who
has not been an affiliate of the Company for at least the three months
immediately preceding the sale and who has beneficially owned shares of Common
Stock for at least three years is entitled to sell such shares under Rule 144
without regard to any of the limitations described above.
Except upon the consent of both Representatives during the first twelve (12)
months of the term of the lock-up period and thereafter upon the consent of one
of the Representatives, all executive officers, all directors and holders of
substantially all of the outstanding stock of the Company and substantally all
holders of any options, warrants or other securities convertible, exercisable or
exchangeable for shares of Common Stock have agreed not to, directly or
indirectly, issue, offer, agree or offer to sell, sell, transfer, assign,
encumber, grant an option for the purchase or sale of, pledge, hypothecate or
otherwise dispose of any beneficial interest in such securities for a period of
twenty-four (24) months following the effective date of the Registration
Statement. Holders of of the "restricted securities" have not agreed not to sell
such shares, all of which will be eligible for sale under, and subject to, Rule
144 within three months following the date of this Prospectus. For a period of
two years from the date of this Prospectus, the Company has also agreed not to
file any registration statement relating to the offering or sale of the
Company's securities (not including any registration statement on Form S-8)
without the consent of the Representatives.
Prior to this offering, there has been no market for the Common Stock and no
prediction can be made as to the effect, if any, that market sales of shares of
Common Stock or the availability of such shares for sale will have on the market
prices prevailing from time to time. Nevertheless, the possibility that
substantial amounts of Common Stock may be sold in the public market may
adversely affect prevailing market prices for the Common Stock and could impair
the Company's ability to raise capital through the sale of its equity
securities.
51
<PAGE>
[Alternate Page For Selling Securityholders Prospectus]
SELLING SECURITYHOLDERS AND PLAN OF DISTRIBUTION
An aggregate of up to 470,649 shares of Common Stock, 470,649 Public Warrants
and 470,649 shares of Common Stock issuable upon the exercise of Public Warrants
may be offered and sold pursuant to this Prospectus by the Selling
Securityholders from time to time as market conditions permit in the
over-the-counter market, or otherwise, at prices and terms then prevailing or at
prices related to the then current market price, or in negotiated transactions
subject to "lock-up" agreements (See "Shares Eligible for Future Sale"). The
Company has agreed to register such shares and warrants under the Securities Act
and to pay all expenses in connection therewith (other than brokerage
commissions and fees and expenses of counsel). Such shares and warrants have
been included in the Registration Statement of which this Prospectus forms a
part. Other than H.T. Ardinger, M. Douglas Adkins, Robert Moody, Jr., and Fred
Kassner, none of the Selling Securityholders beneficially owns 5% or more of the
Company's outstanding Common Stock. See "Principal Stockholders."
<TABLE>
<CAPTION>
Beneficial
Beneficial Ownership of Shares Beneficial Ownership of
of Common Stock Prior to Sale Ownership of Warrants
Public Shares of --------------------
Warrant Warrants Common Stock Prior to After
Selling Securityholder Shares Shares Shares Total after Sale(1) Sale Sale
- ---------------------- ------ ------ ------ ----- ------------- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Robert Gillings ...... 55,171 597,650 55,171 707,992 0 652,821 597,650
A. Starke Taylor, Jr . 92,017 25,000 8,684 125,701 83,333 33,684 25,000
H.T. Ardinger, Jr .... 489,308 532,500 130,306 1,152,114 359,002 662,806 332,883
M. Douglas Adkins .... 305,334 373,000 52,963 731,297 497,251 425,963 373,000
Robert Moody, Jr ..... 592,736 475,000 95,485 1,163,221 252,371 570,485 475,000
Fred Kassner(2) ...... 1,256,346 365,000 181,818 1,803,164 1,074,528 546,818 365,000
Henry Wendt .......... 1,742 5,000 1,742 8,484 0 6,742 5,000
William Heim ......... 17,107 50,000 17,107 84,214 0 67,107 50,000
Joseph W. Geary ...... 49,908 25,000 7,575 82,483 2,333 32,575 25,000
William Wells ........ 16,750 0 16,750 0 0 0 0
</TABLE>
(1) Assumes all of the Selling Securityholders' shares of Common Stock
offered hereby are sold and no additional shares are acquired.
The shares, warrants, and shares underlying such warrants may be sold by one
or more of the following methods: (a) a block trade in which a broker or dealer
so engaged will attempt to sell the shares and/or warrants as agent but may
position and resell a portion of the block as principal to facilitate the
transaction; (b) purchases by a broker or dealer as principal and resale by such
broker or dealer for its account pursuant to this Prospectus; and (c)
face-to-face transactions between sellers and purchasers without a
broker/dealer. In effecting sales, brokers or dealers engaged by the Selling
Securityholders may arrange for other brokers or dealers to participate. Such
brokers or dealers may receive commissions or discounts from Selling
Securityholders in amounts to be negotiated. Such brokers and dealers and any
other participating brokers and dealers may be deemed to be "Underwriters"
within the meaning of the Securities Act in connection with such sales.
52
<PAGE>
[Alternate Page For Selling Securityholders Prospectus]
[THIS PAGE INTENTIONALLY LEFT BLANK]
53
<PAGE>
[Alternate Page For Selling Securityholders Prospectus]
[THIS PAGE INTENTIONALLY LEFT BLANK]
54
<PAGE>
[Alternate Page For Selling Securityholders Prospectus]
CONCURRENT REGISTRATION OF SECURITIES
Concurrently with this offering, 1,800,000 shares of Common Stock (the
"Common Stock") and 1,800,000 Public Warrants have been registered by the
Company under the Securities Act of 1933, as amended (the "Securities Act"),
pursuant to the Company Prospectus included within the Registration Statement of
which this Prospectus forms a part. The Common Stock and the Public Warrants may
not be sold prior to 24 months from the date of this Prospectus, in each case,
without the prior written consent of the Representatives.
INTEREST OF NAMED EXPERTS AND COUNSEL
John S. Stoppelman, a principal of The Stoppelman Law Firm, P.C., counsel to
the Company owns 42,666 shares of Common Stock of the Company, or less than one
percent (1.0%) of the shares outstanding before this offering.
LEGAL MATTERS
The legality of the securities offered hereby will be passed upon for the
Company by The Stoppelman Law Firm, P.C., McLean, Virginia. Orrick, Herrington &
Sutcliffe L.L.P., New York, NY has acted as special counsel to National in
connection with this offering. Gersten, Savage, Kaplowitz, & Curtin, L.L.P., New
York, NY has acted as counsel for the several underwriters in connection with
this offering.
EXPERTS
The consolidated financial statements of the Company and its subsidiaries
(companies in the development stage) at December 31, 1995 and for the year ended
December 31, 1995, appearing in this Prospectus and Registration Statement have
been audited by Ernst & Young LLP, independent auditors, as set forth in their
report thereon appearing elsewhere herein, and are included in reliance upon
such report given upon the authority of such firm as experts in accounting and
auditing.
The consolidated financial statements of the Company and its subsidiaries
(companies in the development stage) at December 31, 1994 and for the year ended
December 31, 1994, appearing in this Prospectus and Registration Statement have
been audited by Hoffman, Morrison & Fitzgerald, P.C. ("Hoffman"), independent
auditors, as set forth in their report thereon appearing elsewhere herein, and
are included in reliance upon such report given upon the authority of such firm
as experts in accounting and auditing.
The former independent auditor for the Company, Hoffman, Morrison &
Fitzgerald, P.C., was dismissed by the Company on November 3, 1995. Hoffman's
report on the financial statements for the fiscal year ended December 31, 1994
did not contain an adverse opinion or disclaimer of opinion, and, except for an
emphasis paragraph describing substantial doubt about the Company's ability to
continue as a going concern, was not modified as to uncertainty, audit scope or
accounting principles. Management is not aware of any disagreements with Hoffman
on any matter of accounting principles or practices, financial statement
disclosure or auditing scope or procedure through the date of dismissal, which,
if not resolved to Hoffman's satisfaction, would have caused Hoffman to make
reference to the subject matter of the disagreement in connection with its
report.
55
<PAGE>
[Alternate Page For Selling Securityholders Prospectus]
=========================================== ================================
No dealer, salesperson or any other per-
son has been authorized to give any
information or to make any representations
other than those contained in this
Prospectus, and, if given or made, such MULTIMEDIA ACCESS
information or representations must not be CORPORATION
relied on as having been authorized by the
Company or the Representative. This
Prospectus does not constitute an offer to
sell or the solicitation of an offer to buy
any security other than the securities
offered by this Prospectus, or an offer to
sell or a solicitation of an offer to buy 470,649 SHARES
any security by any person in any OF COMMON STOCK AND
jurisdiction in which such offer or
solicitation would be unlawful. Neither the
delivery of this Prospectus nor any sale
made hereunder shall, under any
circumstances, imply that the information
in this Prospectus is correct as of any
time subsequent to the date of this
Prospectus.
------------------
TABLE OF CONTENTS
Page
---- 470,649 REDEEMABLE
Prospectus Summary .................... 3 COMMON STOCK
Risk Factors .......................... 7 PURCHASE WARRANTS
Use of Proceeds ...................... 17
Dividends............................. 18
Capitalization ........................ 21
Selected Consolidated Financial Data .. 22
Management's Discussion and Analysis of
Financial Condition and Results of
Operations .......................... 23
Business .............................. 36
Principal Stockholders ................ 42
Certain Transactions .................. 45
Description of Securities ............. 48 ------------
Shares Eligible for Future Sale ....... 50 PROSPECTUS
Selling Securityholders and Plan of ------------
Distribution ........................ 51
Concurrent Registration of Securities 54
Interest of Named Experts and Counsel 54
Legal Matters ........................ 54
Experts ............................... 54
Additional Information ................ 54
Glossary ............................... i
Index to Consolidated Financial State-
ments............................... F-1
Until __, 1996 (25 days after the date
of this Prospectus), all dealers effecting
transactions in the registered securities,
whether or not participating in this
distribution, may be required to deliver a
Prospectus. This is in addition to the
obligation of dealers to deliver a
Prospectus when acting as underwriters and
with respect to their unsold allotments or , 1996
subscriptions.
=========================================== ================================
<PAGE>
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Articles Seven and Ten of the Company's Certificate of Incorporation, contain
the following provisions with respect to indemnification of Directors and
Officers:
SEVENTH. The Corporation shall, to the fullest extent permitted by Section
145 of the General Corporation Law of the State of Delaware, as the same may be
amended and supplemented, indemnify any and all persons whom it shall have power
to indemnify under said section from and against any and all of the expenses,
liabilities or other matters referred to in or covered by said section, and the
indemnification provided for herein shall not be deemed exclusive of any other
rights to which those indemnified may be entitled under any By-Law, agreement,
vote of stockholders or disinterested Directors or otherwise, both as to action
in his official capacity and as to action in another capacity while holding such
office, and shall continue as to a person who has ceased to be director,
officer, employee or agent and shall inure to the benefit of the heirs,
executors and administrators of such a person.
TENTH. To the fullest extent permitted by Delaware General Corporation Law, a
director of the Corporation shall not be personally liable to the Corporation or
its stockholders for monetary damages for breach of fiduciary duty as a
director. Neither any amendment nor repeal of this Article, nor the adopting of
any provision of this Certificate of Incorporation inconsistent with this
Article shall eliminate or reduce the effect of this Article in respect of any
matter occurring, or any cause of action, suit or claim that, but for this
Article would accrue or arise, prior to such amendment, repeal or adoption of an
inconsistent provision.
Section 145 of the General Corporation Law of the State of Delaware contains
provisions entitling directors and officers of the Company to indemnification
from judgments, fines, amounts paid in settlement and reasonable expenses,
including attorney's fees, as the result of an action or proceeding in which
they may be involved by reason of being or having been a director or officer of
the Company provided said officers or directors acted in good faith.
The Company has also entered into indemnification agreements with Messrs.
Norem, Leftwich, Colquhoun, Jobe, and Culp which provide for the indemnification
of said officers and directors to the fullest extent allowable under the laws of
the State of Delaware.
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
SEC Registration ............ $ 10,321
NASD Listing Fee ............ 4,000*
NASDAQ Listing Fee .......... 10,000*
Transfer Agent Fee .......... 3,500*
Printing and Engraving Costs 100,000*
Legal Fees and Expenses .... 125,000*
Accounting Fees and Expenses 100,000*
Blue Sky Fees and Expenses . 35,000*
Miscellaneous ............... 13,000*
TOTAL .................... $400,821
- ---------
* Estimated.
II-1
<PAGE>
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES
The following shares of Common Stock were issued by the Company during the
past three years without registering the securities under the Securities Act.
There were no underwriting discounts or commissions paid in connection with the
issuance of any of said securities, except as noted.
The sales of the securities described in the following table were made in
reliance upon Section 4(2) of the Securities Act, which provides exemptions for
transactions not involving a public offering, to the founders of the Company.
With regard to the Company's reliance upon the exemption from registration
provided by Section 4(2) of the Securities Act of the sale of securities
described below, certain inquiries were made by the Company to establish that
such sales qualified for such exemption. In particular, the Company confirmed
that with respect to the exemption claimed under Section 4(2) of the Securities
Act (i) each investor made representations that he or she was sophisticated
and/or an "accredited investor" within the meaning of Regulation D of the
Securities Act in relation to such investments and (ii) each purchaser gave
written assurance of his or her investment intent, and the certificates for the
securities bear a legend accordingly.
Number of
Shares of Consideration
Purchaser Date Common Stock per Share
--------- ---- ------------ ---------
Robert P. Bernardi .... 2/2/94 650,000 $ 0.0001
Robert M. Sterling, Jr. 2/2/94 650,000 0.0001
Herbert Welch.......... 2/2/94 150,000 0.0001
Michael Rakusin........ 2/2/94 60,000 0.0001
Total................ 1,510,000
The sales of the securities described in the following table were made in
reliance upon Regulation D, Rule 506 of the Securities Act, which provides
exemptions for transactions not involving a public offering. With regard to the
Company's reliance upon the exemption from registration provided by Regulation
D, Rule 506 of the Securities Act of the sale of securities described below,
certain inquiries were made by the Company to establish that such sales
qualified for such exemption. In particular, the Company confirmed that with
respect to the exemption claimed under Regulation D, Rule 506 of the Securities
Act (i) each investor made representations that he or she was sophisticated
and/or an "accredited investor" within the meaning of Regulation D of the
Securities Act in relation to such investments and (ii) each purchaser gave
written assurance of his or her investment intent, and the certificates for the
securities bear a legend accordingly.
Number of
Shares of Consideration
Purchaser Date Common Stock per Share
--------- ---- ------------ ---------
H. J. Partnership .............. 3/16/94 200,000 $ 2.20
H. T. Ardinger, Jr.............. 3/16/94 250,000 2.20
Michael Robbins................. 3/16/94 10,000 2.20
Fred Kassner.................... 3/16/94 20,000 2.20
Joseph & Pilar Serrano.......... 3/16/94 50,000 2.20
A. Starke Taylor, Jr............ 3/16/94 30,000 2.20
B. Michael Pisani............... 3/16/94 10,000 2.20
Socrates Skiadas................ 3/16/94 50,000 2.20
Robert E. Murello............... 3/16/94 50,000 2.20
Moody Insurance Group, Inc. .... 3/16/94 250,000 2.20
M. Douglas Adkins............... 3/16/94 36,364 2.20
John R. Whitman................. 3/16/94 20,000 2.20
Christian & Erika
Brunnschweiler.................. 3/16/94 20,000 2.20
------
Total......................... 996,364
=======
II-2
<PAGE>
The sales of the securities described in the following table were made in
reliance upon Section 4(2) of the Securities Act, which provides exemptions for
transactions not involving a public offering. The sales were made in connection
with the acquisition of Viewpoint by the Company. All of the outstanding Common
Stock and Options of Viewpoint were exchanged for Common Stock and Options of
the Company at an exchange ratio of .511 shares of the Company to one (1) share
of Viewpoint.
Number of
Shares of
Purchaser Date Common Stock
--------- ---- ------------
Glenn A. Norem ................................ 5/11/94 113,787
Glenn A. Norem assignee for Catalyst Financial
Corporation.................................. 5/11/94 511,000
Michael Nissenbaum............................. 5/11/94 91,980
Robert Arnold.................................. 5/11/94 432
Greg Garcia.................................... 5/11/94 19,164
June Pappas.................................... 5/11/94 25,550
Chris Hann..................................... 5/11/94 12,775
G.A. Norem I L.P............................... 5/11/94 4,536
Gary Motley.................................... 5/11/94 12,776
Newell V. Starks............................... 5/11/94 7,665
Sherri N. Davis................................ 5/11/94 12,775
Richard Penn................................... 5/11/94 153,300*
Glenn A. Norem................................. 5/11/94 51,100*
David Kaufman.................................. 5/11/94 4,259*
Alfred Riccomi................................. 5/11/94 28,560*
Curtis Barlowe................................. 5/11/94 20,108*
William Jobe................................... 5/11/94 5,110*
Minnie Branch.................................. 5/11/94 256*
Michael T. Zimmerman........................... 5/11/94 3,066*
Charles B. Humphreyson......................... 5/11/94 8,624*
Leonard A. Woods............................... 5/11/94 6,388*
Eric Eldridge.................................. 5/11/94 3,066*
Chris Hann..................................... 5/31/94 3,727*
-----
Total........................................ 1,100,004
=========
- ------------
* Indicates options to purchase the number of shares indicated. Messrs. Branch,
Zimmerman, Humphreyson, Woods, Eldridge and Hann exercised their options on
5/31/94. Mr. Penn exercised his options on 10/31/94.
II-3
<PAGE>
The Company sold 10,000 shares of Common Stock on June 29, 1994 in exchange
for consulting services, valued at $22,000, rendered by M.F. Branch Associates,
Inc. The sale was made in reliance upon Section 4(2) of the Securities Act,
which provides exemptions for transactions not involving a public offering.
The sales of the securities described in the following table were made in
reliance upon Regulation D, Rule 506 of the Securities Act, which provides
exemptions for transactions not involving a public offering. With regard to the
Company's reliance upon the exemption from registration provided by Regulation
D, Rule 506 of the Securities Act of the sale of securities described below,
certain inquiries were made by the Company to establish that such sales
qualified for such exemption. In particular, the Company confirmed that with
respect to the exemption claimed under Regulation D, Rule 506 of the Securities
Act (i) each investor made representations that he or she was sophisticated
and/or an "accredited investor" within the meaning of Regulation D of the
Securities Act in relation to such investments and (ii) each purchaser gave
written assurance of his or her investment intent, and the certificates for the
securities bear a legend accordingly.
Dollar Amount of Bridge
Purchaser Date Notes Purchased
--------- ---- ---------------
H.T. Ardinger.................. 9/26/94 $ 500,000
Robert Moody, Jr............... 9/27/94 300,000
M. Douglas Adkins.............. 9/28/94 205,000
Fred Kassner................... 9/30/94 200,000
Henry Wendt.................... 10/17/94 10,000
John R. Whitman................ 10/17/94 60,000
Robert Gillings................ 10/21/94 315,300
Elizabeth Sterling............. 10/24/94 50,000
Glenn A. Norem................. 10/24/94 50,000
Richard Pizitz................. 10/24/94 20,000
Michael Pizitz................. 10/24/94 30,000
Greg Garcia.................... 10/26/94 27,000
A. Starke Taylor, Jr........... 10/31/94 50,000
Robert Moody, Jr............... 12/20/94 250,000
Joseph Geary................... 1/10/95 50,000
H.T. Ardinger.................. 1/10/95 250,000
Adkins Family Partnership, Ltd. 1/16/95 100,000
Greg Garcia.................... 1/17/95 27,562.50
June Pappas.................... 1/17/95 55,125
Gary Motley.................... 1/18/95 27,562.50
William Heim................... 1/19/95 100,000
-------
Total........................ $2,677,550
==========
Holders of $2,330,300 principal amount of convertible debt and approximately
$305,000 of accrued interest have elected to convert these amounts to 470,649
shares of Common Stock and 470,649 Public Warrants (based on an assumed offering
price of $5.50 per share and $0.10 per Public Warrant). The remaining dollar
amount of bridge notes purchased plus accrued interest will be repaid with the
proceeds of this offering.
II-4
<PAGE>
The sales of the securities described in the following table were made in
reliance upon Regulation D, Rule 506 of the Securities Act, which provides
exemptions for transactions not involving a public offering. With regard to the
Company's reliance upon the exemption from registration provided by Regulation
D, Rule 506 of the Securities Act of the sale of securities described below,
certain inquiries were made by the Company to establish that such sales
qualified for such exemption. In particular, the Company confirmed that with
respect to the exemption claimed under Regulation D, Rule 506 of the Securities
Act (i) each investor made representations that he or she was sophisticated
and/or an "accredited investor" within the meaning of Regulation D of the
Securities Act in relation to such investments and (ii) each purchaser gave
written assurance of his or her investment intent, and the certificates for the
securities bear a legend accordingly.
Number of
Shares of Consideration
Purchaser Date Common Stock per Share
--------- ---- ------------ ---------
Fred Kassner........... 8/4/95 833,333 $ 3.00
H. T. Ardinger......... 12/31/95 16,504 3.00
M. L. Ardinger......... 12/31/95 16,504 3.00
Doug Adkins............ 12/31/95 107,444 3.00
Robert Moody........... 12/31/95 147,251 3.00
Anthony Bellissimo .... 12/31/95 3,694 3.00
H. T. Ardinger......... 12/31/95 26,747 3.00
M. L. Ardinger......... 12/31/95 26,747 3.00
Doug Adkins............ 4/18/96 35,813 3.00
Fred Kassner........... 3/31/96 221,195 3.00
William Wells.......... 4/18/96 16,750 3.00
David Motley........... 4/18/96 3,333 3.00
Shain McCaig........... 4/18/96 10,000 3.00
Rhett Bently........... 4/18/96 30,000 3.00
James Johnson.......... 4/18/96 10,000 3.00
Craig Noonan........... 4/18/96 3,333 3.00
Jerry S. Harris........ 5/7/96 10,000 3.00
Lanie R. Hughes........ 4/30/96 10,000 3.00
Joseph W. Geary........ 5/24/96 42,333 3.00
John S. Stoppelman .... 6/1/96 42,666 3.00
Robert M. Sterling, Jr. 6/28/96 26,666 3.00
Richard Epstein........ 6/28/96 20,000 3.00
Stanley Epstein........ 6/19/96 5,000 3.00
Joan Etayo............. 6/21/96 16,600 3.00
Paul Ehrlich........... 6/28/96 8,334 3.00
Jared Shaw............. 6/28/96 4,167 3.00
Daniel Kodsi........... 6/28/96 4,167 3.00
A. Starke Taylor....... 6/28/96 53,333 3.00
Richard Friedman....... 6/28/96 20,000 3.00
Robert Rubin........... 6/28/96 36,666 3.00
------
Total............... 1,808,580
=========
II-5
<PAGE>
ITEM 27. LIST OF EXHIBITS
<TABLE>
<CAPTION>
Exhibit
Page No. Description of Exhibit
-------- ----------------------
<S> <C>
1 Form of Underwriting Agreement*
2 Agreement and Plan of Merger and Reorganization**
3(a) Certificate of Incorporation**
3(b) Amendment to Certificate of Incorporation**
3(c) Restated By-Laws**
4(a) Form of Common Stock Certificate*
4(b) Form of Warrant Certificate*
4(c) Form of Warrant Agreement between the Company and Continental Stock Transfer & Trust Company*
4(d) Representatives' Warrant Agreement*
5 Opinion of The Stoppelman Law Firm, P.C. on Legality of Securities Being Registered
9(a) Voting Trust Agreement between Robert M. Sterling, Jr. and Thomas E. Brown**
9(b) Voting Trust Agreement between Robert P. Bernardi and Richard Bernardi**
9(c) Form of Lock-Up Agreement
9(d) Lock-Up Agreement with Robert Sterling Trust
9(e) Lock-Up Agreement with Robert Bernardi Trust
9(f) Lock-Up Agreement with Michael Nissenbaum
10(a) Modified Employment Agreement between the Company and Glenn A. Norem dated October 2, 1996.
10(b) Modified Consulting Agreement between the Company and Sterling Capital Group Inc.**
10(c) Form of Indemnification Agreement between the Company and Executive Officers and Directors**
10(d) 1995 Stock Option Plan**
10(e) 1994 Stock Option Plan**
10(f) 1993 Viewpoint Stock Plan**
10(g) 1995 Director Option Plan**
10(h) Lease Agreement between the Company and Metro Squared, L.P.**
10(i) Employee Stock Purchase Plan**
10(j) Licensing Agreement between the Company and Boca Research, Inc.***
10(k) Agreement between the Company and Unisys Corporation***
10(l) Employment Agreement between the Company and Philip M. Colquhoun
10(m) Employment Agreement between the Company and William S. Leftwich
10(n) Employment Agreement between the Company and David T. Stoner
10(o) Employment Agreement between the Company and Neal Page
10(p) Employment Agreement between the Company and A. David Boomstein
10(q) Employment Agreement between the Company and Daniel W. Dodson
10(r) Lease between the Company and Burlingame Home Office, Inc.
10(s) Lease between the Company and Family Funds Partnership
10(t) Agreement between the Company and Catalyst Financial Corporation
11 Calculation of Net Loss Per Share
21 List of Subsidiaries of the Company**
23(a) Consent of The Stoppelman Law Firm, P.C.
23(b) Consent of Ernst & Young LLP
23(c) Consent of Hoffman, Morrison, & Fitzgerald, P.C.
23(d) Letter from Hoffman, Morrison, & Fitzgerald, P.C.*
24 Power of Attorney****
</TABLE>
- -------------
* To be filed by amendment.
** Filed with initial filing dated August 9, 1996.
*** The Company has requested confidential treatment of certain portions of
this document and such portions have been redacted from this agreement.
**** Included with signature pages.
II-6
<PAGE>
ITEM 28. UNDERTAKINGS
A. Certificates
The undersigned registrant hereby undertakes to provide to the Representative
at the closing specified in the underwriting agreement, certificates in such
denominations and registered in such names as required by the underwriter to
permit prompt delivery to each purchaser.
B. Rule 415 Offering
The undersigned Company hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this Registration Statement to: (i) Include
any prospectus required by Section 10(a)(3) of the Securities Act; (ii)
Reflect in the prospectus any facts or events which, individually or
together, represent a fundamental change in the information in the
registration statement and; (iii) Include any additional or changed material
information on the plan of distribution.
(2) For determining liability under the Securities Act, treat each
post-effective amendment as a new registration statement of the securities
offered, and the offering of the securities at that time to be the initial
bona fide offering.
(3) File a post-effective amendment to remove from registration any of
the securities that remain unsold at the end of the offering.
C. Request for Acceleration of Effective Date
The Company may elect to request acceleration of the effective date of the
Registration Statement under Rule 461 of the Securities Act.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 (the "Securities Act") may be permitted to directors, officers and
controlling persons of the small business issuer pursuant to the foregoing
provisions, or otherwise, the small business issuer has been advised that in the
opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Securities 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 whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
II-7
<PAGE>
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 of filing on Form SB-2 and authorized this registration
statement to be signed on its behalf by the undersigned, in the County of Dallas
in the State of Texas on 2nd day of October, 1996.
Multimedia Access Corporation
By: /s/ Glenn A. Norem
---------------------------------
Glenn A. Norem
Chief Executive Officer
KNOW ALL MEN BY THESE PRESENT, that each person whose signature appears below
constitutes and appoints Glenn A. Norem, his true and lawful attorney-in-fact
and agent, with full power of substitution and resubstitution, for him and in
his name, place and stead, in any and all capacities, to sign any and all
amendments (including post-effective amendments) to this registration statement,
and to file the same, with all exhibits thereto and other documents in
connection therewith, with the Securities and Exchange Commission, granting unto
said attorney-in-fact and agent, full power and authority to do and perform each
and every act and thing requisite or necessary to be done in and about the
premises, as full to all intents and purposes as he might or could do in person,
hereby ratifying and confirming all that said attorney-in-fact and agent or
either of them or their or his substitute or substitutes, may lawfully do or
cause to be done by virtue hereof.
In accordance with the requirements of the Securities Act of 1933, this
Registration Statement was signed by the following persons in the capacities and
on the dates stated.
SIGNATURE TITLE DATE
--------- ----- ----
/s/ Glenn A. Norem
- ------------------- Chief Executive Officer
Glenn A. Norem and Director October 2, 1996
/s/ William S. Leftwich
- -------------------
William S. Leftwich Chief Financial Officer October 2, 1996
/s/ William D. Jobe
- -------------------
William D. Jobe Director October 2, 1996
/s/ Joe C. Culp
- -------------------- October 2, 1996
Joe C. Culp Director
II-8
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
<S> <C>
Sequential
Exhibit Page
Page No Description of Exhibit Number
------- ---------------------- ------
<S> <C>
1 Form of Underwriting Agreement*
2 Agreement and Plan of Merger and Reorganization**
3(a) Certificate of Incorporation**
3(b) Amendment to Certificate of Incorporation**
3(c) Restated By-Laws**
4(a) Form of Common Stock Certificate*
4(b) Form of Warrant Certificate*
4(c) Form of Warrant Agreement between the Company and Continental Stock Transfer & Trust Company*
4(d) Representatives' Warrant Agreement*
5 Opinion of The Stoppelman Law Firm, P.C. on Legality of Securities Being Registered
9(a) Voting Trust Agreement between Robert M. Sterling, Jr. and Thomas E. Brown**
9(b) Voting Trust Agreement between Robert P. Bernardi and Richard Bernardi**
9(c) Form of Lock-Up Agreement
9(d) Lock-Up Agreement with Robert Sterling Trust
9(e) Lock-Up Agreement with Robert Bernardi Trust
9(f) Lock-Up Agreement with Michael Nissenbaum
10(a) Modified Employment Agreement between the Company and Glenn A. Norem dated October 2, 1996.
10(b) Modified Consulting Agreement between the Company and Sterling Capital Group Inc.**
10(c) Form of Indemnification Agreement between the Company and Executive Officers and Directors**
10(d) 1995 Stock Option Plan**
10(e) 1994 Stock Option Plan**
10(f) 1993 Viewpoint Stock Plan**
10(g) 1995 Director Option Plan**
10(h) Lease Agreement between the Company and Metro Squared, L.P.**
10(i) Employee Stock Purchase Plan**
10(j) Licensing Agreement between the Company and Boca Research, Inc.***
10(k) Agreement between the Company and Unisys Corporation***
10(l) Employment Agreement between the Company and Philip M. Colquhoun
10(m) Employment Agreement between the Company and William S. Leftwich
10(n) Employment Agreement between the Company and David T. Stoner
10(o) Employment Agreement between the Company and Neal Page
10(p) Employment Agreement between the Company and A. David Boomstein
10(q) Employment Agreement between the Company and Daniel W. Dodson
10(r) Lease between the Company and Burlingame Home Office, Inc.
10(s) Lease between the Company and Family Funds Partnership
10(t) Agreement between the Company and Catalyst Financial Corporation
11 Calculation of Net Loss Per Share
21 List of Subsidiaries of the Company**
23(a) Consent of The Stoppelman Law Firm, P.C.
23(b) Consent of Ernst & Young LLP
23(c) Consent of Hoffman, Morrison, & Fitzgerald, P.C.
23(d) Letter from Hoffman, Morrison, & Fitzgerald, P.C.*
24 Power of Attorney****
</TABLE>
- -----------
* To be filed by amendment.
** Filed with initial filing dated August 9, 1996.
*** The Company has requested confidential treatment of certain portions of
this document and such portions have been redacted from this agreement.
**** Included with signature pages.
Stoppelman Law Firm P.C. Letterhead
October 2, 1996
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Re: Multimedia Access Corporation
Registration Statement
Dear Sir/Madam:
We are corporate and securities counsel to Multimedia Access
Corporation (the "Company"), a Delaware corporation, in connection with the
registration on Form SB-2 of 2,540,649 shares of the Company's Common Stock (the
"Common Stock"), 2,540,649 Redeemable Common Stock Purchase Warrants (the
"Public Warrants"), the 2,540,649 shares of Common Stock underlying the Public
Warrants.
We hereby advise that, in our opinion, the shares of Common Stock, the
Public Warrants and the shares of Common Stock underlying the Public Warrants
have been duly authorized by all necessary corporate acts of the Company, and
when issued, delivered and paid for by the Underwriter, pursuant to the
Underwriting Agreement, will be legally and validly issued, fully-paid and
non-assessable.
We consent to the use of our firm's name under the heading "Legal
Matters" in the Registration Statement, and any amendments thereto, filed with
the Securities and Exchange Commission in connection with the above-referenced
offering.
Very truly yours,
/s/ John S. Stoppelman
John S. Stoppelman
September 30, 1996
MultiMedia Access Corporation
2665 Villa Creek Drive
Suite 200
Dallas, TX 75234
National Securities Corporation
520 Madison Avenue
11th Floor
New York, NY
Re: Restriction on Stock Sales
--------------------------
Ladies and Gentlemen:
MultiMedia Access Corporation (the "Company") proposes to sell shares (the
"Shares") of its Common Stock (the "Common Stock") in an underwritten public
offering (the "Public Offering"), the underwriters of which are expected to be
National Securities Corporation ("National") and Network 1 Financial Securities
("Network1") (together the "Underwriters").
The Underwriters have indicated that the prospect of public sales of any Common
Stock prior to two years after the Public Offering would be detrimental to its
underwriting effort. The Underwriters have requested that the undersigned agree
not to sell any shares of Common Stock or warrants to purchase Common Stock,
without the prior written consent of the Underwriters, prior to the second
anniversary of the effective date of the Registration Statement on Form SB-2 to
be filed by the Company relating to the Shares and the Underwritten Warrants
(the "Registration Statement").
The undersigned recognizes that it is in the best financial interests of the
undersigned, as a stockholder, director, officer, warrantholder and/or
optionholder of the Company, that the Company complete the proposed Public
Offering.
The undersigned further recognizes that the undersigned's Common Stock or
options or warrants to purchase Common Stock are, or may be, subject to certain
restrictions on their transferability, including those imposed by the federal
securities laws. Notwithstanding these restrictions, the undersigned has agreed
to enter into this agreement to further assure the Underwriters that the
undersigned's Common Stock or warrants to purchase Common Stock will not enter
the public market at a time that might impair the underwriting effort.
The undersigned, therefore, hereby acknowledges and agrees that the undersigned
will not, directly or indirectly, except with the prior written consent of both
National and
<PAGE>
MultiMedia Access Corporation September 30, 1996
2665 Villa Creek Drive
Suite 200
Dallas, TX 75234
Page 2
Network 1 during the first twelve (12) months following the effective date of
the Registration Statement or the prior written consent of either National or
Network 1 during the second twelve (12) months following the effective date of
the Registration Statement, offer, sell, contract to sell, make any short sale,
pledge, grant any option to purchase or otherwise dispose of any shares of
Common Stock or any securities convertible into or exchangeable or exercisable
for or any rights to purchase or acquire Common Stock, including warrants or
options to purchase Common Stock, held by the undersigned prior to the second
anniversary of the effective date of the Registration Statement.
Notwithstanding the foregoing, the undersigned shall have the right to transfer
the shares of Common Stock, or warrants to purchase Common Stock, held by the
undersigned to or for the benefit of any spouse, child or grandchild, or a trust
for his own or their benefit, provided that such shares of Common Stock or
warrants shall remain subject to the foregoing restriction on transfer and any
such permitted transferee shall, as a condition to such transfer, deliver to the
Underwriters a written instrument confirming that such transferee will be bound
by the terms and conditions of the foregoing restriction on transfer.
Executed as an instrument under seal.
Very truly yours,
------------------------------------
Signature of Stockholder
Director, Officer, Warrantholders
and/or Optionholder
------------------------------------
Signature of Co-stockholder
(if applicable)
------------------------------------
Name (please print)
August 14, 1996
MultiMedia Access Corporation
2665 Villa Creek Drive
Suite 200
Dallas, TX 75234
National Securities Corporation
520 Madison Avenue
11th Floor
New York, NY
Re: Restriction on Stock Sales
--------------------------
Ladies and Gentlemen:
MultiMedia Access Corporation (the "Company") proposes to sell shares (the
"Shares") of its Common Stock (the "Common Stock") in an underwritten public
offering (the "Public Offering"), the underwriters of which are expected to be
National Securities Corporation ("National") and Network 1 Financial Securities
("Network 1") (together the "Underwriters").
The Underwriters have indicated that the prospect of public sales of any Common
Stock prior to two years after the Public Offering would be detrimental to its
underwriting effort. The Underwriters have requested that the undersigned agree
not to sell any shares of Common Stock or warrants to purchase Common Stock, the
Registration Statement on Form SB-2 to be filed by the Company relating to the
Shares and the Underwritten Warrants (the "Registration Statement").
The undersigned recognizes that it is in the best financial interests of the
undersigned, as a stockholders, director, officer, warrantholder and/or
optionholder of the Company, that the Company complete the proposed Public
Offering.
The undersigned further recognizes that the undersigned's Common Stock or
options or warrants to purchase Common Stock are, or may be, subject to certain
restrictions on their transferability, including those imposed by the federal
securities laws. Notwithstanding these restrictions, the undersigned has agreed
to enter into this agreement to further assure the Underwriters that the
undersigned's Common Stock or warrants to purchase Common Stock will not enter
the public market at a time that might impair the underwriting effort.
The undersigned, therefore, hereby acknowledges and agrees that the undersigned
will not, directly or indirectly, except with the prior written consent of both
National and Network 1 during the first twelve (12) months following the
effective date of the Registration Statement or
<PAGE>
MultiMedia Access Corporation August 14, 1996
2665 Villa Creek Drive
Suite 200
Dallas, TX 75234
Page 2
the prior written consent of either National or Network 1 during the second
twelve (12) months following the effective date of the Registration Statement,
offer, sell, contract to sell, make any short sale, pledge, grant any option to
purchase or otherwise dispose of any shares of Common Stock or any securities
convertible into or exchangeable or exercisable for or any rights to purchase or
acquire Common Stock, including warrants or options to purchase Common Stock,
held by the undersigned prior to the second anniversary of the effective date of
the Registration Statement. Such consent will not be reasonably withheld.
Notwithstanding the foregoing, the undersigned shall have the right to transfer
the shares of Common Stock, or warrants to purchase Common Stock, held by the
undersigned to or for the benefit of any spouse, child or grandchild, or a trust
for his own or their benefit; provided that such shares of Common Stock or
warrants shall remain subject to the foregoing restriction on transfer and any
such permitted transferee shall, as a condition to such transfer, deliver to the
Underwriters a written instrument confirming that such transferee will be bound
by the terms and conditions of the foregoing restriction on transfer.
Executed as an instrument under seal.
Very truly yours,
/s/ Thomas E. Brown, Trustee for
Robert M. Sterling Trust
--------------------------------------
Signature of Stockholder,
Director, Officer, Warrantholders
and/or Optionholder
--------------------------------------
Signature of Co-stockholder
(if applicable)
Thomas E. Brown, Trustee
--------------------------------------
Name (please print)
8-28-96
LOCK-UP AGREEMENT
WHEREAS, MultiMedia Access Corporation (the "Company") proposes to sell
shares (the "Shares") of its Common Stock (the "Common Stock") in an
underwritten public offering (the "Public Offering"), the underwriters of which
are expected to be National Securities Corporation and Network 1 Financial
Securities, Inc. (each an "Underwriter" and together the "Underwriters");
WHEREAS, the Underwriters have indicated that the prospect of public
sales of any Common Stock prior to the terms set forth in this letter would be
detrimental to its underwriting effort.
WHEREAS, the Underwriters have requested that the undersigned
securityholder (the "Securityholder") agree not to sell any shares of Common
Stock or warrants to purchase Common Stock prior to the release of the
securities by the Underwriter according to the following schedule: on the three
hundred sixty-sixth (366th) day after the effective date of the Registration
Statement on Form SB-2 to be filed by the Company relating to the Shares and the
Underwritten Warrants (the "Registration Statement") the underwriters agree to
release twenty-five percent (25%) of the securities covered by this agreement
with an additional twenty five percent (25%) to be released every ninety (90)
days thereafter until no securities are subject to this agreement.
WHEREAS, the Securityholder recognizes that it is in the best financial
interests of the Securityholder, as a stockholder, warrantholder and/or
optionholder of the Company, that the Company complete the proposed Public
Offering.
WHEREAS, The Securityholder further recognizes that the
Securityholder's Common Stock, or options or warrants to purchase Common Stock,
are, or may be, subject to certain restrictions on their transferability,
including those imposed by the federal securities laws. Notwithstanding these
restrictions, the Securityholder has agreed to enter into this agreement to
further assure the Underwriters that the Securityholder's Common Stock or
warrants to purchase Common Stock will not enter the public market at a time
that might impair the underwriting effort.
THEREFORE, the undersigned parties agree as follows:
The Securityholder hereby acknowledges and agrees that, except with the
prior written consent of both Underwriters during the first twelve (12) months
following the effective date of the registration statement and the prior written
consent of either Underwriter during the second twelve (12) months following the
effective date of the registration statement, the Securityholder will not,
directly or indirectly offer, sell, contract to sell, make any short sale,
pledge, grant any option to purchase or otherwise dispose of any shares of
Common Stock or any securities convertible into or exchangeable or exercisable
for or any rights to purchase or acquire Common Stock,
<PAGE>
including warrants or options to purchase Common Stock, held by the
Securityholder prior to the release by the Underwriter of the securities. Such
written consent will not be unreasonably withheld.
The Underwriters agree to release twenty-five percent (25%) of the
securities covered by this agreement on the three hundred sixty-sixth (366th)
day after the effective date of the Registration Statement and an additional
twenty five percent (25%) every ninety (90) days thereafter until no securities
are subject to this agreement. Such release will be automatic and will not
require the written consent of either Underwriter. The release schedule shall
not preclude the Securityholder from transferring any amount of securities
covered by this agreement in the event that the Securityholder receives the
prior written consent of the Underwriters or either Underwriter in accordance
with the preceding paragraph.
Notwithstanding the foregoing, the Securityholder shall have the right
to transfer the shares of Common Stock, or warrants to purchase Common Stock,
held by the Securityholder to or for the benefit of any spouse, child or
grandchild, or a trust for his own or their benefit; provided that such shares
of Common Stock or warrants shall remain subject to the foregoing restriction on
transfer and any such permitted transferee shall, as a condition to such
transfer, deliver to the Underwriters a written instrument confirming that such
transferee will be bound by the terms and conditions of the foregoing
restriction on transfer.
Securityholder
/s/ Robert Bernardi
- -------------------------------
Robert Bernardi
- -------------------------------
Richard Bernardi - Trustee
National Securities Corporation Network 1 Financial Securities
- ------------------------------- ----------------------------
By: By:
- ------------------------------- ----------------------------
Title Title
September 5, 1996
MultiMedia Access Corporation
2665 Villa Creek Drive
Suite 200
Dallas, TX 75234
National Securities Corporation
520 Madison Avenue
11th Floor
New York, NY
Re: Restriction on Sale of 57,116 Shares of Common Stock
----------------------------------------------------
Ladies and Gentlemen:
MultiMedia Access Corporation (the "Company") proposes to sell shares (the
"Shares") of its Common Stock (the "Common Stock") in an underwritten public
offering (the "Public Offering"), the underwriters of which are expected to be
National Securities Corporation ("National") and Network 1 Financial Securities
("Network 1") (together the "Underwriters").
The Underwriters have indicated that the prospect of public sales of any Common
Stock prior to two years after the Public Offering would be detrimental to its
underwriting effort. The Underwriters have requested that the undersigned agree
not to sell any shares of Common Stock or warrants to purchase Common Stock,
without the prior written consent of the Underwriters, prior to the second
anniversary of the effective date of the Registration Statement on Form SB-2 to
be filed by the Company relating to the Shares and the Underwritten Warrants
(the "Registration Statement").
The undersigned recognizes that it is in the best financial interests of the
undersigned, as a stockholder, director, officer, warrantholder and/or
optionholder of the Company, that the Company complete the proposed Public
Offering.
The undersigned further recognizes that the undersigned's Common Stock or
options or warrants to purchase Common Stock are, or may be, subject to certain
restrictions on their transferability, including those imposed by the federal
securities laws. Notwithstanding these restrictions, the undersigned has agreed
to enter into this agreement to further assure the Underwriters that the
undersigned's 57,116 shares of Common Stock or warrants to purchase Common Stock
will not enter the public market at a time that might impair the underwriting
effort.
The undersigned, therefore, hereby acknowledges and agrees that the undersigned
will not, directly or indirectly, except with the prior written consent of both
National and Network 1 during the first twelve (12) months following the
effective date of the Registration Statement or the prior written consent of
either National or Network 1 during the second twelve (12) months following the
effective date of the Registration Statement, offer, sell, contract to sell,
make any short sale, pledge, grant any option to purchase or otherwise dispose
of any of its 57,116 shares of Common Stock or any securities convertible into
or exchangeable or exercisable for or any rights to purchase or acquire Common
Stock, including warrants or options to purchase Common Stock, held by the
undersigned prior to the second anniversary of the effective date of the
Registration Statement.
<PAGE>
Multimedia Access Corporation September 5, 1996
2665 Villa Creek Drive
Suite 200
Dallas, TX 75234
Page 2
Notwithstanding the foregoing, the undersigned shall have the right to transfer
the shares of Common Stock, or warrants to purchase Common Stock, held by the
undersigned to or for the benefit of any spouse, child or grandchild, or a trust
for his own or their benefit; provided that such shares of Common Stock or
warrants shall remain subject to the foregoing restriction on transfer and any
such permitted transferee shall, as a condition to such transfer, deliver to the
Underwriters a written instrument confirming that such transferee will be bound
by the terms and conditions of the foregoing restriction on transfer.
Executed as an instrument under seal.
Very truly yours,
/s/ Michael K. Nissenbaum
------------------------------------
Signature of Stockholder,
Director, Officer, Warrantholders
and/or Optionholder
------------------------------------
Signature of Co-stockholder
(if applicable)
Michael K. Nissenbaum
------------------------------------
Name (please print)
GLENN A. NOREM
Amended Employment Agreement
AGREEMENT by and between Multimedia Access Corporation, a Delaware
corporation (herein called the "Company"), and Glenn A. Norem (herein called the
"Employee").
WITNESSETH:
For and in consideration of the mutual promises and covenants herein
contained, the parties hereto mutually agree as follows:
Section 1. Employment. The Company hereby employs the Employee as Chief
Executive Officer of the Company for the term and upon the terms and conditions
hereinafter set forth, and the Employee hereby accepts such employment.
Section 2. Term. The Employee's employment hereunder shall be for a term of five
(5) years commencing February 7, 1994, and continuing through and including
February 6, 1999, renewable automatically from year to year thereafter unless
either party provides the other with written notice of non-renewal at least 90
days prior to the expiration of the initial term or of any renewal term.
Section 3. Duties; Control and Direction by Board of Directors.
Section 3(a). Duties. The Employee agrees to serve as Chief Executive
Officer. As such, the Employee (i) shall assist the Company in the development
of all phases of the Company's business and (ii) shall have such other or
further duties, powers, and responsibilities as from time to time may be
assigned to him by the Board of Directors of the Company.
Section 3(b). Rules and Regulations. The Employee shall comply with all
Company rules and regulations applicable to the executive employees of the
Company or to its employees generally and with all Company policies established
by the Board of Directors.
Section 4. Extent of Services. During the term of this Agreement, the Employee
shall devote his best efforts to the business of the Company and the furthering
of its interests and to the discharge of his duties, functions and
responsibilities hereunder.
Section 5. Compensation. As compensation during the term of the Employee's
employment hereunder, the Company shall pay to the Employee, and the Employee
shall accept, a salary at the rate of $135,000 per annum, or at such higher rate
as the Board of Direc-
<PAGE>
tors, after periodic review, at its option and in its sole discretion, may fix.
The Employee will also receive an annual bonus based on performance. Such bonus
will be determined annually by the Board of Directors.
Section 6. Fringe Benefits. The Employee shall have the right to participate, on
the same terms and subject to the same conditions, limitations, restrictions and
requirements as the other executive employees of the Company in such medical,
health, insurance, pension, profit sharing, stock option and other plans, if
any, as the Company may from time to time provide for the benefit of its
employees and in which executive employees of the Company are eligible to
participate. The Company shall provide the Employee with an automobile allowance
of $850.00 per month.
Section 7. Expenses. The Employee is authorized to incur reasonable expenses in
performing services for and in promoting the business of the Company, including
expenses for business entertainment and travel. The Company shall promptly
reimburse the Employee for such expenses provided that the Employee presents an
itemized statement of the same together with such supporting vouchers as the
Company may from time to time require and are normally available.
Section 8. Patents, Copyrights, etc.
Section 8(a). Patents, Copyrights, etc. The Employee agrees that any
and all "Proprietary Property" (as defined in Section 8(b) following) that is
created, developed or discovered by or for the Company, or acquired by the
Company from others, and that comes into the Employee's knowledge or possession
during and in the course of the Employee's employment hereunder, shall be
received by the Employee as an employee of the Company and not in any way for
his own benefit, and that the Employee shall have no rights and shall acquire no
rights therein unless and until the Company shall expressly and in writing waive
the rights that it has therein and thereto under the provisions of this
sentence. The Employee further agrees (a) that any and all Proprietary Property
that is invented, created, written, developed, furnished or produced by the
Employee during the term of the Employee's employment under this Agreement shall
be the exclusive property of the Company, and that the Employee shall have no
right, title or interest of any kind therein or thereto or in and to any results
or proceeds therefrom, and (b) that at any time, during the term of this
Agreement, the Employee will (1) upon the request and at the expense of the
Company, (i) obtain patents or copyrights on, or (ii) permit the Company to
patent or copyright, any such material, whichever (i) or (ii) is appropriate,
and/or (2) at the request of the Company, execute any and all assignments,
instruments of transfer, or other documents, that the Company deems necessary or
appropriate to transfer to the Company all rights in or to such materials or to
- 2 -
<PAGE>
evidence the Company's ownership of such rights or any of them. The Employee
shall not, without limitation as to time or place, use any Proprietary Property
except on Company business during his period of employment or disclose same to
any other person, firm or corporation, except for disclosure on Company
business.
Section 8(b). "Proprietary Property." As used in this Agreement,
"Proprietary Property" means any and all ideas, creations, inventions,
improvements, know-how, methods of applying and putting into practice any
inventions or know-how and proprietary technical information which are not
generally known in the videoconferencing industry and which are disclosed to or
known or developed by Employee as a consequence of or through his employment.
Section 9. Insurance. The Employee agrees to submit to the usual and customary
medical examinations and otherwise cooperate with the Company in its procurement
of such insurance policies on the Employee's life as the Company may desire. If
at any time in the Employee's lifetime the Employee ceases to be employed by the
Company, then the Company shall promptly, if requested by the Employee and
subject to the applicable regulations of the insurance company or companies
concerned, transfer, assign and deliver to the Employee, any and all insurance
policies on the life of the Employee then held and/or owned by the Company.
Premiums shall be adjusted to the date of such transfer, assignment and
delivery.
Section 10. Participation in Competing Business. The Employee shall not at any
time during the term of his employment own a majority or controlling interest in
or be connected with majority ownership, management, operation, or control of
any business that engages in a business which deals in services or products
similar to and competitive with the Company's services or products in the United
States or any other geographic region where the Company is engaged in business,
but the above shall not be deemed to exclude Employee from acting as a director
of or a consultant to other corporations or entities with the consent of the
Company's Board of Directors.
Section 11. Non-Competition.
The Company's Board of Directors may require that the Employee not
compete with the Company or solicit any of the Company's clients on behalf of
himself or an entity founded by the Employee within two years after leaving the
Company. The Employee further agrees that the Company's Board of Directors may
require that the Employee not compete with the Company or solicit any of the
Company's clients as an employee of a company that engages in a business which
deals in services or products and competitive with the Company's services or
products within two years after leaving the Company.
- 3 -
<PAGE>
In consideration for the above agreement, the Company's Board of
Directors agrees that the Employee shall continue to receive a salary at the
level of compensation received by Employee at the time employment ends, as
provided by Section 5 of this Employment Agreement, for the entire period the
Non-Competition clause is in effect.
Section 12. Termination of the Agreement and of the Employee's Employment
Hereunder.
Section 12(a). Termination for Cause by the Company. The Company shall
have the right to terminate this Agreement and Employee's employment hereunder
at any time for cause (as defined in Section 19 hereunder) upon 30 days' written
notice of such termination specifying the reasons therefor. Employee shall have
30 days following receipt of such written notice to cure the cause to the
satisfaction of the Board of Directors. In the event Employee does not cure such
cause in the good faith determination of the Board, Employee's employment
hereunder shall cease. In the event of such termination for cause, Employee
shall be entitled to receive accrued pay and benefits as of the date of
termination.
Section 12(b). Termination Without Cause by the Company or for Good
Reason by the Employee. In the event that:
(1) the Company terminates this Agreement and the Employee's employment
hereunder without cause, that is, for any reason other than "cause" (as defined
in Section 19 hereof), death or incapaci- ty; or
(2) the Employee terminates this Agreement and his employment hereunder
for "Good Reason" (as defined in Section 19 hereof); then, in either such case:
The Employee shall receive from the Company prior to the effective time
of such termination: (i) all Employee's accrued salary, bonuses and benefits
through the date of such termination, (ii) the acceleration as to vesting of
those certain options, assumed by the Company pursuant to the terms of the
Agreement and Plan of Merger and Reorganization between Viewpoint Systems, Inc.
and the Company, to purchase securities of the Company granted or issued to
Employee (and, in the event of a change in control, the assumption by the
acquiror of all such outstanding options) and the right to exercise such options
within 90 days following the effective time of such termination; (iii) a sum
equal in the aggregate to the full amount, discounted by three percent (3%), of
(a) the salary and benefits which the Employee would have received, at the
average rate or rates in effect during the six-month period immediately prior to
termination, and (b) the annual bonus or
- 4 -
<PAGE>
bonuses which the Employee would have received, at the rate of the Employee's
annual bonus for the last full fiscal year of the Company ending prior to
termination, had, with respect to both (a) and (b), the Employee's employment
under this Agreement continued for the full initial five-year term or renewal
term thereof, as the case may be, as provided in Section 2 hereof, and (iv)
immediate payment of all notes, convertible debt, and/or short-term debt owed by
the Company to the Employee (the "Notes"), whether or not such Notes are due and
payable at the time of termination. The Employee shall not be required to
mitigate the amount of any payments provided for in this Section 12(b) by
seeking other employment or otherwise, and any such employment, if obtained,
shall not be deemed to mitigate such amount. In addition, upon termination of
the agreement the Employee's obligations under his "lock-up" agreement with the
Company shall terminate.
Section 12(c). Voluntary Termination without Good Reason. In the event
Employee terminates this agreement and his employment hereunder without Good
Reason, Employee shall be entitled to receive accrued pay and benefits including
benefits set forth in Section 12(b)(iv) as of the date of termination.
Section 12. Termination by Reason of Death or Incapacity of the Employee.
(a) This Agreement will terminate upon the Employee's death.
(b) Incapacity:
(i) In the event Employee shall, during the term of employment,
fail substantially to perform his duties hereunder for a
period of six (6) consecutive months because of illness or
other incapacity, he shall, upon the furnishing by a physician
(acceptable to both Company and Employee or his family) of a
written statement that Employee is totally incapacitated or
that it would be unsafe or unwise for serious health reasons
for Employee to perform his duties hereunder, be deemed to be
totally incapacitated. In the event a physician cannot be
located who is acceptable to both parties, each shall select a
physician who shall together select a third, whose decision
shall be final. In the event of a dispute or inability to
select a third, a physician shall be selected by the American
Arbitration Association, and such physician's decision shall
be final.
(ii) If Employee shall be deemed totally incapacitated as set forth
above, the Company, unless this Agreement shall
- 5 -
<PAGE>
have earlier terminated, may at its option, by giving Employee
written notice of its intention to do so, terminate Employee's
employment hereunder effective as of the end of the calendar
month in which such notice is given, and the Company shall pay
Employee prior to the effective time of such termination a sum
equal in the aggregate to an additional twelve (12) months'
salary and benefits which the Employee would have received, at
the average rate or rates in effect for the six-month period
immediately prior to termination, less any amounts the
Employee receives through disability policies maintained by
the Company, provided that, upon such termination, all notes,
convertible debt, and/or short-term debt owed by the Company
to the Employee (the "Notes"), whether or not such Notes are
due and payable at the time of termination, shall be
immediately payable to the Employee; and further provided
that, upon such termination, the Employee's obligations under
his "lockup" agreement with the Company shall terminate.
(iii) In the event Employee shall not have been deemed totally
incapacitated as provided above, but shall have failed as a
result of temporary incapacitation to perform his duties
hereunder for an aggregate of more than twelve (12) months in
any period of twenty-four (24) consecutive months, the Company
may at its option, by giving Employee written notice of its
intention to do so, terminate Employee's employment hereunder
effective as of the end of the calendar month in which such
notice is given, and the Company shall pay Employee prior to
the effective time of such termination a sum equal in the
aggregate to an additional twelve (12) months of salary and
benefits which the Employee would have received, at the
average rate or rates in effect for the six-month period
immediately prior to termination, less any amounts the
Employee receives through disability policies maintained by
the Company, provided that, upon such termination, all notes,
convertible debt, and/or short-term debt owed by the Company
to the Employee (the "Notes"), whether or not such Notes are
due and payable at the time of termination, shall be
immediately payable to the Employee; and further provided
that, upon such termination, the Employee's obligations under
his "lock- up" agreement with the Company shall terminate.
Section 14. Registration Rights.
Section 14(a). Piggyback Rights. In the event that the Company shall
at any time undertake to file a registration statement with the Securities and
Exchange Commission to register
- 6 -
<PAGE>
securities of the Company for sale to the public (other than a registration
statement relating solely to an employee benefit plan or a Rule 145
transaction), either for the Company's account or for the account of others,
then the Company shall provide to the Employee written notice of such intended
registration and the anticipated terms thereof. The Employee shall be entitled
to include in such registration all or any portion of the shares of Common Stock
of the Company then held by the Employee (including shares of Common Stock
issuable upon exercise of options or warrants or conversion of convertible
securities). The Company shall bear any and all costs of the preparation and
filing of the Registration Statement and the making of the offering, including
without limitation all fees of the Company's independent auditors and
accountants and the fees of one counsel to all selling shareholders, provided
only that the Employee shall be responsible for underwriting discounts and
commissions associated with the shares sold by the Employee. In the event that
the registration statement relates to an underwritten public offering, the
Employee's right to include shares in the registration and offering will be
contingent upon the Employee entering into an underwriting agreement with the
underwriters of the offering providing for reciprocal indemnification and
contribution and other customary terms appearing in underwriting agreements
issued by investment bankers. In the event that the managing underwriters of a
firm commitment underwritten offering advise the Company that marketing factors
limit the aggregate number of shares that may be included in the registration
and offering on behalf of selling stockholders, then the managing underwriters
may limit the shares included in the registration and offering on the part of
the Employee and other selling stockholders, provided that the Employee shall be
entitled to sell a pro rata portion of the aggregate number of shares which are
included on behalf of the selling stockholders, based upon the number of shares
entitled to registration rights held by all selling stockholders proposing to
include shares in the offering.
Section 14(b). Demand Rights. At the written request of the Employee
made at any time prior to termination of this Agreement or within one year
thereafter, the Company agrees promptly to prepare and file a registration
statement with the Securities and Exchange Commission to register under the
Securities Act of 1933 for sale by the Employee of any or all shares of the
Company's Common Stock, $.0001 par value per share, held by the Employee, or
issuable to the Employee upon the exercise of stock options held by the
Employee, to use its best efforts to have such registration statement declared
effective as promptly as practicable and to maintain such registration statement
in effect for not less than two years from its effective date. The Company shall
bear any and all costs of the sale of the securities pursuant to the
registration statement, except for fees payable to broker/dealers or to counsel
for the Employee which will be borne by the Employee.
- 7 -
<PAGE>
Prior to the effective date of the registration statement, the Company and the
Employee will enter into an agreement providing for reciprocal indemnification
and contribution substantially in the form customarily appearing in underwriting
agreements issued by investment bankers.
Section 14(c). Company's Registration Obligations. With regards to the
registration rights granted to the Employee under Sections 14(a) and 14(b) the
Company will use its best efforts to register or qualify the securities under
the securities laws or blue sky laws of such jurisdictions as the Employee
reasonably requires. The Company will also enter into such other agreements
(including an underwriting agreement) as are customary and take such other
actions as are reasonably required in order to expedite and facilitate the sale
of the securities. The registration rights set forth in this section may be
transferred to any transferee who acquires securities from the Employee;
provided, however, that the Company is given written notice by the Employee at
the time of such transfer stating the name and address of the transferee and
identifying the securities with respect to which the rights are being assigned,
and provided further, however, that registration rights may not be transferred
to any person in connection with the acquisition of shares in a transaction that
was registered under the Securities Act.
Section 15. Effect of Termination. Except as otherwise expressly provided for in
this Agreement, the termination of this Agreement and of the Employee's
employment hereunder shall not affect (a) the Company's obligations to pay the
Employee any salary, benefits and bonus payments accrued to the date of such
termination and unpaid, which obligations shall continue to bind the Company,
(b) the Employee's rights under Sections 12, 13 and 14 of this Agreement or
under the written terms of any stock option or other benefit plan of the
Company, or (c) any right to damages or other remedies that either party may
have (under this Agreement or otherwise) by reason of any acts or omissions of
the other party prior to such termination.
- 8 -
<PAGE>
Section 16. Medical Examination. The Employee shall be required to have a
medical examination annually by a physician acceptable to the Company and at the
Company's cost, the results of which shall be submitted to the Company.
Section 17. Waiver of Breach. Forbearance by either party to require performance
of any provision hereof shall not constitute or be deemed a waiver by such party
of such provision or of the right thereafter to enforce the same, and no waiver
by either party of any breach or default hereunder shall constitute or be deemed
a waiver of any subsequent breach or default, whether of the same or similar
nature or of any other nature, or a waiver of the provision or provisions
breached or with respect to which such default occurred.
Section 18. Notices. All notices and other communications required or permitted
hereunder shall be in writing and may be personally delivered, deposited in the
United States mail (first class postage prepaid, return receipt requested),
transmitted by telecopier or telex, with copy by United States mail (first class
postage prepaid), or sent by a private messenger or overnight courier which
issues delivery receipts, addressed to the party for whom they are intended at
the following addresses:
Address for the Company: Multimedia Access Corporation
2665 Villa Creek, Suite 200
Dallas, TX 75234
Address for the Employee: 2665 Villa Creek, Suite 200
Dallas, TX 75234
Such notices and other communications shall be deemed effective upon receipt,
and in any event be deemed received five days after deposit in the U.S. Mail,
one business day after the business day of transmission by telecopy or telex, or
one business day after the business day of deposit with an overnight courier, as
the case may be. The above addresses may be changed by notice given pursuant to
this Section 18.
Section 19. Definitions. As used in this Agreement:
Person. The term "person" shall mean and include any individual, partnership,
firm, corporation, trust, unincorporated organization, or joint venture.
Cause. The term "cause" for termination by the Company of this Agreement and of
Employee's employment hereunder shall mean such act or omission to act, or
series of acts or omissions to act, or
- 9 -
E
<PAGE>
course of conduct of the Employee that would constitute reckless or criminal
misconduct in the performance of his duties under the Agreement.
Good Reason. The term "Good Reason" for termination by the Employee of this
Agreement and of his employment hereunder shall mean (i) a "change in control"
of the Company (as defined herein) to which the Employee has not given his
express written consent prior to its becoming effective; (ii) a good faith
determination by the Employee that as a result of a "change in control" of the
Company he is unable to discharge effectively his duties and offices under this
Agreement; (iii) removal of the Employee from his position as Chief Executive
Officer of the Company or failure to reelect him to this position or as a
director of the Company; or (iv) a failure by the Company to comply with any
material provision of this Agreement where such noncompliance has not been cured
by the Company within thirty (30) days after the giving of written notice
thereof by the Employee to the Company.
Change in Control. A "change in control" with respect to the Company shall be
deemed to have occurred if (i) substantially all the assets of the Company are
sold, other than any such transaction following which the stockholders of the
Company prior to the transaction retain at least a majority of the voting equity
securities of the surviving or successor corporation; (ii) the Company is merged
or consolidated with, or becomes a subsidiary of, another corporation, other
than any such transaction following which the stockholders of the Company prior
to the transaction retain at least a majority of the voting equity securities of
the surviving or successor corporation; (iii) any "person" or "group" of persons
(as such terms are used in Section 13(d) of the Securities Exchange Act of 1934,
as amended), other than the Company or a subsidiary of the Company, and other
than persons holding greater than 10% of the outstanding voting securities
immediately following the merger of Multimedia Acquisition Corporation and
Viewpoint Systems, Inc., becomes the "beneficial owner" (as defined in Rule
13d-3 under the 1934 Act), directly or indirectly, of securities of the Company
representing 50% or more of the combined voting power of the Company's then
outstanding securities, or (iv) during any period of two consecutive years
during the term of this Agreement, individuals who at the beginning of such
period constitute the Board of Directors of the Company cease for any reason to
constitute at least a majority thereof, unless the election of each director who
was not a director at the beginning of such period has been approved in advance
by directors representing at least two-thirds of the directors then in office
who were directors at the beginning of the period.
- 10 -
<PAGE>
Section 20. Severability. The invalidity or unenforceability of any provision of
this Agreement shall not invalidate or render unenforceable any other provisions
of this Agreement.
Section 21. Binding Effect. The rights and obligations of the Company under this
Agreement shall inure to the benefit of and be binding upon the Company and its
successors and assigns. This Agreement shall be binding upon the Employee and,
except that the Employee may not delegate his obligations hereunder, shall inure
to the benefit of the Employee and the Employee's heirs, executors and
administrators.
Section 22. Governing Law. This Agreement shall be governed by, and construed
under and in accordance with, the laws of the State of Texas.
Section 23. Supersession of Prior Employment Agreement(s). As of the
commencement date of this Agreement (September , 1996), -- this Agreement shall
supersede Employee's employment agreements with the Company executed on May 28,
1996 and any and all other employment agreements Employee may have with the
Company or Viewpoint Systems, Inc. This Agreement, however, shall not divest
Employee of any accrued salary, options or other benefits previously granted and
due Employee under the terms of Employee's employment agreement with the Company
or Viewpoint Systems, Inc.
Section 24. Entire Agreement. This instrument embodies the entire agreement and
understanding by and between the parties hereto with respect to the subject
matter hereof. This Agreement may not be changed, modified or amended in whole
or in part except by a writing signed by both parties. No waiver of any of the
rights hereunder of either of the parties hereto shall be effective or binding
unless such waiver shall be in writing and signed by the party against whom such
waiver is sought to be enforced.
IN WITNESS WHEREOF, the parties have executed this Agreement as of this
1st day of October, 1996.
Multimedia Access Corporation Employee
By: /s/ William D. Jobe /s/ Glenn A. Norem
---------------------------- ---------------------------
William D. Jobe Glenn A. Norem
Chairman of the Board
- 11 -
CORPORATE PURCHASE AGREEMENT
CPCM 110.1
12/93
<PAGE>
"Portions of this Exhibit have been omitted pursuant to a request for
confidential treatment. The omitted portions, marked by [***], have been
separately filed with the Commission."
CORPORATE PURCHASE AGREEMENT
INDEX
ARTICLE 1 - DEFINITIONS............................................ 1
ARTICLE 2 - PURCHASE AND SALE...................................... 2
ARTICLE 3 - TERM OF AGREEMENT...................................... 2
ARTICLE 4 - PRICING, INVOICES AND PAYMENT.......................... 3
ARTICLE 5 - RESCHEDULING AND TERMINATION OF ORDERS................. 3
ARTICLE 6 - DELIVERY............................................... 4
ARTICLE 7 - QUALITY REQUIREMENTS................................... 4
ARTICLE 8 - PRODUCT ADDITIONS...................................... 4
ARTICLE 9 - SALE TO OTHERS......................................... 4
ARTICLE 10 - GENERAL PROVISIONS..................................... 5
ARTICLE 11 - ADDENDA/ATTACHMENTS.................................... 6
ARTICLE 12 - SURVIVAL OF PROVISIONS................................. 6
ARTICLE 13 - ENTIRE AGREEMENT....................................... 6
ATTACHMENT A - LIST OF PRODUCTS AND PRICES...............................A-1
ATTACHMENT B - SUBCONTRACTOR POLICY......................................B-1
ATTACHMENT C - INTERNATIONAL OFFSET CREDITS..............................C-1
ATTACHMENT D - PURCHASE ORDER TERMS AND CONDITIONS.......................D-1
<PAGE>
"The information below marked [***] has been omitted pursuant to a request for
confidential treatment. The omitted portions have been separately filed with the
Commission."
CORPORATE PURCHASE AGREEMENT
Agreement No. [***]
This Agreement is entered into by and between Unisys Corporation (hereinafter
"BUYER") , a Delaware corporation, with offices at Township Line and Union
Meeting Roads, Blue Bell, Pennsylvania 19424, and Multimedia Access Corp., Inc.
(hereinafter "SELLER") , a Delaware corporation, with offices at 2655 Villa
Creek Drive, Suite 200, Dallas, Texas 75234.
RECITALS
--------
BUYER intends to purchase from SELLER certain products identified herein and
SELLER desires to manufacture and sell such products to BUYER.
In consideration of the mutual covenants herein contained and intending to be
legally bound by the provisions of this Agreement, the parties agree as follows:
ARTICLE 1 - DEFINITIONS
Words, as employed in this Agreement, shall have their normally accepted
meanings. The terms "herein" and "hereof", unless specifically limited, shall
have reference to the entire Agreement. The word "shall" is mandatory, the word
"may" is permissive, the word "or" is not exclusive, the words "includes" and
"including" are not limiting and the singular includes the plural and vice
versa. The following terms shall have the described meaning:
A. "PRODUCTS" shall mean the goods or articles identified in Attachment A.
B. "SUBSIDIARY" shall mean a corporation, company or other entity thirty
percent (30%) or more of whose control or outstanding voting shares or
securities are, now or hereafter, owned or controlled, directly or
indirectly, by BUYER.
1
<PAGE>
ARTICLE 2 - PURCHASE AND SALE
- -----------------------------
A. SELLER agrees to sell and deliver the PRODUCTS identified in Attachment A
in accordance with the terms and conditions of this Agreement.
B. It is agreed that SUBSIDIARIES may purchase PRODUCTS from SELLER at the
prices set forth in Attachment A.
C. The ordering of PRODUCTS shall be by means of individual purchase orders
and change orders thereto (hereinafter referred to collectively as
"Purchase Orders"), issued from time to time by BUYER'S procurement
personnel.
D. Notwithstanding Paragraph 25 of the terms and conditions on the reverse
side of BUYER'S Purchase Orders, a copy of which is set forth in Attachment
D hereto, any Purchase Orders issued by BUYER, including the terms in
Attachment D, and the additional provisions set forth in Attachment B
hereto, provide the terms and conditions governing the purchase of PRODUCTS
hereunder. In the event of a conflict between the provisions of the main
body of this Agreement (through Article 10 and the signature lines on Page
9), BUYER'S Purchase Orders, and the Attachment B terms, the order of
precedence shall be: (1) the provisions of the main body of this Agreement
and (through Article 10 and the signature lines on Page 9); (2) the
provisions set forth on the face of BUYER'S Purchase Orders; (3) the terms
and conditions stated on the reverse side of BUYER'S Purchase Orders; (4)
the Attachment B terms.
E. The Purchase Orders shall specify applicable prices, quantities, delivery
schedules, shipping instructions, destinations, applicable specifications,
any special requirements, and other similar matters which are necessary for
the individual transaction to be adequately described. The Purchase Orders
shall also include a reference to this Agreement Number.
2
<PAGE>
"The information below marked [***] has been omitted pursuant to a request for
confidential treatment. The omitted portions have been separately filed with the
Commission."
ARTICLE 3 - TERM OF AGREEMENT
- -----------------------------
A. Term: This Agreement shall continue in force for a fixed term of [***]from
the date hereof.
B. This Agreement shall cover all Purchase Orders issued during the term
hereof, with Delivery of PRODUCTS to be made in accordance with the
mutually agreed upon delivery schedules set forth in the Purchase Orders.
C. Termination for Convenience: This Agreement may be terminated by either
party for any reason or no reason effective as of the end of[***] or at any
time thereafter, by giving the other party written notice [***] in advance.
D. Termination for Cause: If either party defaults in the performance of any
provision of this Agreement, then the non-defaulting party may give written
notice to the defaulting party that if the default is not cured within
[***] the Agreement will be terminated. If the non-defaulting party gives
such notice and the default is not cured during the [***] period, then the
Agreement shall automatically terminate at the end of that period. Buyer
will have the additional termination rights with respect to each purchase
order as set forth in Paragraph 10 of Attachment D.
E. Termination for Insolvency: This Agreement shall terminate, (i) upon the
institution by or against Buyer of insolvency, receivership or bankruptcy
proceedings or any other proceedings for the settlement of Buyer's debts,
(ii) upon Buyer's making an assignment for the benefit of creditors, or
(iii) upon Buyer's dissolution or ceasing to do business, provided Buyer
has not eliminated the applicable condition mentioned above upon [***]
advance written notice from Seller to do so.
F. Fulfillment of Orders upon Termination: Upon termination of this Agreement
for other than Buyer's breach, Seller shall continue to fulfill all orders
accepted by Seller prior to the date of termination.
3
<PAGE>
"The information below marked [***] has been omitted pursuant to a request for
confidential treatment. The omitted portions have been separately filed with the
Commission."
G. Return of Materials. All Seller's trademarks, trade names, patents,
copyrights, designs, drawings, formulas or other data, photographs,
samples, literature, and sales aids of every kind, pertaining to Seller's
business or the Products, shall remain the property of Seller. Within
thirty (30) days after the termination of this Agreement, Buyer shall
prepare all such items in its possession for shipment, as Seller may
direct, at Seller's expense. Buyer shall not make, use, dispose of or
retain any copies of any of Seller's confidential items or information
which may have been entrusted to it. Effective upon the termination of this
Agreement, Buyer shall cease to use all trademarks, marks, and trade names
of Seller, except as required to sell remaining Products or complete
performance of this Agreement.
H. Limitation of Liability: In the event of termination by either party in
accordance with any of the provisions of this Agreement, neither party
shall be liable to the other, because of such termination, for
compensation, reimbursement or damages on account of the loss of
prospective profits or anticipated sales or on account of expenditures,
inventory (except as stated in Paragraph 3.C above), investments, leases or
commitments in connection with the business, or damage to a loss of
goodwill of Seller or Buyer. Termination shall not, however, relieve either
party of obligations incurred prior to the termination.
ARTICLE 4 - PRICING, INVOICES AND PAYMENT
- -----------------------------------------
A. The unit prices for PRODUCTS are set forth in Attachment A and are firm and
fixed for the term of this Agreement subject to Paragraph 8 of Attachment
B.
B. Invoices for PRODUCTS may be submitted by SELLER when such PRODUCTS are
delivered. [***].
C. SELLER'S invoices shall include references to this Agreement number and to
Purchase Order numbers.
ARTICLE 5 - RESCHEDULING AND TERMINATION OF ORDERS
- --------------------------------------------------
A. BUYER may, without incurring liability for any additional or increased
costs resulting therefrom, make changes in the quantities of PRODUCTS
scheduled to be delivered, and/or the delivery schedules therefore;
provided, however, BUYER gives SELLER written notice of such changes at
least:
1. Thirty (30) days prior to the Delivery date specified by the Purchase
Order for standard PRODUCTS; or
4
<PAGE>
2. Ninety (90) days prior to the Delivery date specified on the Purchase
Order for nonstandard PRODUCTS.
B. BUYER may terminate Purchase Orders issued hereunder in accordance with
Paragraph 15, Termination, on BUYER'S Purchase Order; provided, however,
there shall be no charge for such termination if BUYER gives SELLER written
notice of termination at least:
1. Ninety (90) days prior to the Delivery date specified on the Purchase
Order for standard PRODUCTS; or
2. Ninety (90) days prior to the Delivery date specified on the Purchase
Order for nonstandard PRODUCTS.
ARTICLE 6 - DELIVERY
- --------------------
Time is of the essence in the performance of this Agreement. Notwithstanding the
F.O.B. terms set forth in the Purchase Orders or in Attachment A, "Delivery"
shall occur when the PRODUCTS specified on the Purchase Order arrive at the
destination designated on the Purchase Order.
ARTICLE 7 - QUALITY REQUIREMENTS
- --------------------------------
A. SELLER shall inspect and test PRODUCTS prior to delivery to BUYER to ensure
compliance with the specifications and drawings identified in Attachment A.
BUYER may test all PRODUCTS received from SELLER and may reject all
PRODUCTS that do not meet the requirements of said specifications and
drawings. BUYER may base acceptance or rejection of any PRODUCTS on
inspection. If such inspection or test by BUYER is made on SELLER'S
premises, SELLER shall furnish without additional charge all reasonable
facilities and assistance for the persons conducting such inspection or
test.
B. SELLER agrees to maintain a quality control system that shall eliminate
defects for all PRODUCTS to be delivered hereunder. Such system shall
include process controls that shall provide data for inspection and quality
verification of all critical parameters or operations on a regular and
continuing basis throughout the manufacturing process, for the term of this
Agreement.
5
<PAGE>
"The information below marked [***] has been omitted pursuant to a request for
confidential treatment. The omitted portions have been separately filed with the
Commission."
C. SELLER agrees to demonstrate its quality assurance program and process
control program to BUYER'S quality, engineering and procurement personnel.
Included in this demonstration shall be a review of current process
controls and a mutual determination of any additional controls which may be
required to assure BUYER that control of the manufacturing process is being
maintained.
ARTICLE 8 - PRODUCT ADDITIONS
- -----------------------------
It is agreed that additional PRODUCTS may be added to Attachment A during the
term of this Agreement, upon completion of negotiations between BUYER and SELLER
for such additions.
ARTICLE 9 - [***]
- ----------------
[***]
ARTICLE 10 - GENERAL PROVISIONS
- -------------------------------
A. Notices/Administration
All notices shall be in writing and shall be sent by certified mail, return
receipt requested, or by wire communications (e.g., telex, twx, or
facsimile) to the respective Contract Administrator, at the addresses noted
below, or as the same may be changed from time to time by notice similarly
given. SELLER'S written notices applicable to Purchase Orders shall also be
sent to BUYER'S Procurement Department personnel at the addresses noted in
the Purchase Orders affected.
1. For BUYER
General Administration and liaison shall be performed by [***]
(referred to herein as "BUYER'S Contract Administrator") , Unisys
Corporation, P.O. Box 500, MS C2NW14, Blue Bell, Pennsylvania 19424, or
his/her designee or successor.
2. For SELLER
General Administration and liaison shall be performed by William S.
Leftwich (referred to herein as "SELLER'S Contract Administrator"),
2665 Villa Creek, #200, Dallas, Texas 75324, or his /her designee or
successor.
3. BUYER'S Procurement Department personnel authorized by Subparagraph 4,
below, to issue Purchase Orders hereunder shall have authority, in
accordance with the terms and conditions of this Agreement, regarding
matters concerning the content of the Purchase Orders, regarding
BUYER'S testing, inspection, rescheduling and rejection of the PRODUCTS
and termination or cancellation of Purchase Orders; provided, however,
that
6
<PAGE>
the exercise of BUYER'S rights of cancellation or termination of this
Agreement, whether for SELLER'S default or BUYER'S convenience, and the
exercise of other general rights of BUYER under this Agreement are
reserved to BUYER'S Contract Administrator.
4. SELLER shall be notified, from time to time, by BUYER'S Contract
Administrator of BUYER'S locations, divisions and SUBSIDIARIES
authorized to issue Purchase Orders pursuant to and in furtherance of
this Agreement and in accord with the provisions herein. BUYER'S
Contract Administrator, wherever located, shall at all times, be
authorized to place Purchase Orders under this Agreement.
B. Governing Law
This Agreement shall be construed, governed and interpreted in accordance
with the laws, but not the rules relating to the choice of law, of the
Commonwealth of Pennsylvania.
C. Captions/Headings
The captions and headings of the Articles, clauses and paragraphs contained
herein have been inserted for the convenience of the parties and shall not
be construed as a part of or modifying any provisions of this Agreement.
D. Severability
If any court should find any particular provision of this Agreement void,
illegal, or unenforceable, then that provision shall be regarded as
stricken from this Agreement and the remainder of this Agreement shall
remain in full force and effect.
E. Divestiture
SUBSIDIARIES, business units of BUYER, and business units of SUBSIDIARIES,
which are, in whole or in part, divested by BUYER or SUBSIDIARIES during
the term of this Agreement, may continue to purchase PRODUCTS under this
Agreement. The pricing set forth in Attachment A shall be applicable for
such purchases and all such purchases shall be contributory toward the
total volume purchased during the term of this Agreement.
7
<PAGE>
F. Duty Drawback
SELLER shall advise BUYER if any portion of the PRODUCTS are imported into
the United States, as well as the country of origin of such imported items.
In the event BUYER advises SELLER that BUYER is exporting PRODUCTS to any
of the countries from which SELLER is importing, SELLER shall furnish BUYER
with proof of duties paid and execute and deliver to BUYER all documents
necessary for BUYER to claim a duty drawback of duties paid by SELLER.
ARTICLE 11 - ATTACHMENTS
- ------------------------
The attachments and other documents referred to in this Agreement and all
specifications, drawings and documents referenced therein are hereby
incorporated in and made part of this Agreement.
ARTICLE 12 - SURVIVAL OF PROVISIONS
- -----------------------------------
In addition to the rights and obligations which survive as expressly provided
for elsewhere in this Agreement, the Articles and Attachments which by their
nature should survive, shall survive and continue after any termination or
cancellation of this Agreement.
ARTICLE 13 - ENTIRE AGREEMENT
- -----------------------------
This Agreement states the entire agreement between the parties with respect to
the subject matter hereof and shall supersede all previous proposals,
negotiations, representations, commitments, writings, agreements, and other
communications, both oral and written, between the parties. This Agreement may
not be released, discharged, changed, or modified except by an instrument in
writing signed by a duly authorized representative of each of the parties.
8
<PAGE>
"The information below marked [***] has been omitted pursuant to a request for
confidential treatment. The omitted portions have been separately filed with the
Commission."
This Agreement has been duly signed by authorized representatives of the parties
and shall become effective as of the latest date set forth below (the "Effective
Date").
Multimedia Access, Inc. Unisys Corporation
By: /s/William S. Leftwich By: [***]
------------------------- ----------------------------
William S. Leftwich [***]
- ----------------------------- ----------------------------
(Printed/typed name) (Printed/ typed name)
Title: CFO Title: Sr. Procurement Specialist
----------------------- --------------------------
Date: 9/19/96 Date: Sept 17, 1996
----------------------- --------------------------
9
<PAGE>
"The information below marked [***] has been omitted pursuant to a request for
confidential treatment. The omitted portions have been separately filed with the
Commission."
Corporate Purchase Agreement
----------------------------
Attachment A
------------
List of Products and Prices
---------------------------
Model Product # Ports List Discount
- ----- ------- ------- ---- --------
PC200 20 slot Rack-mount PC 192 [***] [***]
(Includes, PC, CD-ROM (Max)
keyboard, mouse, monitor,
Ethernet card.)
CN100 Coax Input Board 8 [***] [***]
(inc. cable adapter)
C0100 Coax Output Board 8 [***] [***]
(inc. cable adapter)
UN100 UTP Input Board 16 [***] [***]
(not including cable)
U0100 UTP Output Board 16 [***] [***]
(not including cable)
UT100 UTP Transceiver [***] [***]
(not including cable)
SS100 VBX Client Software [***] [***]
(per desktop)
SS200 VBX Server Software [***] [***]
(192 users max.)
CB100 Conference Kit [***] [***]
(not including Panasonic
4-way MUX)
Training/Installation
- ---------------------
12 Student Installer Training - 2 day [***] [***]
20 Students Support Training - 1 day [***] [***]
Installation [***] [***]
To the above will be added reasonable & actual travel expenses.
<PAGE>
"The information below marked [***] has been omitted pursuant to a request for
confidential treatment. The omitted portions have been separately filed with the
Commission."
Software Services List Discount
- ----------------- ---- --------
Server Software Updates [***] [***]
(1st 12 Months after Installation)
Server Software Updates [***] [***]
Client Software Updates [***] [***]
(1st 12 Months after installation)
Client Software Updates [***] [***]
Discounts:
- ----------
The following discounts apply for the duration of this agreement, subject to the
terms of Paragraph 8. (a) of Attachment B.
Discount Category [***] [***]
Discount Category [***] [***]
Discount Category [***] [***]
All prices F.O.B. Dallas, TX.
Lead Times: 90 days from approval of order.
<PAGE>
CORPORATE PURCHASE AGREEMENT
----------------------------
ATTACHMENT B
------------
SUBCONTRACTOR POLICY
--------------------
1. DEFINITIONS
(a) "Products" shall mean those products listed in Attachment A. Products
may be changed, abandoned or added by Seller, at its sole discretion,
provided that Seller does as generally for its other customers and that
Seller gives thirty (30) days prior written notice to Buyer. Seller
shall be under no obligation to continue the production of any Product,
except as provided herein.
(b) "Territory" shall mean sales to end-user account by Unisys or its
subsidiaries within the established territory of Unisys Corporation and
its subsidiaries.
(c) "Software" shall mean all software, computer programs, source codes,
object codes, listings, and related materials in machine readable or
printed form (including firmware and all types of media) and all updates
and modifications thereto, that are included in the Product.
2. APPOINTMENT AND AUTHORITY OF BUYER
(a) Appointment: Subject to the terms and conditions set forth herein,
Seller hereby appoints Buyer as Seller's non-exclusive Buyer for the
Products in the Territory, and Buyer hereby accepts such appointment.
Seller shall retain the right to appoint other Buyers with
responsibility for sale of the Products in the Territory.
(b) Independent Contractors: The relationship of Seller and Buyer
established by this Agreement is that of independent contractors, and
nothing contained in this Agreement shall be construed to:
(i) give either party the power to direct and control the day-to-day
activities of the other,
(ii) constitute the parties as partners, joint venturers, co-owners or
otherwise as participants in a joint or common undertaking, or
(iii) allow Buyer to create or assume any obligation on behalf of Seller
for any purpose whatsoever.
B-1
<PAGE>
All financial obligations associated with Buyer's business are the sole
responsibility of Buyer. All sales and other agreements between Buyer and its
customers are Buyer's exclusive responsibility and shall have no effect on
Buyer's obligations under this Agreement. Buyer shall be solely responsible for,
and shall indemnify and hold Seller free and harmless from, any and all claims,
damages, or lawsuits for personal injury or damage to tangible property
(including Seller's attorneys' fees) arising solely out of the wrongful or
negligent acts of Buyer, its employees or its agents.
3. TERMS OF PURCHASE OF PRODUCT BY BUYER
(a) Purchase of Products Subject to Software License and Other Restrictions.
The sale of each Product to Buyer and the transfer of title for each
purchased Product to Buyer shall not include a sale of the Software or
transfer of its title but shall instead include a fully paid license for
Buyer to transfer the Software to its customers upon execution of a
Software license by Buyer's customers in accordance with the terms of
Subsection 7 (a) below. Seller shall retain full title to the Software
and all copies thereof, and Buyer and its customers may use the Software
only in accordance with the provisions of their executed Software
licenses. Neither Buyer nor its customers shall have any access to or
rights in the Software source codes except as provided under a separate
Source Code Agreement to be executed between Seller and the Buyer or
customer. Neither Buyer nor its customers shall have the right to copy,
modify, or remanufacture any Product or part thereof except as provided
under separate, specific Agreements between the Seller and the Buyer or
its customers.
4. TRAINING, INSTALLATION, AND SERVICE
(a) Services by Buyer: Buyer shall have the responsibility to install the
Products, test the installed Products, provide first-level customer
support, and train the customers with respect to the Products sold.
Seller agrees to provide field assistance in these areas when requested
by Unisys during the first six months of the Term of the Agreement,
until Unisys personnel are fully trained. The services shall be
performed by trained personnel of Buyer as described in Paragraph 4 (b)
and shall be prompt and of the highest quality.
B-2
<PAGE>
(b) Training by Seller: Seller shall provide sales and service training to
Buyer's personnel at periodic intervals, with the frequency and content
of the training to be determined by. Seller. When possible, such
training shall be given at Buyer's facilities, but it may be necessary
to provide combined training at a geographically central location near
but not in the Territory. In either case, Seller and Buyer shall each
pay their own costs for travel, food and lodging during the training
period. Training costs per Price List on Attachment A. In addition to
sales and service training, Seller shall cooperate with Buyer in
establishing efficient service procedures and policies.
5. REPAIRS
(a) Factory Authorized Service Centers: At Buyer's option, it may request to
qualify as a Factory Authorized Service Center. If Buyer should so
request, Seller shall have sole discretion in determining whether or not
to qualify Buyer as a Factory Authorized Service Center.
(b) Repair Provisions: For so long as Buyer is not a Factory Authorized
Service Center, service and repairs of the Products may be obtained from
Seller by delivery of the Product to Seller's office in Dallas, Texas,
postage prepaid, accompanied by a written request. If such service and
repair are not covered by Seller's standard limited warranty (described
below), Seller may charge the customer for Seller's expenses and hourly
charges according to Seller's established rates and terms in effect.
6. WARRANTY TO BUYER'S CUSTOMERS
(a) Standard Limited Warranty: Buyer shall pass on to its customers Seller's
standard limited warranty for the Products, including the limitations
set forth in Subsections 6(b) and 6(c) below. This warranty shall cover
repair or replacement of all parts necessary to maintain the Products in
good working order provided that the Product is returned to Seller's
office in Dallas, Texas, postage paid; and shall extend for a period of
twelve (12) months from the date of delivery. This warranty is
contingent upon proper use of a Product in the application for which it
was intended and does not
B-3
<PAGE>
cover Products that were modified without Seller's approval or that were
subjected by the customer to unusual physical or electrical stress,
among other terms and limitations provided therein. In addition to the
above warranty, the provisions of Paragraph 8, "Warranty" of Attachment
D are incorporated by reference in this Paragraph 6(a).
(b) No Other Warranty: EXCEPT FOR THE EXPRESS WARRANTY SET FORTH ABOVE,
SELLER GRANTS NO OTHER WARRANTIES, EXPRESS OR IMPLIED, BY STATUTE OR
OTHERWISE, REGARDING THE PRODUCTS, THEIR FITNESS FOR ANY PURPOSE, THEIR
QUALITY, THEIR MERCHANTABILITY, OR OTHERWISE.
(c) Limitation of Liability: SELLER'S LIABILITY UNDER THE WARRANTY SHALL BE
LIMITED TO REPAIR OR REPLACEMENT OF THE PRODUCT OR PARTS THEREOF AS
PROVIDED ABOVE. IN NO EVENT SHALL SELLER BE LIABLE FOR THE COST OF
PROCUREMENT OF SUBSTITUTE GOODS BY THE CUSTOMER, EXCEPT FOR NORMAL
COVER-TYPE DAMAGES AVAILABLE TO BUYER BY LAW, OR FOR ANY SPECIAL,
CONSEQUENTIAL OR INCIDENTAL DAMAGES FOR BREACH OF WARRANTY.
(d) High Risk Activities: Buyer acknowledges that the Seller's Products are
not fault-tolerant and are not designed, manufactured or intended by
Seller for use or resale in online control equipment in hazardous
environments requiring fail-safe performance, such as in the operation
of nuclear facilities, aircraft navigation or communication systems, air
traffic control, direct life support machines, or weapons systems, in
which the failure of products could lead directly to death, personal
injury, or severe physical or environmental damage ("High Risk
Activities"). Seller specifically disclaims any express or implied
warranty of fitness for High Risk Activities. Buyer represents and
warrants that it will not use Seller's Products or technology or
derivative technology and will not use, distribute or resell Products
for High Risk Activities.
7. SOFTWARE LICENSING AND SERVICES
(a) License to Buyer: Seller hereby grants to Buyer a nonexclusive,
royalty-free, fully paid license to use, demonstrate, and sublicense the
object code of the Software in the Territory in carrying out Buyer's
obligations under the provisions of this Agreement. The license shall
terminate on the termination of this Agreement for any reason.
B-4
<PAGE>
"The information below marked [***] has been omitted pursuant to a request for
confidential treatment. The omitted portions have been separately filed with the
Commission."
(b) Sublicensing:
(c) Services: To each licensee of the Software, Seller shall provide the
opportunity to subscribe for the optional software maintenance services
that are referred to in the License.
8. BUYER DISCOUNT PROVISIONS
(a) Buyer shall be entitled to the prices listed in Attachment A, which
represent [***] discount to Seller's U.S. List Prices, for the Term of
the Agreement, [***]
B-5
<PAGE>
"The information below marked [***] has been omitted pursuant to a request for
confidential treatment. The omitted portions have been separately filed with the
Commission."
ATTACHMENT C
TO
CORPORATE PURCHASE AGREEMENT
NO. [***]
INTERNATIONAL OFFSET CREDITS
Seller in consideration of the issuance of Purchase Order(s) by Buyer, herewith
agrees to transfer on a best effort basis to Buyer, indirect offset credits in
the aggregate amount of [***] the value of individual Purchase Order(s) within
[***] from date of such Purchase Order(s).
The aforementioned indirect offset credits are to be the result of purchases by
Seller in Canada, Israel, Mexico, Spain, Brazil and Australia or exports from
these countries by Seller, subject to award of indirect offset credits for such
procurement or exports by and specific approval for transfer of, such awarded
credits to Buyer, from the appropriate authorities in these countries.
Seller further agrees to provide to Buyer within [***]from date of Purchase
Order(s) a breakdown of the aggregate amount of indirect offset credits involved
on a country-by-country basis for the above named countries. Thereafter, Seller
will provide to Buyer progress reports on a quarterly basis until such time as
the aggregate amount involved has been reached or has been limited by
circumstances beyond Seller's control.
Buyer at its option may declare offset credits for purchases and shipments made
from Seller within the boundaries of the abovementioned countries.
B-6
<PAGE>
Attachment D
PURCHASE ORDER TERMS AND CONDITIONS
1. DEFINITIONS - The word "Articles" means the goods, materials, products,
technical data, intellectual property, drawings, or services identified in
this purchase order The term "Government" means the government of the
United States of America or any department or agency thereof.
2. ACCEPTANCE OF PURCHASE ORDER - This purchase order constitutes Buyer offer
to Seller and shall become a binding contract upon the terms and condition
set forth herein upon acceptance by Seller either by signing and returning
the acknowledgment form hereof, commencement of effort, or by prompt
shipment conforming Articles, whichever occurs first. This purchase order
does not constitute an acceptance by Buyer of any offer to sell, any
quotation, or any proposal. Reference in this purchase order to any such
offer to sell, quotation, proposal shall in no way constitute a
modification of any of the terms and conditions of this purchase order to
any degree whatsoever. Any terms and conditions proposed by Seller in
acknowledging or accepting Buyer's offer which are inconsistent with or in
addition to the terms set forth in this purchase order shall not be binding
upon Buyer and shall be void and of no effect, unless and to the extent
expressly accepted in writing by Buyer's authorized procurement
representative.
3. DATA - Seller acknowledges that it has in its possession all applicable
specifications, drawings and documents necessary to perform its obligation
hereunder at the price and schedule set forth. All such documentation shall
be deemed to be a part of this purchase order.
4. PACKAGING AND SHIPPING - Deliveries shall be made as specified without
charge for packaging or storage unless otherwise specified, and Articles
shall be suitable packed to secure lowest transportation costs and in
accordance with the requirements of common carriers. Articles shall be
described on bills of lading Buyer's order numbers must be plainly marked
on all packages, bills of lading and shipping orders. Buyer's count or
weight shall be final and conclusive on shipments. Except as consented to
by Buyer, Seller shall not ship in advance of schedule and shall ship exact
quantities ordered.
5. TAXES AND DUTIES - The prices stated herein include all applicable taxes
and duties, except state and local sales and use taxes which by statute may
be passed on to Buyer. Such sales and use taxes shall be separately stated
on Seller's invoice. This order shall include all related customs duty and
import drawback rights, if any, including rights developed by substitution
and rights which may be acquired from Seller's suppliers, which Seller can
transfer to Buyer. Seller agree to inform Buyer of the existence of all
such rights, and to supply such document as may be required to obtain such
drawbacks, unless waived by Buyer. Seller agrees to certify to Buyer the
country of origin for the goods supplied under this purchase order.
1
<PAGE>
6. PRICES - Seller represents that prices quoted to or paid by Buyer shall not
exceed current prices charged to any other customer of Seller for items
which are the same or substantially similar to the Articles, taking into
account the quantity under consideration. Seller shall refund any amounts
paid by Buyer in excess of such price.
7. SET-OFF - Buyer shall be entitled at all times to set-off any amount owing
at any time from Seller to Buyer, any of its divisions or any of its
affiliates or subsidiaries against any amount payable at any time to Seller
by Buyer, any of its divisions of any of its affiliates or subsidiaries.
8. WARRANTY - Seller warrants that all Articles will conform to applicable
specifications, drawings, descriptions, and samples, and will be of new
manufacture, good workmanship and materials, and free from defect, claim
encumbrance, or lien. Unless manufactured pursuant to detail design
furnished by Buyer, Seller assumes design responsibility and warrants the
Articles to be free from design defect and suitable for the purposes
intended by Buyer. If the Articles delivered or services furnished
hereunder do not meet the warranties specified herein or otherwise
applicable, Buyer may, at its option return at Seller's expense the
defective or nonconforming Articles for credit or refund, or require Seller
to correct, at no cost to Buyer, any defective or nonconforming Articles or
services Articles required to be corrected or replaced shall be subject to
this clause and Clause 9 entitled "Inspection" in the same manner and to
the same extent as Articles delivered under this order originally. Seller's
warranties, together with its service guarantees, shall run to Buyer and
its customers or users of the Articles and shall not be deemed to be
exclusive. Buyer's inspection, approval, acceptance use of or payment for
all or any part of the Article shall in no way affect its warranty rights
whether or not breach of warranty had become evident at the time.
9. INSPECTION - The Articles may be inspected by Buyer at all times and places
and at any stage or production, and if at the premises of Seller, Seller
without additional charge shall provide all reasonable facilities and
assistance required for safe and convenient test and inspection. The
foregoing shall not relieve Seller's of its obligation to make full and
adequate test and inspection. Buyer may base acceptance or rejection of any
or all Articles on inspection by sampling. From the time of notice of
rejection of defective Articles upon inspection, or for a breach of
warranty, risk of loss thereof shall be upon Seller until redelivery, if
any, to Buyer. All rejected Articles may be returned to Seller at Seller's
risk and expense or be held by Buyer at Seller's risk and expense, subject
to Seller's disposal.
10. DEFAULT - Buyer may, by written notice to Seller, cancel this purchase
order for default, (a) if the Seller fails to deliver the Articles or to
perform the services strictly within the time specified herein, or if no
time is specified, within a reasonable time (b)if the Articles delivered do
not conform to contractual requirements or if Seller fails to perform any
of the other provisions of the purchase order, or so fails to make progress
as to endanger performance of the contract in accordance with its terms;
or(c)if Seller's financial conditions shall at any time become
unsatisfactory to Buyer. Upon such cancellation Seller will deliver to
Buyer any of the Articles, for which Buyer shall make written request at or
after cancellation and Buyer will pay Seller the fair value of any such
property so requested and delivered.
2
<PAGE>
11. CHANGES - Buyer shall have the right by written notice to change the extent
of the work covered by the purchase order, the drawings, specifications, or
other description herein, the time method or place of delivery or the
method of shipment or packaging or to suspend work. Upon receipt of any
such notice, Seller shall proceed promptly to make the changes in
accordance with the terms of the notice. If any such change causes an
increase or decrease in the cost of performance or in the time required for
performance Seller shall provide prompt notice to Buyer of any change of
costs or time for performance and an equitable adjustment shall be
negotiated promptly and the purchase order modified in writing accordingly.
12. TOOLS AND MATERIALS - Title to and the right of immediate possession of all
tooling, equipment, or materials furnished or paid for by Buyer directly or
indirectly for use hereunder shall be and remain in Buyer. Buyer does not
guarantee or warrant the accuracy of any tooling furnished by it. Seller
shall (a) be responsible for all loss or damage to such tooling, equipment,
or materials while in its possession and insure its risk in this respect
with adequate fire and extended coverage insurance; (b) clearly mark the
same as belonging to Buyer, keep it segregated in Seller's plant and treat
it confidentially; (c) keep the same in good operating condition; and (d)
use the same exclusively for the performance of work for Buyer and not for
production of larger quantities than specified or in advance of normal
production schedules, except with Buyer's written consent. Tooling,
equipment or materials furnished shall not include Government furnished
items of this sort. Upon completion of this order, all such items shall be
disposed of as Buyer directs.
13. PATENTS, COPYRIGHTS, TRADEMARKS AND TRADE SECRETS - The Seller shall defend
at its expense and hold harmless Buyer, its subsidiaries, agents, customers
and users, from any and all loss, damages or liability (including legal
expense) for or on account of, or resulting from, any claim of infringement
of any existing or future patents, copyrights, or trademarks, or violation
of any trade secrets, with respect to any of the Articles furnished under
this purchase order. The fact that Buyer furnishes specifications to Seller
with respect to any of the Articles, shall neither relieve the Seller from
its obligations hereunder nor limit the Seller's liability therefor, nor
shall the same be deemed to constitute an undertaking by Buyer to hold
Seller harmless against any such claim which arises out of compliance with
the specifications.
14. CONFIDENTIAL INFORMATION - Seller shall not disclose to any third party or
use any confidential information concerning this purchase order or other
material intended for use therewith without first obtaining the written
consent of Buyer. The Buyer shall retain title at all times to such
drawings, specifications, samples and other material, all of which,
including copies thereof, upon request or upon completion of this order,
shall be promptly returned to Buyer. Any knowledge or information which
Seller may disclose to Buyer in connection with the purchase of any of the
Articles shall not, unless otherwise specifically agreed upon in writing by
Buyer, be deemed to be confidential information and shall be acquired free
from any restriction as part of the consideration for this purchase order.
3
<PAGE>
15. TERMINATION - At any time Buyer may at its option with or without reason
terminate this order for convenience in whole or in part by written or
telegraphic notice. Any claim of Seller shall be settled on the basis of
reasonable costs it has incurred in performance of this purchase order.
16. COMPLIANCE WITH LAW - Seller shall in the performance of the purchase order
comply with all applicable laws, executive orders, regulations, ordinances,
proclamations, demands and regulations of the Government, or of any state
or local government authority which may now or hereafter govern performance
hereunder.
17. NOTICE OF DELAY - Whenever an actual or potential labor dispute or other
event is delaying or threatens to delay the timely performance of this
order, Seller will immediately give notice thereof, including all relevant
information with respect thereto, to Buyer.
18. ASSIGNMENT AND SUBCONTRACT - Neither this purchase order nor any duty of
right thereunder shall be delegated or assigned by Seller without the prior
written consent of Buyer. Seller agrees that it will not subcontract for
completed or, substantially completed Articles or major components thereof
without Buyers prior written consent. Any assignment not made in accordance
with the terms and conditions of this paragraph is void and will have no
effect.
19. ADVERTISING - Seller shall not, without first obtaining the written consent
of Buyer, in any manner advertise or publish the fact that Seller
contracted to furnish Buyer the Articles.
20. INDEMNITY - Seller agrees to indemnify and hold Buyer harmless from any and
all claims and liability, including expenses, including but not limited to,
legal fees and court costs, for injuries or death to persons or damage to
or destruction of property caused by or resulting from the acts or
omissions of Seller, its agents, suppliers or employees in the performance
of this order and defend at Sellers expense all suits or proceedings
arising out of any of the foregoing. If work or services under this order
are to be performed within the premises occupied or controlled by Buyer or
a customer of Buyer, then Seller agrees as follows: (a) to accept the
premises in their present condition as safe and satisfactory for the work
or services to be performed, (b)to hold Buyer and its customers harmless
from all injuries, damages, and claims arising from such performance, (c)
to maintain insurance that will protect Seller, Buyer, and its customers
from claims under Workmen's Compensation Acts and from any other claims for
damages, personal injury, or death to employees of Seller, Buyer, or its
customers, or any other persons, which may arise from performance of work
or services covered by this order, whether performed by Seller or any
subcontractor, or anyone directly or indirectly employed by either of them,
and (d) to file certificates of such insurance with Buyer, and to obtain
Buyer's approval of the adequacy of protection whenever so required.
21. HAZARDOUS CHEMICALS AND HAZARDOUS MATERIALS - Prior to shipment or transfer
of any hazardous chemicals (as defined by regulations promulgated pursuant
to the occupational Health and Safety Act) and hazardous materials (as
defined by regulations promulgated by the U.S. Department of Transportation
and
4
<PAGE>
Appendix A of Federal Standard number 313A), Seller shall provide the Buyer
with an appropriate, up-to-date Material Safety Data Sheet.
22. U.S. GOVERNMENT EXPORT CONTROLS - If Buyer provides or has provided Seller
articles or technical data, identified as subject to U.S. export controls,
Seller's use in connection with performance under this purchase order, then
Seller responsible for compliance with U.S. Government export regulations
15 CFR 368-399, 22 CFR Parts 121-130, DOD Directive 5230.25 and other U.S.
Government regulations applicable to the disclosure or export of articles
technical data to Foreign Nationals of the United States. Buyer reserves
the right to obtain any necessary U.S. Government export approvals,
licenses, certification and assurances.
23. DELIVERY - Delivery according to schedule is a major condition of this
order. Therefore, time is of the essence with respect to any delivery or
service to be provided hereunder.
24. WAIVER - The failure of Buyer to insist, in any one or more instances, upon
the performance of any of the terms, covenants or conditions of this
purchase order or to exercise any right hereunder, shall not be construed
as a waiver or relinquishment of the future performance of any such term,
covenant or condition or the future exercise of such right, but the
obligation of Seller with respect to such future performance shall continue
in full force and effect.
25. ENTIRE AGREEMENT - This purchase order constitutes the entire agreement and
exclusive statement of the terms between the parties with respect to the
purchase and sale of the Articles hereunder and supersedes all previous
communications representations, or agreements between the parties with
respect thereto. No alteration, modification or amendment of any of the
provisions hereof shall be binding unless in writing and signed by Buyer's
authorized procurement representative.
26. CONSTRUCTION - This purchase order and the performances of the parties
hereunder shall be construed in accordance with and governed by the laws of
the Commonwealth of Pennsylvania.
27. SUPPLEMENTARY PROVISIONS TO GOVERNMENT CONTRACTS - For work involving or
subject to a U.S. Government contract, the applicable provisions are
contained in the supplement attached hereto and made a part of this
purchase order.
5
Multimedia Access Corporation letterhead
November l, 1995
Mr. Philip M. Colquhoun
6201 Sandydale Drive
Dallas, TX 75248
RE: Offer of Employment
Dear Phil,
On behalf of MultiMedia Access Corporation, (MMAC), I am pleased to extend to
you an offer of employment as President and General Manager of Viewpoint Systems
Inc. and Osprey Technology Inc., both wholly owned subsidiaries of MultiMedia
Access Corporation. The details of our offer are as follows:
1. Your start date will be 11/01/95.
2. Your base salary will be $7,500 per month, payable semi-monthly on or about
the 15th and 30th of each month for the period from your start date through
December 31, 1995. As of January 1, 1996, your salary will be $ 11,667 per
month. You will receive a signing bonus of $3,500.00 which will be paid in the
first payroll check of 1996.
3. You will be eligible to participate in the MultiMedia Access Corporation
Executive Bonus program (cash and/or stock). Your 1996 cash bonus plan is 50% of
your base salary and is payable upon accomplishment of objectives as attached.
You will receive a guaranteed draw of one-half of your 1996 bonus potential (or
$35,000), 25% of which will be paid to you at the end of each quarter. If your
total bonus earned in 1996 is more than $35,000, the draw will be subtracted
from your total 1996 bonus payment. If the total 1996 bonus is less than $35,000
(or zero), the draw is non-recoverable. Bonus plans are subject to change from
year to year at the sole discretion of the Board of Directors
4. MMAC agrees that at a meeting of its Board of Directors to be held on
November 28, 1995, you will be granted an initial option pursuant to the
Company's 1995 Stock Option Plan to purchase up to 200,000 shares of MMAC Common
Stock at an option price equal to the then current Fair Market Value (as defined
in the Plan), such Option to be exercisable as to 12/60th of the Shares at the
expiration of the first year following the date of grant of the Option and as to
an additional l/60th of the shares at the expiration of each of the next
consecutive 48 months thereafter. You will also have the right to an additional
grant of an option for an additional
<PAGE>
50,000 shares of MMAC Common Stock, at the then Fair Market Value, after (i) 18
months of service to MMAC. or (ii) upon approval of the Board of Directors. The
agreement pursuant to which the initial Option is granted, will provide that the
Option will be immediately exercisable as to all of the Option Shares in the
event of a Change of Control, provided however, that only 100,000 of the Option
Shares (in addition to what has already been vested) shall be immediately
exercisable in the event the Change of Control results from a business
combination with Reply Corporation prior to June 30, 1996. In the event of a
business combination with Reply Corporation within such time period, the Option
Shares which remain unexercisable shall become exercisable based on the original
vesting schedule.
5. In addition to rights granted under the 1995 Employee Stock Option Plan, for
purposes hereof and for purposes of the Stock Option Plan pursuant to which the
Option is granted, a "Change of Control" shall be deemed to have occurred if (i)
MMAC sells substantially all of its assets, or (ii) MMAC merges or combines with
another entity following which MMAC is not the surviving entity.
If your grant under the 1995 Employee Stock Option Plan is repriced, resulting
in the cancellation of existing option grant and the reissuance of new grant at
the revised pricing, the new grant, related to this agreement, will be for not
less than 50% of the original Option grant.
The Board of Directors of MMAC will have the right to accelerate the exercise
dates with respect to all or a portion of the Option Shares based on your
performance.
6. You will be entitled to participate in the Company's standard benefits plan
applicable to all employees as described in the MMAC Outline of Benefits. You
will also receive 15 days vacation, 5 days of which will be taken between
Christmas and New Years.
7. This is intended to be an agreement to employ you for not less than 12
months. After 12 months, if your employment is terminated by MMAC for other than
Cause, MMAC will pay you severance payments in an amount equal to six months
salary plus one half of the earned or guaranteed bonus for the year in which the
termination takes place. These severance payments shall be paid in semi-monthly
installments over the six month period. The term "Cause" shall mean (a.)
Employee engages in actions involving willful and material insubordination,
misconduct or gross negligence, (b.) Employee is convicted of, or pleads nolo
contendere to, a felony or a crime involving moral turpitude, (c.) Employee is
habitually absent, or (d.) Employee has failed to meet the reasonable
performance standards expected of an executive of your experience and skill. The
existence or nonexistence of Cause will be determined by the Company's Board of
Directors after notice in writing is given to Employee of such determination.
Except in the case of (b.) above, employee shall be given the opportunity to
make a presentation to the Board of Directors for its consideration.
If you resign from MMAC or are terminated with Cause, you will receive two weeks
salary after your resignation/termination date.
8. If you are removed from your position as President and General Manager of
either subsidiary (unless mutually agreeing thereto), or if you shall be
required to relocate your office
<PAGE>
or residence outside of the Dallas/Fort Worth Metroplex, and as a result of any
such event or such relocation you elect to terminate your employment, such
termination shall be treated as a termination of your employment by MMAC without
Cause.
This offer is contingent upon compliance with the Immigration Reform and Control
Act of 1986, which requires MMAC to verify that each employee hired is legally
entitled to work in the United States. Enclosed is a copy of the Employment
Verification Form I-9, with instructions, as required by such Act. Please review
and execute this document and be prepared to bring the appropriate documentation
on the day you first report to work.
This offer is further contingent upon your execution of (i) the MultiMedia
Access Corporation Proprietary Rights and Information Agreement in the form
attached hereto, and (ii) the MultiMedia Access CorPoration Indemnification
Agreement in the form attached hereto.
Phil, we look forward to working with you. Please indicate your acceptance by
signing and returning to me a copy of the offer letter.
Sincerely,
MultiMedia Access Corporation
By: /s/ Glenn A. Norem
-------------------------------------
Glenn Norem
President and Chief Executive Officer
Accepted by:
/s/ Philip M. Colquhoun
- ---------------------------
Philip M. Colquhoun
1-15-96
- ---------------------------
Date
MultiMedia Access Corporation letterhead
March 13, 1995
Mr. William Leftwich
521 Spinner Road
DeSoto, TX 75115
RE: Offer of Employment
Dear Bill:
On behalf of Multimedia Access Corporation, (MMAC), I am pleased to
extend to you an offer of employment as Vice President of Finance and Chief
Financial Officer. The details of the offer are as follows:
1. Your start date will be agreed upon concurrent with the acceptance
of our offer.
2. Your base salary will be $ 7,500 per month, payable bi-monthly on or
about the 15th and 30th each month. Upon the completion of the initial
public offering, your base salary will be adjusted to $9,583 per month.
3. You will be eligible to participate in the Multimedia Access
Corporation Executive Bonus program (cash and/or stock). Cash bonus is
targeted at 30% of your base salary.
4. MMAC will recommend to its Board of Directors that you be granted an
option pursuant to the Company's 1995 Stock Option Plan to purchase
60,000 shares of MMAC Common Stock, each such option vesting 12/60 of
the shares on the date which is twelve months from the date of grant
and 1/60 of the shares each month thereafter, such that all of the
shares are fully vested five years from the date of grant. The initial
60,000 shares will be at the fair market value per share as determined
on the date of grant by the Board of Directors.
The Board of Directors of MMAC reserves the right to accelerate your
vesting in any or all option grants for meeting key milestones and
profitability levels which will be defined.
5. You will be entitled to participate in the Company's standard
benefits plans applicable to all employees, to be described in the
forthcoming MMAC Outline of Benefits. You will also be entitled to two
weeks of vacation, as well as time off for the week between Christmas
and New Year's.
6. Your employment with the Company will be "at will" and may be
terminated by you or the Company at any time, for any reason or no
reason. By accepting this offer of employment, you accept employment on
such terms.
This offer is contingent upon compliance with the Immigration Reform
and Control Act of 1986, which requires MMAc to verify that each employee hired
is legally entitled to work in the United States. Enclosed is a copy of the
Employment Verification Form I-9, with instructions, as required by such Act.
Please review and execute this document and be prepared to bring the appropriate
documentation on the day you first report to work.
<PAGE>
William S. Leftwich
Offer of Employment
March 13, 1995
Page 2
This offer is further contingent upon your execution of an employee
proprietary information agreement in the standard form utilized by the Company
for its employees. Such agreement, a copy of which is enclosed, provides
generally that the Company shall own all proprietary rights you develop while
employed by the Company, and contains certain non-competition and
non-solicitation agreements. Furthermore, the terms and conditions of your
employment agreement are considered confidential ar are not to be discussed with
anyone but your immediate superior and Officers of the Company.
Bill, we look forward to working with you. If you have any questions,
please call me at (214) 488-7201. Please indicate your acceptance by signing and
returning to me a copy of this letter.
Sincerely,
Multimedia Access Corporation
By: /s/ Glenn A. Norem
-----------------------------------
Glenn Norem
President & Chief Executive Officer
Accepted By:
/s/ William S. Leftwich
- ---------------------------
William S. Leftwich
3/13/95
- ---------------------------
Date
Multimedia Access Corporation letterhead
August 1, 1996
Mr. David T. Stoner
2815 Colonial Circle
McKinney, TX 75070
RE: Offer of Employment
Dear Dave,
On behalf of Multimedia Access Corporation, (MMAC), I am pleased to extend to
you an offer of employment as Vice President, Product Development and Operations
for Multimedia Access Corporation. The details of our offer are as follows:
1. Your start date will be August 19, 1996 or as soon as possible thereafter.
2. Your base salary will be $10,000.00 per month, payable semi-monthly on or
about the 15th and 30th of each month.
3. MMAC agrees that at the next meeting of its Board of Directors you will be
granted an initial option pursuant to the Company's 1995 Stock Option Plan to
purchase up to 100,000 shares of MMAC Common Stock at an option price equal to
the then current Fair Market Value (as defined in the Plan), such Option to be
exercisable as to 12/60 of the Shares at the expiration of the first year
following the date of grant of the Option and as to an additional 1/60th at the
expiration of each of the next consecutive 48 months thereafter.
4. You will be eligible to participate in the MMAC Executive Bonus Plan (cash
and/or stock) which is payable upon accomplishment of objectives and milestones
to be defined.
5. You will be entitled to participate in the Company's standard benefits plan
applicable to all employees as described in the MMAC Outline of Benefits. In
calendar year 1996, you will receive 10 days vacation, 5 days of which must be
taken between Christmas and New Years. In following years you will receive 15
days vacation, 5 of which must be taken between Christmas must be taken between
Christmas and New Years.
6. If your employment is terminated by MMAC for other than Cause, MMAC will
continue to pay you for three months of your then current salary as a severance
payment.
Your employment with the Company will be "at will" and may be terminated by you
or the Company at any time, for any reason or no reason. By accepting this offer
of employment, you accept employment on such terms.
<PAGE>
This offer is contingent upon compliance with the Immigration Reform and Control
Act of 1986, which requires MMAC to verify that each employee hired is legally
entitled to work in the United States. Enclosed is a copy of the Employment
Verification Form I-9, with instructions, as required by such Act. Please review
and execute this document and be prepared to bring the appropriate documentation
on the day you first report to work.
This offer is further contingent upon your execution of (i) the Multimedia
Access Corporation Proprietary Rights and Information Agreement in the form
attached hereto, and (ii) the Multimedia Access Corporation Indemnification
Agreement in the form attached hereto. The Proprietary Rights and Information
Agreement provides generally that the Company shall own all proprietary rights
you develop while employed by the Company, and contains certain non-competition
and non-solicitation agreements. Furthermore, the terms and conditions of your
employment agreement are considered confidential and are not to be discussed
with anyone but your immediate superior and Officers of the Company.
Dave, we look forward to working with you. Please indicate your acceptance by
signing and returning to me a copy of the offer letter.
Sincerely,
Multimedia Access Corporation
By: /s/ Philip M. Colquhoun
----------------------------
Philip M. Colquhoun
President
Accepted by:
/s/ David T. Stoner
- ------------------------
David T. Stoner
8/2/96
- ------------------------
Date
September 20, 1994
Neal Page
RE: Offer of Employment
Dear Neal,
On behalf of Multimedia Access Corporation, (MMAC), and its new
division, Osprey Systems (Osprey), I am pleased to extend to you an offer of
employment with Osprey as Director of Business Development. The details of the
offer are as follows:
1. Your start date will be October 3, 1994 or earlier is possible.
2. Your base salary will be $7,500.00 per month, payable bi-monthly on or
about the 15th and 30th of each month. You will be eligible for performance
bonuses for meeting goals and objectives.
3. MMAC will recommend to its Board of Directors that you will be granted an
initial option pursuant to the Company's 1994 Stock Option Plan to purchase
50,000 shares of MMAC Common Stock at fair market value per share as determined
on the date of the grant by the Board of Directors. These options will vest such
that no option for the first six months of employment, 6/60th of the options
will vest at six months, and you will vest at 1/60th per month thereafter.
Assuming you remain employed with the Company, the options will be fully vested
5 years after commencement of employment.
4. MMAC will recommend to its Board of Directors that you be granted an
additional option pursuant to the COmpany's 1994 Stock Option Plan to purchase
30,000 shares of MMAC Common Stock at the fair market value per share following
the Initial Public Offering. These options will vest such taht no option will
vest for the first six months of employment, 6/60th of the options will vest at
six months, and you will vest at 1/60th per month thereafter. Assuming you
remain employed with the Company, the options will be fully vested 5 years after
commencement of employment.
5. You will be entitled to participate in the Company's standard benefits plan
applicable to all employees, to be described in the forthcoming MMAC Outline of
Benefits.
6. Your employment with the Company will be "at will" and may be terminated by
you or the Company at any time, for any reason or no reason. By accepting this
offer of employment, you accept employment on such terms.
This offer is contingent upon compliance with the Immigration Reform and
Control Act
<PAGE>
of 1986, which requires MMAC to verify that each employee hired is legally
entitled to work in the United States. Enclosed is a copy of the Employment
Verification Form I-9, with instructions, as required by such Act. Please review
and execute this document and be prepared to bring the appropriate documentation
on the day you first report to work.
This offer is further contingent upon your execution of an employee
proprietary information agreement in the standard form utilized by the Company
for its employees, Such agreement, a copy of which is enclosed, provides
generally that the Company shall own all proprietary rights you develop while
employed by the Company, and contains certain non-competition and
non-solicitation agreements.
Furthermore, the terms and conditions of your employment agreement are
considered confidential and are not to be discussed with anyone but your
immediate superior and Officers of the Company.
Neal, we look forward to working with you. If you have any questions,
please call me at (214) 488-7201. Please indicate your acceptance by signing and
returning to me a copy of the offer letter.
Sincerely,
Multimedia Access Corporation
By: /s/ Glenn A. Norem
---------------------
Glenn Norem
President & CEO
Accepted by:
/s/ Neal S. Page
- -----------------
Neal Page
- -----------------
Date
(VIEWPOINT SYSTEMS LETTERHEAD)
January 12, 1995
Mr. A. David Boomstein
1311 Hiwan Trail
Huntsville, AL 35802
RE: Offer of Employment
Dear David:
On behalf of Viewpoint Systems, Inc., a Multimedia Access Corporation,
(MMAC) subsidiary, I am pleased to extend an offer of employment as Vice
President of Marketing, to you. The details of the offer are as follows:
1. Your start date will be contingent upon the terms of your
resignation from your current employment but no later than February 1,
1995.
2. Your base salary will be $5,417 per month, payable bi-monthly on or
about the 15th and 30th of each month. This salary will be increased
to $6,050.00 per month when you relocate to Dallas on July 1, 1995.
3. You will be eligible for a Bonus for 1995 based on Viewpoint's
performance to 1995 plan and you achieving pre defined MBO's. For the
period February 1 through July 31, 1995, you will be eligible for a
bonus of $10,000 for successfully implementing five MBO's - these
written MBO's will be defined by Peter W. Craine prior to your start
date.
4. You will be entitled to participate in the Company's standard
benefits plans applicable to all employees, to be described in the
forthcoming MMAC Outline of Benefits. As a VP you will be entitled to
3 weeks vacation.
5. MMAC will recommend to its Board of Directors that you be granted
an option pursuant to the Company's 1994 Stock Option Plan to purchase
20,000 shares of MMAC Common Stock, each such option vesting 12/60 of
the shares on the date which is one year from the date of grant and
1/60 of the shares each month thereafter, such that all of the shares
are fully vested five years from the date of grant. The initial 20,000
shares will be at the fair market value per share as determined on the
date of grant by the Board of Directors. MMAC will recommend to the
Board of Directors that you be granted an additional option to
purchase 15,000 shares after MMAC's Initial Public Offering.
6. Through June 30, 1995 you will be compensated for travel incidental
to
<PAGE>
commuting from Huntsville to Dallas prior to your permanent relocation
to Dallas.
7. Your employment with the Company will be "at will" and may be
terminated by you or the Company at any time, for any reason or no
reason. By accepting this offer of employment, you accept employment
on such terms.
This offer is contingent upon compliance with the Immigration Reform
and Control Act of 1986, which requires MMAC to verify that each employee hired
is legally entitled to work in the United States. Enclosed is a copy of the
Employment Verification Form I-9, with instructions, as required by such Act.
Please review and execute this document and be prepared to bring the appropriate
documentation on the day you first report to work.
This offer is further contingent upon your execution of an employment
proprietary information agreement in the standard form utilized by the Company
for its employees. Such agreement, a copy of which is enclosed, provides
generally that the Company shall own all proprietary rights you develop while
employed by the Company, and contains certain non-competition and
non-solicitation agreements.
Furthermore, the terms and conditions of your employment agreement are
considered confidential and are not to be discussed with anyone but your
immediate superior and Officers of the Company.
David, we look forward to working with you. If you have any questions,
please call me at (214) 488-7104. Please indicate your acceptance by signing and
returning to be a copy of this letter.
Sincerely,
Multimedia Access Corporation
By: /s/ Michael K. Nissenbaum (CFO)
--------------------------------
Peter W. Craine
Senior VP, Sales & Marketing
Accept By:
- ------------------
A. David Boomstein
- ------------------
Date
cc: Glenn Norem - CEO
Multimedia Access Corporation letterhead
January 3, 1995
Mr. Daniel W. Dodson
3883 Turtle Creek Blvd.
Dallas, TX 75219
RE: Offer of Employment
Dear Dan,
On behalf of MultiMedia Access Corporation, (MMAC), I am pleased to extend to
you an offer of employment as Vice President-Marketing of Viewpoint Systems
Inc., a wholly owned subsidiary of MultiMedia Access Corporation. The details of
our offer are as follows:
1. Your start date will be 1/21/96.
2. Your base salary will be $7,083.33 per month, payable semi-monthly on or
about the 15th and 30th of each month.
3. You will be eligible to participate in the MultiMedia Access Corporation
Executive Bonus program (cash and/or stock). Your 1996 cash bonus is targeted
each year you are employed by MMAC at not less than 30% of your base salary for
each such year and is payable upon accomplishment of objectives to be defined.
4. MMAC agrees that at the next meeting of its Board of Directors, you will be
granted an initial option pursuant to the Company's 1995 Stock Option Plan to
purchase up to 30,000 shares of MMAC Common Stock at an option price equal to
the then current Fair Market Value (as defined in the Plan), such Option to be
exercisable as to 12/60 of the Shares at the expiration of the first year
following the date of grant of the Option and as to an additional l/60th of the
shares at the expiration of each of the next consecutive 48 months thereafter.
You will also have the right to an additional grant of an option for an
additional 15,000 shares of MMAC Common Stock after one year of service to MMAC
based upon accomplishment of objectives to be defined, or at any time upon
approval by the Board of Directors.
5. You will be entitled to participate in the Company's standard benefits plan
applicable to all employees as described in the MMAC Outline of Benefits. You
will also receive 15 days vacation, 5 days of which must be taken between
Christmas and New Years.
<PAGE>
6. Your employment with the Company will be "at will" and may be terminated by
you or the Company at any time, for any reason or no reason. By accepting this
offer of employment, you accept employment on such terms.
This offer is contingent upon compliance with the Immigration Reform and Control
Act of 1986, which requires MMAC to verify that each employee hired is legally
entitled to work in the United States. Enclosed is a copy of the Employment
Verification Form I-9, with instructions, as required by such Act. Please review
and execute this document and be prepared to bring the appropriate documentation
on the day you first report to work.
This offer is further contingent upon your execution of (i) the MultiMedia
Access Corporation Proprietary Rights and Information Agreement in the form
attached hereto, and (ii) the MultiMedia Access CorPoration Indemnification
Agreement in the form attached hereto. The Proprietary Rights and Information
Agreement provides generally that the Company shall own all proprietary rights
you develop while employed by the Company, and contains certain non-competition
and non-solicitation agreements. Furthermore, the terms and conditions of your
employment agreement are considered confidential and are not to be discussed
with anyone but your immediate superior and Officers of the Company.
Dan, we look forward to working with you. Please indicate your acceptance by
signing and returning to me a copy of the offer letter.
Sincerely,
MultiMedia Access Corporation
By: /s/ Glenn A. Norem
---------------------------
Glenn Norem
President and Chief Executive Officer
Accepted by:
/s/ Dan Dodson
- ----------------
Dan Dodson
1-3-96
- ----------------
Date
BURLINGAME HOME OFFICE INC.
500 AIRPORT BLVD.
Suite 100
Burlingame, CA 94010
(415) 579-6600
(415) 579-0650 fax
- --------------------------------------------------------------------------------
THIS LEASE IS EXECUTED THIS 11TH DAY OF OCTOBER, 1995 BY
AND BETWEEN BURLINGAME HOME OFFICE INC., HEREINAFTER REFERRED TO AS LESSOR, AND
MULTIMEDIA ACCESS CORP., HEREINAFTER REFERRED TO AS LESSEE.
WITNESSETH:
LESSOR hereby leases to LESSEE AND LESSEE hereby leases from LESSOR Suite/s No.
112 hereinafter referred to as Premises. The parties hereto agree that said
letting and hiring is upon and subject to the terms, covenants and conditions
herein set forth and LESSEE covenants as a material part of the consideration
for this lease to keep and perform each and all of said terms, covenants and
conditions by it to be kept and performed and that this lease is made upon the
condition of such performance.
If the LESSOR is unable to deliver possession of the Premises at the time herein
agreed, then the LESSOR shall not be liable for any damage caused thereby nor
shall this Lease be void or voidable, but the LESSEE shall not be liable for any
rent until such times as the LESSOR can deliver possession.
The LESSOR shall have the right at all reasonable times to enter the Premises to
inspect the same and to make such repairs and alterations as the LESSOR shall
see fit.
1. TERM. The term of this lease shall for MONTH TO MONTH months commencing
on the FIFTEENTH day of OCTOBER, 1995.
2. RENT: LESSEE agrees to pay LESSOR as monthly rent for the Premises the
sum of FOUR HUNDRED ($400.00) DOLLARS in advance on the first day of
each month and every calendar month during said term, except that the
first month's rent shall be paid upon the execution hereof. In the
event the term of this lease commences or ends on a day other than the
first day of a calendar month, then the rental for such period shall be
prorated and paid with the second month's rent.
All rents are due and payable the first day of each month. Any rents received
after the fifth day of the month are subject to a $25.00 late service charge per
month.
3. SECURITY DEPOSIT: LESSEE has deposited with LESSOR the sum of $400.00.
Said sum shall be held by LESSOR as security for faithful performance
by LESSEE of all of the terms, covenants and conditions of this Lease
during the term thereof. If LESSEE defaults with respect to this Lease,
including but not limited to the provisions relating to the payment of
rent, LESSOR may (but shall not be required to) use, apply, retain all
or any part of this security deposit for the payment of any rent or any
other sum in default, or for the payment of any other sum in default,
or for the payment of any other amount which LESSOR may spend or become
obligated to spend by reason of LESSEE'S may suffer by reason of
LESSEE'S default. If any portion of said deposit is so used or applied,
LESSEE shall, upon demand therefore, deposit cash with LESSOR in an
amount sufficient to restore the security deposit to its original
amount and LESSEE'S failure to do so shall be a material breach of this
Lease. Lessor shall not be required to keep this security deposit
separate from its general funds, and
(1)
<PAGE>
LESSEE shall not be entitled to interest on such deposit. If LESSEE
shall fully and faithfully perform every provision of this Lease to be
performed by it, the security deposit or any balance thereof shall be
returned to LESSEE (or, at LESSOR's option, to the last assignee of
LESSEE'S interests hereunder) at the expiration of the Lease term.
4. HOLDING OVER: Should LESSEE hold over the term hereby created with the
consent of LESSOR, the term of this lease shall be deemed to be and be
extended at the rental herein above provided and otherwise upon the
covenants and conditions in this Lease contained until either party
hereto serves upon the other thirty (30) days written notice of
termination, reciting therein the effective date of cancellation. Upon
this said date this Lease so extended, shall terminate, and if the same
occurs at other than the last day of the rental month, any unearned
prepaid rental shall immediately following the surrender of the demised
Premises by LESSEE by refunded to it.
5. ALTERATIONS: LESSEE shall make no alterations, decoration, additions,
or improvements in or or to the Premises without LESSOR'S prior written
consent, and then only by contractors or mechanics approved by LESSOR.
All such work shall be done at such times and in such manner as LESSOR
may from time to time designate.
6. BUILDING ACCESS: Provided the LESSEE shall not be in default hereunder
and subject to the provisions elsewhere herein contained, the LESSOR
agrees to furnish in reasonable quantities electric current for
lighting and normal office use only, automatic elevator service, common
restroom facilities with hot and cold water, heating and air
conditioning, but the LESSOR shall not be liable for any damage caused
thereby, or for stoppage or interruption of any said services in this
paragraph mentioned caused by labor disputes, or labor disturbances
(whether caused by LESSOR or otherwise), accidents repairs or other
cause, not shall LESSOR be liable under any circumstances for loss or
injury to persons of property, however occurring, through or in
connection with or incidental to the furnishing of any of the foregoing
or any other service by LESSOR to LESSEE or any of his employees or
agents, nor shall any such failure relieve LESSEE from the duty to pay
the full amount of rent herein reserved or constitute or be construed
as constructive or other eviction of LESSEE.
7. INSURANCE: The LESSEE at LESSEE'S expense will provide liability
insurance of the lease area. Minimum coverage will be $100,000/300,000
bodily injury and $25,000 property damage. The LESSOR will be endorsed
as an additional named insured on the policy. THE LESSOR will not carry
insurance on LESSEE'S possessions.
Note: If LESSEE is covered by a HOME OWNERS POLICY,
coverage may be extended to cover office liability.
8. SIGNS AND OPTIONS: LESSEE shall not place any sign upon the Premises or
Building conduct any auction thereon without LESSOR'S prior written
consent.
9. LEASE TERMINATION: Intended termination of Lease by LESSEE must be
given in written to LESSOR thirty (30) days prior to the last day of
occupancy.
10. CHOICE OF LAW: This lease shall be governed by the laws of the State in
which the Premises are located. In the event the LESSOR shall bring and
sustain an action against the LESSEE for breach of any covenant,
agreement or condition herein contained, or for the recovery of
possession of the demised Premises, or should the LESSOR, without fault
on its part, be named as a defendant in any action brought against the
LESSEE in connection with this lease or arising out of its occupancy of
the demised Premises, the LESSEE will pay to the lessor all costs and
expenses incurred by it in such action, including a reasonable
attorney's fee.
(2)
<PAGE>
11. SUBLET: Neither the LESSEE nor anyone claiming by, through or under the
LESSEE shall mortgage or assign this Lease or sublet the Premises or
any part thereof or permit the use of the Premises by any person other
than the LESSEE without prior written consent.
12. BUILDING RULES: The Rules and Regulations of the building attached
hereto as Exhibit A are expressly made a part of this Lease by
reference, and the LESSEE hereby expressly covenants and agrees to
abide by all of said Rules and Regulations, as well as such reasonable
modifications thereof as may be hereafter adopted and notice thereof
given by the LESSOR. The LESSOR shall have no responsibility to the
LESSEE for violation or non-performance by any other lessee of the
building of any of said Rules and Regulations.
13. WRITTEN NOTICES: All notices by the LESSOR to the LESSEE, or by the
LESSEE to the LESSOR, shall be in writing. Notices to the LESSEE shall
be deemed to be duly given if mailed by registered mail, postage
prepaid, and addressed to the LESSEE at the demised Premises.
14. COVENANTS AND CONDITIONS: All terms, covenants and conditions of this
Lease shall inure to the benefit of and be binding upon the successors
and assigns of the LESSOR (subject to the restrictions on assignments
herein contained) the successors and assigns of the LESSEE, to the same
extent as said terms, covenants and conditions inure to the benefit of
and are binding upon the LESSOR and the LESSEE respectively.
15. ENTRY: Time shall be of the essence in this Lease and all of the terms
and covenants hereof are conditions, upon the breach by the LESSEE of
any of the same it shall be optional with the LESSOR to terminate this
Lease, in which event LESSOR shall have the immediate right of re-entry
and may remove all persons and property from the Premises.
16. STAFF: LESSEE is hereby advised and LESSEE hereby acknowledges that all
employees of the Home Office, who perform work or services for LESSEE
under this Lease or under any service agreements as may be executed by
and between the parties hereto, are, in fact, employees of LESSOR. If,
during the term of this Lease or within six (6) months following the
termination of the Lease, LESSEE hires any employee of The Home Office,
LESSEE agrees to pay LESSOR a few equal in amount to three (3) months
of that employee's last salary with The Home Office.
17. REPAIRS: By entry hereunder LESSEE accepts the Premises as being in
good, sanitary order, condition and repair. LESSEE shall at LESSEE'S
sole cost and expense keep the Premises and every part thereof,
including all windows and doors, in good condition and repair, ordinary
wear and tear excepted. LESSEE shall upon the expiration or termination
of the term hereof surrender the Premises to LESSOR in the same
condition as when received, ordinary wear and tear excepted.
(3)
<PAGE>
LESSOR shall have no obligation to alter, remodel, improve, repair,
decorate or paint the Premises or any part thereof and the parties
hereto affirm that LESSOR has made no representations to LESSEE
respected the conditions of the Premises or the Building except as
specifically herein set forth.
18. SERVICE ADDENDUM. Services as are to be performed by Burlingame Home
Office Inc. on behalf of the LESSEE are defined in that Executive Suite
Tenant Service Agreement as executed by the parties hereto and which,
by reference herein, as part hereof.
IN WITNESS WHEREOF, The LESSOR and LESSEE have executed this Lease as
of the day and year first above written.
LESSOR: BURLINGAME HOME OFFICE INC. LESSEE: MULTIMEDIA ACCESS CORP.
BY: SCOTT CHAMBERS BY: William S. Leftwich
---------------------------- -----------------------
TITLE: BUSINESS ADMINISTRATOR TITLE: CFO
---------------------------- -----------------------
SIGNATURE /s/ Scott Chambers 10-11-95 SIGNATURE /s/ William S. Leftwich
---------------------------- -----------------------
(4)
<PAGE>
EXHIBIT "A"
RULES AND REGULATIONS WHICH CONSTITUTE A PART OF THE OFFICE
LEASE OF THE HOME OFFICE
1. The sidewalks, entrances, passages, courts, elevators, vestibules,
stairways, corridors or halls shall not be obstructed for any purpose
other than ingress and egress.
2. No awnings or other projection shall be attached to the outside walls
of the buildings without the prior written consent of the LESSOR. No
curtains, or blinds, shades or screens shall be attached to or hung in
or used in connection with, any window or door of the Premises without
prior written consent of LESSOR. All electrical coiling fixtures hung
in offices or spaces along the perimeter of the building must be
fluorescent and/or of a quality, type, design and bulb color approved
by LESSOR.
3. No sign, advertisement or notice shall be exhibited, painted or affixed
by LESSEE on any part of, or so as to be seen from the outside of, the
Premises or the building without the prior written consent of the
LESSOR. In the event of the violation of the foregoing by LESSEE,
LESSOR may remove same without any liability and may charge the expense
incurred in such removal to the LESSEE. Interior signs on doors and
directory tablet shall be inscribed, painted or affixed for LESSEE by
LESSOR at the expense of LESSEE, and shall be of a size, color and
style acceptable to the LESSOR.
4. The sashes, sash doors, skylights, windows and doors that reflect or
admit light into halls, passageways or other public places in the
buildings shall not be covered or obstructed by LESSEE, nor shall any
bottles, parcels or other articles be placed on the windowsills.
5. LESSEE shall not mark, paint, drill into, or in any way deface any part
of the Premises or the building. No boring, cutting, or stringing of
wires or laying of linoleum or other floor covering shall be permitted,
except with the prior consent of the LESSOR, and as LESSOR may direct.
6. No bicycles, vehicles or animals or any kind shall be brought into or
kept in or about the Premises, and no cooking shall be done or
permitted by the LESSEE in the Premises, except that the preparation of
coffee, tea, hot chocolate and similar items for LESSEE, its employees
and visitors shall be permitted. LESSEE shall not cause or permit any
unusual or objectionable odors to be produced in or permeate from the
Premises.
7. The Premises shall not be used for manufacturing or for the storage of
merchandise except such as storage may be incidental to the use of the
Premises for general office purposes. LESSEE shall not, without the
prior written consent of LESSOR, occupy or permit any portion of its
Premises to be occupied or used for the manufacture or sale of liquor,
narcotics, or tobacco in any form, or as a medical office, or as a
barber or manicure shop, or as an employment bureau. LESSEE shall not
engage or pay any employees on the Premises except those actually
working for the LESSEE on the Premises nor advertise for laborers
giving an address at the Premises. The Premises shall not be used for
lodging or sleeping or for any immoral or illegal purposes.
8. LESSEE shall not make, or permit to be made any unseemly or disturbing
noises or disturbing noises or disturb or interfere with occupants of
this or neighboring buildings or premises or those having business with
them whether by the use of any musical instrument, radio, phonograph,
unusual noise, or any other way. LESSEE shall not throw anything out of
doors, windows or skylights or down the passageways.
(5)
<PAGE>
9. Neither LESSEE, nor any of LESSEE'S servants, employees, agents,
visitors or licensee, shall at any time bring or keep upon the Premises
any inflammable, combustible or explosive fluid, chemical or substance.
10. No additional locks or bolts of any kind shall be place upon any of the
doors or windows by LESSEE, nor shall any changes be made in existing
locks or the mechanisms thereof unless LESSOR is furnished a key
thereof. LESSEE must, upon the termination of its tenancy, give to the
LESSOR all keys of stores, offices or toilets and toilet rooms, either
furnished to, or otherwise procured by LESSEE, and in the event of the
loss of any keys so furnished, LESSEE shall pay LESSOR the cost of are
placing the same or of changing the lock or locks opened by such lost
key if LESSOR shall deem it necessary to make such change.
11. All removals, or the carrying in or out of any safes, freight,
furniture, or bulky matter of any description must take place during
the hours which LESSOR may determine from time to time. The moving of
safes or other fixtures of bulky matter of any kind must be made upon
previous notice to the Office of the building and under its
supervision, and the persons employed by LESSEE for such work must be
acceptable to the LESSOR. The LESSOR reserves the right to inspect all
safes, freights or other bulky articles which violate any of these
Rules and Regulations or the Lease of which these Rules and Regulations
are a part. LESSOR reserves the right to prescribe the weight and
position of all safes, which must be placed upon supports approved by
LESSOR to distribute the weight.
12. All office equipment of any electrical or mechanical nature shall be
placed by LESSEE in the Premises in settings approved by LESSOR, to
absorb or prevent any vibration, noise, or annoyance.
13. No air conditioning unit or other similar apparatus shall be installed
or used by LESSEE without the written consent of LESSOR.
14. One key shall be furnished to LESSEE without charge at the time of move
in. Extra keys may be obtained for a nominal fee from LESSOR.
15. LESSOR will not permit admittance to leased Premises to non-tenants
without prior written consent of LESSEE.
16. Plastic chair mats are mandatory for all desk chairs equipped with
rolling casters. Carpet damage resulting from negligence in this regard
will be billed to LESSEE and LESSEE will be responsible for such
damages up to and including the cost of the entire carpet in the
demised Premises.
17. Solicitors are not permitted on the Premises. Should you encounter
solicitors, a report of activity to the LESSOR will be appreciated.
(6)
<PAGE>
THE HOME OFFICE EXECUTIVE SUITE SERVICE AGREEMENT (EST)
THE HOME OFFICE and the undersigned, hereinafter referred to as the CLIENT, do
hereby enter into this agreement whereby THE HOME OFFICE is authorized to
provide the CLIENT those services as defined herein and to commence such
services on the 15th of OCTOBER, 1995, and whereby this agreement is subject
to cancellation by either party upon thirty days notice by either party.
SERVICES
1. TELEPHONE ANSWERING
THE HOME OFFICE, during the hours of 8:30am to 5:00pm, Monday through Friday,
excepting for designated holidays, shall answer the CLIENTS telephone when
CLIENT is absent from the office and relay messages to the CLIENT in accordance
with the Telephone Services agreement which by reference is made part hereof.
2. RECEPTIONIST
THE HOME OFFICE shall receive CLIENT'S visitors; advise CLIENTS'S office. IF
CLIENT is out of the office, a message will be taken and relayed to the CLIENT.
3. SECRETARIAL
THE HOME OFFICE provides a variety of secretarial services including word
processing, special projects, i.e., filing, labels, mailing forms, fax sending.
All secretarial services will be charged at the published secretarial hourly
rate schedule.
4. MAIL SERVICE
THE HOME OFFICE will act as agent for CLIENT in receiving mail for delivery to
the CLIENT'S office when such mail is delivered to THE HOME OFFICE. In
conjunction with this service the CLIENT:
a. agrees to those conditions as included in the U.S. Post Office
Form No. 1583 which, by reference, is made a part hereof,
b. shall show THE HOME OFFICE positive proof of identification, in
accordance with federal regulations,
c. authorizes THE HOME OFFICE to sign for any mail that is
deliverable only upon a signature.
THE HOME OFFICE shall process CLIENT'S outgoing mail through its metered mail,
UPS, Federal Express systems on a daily basis except designated holidays.
(7)
<PAGE>
5. PHOTOCOPYING
Photocopies will be charged at THE HOME OFFICE published rate sheet.
6. BUSINESS ADDRESS
THE HOME OFFICE hereby authorizes the CLIENT'S use of its business address on
the CLIENT'S business letterheads and business cards provided the client:
A. agrees not to use THE HOME OFFICE address for any unlawful
purpose and that the use of the address will only be for the
purpose of promoting the interests of the CLIENT'S stated
business;
B. shall not use THE HOME OFFICE address for advertising or any
other purpose not expressly defined herein without the written
consent of THE HOME OFFICE.
7. BUSINESS LISTING
THE HOME OFFICE shall list the CLIENT'S business name on the building
directory as follows:
- --------------------------------------------------------------------------------
OSPREY TECHNOLOGIES INC.
- --------------------------------------------------------------------------------
8. THE HOME OFFICE will make other business services and equipment in the
office available for use by the CLIENT in accordance with THE HOME
OFFICE published rate schedule.
9. ADDITIONAL SERVICES INCLUDED IN LEASE
PHONE SET & PHONE LINE @ $35.00
ADDITIONAL SETS @
ADDITIONAL LINES @
ANSWERING SERVICE @
VOICE MAIL 1 @ $20.00
TOTAL ADDITIONAL SERVICES $55.00
PAYMENT TERMS
CLIENT agrees to pay THE HOME OFFICE the amount defined in the monthly
lease in advance each month. Charges for optional services will be
included in each monthly invoice which is due and payable upon receipt.
(8)
<PAGE>
CLIENT agrees not to hold THE HOME OFFICE liable of commission or
omission in the rendering of services under this agreement and further
agrees that this agreement is in effect for the term of that office
lease executed by the parties hereto.
This Executive Suite Service Agreement executed on this FIFTEENTH day
of OCTOBER, 1995, by:
/s/ Scott Chambers 10-11-95 /s/ William S. Leftwich
-------------------- -----------------------
Signature Signature
Name SCOTT CHAMBERS Name William S. Leftwich
------------------ -------------------
Company BURLINGAME HOME OFFICE, INC. Company MULTIMEDIA ACCESS CORP.
---------------------------- -----------------------
(9)
LEASE AGREEMENT
THIS LEASE AGREEMENT dated this 23rd day of January, 1995, by
and between Family Funds Partnership, hereinafter called "LESSOR", and
MultiMedia Access Corporation, hereinafter called "LESSEE".
WITNESSETH:
The Lessor hereby leases to the Lessee and the Lessee hereby leases
from the Lessor the following described property: Being all of that certain
space consisting of approximately 2783 square feet of floor area and located on
the 1st floor of the office building located at 1150 S.E. Maynard Road, Cary,
Wake County, North Carolina. The area being leased is specifically identified as
Suite Number 110 and shown on a floor plan entitled Exhibit A and attached
hereto and by reference made a part hereof.
I. TERM
Lessee to have and to hold the above described premises for a term of
three (3) year(s) commencing on the first calendar day of March 1995, or as soon
thereafter as possession is surrendered by the existing occupant, and fully
ending at midnight on the last calendar day of February 1998, on the terms and
conditions as set forth herein. In the event possession of said space is
delivered after the date set forth above, then this lease will expire on the
last day of the calendar month in which possession was delivered, three (3)
year(s) later. All parties agree that in matters pertaining to this agreement
that time is of the essence and except in accordance with the provisions
contained herein, this lease shall not be canceled, abridged, abated, revoked,
rescinded or denied.
II. USE AND POSSESSION
It is understood and agreed that the leased premises are to be used as
an office facility for the Lessee to conduct such activities as is commonly
consistent with Lessee's business. Lessee agrees not to use the leased premises
for any unlawful purpose or so as to constitute a nuisance, or in such a manner
as to be offensive to general office use in the remainder of the building. The
Lessee at the expiration of the term shall deliver up the leased premises in
good order, repair and condition, damages beyond the control of the Lessee,
reasonable use, ordinary decay, wear and tear excepted.
III. PARKING
The Lessor shall, when available, provide on-site parking for Lessee,
Lessee's employees, guests and invitees without additional charge therefor.
On-site parking, when available, shall be provided on a first-come, first-serve
basis and no parking spaces shall be considered as exclusively reserved for
Lessee, his employees, guests or invitees except that if Lessor shall designate
certain available parking spaces for guests or visitors to the building, or for
handicapped persons, then Lessee shall not use these parking spaces for his
personal automobile, nor shall Lessee allow any employees of Lessee to use these
parking spaces unless said employee is handicapped.
IV. RENT
The Lessee hereby covenants and agrees to pay during the term hereof to
the Lessor in advance and without deduction therefrom or demand therefor and
beginning upon the commencement day of this lease and on the first day of each
and every month thereafter an annual rent of Thirty-eight Thousand Three Hundred
Thirty-Three and 64/100 ($38,333.64) which shall be paid in equal monthly
installments of Three Thousand One
- 1 -
<PAGE>
Hundred Ninety-Four and 47/100 ($3,194.47). The first such installment being due
and payable upon the effective date of this lease and all future installments on
the first calendar day of each month in advance.
Further, the Lessee shall, during the term of the lease, reimburse the
Lessor for any and all renovation cost made to Lessee's leased space, which cost
is in excess of Eighteen Thousand Dollars ($18,000.00). The total of such excess
cost shall be determined upon the completion of construction and certified to by
the contractor and sub-contractors involved. Such excess cost shall bear
interest at the rate of nine percent (9%) per annum and be paid back to Lessor
in thirty-six (36) equal monthly installments concurrent with the rent payment.
Provided, however, that such excess cost shall not exceed Eighteen Thousand
Dollars ($ 1 S,000). Upon the completion of construction the Lessor or Lessor's
agent shall calculate the total cost to renovate Lessee's space. Lessor shall
subtract from the total cost the allowance herein staled and shall compute the
monthly payment on the amount in excess of the allowance. The Lessor shall
notify Lessee of this amount and of the monthly payment required to amortize
this amount.
(See Addendum attached)
Rent shall be paid to the Lessor at:
Equity and Investors Management Corporation
Post Office Box 18824
Raleigh, North Carolina
V. ADDITIONAL RENT
After January 1st of each year during the term hereof the Lessor shall
compute his operating expenses for the preceding calendar year, as said
operating expenses relate to the building in which the leased space is located.
If these operating expenses shall exceed the operating expenses of the property
for the base year, then the Lessee shall within thirty (30) days after receiving
notice from Lessor, pay to Lessor, Lessee's pro rata share of any such
increases. Lessee's pro rata share of any increased operating expenses shall be
a sum equal to the total amount of increased operating expenses multiplied by
2783 square feet/13,633 square feet. It is agreed and understood that in the
event Lessee should not have been in possession of the Lessee's premises for the
entire year, then Lessee will only be liable for the same portion of such nun as
the time of his occupancy bears to the total y ear. It is further agreed and
understood that the base year as referenced in this section shall be that twelve
month period ending December 31, 1995.
For the purpose of this paragraph, the term "operating expenses" shall
include the following: Maintenance labor and materials, utilities, real estate
taxes, personal property taxes, building insurance and management fees.
Specifically excluded from this definition are leasing fees, legal fees, new
office fit up cost and administrative supplies and forms. In no event shall the
additional rent referenced in this section exceed six percent (6%) of the base
rent times the number of years lapsed on the lease.
VI. DEFAULT
In the event the Lessee shall default in the payment of rent or any
other nuns payable by the Lessee herein, and such default shall continue for a
period of ten (10) days after written notice by Lessor, delivered via certified
mail, or if the Lessee shall default in the performance of any other covenant or
agreements of this lease and such default shall continue for thirty (30) days
after written notice thereof, or if the Lessee should become bankrupt or
insolvent, file for reorganization wider any bankruptcy law, or any material
debtor proceedings be taken by or against the Lessee, then and in addition to
any and all other legal remedies and rights, the Lessor may declare the entire
balance of the rent for the remainder of the term to be due and payable and may
collect the same by distress or otherwise and Lessor shall have a lien on the
personal property of the Lessee which is located in the leased premises, and in
order to protect its security interest in the said property, Lessor may, after
- 2 -
<PAGE>
first obtaining a distress warrant, lock up the leased premises in order to
protect said interest in the secured property, or the Lessor may terminate this
lease and retake possession of the leased premises, or enter the leased premises
and re-let the same without termination, in which latter event the Lessee
covenants and agrees to pay any deficiency after Lessee is credited with the
rent thereby obtained less all repairs and expenses (including the expenses of
obtaining possession), or the Lessor may resort to any two or more of such
remedies or rights, and adoption of one or more such remedies or rights shall
not necessarily prevent the enforcement of others concurrently or thereafter.
The Lessee also covenants and agrees to pay reasonable attorney's fees and costs
and expenses of the Lessor, including court costs, if the Lessor employs an
attorney to collect rent or enforce other rights of the Lessor herein. In the
event of any breach as aforesaid the same shall be payable if collection or
enforcement is effected by suit or otherwise.
VII. NOTICES
For the purpose of notice or demand, the respective parties shall be
served by certified or registered mail, receipt requested, addressed to the
Lessee or to the Lessor at the following addresses:
If to Lessor: Family Funds Partnership
c/o Equity and Investors Management Corporation
Post Office Box 18824
Raleigh, N.C., 27619
If to Lessee: MultiMedia Access Corporation
2665 Villa Creek Drive - Suite 200
Dallas, Texas 75234
VIII. ORDINANCES AND REGULATIONS
The Lessee hereby covenants and agrees to comply with all the rules and
regulations of the AIA, NBFU, Officers of Boards of the City, County or State
having jurisdiction over the leased premises and with all ordinances and
regulations of governmental authorities wherein the leased premises are located,
at the Lessee's sole cost and expense, but only so far as any of such rules,
ordinances and regulations pertain to the manner in which the Lessee shall use
the leased premises; the obligation to comply in every other case, and also all
cases where such rules, regulations and ordinances require repairs, alterations,
changes or additions to the building (including the leased premises) or building
equipment, or any part of either, being hereby expressly assumed by Lessor and
Lessor covenants and agrees promptly and duly to comply with all such rules,
regulations and ordinances with which Lessee has not herein expressly agreed to
comply.
IX. SIGNS
The Lessee will not place any signs or other advertising matter or
material on the exterior or on the interior where same is possible to be seen
from the exterior of the leased premises or of the building in which the leased
premises are located without the prior written consent of the Lessor. Any
lettering or signs placed on the interior of said building shall be for
directional purposes only and such signs and lettering shall be of a type, kind,
style, character and description to be approved by Lessor All signs shall be in
a manner comparable to those signs which are provided by other tenants. No sign
may be placed on outside of building unless the design, type and location first
be approved by the Lessor in writing.
- 3 -
<PAGE>
X. SERVICES AND UTILITIES
Lessor shall be responsible to furnish all utilities used on the leased
space including electricity, water, gas and lights. Lessee shall be responsible
for telephone service. Lessor shall be responsible to maintain the heating and
air conditioning systems serving the leased premises and shall further maintain
the building's common areas, exterior walls and sewage pipes from the building
to the municipal line. Further, Lessor shall be responsible to furnish
janitorial service each night during the business week and to replace
fluorescent light bulbs and venetian blinds as the necessity arises. It is
understood that Lessor shall not be liable for any damages sustained by Lessee
as a result of the failure to furnish the foregoing unless and until Lessee has
given Lessor written notice of the failure and Lessor has failed within a
reasonable period of time after receipt of notice to correct the failure or
defect. In addition, Lessor shall provide adequate water coolers in common area
locations for Lessee.
XI. QUIET ENJOYMENT
The Lessor covenants and agrees that the Lessee, on paying the monthly
rental and other charges herein and performing the covenants herein, shall and
may peaceably hold and enjoy the leased premises and common areas, including but
not limited to parking areas, sidewalks, exits and lobbies.
XII. ALTERATIONS
Lessee shall maintain the leased premises and every part thereof in
good repair and condition, subject to normal wear and tear, damage thereto by
fire, windstorm, acts of God or the elements excepted Lessee shall not make or
suffer to be made any alterations, additions or improvements to or of the leased
premises or any part thereof without the prior written consent of the Lessor,
which consent shall not be unreasonably withheld If the Lessor consents to the
proposed alterations, additions or improvements to or of the leased premises or
any part thereof, the same shall be at the Lessee's sole cost thereof Any such
alterations shall be made at such times and in such manner as not to
unreasonably interfere with the occupation, use and enjoyment of the remainder
of the occupants of the building. If required by the Lessor, such alterations
shall be removed by the Lessee upon the termination, or sooner expiration of the
tenn of this lease and the Lessee shall repair damage to the premises caused by
such removal, all at Lessee's costs and expense. Lessor shall determine and
notify Lessee in advance if such alterations are to be later removed by Lessee.
XIII. NEW CONSTRUCTION
The Lessor and the Lessee agree as a mutual inducement to the execution
of this lease that Lessor shall erect walls and partitions, floor cover, doors,
lights, ceiling, plumbing, air condition ducting and fixtures in accordance with
the floor plan and modified specifications submitted by Lessee and attached
hereto as Exhibit "A" and being made a part hereof. Such construction shall be
administered by Lessor and performed by contractors and sub-contractors selected
and approved by lessor. The cost of such construction shall be the obligation
and cost of the Lessor in an amount not to exceed Eighteen Thousand Dollars
($18,000.00). Any and all cost incurred by the Lessor to renovate Lessee's space
in excess of Eighteen Thousand Dollars ($18,000.00) shall be reimbursed to
Lessor by Lessee as set forth in Paragraph IV above.
XIV. INDEMNIFICATION
Except as results from the fault of the Lessor, the Lessor shall not be
liable for any damage or injury to any person or property whether it be the
person or property of the Lessee, the Lessee's employees, agents, guests,
invitees or otherwise by reason of the Lessee's occupancy of the leased premises
or because of fire, flood, windstorm, acts of God or for any other reason. The
Lessee agrees to indemnify and save harmless the Lessor from and against any and
all loss, damage, liability or expense by reason or damage to person or property
which
- 4 -
<PAGE>
may arise or be claimed to have arisen as a result of the occupancy or use of
said leased premises by the Lessee or by reason thereof or in connection
therewith, or in any way arising on account of any injury or damage caused to
any person or property on or in the leased premises providing, however, that
Lessee shall not indemnify as to the loss or damage due to the fault of the
Lessor.
XV. DESTRUCTION OF PROPERTY
A. If the leased premises are totally destroyed by fire or other
casualties, both the Lessor and the Lessee shall have the option of terminating
the lease or any renewal thereof upon giving written notice at any time within
thirty days from the date of such destruction, and if the lease be so
terminated, all rent shall cease as of the date of such destruction and any
prepaid rent shall be refunded.
B. If such leased premises are partially damaged by fire or other
casualty, or totally destroyed thereby and neither party elects to terminate
this lease within the provisions of Section XV-A above or Section XV-C below,
then the Lessor agrees at Lessor's sole cost and expense to restore the leased
premises to a kind and quality substantially similar to that immediately prior
to such destruction or damage. Said restoration shall be commenced within a
reasonable time and completed without delay on the part of the Lessor and in any
event shall be accomplished within ninety (90) days from the date of the fire or
casualty. In such case, all rents paid in advance shall be apportioned as of the
date of damage or destruction and all rent thereafter accruing shall be
equitably and proportionately suspended and adjusted according to the nature and
extent of the destruction or damage, pending completion of the rebuilding,
restoration or repair, except that in the event the destruction or damage is so
extensive to make it unfeasible for the Lessee to conduct Lessee's business on
the leased premises, whichever shall first occur. The Lessor shall not be liable
for any inconvenience or interruption of business of the Lessee occasioned by
fire or other casualty. Provided, however, that nothing herein shall relieve
Lessee of the obligation to repay to Lessor the Lessee's portion of renovation
cost as set forth in Paragraphs IV and XIII.
C. If the Lessor undertakes to restore, rebuild or repair the premises
and such restoration, rebuilding or repairs are not accomplished within ninety
(90) days and such failure does not result from causes beyond the control of
Lessor, the Lessee shall have the right to terminate this lease by written
notice to the Lessor within thirty (30) days after the expiration of said ninety
(90) days.
D. Lessor shall not be liable to carry fire, casualty or extended
damage insurance on the property or person of the Lessee or any person or
property which may not or hereafter be placed in the leased premises.
XVI. CONDEMNATION
If, during the term of this lease or any renewal thereof, the whole of
the leased premises or such portion thereof as will make the leased premises
unusable for the purpose leased, be condemned by public authority for public
use, then, in either event, the term hereby granted shall cease and come to an
end as of the date of the vesting of title in such public authority, or when
possession is given to such public authority, whichever event last occurs. Upon
such occurrence the rent shall be proportioned as of such date and any prepaid
rent shall be returned to the Lessee. The Lessor shall be entitled to the entire
award for such taking except for any statutory claim of the Lessee for injury,
damage or destruction of Lessee's business, and relocation expenses awarded to
Lessee as a result of such taking. If possession of the leased premises is taken
or condemned by public authority for public use so as not to make the remaining
portion of the leased premises unusable for the purposes leased, this lease will
not be terminated but shall continue. In such case, the rent shall be equitably
and fairly reduced or abated for the remainder of the term in proportion to the
- 5 -
<PAGE>
amount of the leased premises taken. In no event shall the Lessor be liable to
the Lessee for any business interruption or diminution in the use or for the
value of any unexpired term of the lease.
XVII. ASSIGNMENT AND SUBLEASE
The Lessee covenants and agrees not to encumber or assign this lease or
sublet all or any part of the leased premises without the written consent of the
Lessor, which consent the Lessor shall not unreasonably withhold. Such
assignment shall in no way relieve the Lessee from any obligations hereunder for
the payment of rents or the performance of the conditions, covenants and
provisions of this lease. In no event shall the Lessee assign or sublet the
leased premises for a rent greater than the amount of rent being paid by the
Lessee at the time of the assignment, or any part of the leased premises for any
amount greater than its pro rata share of such rent, as adjusted in Section V or
for any terms, conditions and covenants other than those contained herein. In no
event shall this lease be assigned or be assignable by operation of law or by
voluntary or involuntary bankruptcy proceedings, reorganization proceedings, or
otherwise, and in no event shall this lease or any rights or privileges
hereunder be an asset of Lessee under any bankruptcy, insolvency or
reorganization proceedings. Lessor shall not be liable nor shall the leased
premises be subject to any mechanics materialmen or other type of liens and
Lessee shall keep the premises and property in which the leased premises are
situated free from any such liens and shall indemnify Lessor against and satisfy
any such liens which may result from acts of Lessee, notwithstanding the
foregoing provision.
XVIII. HOLDOVER
It is further covenanted and agreed that if the Lessee, any assignee or
sublessee shall continue to occupy the leased premises after the termination of
the lease (including a termination by notice under Section VI) without prior
written consent of the Lessor, such tenancy shall be Tenancy at Sufferance.
Acceptance by the Lessor of rent after such termination shall not constitute a
renewal of this lease or a consent to such occupancy, or shall it waive the
Lessor's right of re-entry or any other right contained herein.
XIX. SUBORDINATION
This lease shall be subject and subordinated at all times to the liens
of any mortgages or deeds of trust in an amount or amounts whatsoever now
existing or hereafter encumbered to the leased premises, without the necessity
of having further instruments executed by the Lessee to effect such
subordination. Notwithstanding the foregoing, Lessee covenants and agrees to
execute and deliver upon demand such further instruments evidencing such
subordination of this lease to such liens or any such mortgages or deeds of
trust as may be requested by Lessor.
So long as Lessee hereunder shall pay the rent reserved and comply
with, abide by and discharge the terms and conditions, covenants and obligations
on its part, to be kept and performed herein and shall attorn to any successor
in title, notwithstanding the foregoing, Lessor shall on request from Lessee
request any mortgages to agree that the peaceable possession of the Lessee in
and to the leased premises for the remaining term of the lease shall not be
disturbed, in the event of the foreclosure of any mortgage or deed of trust by
the purchaser at such foreclosure sale or such purchaser's successor in title.
XX. LESSOR'S RIGHT TO INSPECT AND DISPLAY
The Lessor shall have the right at all reasonable times during the term
of this lease to enter the leased premises for the purpose of examining or
inspecting same and of making such repairs or alterations therein as the Lessor
shall deem necessary. The Lessor shall also have the right to enter the leased
premises at all reasonable hours for the purpose of displaying the premises to
prospective tenants within ninety (90) days prior to the termination of this
lease with advance notice to Lessee.
- 6 -
<PAGE>
XXI. SUCCESSORS AND ASSIGNS
This lease shall bind and inure to the benefit of the successors,
assigns, heirs, executors, administrators and legal representatives of the
parties hereto.
XXII. NON-WAIVER
No waiver of any covenant or condition of this lease by either party
shall be deemed to imply or constitute a further waiver of the same covenant or
condition or any other covenant or condition of this lease.
XXIII. CONSTRUCTION OF LANGUAGE
The terms "lease", "lease agreement" or "agreement" shall be inclusive
of each other, also to include renewals, extensions or modification of the
lease. Words of any gender used in the lease shall be held to include any other
gender and words in the singular shall be held to include the plural and the
plural to include the singular, when the sense requires. The section headings
and titles are not a part of the lease and shall have no effect upon the
construction or interpretation of any part hereof.
XXIV. LIABILITY INSURANCE
Lessee shall provide liability insurance naming Lessor as additional
co-insured on said policy.
XXV. EXCULPATION
Lessor, its parent, affiliates, subsidiaries, directors, officers or
employees shall not be personally liable for any of the obligations of Lessor
under this lease, and further, Lessee expressly agrees that in the event of any
default by Lessor under this lease, Lessor's liability hereunder or otherwise
shall be limited to, and Lessee shall only have recourse against or the value of
the building.
IN WITNESS WHEREOF, Lessee and Lessor have caused this instrument to be
executed as of the date first above written, by their respective officers or
parties thereunto duly authorized.
LESSOR:
Family Funds Partnership
Date 2/1/95 /s/ Arthur H. Kurtz
-----------------------------------------
Arthur H. Kurtz, Managing General Partner
LESSEE:
MultiMedia Access Corporation
Date 1/23/95 /s/ Michael Nissenbaum
-----------------------------------------
Chief Financial Officer
- 7 -
<PAGE>
ADDENDUM
This Addendum, attached to and made a part of that certain Lease dated
the 23rd day of January, 1995, by and between Family Funds Partnership, as
Lessor, and MultiMedia Access Corporation, as Lessee.
WHEREAS, the Lessee, prior to arranging for this lease, did engage the
services of M. Rich Company to assist Lessee in identifying for Lessee rental
opportunities within the local market. Although M. Rich Company was not involved
in identifying the space referenced in this lease, nor in the subsequent
negotiations, it is the decision of the Lessee to compensate M. Rich Company the
sum of Two Thousand Dollars ($2,000.00) which sum has been agreed to by M. Rich
Company. Lessee has asked the Lessor to advance this cost and to factor the same
into the rent to be reimbursed by the Lessee to the Lessor at the interest rate
of nine percent (9%) per annum. For Lessee's commitment to reimburse Lessor, the
Lessor agrees to advance this cost and factor it back into the rent.
- 8 -
C A T A L Y S T
CATALYST FINANCIAL CORPORATION
Two Metro Square, Suite 200
2665 Villa Creek
Dallas, Texas 75234
August 21, 1995
Glenn A. Norem
President & CEO
MultiMedia Access Corporation
2665 Villa Creek
Dallas, Texas 75234
Dear Glenn:
Pursuant to our discussions, Catalyst Financial Corporation ("Catalyst") is
please to be able to reinstate its relationship and to act as an independent
consultant advising MultiMedia Access Corporation ("MMAC") in its mergers and
acquisitions activities. The renumeration schedule has been restructured to
reflect the evolution of this relationship and is described below. In that these
activities have been ongoing since May 1st, 1995 the effective date of the
re-instatement of this agreement will be as of that date.
The scope of this effort will be, as before, to identify potential
merger/acquisition opportunities and advise as sell as actively participate in
the qualification and negotiation process required to pursue these
opportunities. The primary projects to date are listed on the following
attachment A.
From May 1st until now, and in recognition of the timing of MMAC's funding
program, Catalyst has been devoting more than half of its time to MMAC
activities. As these activities are now expanding in number and escalating in
scope, Catalyst will be expending more time and effort. In acknowledgment of
this and as discussed, Catalyst will be revising its fee schedule, beginning in
September, to a basic retainer of $7,500.00 for up to three weeks involvement
per month. Should the activity level require Catalyst to devote substantially
all of its time to MMAC related efforts for any month, then Catalyst will
invoice MMAC an additional $2,500.000 for that month. The basic retainer will be
payable in advance on the 1st business day of the month. Any expenses that have
been incurred and were pre-approved, will be billed at the end of the month
along with the additional retainer if appropriate and are payable upon receipt
of invoice.
As before, Catalyst (or its assigns) will be paid a success fee for any
transactions identified (whether by Catalyst or any member of MMAC or its
agents) and/or completed during the pendency of this contract. The success fee
will be 3% of the fair market value of each transaction actually consummated
plus the right to purchase for $1.00, a three year option on MMAC common stock.
The number of shares that this option can purchase will be equal to 3% of the
fair market value for each transaction actually consummated divided by the fair
market
<PAGE>
value of MMAC common stock for the average price during the one week period
preceding the announcement of the transaction.
This contract can be terminated by either party with thirty days written notice.
Within sixty days of the termination of this contract, Catalyst must submit to
MMAC a list of active projects that were identified during the term of this
contract in order to preserve the rights should any of those transactions close
subsequent to the termination of this contract.
If these basic terms are acceptable to, please sign below.
Sincerely,
/s/ James E. Gordon
- -----------------------
James E. Gordon
President
Agreed to by /s/ Glenn A. Norem on 8/21/95
------------------ -------
Glenn A. Norem, President & CEO
MultiMedia Access Corporation
Enclosures:
Attachment A; list of projects to date
Attachment B; Original Catalyst/MMAC Agreement dated March 28,
1994 Invoice; Retainer for September 1995
<PAGE>
Attachment A
Letter of August 21, 1995
List of Projects to date:
Acquisitions:
* Datapoint: MINX
* SYZYGY Communications, Inc.
* CrossTies
* Identitech
Mergers:
* Diamond Multimedia
* STB Systems
Strategic Partners:
* PhonoScope
* CTE Vantage Corporation
* Century Telephone Enterprises
<PAGE>
Attachment B
C A T A L Y S T
CATALYST FINANCIAL CORPORATION
Two Metro Square, Suite 200
2665 Villa Creek
Dallas, Texas 75234
March 28, 1994
Glenn A. Norem
President & C.E.O.
MultiMedia Access Corporation
2247 Wisconsin Street
Dallas, TX 75229
Dear Glenn:
Pursuant to our recent discussion, Catalyst Financial Corporation ("Catalyst")
is pleased to accept your offer to act as an independent consultant advising
MultiMedia Access Corporation ("MMAC") in its mergers and acquisitions
activities during 1994.
The scope of our initial effort will be to help you identify potential
acquisitions and provide advice in the negotiations required to close a number
of transactions. Specific areas of interest to MMAC include companies involved
with Collaborative Computing/Groupware, Video on Demand, Distance Learning,
Analog or Audio switches, large format displays, and Value Added Resellers with
expertise in networking or multimedia installations.
Due to MMAC's urgent timing requirements, Catalyst hereby agrees to devote
substantially all of its time to this effort. Compensation will be in the form
of a $10,000 monthly retainer, payable in advance, plus expenses only for
pre-approved out of town travel (Catalyst will bear responsibility for all local
expenses). In addition, Catalyst (or its assigns) will be paid a success fee for
any transactions identified (whether by Catalyst or any member of MMAC or its
agents) or completed during the pendency of this contract. The success fee will
be 3% of the fair market value of each transaction actually consummated plus the
right to purchase for $1.00, a three year option on MMAC common stock. The
number of shares which this option can purchase will be equal to 3% of the fair
market value of each transaction actually consummated divided by the fair market
value of MMAC common stock for the average price during the one week period
preceding the announcement of the transaction.
This contract can be terminated by either party with thirty days written notice.
Within sixty days of the termination of this contract, Catalyst must submit to
MMAC a list of potential acquisitions
<PAGE>
which were identified during the term of this contract in order to preserve its
rights to compensation should any of those transaction close subsequent to the
termination of this contract.
If the basic terms are acceptable to you, please sign below and we will start
work immediately.
Sincerely,
/s/ Newell V. Starks
-------------------------------
Newell V. Starks
President
Agreed to by: /s/ Glenn A. Norem on 3/28/94
------------------ -------
Glenn A. Norem, President
<PAGE>
C A T A L Y S T
CATALYST FINANCIAL CORPORATION
Two Metro Square, Suite 200
2665 Villa Creek
Dallas, Texas 75234
October 1, 1994
Glenn A. Norem
President & CEO
MultiMedia Access Corporation
2247 Wisconsin Street
Dallas, TX 75229
Dear Glenn:
This letter confirms our mutual agreement to terminate the retainer portion of
the consulting relationship between MultiMedia Access Corporation ("MMAC") and
Catalyst Financial Corporation ("Catalyst") effective September 30, 1994.
Between March 28, 1994 and September 30, 1994, Catalyst performed three and one
half months of consulting work for MMAC and is therefore entitled to $35,000. In
addition, any of the companies that Catalyst introduced to MMAC during this
period may earn the success fee outlined in the March 28, 1994 contract if any
transaction is consummated with them for a 12 month period ending September 30,
1995.
I look forward to continuing this business relationship on a transactional
basis.
Sincerely,
/s/ Newell V. Starks
-------------------------
Newell V. Starks
President
Agreed to by: /s/ Glenn A. Norem on 10/8/94
------------------- -------
Glenn A. Norem, President
<PAGE>
C A T A L Y S T
CATALYST FINANCIAL CORPORATION
Two Metro Square, Suite 200
2665 Villa Creek
Dallas, Texas 75234
January 12, 1996
Glenn A. Norem
President & CEO
MultiMedia Access Corporation
2247 Wisconsin Street
Dallas, TX 75229
Dear Glenn:
Pursuant to our discussions, this letter confirms our mutual agreement to
terminate the retainer portion of the consulting relationship between MultiMedia
Access Corporation ("MMAC") and Catalyst Financial Corporation ("Catalyst")
effective February 1, 1996.
As before, Catalyst (or its assigns) will be paid a success fee for any
transactions identified (whether by Catalyst or any member of MMAC or its
agents) and/or completed during the pendency of this contract. The success fee
will be 3% of the fair market value of each transaction actually consummated
plus the right to purchase for $1.00, a three year option on MMAC common stock.
The number of shares that this option can purchase will be equal to 3% of the
fair market value for each transaction actually consummated divided by the fair
market value of MMAC common stock for the average price during the one week
period preceding the announcement of the transaction.
This contract can be terminated by either party with thirty days written notice.
Within sixty days of the termination of this contract, Catalyst must submit to
MMAC a list of active projects that were identified during the term of this
contract in order to preserve the rights should any of those transactions close
subsequent to the termination of this contract.
We at Catalyst look forward to continuing this business relationship on a
transaction basis.
Sincerely,
James E. Gordon
President
Agreed to by /s/ Glenn A. Norem on 2/2/96
------------------ ------
Glenn A. Norem, President & CEO
MultiMedia Access Corporation
<PAGE>
C A T A L Y S T
CATALYST FINANCIAL CORPORATION
Two Metro Square, Suite 200
2665 Villa Creek
Dallas, Texas 75234
April 2, 1996
William S. Leftwich
CFO
MultiMedia Access Corporation
2665 Villa Creek
Dallas, Texas 75234
Dear Bill:
Pursuant to our discussion, this letter confirms our mutual agreement between
MultiMedia Access Corporation ("MMAC") and Catalyst Financial Corporation
("Catalyst") in regard to the applicable fee for "equity investment" in
MultiMedia Access Corporation ("MMAC") effective April 1, 1996. This arrangement
is independent of the existing agreement between "MMAC" and "Catalyst" for
ongoing Merger and Acquisition activities.
Catalyst (or its assigns) will be paid a success fee for any "equity investment"
transactions identified (whether by Catalyst; its agents, affiliates,
consultants or derived thereof). The success fee will be 6% of the "equity
investment". This success fee may be paid in cash and/or stock; and/or warrants
as agreed by both parties at the time of the investment. As before, the
candidates for investment will be listed on the following Attachment "A". This
Attachment will be periodically updated as additional investors are identified.
This contract can be terminated by either party with thirty days written notice.
Within sixty days of the termination of this contract, Catalyst must submit to
MMAC a list of active projects that were identified during the term of this
contract in order to preserve its rights should any of those transactions close
subsequent to the termination of this contract.
We at Catalyst look forward to continuing this business relationship.
Sincerely,
/s/ James E. Gordon
- -----------------------
James E. Gordon
President
Agreed to by /s/ William S. Leftwich on 4/2/96
----------------------- ------
William S. Leftwich, CFO
Multimedia Access Corporation
<PAGE>
Attachment A
Letter of April 2, 1996
Note:
As per our discussions, and subsequent agreement; the "Success Fee" associated
with the following specific list of potential "Equity Investors" will be payable
in Warrants:
* Gary Motley
* David Motley
* Rhett Bentley
* Lanny Hughes
* Craig Noonan
* Robert Ligon
* William Wells
Agreed to by /s/ William S. Leftwich on 4/2/96
----------------------- ------
William S. Leftwich, CFO
Multimedia Access Corporation
Individuals may be added to, or deleted from, this Attachment A at any time
during the term of this agreement without prior written agreement of MMAC and
Catalyst.
EXHIBIT 11
MULTIMEDIA ACCESS CORPORATION AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
STATEMENT RE: COMPUTATION OF LOSS PER SHARE
<TABLE>
<CAPTION>
For the six months
Year ended December 31, ended June 30,
----------------------- --------------
1994 1995 1995 1996
---- ---- ---- ----
(Unaudited) (Unaudited)
LOSS PER SHARE DATA:
<S> <C> <C> <C> <C>
Net loss as reported in the financial statements .. $(2,717,421) $(5,414,878) $(2,420,653) $(2,058,157)
=========== =========== =========== ===========
Weighted average number of common shares
outstanding ....................................... 3,018,610 3,528,536 3,252,765 4,632,794
Common and common equivalent shares issued in
the twelve month period preceding the filing
date of the initial public offering as required
by SAB No. 83:
Common stock ..................................... 822,080 696,406 822,080 191,599
------- ------- ------- -------
Incentive stock options .......................... 372,182 372,182 372,182 372,182
------- ------- ------- -------
Non-qualified stock options ...................... 54,830 54,830 54,830 54,830
------ ------ ------ ------
Warrants ......................................... 890,230 890,230 890,230 890,230
------- ------- ------- -------
Weighted average number of common and common
equivalent shares outstanding as reported in the
financial statements ............................. 5,157,932 5,542,184 5,392,087 6,141,635
========= ========= ========= =========
Loss per share as reported in the financial
statements........................................ $ (0.53) $ (0.98) $ (0.45) $ (0.34)
=========== =========== ========== ===========
SUPPLEMENTAL LOSS PER SHARE DATA:
Net loss as reported in the financial statements . $(5,414,878) $(2,058,157)
Interest saved on debt to be retired:
$222,548 of 15% secured debt ..................... 33,382 16,691
------ ------
$347,250 of 8% convertible debt .................. 27,780 13,890
------ ------
$35,000 of non-interest debt at 12/31/95 ......... -- --
$220,000 of non-interest debt at 6/30/96 ......... -- --
------ ---------
Adjusted net loss $(5,353,716) $(2,027,576)
=========== ===========
Weighted average number of common and common
equivalent shares outstanding as reported in the
financial statements ............................. 5,542,184 6,141,635
Shares necessary to pay off debt:
Total proceeds to retire debt of $604,798 at
December 31, 1995 and $789,798 at June 30, 1996
divided by the offering price of $5.50 per share 109,963 143,600
Adjusted weighted average number of shares
outstanding ...................................... 5,652,147 6,285,235
========= =========
Supplemental loss per share ....................... $ (0.95) $ (0.32)
=========== ===========
</TABLE>
Stoppelman Law Firm P.C. Letterhead
October 2, 1996
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Re: Multimedia Access Corporation
Registration Statement
-----------------------------
Dear Sir/Madam:
We are corporate and securities counsel to Multimedia Access
Corporation (the "Company"), a Delaware corporation, in connection with the
registration on Form SB-2 of 2,540,649 shares of the Company's Common Stock (the
"Common Stock"), 2,540,649 Redeemable Common Stock Purchase Warrants (the
"Public Warrants"), the 2,540.649 shares of Common Stock underlying the Public
Warrants.
We hereby advise that, in our opinion, the shares of Common Stock, the
Public Warrants and the shares of Common Stock underlying the Public Warrants
have been duly authorized by all necessary corporate acts of the Company, and
when issued, delivered and paid for by the Underwriter, pursuant to the
Underwriting Agreement, will be legally and validly issued, fully-paid and
non-assessable.
We consent to the use of our firm's name under the heading "Legal
Matters" in the Registration Statement, and any amendments thereto, filed with
the Securities and Exchange Commission in connection with the above-referenced
offering.
Very truly yours,
/s/ John S. Stoppelman
John S. Stoppelman
EXHIBIT 23B
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" and to
the use of our report dated April 5, 1996, except for Note 12, as to which the
date is July 2, 1996 in the Registration Statement No. 333-09935 (Form SB-2) and
related Prospectus of MultiMedia Access Corporation for the registration of
1,800,000 shares of its common stock and 1,800,000 redeemable common stock
purchase warrants.
Dallas, TX
October 2, 1996 ERNST & YOUNG LLP
EXHIBIT 23C
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" and to
the use of our report dated March 17, 1995, except for note 12, as to which the
date is May 8, 1995 in the Registration Statement No. 333-09935 (Form SB-2) and
related Prospectus of MultiMedia Access Corporation for the registration of
1,800,000 shares of its common stock and 1,800,000 redeemable common stock
purchase warrants.
Vienna, VA
October 4, 1996 HOFFMAN, MORRISON & FITZGERALD, P.C.
(formerly Hoffman, Dykes & Fitzgerald, P.C.)
