As filed with the Securities and Exchange Commission on July 8, 1996
Registration No. 333-
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM SB-2
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Allegiant Technologies Inc.
(Name of small business issuer as specified in its charter)
Washington 7372 98-0138706
(State or other jurisdiction (Primary standard (I.R.S. Employer
of incorporation Industrial Identification Number)
or organization) Classification
Code Number)
9740 Scranton Place, Suite 300, San Diego, California
92121, (619) 587-0500 (Address and telephone
number of principal executive offices)
9740 Scranton Place, Suite 300, San Diego, California
92121, (619) 587-0500 (Address of principal place of
business or intended principal place of business)
Joel B. Staadecker, Allegiant Technologies, Inc.
9470 Scranton Place, Suite 300, San Diego, California 92121, (619) 587-0500
(Name, address and telephone number of agent for service)
Copies to:
DAVID R. WILSON
Foster Pepper & Shefelman
1111 Third Avenue, Suite 3400
Seattle, Washington 98101
Approximate Date of Proposed Sale to the Public: From time to time after
the effective date of this registration statement.
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. |_|
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. |_|
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. |_|
<TABLE>
<CAPTION> CALCULATION OF REGISTRATION FEE
===============================================================================================================================
Amount to Proposed Proposed Maximum Amount of
Title of Each Class of be Maximum Offering Aggregate Registration
Securities to be Registered Registered Price Per Share (1) Offering Price Fee
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, $0.01 par value 2,130,469 $1.6875 $3,595,167 $1,240
===============================================================================================================================
(1) Calculated pursuant to Rule 457(c) using the average of the high and
low bid and ask prices per share of the Registrant's Common Stock, as
reported on the OTC Bulletin Board for July 2, 1996.
</TABLE>
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.
Preliminary Prospectus
ALLEGIANT TECHNOLOGIES INC.
2,130,469 Shares
Common Stock
This prospectus relates to 2,130,469 shares (the "Shares") of common stock,
$.01 par value (the "Common Stock"), of Allegiant Technologies, Inc., a
Washington corporation (the "Company"). The Shares are outstanding shares of
Common Stock, or will be outstanding shares of Common Stock acquired upon
exercise of warrants or the conversion of convertible debt securities, owned by
the persons named in this Prospectus under the caption "Selling Stockholders."
The Shares were acquired by the Selling Stockholders in various transactions,
all of which were exempt from the registration provisions of the Securities Act
of 1933, as amended (the "1933 Act"), including sales of the Shares in private
placements by the Company, issuance of the Shares as compensation, the exercise
of warrants by certain of the Selling Stockholders and the conversion of
convertible debt instruments held by certain of the Selling Stockholders.
The Selling Stockholders may from time to time sell the Shares on the OTC
Bulleting Board, on the Vancouver Stock Exchange, on any other national
securities exchange or automated quotation system on which the Common Stock may
be listed or traded, in negotiated transactions or otherwise, at prices then
prevailing or related to the then current market price or at negotiated prices.
The Shares may be sold directly or through brokers or dealers. See "Plan of
Distribution."
The Company will receive no part of the proceeds of any sales made
hereunder. See "Use of Proceeds." All expenses of registration incurred in
connection with this offering are being borne by the Company, but all selling
and other expenses incurred by the Selling Stockholders will be borne by the
Selling Stockholders. See "Selling Stockholders."
The Selling Stockholders and any broker-dealers participating in the
distribution of the Shares may be deemed to be "underwriters" within the meaning
of the 1933 Act, and any commissions or discounts given to any such
broker-dealer may be regarded as underwriting commissions or discounts under the
1933 Act.
The Shares have not been registered for sale by the Selling Stockholders
under the securities laws of any state as of the date of this Prospectus.
Brokers or dealers effecting transactions in the Shares should confirm the
registration thereof under the securities laws of the States in which
transactions occur or the existence of any exemption from registration.
The Common Stock is traded on the OTC Bulletin Board under the symbol "ALGT"
and on the Vancouver Stock Exchange under the symbol "AGH.U" On June 24, 1996,
the closing bid and asked prices of the Common Stock as reported on the OTC
Bulletin Board were $1.375 and $2.00, respectively.
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 _______, 1996
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and financial statements, including the notes thereto, appearing
elsewhere in this Prospectus. All dollar amounts in this Prospectus are stated
in the lawful currency of the United States unless otherwise indicated.
The Company
Allegiant Technologies Inc. ("Allegiant" or the "Company") designs,
develops and markets multimedia, Internet, and application development software
authoring tools used to create interactive, multimedia communication, education,
entertainment, presentation and information management applications ("Multimedia
Applications"). The Company's proprietary technology, "SuperCard," comprises a
set of sophisticated software authoring tools which enable professional
Multimedia Application developers to combine text, images, graphics, video,
animation, and sound into a wide variety of application software. The primary
applications for SuperCard include corporate training and performance support,
entertainment, multimedia presentations, education, interactive information
kiosks and data base front-ends for information systems applications. The
Company's products are designed for relative ease of use and are based on a
high-level scripting language, "SuperTalk," which does not require knowledge of
an independent programming language. Currently, SuperCard runs only on computers
compatible with the Macintosh operating system. The Company has announced a
version of SuperCard that will run on the Microsoft Windows operating system,
and presently intends to ship a runtime player by the end of 1996.
SuperCard is used by numerous corporations and higher education
institutions to develop a variety of application software. Examples of these
applications include Boeing Company's development of the prototype for its
computer-based training of pilots and mechanics for its 777 commercial jet
airplane, Harvard and Yale University Medical Schools' development of medical
training applications, Mercedes-Benz' development of performance support
applications which deliver schematics and other graphically rich data to the
point of manufacture and Toyota's development of interactive marketing
presentation applications, including an interactive electronic brochure for the
Toyota Tercel.
The company's strategy is to expand the availability and accessibility of
its SuperCard core technology by developing software products that (i) create
Multimedia Applications that run on both Macintosh and Windows operating
environments; (ii) create Multimedia Applications that run over the Internet on
the World Wide Web (the "Web"), and (iii) enable non-professional developers to
create custom Multimedia Applications, thereby expanding the user base for the
company's products. The Company has recently announced its strategy for
authoring and delivering Multimedia Applications on the Internet and Web, which
initially consists of three products: Marionet, Jetstream and Xenon. These
products are designed to run on Macintosh and Windows operating environments.
Marionet allows Multimedia and Internet Application developers to create
completely custom applications that access and manage information across the
Internet. Jetstream, which is plug-in player for Web browsers such as Netscape's
Navigator, enables SuperCard Multimedia Applications to run interactively across
the Web. In order to establish the Company's products as a standard for
deployment of Multimedia Applications on the Web, the Company intends to make
Jetstream available free of charge to users. Xenon is intended to be a
Multimedia Application development tool, based on SuperCard technology, that
will permit businesses and organizations to build interactive Multimedia
Applications for the Web. The Macintosh version of Marionet began shipping in
January 1996. Windows and Macintosh beta versions of Jetstream are presently
scheduled to be released during the second half of 1996. An enhanced version of
Marionet for Macintosh and Windows is presently scheduled to be shipped in the
second half of 1996. A version of Xenon for Macintosh and Windows is presently
scheduled to be shipped in the first half of 1997.
The Company believes that demand for authoring tools for Multimedia
Applications and the connectivity software which allows the use of Multimedia
Applications on the Web will be driven by the following factors: (i) the ability
of interactive media to enhance the quality and impact of communication,
education and entertainment; (ii) the availability of multimedia-capable
computer systems at affordable prices to consumers; (iii) the growth and
acceptance of the Web as a channel of communication and commerce; and (iv) the
needs of educators, corporate trainers and developers and other non-professional
application developers for powerful and easy-to-use tools to create and utilize
Multimedia Applications and distribute these applications across the Web.
The Company's principal executive offices are located at 9740 Scranton
Road, Suite 300, San Diego, California 92121 and its telephone number is (619)
587-0500. The Company was incorporated in Washington in December, 1993. The
address of the Company's home page on the Web is www.allegiant.com.
Prior to this offering, the Company was not required to file reports with
the Securities and Exchange Commission under the Securities Exchange Act of
1934, as amended (the "1934 Act"). Upon the effective date of the registration
statement of which this Prospectus is a part, the Company will be required to
file reports under the 1934 Act. The Company furnishes annual reports to its
shareholders which include audited financial statements reported on by its
independent auditors and quarterly reports containing unaudited condensed
financial information for the first three quarters of each fiscal year. The
Company also furnishes such other reports from time to time as it may determine
or as may be required by law.
SuperCard is a federally registered trademark of the Company. Trademark
registrations are pending for Allegiant and Marionet. Jetstream and Xenon are
Company codenames for products in development.
This Prospectus also contains names and marks of other companies.
<TABLE>
Summary Financial Data
Three Months
<CAPTION> From Inception to Year Ended Ended March 31
December 31, 1994 December 31, 1995 1995 1996
<S> <C> <C> <C> <C>
Statement of Operations Data
Net Revenue...................... $ 818,153 $2,227,582 $744,237 $470,710
Gross Profits.................... $ 647,961 $1,581,035 $530,741 $369,807
Operating Loss................... $(628,037) $(1,066,158) $(42,563) $(815,318)
Net Loss......................... $(626,698) $(1,057,366) $(42,187) $(830,538)
Net Loss per Share............... $ (0.25) $ (0.24) $.(0.01) $ (0.16)
Weighted average common and
common equivalent shares......... 2,535,397 4,372,592 3,694,000 5,042,295
</TABLE>
<TABLE>
<CAPTION> March 31, 1996
December 31, 1995 Actual Pro Forma(1)
<S> <C> <C> <C>
Balance Sheet Data
Working Capital.................. $ 557,420 $(82,362) $1,371,008
Total Assets..................... $1,638,391 $1,230,778 $2,550,566
Long-Term Debt................... $ 470,034 $479,834 $479,834
Stockholders' Equity............. $ 790,757 $210,219 $1,530,007
(1)Adjusted to reflect the sale by the Company of $1,630,000 of securities of
the Company during April, 1996 and the application of the net proceeds
received therefrom (after deducting discounts and commissions and expenses
paid by the Company).
</TABLE>
RISK FACTORS
In addition to the other information in this Prospectus, the following
risk factors should be considered carefully in evaluating the Company
and its business before purchasing the Shares offered hereby. A purchase of
the Shares offered hereby is speculative in nature and involves a high degree
of risk. No purchase of the Shares should be made by any person who is not
in a position to lose the entire amount of such investment.
Limited Operating History; Historical Operating Losses; Variability
of Results of Operations
The Company is subject to risks associated with early stage companies,
including start-up losses, uncertainty of revenues, profitability and the need
for additional funding. The Company has a limited history of operations and no
history of profitability. The Company has incurred cumulative losses of
$2,514,602 from the date of incorporation on December 28, 1993 to March 31,
1996. There can be no assurance that product sales will either continue at
historical rates or increase, that the Company will achieve profitable
operations, or that new products introduced by the Company will achieve market
acceptance. The Company's results of operations vary significantly depending on
the timing of product introductions and enhancements by the Company and its
competitors, changes in pricing, execution of technology licensing agreements
and the volume and timing of orders received during the quarter, which are
difficult to forecast. Customers generally order on an as-needed basis, and the
Company normally ships products within one week after receipt of an order.
Accordingly, the Company has historically operated with minimal backlog. A
significant portion of the Company's expenses are relatively fixed and planned
expenditures are based on sales forecasts. As a result of the foregoing and
other factors, the Company anticipates that it may experience material and
adverse fluctuations in results of operations on a quarterly or annual basis.
Therefore, the Company believes that period to period comparisons of its
revenues and results of operations are not necessarily meaningful and that such
comparisons cannot be relied upon as indicators of future performance. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
Emerging Multimedia and Internet Markets
The market for multimedia and Internet authoring tools is emerging and is
dependent on the demand for Multimedia Applications, which is difficult to
predict with any assurance. The demand for Multimedia and Internet Applications
is dependent on a number of variables, including the installed base of
multimedia-capable personal computers, the number of computer users with access
to the Internet and the Web, the widespread availability of digital media and
the number of professional application developers capable of creating high
quality applications that achieve market acceptance. To date, the demand for
multimedia authoring tools has been limited to a relatively small number of
professional application developers of Multimedia Applications. Unless and until
the installed base of multimedia-capable personal computers and the number of
titles with wide market acceptance increase the market demand for Multimedia
Applications, the demand for multimedia authoring tools will be limited. Even if
there is an increase in demand for Multimedia Applications, the demand for
multimedia authoring tools is not expected to increase at the same rate. There
can be no assurance that the market for Multimedia Applications or authoring
tools will develop at the rate contemplated by the Company or that the demand
for multimedia authoring tools will grow at a rate sufficient to support the
Company's business plan. See "Business."
Product and Platform Concentration
Substantially all of the revenues of the Company from its inception to date
are from the sale or license of SuperCard. The Company expects that its revenues
will continue to be dependent upon SuperCard and that competition for SuperCard
will intensify in the future. A decline in the sales of SuperCard, as a result
of competition, technological change or other factors, would have a material
adverse effect on the Company's resultsof operations. Currently, SuperCard is
only fully-functional on the Macintosh computer. Although the Company plans to
release a version of SuperCard for the Windows operating system, a decline in
the sales rate of a multimedia-capable Macintosh computers could have a material
effect adverse on the Company's results of operations. See "Business--Products."
Rapid Technological Change
The emerging multimedia and Internet markets and the personal computer
industry in general are characterized by rapidly changing technology, resulting
in short product life cycles and rapid price declines. The Company must
continuously update its existing and planned products to keep them current with
changing technologies and must develop new products to take advantage of new
technologies that could render the Company's existing products obsolete. The
Company's future prospects are highly dependent on its ability to increase the
functionality of its products in a timely manner and to develop new products
that address new technologies and achieve market acceptance. There can be no
assurance that the Company will be successful in these efforts. If the Company
were unable to develop and introduce such products in a timely manner, due to
resource constraints or technological or other reasons, this inability could
have a material adverse effect on the Company's results of operations. In
particular, the introduction of new products, such as the Company's planned
Windows-based version of SuperCard, and its Jetstream and Xenon products, is
subject to the inherent risk of development delays. The Company has experienced
product development delays in the past, and such delays may occur in the future.
In addition, due to the uncertainties associated with the Company's emerging
market, there can be no assurance that the Company will be able to forecast
product demand accurately or to respond in a timely manner to changing
technologies and customer requirements. See "Business--Product Development
Plans."
Competition
The market for the Company's products is highly competitive and is
characterized by pressures to reduce prices, incorporate new features and
accelerate the release of new product versions. A number of companies currently
offer products that compete directly or indirectly with one or more of the
Company's products. Certain of the Company's competitors or potential
competitors have significantly greater financial, management, technical and
marketing resources than the Company. In the event that price competition
significantly increases, competitive pressures could cause the Company to reduce
the prices of its products, which would adversely affect the Company's results
of operations. A variety of other potential actions by the Company's
competitors, including increased promotion and accelerated introduction of new
or enhanced products, could have a material adverse effect on the Company's
results of operations. There can be no assurance that the Company will be able
to compete successfully in the future. In addition, the Company's products
compete to a certain extent with multimedia authoring tools developed and used
internally by developers of Multimedia Applications. The Company's growth will
depend in part on its ability to persuade such potential customers to replace or
augment their in house tools with the Company's products. There can be no
assurance that the Company will be able to do so. See "Business--Competition."
Future Capital Needs and Uncertainty of Additional Funding
The Company has expended, and will continue to expend in the future,
substantial funds to complete the research and development, manufacturing and
marketing of its products. Based on its current staffing level and product
development schedule, the Company anticipates that its working capital and
funds anticipatedto be derived from operations should be adequate to satisfy
its capital and operating requirements through October 31, 1996. This
estimate is based upon certain assumptions; however, there can be no assurance
that the Company will have sufficient working capital to satisfy the
Company's capital needs beyond October 31, 1996. The Company anticipates
that it will seek additional funding through public or private sales of its
securities, including equity securities. Adequate funds, whether through
financial markets or collaborative or other arrangements with corporate
partners or from other sources may not be available when needed or on terms
acceptable to the Company. In the event that the Company is not able to
obtain additional funding on a timely basis, the Company may be required to
scale back or eliminate certain or all of its development, manufacturing or
marketing programs or to license third parties to commercialize products or
technologies that the Company would otherwise seek to develop, manufacture or
market itself, any of which could have a material adverse effect on the
Company's results of operations in order to satisfy its capital and operating
requirements into early 1997. See Management's Discussion and Analysis of
Financial Condition and Results of Operations Liquidity and Capital Resources.
Reliance on Third Party Resellers
A substantial majority of the Company's revenues is derived from the sale
of its products through third parties. Accordingly, the Company is dependent on
the continued viability and financial stability of these resellers. The Company
is particularly dependent on the resellers who generally offer products of
several different companies, including in some cases products that are
competitive with the Company's products. There can be no assurance that the
Company's resellers will continue to purchase the Company's products or provide
them with adequate levels of support. The loss of, or a significant reduction in
sale volume to, a number of the Company's resellers could have a material
adverse effect on the Company's results of operations. See "Business--Sales,
Marketing and Distribution."
The Company grants its distributors limited rights under a stock balancing
policy to return unsold inventories of the Company's products in exchange for an
equal amount of new purchases. The Company expects that the rate of new product
introductions by the Company and other participants in the multimedia software
tools market segment will increase, which could lead to an increased return rate
of the Company's products. Although the Company provides allowances that are
adequate, and have been adequate in the past, there can be no assurance that
product returns will not exceed such allowances in the future. In addition, the
Company provides price protection to its distributors. Although the Company
accrues for such price protection in its allowance for product returns, and such
accruals have been adequate in the past, a decrease in the price of the
Company's products could have a material adverse effect on the Company's results
of operations.
Dependence on Key Personnel
The Company has a small core management and development team and the
unexpected loss of any of these individuals would have a material adverse effect
on the Company's business and results of operations. Each of the key executives
of the Company, including Mr. Staadecker (President, Chief Executive Officer and
Director) and Mr. Henigson (Vice President, Marketing), has an employment
contract with the Company which contains a non-competition covenant in the event
of voluntary termination. At present, there is no key-man insurance in place for
any members of the Company. See "Management."
Management of Growth
The Company's business has grown rapidly in recent periods. The growth of
the Company's business has placed, and if sustained will continue to place, a
substantial burden on its managerial, operational, financial and information
systems. In particular, the growth of the Company's business has required and,
if sustained, will continue to require the employment of additional software and
development engineers, the number of which could be substantial. There can be no
assurance that the Company will be able to hire engineers and other employees
with the necessary qualifications. The future success of the Company also
depends upon its ability to attract and retain highly skilled managerial, sales,
marketing and operations personnel. Competition for such personnel is intense,
and there can be no assurance that the Company will be successful in attracting
and retaining such personnel. There can be no assurance that the Company's
management will be able to manage future expansions, if any, successfully, or
that its management, personnel or systems will be adequate to support the
Company's operations or will be implemented in a cost-effective or timely
manner. The Company's success depends to a significant extent on the ability of
its executive officers and other members of senior management to respond to
these challenges effectively. The Company's inability to manage growth
effectively could have a material adverse effect on the Company's business,
results of operations and financial condition. See "Management."
Limited Protection of Proprietary Technology
The Company regards its software technology as proprietary and attempts to
protect it under copyright, trademark and trade secret laws as well as through
contractual restrictions on disclosure, copying and distribution. The Company
distributes individual copies of its software under a "shrinkwrap" license
agreement containing these restrictions and generally does not obtain signed
license agreements from its end users. There is a possibility that such
shrinkwrap licenses may not be enforceable in certain jurisdictions. It may be
possible for unauthorized third parties to copy the Company's products or to
reverse engineer or obtain and use information that the Company regards as
proprietary. There can be no assurance that the Company's competitors will not
independently develop technologies that are substantially equivalent or superior
to the Company's technologies. In addition, the laws of certain countries in
which the Company's products are or may be distributed do not protect the
Company's products and intellectual rights to the same extent as the laws of
the United States. As the number of software products increases and
the functionality of these products further overlaps, the Company believes
that software will increasingly become the subject of claims that such
software infringes the rights of others. To date no third party has filed an
infringement claim against the Company and there have been no explicit threats
of litigation asserting that the Company's products infringe their
intellectual property rights. There can be no assurance that third
parties will not assert infringement claims against the Company in the
future or that any such assertion will not result in costly litigation or
require the Company to obtain a license to intellectual property rights of
third parties. If the Company were required to so obtain any such licenses,
there can be no assurance that such licenses will be available on
reasonable terms, or at all. See "Business--Proprietary Protection."
Dependence on Third Party for Manufacturing and Shipping
The Company utilizes an independent third party for the manufacture and
shipment of its finished product. The manufacture of the Company's products
consists of duplicating diskettes, pressing CD-ROMs, printing manuals and
packaging and assembling finished products, all of which are performed for
the Company in accordance with the Company's specifications and forecasts.
Although the Company believes there are multiple vendors who can supply the
manufacturing and shipping services it requires and has not experienced
material difficulties or significant delays in the filling of its orders,
any significant failure to manufacture or ship the Company's products on
a timely basis could have a material adverse effect on the Company's results
of operations. See -Business-Manufacturing-and-Shipping.
Classification of the Common Stock as Penny Stock
In October 1990, Congress enacted the "Penny Stock Reform Act of 1990."
"Penny Stock" is generally any equity security other than a security (a) that is
registered or approved for registration and traded on a national securities
exchange or an equity security for which quotation information is disseminated
by The National Association of Securities Dealers Automated Quotation ("NASDAQ")
System on a real-time basis pursuant to an effective transaction reporting plan,
or which has been authorized or approved for authorization upon notice of
issuance for quotation in the NASDAQ System, (b) that is issued by an investment
company registered under the Investment Company Act of 1940, (c) that is a put
or call option issued by Options Clearing Corporation, (d) that has a price of
five dollars or more or (e) whose issuer has net tangible assets in excess of
$2,000,000, if the issuer has been in continuous operation for at least three
years, or $5,000,000, if the issuer has been in continuous operation for less
than three years and average revenue of at least $6,000,000 for the last three
years.
None of the Securities of the Company, including the Common Stock, meets
these criteria. Therefore, the Common Stock is subject to Rules 15g-2 through
15g-9 (the "Penny Stock Rules") under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"). The Penny Stock Rules impose additional reporting,
disclosure and sales practice requirements on brokers and dealers and require
that such brokers and dealers must make a special suitability determination of
each purchaser and must have received the purchaser's written consent to the
transaction prior to the sale. Consequently, the Penny Stock Rules may affect
the ability of brokers and dealers to sell the Common Stock and may affect the
ability of purchasers to sell any of the Shares acquired hereby in the secondary
markets.
So long as the Common Stock is within the definition of "Penny Stock" as
defined in Rule 3a51-1 of the Exchange Act, the Penny Stock Rules will continue
to be applicable to the Common Stock. Unless and until the price per share of
Common Stock is equal to or greater than $5.00, the Common Stock will be subject
to substantial additional risk disclosures and document and information delivery
requirements on the part of brokers and dealers effecting transactions in the
Common Stock. Such additional risk disclosures and document and information
delivery requirements on the part of such brokers and dealers may have an
adverse effect on the market for and/or valuation of the Common Stock.
Control by Existing Stockholders; Anti-Takeover Provisions
The Company's directors, officers and principal (greater than 5%)
stockholders, taken as a group, together with their affiliates, beneficially own
in the aggregate approximately 37.0% of the Company's outstanding Common Stock.
Certain principal stockholders are directors or executive officers of the
Company. As a result of such ownership, these stockholders will be able to
control matters requiring approval by the stockholders of the Company, including
the election of directors. In addition, certain provisions of Washington law and
of the Company's Articles of Incorporation (the "Articles") and Bylaws (the
"Bylaws") could have the effect of making it more difficult or more expensive
for a third party to acquire, or of discouraging a third party from attempting
to acquire, control of the Company. The Company is also authorized to issue
preferred stock with rights senior to, and that may adversely affect, the Common
Stock, with such rights, preferences and privileges as the Company's Board of
Directors may determine, without the necessity of shareholder approval. The
Company, however, has no present plans to issue any shares of preferred stock.
See "Principal Stockholders" and "Description of Securities--Antitakeover
Provisions."
Limited Prior Market for Common Stock; Possible Volatility of Stock Price
The Common Stock is traded on the Vancouver Stock Exchange and quoted on
the OTC Bulletin Board. However, no assurance can be given that an active public
market will develop or be sustained. Factors such as announcements of the
introduction of new or enhanced products by the Company or its competitors and
quarter-to-quarter variations in the Company's results of operations, as well as
market conditions in the technology and emerging growth company sector, may have
a significant impact on the market price of the Company's shares. Further, the
stock market has experienced extreme volatility that has particularly affected
the market prices of equity securities of many high technology companies and
that often has been unrelated or disproportionate to the operating performance
of such companies. These market fluctuations may adversely affect the price of
the Common Stock.
USE OF PROCEEDS
All of the Shares offered hereby are being offered by the Selling
Stockholders. The Company will not receive any of the proceeds from the sale of
the Shares. See "Selling Stockholders."
SELLING STOCKHOLDERS
The following table sets forth the number of shares of Common Stock which
may be offered for sale from time to time by the Selling Stockholders. The
shares offered for sale constitute all of the shares of Common Stock known to
the Company to be beneficially owned by the Selling Stockholders. None of the
Selling Stockholders has held any position or office with the Company. Other
than the relationships described below, none of the Selling Stockholders had or
have any material relationship with the Company.
<TABLE>
<CAPTION> Shares Owned and
Selling Stockholder Being Offered
<S> <C>
Geller & Friend Partnership I...................................................................... 575,000
Grandview Partners, L.P............................................................................ 225,000
Ben Murillo........................................................................................ 150,000
Hathaway Partners Investment Limited Partnership................................................... 150,000
Irving B. Harris Revocable Trust DTD 7/31/87....................................................... 144,000
Greenbrae Capital Partners......................................................................... 101,559
Steven Lampe....................................................................................... 90,000
L.H. Friend, Weinress, Frankson & Presson, Inc.(1)................................................. 81,500
Wolfson Equities................................................................................... 75,000
David W. Ruttenberg................................................................................ 67,500
Mickey D. Levy..................................................................................... 67,500
Hilltop Partners, L.P.............................................................................. 56,250
The Gordon Family Trust............................................................................ 45,000
Firebird Overseas Limited.......................................................................... 45,000
Patriot Group, L.P................................................................................. 45,000
Kent Bennett Williams.............................................................................. 37,500
James L. Dritz..................................................................................... 37,500
Catherine E. Williams.............................................................................. 37,500
Jerome Kahn Jr. Revocable Trust DTD 10/16/87....................................................... 36,000
Judy W. Solely..................................................................................... 22,500
Euro Dutch Trust Company........................................................................... 22,500
Hilltop Offshore Limited........................................................................... 18,750
(1) L.H. Friend, Weinress, Frankson & Presson, Inc. acted as placement agent for a private placement of the
Company's common stock and warrants in April 1996.
</TABLE>
Pursuant to the purchase agreements by which certain of the Selling
Stockholders acquired their Shares, the Company agreed to use its best efforts
to file a registration statement for the resale of such Shares and to use its
best efforts to cause such registration statement to be declared effective.
Pursuant to those agreements, the Company will pay all expenses in connection
with the registration and sale of the Shares, except any selling commissions or
discounts allocable to sales of the Shares, fees and disbursements of counsel
and other representatives of the Selling Stockholders, and any stock transfer
taxes payable by reason of any such sale.
DIVIDEND POLICY
The Company has never declared or paid a cash dividend on its capital stock
and does not expect to pay cash dividends on its Common Stock in the foreseeable
future. The Company currently intends to retain its earnings, if any, for use in
its business. Any dividends declared in the future will be at the discretion of
the Board of Directors and subject to restrictions that may be imposed by the
Company's lenders.
PRICE RANGE COMMON STOCK
In May 1996, quotation of the Company's Common Stock began on the OTC
Bulletin Board (trading symbol: ALGT). The Common Stock has traded on the
Vancouver Stock Exchange (trading symbol: AGH) since May 24, 1995. Prior to that
date, there was no public market for the Company's Common Stock.
The high and low sale prices of the Common Stock on the Vancouver Stock
Exchange for each quarter are as follows:
<TABLE>
<CAPTION> High Low
<S> <C> <C>
Second quarter 1995 ........................ $ 1.28 $ 1.00
Third quarter 1995 ......................... $ 2.00 $ .90
Fourth quarter 1995 ........................ $ 2.90 $ 1.55
First quarter 1996 ......................... $ 3.50 $ 2.00
Second quarter 1996 ........................ $ 2.95 $ 1.40
</TABLE>
The above prices were converted from Canadian dollars to U.S. dollars at
the average of the daily exchange rates quoted by the Bank of Canada during each
respective calendar quarter.
The high and low bid and ask prices of the Common Stock on the OTC Bulletin
Board for the first quarter of 1996 were $3.63 and $2.00 and the second quarter
of 1996 were $3.25 and $1.50, respectively. On June 28, 1996, the last
reported bid and ask prices of the Common Stock on the OTC Bulletin Board
were $1.375 and $2.00 per share, respectively.
SELECTED FINANCIAL DATA
The following selected financial data is qualified by reference to and
should be read in conjunction with the financial statements and the notes
thereto included elsewhere herein. The statement of operations data set forth
below with respect to the period ended December 31, 1994 and the year ended
December 31, 1995 and the balance sheet data at December 31, 1994 and 1995 are
derived from, and are qualified by reference to, the audited financial
statements and notes thereto included elsewhere in this Prospectus. The selected
financial data presented below for the three months ended March 31, 1995 and
1996 was derived from the unaudited financial statements and notes thereto
included elsewhere in this Prospectus. In the opinion of management, all
unaudited financial statements include adjustments, consisting only of normal
recurring accruals necessary for a fair presentation of such information for the
periods presented. The results of operations for the three months ended March
31, 1996 are not necessarily indicative of results to be expected for the year
ending December 31, 1996.
<TABLE>
<CAPTION> From Incorporation on
December 28, 1993 to Year Ended Three Months
December 31, December 31, Ended March 31
1994 1995 1995 1996
----- ------ ---- ----
<S> <C> <C> <C> <C>
Income Statement Data:
Net revenue $ 818,153 $ 2,227,582 $ 744,237 $ 470,710
Cost of revenue 170,192 646,547 213,496 100,903
------------ ------------ ---------- ----------
Gross profit 647,961 1,581,035 530,741 369,807
------------ ------------ ---------- ----------
Expenses
Sales and marketing 441,220 1,045,383 243,818 651,561
Research and development 288,563 607,012 128,192 249,874
General and administrative 454,915 863,535 172,228 248,791
Amortization of purchase of intangibles 91,300 131,263 29,066 34,899
------------ ------------ ---------- -----------
Total operating expenses 1,275,998 2,647,193 573,304 1,185,125
----------- ------------ ---------- ----------
Loss from operations (628,037) (1,066,158) (42,563) (815,318)
Interest income 1,339 14,966 1,070 4,132
Interest expense --- (6,174) (694) (19,352)
-------------- -------------- ------------ -----------
Net loss $ ( 626,698) $ (1,057,366) $ (42,187) $ (830,538)
=============== ============= =========== ===========
Loss per share $ ( 0.25) $ ( 0.24) $ ( 0.01) $ ( 0.16)
=============== ============== =========== ===========
Shares used in computing per share
amounts 2,535,397 4,372,592 3,634,000 5,042,295
=============== ============== =========== ===========
</TABLE>
<TABLE>
<CAPTION> December 31, March 31, 1996
-------------- ---------------
1994 1995 Actual Pro Forma(1)
------ ------ ------ ---------
<S> <C> <C> <C> <C>
Balance Sheet Data:
Working capital................................ $ 329,523 $ 557,420 $ (82,362) $1,371,008
Total assets................................... $ 1,086,819 $ 1,638,391 $1,230,778 $2,550,566
Long-term debt................................. $ 250,000 $ 470,034 $ 479,834 $ 479,834
Total shareholders' equity..................... $ 635,302 $ 790,757 $ 210,219 $1,530,007
(1) Adjusted to reflect the sale by the Company of $1,630,000 of securities of
the Company during April, 1996 and the application of the net proceeds
received therefrom (after deducting discounts and commissions and expenses
paid by the Company).
</TABLE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Overview
This section contains forward-looking statements regarding the Company's
business and financial condition. No assurance can be given that actual results
of operations will not differ materially from the forward-looking statements
contained herein. For a discussion of various factors which may cause actual
results to vary, see "RISK FACTORS" commencing at page 5 hereof.
The Company has a limited history of operations. It was incorporated on
December 28, 1993, acquired SuperCard, together with its customer franchise,
from Aldus Corporation ("Aldus") on February 4, 1994, and released its first
product upgrade in June 1994. The Company has incurred substantial start-up
expenses and planned development and infrastructure expenditures necessary to
position the Company for future growth, which has resulted in cumulative net
losses to March 31, 1996 of $2,514,602. The Company's revenues to date have been
substantially derived from the sale of SuperCard. The sale of Marionet, the
Company's Internet scripting tool and its second product offering, commenced in
January 1996. There can be no assurance that product sales will either continue
at historical rates or increase or achieve profitable operations, or that new
products introduced by the Company will achieve market acceptance. The Company's
historical rate of growth should not be taken as indicative of growth rates that
can be expected in the future.
The Company expects to increase expenses primarily in the areas of
marketing and software engineering as part of a strategy to increase market
share, expand the number of markets in which the Company's products are sold and
facilitate new product development. There can be no assurance that the Company's
business strategies will be successful.
To date, the Company expensed all of its software development costs and
amortized purchased intangibles over five years on a straight-line basis. See
Notes to the Financial Statements for a complete description of the Company's
accounting policies.
Results of Operations
The following table sets forth, for the periods indicated, certain
operating data as a percentage of net revenue.
<TABLE>
<CAPTION> From
Incorporation on
December 28, Year
1993 to Ended Three
December December Months Ended
31, 1994 31, 1995 March 31,
1995 1996
----------- -------- ------- -------
<S> <C> <C> <C> <C>
Revenue:
Net product sales 99% 89% 87% 99%
- -----
Service fees and royalty income 1 11 13 1
------------------ ---------------- -------------- --------------
Net revenue 100 100 100 100
Cost of revenue 21 29 29 21
------------------ ---------------- -------------- --------------
Gross profit 79 71 71 79
------------------ ---------------- -------------- --------------
Expenses:
Sales and marketing 54 47 33 138
- -----
Research and development 35 27 17 53
General and administrative 56 39 23 53
Amortization 11 6 4 7
------------------ ---------------- -------------- --------------
Total operating expenses 156 119 77 251
------------------ ---------------- -------------- --------------
Loss from operations (77) (48) (6) (172)
Net interest income (expense) - 1 - (4)
------------------ ---------------- --------------- --------------
Net loss (77)% (47)% (6)% (176)%
================== ================ =============== ==============
</TABLE>
Three Months Ended March 31, 1996 Compared to Three Months Ended March 31, 1995
Net revenue includes revenues from sales of software products and services,
less reserves for anticipated product returns and future vendor support
services. Total net revenues decreased by 37% from $744,237 for the three months
ended March 31, 1995 to $470,710 for the three months ended March 31, 1996. The
decrease is due to the following factors: (1) revenues for the first three
months of 1995 include a non-recurring non-refundable advance royalty of
$100,000, (2) net product sales during the first three months of 1995 were from
the sale of SuperCard version 2.0 which was at the beginning of a product
upgrade cycle whereas sales for 1996 were substantially from the sale of version
2.5 which was at the end of a product upgrade cycle, (3) the announced changes
at Apple Computer negatively impacted purchasing decisions because of the
Company's products current dependance upon the Macintosh operating platform, and
(4) the Company increased its reserves in 1996 for anticipated product returns
and future vendor support services to 15% of gross product revenues from less
than 5%. The initial sales of Marionet, which was introduced in the first
quarter of 1996, were slower than expected. Financing delays prevented the
Company from undertaking its planned marketing program to increase market
awareness. The Company has recently received favourable product reviews form
MacUser and InforWorld magazines that support the Company's belief that Marionet
can provide substantial value to the "Internet" and "Intranet" developer
community. The Company is reviewing its current business model and market
emphasis to determine the most expeditious means to maximize revenues from the
sale or license of Marionet technology.
Cost of revenue includes the cost of manuals, diskettes and their
duplication, packaging materials, assembly, paper goods, bundled products, and
shipping as well as royalties and reserves for inventory obsolescence. Cost of
revenue decreased from 29% to 21% for the first three months of 1995 as compared
to 1995. The decrease is primarily due to the change in costs associated with
other vendor products that were bundled with SuperCard from time to time.
Sales and marketing expenses include the costs of advertising, promotion,
trade shows and printed collateral materials, salaries and the costs of
contracted services. Total costs increased from 33% to 138% as a percentage of
net revenues for the first three months of 1995 as compared to 1996. The
increase is due to the following factors: (1) the Company substantially
increased its presence at the MacWorld conference and other trade shows held in
the first quarter of each year to properly position the Company within the
industry; (2) it increased its staff levels to facilitate planned growth, (3) it
commenced a roll out program for its Windows product which was delayed as a
result of financing delays and technology changes; (4) it incurred introductory
marketing costs associated with the introduction of Marionet. The Company is
reviewing its marketing plans and infrastructure costs in relation to its
current product development plans and its available working capital.
Research and development expenditures consisted of personnel expenses,
costs of independent contractors and supplies required to conduct the Company's
development efforts. The increase in research and development costs is directly
attributable to the increase in engineering staff necessary to complete the
Company's current product development plan.
General and administrative expenses consist primarily of the costs of the
Company's finance and administrative personnel, including the chief executive
officer. The increase in general and administrative expenses is reflective of
Company growth and is not attributable to any particular factor.
Year Ended December 31, 1995 Compared to Period From Incorporation on
December 28, 1993 to December 31, 1994
Total net revenue increased by 172% from $818,153 for the period from
incorporation on December 28, 1993 to December 31, 1994, to $2,227,582 for the
year ended December 31, 1995. Net product sales were $1,980,861 for 1995
compared to $807,007 for 1994. Unit sales increased by 136% from 5,988 during
the period from incorporation on December 28, 1993 to December 31, 1994, to
14,166 during 1995. Service revenue attributable to services were $146,721 for
1995 compared to $11,146 for the period from incorporation on December 28, 1993
to December 31, 1994. Although the Company acquired SuperCard on February 4,
1994, the Company did not release its first product upgrade, Version 1.7 until
June 10, 1994, therefore, substantially all of the sales in 1994 were made
during the seven months ended December 31, 1994. The 1995 net revenue also
included a non-refundable advance royalty of $100,000.
Cost of revenue increased from 21% to 29% for fiscal 1995 as compared to
the period from incorporation on December 28, 1993 to December 31, 1994 as a
percentage of net revenue. This increase is primarily due to the added costs of
other vendor products that were bundled with SuperCard in connection with
specific and targeted marketing campaigns undertaken at various times during
1995.
Total sales and marketing costs decreased from 54% to 47% as a percentage
of net revenue for fiscal 1995 as compared to the period from incorporation on
December 28, 1993 to December 31, 1994. Although no assurances can be given, it
is expected that total sales and marketing costs as a percentage of net revenue
will decrease as markets are developed and the costs to establish and maintain
sales and marketing departments level off. At the end of 1995, the Company
employed 12 full-time persons in marketing, sales and customer services and
technical support as compared to 4 at the end of 1994.
Total research and development costs increased from $288,563 for the period
from incorporation on December 28, 1993 to December 31, 1994, to $607,012 for
fiscal 1995. The costs in 1994 relate to the development of SuperCard versions
1.7 and 2.0. The costs in 1995 relate to the development of SuperCard version
2.5, a Windows version of SuperCard and Marionet. Only the development of the
Windows version of SuperCard was not completed by the end of 1995. At the end of
1995, the Company employed 13 full-time persons in product and application
engineering as compared to 4 at the end of 1994. The Company expects to make a
greater investment in research and development during the ensuing year in order
to remain competitive. See "Business-Product Development Plans."
Total general and administrative costs decreased from 56% to 39% as a
percentage of net revenue for fiscal 1995 as compared to the period from
incorporation on December 28, 1993 to December 31, 1994. It is expected that the
Company will hire additional administrative personnel, including a new chief
financial officer, in 1996.
Liquidity and Capital Resources
Since inception, the Company has financed its operations through a
combination of equity and convertible debt placements. As of March 31,
1996 the Company had cash and cash equivalents of $167,325 and a working
capital deficiency of $82,362. In April 1996, the Company completed the
sale of 815,000 shares of common stock and warrants to acquire an additional
489,000 shares of common stock, and received net proceeds from such sale
(after payment of commissions and expenses) of $1,453,370. Based on its
current staffing level and product development schedule, the Company
believes that its existing working capital and funds anticipated to be
derived from operations will satisfy the Company's projected working capital
and capital expenditure requirements through October 31, 1996. The Company's
primary future needs for capital are expanded product development,
marketing and selling expenses and working capital to finance inventories
and accounts receivable for sales growth. The Company's working capital
requirements may vary depending upon numerous factors including the progress
of the Company's product development, competitive and technological advances,
marketing acceptance of the Company's products and other factors. The
Company anticipates that it will seek additional funding through public or
private sales of securities, including equity securities. In the event that
the Company is not able to obtain additional funding on a timely basis, the
Company may be required to scale back or eliminate certain or all of its
development, manufacturing or marketing programs or to license third parties
to commercialize products or technologies that the Company would otherwise
seek to develop, manufacture or market itself, so that it will have adequate
working capital into early 1997. Such reductions in staffing and marketing
efforts and delays in product development could have a material adverse effect
in the Company's business and results of operations.
BUSINESS
This section contains forward-looking statements regarding the Company's
business and financial condition. No assurance can be given that actual results
of operations will not differ materially from the forward-looking statements
contained herein. For a discussion of various factors which may cause actual
results to vary, see "RISK FACTORS" commencing at page 5 hereof.
General
Allegiant Technologies Inc. designs, develops and markets multimedia,
Internet, and application development software authoring tools used to create
interactive, multimedia communication, education, entertainment, presentation
and information management applications ("Multimedia Applications"). The
Company's proprietary technology, "SuperCard," comprises a set of sophisticated
software authoring tools which enable professional Multimedia Application
developers to combine text, images, graphics, video, animation, and sound into a
wide variety of application software. The primary applications for SuperCard
include corporate training and performance support, entertainment, multimedia
presentations, education, interactive information kiosks and data base
front-ends for information systems applications. The Company's products are
designed for relative ease of use and are based on a high-level scripting
language, "SuperTalk," which does not require knowledge of an independent
programming language. Currently, SuperCard runs only on computers compatible
with the Macintosh operating system. The Company has announced a Windows version
of SuperCard, and intends to ship a runtime player by the end of 1996.
The Company's strategy is to expand the availability and accessibility of
its SuperCard core technology by developing software products which (i) create
multiple platform software applications which can run in both Macintosh and
Windows-based operating environments; (ii) enable the creation, deployment,
access and management of Multimedia Applications on the Web, and (iii) expand
the user base for the Company's products by enabling non-professional developers
and home users to create custom Multimedia Applications. The Company has
recently announced its strategy for authoring and delivering Multimedia
Applications on the Internet and the Web, which initially consists of three
products Marionet, Jetstream and Xenon. These products are designed to run on
multiple platforms and operating systems. Marionet allows Multimedia and
Internet Application developers to create completely custom applications that
access and manage information across the Internet. Jetstream, designed to run as
a plug-in application to Web browsers, such as Netscape's Navigator, enables
SuperCard Multimedia Applications to run interactively across the Web. In order
to establish the Company's products as the standard for the development of
Multimedia Applications on the Web, the Company intends to make Jetstream
available free of charge to users. Xenon is intended as a Multimedia Application
development tool for the Internet based on SuperCard technology which will
permit businesses and organizations to build interactive Multimedia Applications
for Web sites. The Macintosh version of Marionet began shipping in January 1996
and a version intended to run on the Windows operating system is presently
scheduled to be shipped by the end of 1996.
Industry Background
The Company believes that demand for authoring tools for Multimedia
Applications and the connectivity software to allow use of Multimedia
Applications on the Web will be driven by the following factors: (i) the ability
of interactive media to enhance the quality and impact of communication,
education and entertainment; (ii) the availability of multimedia-capable
computer systems at affordable prices to consumers; (iii) the growth and
acceptance of the Web as a channel of communication and commerce; and (iv) the
needs of educators, corporate trainers and developers and other non-professional
developers for powerful and easy-to-use tools to create and utilize Multimedia
Applications and distribute these applications across the Web.
The Impact of Interactive Multimedia
Multimedia Applications and the ability for the users of those applications
to interact are revolutionizing the ways in which people work, learn and
entertain themselves. By combining text, still images, 2D and 3D graphics,
animation, sound and video, Multimedia Applications enable people to interact
with information in a richer, more natural way. In business communications,
multimedia is used to create high-impact presentations, self-running product
demonstrations, interactive information kiosks and desktop videos to enhance
static textual and graphical information. In education, multimedia significantly
enhances the quality and consistency of instruction, increases the motivation to
learn and improves the retention of information. Interactive education and
training applications deliver information on demand, accommodate the individual
learning styles of students and provide them with immediate written, visual and
auditory feedback to reinforce important concepts. In entertainment, interactive
multimedia is adding new dimensions to motion pictures and video games. The
availability of 3D graphics, animation, sound and video for personal computers
has enabled the development of interactive presentations and simulations with
dramatically increased realism and far greater interactivity than was available
with conventional graphical displays. Multimedia has also enabled the creation
of entertainment applications like interactive movies, books, travel guides and
reference works in new categories such as "edutainment" -- applications that
provide educational material in an interactive, entertaining way.
Affordability of Multimedia-Capable Personal Computers
In recent years, rapidly declining prices of microprocessors, semiconductor
memories and CD-ROM drives have dramatically reduced the cost of providing
multimedia capabilities in personal computers. The affordability of these
systems has led to the proliferation of multimedia-capable computers in business
and the home. While prices have declined, new technology advances have increased
the power of personal computers to process the large amounts of data required to
present multimedia information in digital format. These new technologies include
fast microprocessors, high-resolution color displays, audio support, data
compression, CD-ROM drives and high speed networks. In addition, new system
software extensions such as Apple's QuickTime and Microsoft's Video for Windows
further enhance the multimedia capabilities of the hardware by providing, in
software, standard digital media support for the general personal computing
environment.
The Need for Easy-to-Use Multimedia Authoring Tools
New authoring tools are required to create Multimedia Applications on the
desktop and across the Web. Just as authors of printed books use word processing
software and a computer as their tools, "multimedia authors" use a set of
software authoring tools and a computer to create Multimedia Applications.
Before multimedia information can be used, it must be organized, processed and
presented in new ways. Because of the creative and instructional content of this
information, Multimedia Applications are being developed largely by people who
typically do not have sophisticated computer programming expertise. The Company
believes that these developers increasingly require powerful but easy-to-use
authoring tools designed specifically for their needs.
Creative and learning professionals typically use high-end desktop
computers and peripherals and a variety of software tools to create Multimedia
Applications. Because of the need to integrate and precisely synchronize media
elements that have been created by different tools, it is important to the
professional developer that the different tools work well together. Once an
application is authored, Multimedia Application developers desire to have access
to the largest possible installed base for distribution of the finished product.
However, because each delivery platform may have a different operating system,
it is very costly and time-consuming to reauthor the application for each
potential delivery platform. Developers want to be able to author an application
once and then easily translate it for playback on a variety of different
delivery platforms.
Traditional authoring tools have not met the needs of Multimedia
Application developers primarily because they require programming expertise, are
not well integrated with other tools and do not provide for multiple platform
playback capability.
The interest in the Internet has created significant demand from developers
using authoring tools such as SuperCard to incorporate Internet data into their
custom applications and multimedia titles. The extent of this demand is
difficult to gauge, but it appears to be on a scale equivalent to the
broad-scale demand for system level multimedia services such as QuickTime
digital video.
Multimedia authoring tools such as SuperCard provide software developers
with an easy-to-use, object-based scripting language which eliminates the need
for expertise in complex programming languages. This capability makes the
creation of Multimedia Applications available to creative professionals such as
artists, animators, graphic designers, educators and trainers who are not
proficient in computer programming languages.
Growth of the Web
The Company believes that Multimedia Applications and the growth and use of
the Web as a means of disseminating information are revolutionizing the
traditional ways which educational institutions and industry have presented
information. The ability to combine test, graphics, video, sound and animation
into a seamless presentation which can be run and manipulated on a personal
computer allows educators, business training professionals and industrial
performance support systems developers to create customized learning and
training environments which accommodate individual learning styles. In addition,
the ability to retrieve information and images from multiple databases across
the Web makes content available to an audience of users which was largely
unaccessible before the Web.
Much of the recent growth in Internet use by business and individuals has
been a result of the emergence of a network of servers and information available
on the Web. The Web is a client/server system of hyperlinked multimedia
databases introduced in 1992, in which certain computers ("servers") store files
and respond to requests issued by remote computers ("clients") to download
files, thus allowing multiple, geographically dispersed users to view
information stored on a single server. The Web enables users to find, retrieve
and link information on the Internet in a consistent way that makes the
underlying complexities transparent to the user. Currently, the client accesses
the information by way of a Web browser, which enables a user of a Windows-based
or Macintosh personal computer to use the Internet without any understanding of
the complex UNIX operating system on which the Internet is based. Electronic
documents are published on Web servers in a common format described by the
Hypertext Markup Language ("HTML"). The browser can read the HTML documents and
follow hypertext links to retrieve information from other sources. Web client
software can retrieve these documents across the Internet by making requests
using a standard protocol called Hypertext Transfer Protocol ("HTTP").
The HTML format has significant limitations for interactive communication
and when working with Multimedia Applications. The Company believes that its
enabling technology, Jetstream, is a solution to this problem.
Company Strategy
The Company's strategy is to leverage its core SuperCard technology to
become a leading supplier of multimedia and Web page authoring tools. This
strategy has the following key elements:
Provide Multiple Platform Products for the Professional and
Corporate Developer. The Company presently offers products which
operate on the Macintosh and Power-Macintosh computers. The
Company has announced a Windows version of SuperCard, and intends
to ship a runtime player by the end of 1996, which will enable
developers to deliver Multimedia Applications on either Macintosh
or Windows-based environments.
Provide Products to Enable the Deployment of Multimedia
Applications on the Web and to Access and Manage Information on
the Internet. The Company's existing Marionet product and its
recently announced Jetstream and Xenon products will provide a
family of products that will enable the creation and practical use
of interactive Multimedia Applications on the Web. The Company
intends to develop strategic alliances with developers of Web
browser software and Internet access providers so that its
products are more broadly accepted.
Expand User Base. The Company intends to create new authoring tool
products derived from the core SuperCard technology which will
permit new classes of developers to create custom Multimedia
Applications.
Products
SuperCard
The Company's proprietary technology, "SuperCard," comprises a set of
sophisticated software authoring tools which enable professional Multimedia
Application developers to combine text, images, graphics, video, animation, and
sound into a wide variety of application software. Version 2.5 was released on
August 8, 1995 and was chosen by MacUser Magazine as the winner of its 1995
Editor's Choice Award for Best New Multimedia Authoring Application and by
Macworld Magazine as a World Class Award finalist which honors the "Best of the
Best" Mac products. The suggested retail list price for SuperCard is $595.
Currently, SuperCard runs only on computers compatible with the Macintosh
operating system. The Company's current schedule calls for SuperCard 3.0 for
Macintosh and a Windows-based runtime player to be shipped by the end of 1996.
The SuperCard "technology" consists of a development environment known as
SuperEdit, a run-time editor known as SuperCard, a debugging tool known as
ScriptTracer and a scripting language known as SuperTalk, all of which are
packaged and sold under the trade name "SuperCard." A SuperCard user needs to be
familiar with the Macintosh interface and have a basic knowledge of Macintosh
graphics applications that perform bitmapped editing ("painting") and
vector-editing ("drawing"). SuperCard is based on a high-level scripting
language which does not require knowledge of an independent programming
language. SuperCard offers a rich, object-based visual development environment
coupled with "SuperTalk," the most complete implementation of the industry
standard, fourth-generation programming language commonly known as HyperTalk.
SuperCard's SuperTalk supports the widest range of operating system-level
messages, which means that developers can script more sophisticated levels of
interactivity in their work. This combination of features enables developers to
easily and quickly create Multimedia Applications that in many cases couldn't be
executed in competing authoring tools and which would take more time and more
expensive engineering talent to execute in a conventional programming language.
One of the most common uses for SuperCard is the building of Multimedia
Applications or "titles" such as computer games or CD-ROMs which use more than
one media source (i.e. graphics and sound) to deliver content to users.
Applications that are created, tested and modified with SuperCard are designed
to function as stand-alone multimedia "titles" that do not require SuperCard to
run.
Another common use of SuperCard is the building of computer-based
management information systems for the delivery of information throughout an
organization. SuperCard allows the user to organize and present data including
pictures or full motion video, graphical illustrations, sound and text within an
easy-to-access environment.
SuperCard-based applications have won the 1994 MacUser Magazine Editor's
Choice Award for best new multimedia software (Digital Chisel) and several of
the top awards for the most innovative Multimedia Applications in 1993
(presented by NewMedia Magazine), including the grand prize winner, the
"Animated Dissection of Anatomy for Medicine" (A.D.A.M.) from ADAM Software.
SuperCard has been used by Boeing Company to develop the prototype for its
computer-based training of pilots and mechanics for its 777 aircraft, by Harvard
and Yale University Medical Schools to develop training applications, by
Mercedes-Benz to develop performance support applications which deliver
schematics to the point of manufacture and by Toyota to develop presentation
applications, including an interactive marketing presentation of the Toyota
Tercel.
Based upon sales by the Company, the Company estimates that there are more
than 7,000 active developer/users. As of March 31, 1996, total unit sales since
the introduction of SuperCard in 1989 were approximately 60,000.
Marionet
On January 9, 1996, the Company introduced its new Macintosh Internet
scripting kit, Marionet version 1.0 at the Macworld Exposition in San Francisco.
Marionet is a software solution that allows Internet developers to create custom
applications that access and manage information across the Internet. Designed to
work in conjunction with popular authoring tools such as SuperCard, Macromedia's
Director and AppleScript aware productivity applications, Marionet is a
complete, script-level interface to the Internet that runs transparently in the
background as a "faceless" background task. A convenient Control Panel allows
users to set common preferences. Responding to simple, English-like commands
from authoring tools that utilize an External Command (XCMD) interface, such as
the Company's SuperCard, Apple HyperCard and Macromedia Director, or from
productivity applications that support attachable AppleScripts, such as Claris
FileMaker Pro, Microsoft Excel and UserLand Frontier, Marionet offers complete
control over standard Internet protocols and also includes a dramatic new custom
peer-to-peer protocol called "Chat". Marionet uses Apple's Thread Manager to
full advantage for asynchronous operation and can also function synchronously.
The retail list price of Marionet is $219, but the Company is offering
introductory pricing of $99.
Management believes that the applications for Marionet run from
sophisticated Web page authoring and maintenance tools to personal or
collaborative applications. Management believes that Marionet will enable (i)
CD-ROM titles to be integrated into dynamic Internet access and retrieval, (ii)
software companies to provide automatic software updates or build automatic
e-mail support as an integral part of their applications, (iii) educational
institutions to build Internet browsers that only offer access to selected
Internet sites (e.g. the university system), (iv) trainers to deliver
"distance-learning" applications that are easily and automatically updated from
a central web site and (v) individuals to create multi-player games, collaborate
with family members or develop tools to automatically gather information.
Product Development Plans
The Company's current product development efforts and market strategy
include (i) the completion of SuperCard 3.0, which will permit the creation of
applications for both Windows- and Macintosh-based operating environments; (ii)
the development of a Windows version of Marionet 1.1; and (iii) the development
of Jetstream and Xenon, the initial products of a family of Internet authoring
tools based upon SuperCard technologies, that will allow the development of
interactive Web pages.
The product release dates and anticipated shipping schedules of the
products set forth below are based on the Company's current schedule. In the
normal course of its business, the Company may decide to re-order its priorities
and to accelerate development of one product. Due to limitations on the
Company's resources, such a re-ordering of product priorities may cause the
development and shipment of other products to be delayed.
SuperCard
The Company is currently shipping SuperCard version 2.5 for the Macintosh.
New product developments are planned as follows:
SuperCard 3.0. A nearly simultaneous release is planned for SuperCard
Version 3.0 on the Macintosh and a runtime player for Windows. SuperCard 3.0 is
designed to deliver a new interface with support for plug-in tools, "smart"
objects, drag-and-drop editing and automated scripting for simple to moderately
difficult tasks, enhanced extensibility to allow SuperCard developers greater
flexibility in adding functionality they require, and a common file format on
both platforms to facilitate delivery on both platforms.
Marionet
Marionet 1.1. An enhanced, multiple platform version of Marionet is
intended to be released in 1996, designated Version 1.1. This release will be
the first version of Marionet for Windows-based and Macintosh-based personal
computers, and is designed to deliver enhancements over the current version of
Marionet on the Macintosh. Marionet will include more complete support for the
currently supported Internet protocols, support for additional protocols for a
broader range of host authoring tools.
Jetstream
Jetstream is a multiple platform plug-in to Web browsers, such as
Netscape's Navigator, that is designed to play SuperCard-based content
distributed over the Web. Jetstream is designed to enable Macintosh and
Windows-based Web developers to incorporate dynamic, media-rich SuperCard
content directly into a Web page and give anyone on the Internet access to
content developed in SuperCard. Jetstream is derived from SuperCard software
technology and will support all of the SuperTalk language that is appropriate in
the Internet environment. It is designed to bridge the Web application
development and multimedia worlds, just as SuperCard appeals to those same
audiences in the desktop market. Jetstream has several inherent advantages over
more complex solutions for delivering multimedia over the Internet, including:
o Jetstream is an integrated environment that supports significant
application functionality and numerous media formats. With these
capabilities, it is possible to build rich multimedia experiences
for playback entirely within the single Jetstream plug-in. While
some individual features of Jetstream may be matched by a
single-purpose plug-in, to the Company's knowledge, no other
plug-ins available today offer this level of integration and ease
of development. Approximating this functionality with existing
tools would require a complex combination of HTML
scripting, utilization of several other plug-ins and
programming.
o Jetstream is a distributed environment. A key strength of
SuperCard is its ability to employ and play back external
media within an application shell. This strength enables
Jetstream to meet the requirements of delivering meaningful
interactive multimedia experiences within the bandwidth
limitations of the Internet. For instance, a Jetstream
developer can create a simple shell application
that can be downloaded quickly and provide a fast response
to the user. Additional data elements can then be streamed
to the user and cached locally to play back within the shell.
In the worst case the data will arrive as fast as it would
in a conventional HTML environment; in many cases the
developer can anticipate and sequence data downloading so
that the user never has to experience wait times. In this
way the end user can have a positive experience with the
data almost immediately, bandwidth can be maximized by
continuously downloading data and the developer can exercise
great control over the user experience across a wide range of
bandwidths.
o Jetstream is extensible. While the underlying SuperCard technology
is extensible on the Macintosh and Windows, that capability has
been excised from Jetstream as a security measure. However, a
future version of Jetstream will include support for Sun
Microsystem's programming language, Java.
o Jetstream is accessible. The underlying SuperTalk scripting engine
is based on HyperTalk the industry standard for fourth-generation
scripting languages. Out of the box, Jetstream's scripting
language will be understandable to literally millions of content
and applications developers on both platforms who have used
SuperCard, HyperCard, Director and Toolbook. Jetstream will be
available free of charge on the Internet.
Xenon
To further open up access to real-time Multimedia Applications on the Web,
the Company will follow Jetstream with a new point-and-click application to
author content for Jetstream. Code-named Xenon, this new multiple platform
(Macintosh and Windows) product is being derived from the award-winning
SuperCard software technology.
Xenon will permit development of interactive Web Multimedia Applications
such as electronic catalogs, virtual galleries, presentations, games, corporate
training and educational reference. Despite its sophistication, Xenon is being
designed to eliminate a significant amount of the scripting on the part of the
end user through the use of pre-scripted templates and utilities. Xenon will
permit new classes of developers to build virtually Web sites that will have
more interactivity and multimedia richness and functionality than what is common
of today's Web sites.
Xenon is intended for use by small business, corporate and educational
users who are expected to embrace Xenon as a solution for Web-based interactive
Multimedia Applications.
The Company believes that its future success will depend in large part on
its ability to enhance its existing products and to develop and introduce new
products on a timely basis. New products or enhancements must keep pace with
competitive offerings, adapt to new delivery platforms and emerging industry
standards and provide additional functionality. If the Company were unable, due
to resource constraints or technological or other reasons, to develop and
introduce such products in a timely manner, this inability would have a material
adverse effect on the Company's results of operations. The Company currently has
a number of new product development efforts under way. Any delay in the release
of scheduled product offerings could have a material adverse impact on the
Company's results of operations.
Sales, Marketing and Distribution
The Company generates brand awareness and demand for its products through
public relations activities, advertising, product reviews, competitive upgrade
offerings, and national and local trade shows. The Company also uses direct mail
and support services to introduce and educate customers about new products and
enhancements, and to cross-sell additional products to current customers such as
new products resulting from the Company's development efforts or third-party
products that the Company licenses or co-markets. In addition, the Company uses
multimedia to sell multimedia by distributing a variety of interactive
demonstration materials directly to prospects. The Company has initiated a
direct mail-order campaign with registered users to introduce versions 1.7, 2.0
and 2.5 of SuperCard and version 1.0 of Marionet and will do the same with new
product enhancements and service offerings. The Company allows trial versions of
its products to be downloaded from its Internet home page on the Web so that
prospective purchasers may try the Company's products for specific periods of
time before purchase is required.
The Company distributes its products through multiple distribution
channels, including traditional software distributors, international
distributors, value-added-resellers, educational market distributors, hardware
and software vendors and for certain large customers, direct sales and licenses.
The Company has entered into a non-exclusive cooperative agreement with
MacWarehouse and PC Connection and is pursuing other traditional channels.
SuperCard is generally sold as part of a "studio," which includes a video
editor, animation package, sound editor, texture package and a morphing special
effects package. These additional products are sold under a license agreement
with the owners. The Company pays a total royalty of approximately $45 per
"studio." Certain of these vendors bundle SuperCard with their products and pay
the Company a royalty.
The Company grants its distributors limited rights under a stock balancing
policy to return unsold inventories of the Company's products in exchange for an
equal amount of new purchases. In addition, the Company provides price
protection in its distributors. The Company extends credit terms to its
resellers of 30 days net from the date of invoice (the date of shipment), but
may, under certain circumstances, grant terms of up to 60 days net, at the
discretion of the Company.
Although the Company intends to focus its sales and marketing efforts in
the United States, it has entered into software license, foreign localization
and distribution agreements with distributors in Japan, United Kingdom India,
Italy, Australia, Canada, France, Sweden and Israel, where English versions of
SuperCard had already gained market acceptance. In November and December 1995,
the Company released a Kanji and French version of SuperCard for sale in the
Japanese and French markets, respectively, which historically have been strong
Macintosh markets.
Competition
The markets in which the Company's products are sold are highly competitive
and are characterized by pressure to reduce prices, incorporate new features and
accelerate the release of new product versions. A number of companies, including
Apple, Asymetrix, Macromedia, Microsoft, Oracle and Sun Microsystems, currently
offer products or have products in the planning stages that compete or will
compete directly or indirectly with products and scheduled products of the
Company. These competitors have significantly greater financial, management,
technical and marketing resources than the Company.
The principal aspects of competition in the multimedia authoring tools
market are diverse and thus allow for potentially successful niche marketing
strategies. These principal aspects include product features and quality, price,
ease of use, brand name recognition, reliability and quality of support
services. Management of the Company believes that it can compete favorably with
respect to each of these factors.
Although there are products that provide script-level access to Internet
protocols through a specific interface (such as Visual Basic Extensions, or
VBXs), or that provide pre-built graphical user interface ("GUI") access to the
Internet through a multiple platform object model, (such as OpenDoc), there are
currently, to the Company's knowledge, no other products that provide a common
scripting interface to Internet protocols for popular authoring tools on both
MacOS and Windows platforms. The Company anticipates that as the use of the
Internet increases competitors will develop products that compete directly with
Marionet. This market is characterized by strong competition and significant
price pressure. Moreover, there is a reasonable expectation that system software
vendors, including Microsoft and Apple, will incorporate some degree of
Marionet's current functionality into their respective operating systems in the
foreseeable future.
Manufacture and Shipping
The production of SuperCard and Marionet for sale includes diskette
duplication, component assembly, printing of user manuals and final packaging,
all of which are performed by specialty contractors in accordance with the
Company's specifications and forecasts. There are a number of alternate sources
for these services that could be implemented without delay or any material
adverse effect on the Company's business or results of operation.
Customer Service and Technical Support
The Company's Customer Service and Technical Support Program offers three
levels of technical support during normal business hours intended to build and
foster the skills necessary to become proficient with the SuperCard and Marionet
tool set. Level I basic Technical Support assistance is provided at no charge.
Level II Scripting Support provides assistance with high-level scripting
and script debugging. There is a $35 per incident charge or $299 annual charge
for this service.
The Company's Level III Developer Support provides professional developers
with significant external command development tools (external commands "extend"
SuperCard's built-in capabilities), a private account for use with the Company's
on-line servers, pre-release versions of software in development and priority
service. There is a $495 annual charge for this service. As of March 31,
1996,the Level III program has approximately 250 members.
Proprietary Protection
The Company's success and ability to compete is dependent in part upon its
proprietary technology. While the Company relies on trademark, trade secret and
copyright law to protect its technology, the Company believes that factors such
as the technological and creative skills of its personnel, new product
developments, frequent product enhancements, name recognition and reliable
product maintenance are more essential to establishing and maintaining a
technology leadership position. The Company presently has no patents or patent
applications pending. There can be no assurance that others will not develop
technologies that are similar or superior to the Company's technology. The
source code for the Company's proprietary software is protected both as a trade
secret and as a copyrighted work. The Company generally enters into
confidentiality or license agreements with its employees, consultants and
vendors, and generally controls access to and distribution of its software,
documentation and other proprietary information. Despite these precautions, it
may be possible for a third party to copy or otherwise obtain and use the
Company's products or technology without authorization, or to develop similar
technology independently. In addition, effective copyright and trade secret
protection may be unavailable or limited in certain foreign countries, and the
global nature of the Internet makes it virtually impossible to control the
ultimate destination of the Company's products. To license its products, the
Company primarily relies on "shrink wrap" licenses that are not signed by the
end-user and, therefore, may be unenforceable under the laws of certain
jurisdictions. Despite the Company's efforts to protect its proprietary rights,
unauthorized parties may attempt to copy aspects of the Company's products or to
obtain and use information that the Company regards as proprietary. Policing
unauthorized use of the Company's products is difficult. There can be no
assurance that the steps taken by the Company will prevent misappropriation of
its technology or that such agreements will be enforceable. In addition,
litigation may be necessary in the future to enforce the Company's intellectual
property rights, to protect the Company's trade secrets, to determine the
validity and scope of the proprietary rights of others, or to defend against
claims of infringement or invalidity. Such litigation could result in
substantial costs and diversion of resources and could have a material adverse
effect on the Company's business, operating results or financial condition.
Unisys recently announced its intention to require the payment of royalties
for the use of compression technology associated with the Graphics Interchange
Format ("GIF"). Unisys asserts that this popular file format is based on
compression technology patented by Unisys. The Company's products have the
ability to decompress files, including files stored in GIF. Although the Company
has not received notice of Unisys' intention to enforce or license such patent,
the Company believes that certain of its competitors have received such notice.
The Company is currently reviewing the matter in order to determine its course
of action. The Company could incur additional costs and liability should its
products be found to be within the scope of the Unisys patent, including costs
and liability from claims for indemnification resulting from infringement. The
assertion of these patent rights by Unisys, if successful, could result in
additional costs to the Company or prevent the Company's products from enabling
users to view files compressed in GIF. There can be no assurance that the
Company's products are not within the scope of the Unisys patent or that the
Company's business, operating results and financial condition will not be
materially adversely affected if the Company's products are found to be within
the scope of the Unisys patent.
Although the Company does not believe that its products infringe the
proprietary rights of any third parties, there can be no assurance that
infringement or invalidity claims (or claims for indemnification resulting from
infringement claims) will not be asserted or prosecuted against the Company or
that any such assertions or prosecutions will not materially adversely affect
the Company's business, financial condition or results of operations.
Irrespective of the validity or the successful assertion of such claims, the
Company would incur significant costs and diversion of resources with respect to
the defense thereof which could have a material adverse effect on the Company's
business, financial condition or results of operations. If any claims or actions
are asserted against the Company, the Company may seek to obtain a license under
a third party's intellectual property rights. There can be no assurance,
however, that under such circumstances, a license would be available on
reasonable terms or at all.
The Company also relies on certain technology which it licenses from third
parties, including software which is integrated with internally developed
software and used in the Company's products to perform key functions. There can
be no assurance that these third party technology licenses will continue to be
available to the Company on commercially reasonable terms. The loss of or
inability to maintain any of these technology licenses could result in delays or
reductions in product shipments until equivalent technology could be identified,
licensed and integrated. Any such delays or reductions in product shipments
could materially adversely affect the Company's business, operating results and
financial condition.
Employees
At May 31, 1996, the Company employed 26 full-time persons, including 11 in
marketing, sales and customer service and technical support, 12 in product
development, product engineering and content development and 3 in
administration. The Company also employs a small number of temporary and
contract employees. None of the Company's employees is represented by a labor
union. The Company is not a party to any collective bargaining agreement or
other similar agreement. The Company has no work stoppages to date. The Company
believes that its relationship with its employees is good.
It is expected that additional employees will be required throughout 1996,
primarily in engineering, sales and customer service and technical support. No
assurance can be given that the Company will be able to locate and hire people
with the requisite experience and skills, or that the Company will have
sufficient working capital to hire all of the additional employees it could
optimally utilize. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations - Liquidity and Capital Resources."
Facilities
The Company operates out of a 10,500 square foot office facility in San
Diego, California. The office premises are leased pursuant to a lease agreement
that expires on October 6, 1998. The base rent is approximately $13,000 per
month. In addition to the base rent, the Company pays its share of the operating
expenses, property tax, and insurance premiums on the building. The Company
believes its facilities are adequate for its current needs and that suitable
additional or substitute space will be available as needed.
Legal Proceedings
The Company is not a party to any material pending legal proceedings.
MANAGEMENT
Executive Officers and Directors
The following table sets forth certain information concerning the executive
officers and directors of the Company.
<TABLE>
<CAPTION>
Name Age Position
<S> <C> <C>
Joel B. Staadecker (1).......................... 49 President, Chief Executive Officer and Director
William D. McCartney............................ 40 Secretary, Chief Financial Officer and Director
Stuart F. Henigson.............................. 45 Vice President, Marketing
David Baron..................................... 36 Vice President, Engineering
Leonard Petersen (1)............................ 41 Director
William C. Appleton............................. 34 Director
Tommy J.H. Lee (1).............................. 32 Director
- --------------------
(1) Member of the Audit Committee
</TABLE>
Mr. Staadecker has been President, Director and Chief Executive Officer of
the Company since January, 1994. Mr. Staadecker was the President of Allegiant
Financial Group Inc., of Seattle, Washington ("AFG"), a financial consulting
firm, from 1991 to 1994. AFG was responsible for organizing the acquisition of
SuperCard by the Company from Aldus. From 1989 to 1991, Mr. Staadecker was the
President and Chief Operating Officer of the Pacific Institute, a worldwide
education and training organization, in Seattle, Washington.
Mr. McCartney has been Chief Financial Officer and a director of the Company
since January, 1994. From 1990 to the present, he has been the President of
Pemcorp Management Inc., which provides corporate finance services to public and
private companies. Mr. McCartney is a chartered accountant in the Province of
British Columbia, Canada and has a bachelors degree in business from Simon
Fraser University.
Mr. Henigson has been the Vice President Marketing of the Company since
January, 1994. Prior to this, Mr. Henigson was a Strategic Marketing Manager at
Aldus Corporation and its predecessor, Silicon Beach Software, from 1988 to
1992, during which time he was responsible for the marketing of several software
products including SuperCard. From 1992 to 1994, he acted as an independent
consultant. Mr. Henigson has eleven years of software industry experience. Mr.
Henigson has a bachelors degree in economics from Whitman College, a masters
degree in economics from Yale University and an M.B.A. in marketing from the
University of California at Los Angeles.
Mr. Baron has been the Vice President of Engineering of the Company on a
full-time basis since May, 1995. Previously, he was the Director of Product
Design at Blyth Software from 1991 to 1995. Mr. Baron is a graduate of
Rensselaer Polytechnic Institute.
Mr. Petersen has been a director of the Company since February, 1994. From
1990 to the present, he has been a senior officer of Pemcorp Management Inc.,
which provides corporate finance services to public and private companies. Mr.
Petersen has been a director of CVD Financial Corporation since May 1995 and of
Logan International Corp. since January 1994. Mr. Petersen is a chartered
accountant in the Province of British Columbia, Canada.
Mr. Appleton is the original creator of SuperCard. He has been a director
of the Company since February, 1994. Mr. Appleton has been self-employed or has
acted as the President of CyberFlix Incorporated, a developer of interactive
multimedia games since 1989.
Mr. Lee is a Software Development Manager for MDSI Mobile Data Solutions
Inc. He has been a director of the Company since February, 1994. From 1988 to
1995 he was a senior software engineer for MacDonald Dettwiler and Associates.
Audit Committee
The Board has established an Audit Committee, which is comprised of Messrs.
Staadecker, Lee and Petersen. The Audit Committee administers the Company's
stock option plan, recommends the selection of the Company's independent
auditors and consults with the independent auditors on the Company's internal
accounting controls.
Executive Compensation
The following table sets forth all compensation awarded to, earned by, or
paid for services to the Company in all capacities during the fiscal year ended
December 31, 1995 to the Company's chief executive officer. No director or
executive officer received total compensation in respect of the 1995 fiscal year
exceeding $100,000.
<TABLE>
Summary Compensation Table
<CAPTION> Annual Compensation
Name and Position Year Salary Other Total
<S> <C> <C> <C> <C>
Joel B. Staadecker
President, C.E.O., Director................ 1995 $60,000 $22,800(1) $82,800
(1) At the request of the Company, Mr. Staadecker relocated from Seattle to San Diego. The Company pays
the certain costs for Mr. Staadecker to maintain his home in Seattle.
</TABLE>
Directors Compensations
The Company does not currently compensate its directors under any standard
arrangement, but are reimbursed for their out-of-pocket expenses in serving on
the Board of Directors. Directors were granted incentive stock options during
fiscal 1994.
Pemcorp Management Inc., a management advisory services company controlled
by Mr. McCartney and Mr. Petersen, was paid $30,000 for the year ended December
31, 1995 pursuant to a management services contract.
The Company has entered into indemnification agreements with each of its
directors which provide for indemnification of the directors by the Company to
the fullest extent permitted by Washington law. See "Description of
Securities--Limitation of Liability and Indemnification."
Grants of Stock Options
The following table sets forth information concerning the award of stock
options to the Mr. Staadecker during the year ended December 31, 1995.
<TABLE>
Option Grants in the Last Fiscal Year
<CAPTION> Number of Securities % of Total Options
Underlying Options Granted to Employees Exercise or Base Expiration
Name Granted in Fiscal Year Price ($/Sh) Date
<S> <C> <C> <C> <C>
Joel B. Staadecker........... 165,000 14.4% C$1.40 5/24/00
</TABLE>
No options were exercised by Mr. Staadecker during the year ended December
31, 1995.
Employment Contracts
Mr. Staadecker has entered into an employment agreement with the Company
dated February 1, 1995. The term of employment is for two years beginning
February 1, 1995. Mr. Staadecker is paid a monthly aggregate remuneration,
inclusive of salary and direct reimbursement for housing costs, equal to $6,900
per month or such greater amount as is mutually agreed upon from time to time.
Mr. Henigson has entered into an employment agreement with the Company dated
February 1, 1994, as amended on July 1, 1994 having the following material
terms: (1) The term of employment commenced on February 1, 1994 and will
continue for an initial term of four years and thereafter for an indefinite
period; and (2) Mr. Henigson is paid a gross annual salary of $46,000, payable
monthly plus an expense allowance of $2,000 per month and the fringe benefits
that the Company provides from time to time to its other employees performing
comparable services for the Company or such greater amounts as is mutually
agreed upon from time to time.
Mr. Baron has entered into an employment agreement with the Company having
the same material terms as Mr. Henigson's employment agreement set out above
except that Mr. Baron commenced his employment with the Company in May, 1995,
and is paid a gross annual salary of $100,000 per year. Mr. Baron does not own
any of the Escrowed Common Shares.
Stock Option Plan
On May 1, 1995, the Company's stockholders approved the 1995 Stock Option
Plan (the "Plan"). The Plan took effect on January 31, 1995, and was amended on
May 14, 1996. All officers, directors and employees of the Company or its
affiliates are eligible to be granted options under the Plan. The Company has
reserved 2,187,688 shares of Common Stock for issuance upon the exercise of
options granted to participants under the Plan. As of March 31, 1996, the
Company had awarded options to purchase 1,730,000 shares of Common Stock, which
are exercisable at prices ranging from C$1.40 to C$3.66 per share. Of such
options, 1,065,833 were exercisable as of March 31, 1996.
Under the Plan, two types of options to purchase shares of Common Stock may
be granted to employees, consultants and advisors of the Company: (1) options
which qualify as incentive stock options ("Incentive Options") under Section 422
of the Code, and (2) options which do not qualify as incentive stock options
under the Code ("Nonqualified Options"). Both Incentive Options and Nonqualified
Options may be granted to employees. No person can receive options in any
calendar year to purchase more than the number of shares of Common Stock equal
to five percent of the Common Stock outstanding at the time of the grant.
In the event of changes affecting the shares of Common Stock, such as a
subdivision or consolidation of shares, the payment of a share dividend, or
other increase or decrease in the shares of Common Stock effected without
receipt of consideration by the Company, the aggregate number of shares for
which options may be granted, the number of shares covered by each outstanding
option, and the exercise price per share for each option will be proportionately
adjusted.
In general, upon an optionee's termination of employment with the Company
and its affiliates, each option held by such optionee ceases to be exercisable
30 days after the termination date of employment. However, an optionee may
exercise such options any time within twelve months if termination is due to
death. The optionee's personal representative is permitted to exercise only
those options that were exercisable on the date of death.
The Plan is administered by the Board or a committee of the Board duly
appointed for this purpose by the Board and consisting of not less than three
directors. The interpretation and construction of any provision of the Plan
shall be within the discretion of the Board or such committee, whose
determination shall be final and binding. The Board or such committee has the
sole discretion to determine the employees to whom options are to be granted,
the number of shares to be subject to such options and the terms, conditions and
any performance criteria for the options.
The Board of Directors may at any time suspend, amend or terminate the
operation of the Plan. However, to the extent required for compliance with Rule
16b-3 promulgated under Section 16(b) of the Securities Exchange Act of 1934,
Section 422 of the Code or by any applicable law or regulation, the approval of
the Company's shareholders is required for any amendment that would (a)
materially increase the benefits accruing to participants under the Plan, (b)
materially increase the number of shares of Common Stock which may be accrued
under the Plan, or (c) materially modify the requirements as to eligibility for
participation in the Plan.
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information with respect to
beneficial ownership of Common Stock as of April 30, 1996, by (i) each person
who is known by the Company to beneficially own more than 5% of the outstanding
shares of Common Stock, (ii) each of the Company's directors, (iii) each of the
executive officers named in the Summary Compensation Table and (iv) all current
directors and executive officers as a group. Unless otherwise indicated in the
footnotes to the table, each person or entity has sole voting and investment
power with respect to all shares of Common Stock shown as beneficially owned by
such person or entity.
<TABLE>
<CAPTION> Number of Shares Percentage of
Name of Stockholder Beneficially Owned Outstanding Shares(1)
<S> <C> <C>
Joel B. Staadecker
President and Director
9740 Scranton Road
San Diego, CA 92121....................................... 1,310,000(2) 15.8%
William D. McCartney
Chief Financial Officer and Director
1270 - 609 Granville Street
Vancouver, BC
Canada, V7Y 1G6........................................... 775,000(3) 9.4%
Stuart F. Henigson
Vice-President, Marketing
9740 Scranton Road
San Diego, CA 92121....................................... 400,000(4) 4.8%
David Baron
Vice President, Engineering
9740 Scranton Road
San Diego, CA 92121....................................... 150,000(5) 1.8%
Leonard Petersen
Director
1270 - 609 Granville Street
Vancouver, BC
Canada, V7Y 1G6........................................... 775,000(6) 9.4%
William C. Appleton
Director and Product Strategist
4 Market Square
Knoxville, TN
U.S.A 37902............................................... 125,000(7) 1.5%
Tommy J.H. Lee
Director
135-10551 Shellbridge Way
Richmond, BC
Canada, V6X 2W9........................................... 200,000(8) 2.4%
Geller & Friend Partnership I
3333 Michelson Drive, Suite 650
Irvine, CA
U.S.A. 92715-1686........................................ 575,000(9) 7.1%
All directors and executive officers as a group (7
persons)(10). . . . . . . . . . . . . . . 3,735,000 45.1%
- -------------------------
(1) The percentages reflected in this column are based on the assumption that
the respective owner exercises any rights he or it has to purchase
additional shares of Common Stock within sixty days from the date hereof and
excludes all other shares of Common Stock reserved for issuance upon
exercise of outstanding options and warrants or upon conversion of
outstanding convertible debt of the Company.
(2) Includes 350,000 Escrowed Common Shares and 165,000 employee incentive
options.
(3) Includes 350,000 Escrowed Common Shares and 125,000 employee incentive
options. All of the issued shares are held indirectly by companies
controlled by William D. McCartney.
(4) Includes 300,000 Escrowed Common Shares and 100,000 employee incentive
options.
(5) Includes 150,000 employee incentive options.
(6) Leonard Petersen holds 125,000 employee incentive options directly and
650,000 shares, including 350,000 Escrowed Common Shares, indirectly through
Petersen Management Inc., an investment management company controlled by Mr.
Petersen.
(7) Includes 100,000 Escrowed Common Shares and 25,000 employee incentive
options.
(8) Includes 175,000 Escrowed Common Shares and 25,000 employee incentive
options.
(9) Includes a maximum of 250,000 shares to be issued upon the conversion of a
debenture in the amount of $425,000 and a maximum 325,000 shares to be
issued upon the exercise of warrants of which 75,000 are issued and 250,000
are to be issued upon the conversion of the debenture.
(10)Includes an aggregate of 1,625,000 Escrowed Common Shares and an aggregate
of 715,000 employee incentive options.
</TABLE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During the year ended December 31, 1994, the Company paid the sum of
$100,000 to Allegiant Financial Group Inc. ("AFG"), the principals of which were
Joel B. Staadecker, William D. McCartney and Leonard Petersen. The amount paid
to AFG is in respect of two matters. It includes two payments of $5,000 ($10,000
in total) for management services rendered during the months of February and
March, 1994. It also includes a consulting fee of $90,000 which was paid in
connection with the acquisition of SuperCard, by the Company from Aldus
Corporation. No fees have been paid to AFG since such time and no fees are
anticipated being paid to AFG in the foreseeable future.
On January 24, 1995, the Company and Mr. William Appleton agreed to
terminate Mr. Appleton's royalty on sales of SuperCard effective January 31,
1995, for consideration of $100,000 which continues to be paid over two years in
equal monthly installments of $4,568, inclusive of interest calculated at nine
percent per annum, to March 1, 1997.
DESCRIPTION OF SECURITIES
The following summary description of the Company's capital stock and of
certain provisions of the Articles and Bylaws are summaries and do not purport
to be complete and are subject to and qualified in their entirety by reference
to the Articles and Bylaws, copies of which are filed as exhibits to the
Registration Statement of which this Prospectus is a part. Reference is made to
such exhibit for a detailed description of the provisions summarized below.
The Company's authorized capital stock consists of 100,000,000 shares of
Common Stock, $0.01 par value per share and 50,000,000 shares of preferred
stock, $0.01 par value per share (the "Preferred Stock").
As of April 30, 1996, there were 8,107,295 shares of Common Stock held of
record by a total of 61 shareholders (excluding shares issuable upon exercise of
outstanding options and warrants and convertible debentures of the Company) and
no shares of Preferred Stock issued and outstanding.
Common Stock
General. Holders of Common Stock are entitled to one vote per share on all
matters to be voted on by the stockholders. There are no cumulative voting
rights. Accordingly, the holders of a majority of the shares of Common Stock
voting for the election of directors can elect all the directors if they choose
to do so. Subject to dividends received by holders of Preferred Stock, if any,
holders of Common Stock are entitled to receive ratably such dividends, if any,
as may be declared from time to time by the Board of Directors out of funds
legally available therefor. See "Dividend Policy." In the event of the
liquidation, dissolution or winding up of the Company, holders of Common Stock
are entitled to share ratably in all assets remaining after payment of the
Company's liabilities. Holders of Common Stock have no preemptive rights and the
Common Stock is neither redeemable nor convertible into any other securities.
All of the issued and outstanding common stock is fully paid and nonassessable.
Escrowed Shares. The Company sold a total of 2,000,000 shares to principals
of the Company for $.01 per share in accordance with Local Policy Statement 3-07
of the British Columbia Securities Commission (the "Policy"). These shares are
being held in escrow pursuant to the terms of an Escrow Agreement dated for
reference March 31, 1994 among the Company, Montreal Trust Company, as Escrow
Agent, and the holders of the shares held subject to performance criteria (the
"Escrow Agreement"). The Escrow Agreement is in the form required by the Policy
and provides that the shares must remain in escrow until the Vancouver Stock
Exchange permits them to be released from escrow or requires them to be
cancelled.
The shares may be released from escrow, on a pro rata basis, based upon the
cumulative cash flow of the Company, as evidenced by the Company's annual
audited financial statements. "Cash flow" is defined in the Policy to mean net
income or loss before tax, adjusted for certain add-backs. For each C$0.52 of
cumulative cash flow generated by the Company from its operations, one share may
be released from escrow.
The holders of these shares may not transfer their shares except in
accordance with the Policy and only with the consent of the Superintendent of
Brokers or the Vancouver Stock Exchange. A holder of such shares has the right
to vote the shares, except on a resolution to cancel the shares, but has waived
the right to receive dividends and to participate in the assets and property of
the Company on a winding-up or dissolution of the Company.
A holder of these shares who ceases to be a principal, as that term is
defined in the Policy, dies or becomes bankrupt, is entitled to retain any such
shares then held by him and is not obligated to transfer or surrender the shares
to the Company or to any other person, subject to separate divestiture
provisions contained in certain management employee agreements.
These shares must be surrendered for cancellation if the Company's shares
are the subject of a cease trade order for two consecutive years and any such
shares not released from escrow ten years from the later of the date of the
issue of the shares and the date of the receipt for the Company's final Offering
Circular must be surrendered for cancellation.
Preferred Stock
Pursuant to the Articles, the Company is authorized to issue shares of
Preferred Stock, which may be issued from time to time in one or more series
upon authorization by the Company's Board of Directors. The Board of Directors,
without further approval of the stockholders, is authorized to fix the dividend
rights and terms, conversion rights, voting rights, redemption rights and terms,
liquidation preferences, and any other rights, preferences, privileges and
restrictions and applicable to each series of the Preferred Stock. The issuance
of Preferred Stock, while providing flexibility in connection with possible
acquisitions and other corporate purposes, among other things, could adversely
affect the voting power of the holders of Common Stock and, under certain
circumstances, make it more difficult for a third party to gain control of the
Company, discourage bids for the Company's Common Stock at a premium to the
prevailing market price or otherwise adversely affect the market price of the
Common Stock. The Company has no present plans to issue any shares of Preferred
Stock.
Warrants
The Company has an outstanding series of warrants to purchase an aggregate
of 489,000 shares of Common Stock. Each warrant entitles the holder to purchase
at any time one share of Common Stock for a period ending April 26, 1998, at an
exercise price of $2.30 per share of Common Stock, subject to adjustment of the
price per share and number of shares issuable upon exercise of such warrants
upon any subdivision, consolidation or reclassification of the Common Stock of
the Company or if any stock dividend upon the Common Stock is declared and paid
by the Company. The warrants do not contain antidilution provisions relating to
issuances or sales of Common Stock at prices below the exercise price or the
then prevailing market price of the Common Stock. The warrants may be exercised
in whole or in part. Commencing on the later of January 26, 1997 or the date a
registration statement relating to the resale of the Shares is declared
effective by the Securities and Exchange Commission, the Company, upon 30 days'
written notice at any time after the last sale price of the Company's Common
Stock as reported on the OTC Bulletin Board or the Nasdaq SmallCap Market (or
such other exchange on which the Company's Common Stock may be traded or quoted)
has been at least 175% of the then effective exercise price of the warrants for
20 consecutive trading days ending within 5 days of the date of such notice, may
demand that the holders exercise all of the warrants prior to the end of the
30-day notice period, after which the warrants will automatically expire (with
the exception of warrants for 81,500 shares to which this call provision does
not apply). Unless exercised or called, the warrants will automatically expire
two years from the date of closing of this Offering.
As of the date hereof, the Company has additional outstanding warrants to
purchase an aggregate of 238,235 shares of Common Stock (excluding warrants
issuable upon conversion of outstanding convertible debentures of the Company).
88,235 of such warrants expire on December 18, 1997 and 150,000 of such warrants
expire on April 25, 1998. Each of such warrants are non-transferable and the
price per share and number of shares issuable upon exercise thereof are subject
to adjustment in the event of any subdivision, consolidation or reclassification
of the Common Stock of the Company or if any stock dividend upon the Common
Stock is declared and paid by the Company. As with the Warrants described above
these other warrants are subject to adjustment of the price per share and number
of shares issuable upon exercise of such warrants upon any subdivision,
consolidation or reclassification of the Common Stock of the Company or if any
stock dividend upon the Common Stock is declared and paid by the Company. These
other warrants do not contain antidilution provisions relating to issuances or
sales of Common Stock at prices below the exercise price or the then prevailing
market price of the Common Stock. These warrants may also be exercised in whole
or in part.
Convertible Debentures
On December 18, 1995, the Company issued Convertible Debentures in an
aggregate amount of $500,000 (the "Debentures") to Geller & Friend Partnership I
("G&F")and Greenbrae Capital Partners L.P. ("Greenbrae"). In addition, the
Company issued warrants to purchase 75,000 shares of Common Stock to G&F and
warrants to purchase 13,235 shares of Common Stock to Greenbrae. The outstanding
principal of the Debentures becomes due and payable on the earlier of (a) any
date after December 18, 1996 if a registration statement with respect to the
underlying shares and shares issuable upon exercise of the underlying warrants
has not been declared effective by the Securities and Exchange Commission (the
"Commission") or the resale of such shares is not otherwise exempt from
registration and the Company is requested to make such repayment, (b) an event
of default that is not cured in accordance with the terms of the Debenture, or
(c) December 18, 1997. If a Registration Statement with respect to the resale of
the underlying shares and shares issuable upon exercise of the underlying
warrants has not been declared effective by the Commission or is not otherwise
exempt from registration prior to June 30, 1996, interest begins to accrue on
the outstanding principal amount of the Debentures at a rate of 8% per annum,
calculated annually, not in advance and payable monthly until the Debenture is
fully converted or paid in full. If such condition has not been satisfied prior
to December 31, 1996, the interest rate becomes 14% per annum. The Company has
granted to G&F and Greenbrae a security interest in all of the Company's right,
title and interest in and to all presently owned and after acquired personal
property, assets and undertakings of the Company, and all proceeds and renewals
of same, which security interest is subordinated to all principal and interest
on all monies borrowed by the Company from institutional lenders subsequent to
December 18, 1995. The terms of the Debentures require the consent of a majority
in value of the Debentures in the event the Company desires to borrow in excess
of $500,000 from any lender or lenders.
The Debentures are convertible into units of one share of Common Stock and
one warrant entitling the Debenture holder to purchase one share of Common Stock
at any time prior to December 18, 1997 at a price of $1.70 per share if
exercised prior to December 18, 1996 and $1.96 per share if exercised after
December 18, 1996 and prior to December 18, 1997; provided, that any partial
conversion will be permitted only in increments of $75,000, unless the Company
otherwise consents to a lesser amount. Pursuant to the terms of the Debentures,
the Company is required to file a registration statement with respect to the
shares of Common Stock into which the Debentures are convertible and the shares
of Common Stock issuable upon exercise of the underlying warrants (subject to
any underwriter cutbacks or certain other matters affecting the registration of
such shares) and to use its commercially reasonable best efforts to cause such
registration statement to become effective within 120 days following the closing
of this Offering and to keep such registration statement effective for two years
from the closing of this Offering (or such shorter period as may be required to
sell all of such shares). As of the date hereof, 250,000 shares of Common Stock
and warrants to purchase an additional 250,000 shares are issuable to G&F and
44,117 shares of Common Stock and warrants to purchase and additional 44,117
shares are issuable to Greenbrae upon conversion of the Debentures.
Antitakeover Provisions
Statutory Provisions. Washington law contains certain provisions that may
have the effect of delaying, deterring or preventing a change in control of the
Company. Chapter 23B.17 of the Washington Business Corporation Act (the "WBCA")
prohibits, subject to certain exceptions, a merger, sale of assets or
liquidation of the Company involving an "interested shareholder" (defined as a
person who owns beneficially 20% or more of the Company's voting securities)
unless the transaction is determined to be at a "fair price" or otherwise
approved by a majority of the Company's disinterested directors or is approved
by holders of two-thirds of the Company's outstanding voting securities, other
than those held by the interested shareholder. A Washington corporation may, in
its articles of incorporation, exempt itself from coverage of this provision,
but the Company has not done so. In addition, Chapter 23B.19 of the WBCA
prohibits the Company, with certain exceptions, from engaging in certain
significant business transactions with an "acquiring person" (defined as a
person who acquires 10% or more of the Company's voting securities without the
prior approval of the Company's Board of Directors) for a period of five years
after such acquisition. Since the Company's principal executive offices are
located outside Washington State and a majority of the Company's employees are
not residents of Washington State, the protections afforded by Chapter 23B.19
are not presently available. The prohibited transactions include, among others,
a merger with, disposition of assets to, or issuance or redemption of stock to
or from, the acquiring person, or otherwise allowing the acquiring person to
receive any disproportionate benefit as a shareholder. The Company may not
exempt itself from coverage of this statute. If these statutory provisions are
applicable, they may have the effect of delaying, deterring or preventing a
change in control of the Company.
Article Provisions. Under the Company's Articles, the Board of Directors has
the authority to issue up to 50,000,000 shares of Preferred Stock with such
rights and preferences as the Board of Directors may determine. The issuance of
such shares may have the effect of delaying, deterring or preventing a change in
control of the Company. See "-- Preferred Stock."
The Articles do not provide for cumulative voting in the election of
directors. The Articles prohibit stockholders from calling a special meeting of
stockholders. A special meeting of stockholders may be called only by a majority
of the Board of Directors.
Limitation of Liability and Indemnification
Article VI of the Articles limits to the full extent permitted by
Washington law, the personal liability of directors to the Company or its
stockholders for monetary damages for conduct as a director. The Articles and
Section 23B.08.320 of the Washington Business Corporation Act do not permit
limitations on a director's liability in circumstances involving intentional
misconduct or a knowing violation of law, illegal corporate distributions, or
any transaction from which the director personally receives a benefit in money,
property or services to which the director is not legally entitled. Article VII
of the Articles provides that the Company shall to the full extent permitted by
Washington law, indemnify and advance or reimburse the reasonable expenses
incurred by any person made a party to a proceeding because that person is or
was a director of the Company. In addition, Section 9.2 of the Bylaws permits
the Company's Board of Directors to indemnify the Company's officers, employees
and agents to the full extent permitted by Washington law. To this end, the
Company has entered into Indemnification Agreements with its directors.
Transfer Agent and Registrar
The transfer agent and registrar for the Common Stock is Montreal Trust
Company of Canada situated at 510 Burrard St., Vancouver, British Columbia, V6C
3B9.
PLAN OF DISTRIBUTION
The Selling Stockholders may from time to time sell all or a portion of the
Shares Market in the over-the-counter market, on the Vancouver Stock Exchange,
on any other national securities exchange on which the Common Stock is listed or
traded, in negotiated transactions or otherwise, at prices then prevailing or
related to the then current market price or at negotiated prices. The Shares
will not be sold in an underwritten public offering. The Shares may be sold
directly or through brokers or dealers. The methods by which the Shares may be
sold include: (a) a block trade (which may involve crosses) in which the broker
or dealer so engaged will attempt to sell the securities 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; (c) ordinary
brokerage transactions and transactions in which the broker solicits purchasers;
and (d) privately negotiated transactions. In effecting sales, brokers and
dealers engaged by Selling Stockholders may arrange for other brokers or dealers
to participate. Brokers or dealers may receive commissions or discounts from
Selling Stockholders (or, if any such broker-dealer acts as agent for the
purchaser of such shares, from such purchaser) in amounts to be negotiated which
are not expected to exceed those customary in the types of transactions
involved. Broker-dealers may agree with the Selling Stockholders to sell a
specified number of such shares at a stipulated price per share, and, to the
extent such broker-dealer is unable to do so acting as agent for a Selling
Stockholder, to purchase as principal any unsold shares at the price required to
fulfill the broker-dealer commitment to such Selling Stockholder. Broker-dealers
who acquire shares as principal may thereafter resell such shares from time to
time in transactions (which may involve crosses and block transactions and sales
to and through other broker-dealers, including transactions of the nature
described above) in the over-the-counter market or otherwise at prices and on
terms then prevailing at the time of sale, at prices then related to the
then-current market price or in negotiated transactions and, in connection with
such resales, may pay to or receive from the purchasers of such shares
commissions as described above.
In connection with the distribution of the Shares, the Selling Stockholders
may enter into hedging transactions with broker-dealers. In connection with such
transactions, broker-dealers may engage in short sales of the Shares in the
course of hedging the positions they assume with the Selling Stockholders. The
Selling Stockholders may also sell the Shares short and redeliver the Shares to
close out the short positions. The Selling Stockholders may also enter into
option or other transactions with broker-dealers which require the delivery to
the broker-dealer of the Shares. The Selling Stockholders may also loan or
pledge the Shares to a broker-dealer and the broker-dealer may sell the Shares
so loaned or upon a default the broker-dealer may effect sales of the pledged
shares. In addition to the foregoing, the Selling Stockholders may enter into,
from time to time, other types of hedging transactions.
The Selling Stockholders and any broker-dealers participating in the
distributions of the Shares may be deemed to be "underwriters" within the
meaning of Section 2(11) of the Securities Act and any profit on the sale of
Shares by the Selling Stockholders and any commissions or discounts given to any
such broker-dealer may be deemed to be underwriting commissions or discounts
under the Securities Act.
The Shares may also be sold pursuant to Rule 144 under the Securities Act
beginning two years after the Shares were issued, provided such date is at least
90 days after the date of this Prospectus.
The Company has filed the Registration Statement, of which this Prospectus
forms a part, with respect to the sale of the Shares. The Company has agreed to
use its best efforts to keep the Registration Statement current and effective
for a period commencing on the effective date of the Registration Statement and
terminating 24 months after the Registration Statement is filed with the
Commission. There can be no assurance that the Selling Stockholders will sell
any or all of the Shares offered hereunder.
Under the Exchange Act and the regulations thereunder, any person engaged in
a distribution of the shares of Common Stock of the Company offered by this
Prospectus may not simultaneously engage market making activities with respect
to the Common Stock of the Company during the applicable "cooling off" periods
prior to the commencement of such distribution. In addition, and without
limiting the foregoing, the Selling Stockholders will be subject to applicable
provisions of the Exchange Act and the rules and regulations thereunder,
including, without limitation, Rules 10b-6 and 10b-7, which provisions may limit
the timing of purchases and sales of Common Stock by the Selling Stockholders.
The Company will pay all of the expenses incident to the offering and sale
of the Shares, other than commissions, discounts and fees of underwriters,
dealers or agents.
LEGAL MATTERS
The validity of the issuance of the shares of Common Stock offered hereby
has been passed upon for the Company by Foster Pepper & Shefelman, Seattle,
Washington.
EXPERTS
The financial statements of Allegiant Technologies Inc. at December 31,
1995, and for the year then ended, appearing in this Prospectus and Registration
Statement have been audited by Ernst & Young LLP, Independent Auditors, and at
December 31, 1994, and for the period from incorporation on December 28, 1993 to
December 31, 1994, by Baker & Company, Chartered Accountants, as set forth in
their respective reports thereon appearing elsewhere herein, and are included
in reliance upon such reports given upon the authority of such firms as experts
in accounting and auditing.
CHANGE OF ACCOUNTANTS
The Company engaged Ernst & Young on December 31, 1995 as the Company's
independent accountants to report on the Company's financial statements
commencing with the year ended December 31, 1995. Baker & Company acted as the
Company's independent accountants with regard to the year ended December 31,
1994. Baker & Company was dismissed by the Company on December 31, 1995. The
report on the financial statements for such year did not contain an adverse
opinion or disclaimer of opinion, or a modification as to uncertainty, audit
scope, or accounting principles. The decision to change accountants on December
31, 1995 was approved by the Company's Board of Directors. There were no
disagreements with Baker & Company, resolved or unresolved, on any matter of
accounting principles or practices, financial disclosure, or auditing scope or
procedure, which if not resolved to Baker & Company's satisfaction, would have
caused it to make reference to the subject matter of the disagreement(s) in
connection with its report.
ADDITIONAL INFORMATION
The Company has filed with the Securities and Exchange Commission a
Registration Statement on Form SB-2 under the Securities Act with respect to the
Common Stock offered hereby. This Prospectus does not contain all of the
information set forth in the Registration Statement and the exhibits and
schedules to the Registration Statement. For further information with respect to
the Company and the Common Stock offered hereby, reference is made to the
Registration Statement and the exhibits and scheduled filed as a part of the
Registration Statement. Statements contained in this Prospectus concerning the
contents of any contract or any other document referred to are not necessarily
complete, and reference is made in each instance to the copy of such contract or
document filed as an exhibit to the Registration Statement. Each such statement
is qualified in all respects by such reference to such exhibit. The Registration
Statement, including exhibits and schedules thereto, may be inspected without
charge at the Securities and Exchange Commission's principal office in
Washington, D.C., and copies of all or any part thereof may be obtained from
such office after payment of fees prescribed by the Securities and Exchange
Commission.
REPORT OF INDEPENDENT AUDITORS
The Board of Directors
Allegiant Technologies, Inc.
We have audited the balance sheet of Allegiant Technologies, Inc. as of December
31, 1995, and the related statements of operations, shareholders' equity, 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. The financial
statements of Allegiant Technologies, Inc. at December 31, 1994, and for the
period from incorporation on December 28, 1993 to December 31, 1994, were
audited by other auditors whose report, dated January 27, 1995, expressed an
unqualified opinion on those statements.
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 finanical 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 principals
used and significant estimates made by management, as well as evaluating
the overall finanical statement presentation. We believe that our audit
provides a reasonable basis for our opinion.
In our opinion, the 1995 financial statements referred to above present
fairly, in all material respects, the financial position of Allegiant
Technologies, Inc. at December 31, 1995, and the results of its operations
and its cash flows for the year then ended in conformity with generally
accepted accounting principles.
/s/ Ernst & Young LLP
February 7, 1996
AUDITORS' REPORT
To the Directors of
Allegiant Technologies Inc.
We have audited the balance sheet of Allegiant Technologies Inc. as at
December 31, 1994 and the statements of earnings and deficit, changes
in shareholders' equity and changes in financial position for the
period from incorporation on December 28, 1993 to December 31, 1994.
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 Canadian generally
accepted auditing standards. Those standards require that we plan
and perform an audit to obtain reasonable assurance whether the
financial statements are free of material misstatement. An audit
also includes assessing the accounting principles used and
significant estimates made by management, as well as, evaluating
the overall financial sstatement presentation.
In our opinion, these financial statements present fairly, in all
material respects, the financial position of the Company as at
December 31, 1994 and the results of its operations, changes in
shareholders' equity and the changes in its financial position
for the period from incorporation on December 28, 1993 to December
31, 1994 then ended in accordance with Canadian generally accepted
accounting principles.
/s/ Baker & Company
Chartered Accountants
West Vancouver, Canada
January 27, 1995
ALLEGIANT TECHNOLOGIES INC.
FINANCIAL STATEMENTS
(Expressed in United States Dollars)
DECEMBER 31, 1995
<TABLE>
ALLEGIANT TECHNOLOGIES INC.
BALANCE SHEET
(Expressed in United States Dollars)
AS OF DECEMBER 31
<CAPTION> 1994 1995
---- ----
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 253,218 $ 616,868
Accounts receivable, net of allowance for doubtful accounts of
$17,131 in 1994 and $15,000 in 1995 197,625 134,276
Inventories 50,950 99,367
Prepaid expenses and deposits 29,247 58,106
------------- ------------
Total current assets 531,040 908,617
Deposits - 15,709
Property and equipment, net (Note 3) 96,184 253,628
Intangible assets, net (Note 4) 406,700 384,187
Deferred costs 52,895 76,250
------------- ------------
Total assets $ 1,086,819 $ 1,638,391
============= ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 173,517 $ 212,380
Accrued liabilities 8,200 33,559
Deferred revenues 19,800 53,798
Current portion of notes payable - 51,460
------------- ------------
Total current liabilities 201,517 351,197
Deferred rent - 26,403
Notes payable, net of current portion (Note 5) 250,000 9,034
Debentures payable (Note 6) - 461,000
------------- ------------
Total liabilities 451,517 847,634
------------- ------------
Commitments (Note 7)
Shareholders' equity:
Capital stock (Note 9)
Authorized
50,000,000 preferred shares, par value $0.01 per share
100,000,000 common shares, par value $0.01 per share
Issued and outstanding
7,042,295 common shares (1994 - 5,634,000) 56,340 70,423
Additional paid-in capital 1,205,660 2,404,398
Accumulated deficit (626,698) (1,684,064)
------------- -----------
Total shareholders' equity 635,302 790,757
------------- -----------
Total liabilities and shareholders' equity $ 1,086,819 $ 1,638,391
============= ===========
See accompanying notes.
</TABLE>
<TABLE>
ALLEGIANT TECHNOLOGIES INC.
STATEMENTS OF OPERATIONS
(Expressed in United States Dollars)
<CAPTION> From
Incorporation on
December 28,
1993 to Year Ended
December 31, December 31,
1994 1995
<S> <C> <C>
NET REVENUE $ 818,153 $ 2,227,582
COST OF REVENUE 170,192 646,547
------------- ------------
GROSS PROFIT 647,961 1,581,035
------------- ------------
EXPENSES
Sales and marketing 441,220 1,045,383
Research and development 288,563 607,012
General and administrative 454,915 863,535
Amortization of purchase of intangibles 91,300 131,263
------------- ------------
Total operating expenses 1,275,998 2,647,193
------------- ------------
Loss from operations (628,037) (1,066,158)
Interest income 1,339 14,966
Interest expense - (6,174)
------------- ------------
Net loss $ (626,698) $ (1,057,366)
============== =============
Loss per share $ (0.25) $ (0.24)
============== =============
Shares used in computing per share amounts 2,535,397 4,372,592
============= ============
See accompanying notes.
</TABLE>
<TABLE>
ALLEGIANT TECHNOLOGIES INC.
STATEMENTS OF SHAREHOLDERS' EQUITY
(Expressed in United States Dollars)
<CAPTION> Additional Total
Number Paid-in Accumulated Shareholders'
of Shares Par Value Capital Deficit Equity
<S> <C> <C> <C> <C> <C>
Balances at December 28, 1993 1 $ 1 $ - $ - $ 1
Shares issued - cash 5,639,999 56,339 1,205,660 1,261,999
Net loss (626,698) (626,698)
------------- ------------- ------------- ------------- -----------
Balances at December 31, 1994 5,634,000 56,340 1,205,660 (626,698) 635,302
Shares issued - cash 875,000 8,750 866,250 875,000
- corporate finance fee 64,545 645 63,900 64,545
- exercise of warrants 218,750 2,188 216,562 218,750
- conversion of note payable 250,000 2,500 247,500 250,000
- issuance of warrants - - 39,000 39,000
Offering costs (234,474) (234,474)
Net loss (1,057,366) (1,057,366)
------------- ------------- ------------- ------------- -----------
Balances at December 31, 1995 7,042,295 $ 70,423 $ 2,404,398 $ (1,684,064) $ 790,757
============= ============= ============= ============== ===========
See accompanying notes.
</TABLE>
<TABLE>
ALLEGIANT TECHNOLOGIES INC.
STATEMENTS OF CASH FLOWS
(Expressed in United States Dollars)
<CAPTION> From
Incorporation on
December 28,
1993 to Year Ended
December 31, December 31,
1994 1995
<S> <C> <C>
OPERATING ACTIVITIES
Net loss $ (626,698) $ (1,057,366)
Adjustments to reconcile net loss to net cash
used in operating activities
Amortization and depreciation 105,897 168,086
Changes in operating assets and liabilities
Accounts receivable (197,625) 63,349
Inventories (50,950) (48,417)
Prepaid expenses and deposits (29,247) (44,568)
Accounts payable and accrued liabilities 181,717 64,222
Deferred revenues 19,800 33,998
------------- ------------
Net cash used for operating activities (597,106) (820,696)
------------- ------------
INVESTING ACTIVITIES
Purchase of property and equipment (110,781) (194,268)
Purchase of intangible assets (498,000) -
------------- -------------
Net cash used for investing activities (608,781) (194,268)
------------- ------------
FINANCING ACTIVITIES
Proceeds from issuance of capital stock 1,262,000 923,821
Proceeds from notes payable 250,000 -
Payments on notes payable - (39,506)
Proceeds from debentures payable - 500,000
Deferred costs (52,895) (32,104)
Deferred rent - 26,403
------------- ------------
Net cash provided by financing activities 1,459,105 1,378,614
------------- ------------
Increase in cash and cash equivalents 253,218 363,650
Cash and cash equivalents, beginning of period - 253,218
------------- ------------
Cash and cash equivalents, end of period $ 253,218 $ 616,868
============= ============
Supplemental Disclosures of Non-Cash
Investing and Financing Activities
Note payable issued for royalty buy-out $ - $ 100,000
Common shares issued for conversion of note payable - 250,000
Common shares issued for corporate finance fee - 64,545
See accompanying notes.
</TABLE>
ALLEGIANT TECHNOLOGIES INC.
NOTES TO THE FINANCIAL STATEMENTS
(Expressed in United States Dollars)
DECEMBER 31, 1995
1. NATURE OF OPERATIONS
Allegiant Technologies Inc. was incorporated in Washington State, U.S.A. on
December 28, 1993 and was registered to carry on business in the State of
California on March 23, 1994. The Company's principal line of business is
developing, marketing and supporting interactive multimedia development
software.
2. SIGNIFICANT ACCOUNTING POLICIES
Inventories
Inventories consist primarily of software media, manuals and related
packing materials. Inventories are valued at standard cost, which approximates
the lower of cost, determined on a first-in, first-out basis, or market.
Capital assets
Capital assets are recorded at cost. Depreciation is provided over the
estimated useful lives ranging from three to seven years using the straight-line
method.
Intangible assets
Intangible assets are recorded at cost. Amortization is provided over the
estimated useful lives of five years using the straight-line method. Management
evaluates the future realization of intangible assets quarterly and writes down
any amounts that management deems unlikely to be recorded through future product
sales. To date no write downs have been recorded to intangible assets acquired
from Aldus Corporation.
Deferred costs
Deferred costs will be offset against the proceeds of equity financing
or amortized over the period of debt financing.
Capitalized software costs
Financial accounting standards provide for capitalization of certain
software development costs after technical feasibility of the software is
attained. No such costs were capitalized in 1994 or 1995 because the impact on
the financial statements would not be material.
Advertising costs
Advertising costs are expensed as incurred. Included in sales and marketing
are advertising costs of $135,453 and $376,860 in 1994 and 1995, respectively.
Revenue Recognition
Revenue is derived from product sales and licenses, maintenance contracts
and consulting, training and other services. Revenues from product sales and
licenses are recognized upon shipment of the products. Revenue from software
maintenance contracts is recognized on a straight-line basis over the term of
the contract, generally one year. Revenue from consulting, training and other
services are recognized in the period in which services are performed. To the
extent that an engagement is projected to be completed at a loss, a provision
for the full amount of the loss is provided at that time. The Company may enter
into agreements whereby it licenses products or provides customers the right to
multiple copies. Such agreements generally provide for non-refundable fixed fees
which are recognized at delivery of the product master or the first copy. Per
copy royalties in excess of the fixed minimum amounts and refundable license
fees are recognized as revenue when such amounts are reported to the Company and
no longer refundable. The Company will sell its products throughout the world,
however the most significant geographical area is the United States. The Company
performs ongoing credit evaluations of its customers and generally does not
require collateral on domestic sales. The Company maintains an allowance for
potential credit losses. Additionally, the Company maintains an allowance for
anticipated returns on products sold to distributors and direct customers. Two
customers accounted for 13% and 11% of the Company's revenue in 1995.
Foreign currency translation
The Company translates foreign currency transactions and balances using the
temporal method. Under this method, monetary assets and liabilities are
translated at period-end rates whereas non-monetary assets and liabilities are
recorded at rates prevailing at the transaction dates. Revenue and expenses are
translated at the average monthly rate throughout the period. Currency gains and
losses are reflected in the results of operations for the periods and were not
significant.
Reclassifications
Certain amounts in the 1994 financial statements have been reclassified
to conform with the 1995 presentation.
Income taxes
The Company accounts for income taxes pursuant to Statement of Financial
Accounting Standards No. ("SFAS") 109, "Accounting for Income Taxes".
New accounting standards
In March 1995, the Financial Accounting Standards Board issued SFAS 121,
"Accounting for Impairment of Long-Lived Assets and for Long-Lived Assets to be
Disposed Of", effective for fiscal years beginning after December 15, 1995. SFAS
121 requires impairment losses to be recorded on long-lived assets used in
operations when indicators of impairment are present and the undiscounted cash
flows estimated to be generated by those assets are less than the assets'
carrying amount. SFAS 121 also addresses the accounting for long-lived assets
that are expected to be disposed of. The Company does not believe, based on
current circumstances, the effect of adoption of SFAS 121 will be material. In
October 1995, the Financial Accounting Standards Board issued SFAS 123,
"Accounting for Stock-Based Compensation", effective for fiscal years beginning
after December 15, 1995. SFAS 123 establishes the fair value based method of
accounting for stock-based compensation arrangements, under which compensation
cost is determined using the fair value of the stock option at the grant date
and is recognized over the periods in which the related services are rendered.
If the Company were to retain its current intrinsic value based method, as
allowed by SFAS 123, it will be required to disclose the pro forma effect of
adopting the fair value based method. The Company does not plan to adopt the
fair value based method.
United States Generally Accepted Accounting Principles
Accounting under United States and Canadian generally accepted accounting
principles is substantially the same with respect to the accounting principles
used by the Company in the preparation of these financial statements.
<TABLE>
3. CAPITAL ASSETS
1994 1995
<CAPTION> -------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Capital assets consist of:
Furniture and fixtures $ 23,801 $ 114,933
Office equipment 16,387 17,416
Computer equipment 70,593 172,699
------------- ------------
110,781 305,048
Accumulated depreciation (14,597) (51,420)
------------- ------------
$ 96,184 $ 253,628
============= ============
</TABLE>
<TABLE>
4. INTANGIBLE ASSETS
1994 1995
<CAPTION>---------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Intangible assets consist of:
Acquisition costs of SuperCard $ 498,000 $ 498,000
Royalty buyout - 100,000
------------- ------------
498,000 598,000
Accumulated amortization (91,300) (213,813)
------------- ------------
$ 406,700 $ 384,187
============= ============
</TABLE>
Acquisition costs include goodwill, product technology and related
acquisition costs. On February 4, 1994 the Company purchased from a non-related
party, the rights to a product sold under the name "SuperCard" and the
underlying software technology for cash and other consideration. Royalty buyout
represents a fixed sum payment for the termination of the royalty interest on
SuperCard sales. The buyout option was negotiated as part of the original
acquisition of SuperCard.
<TABLE>
ALLEGIANT TECHNOLOGIES INC.
NOTES TO THE FINANCIAL STATEMENTS
(Expressed in United States Dollars)
DECEMBER 31, 1995
5. NOTES PAYABLE
<CAPTION> 1994 1995
---------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Note payable to a shareholder of the Company, due on demand on or after
September 30, 1996, without interest and unsecured. The note is
convertible into units at $1.40 Cdn per unit until May 24, 1996 and
$1.61 Cdn until May 24, 1997. Each unit consists of one share and one
share purchase warrant entitling the holder to purchase one share
under the same terms as the conversion of the note. During 1995 the
note payable was converted. $ 250,000 $ -
Note payable on buyout of royalty on SuperCard sales, payable over two
years in equal monthly instalLments commencing March 1, 1995
with interest at 9% per annum. - 60,494
Less: current portion - (51,460)
------------- ------------
Notes payable less current portion $ 250,000 $ 9,034
============= ============
Cash paid in 1995 for interest was $6,174.
</TABLE>
<TABLE>
6. DEBENTURES PAYABLE
<CAPTION> 1994 1995
------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
The Company has issued debentures in the aggregate amount of $500,000
which may be converted into Units of the Issuer at a price of $1.70
per Unit until December 18, 1996 and thereafter at $1.96 until
December 18, 1997, at the option of the holder. Each Unit consists of
one common share and one share purchase warrant entitling the holder
to purchase an additional common share at $1.70 until December 18,
1996 and thereafter at $1.96 until December 18, 1997. The debentures,
if not converted into Units, are due on December 18, 1997. The
holders may cause the Company to repay the debentures at any time
after December 18, 1996 provided that a registration statement for
the resale of the shares to be issued upon the exercise of the
debentures and the shares issued upon the exercise of the warrants
that are issued upon the conversion of the debenture (collectively
the "Shares") has not been declared effective by the Securities and
Exchange Commission.
The debentures are secured by a general charge over the assets of the
Company and bear interest at 8% per annum payable monthly commencing
on June 18, 1996. Upon the registration of the Shares for resale the
charge over the assets of the Company will be released and interest
will cease to accrue. $ - $ 500,000
Less discount - 39,000
------------- ------------
</TABLE>
ALLEGIANT TECHNOLOGIES INC.
NOTES TO THE FINANCIAL STATEMENTS
(Expressed in United States Dollars)
DECEMBER 31, 1995
7. COMMITMENTS
Lease
The Company leases office space. Minimum lease payments are as follows:
1996 $ 123,904
1997 147,630
1998 123,377
Rent expense for the years ending December 31, 1994 and 1995 were
$27,306 and $82,549, respectively.
<Table/>
8. INCOME TAXES
Significant components of the Company's deferred tax assets as of
December 31, 1995 are shown below. A valuation allowance has been
recognized to offset the deferred tax assets as realization of such
assets is uncertain.
<TABLE>
<CAPTION> 1994 1995
---------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforwards $ 236,000 $ 600,000
Research and development credits 34,000 80,000
Other - net 4,000 52,000
------------- -------------
Total deferred tax assets 274,000 732,000
Valuation allowance for deferred tax assets (274,000) (732,000)
------------- -------------
Net deferred tax assets $ - $ -
============= =============
At December 31, 1995, the Company has federal and California tax net
operating loss carryforwards of approximately $1,500,000. The Company
also has federal and California research credit carryforwards of
approximately $50,000 and $30,000, respectively. The federal tax loss
carryforward and the research credit carryforwards will begin expiring
in 2009 unless previously utilized. The California tax loss carryforward
will begin expiring in 2002 unless previously utilized.
In accordance with certain provisions of the Internal Revenue Code, a
change in ownership of a corporation of greater than 50 percent within a
three-year period will place an annual limitation on the corporation's
ability to utilize its existing tax loss and tax credit carryforwards.
</TABLE>
9. CAPITAL STOCK
Authorized
50,000,000 preferred stock, par value $0.01 per share. The Board of
Directors has the authority to divide the shares into
one or more series and to determine their attributes at
the time of issuance.
100,000,000 common stock, par value $0.01 per share
Included in issued and outstanding shares are 2,000,000 performance
shares to be released from escrow on the basis of 1 share for every
$0.52 Cdn of pre-tax cash earned by the Company. Of the performance
shares, 675,000 shares have further vesting provisions attached to them
in addition to the earn-out provisions. The value of these performance
shares will be charged to expense at the time of their release from
escrow.
The Company has granted directors and employees stock options to
purchase common shares of the Company as follows:
December 31, 1994 -
Granted during 1995 1,530,000
December 31, 1995 1,530,000
=============
The option price varies from $1.40 Cdn to $3.66 Cdn and the option
expiry dates range from May 24, 2000 to December 8, 2000.
At the end of the year 1,015,833 options vested and were available to
exercise. There are available 442,200 options that can be granted under
the stock option plan.
The Company has outstanding share purchase warrants entitling the
holders to purchase a total of 338,235 common shares of the Company as
follows:
<TABLE>
<CAPTION> Number Warrant
of Shares Price Expiry Date
<S> <C> <C>
250,000 $ 1.40 Cdn to May 24, 1996 May 24, 1997
$ 1.61 Cdn from
May 25, 1996
to May 24, 1997
88,235 $ 1.70 to December 18, 1996 December 18, 1997
$ 1.96 from December 19, 1996
------------- to December 18, 1997
338,235
</TABLE>
10. RELATED PARTY TRANSACTIONS
During 1995 the Company paid $Nil (1994 - $90,000) in consulting fees
and $30,000 (1994 - $32,500) in management fees to companies controlled
by certain directors of the Company. The consulting fees were paid in
connection with and were contingent upon the acquisition of SuperCard
and have been included in the acquisition costs capitalized (refer to
Note 4).
ALLEGIANT TECHNOLOGIES INC.
NOTES TO THE FINANCIAL STATEMENTS
(Expressed in United States Dollars)
DECEMBER 31, 1995
11. SEGMENTED INFORMATION
Substantially all the Company's operations, employees and assets are
located in the United States.
A significant portion of the Company's sales are to customers in foreign
countries:
<TABLE>
<CAPTION> 1994 1995
------------------------------------------------------------------------------------------------------
<S> <C> <C>
Sales by geographical region:
Japan $ 46,100 $ 260,506
Europe 48,990 246,231
Other 16,907 131,856
------------- ------------
Total export sales 111,997 638,593
United States 706,156 1,588,989
------------- ------------
Net sales $ 818,153 $ 2,227,582
============= ============
</TABLE>
ALLEGIANT TECHNOLOGIES INC.
(Expressed in United States Dollars)
FINANCIAL STATEMENTS
(Unaudited - Prepared by Management)
MARCH 31, 1996
ALLEGIANT TECHNOLOGIES INC.
BALANCE SHEET
(Expressed in United States Dollars)
AS OF MARCH 31 - Unaudited
<TABLE>
<CAPTION> 1995 1996
------------- --------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 102,313 $ 167,325
Accounts receivable, net of allowance for doubtful accounts of
$9,765 in 1995 and $13,000 in 1996 283,934 130,418
Inventories 64,354 97,189
Prepaid expenses and deposits 31,023 39,668
------------- ------------
Total current assets 481,624 434,600
Deposits - 15,709
Property and equipment, net (Note 3) 108,075 293,849
Intangible assets, net (Note 4) 477,634 353,038
Deferred costs 104,881 133,582
------------- ------------
Total assets $ 1,172,214 $ 1,230,778
============= ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 156,288 $ 382,348
Accrued liabilities 39,753 34,843
Deferred revenues 36,887 51,713
Current portion of notes payable 48,113 48,058
------------- ------------
Total current liabilities 281,041 516,962
Deferred rent - 23,763
Notes payable, net of current portion (Note 5) 298,058 -
Debentures payable (Note 6) - 479,834
------------- ------------
Total liabilities 579,099 1,020,559
------------- ------------
Commitments (Note 7)
Shareholders' equity:
Capital stock (Note 9)
Authorized
50,000,000 preferred shares, par value $0.01 per share
100,000,000 common shares, par value $0.01 per share
Issued and outstanding
7,292,295 common shares (1995 - 5,634,000) 56,340 72,923
Additional paid-in capital 1,205,660 2,651,898
Accumulated deficit (668,885) (2,514,602)
------------- -----------
Total shareholders' equity 593,115 210,219
------------- -----------
Total liabilities and shareholders' equity $ 1,172,214 $ 1,230,778
============= ===========
Unaudited - See accompanying notes.
</TABLE>
ALLEGIANT TECHNOLOGIES INC.
STATEMENTS OF OPERATIONS
(Expressed in United States Dollars)
THREE MONTHS ENDED MARCH 31 - Unaudited
<TABLE>
<CAPTION> 1995 1996
------------- --------
<S> <C> <C>
NET REVENUE $ 744,237 $ 470,710
COST OF REVENUE 213,496 100,903
------------- ------------
GROSS PROFIT 530,741 369,807
------------- ------------
EXPENSES
Sales and marketing 243,818 651,561
Research and development 128,192 249,874
General and administrative 172,228 248,791
Amortization of purchase of intangibles 29,066 34,899
------------- ------------
Total operating expenses 573,304 1,185,125
------------- ------------
Loss from operations (42,563) (815,318)
Interest income 1,070 4,132
Interest expense (694) (19,352)
------------- ------------
Net loss $ (42,187) $ (830,538)
============= ============
Loss per share $ (0.01) $ (0.16)
============= ============
Shares used in computing per share amounts 3,694,000 5,042,295
============= ============
Unaudited - See accompanying notes.
</TABLE>
ALLEGIANT TECHNOLOGIES INC.
STATEMENTS OF SHAREHOLDERS' EQUITY
(Expressed in United States Dollars)
<TABLE>
<CAPTION> Additional Total
Number Paid-in Accumulated Shareholders'
of Shares Par Value Capital Deficit Equity
<S> <C> <C> <C> <C> <C>
Balances at December 31, 1994 5,634,000 $ 56,340 $ 1,205,660 $ (626,698) $635,302
Net loss (42,187) (42,187)
------------- ------------- ------------- ------------- -----------
Balances at March 31, 1995 5,634,000 56,340 1,205,660 (668,885) 593,115
Shares issued - cash 875,000 8,750 866,250 875,000
- corporate finance fee 64,545 645 63,900 64,545
- exercise of warrants 218,750 2,188 216,562 218,750
- conversion of note payable 250,000 2,500 247,500 250,000
- issuance of warrants - - 39,000 39,000
Offering costs (234,474) (234,474)
Net loss (1,015,179) (1,015,179)
------------- ------------- ------------- ------------- -----------
Balances at December 31, 1995 7,042,295 70,423 2,404,398 (1,684,064) 790,757
Shares issued - cash 250,000 2,500 247,500 250,000
Net loss (830,538) (830,538)
------------- ------------- ------------- ------------- -----------
Balances at March 31, 1996 7,292,295 $ 72,923 $ 2,651,898 $ (2,514,602) $ 210,219
============= ============= ============= ============= ===========
Unaudited - See accompanying notes.
</TABLE>
ALLEGIANT TECHNOLOGIES INC.
STATEMENTS OF CASH FLOWS
(Expressed in United States Dollars)
THREE MONTHS ENDED MARCH 31 - Unaudited
<TABLE>
<CAPTION> 1995 1996
------------- -------
<S> <C> <C>
OPERATING ACTIVITIES
Net loss $ (42,187) $ (830,538)
Adjustments to reconcile net loss to net cash
used in operating activities
Amortization and depreciation 34,766 72,782
Changes in operating assets and liabilities
Accounts receivable (86,309) (23,609)
Inventories (13,404) 2,178
Prepaid expenses and deposits (1,776) 45,905
Accounts payable and accrued liabilities 14,324 171,251
Deferred revenues 17,087 (2,085)
------------- ------------
Net cash used for operating activities (77,499) (564,116)
------------- ------------
INVESTING ACTIVITIES
Purchase of property and equipment (17,591) (59,269)
Purchase of intangible assets (100,000) -
------------- ---------
Net cash used for investing activities (117,591) (59,269)
------------- ------------
FINANCING ACTIVITIES
Proceeds from issuance of capital stock - 250,000
Proceeds from notes payable 100,000 -
Payments on notes payable (3,829) (12,436)
Deferred costs (51,986) (61,082)
Deferred rent - (2,640)
------------- ------------
Net cash provided by financing activities 44,185 173,842
------------- ------------
Decrease in cash and cash equivalents (150,905) (449,543)
Cash and cash equivalents, beginning of period 253,218 616,868
------------- ------------
Cash and cash equivalents, end of period $ 102,313 $ 167,325
============= ============
Unaudited - See accompanying notes.
</TABLE>
ALLEGIANT TECHNOLOGIES INC.
NOTES TO THE FINANCIAL STATEMENTS
(Expressed in United States Dollars)
MARCH 31, 1996
1. NATURE OF OPERATIONS
Allegiant Technologies Inc. was incorporated in Washington State,
U.S.A. on December 28, 1993 and was registered to carry on business
in the State of California on March 23, 1994.
The Company's principal line of business is developing, marketing
and supporting interactive multimedia development software.
2. SIGNIFICANT ACCOUNTING POLICIES
Inventories
Inventories consists primarily of software media, manuals an
related packing materials. Inventories are valued at
standard cost, which approximates the lower of cost, determined
on a first-in, first-out basis, or market.
Capital assets
Capital assets are recorded at cost. Depreciation is provided over
the estimated useful lives ranging from three to seven years
using the straight-line method.
Intangible assets
Intangible assets are recorded at cost. Amortization is provided over
the estimated useful lives of five years using the straight-line method.
Management evaluates the future realization of intangible assets
quarterly and writes down any amounts that management deems unlikely to
be recorded through future product sales. To date no write downs have
been recorded to intangible assets acquired from Aldus Corporation.
Deferred costs
Deferred costs will be offset against the proceeds of equity financing
or amortized over the period of debt financing.
Capitalized software costs
Financial accounting standards provide for capitalization of certain
software development costs after technical feasibility of the software
is attained. No such costs were capitalized in the first quarter of 1995
or 1996 because the impact on the financial statements would not be
material.
Revenue Recognition
Revenue is derived from product sales and licenses, maintenance
contracts and consulting, training and other services. Revenues from
product sales and licenses are recognized upon shipment of the products.
Revenue from software maintenance contracts is recognized on a
straight-line basis over the term of the contract, generally one year.
Revenue from consulting, training and other services are recognized in
the period in which services are performed. To the extent that an
engagement is projected to be completed at a loss, a provision for the
full amount of the loss is provided at that time.
The Company may enter into agreements whereby it licenses products or
provides customers the right to multiple copies. Such agreements
generally provide for non-refundable fixed fees which are recognized at
delivery of the product master or the first copy. Per copy royalties in
excess of the fixed minimum amounts and refundable license fees are
recognized as revenue when such amounts are reported to the Company and
no longer refundable.
The Company will sell its products throughout the world, however the
most significant geographical area is the United States. The Company
performs ongoing credit evaluations of its customers and generally does
not require collateral on domestic sales. The Company maintains an
allowance for potential credit losses. Additionally, the Company
maintains an allowance for anticipated returns on products sold to
distributors and direct customers.
Foreign currency translation
The Company translates foreign currency transactions and balances using
the temporal method. Under this method, monetary assets and liabilities
are translated at period-end rates whereas non-monetary assets and
liabilities are recorded at rates prevailing at the transaction dates.
Revenue and expenses are translated at the average monthly rate
throughout the period. Currency gains and losses are reflected in the
results of operations for the periods and were not significant.
Reclassifications
Certain amounts in the 1995 financial statements have been reclassified
to conform with the 1996 presentation.
Income taxes
The Company accounts for income taxes pursuant to Statement of Financial
Accounting Standards No. ("SFAS") 109, "Accounting for Income Taxes".
New accounting standards
In March 1995, the Financial Accounting Standards Board issued SFAS 121,
"Accounting for Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed Of", effective for fiscal years beginning after
December 15, 1995. SFAS 121 requires impairment losses to be recorded on
long-lived assets used in operations when indicators of impairment are
present and the undiscounted cash flows estimated to be generated by
those assets are less than the assets' carrying amount. SFAS 121 also
addresses the accounting for long-lived assets that are expected to be
disposed of. Based on current circumstances, there was no impact of
of adopting SFAS 121 in 1996.
In October 1995, the Financial Accounting Standards Board issued SFAS
123, "Accounting for Stock-Based Compensation", effective for fiscal
years beginning after December 15, 1995. SFAS 123 establishes the fair
value based method of accounting for stock-based compensation
arrangements, under which compensation cost is determined using the fair
value of the stock option at the grant date and is recognized over the
periods in which the related services are rendered. If the Company were
to retain its current intrinsic value based method, as allowed by SFAS
123, it will be required to disclose the pro forma effect of adopting
the fair value based method in its December 31, 1996 financial statements.
The Company does not plan to adopt the fair value based method.
United States Generally Accepted Accounting Principles
Accounting under United States and Canadian generally accepted
accounting principles is substantially the same with respect to the
accounting principles used by the Company in the preparation of these
financial statements.
3. CAPITAL ASSETS
<TABLE>
<CAPTION> 1995 1996
------------- ------------
<S> <C> <C>
Capital assets consist of:
Furniture and fixtures $ 29,106 $ 153,464
Office equipment 16,387 17,416
Computer equipment 82,879 193,437
------------- ------------
128,372 364,317
Accumulated depreciation (20,297) (70,468)
------------- ------------
$ 108,075 $ 293,849
============= ============
</TABLE>
<TABLE>
4. INTANGIBLE ASSETS
<CAPTION> 1994 1995
------------- ------------
<S> <C> <C>
Intangible assets consist of:
Acquisition costs of software $ 498,000 $ 498,000
Royalty buyout 100,000 100,000
------------- ------------
598,000 598,000
Accumulated amortization (120,366) (244,962)
------------- ------------
$ 477,634 $ 353,038
============= ============
</TABLE>
<TABLE>
5. NOTES PAYABLE
<CAPTION> 1995 1996
------------- ------------
<S> <C> <C>
Note payable to a shareholder of the Company, due on demand on or after
September 30, 1996, without interest and unsecured. The note is
convertible into units at $1.40 Cdn per unit until May 24, 1996 and
$1.61 Cdn until May 24, 1997. Each unit consists of one common share and one
share purchase warrant entitling the holder to purchase one common share
under the same terms as the conversion of the note. During
1995 the note payable was converted. $ 250,000 $ -
Note payable on buyout of royalty, payable over two years in equal
monthly installments commencing March 1, 1995 with
interest at 9% per annum. 96,171 48,058
------------- -----------
346,171 48,058
Less: current portion (48,113) (48,058)
------------- ------------
Notes payable less current portion $ 298,058 $ -
============= ============
</TABLE>
<TABLE>
6. DEBENTURES PAYABLE
<CAPTION> 1995 1996
------------- -------------
<S> <C> <C>
The Company has issued debentures in the aggregate amount of $500,000
which may be converted into Units of the Issuer at a price of $1.70
per Unit until December 18, 1996 and thereafter at $1.96 until
December 18, 1997, at the option of the holder. Each Unit consists of
one common share and one share purchase warrant entitling the holder
to purchase an additional common share at $1.70 until December 18,
1996 and thereafter at $1.96 until December 18, 1997. The debentures,
if not converted into Units, are due on December 18, 1997. The
holders may cause the Company to repay the debentures at any time
after December 18, 1996 provided that a registration statement for
the resale of the shares to be issued upon the exercise of the
debentures and the shares issued upon the exercise of the warrants
that are issued upon the conversion of the debenture (collectively
the "Shares") has not been declared effective by the Securities and
Exchange Commission.
The debentures are secured by a general charge over the assets of the
Company and bear interest at 8% per annum payable monthly commencing
on June 18, 1996. Upon the registration of the Shares for resale the
charge over the assets of the Company will be released and interest
will cease to
accrue. $ - $ 500,000
Less unamortized discount - 20,166
------------- ------------
$ - $ 479,834
============= ============
</TABLE>
7. COMMITMENTS
Lease
The Company leases office space. Minimum lease payments are as
follows:
1996 $ 123,904
1997 147,630
1998 123,377
<TABLE>
8. INCOME TAXES
Significant components of the Company's deferred tax assets as of March
31, 1995 and 1996 are shown below. A valuation allowance has been
recognized to offset the deferred tax assets as realization of
such assets is uncertain.
<CAPTION> 1995 1996
------------- -------------
<S> <C> <C>
Deferred tax assets:
Net operating loss carry forwards $ 200,000 $ 880,000
Research and development credits 15,000 100,000
Other - net 2,000 80,000
------------- -------------
Total deferred tax assets 217,000 1,060,000
Valuation allowance for deferred tax assets (217,000) (1,060,000)
------------- -------------
Net deferred tax assets $ - $ -
============= ==============
</TABLE>
At March 31, 1996, the Company has federal and California tax net
operating loss carryforwards of approximately $2,200,000. The Company
also has federal and California research credit carryforwards of
approximately $60,000 and $30,000, respectively. The federal tax loss
carryforward and the research credit carryforwards will begin expiring
in 2009 unless previously utilized. The California tax loss carryforward
will begin expiring in 2002 unless previously utilized.
In accordance with certain provisions of the Internal Revenue Code, a
change in ownership of a corporation of greater than 50 percent within a
three-year period will place an annual limitation on the corporation's
ability to utilize its existing tax loss and tax credit carryforwards.
9. CAPITAL STOCK
Authorized
50,000,000 preferred stock, par value $0.01 per share. The Board of
Directors has the authority to divide the shares into
one or more series and to determine their attributes at
the time of issuance.
100,000,000 common stock, par value $0.01 per share
Included in issued and outstanding shares are 2,000,000 performance
shares to be released from escrow on the basis of 1 share for every
$0.52 Cdn of pre-tax cash earned by the Company. Of the performance
shares, 675,000 shares have further vesting provisions attached to them
in addition to the earn-out provisions. The value of these performance
shares will be charged to expense at the time of their release from
escrow.
The Company has granted directors and employees stock options to
purchase 1,730,000 common shares of the Company.
The option price varies from $1.40 Cdn to $3.66 Cdn and the option
expiry dates range from May 24, 2000 to December 8, 2000.
At March 31, 1996, 1,065,833 options vested and were available to
exercise. There are available 242,200 options that can be granted under
the stock option plan.
The Company has outstanding share purchase warrants entitling the
holders to purchase a total of 88,235 common shares of the Company at
$1.70 per share to December 18, 1996 and at $1.96 per share to December
18, 1997.
10. RELATED PARTY TRANSACTIONS
During the three months ended March 31, 1996, the Company paid $7,500
(1995 - $7,500) in management fees to a company controlled by certain
directors of the Company.
11. SEGMENTED INFORMATION
Substantially all the Company's operations, employees and assets are
located in the United States.
A significant portion of the Company's sales are to customers in foreign
countries:
<TABLE>
<CAPTION> 1995 1996
------------- ------------
<S> <C> <C>
Sales by geographical region:
Japan $ 20,557 $ 29,951
Europe 52,747 106,678
Other 37,828 45,157
------------- ------------
Total export sales 111,132 181,786
United States 633,105 288,924
------------- ------------
Net sales $ 744,237 $ 470,710
============= ============
</TABLE>
12. SUBSEQUENT EVENT
Subsequent to March 31, 1996, the Company issued 815,000 common shares
at a purchase price of $2.00 per share, warrants entitling the holders
to purchase an additional 489,000 common shares at $2.30 per share to
April 25, 1998, and warrants entitling the holder to purchase 150,000
common shares at C$3.15 to April 25, 1997 and at C$3.62 thereafter to
April 25, 1998.
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 24. Indemnification of Directors and Officers.
Section 23B.08.320 of the Washington Business Corporation Act
(the "Corporation Act") provides that the personal liability of
directorsto a corporation imposed by Section 23B.08.310 of the
Corporation Act may be eliminated by the articles of incorporation of the
corporation, except in the case of acts or omissions involving certain types
of conduct. At Article XI of its Articles of Incorporation, the Registrant
has elected to eliminate the liability of directors to the Registrant to the
extent permitted by law. Thus, a director of the Registrant is not personally
liable to the Registrant or its shareholders for monetary damages for
conduct as a director, except for liability of the director (i) for
acts or omissions that involve intentional misconduct by the director or a
knowing violation of law by the director, (ii) for conduct violating
Section 23B.08.310 of the Corporation Act, or (iii) for any transaction
from which the director will personally receive a benefit in money,
property or services to which the director is not legally entitled.
Section 23B.08.560 of the Corporation Act provides that if authorized
by (i) the articles of incorporation, (ii) a bylaw adopted or ratified
by the shareholders, or (iii) a resolution adopted or ratified, before or
after the event, by the shareholders, a corporation shall have the power
to indemnify directors made party to a proceeding, or obligate itself to
advance or reimburse expenses incurred in a proceeding, without regard
to the limitations on indemnification contained in Sections 23B.08.510
through 23B.08.550 of the Corporation Act. Article IX of the Registrant's
Bylaws (the "Bylaws") authorizes the Registrant to indemnify its directors
(as well as its officers, employees and agents) against all liability,
expenses and losses arising from or in connection with service for or
at the request of, employment by, or other affiliation with the
Registrant. Furthermore, pursuant to Article IX of the Bylaws the
Registrant has the power to pay its directors (as well as its
officers, employees and agents) any expenses incurred in defending
any such proceeding in advance of its final disposition. The Bylaws
provide that the Registrant must provide indemnification, and pay
expenses in advance of final disposition of a proceeding, to its
directors to the full extent that the Registrant is empowered.
The Bylaws also provide that the Registrant may, by action of its
Board of Directors from time to time, provide indemnification, and
pay expenses in advance of the final disposition of a proceeding,
to its officers, employees and agents to the full extent the Registrant
is empowered or to any lesser extent which the Board of Directors may
determine.
Item 25. Other Expenses of Issuance and Distribution.
<TABLE>
<CAPTION>
The following table sets forth the costs and expenses, other than
underwriting discounts and commissions, payable by the Registrant in connection
with the sale of the Common Stock offered hereby.
<S> <C>
Securities and Exchange Commission Registration Fee................................ $1,240
Printing and Engraving Expenses.................................................... 5,000
Legal Fees and Expenses............................................................ 25,000
Accounting Fees and Expenses....................................................... 20,000
Miscellaneous Expenses............................................................. 5,000
-------
Total...................................................................... $56,240
======
</TABLE>
- -------------------------
* Estimated
Item 26. Recent Sales of Unregistered Securities.
<TABLE>
The Company was incorporated on December 28, 1993. Since that time and
to the date hereof the Company has issued the following securities:
<CAPTION> Securities
Date of Issuance Identity Sold Consideration Exemption
<S> <C> <C> <C>
February 4, 1994 Employees/
Director 1,125,000 $ 11,250 Rule 701, Regulation D.
(9 persons) Shares of
common stock
February 4, 1994 Employees/
Director 875,000 $ 8,750 Regulation S.
(3 persons) Shares of
common stock
February 5, 1994 Employees/
Director 320,000 $ 80,000 Rule 701, Section 4(2).
(1 persons) Shares of
common stock
February 5, 1994 Employees/
Director 400,000 $ 100,000 Regulation S.
(2 persons) Shares of
common stock
February 5, 1994 Investors 1,240,000 $ 310,000 Regulation S.
(2 persons) Shares of
common stock
February 5, 1994 Investor 40,000 $ 10,000 Section 4(2)
(1 persons) Shares of
common stock
March 31, 1994 Employees/
Director 10,000 $ 5,000 Rule 701, Section 4(2).
(1 persons) Shares of
common stock
March 31, 1994 Investors 29,000 $ 14,500 Section 4(2)
(2 persons) Shares of
common stock
March 31, 1994 Investors 605,000 $ 302,500 Regulation S.
(19 persons) Shares of
common stock
April 30, 1994 Investor $250,000 $ 250,000 Regulation S.
(1 person) Convertible note
May 31, 1994 Employees/
Director 150,000 $ 50,000 Rule 701, Section 4(2).
(2 persons) Shares of
common stock
May 31, 1994 Employees/
Director 200,000 $ 50,000 Regulation S.
(2 persons) Shares of
common stock
May 31, 1994 Investors 60,000 $ 30,000 Section 4(2)
(2 persons) Shares of
common stock
February 1, 1995 Employees/
Director 400,000 $ 200,000 Rule 701, Section 4(2).
(1 persons) Shares of
common stock
February 1, 1995 Investor 100,000 $ 50,000 Regulation S.
(1 persons) Shares of
common stock
February 1, 1995 Investor 80,000 $ 40,000 Section 4(2)
(1 persons) Shares of
common stock
May 19, 1995 Underwriter 875,000 $ 875,000 (1) Regulation A.
Shares of
common stock
May 19, 1995 Underwriter 64,545 $ 64,545 (1) Regulation A.
Shares of
common stock
July 11, 1995 Underwriter 186,250 $ 186,250 (1) Regulation A.
Shares of
common stock
September 29, 1995 Investor 250,000 $ 250,000 (2) Regulation S.
(1 persons) Shares of
common stock
and
250,000
warrants
November 14, 1995 Underwriter 32,500 $ 32,500 (1) Regulation A.
Shares of
common stock
December 18, 1995 Investor $500,000 $ 500,000 Section 4(2)
(2 persons) convertible
debt and
warrants
December 18, 1995 Investor Warrants selling Section 4(2)
(2 persons) to purchase commission
88,235
shares of
common stock
March 7, 1996 Investor 250,000 $ 250,000 Regulation S.
(1 person) Shares of
common stock
on exercise
of warrants
April 26, 1996 Investors (3) 815,000 $1,630,000 Regulation D
(18 persons) shares of
common stock
and warrants
to purchase
489,000 shares
of common stock
April 26, 1996 Consultant warrants to services Section 4(2)
(1 person) purchase
150,000
shares of
common stock
(1) Canaccord Capital Corporation of Vancouver, British Columbia acted as agent
(the "Underwriter") for the sale of 875,000 common shares (the "Shares") of
the Company in the Province of British Columbia, Canada. None of the Shares
were issued to residents of the U.S.A. As consideration, the Company paid
to the Underwriter 10% of the proceeds on the sale of the Shares which
amounted to $87,500 and issued 64,545 common shares ("Fee Shares") of the
Company. In addition, the Company granted to the Underwriter warrants (the
"Underwriter's Warrants") entitling the Underwriter to purchase from the
Company, for a period of one year, 218,750 common shares at a purchase
price of $1.00 per share (C$1.40). The Underwriter exercised 186,250 of the
Underwriter's Warrants on July 11, 1995 and the balance on November 14,
1995. The Shares, the Fee Shares and the shares issued upon the exercise of
the Underwriter's Warrants were qualified for resale under an Offering
Circular, prepared in accordance with Regulation A of the 1993 Act,
declared effective by the Securities and Exchange Commission on March 29,
1995.
(2) These shares were issued upon the conversion of a convertible note that was
issued to one investor who was not a resident of the U.S.A. pursuant to
Regulation S of the Act. Included with the Shares were warrants to purchase
an additional 250,000 common shares of the Company which were exercised on
March 7, 1996.
(3) Private placement in which L.H. Friend, Weinress, Frankson & Presson, Inc. acted as placement agent, for which they
received warrants to purchase 81,500 shares of common stock.
</TABLE>
Item 27. Exhibits.
3.1 Articles of Incorporation of Allegiant Technologies, Inc.
3.2 Bylaws of Allegiant Technologies, Inc.
4.1(a) Form of Share Purchase Warrant
4.1(b) Form of Share Purchase Warrant
4.2 Convertible Debenture dated December 18, 1995
4.3 Form of Registration Rights Agreement
5 Opinion of Foster Pepper & Shefelman
10.1 Employment Agreement with Stuart Henigson, as amended
10.2 Employment Agreement with Joel Staadecker
10.3 Employment Agreement with David Baron
10.4 Management Agreement among Allegiant Technologies Inc.,
Pemcorp Management Inc., William McCartney, and
Leonard Petersen
10.5 Incentive Stock Option Plan
10.6 Royalty Termination Agreement with William C. Appleton
10.7 Escrow Agreement with Montreal Trust Company of Canada
10.8 Form of Indemnity Agreement
11 Statement re Computation of Per Share Earnings
16 Letter from Baker & Company
23.1 Consent of Ernst & Young LLP, Independent Auditors
23.2 Consent of Baker & Company, Chartered Accountants
23.3 Consent of Foster Pepper & Shefelman is included in their
opinion filed on Exhibit 5.
24 Power of Attorney is included on the Signature Page of the Registration
Statement.
27 Financial Data Schedule
Item 28. Undertakings.
(a) The undersigned Registrant will:
(1) File, during any period in which it offers or sells
securities, 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. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering range
may be reflected in the form of prospectus filed with the Commission pursuant
to Rule 424(b) if, in the aggregate, the changes in volume and price
represent no more than a 20 percent change in the maximum aggregate
offering price set forth in the "Calculation of Registration Fee"
table in the effective registration statement; and
(iii) Include any additional or changed 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.
(d) The small business issuer will provide to the underwriter
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.
(e) Insofar as indemnification for liabilities arising
under the Securities Act of 1933 (the "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 Act and is, therefore,
unenforceable.
In the event that a claim for indemnification against such
liabilities (other than the payment by the small business issuer
of expenses incurred or paid by a director, officer or controlling
person of the small business issuer 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 small business issuer 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.
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 the requirements for filing on Form SB-2 and authorized this
registration statement to be signed on its behalf by the undersigned in
the City of San Diego, State of California on June 24, 1996.
ALLEGIANT TECHNOLOGIES INC.
By: /s/ Joel B. Staadecker
Joel B. Staadecker
President
POWER OF ATTORNEY
Each person whose signature appears below constitutes and
appoints and hereby authorizes Joel B. Staadecker and William D. McCartney,
and either of them, with the full power of substitution, as attorney-in-fact
to sign in such person's behalf, individually and in each capacity stated
below, and to file any amendments, including post-effective amendments
to this Registration Statement.
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.
/s/ June 24, 1996
Joel B. Staadecker
President and Director
(Chief Executive Officer)
/s/ June 24, 1996
William D. McCartney
Chief Financial Officer and Director
(Principal Financial and Accounting Officer)
/s/ June 24, 1996
Leonard Petersen
Director
June 24, 1996
William C. Appleton
Director
/s/ June 24, 1996
Tommy J.H. Lee
Director
<TABLE>
INDEX TO EXHIBITS
<CAPTION> Sequential
Exhibit Number Page Number
<S> <C>
3.1 Articles of Incorporation of Allegiant Technologies, Inc. *
3.2 Bylaws of Allegiant Technologies, Inc. *
4.1(a) Form of Share Purchase Warrant *
4.1(b) Form of Share Purchase Warrant
4.2 Convertible Debenture dated December 18, 1995 *
4.3 Form of Registration Rights Agreement
5 Opinion of Foster Pepper & Shefelman *
10.1 Employment Agreement with Stuart Henigson, as amended *
10.2 Employment Agreement with Joel Staadecker *
10.3 Employment Agreement with David Baron *
10.4 Management Agreement among Allegiant Technologies Inc., Pemcorp *
Management Inc., William McCartney, and Leonard Petersen
10.5 Incentive Stock Option Plan *
10.6 Royalty Termination Agreement with William C. Appleton *
10.7 Escrow Agreement with Montreal Trust Company of Canada *
10.8 Form of Indemnity Agreement *
11 Statement re Computation of Per Share Earnings *
16 Letter from Baker & Company, Chartered Accountants *
23.1 Consent of Ernst & Young LLP, Independent Auditors *
23.2 Consent of Baker & Company, Chartered Accountants *
23.3 Consent of Foster Pepper & Shefelman is included in their opinion filed on *
Exhibit 5.
24 Power of Attorney is included on the Signature Page of the Registration *
Statement.
27 Financial Data Schedule *
</TABLE>
ARTICLES OF INCORPORATION
OF
ALLEGIANT TECHNOLOGIES INC.
ARTICLE I: NAME
The name of this corporation is:
ALLEGIANT TECHNOLOGIES INC.
ARTICLE II: DURATION
The period of duration of this corporation shall be perpetual.
ARTICLE III: PURPOSES
This corporation is organized for the purpose of transacting
any and all lawful business for which corporations may be incorpor-
ated under the Washington Business Corporation Act.
ARTICLE IV: CAPITAL STOCK
Section 1. Classes. The total number of shares of all
classes of stock which this corporation shall have authority to
issue is one hundred fifty million (150,000,000), consisting of:
(a) Fifty Million (50,000,000) shares of preferred
stock, par value one cent ($.01) per share (the "Preferred Stock");
and
(b) One Hundred Million (100,000,000) shares of common
stock, par value one cent ($.01) per share (the "Common Stock").
Section 2. Preferred Stock. The shares of Preferred Stock
may be divided into and issued in series. The board of directors
of this corporation shall have the authority to divide the shares
of Preferred Stock into one or more series; to designate the number
of shares of each series and the designation thereof; to fix and
determine the relative rights and preferences as between series, as
shall be stated and expressed in the resolution or resolutions
adopted by the board of directors providing for the issue of such
series and as may be permitted by the Washington Business
Corporation Act, including, without limitation, the dividend rate
(and whether dividends are cumulative), conversion rights, voting
rights, rights and terms of redemption (including sinking fund
provisions), redemption price and liquidation preferences (if and
to the extent that any such rights or preferences are to be
applicable to such series); and to amend the relative rights and
preferences of any series that is wholly unissued. The board of
directors may, after the issue of shares of a series, amend the
resolution establishing the series to decrease (but not below the
number of shares of such series then outstanding) the number of
shares of that series, and the number of shares constituting the
decrease shall resume the status which they had before the adoption
of the resolution establishing the series.
ARTICLE V: PREEMPTIVE RIGHTS
Subject to the rights of the holders of any series of
Preferred Stock, the shareholders of the corporation have no
preemptive rights to acquire additional shares of this corporation.
ARTICLE VI: REGISTERED OFFICE AND AGENT
The address of the initial registered office of this
corporation is Suite 1500, 777 108th Avenue N.E., Bellevue,
Washington 98004 and the name of its initial registered agent at
such address is David R. Wilson.
ARTICLE VII: NUMBER OF DIRECTORS
The number of directors which shall constitute the whole board
of directors of this corporation shall be fixed by, or in the
manner provided in the bylaws of this corporation, as the same may
be amended from time to time.
The initial board of directors shall be (1) in number. The
name and address of the person who is to serve as director until
the first annual meeting of shareholders or until his successors be
elected and qualify is:
David R. Wilson
Suite 1500
777 108th Avenue N.E.
Bellevue, Washington 98004
ARTICLE VIII: ELECTION OF DIRECTORS
Effective at the first annual meeting of shareholders
following the filing of this Certificate of Incorporation, the
board of directors shall be divided into three classes: Class I,
Class II and Class III. Such classes shall be as nearly equal in
number of directors as possible. Each director shall serve for a
term ending at the third annual shareholders' meeting following the
annual meeting at which such director was elected; provided,
however, that the directors first elected to Class I shall serve
for a term ending at the annual meeting to be held in the year
following the first election of directors by classes, the directors
first elected to Class II shall serve for a term ending at the
annual meeting to be held in the second year following the first
election of directors by classes, and the directors first elected
to Class III shall serve for a term ending at the annual meeting to
be held in the third year following the first election of directors
by classes. Notwithstanding any of the foregoing provisions of
this Article VIII, each director shall serve until his successor is
elected and qualified or until his earlier death, resignation or
removal.
At each annual election, the directors chosen to succeed those
whose terms then expire shall be identified as being of the same
class as the directors they succeed, unless, by reason of any
intervening changes in the authorized number of directors, the
board of directors shall designate one or more directorships whose
terms then expire as directorships of another class in order more
nearly to achieve equality in the number of directors among the
classes. When the board of directors fills a vacancy resulting
from the death, resignation or removal of a director, the director
chosen to fill that vacancy shall be of the same class as the
director he succeeds.
Notwithstanding the rule that the three classes shall be as
nearly equal in number of directors as possible, upon any change in
the authorized number of directors, each director then continuing
to serve as such will nevertheless continue as a director of the
class of which he is a member, until the expiration of his current
term or his earlier death, resignation or removal. Any vacancy to
be filled by reason of an increase in the number of directors may
be filled by the board of directors for a term of office continuing
only until the next election of directors by the shareholders.
ARTICLE IX: INCORPORATION
The name and address of the incorporator is David R. Wilson,
Suite 1500, 777 108th Avenue N.E., Bellevue, Washington 98004.
ARTICLE X: CUMULATIVE VOTING
The right to cumulate votes in the election of directors shall
not exist with respect to shares of stock of this corporation.
ARTICLE XI: LIABILITY OF DIRECTORS
A director of this corporation shall not be personally liable
to the corporation or its shareholders for monetary damages for
conduct as a director, except for liability of the director (i) for
acts or omissions that involve intentional misconduct by the
director or a knowing violation of law by the director, (ii) for
conduct violating Section 23B.08.310 of the Washington Business
Corporation Act or (iii) for any transaction from which the
director will personally receive a benefit in money, property, or
services to which the director is not legally entitled. If the
Washington Business Corporation Act is amended to authorize
corporate action further eliminating or limiting the personal
liability of directors, then the liability of a director of the
corporation shall be eliminated or limited to the fullest extent
permitted by the Washington Business Corporation Act, as so
amended. Any repeal or modification of this Article XI by the
shareholders of the corporation shall not adversely affect any
right or protection of a director of the corporation existing at
the time of such repeal or modification.
ARTICLE XII: CALL OF SPECIAL MEETING
Special meetings of the shareholders of this corporation for
any purpose or purposes may be called at any time by a majority
vote of the board of directors or by a majority of the members of
the board of directors, or by holders of at least ten percent of
the outstanding shares entitled to vote at such special meeting.
At such time as this corporation shall become a "public company" as
defined in the Washington Business Corporation Act, shareholders
shall have no right to call a special meeting of shareholders.
ARTICLE XIII: QUORUM REQUIREMENTS
For all meetings of shareholders, one-third of the votes
entitled to be cast by each voting group with respect to a matter
shall constitute a quorum of that voting group for action on that
matter.
Executed in duplicate this 27th day of December, 1993.
______________________________
David R. Wilson
Incorporator
<PAGE>
CONSENT TO SERVE AS AGENT FOR SERVICE OF PROCESS
I, David R. Wilson, hereby consent to serve as registered
agent in the State of Washington for Allegiant Technologies Inc.
I understand that as agent for the corporation it will be my
responsibility to receive service of process in the name of the
corporation, to forward all mail to the corporation and to
immediately notify the office of the Secretary of State in the
event of my resignation, or of any changes in the registered office
address of the corporation for which I am agent.
December 27, 1993 ___________________________
DATE (signature of agent)
NAME OF REGISTERED AGENT DAVID R. WILSON
ADDRESS OF REGISTERED AGENT Suite 1500
777 108th Avenue N.E.
Bellevue, Washington 98004
BYLAWS
OF
ALLEGIANT TECHNOLOGIES INC.
Originally adopted on January 7, 1994.
Amendments are listed on page i
<PAGE>
AMENDMENTS
Date of
Article/Section Effect of Amendment Amendment
<PAGE>
TABLE OF CONTENTS
Article/Section Provision Page
ARTICLE I. OFFICES. . . . . . . . . . . . . . . . . . . .1
ARTICLE II. NUMBER OF DIRECTORS. . . . . . . . . . . . . .1
ARTICLE III. SHAREHOLDERS . . . . . . . . . . . . . . . . .1
3.1. Annual Meeting . . . . . . . . . . . . .1
3.2. Special Meetings . . . . . . . . . . . .1
3.3. Place of Meetings. . . . . . . . . . . .1
3.4. Fixing of Record Date. . . . . . . . . .1
3.5. Voting Lists . . . . . . . . . . . . . .2
3.6. Notice of Meetings . . . . . . . . . . .2
3.7. Waiver of Notice . . . . . . . . . . . .3
3.8. Manner of Acting;
Proxies . . . . . . . . . . . . . . . .3
3.9. Participation by
Conference Telephone. . . . . . . . . .3
3.10. Quorum . . . . . . . . . . . . . . . . .3
3.11. Voting of Shares . . . . . . . . . . . .4
3.12. Voting of Shares by
Certain Holders . . . . . . . . . . . .4
3.13. Action by Shareholders
Without a Meeting . . . . . . . . . . .5
ARTICLE IV. BOARD OF DIRECTORS . . . . . . . . . . . . . .5
4.1. General Powers . . . . . . . . . . . . .5
4.2. Number, Tenure and
Qualification . . . . . . . . . . . . .5
4.3. Annual and Other
Regular Meetings. . . . . . . . . . . .6
4.4. Special Meetings . . . . . . . . . . . .6
4.5. Quorum . . . . . . . . . . . . . . . . .6
4.6. Manner of Acting . . . . . . . . . . . .6
4.7. Participation by
Conference Telephone. . . . . . . . . .7
4.8. Presumption of Assent. . . . . . . . . .7
4.9. Action by Board Without
a Meeting . . . . . . . . . . . . . . .7
4.10. Board Committees . . . . . . . . . . . .7
4.11. Resignation. . . . . . . . . . . . . . .7
4.12. Removal. . . . . . . . . . . . . . . . .7
4.13. Vacancies. . . . . . . . . . . . . . . .8
4.14. Compensation . . . . . . . . . . . . . .8
ARTICLE V. OFFICERS . . . . . . . . . . . . . . . . . . .8
5.1. Number . . . . . . . . . . . . . . . . .8
5.2. Appointment and Term of
Office. . . . . . . . . . . . . . . . .8
5.3. Resignation. . . . . . . . . . . . . . .9
5.4. Removal. . . . . . . . . . . . . . . . .9
5.5. Chairman and Vice-
Chairmen of the Board . . . . . . . . .9
5.6. President. . . . . . . . . . . . . . . .9
5.7. VicePresidents . . . . . . . . . . . . .9
5.8. Secretary. . . . . . . . . . . . . . . 10
5.9. Treasurer. . . . . . . . . . . . . . . 10
5.10. Assistant Officers . . . . . . . . . . 10
5.11. Compensation of
Officers and
Employees . . . . . . . . . . . . . . 10
ARTICLE VI. CONTRACTS, LOANS, CHECKS, DEPOSITS . . . . . 11
6.1. Contracts. . . . . . . . . . . . . . . 11
6.2. Loans. . . . . . . . . . . . . . . . . 11
6.3. Checks, Drafts, Etc. . . . . . . . . . 11
6.4. Deposits . . . . . . . . . . . . . . . 11
6.5. Contracts with or Loans
to Directors and
Officers. . . . . . . . . . . . . . . 11
ARTICLE VII. SHARES . . . . . . . . . . . . . . . . . . . 12
7.1. Certificates for
Shares. . . . . . . . . . . . . . . . 12
7.2. Issuance of Shares . . . . . . . . . . 12
7.3. Beneficial Ownership . . . . . . . . . 12
7.4. Transfer of Shares . . . . . . . . . . 12
7.5. Lost or Destroyed
Certificates. . . . . . . . . . . . . 12
7.6. Restrictions on
Transfer. . . . . . . . . . . . . . . 13
7.7. Stock Transfer Records . . . . . . . . 13
ARTICLE VIII. SEAL . . . . . . . . . . . . . . . . . . . . 13
ARTICLE IX. INDEMNIFICATION OF DIRECTORS, OFFICERS,
EMPLOYEES AND AGENTS . . . . . . . . . . . . 13
9.1. Power to Indemnify . . . . . . . . . . 13
9.2. Indemnification of
Directors, Officers,
Employees and Agents. . . . . . . . . 15
9.3. Insurance. . . . . . . . . . . . . . . 16
9.4. Survival of Benefits . . . . . . . . . 16
9.5. Severability . . . . . . . . . . . . . 16
9.6. Applicable Law . . . . . . . . . . . . 16
ARTICLE X. BOOKS AND RECORDS. . . . . . . . . . . . . . 16
ARTICLE XI. FISCAL YEAR. . . . . . . . . . . . . . . . . 16
ARTICLE XII. VOTING OF SHARES OF ANOTHER CORPORATION. . . 17
ARTICLE XIII. AMENDMENTS TO BYLAWS . . . . . . . . . . . . 17
<PAGE>
BYLAWS
OF
ALLEGIANT TECHNOLOGIES INC.
ARTICLE I. OFFICES
The principal office and place of business of the corporation
shall be located at such place within or without the state of
Washington as the Board of Directors may establish from time to
time.
The corporation may have such other offices within or without
the state of Washington as the board of directors may designate or
the business of the corporation may require from time to time.
ARTICLE II. NUMBER OF DIRECTORS
The board of directors of this corporation shall consist of NO
fewer than three (3) nor more than thirteen (13) directors. The
Board of Directors shall fix the number of directors from time to
time by appropriate resolution.
ARTICLE III. SHAREHOLDERS
Section 3.1. Annual Meeting. The annual meeting of the
shareholders shall be held on the second Tuesday in the month of
May in each year, beginning with the year 1994, at 10:00 A.M., or
at such other date or time as may be determined by the board of
directors, for the purpose of electing directors and for the
transaction of such other business as may come before the meeting.
If the day fixed for the annual meeting shall be a legal holiday in
the state of Washington, the meeting shall be held on the next
succeeding business day. If the election of directors is not held
on the day designated herein for any annual meeting of the
shareholders or at any adjournment thereof, the board of directors
shall cause the election to be held at a meeting of the
shareholders as soon thereafter as may be convenient.
Section 3.2. Special Meetings. Special meetings of the
shareholders of this corporation for any purpose or purposes may be
called at any time by a majority vote of the board of directors or
by a majority of the members of the board of directors, or by
holders of at least ten percent of the outstanding shares entitled
to vote at such special meeting. At such time as this corporation
shall become a "public company" as defined in the Washington
Business Corporation Act, shareholders shall have no right to call
a special meeting of shareholders.
Section 3.3. Place of Meetings. Meetings of the shareholders
shall be held at either the principal office of the corporation or
at such other place within or without the state of Washington as
the board of directors or the president may designate.
Section 3.4. Fixing of Record Date. For the purpose of
determining shareholders entitled to notice of or to vote at any
meeting of shareholders or any adjournment thereof, or shareholders
entitled to receive payment of any dividend, or in order to make a
determination of shareholders for any other proper purpose, the
board of directors may fix in advance a date as the record date for
any such determination of shareholders, which date in any case
shall not be more than seventy (70) days prior to the date on which
the particular action requiring such determination of shareholders
is to be taken. If no record date is fixed for the determination
of shareholders entitled to notice of or to vote at a meeting of
shareholders, or shareholders entitled to receive payment of a
dividend or distribution, the day before the first notice of a
meeting is dispatched to shareholders or the date on which the
resolution of the board of directors authorizing such dividend or
distribution is adopted, as the case may be, shall be the record
date for such determination of shareholders. When a determination
of shareholders entitled to notice of or to vote at any meeting of
shareholders has been made as provided in this section, such
determination shall apply to any adjournment thereof unless the
board of directors fixes a new record date, which it must do if the
meeting is adjourned to a date more than one hundred twenty (120)
days after the date fixed for the original meeting.
Section 3.5. Voting Lists. At least ten (10) days before
each meeting of the shareholders, the officer or agent having
charge of the stock transfer books for shares of the corporation
shall prepare an alphabetical list of all its shareholders on the
record date who are entitled to vote at the meeting or any
adjournment thereof, arranged by voting group, and within each
voting group by class or series of shares, with the address of and
the number of shares held by each, which record for a period of ten
(10) days prior to the meeting shall be kept on file at the
principal office of the corporation or at a place identified in the
meeting notice in the city where the meeting will be held. Such
record shall be produced and kept open at the time and place of the
meeting and shall be subject to the inspection of any shareholder,
shareholder's agent or shareholder's attorney during the whole time
of the meeting. Failure to comply with the requirements of this
bylaw shall not affect the validity of any action taken at the
meeting.
Section 3.6. Notice of Meetings. Written or printed notice
stating the date, time and place of a meeting of shareholders and,
in the case of a special meeting of shareholders, the purpose or
purposes for which the meeting is called, shall be given by or at
the direction of the president, the secretary, or the officer or
persons calling the meeting to each shareholder of record entitled
to vote at such meeting (unless required by law to send notice to
all shareholders regardless of whether or not such shareholders are
entitled to vote), not less than ten (10) days and not more than
sixty (60) days before the meeting, except that notice of a meeting
to act on an amendment to the articles of incorporation, a plan of
merger or share exchange, a proposed sale, lease, exchange or other
disposition of all or substantially all of the assets of the
corporation other than in the usual course of business, or the
dissolution of the corporation shall be given not less than twenty
(20) days and not more than sixty (60) days before the meeting.
Written notice may be transmitted by: Mail, private carrier or
personal delivery; telegraph or teletype; or telephone, wire or
wireless equipment which transmits a facsimile of the notice. Such
notice shall be effective upon dispatch if sent to the
shareholder's address, telephone number, or other number appearing
on the records of the corporation.
If an annual or special shareholders' meeting is adjourned to
a different date, time or place, notice need not be given of the
new date, time or place if the new date, time or place is announced
at the meeting before adjournment unless a new record date is or
must be fixed. If a new record date for the adjourned meeting is
or must be fixed, however, notice of the adjourned meeting must be
given to persons who are shareholders as of the new record date.
Section 3.7. Waiver of Notice. A shareholder may waive any
notice required to be given under the provisions of these bylaws,
the articles of incorporation or by applicable law, whether before
or after the date and time stated therein. A valid waiver is
created by any of the following three methods: (a) in writing
signed by the shareholder entitled to the notice and delivered to
the corporation for inclusion in its corporate records; (b) by
attendance at the meeting, unless the shareholder at the beginning
of the meeting objects to holding the meeting or transacting
business at the meeting; or (c) by failure to object at the time of
presentation of a matter not within the purpose or purposes
described in the meeting notice.
Section 3.8. Manner of Acting; Proxies. A shareholder may
vote either in person or by proxy. A shareholder may vote by proxy
by means of a proxy appointment form which is executed in writing
by the shareholder, his agent, or by his duly authorized
attorney-in-fact. All proxy appointment forms shall be filed with
the secretary of the corporation before or at the commencement of
meetings. No unrevoked proxy appointment form shall be valid after
eleven (11) months from the date of its execution unless otherwise
expressly provided in the appointment form. No proxy appointment
may be effectively revoked until notice in writing of such
revocation has been given to the secretary of the corporation by
the shareholder appointing the proxy.
Section 3.9. Participation by Conference Telephone. At the
discretion of the board of directors, shareholders or proxies may
participate in a meeting of the shareholders by any means of
communication by which all persons participating in the meeting can
hear each other during the meeting, and participation by such means
shall constitute presence in person at the meeting.
Section 3.10. Quorum. For all meetings of shareholders,
one-third of the votes entitled to be cast by each voting group
with respect to a matter shall constitute a quorum of that voting
group for action on that matter. Once a share is represented at a
meeting, other than to object to holding the meeting or transacting
business, it is deemed to be present for purposes of a quorum for
the remainder of the meeting and for any adjournment of that
meeting unless a new record date is or must be fixed for the
adjourned meeting. At such reconvened meeting, any business may be
transacted which might have been transacted at the adjourned
meeting. If a quorum exists, action on a matter is approved by a
voting group if the votes cast within the voting group favoring the
action exceed the votes cast within the voting group opposing the
action, unless the question is one upon which a different vote is
required by express provision of law or of the articles of
incorporation or of these bylaws.
Section 3.11. Voting of Shares. Each outstanding share,
regardless of class, shall be entitled to one vote on each matter
submitted to a vote at a meeting of shareholders, except as may be
otherwise provided in the articles of incorporation.
Section 3.12. Voting of Shares by Certain Holders.
3.12.1. Shares standing in the name of another
corporation, domestic or foreign, may be voted by such officer,
agent or proxy as the board of directors of such corporation may
determine. A certified copy of a resolution adopted by such
directors shall be conclusive as to their determination.
3.12.2. Shares held by a personal representative,
administrator, executor, guardian or conservator may be voted by
such administrator, executor, guardian or conservator, without a
transfer of such shares into the name of such personal
representative, administrator, executor, guardian or conservator.
Shares standing in the name of a trustee may be voted by such
trustee, but no trustee shall be entitled to vote shares held in
trust without a transfer of such shares into the name of the
trustee.
3.12.3. Shares standing in the name of a receiver may
be voted by such receiver, and shares held by or under the control
of a receiver may be voted by the receiver without the transfer
thereof into his name if authority so to do is contained in an
appropriate order of the court by which such receiver was
appointed.
3.12.4. If shares are held jointly by three or more
fiduciaries, the will of the majority of the fiduciaries shall
control the manner of voting or appointment of a proxy, unless the
instrument or order appointing such fiduciaries otherwise directs.
3.12.5. Unless the pledge agreement expressly provides
otherwise, a shareholder whose shares are pledged shall be entitled
to vote such shares until the shares have been transferred into the
name of the pledgee, and thereafter the pledgee shall be entitled
to vote the shares so transferred.
3.12.6. Shares held by another corporation shall not be
voted at any meeting or counted in determining the total number of
outstanding shares entitled to vote at any given time if a majority
of the shares entitled to vote for the election of directors of
such other corporation is held by this corporation.
3.12.7. On and after the date on which written notice
of redemption of redeemable shares has been dispatched to the
holders thereof and a sum sufficient to redeem such shares has been
deposited with a bank or trust company with irrevocable instruction
and authority to pay the redemption price to the holders thereof
upon surrender of certificates therefor, such shares shall not be
entitled to vote on any matter and shall be deemed to be not
outstanding shares.
Section 3.13. Action by Shareholders Without a Meeting. Any
action which may or is required to be taken at a meeting of the
shareholders may be taken without a meeting if one or more written
consents setting forth the action so taken shall be signed, either
before or after the action taken, by all the shareholders entitled
to vote with respect to the subject matter thereof. Action taken
by written consent of the shareholders is effective when all
consents are in possession of the corporation, unless the consent
specifies a later effective date. Whenever any notice is required
to be given to any shareholder of the corporation pursuant to
applicable law, a waiver thereof in writing, signed by the person
or persons entitled to notice, shall be deemed equivalent to the
giving of notice.
ARTICLE IV. BOARD OF DIRECTORS
Section 4.1. General Powers. The business and affairs of the
corporation shall be managed by its board of directors.
Section 4.2. Number, Tenure and Qualification. The number of
directors set forth in Article II of these bylaws may be increased
or decreased from time to time by amendment to or in the manner
provided in these bylaws. No decrease, however, shall have the
effect of shortening the term of any incumbent director unless such
director resigns or is removed in accordance with the provisions of
these bylaws. Except as classification of directors may be
specified by the articles of incorporation and unless removed in
accordance with these bylaws, each director shall hold office until
the next annual meeting of the shareholders and until a successor
shall have been elected and qualified. Directors need not be
residents of the state of Washington or shareholders of the
corporation.
Section 4.3. Annual and Other Regular Meetings. An annual
meeting of the board of directors shall be held without other
notice than this bylaw, immediately after and at the same place as
the annual meeting of shareholders. The board of directors may
specify by resolution the time and place, either within or without
the state of Washington, for holding any other regular meetings of
the board of directors.
Section 4.4. Special Meetings. Special meetings of the board
of directors may be called by the board of directors, the chairman
of the board, the president, the secretary or any director. Notice
of special meetings of the board of directors stating the date,
time and place thereof shall be given at least two (2) days prior
to the date set for such meeting by the person or persons
authorized to call such meeting, or by the secretary at the
direction of the person or persons authorized to call such meeting.
The notice may be oral or written. Oral notice may be communicated
in person or by telephone, wire or wireless equipment, which does
not transmit a facsimile of the notice. Oral notice is effective
when communicated. Written notice may be transmitted by mail,
private carrier, or personal delivery; telegraph or teletype; or
telephone, wire, or wireless equipment which transmits a facsimile
of the notice. Written notice is effective upon dispatch if such
notice is sent to the director's address, telephone number, or
other number appearing on the records of the corporation. If no
place for such meeting is designated in the notice thereof, the
meeting shall be held at the principal office of the corporation.
Any director may waive notice of any meeting at any time. Whenever
any notice is required to be given to any director of the
corporation pursuant to applicable law, a waiver thereof in writing
signed by the director, entitled to notice, shall be deemed
equivalent to the giving of notice. The attendance of a director
at a meeting shall constitute a waiver of notice of the meeting
except where a director attends a meeting for the express purpose
of objecting to the transaction of any business because the meeting
is not lawfully convened. Unless otherwise required by law,
neither the business to be transacted at, nor the purpose of, any
regular or special meeting of the board of directors need be
specified in the notice or waiver of notice of such meeting.
Section 4.5. Quorum. A majority of the number of directors
specified in or fixed in accordance with these bylaws shall
constitute a quorum for the transaction of any business at any
meeting of directors. If less than a majority shall attend a
meeting, a majority of the directors present may adjourn the
meeting from time to time without further notice, and a quorum
present at such adjourned meeting may transact business.
Section 4.6. Manner of Acting. If a quorum is present when
a vote is taken, the affirmative vote of a majority of directors
present is the act of the board of directors.
Section 4.7. Participation by Conference Telephone.
Directors may participate in a regular or special meeting of the
board by, or conduct the meeting through the use of, any means of
communication by which all directors participating can hear each
other during the meeting and participation by such means shall
constitute presence in person at the meeting.
Section 4.8. Presumption of Assent. A director who is
present at a meeting of the board of directors at which action is
taken shall be presumed to have assented to the action taken unless
such director's dissent shall be entered in the minutes of the
meeting or unless such director shall file his written dissent to
such action with the person acting as secretary of the meeting
before the adjournment thereof or shall forward such dissent by
registered mail to the secretary of the corporation immediately
after adjournment of the meeting. Such right to dissent shall not
apply to a director who voted in favor of such action.
Section 4.9. Action by Board Without a Meeting. Any action
permitted or required to be taken at a meeting of the board of
directors may be taken without a meeting if one or more written
consents setting forth the action so taken, shall be signed, either
before or after the action taken, by all the directors. Action
taken by written consent is effective when the last director signs
the consent, unless the consent specifies a later effective date.
Section 4.10. Board Committees. The board of directors may
by resolution designate from among its members an executive
committee and one or more other committees, each of which must have
two (2) or more members and shall be governed by the same rules
regarding meetings, action without meetings, notice, waiver of
notice, and quorum and voting requirements as applied to the board
of directors. To the extent provided in such resolutions, each
such committee shall have and may exercise the authority of the
board of directors, except as limited by applicable law. The
designation of any such committee and the delegation thereto of
authority shall not relieve the board of directors, or any members
thereof, of any responsibility imposed by law.
Section 4.11. Resignation. Any director may resign at any
time by delivering written notice to the chairman of the board, the
president, the secretary, or the registered office of the
corporation, or by giving oral notice at any meeting of the
directors or shareholders. Any such resignation shall take effect
at any subsequent time specified therein, or if the time is not
specified, upon delivery thereof and, unless otherwise specified
therein, the acceptance of such resignation shall not be necessary
to make it effective.
Section 4.12. Removal. At a meeting of the shareholders
called expressly for that purpose, any director or the entire board
of directors may be removed from office, with or without cause
(unless the articles of incorporation provide that directors may be
removed only for cause) by a vote of the holders of a majority of
the shares then entitled to vote at an election of the director or
directors whose removal is sought. If shareholders have the right
to cumulate votes in the election of directors and if less than the
entire board is to be removed, no one of the directors may be
removed if the votes cast against his removal would be sufficient
to elect him if then cumulatively voted at an election of the
entire board or the class of directors of which he is a part. If
the board of directors or any one or more directors is so removed,
new directors may be elected at this same meeting.
Section 4.13. Vacancies. A vacancy on the board of directors
may occur by the resignation, removal or death of an existing
director, or by reason of increasing the number of directors on the
board of directors as provided in these bylaws. Except as may be
limited by the articles of incorporation, any vacancy occurring in
the board of directors may be filled by the affirmative vote of a
majority of the remaining directors though less than a quorum. A
director elected to fill a vacancy shall be elected for the
unexpired term of his predecessor in office, except that a vacancy
to be filled by reason of an increase in the number of directors
shall be filled by the board of directors for a term of office
continuing only until the next election of directors by
shareholders.
If the vacant office was held by a director elected by holders
of one or more authorized classes or series of shares, only the
holders of those classes or series of shares are entitled to vote
to fill the vacancy.
Section 4.14. Compensation. By resolution of the board of
directors, the directors may be paid a fixed sum plus their
expenses, if any, for attendance at meetings of the board of
directors or committee thereof, or a stated salary as director. No
such payment shall preclude any director from serving the
corporation in any other capacity and receiving compensation
therefor.
ARTICLE V. OFFICERS
Section 5.1. Number. The corporation shall have a president,
and may have one or more vice-presidents, a secretary and a
treasurer, each of whom shall be appointed by the board of
directors. Such other officers and assistant officers, including
a chairman of the board, as may be deemed necessary or appropriate
may be appointed by the board of directors. By resolution, the
board of directors may designate any officer as chief executive
officer, chief operating officer, chief financial officer, or any
similar designation. Any two or more offices may be held by the
same person.
Section 5.2. Appointment and Term of Office. The officers of
the corporation shall be appointed by the board of directors for
such term as the board may deem advisable or may be appointed to
serve for an indefinite term at the pleasure of the board. Each
officer shall hold office until a successor shall have been
appointed regardless of such officer's term of office, except in
the event of such officer's termination of an indefinite term at
the pleasure of the board or such officer's removal in the manner
herein provided.
Section 5.3. Resignation. Any officer may resign at any time
by delivering written notice to the chairman of the board, the
president, a vice-president, the secretary or the board of
directors, or by giving oral notice at any meeting of the board.
Any such resignation shall take effect at any subsequent time
specified therein, or if the time is not specified, upon delivery
thereof and, unless otherwise specified therein, the acceptance of
such resignation shall not be necessary to make it effective.
Section 5.4. Removal. Any officer appointed by the board of
directors may be removed by the board of directors with or without
cause. The removal shall be without prejudice to the contract
rights, if any, of the person so removed. Appointment of an
officer or agent shall not of itself create contract rights.
Section 5.5. Chairman and Vice-Chairmen of the Board. The
chairman of the board, if there be such an office, shall, if
present, preside at all meetings of the board of directors, and
exercise and perform such other powers and duties as may be
determined from time to time by resolution of the board of
directors. The vice-chairman of the board, if there be such an
office, or in the event there shall be more than one vice-chairman,
the one designated most senior at the time of election, shall
perform the duties of the chairman of the board in the chairman's
absence, or in the event of the chairman's death, disability or
refusal to act. The vice-chairman of the board shall exercise and
perform such other powers and duties as may be determined from time
to time by resolution of the board of directors.
Section 5.6. President. The president shall be the principal
executive officer of the corporation and, subject to the control of
the board of directors, shall generally supervise and control the
business and affairs of the corporation. When present the
president shall preside at all meetings of the shareholders and in
the absence of the chairman of the board, or if there be none, at
all meetings of the board of directors. The president may sign
with the secretary or any other proper officer of the corporation
thereunto authorized by law, certificates for shares of the
corporation, and may sign deeds, mortgages, bonds, contracts, or
other instruments which the board of directors has authorized to be
executed, except in cases where the signing and execution thereof
shall be expressly delegated by the board of directors or by these
bylaws to some other officer or agent of the corporation or shall
be required by law to be otherwise signed or executed. In general,
the president shall perform all duties incident to office of and
such other duties as may be prescribed by resolution of the board
of directors from time to time.
Section 5.7. Vice-Presidents. In the absence of the
president or in the event of his death, disability or refusal to
act, the vice-president, or in the event there shall be more than
one vice-president, the vice-presidents in the order designated at
the time of their election, or in the absence of any designation
then in the order of their election, if any, shall perform the
duties of the president. When so acting the vice-president shall
have all the powers of and be subject to all the restrictions upon
the president and shall perform such other duties as from time to
time may be assigned to the vice-president by resolution of the
board of directors.
Section 5.8. Secretary. The secretary shall keep the minutes
of the proceedings of the shareholders and board of directors,
shall give notices in accordance with the provisions of these
bylaws and as required by law, shall be custodian of the corporate
records of the corporation, shall keep a record of the names and
addresses of all shareholders and the number and class of shares
held by each, have general charge of the stock transfer books of
the corporation, may sign with the president, or a vice-president,
certificates for shares of the corporation, deeds, mortgages,
bonds, contracts, or other instruments which shall have been
authorized by resolution of the board of directors, and in general
shall perform all duties incident to the office of secretary and
such other duties as from time to time may be assigned to the
secretary by resolution of the board of directors.
Section 5.9. Treasurer. If required by the board of
directors, the treasurer shall give a bond for the faithful
discharge of his duties, in such sum and with such surety or
sureties as the board of directors shall determine. The treasurer
shall have charge and custody of and be responsible for keeping
correct and complete books and records of account, for all funds
and securities of the corporation, receive and give receipts for
moneys due and payable to the corporation from any source
whatsoever, deposit all such moneys in the name of the corporation
in the banks, trust companies or other depositories as shall be
selected in accordance with the provisions of these bylaws, and in
general perform all of the duties incident to the office of
treasurer and such other duties as from time to time may be
assigned to the treasurer by resolution of the board of directors.
Section 5.10. Assistant Officers. The assistant officers in
general shall perform such duties as are customary or as shall be
assigned to them by resolution of the board of directors. If
required by the board of directors, the assistant treasurers shall
respectively give bonds for the faithful discharge of their duties
in such sums and with such sureties as the board of directors shall
determine.
Section 5.11. Compensation of Officers and Employees. The
board of directors shall fix compensation of officers and may fix
compensation of other employees from time to time. No officer
shall be prevented from receiving a salary by reason of the fact
that such officer is also a director of the corporation. In the
event any salary payment, or portion thereof, to an officer or
other employee is not allowable as a deduction for employee
compensation under Section 162(a)(1) of the Internal Revenue Code
of 1986, as may be amended from time to time, on the grounds such
payment was unreasonable in amount, then such officer or employee
shall promptly repay the amount disallowed as a deduction to the
corporation; it shall be the duty of the board of directors to take
all action necessary to enforce this bylaw requiring repayment of
unreasonable compensation.
ARTICLE VI. CONTRACTS, LOANS, CHECKS, DEPOSITS
Section 6.1. Contracts. The board of directors may authorize
any officer or officers, agent or agents, to enter into any
contract or execute and deliver any instrument in the name of and
on behalf of the corporation, and that authority may be general or
confined to specific instances.
Section 6.2. Loans. No loans shall be contracted on behalf
of the corporation and no evidences of indebtedness shall be issued
in its name unless authorized by a resolution of the board of
directors, which authority may be general.
Section 6.3. Checks, Drafts, Etc. All checks, drafts or
other orders for the payment of money, notes or other evidences of
indebtedness issued in the name of the corporation shall be signed
by the officer or officers, or agent or agents, of the corporation
and in the manner as shall from time to time be prescribed by
resolution of the board of directors.
Section 6.4. Deposits. All funds of the corporation not
otherwise employed shall be deposited from time to time to the
credit of the corporation in the banks, trust companies or other
depositories as the board of directors may select.
Section 6.5. Contracts with or Loans to Directors and
Officers. The corporation may enter into contracts and otherwise
transact business as vendor, purchaser, or otherwise, with its
directors, officers, and shareholders and with corporations,
associations, firms, and entities in which they are or may become
interested as directors, officers, shareholders, members, or
otherwise, as freely as though such interest did not exist, as
permitted by applicable law. In the absence of fraud the fact that
any director, officer, shareholder, or any corporation,
association, firm or other entity of which any director, officer,
or shareholder is interested, is in any way interested in any
transaction or contract shall not make the transaction or contract
void or voidable, or require the director, officer, or shareholder
to account to this corporation for any profits therefrom if the
transaction or contract is or shall be authorized, ratified, or
approved by (a) vote of a majority of a quorum of the board of
directors excluding any interested director or directors, (b) the
written consent of the holders of a majority of the shares entitled
to vote, or (c) a general resolution approving the acts of the
directors and officers adopted at a shareholders meeting by vote of
the holders of the majority of the shares entitled to vote.
Nothing herein contained shall create or imply any liability in the
circumstances above described or prevent the authorization,
ratification or approval of such transactions or contracts in any
other manner.
ARTICLE VII. SHARES
Section 7.1. Certificates for Shares. The shares of the
corporation may be represented by certificates in such form as
prescribed by the board of directors. Signatures of the corporate
officers on the certificate may be facsimiles if the certificate is
manually signed on behalf of a transfer agent, or registered by a
registrar, other than the corporation itself or an employee of the
corporation. All certificates shall be consecutively numbered or
otherwise identified. All certificates shall bear such legend or
legends as prescribed by the board of directors or these bylaws.
Section 7.2. Issuance of Shares. Shares of the corporation
shall be issued only when authorized by the board of directors,
which authorization shall include the consideration to be received
for each share.
Section 7.3. Beneficial Ownership. Except as otherwise
permitted by these bylaws, the person in whose name shares stand on
the books of the corporation shall be deemed by the corporation to
be the owner thereof for all purposes. The board of directors may
adopt by resolution a procedure whereby a shareholder of the
corporation may certify in writing to the corporation that all or
a portion of the shares registered in the name of such shareholder
are held for the account of a specified person or persons. Upon
receipt by the corporation of a certification complying with such
procedure, the persons specified in the certification shall be
deemed, for the purpose or purposes set forth in the certification,
to be the holders of record of the number of shares specified in
place of the shareholder making the certification.
Section 7.4. Transfer of Shares. Transfer of shares of the
corporation shall be made only on the stock transfer books of the
corporation by the holder of record thereof or by his legal
representative who shall furnish proper evidence of authority to
transfer, or by his attorney thereunto authorized by power of
attorney duly executed and filed with the secretary of the
corporation, on surrender for cancellation of the certificate for
the shares. All certificates surrendered to the corporation for
transfer shall be cancelled and no new certificate shall be issued
until the former certificate for a like number of shares shall have
been surrendered and cancelled.
Section 7.5. Lost or Destroyed Certificates. In the case of
a lost, destroyed or mutilated certificate, a new certificate may
be issued therefor upon such terms and indemnity to the corporation
as the board of directors may prescribe.
Section 7.6. Restrictions on Transfer. Except to the extent
that the corporation has obtained an opinion of counsel acceptable
to the corporation that transfer restrictions are not required
under applicable securities laws, all certificates representing
shares of the corporation shall bear a legend on the face of the
certificate or on the reverse of the certificate if a reference to
the legend is contained on the face, to the effect as follows:
These securities are not registered under state or
federal securities laws and may not be offered, sold,
pledged or otherwise transferred, nor may these
securities be transferred on the books of the company,
without an opinion of counsel or other assurance
satisfactory to the company that no violation of such
registration provisions would result therefrom.
Section 7.7. Stock Transfer Records. The stock transfer
books shall be kept at the principal office of the corporation or
at the office of the corporation's transfer agent or registrar.
The name and address of the person to whom the shares represented
by any certificate, together with the class, number of shares and
date of issue, shall be entered on the stock transfer books of the
corporation. Except as provided in these bylaws, the person in
whose name shares stand on the books of the corporation shall be
deemed by the corporation to be the owner thereof for all purposes.
ARTICLE VIII. SEAL
This corporation need not have a corporate seal. If the
directors adopt a corporate seal, the seal of the corporation shall
be circular in form and consist of the name of the corporation, the
state and year of incorporation, and the words "Corporate Seal".
ARTICLE IX. INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES
AND AGENTS
Section 9.1. Power to Indemnify. The corporation shall have
the following powers:
9.1.1. Power to Indemnify. The corporation may
indemnify and hold harmless to the full extent permitted by
applicable law each person who was or is made a party to or is
threatened to be made a party to or is involved (including, without
limitation, as a witness) in any actual or threatened action, suit
or other proceeding, whether civil, criminal, administrative or
investigative, by reason of that fact that he or she is or was a
director, officer, employee or agent of the corporation or, being
or having been such a director, officer, employee or agent, he or
she is or was serving at the request of the corporation as a
director, officer, employee, agent, trustee, or in any other
capacity of another corporation or of a partnership, joint venture,
trust or other enterprise, including service with respect to
employee benefit plans, whether the basis of such proceeding is
alleged action or omission in an official capacity or in any other
capacity while serving as a director, officer, employee, agent,
trustee or in any other capacity, against all expense, liability
and loss (including, without limitation, attorneys' fees,
judgments, fines, ERISA excise taxes or penalties and amounts to be
paid in settlement) actually or reasonably incurred or suffered by
such person in connection therewith. Such indemnification may
continue as to a person who has ceased to be a director, officer,
employee or agent of the corporation and shall inure to the benefit
of his or her heirs and personal representatives.
9.1.2. Power to Pay Expenses in Advance of Final
Disposition. The corporation may pay expenses incurred in
defending any such proceeding in advance of the final disposition
of any such proceeding; provided, however, that the payment of such
expenses in advance of the final disposition of a proceeding shall
be made to or on behalf of a director, officer, employee or agent
only upon delivery to the corporation of an undertaking, by or on
behalf of such director, officer, employee or agent, to repay all
amounts so advanced if it shall ultimately be determined that such
director, officer, employee or agent is not entitled to be
indemnified under this Article or otherwise, which undertaking may
be unsecured and may be accepted without reference to financial
ability to make repayment.
9.1.3. Power to Enter Into Contracts. The corporation
may enter into contracts with any person who is or was a director,
officer, employee and agent of the corporation in furtherance of
the provisions of this Article and may create a trust fund, grant
a security interest in property of the corporation, or use other
means (including, without limitation, a letter of credit) to ensure
the payment of such amounts as may be necessary to effect
indemnification as provided in this Article.
9.1.4. Expansion of Powers. If the Washington
Business Corporation Act is amended in the future to expand or
increase the power of the corporation to indemnify, to pay expenses
in advance of final disposition, to enter into contracts, or to
expand or increase any similar or related power, then, without any
further requirement of action by the shareholders or directors of
this corporation, the powers described in this Article shall be
expanded and increased to the fullest extent permitted by the
Washington Business Corporation Act, as so amended.
9.1.5. Limitation on Powers. No indemnification shall
be provided under this Article to any such person if the
corporation is prohibited by the nonexclusive provisions of the
Washington Business Corporation Act or other applicable law as then
in effect from paying such indemnification. For example, no
indemnification shall be provided to any director in respect of any
proceeding, whether or not involving action in his or her official
capacity, in which he or she shall have been finally adjudged to be
liable on the basis of intentional misconduct or knowing violation
of law by the director, or from conduct of the director in
violation of RCW 23B.08.310, or that the director personally
received a benefit in money, property or services to which the
director was not legally entitled.
Section 9.2. Indemnification of Directors, Officers,
Employees and Agents.
9.2.1. Directors. The corporation shall indemnify and
hold harmless any person who is or was a director of this
corporation, and pay expenses in advance of final disposition of a
proceeding, to the full extent to which the corporation is
empowered.
9.2.2. Officers, Employees, and Agents. The
corporation may, by action of its Board of Directors from time to
time, indemnify and hold harmless any person who is or was an
officer, employee or agent of the corporation, and pay expenses in
advance of final disposition of a proceeding, to the full extent to
which the corporation is empowered, or to any lesser extent which
the Board of Directors may determine.
9.2.3. Character of Rights. The rights to
indemnification and payment of expenses in advance of final
disposition of a proceeding conferred by or pursuant to this
Article shall be contract rights.
9.2.4. Enforcement. A director, officer, employee or
agent ("claimant") shall be presumed to be entitled to
indemnification and/or payment of expenses under this Article upon
submission of a written claim (and, in an action brought to enforce
a claim for expenses incurred in defending any proceeding in
advance of its final disposition, where the undertaking in
subsection 9.1.2 above has been delivered to the corporation) and
thereafter the corporation shall have the burden of proof to
overcome the presumption that the claimant is so entitled.
If a claim under this Article is not paid in full by the
corporation within sixty (60) days after a written claim has been
received by the corporation, except in the case of a claim for
expenses incurred in defending a proceeding in advance of its final
disposition, in which case the applicable period shall be twenty
(20) days, the claimant may at any time thereafter bring suit
against the corporation to recover the unpaid amount of the claim
and, to the extent successful in whole or in part, the claimant
shall be entitled to be paid also the expense of prosecuting such
claim. Neither the failure of the corporation (including its board
of directors, its shareholders or independent legal counsel) to
have made a determination prior to the commencement of such action
that indemnification of or reimbursement or advancement of expenses
to the claimant is proper in the circumstances nor an actual
determination by the corporation (including its board of directors,
its shareholders or independent legal counsel) that the claimant is
not entitled to indemnification or to the reimbursement or
advancement of expenses shall be a defense to the action or create
a presumption that the claimant is not so entitled.
9.2.5. Rights Not Exclusive. The right to
indemnification and payment of expenses in advance of final
disposition of a proceeding conferred in this Article shall not be
exclusive of any other right which any person may have or hereafter
acquire under any statute, provision of the articles of
incorporation, bylaws, agreement, vote of shareholders or
disinterested directors or otherwise.
Section 9.3. Insurance. The corporation may purchase and
maintain insurance, at its expense, to protect itself and any
director, officer, employee, agent or trustee of the corporation or
another corporation, partnership, joint venture, trust or other
enterprise against any expense, liability or loss, whether or not
the corporation would have the power to indemnify such person
against such expense, liability or loss under the Washington
Business Corporation Act.
Section 9.4. Survival of Benefits. Any repeal or
modification of this Article shall not adversely affect any right
of any person existing at the time of such repeal or modification.
Section 9.5. Severability. If any provision of this Article
or any application thereof shall be invalid, unenforceable or
contrary to applicable law, the remainder of this Article, or the
application of such provision to persons or circumstances other
than those as to which it is held invalid, unenforceable or
contrary to applicable law, shall not be affected thereby and shall
continue in full force and effect.
Section 9.6. Applicable Law. For purposes of this Article,
"applicable law" shall at all times be construed as the applicable
law in effect at the date indemnification may be sought, or the law
in effect at the date of the action, omission or other event giving
rise to the situation for which indemnification may be sought,
whichever is selected by the person seeking indemnification. As of
the date hereof, applicable law shall include RCW 23B.08.500
through .600, as amended.
ARTICLE X. BOOKS AND RECORDS
The corporation shall keep correct and complete books and
records of account, stock transfer books, minutes of the
proceedings of its shareholders and the board of directors and such
other records as may be necessary or advisable.
ARTICLE XI. FISCAL YEAR
The fiscal year of the corporation shall be determined by
resolution adopted by the board of directors. In the absence of
such a resolution, the fiscal year shall be the calendar year.
ARTICLE XII. VOTING OF SHARES OF ANOTHER CORPORATION
Shares of another corporation held by this corporation may be
voted by the president or vice-president, or by proxy appointment
form executed by either of them, unless the directors by resolution
shall designate some other person to vote the shares.
ARTICLE XIII. AMENDMENTS TO BYLAWS
These bylaws may be altered, amended or repealed, and new
bylaws may be adopted, by the board of directors or by the
shareholders. Any bylaw adopted, amended or repealed by the
directors may be repealed, amended or reinstated by the
shareholders at the next meeting of shareholders following such
action, without further notice than this bylaw.
The undersigned, being the secretary of the corporation,
hereby certifies that these bylaws are the bylaws of ALLEGIANT
TECHNOLOGIES INC. adopted by resolution of the directors on
January 7, 1994.
DATED this day of January, 1994.
_____________________, Secretary
NEITHER THIS WARRANT NOR THE SHARES ISSUABLE UPON EXERCISE OF
THIS WARRANT HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933 AS AMENDED, OR UNDER THE LAWS OF ANY STATE, AND THUS MAY
NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION UNDER SUCH LAWS OR AN OPINION OF COUNSEL
ACCEPTABLE TO THE COMPANY TO THE EFFECT THAT SUCH REGISTRATION
IS NOT REQUIRED.
___________________________________
TRANSFER OF THIS WARRANT IS PROHIBITED, EXCEPT AS PROVIDED IN
SECTION 2
___________________________________
THIS WARRANT AND THE WARRANT SHARES (AS DEFINED HEREIN) ARE
NOT TRANSFERABLE WITHOUT THE PRIOR CONSENT OF THE VANCOUVER
STOCK EXCHANGE UNTIL (ONE YEAR FROM THE DATE OF ISSUANCE)
WARRANT
Warrant No. Warrant to purchase
Warrant Shares (subject to
adjustment)
ALLEGIANT TECHNOLOGIES INC.
a Washington corporation
Allegiant Technologies Inc., a Washington corporation
(the "Company"), for value received, hereby grants to
(the "Holder"), the right, subject to the
terms and conditions set forth herein, to purchase from the
Company, at any time and from time to time, up to
( ) duly authorized, validly issued, fully
paid and non-assessable shares (the "Warrant Shares") of the
Common Stock, $.01 par value, of the Company (the "Common
Stock"), at an initial purchase price on a per share basis,
subject to adjustment as provided in Section 3 hereof, equal
to Three Dollars and 45/100 ($3.45) ("Exercise Price");
provided, however, that this Warrant must be exercised, if at
all, in whole or in part, on or before the earlier of
(i) ___________, 1998; and (ii) 30 days following the delivery
by the Company of a Call Notice pursuant to the provisions of
Section 5 hereof. The number and character of the securities
purchasable upon exercise of such rights of purchase, and the
Exercise Price, are subject to adjustment as provided herein.
The term "Warrant" as used herein shall include this Warrant,
any Warrant or Warrants issued in substitution for or
replacement of this Warrant, or any Warrant or Warrants into
which this Warrant may be divided or exchanged. The term
"Warrant Shares" shall mean the Common Stock issuable upon
exercise of this Warrant. For purposes hereof, the term
"Person" shall include any natural person, corporation,
limited liability company, joint venture, partnership, trust
or other entity.
1. METHOD OF EXERCISE; PAYMENT OF EXERCISE PRICE
(a) Subject to the other terms and conditions of
this Warrant, the purchase rights evidenced by this Warrant
may be exercised in whole or, from time to time, in part, at
the times and subject to the conditions set forth above, by
the Holder's presentation of this Warrant to the Company at
its principal offices, accompanied by a duly executed Notice
of Exercise, in the form attached hereto as Exhibit A and by
this reference incorporated herein, and by payment of the
aggregate Exercise Price in the manner specified in
Section 1(b) hereof, for the number of Warrant Shares
specified in the Notice of Exercise.
(b) The aggregate Exercise Price for the number of
Warrant Shares specified in any Notice of Exercise may be paid
in cash by certified check or bank cashier's check or wire
transfer of immediately available funds.
(c) In the event of any exercise of the rights
represented by this Warrant, a certificate or certificates for
the Warrant Shares so purchased shall be dated the date of
such exercise and delivered to the Holder hereof within a
reasonable time, not exceeding fifteen (15) days after such
exercise. If this Warrant is exercised in part only, as soon
as is practicable after the presentation and surrender of this
Warrant to the Company for exercise, the Company shall execute
and deliver to the Holder a new Warrant, containing the same
terms and conditions as this Warrant, evidencing the right of
the Holder to purchase the number of Warrant Shares as to
which this Warrant has not been exercised. Upon receipt of
this Warrant by the Company at its principal offices
accompanied by the items required for exercise specified in
subsection (a) above, the Holder shall be deemed to be the
holder of record of the Warrant Shares issuable upon such
exercise and a shareholder of the Company, notwithstanding
that the stock transfer books of the Company may then be
closed or that certificates representing such Warrant Shares
may not then be actually delivered to the Holder.
2. TRANSFERABILITY, EXCHANGE OR LOSS OF WARRANT
(a) Except as provided herein, the Warrants shall
not be transferable, in whole or in part. The Warrants may be
transferred to any person receiving the Warrants from the
Holder at the Holder's death pursuant to a will or trust or
the laws of intestate succession.
(b) This Warrant, alone or with any other Warrant
owned by the same Holder containing substantially the same
terms and conditions, is exchangeable at the option of the
Holder but at the Company's sole expense, at any time prior to
its expiration either by its terms or by its exercise in full,
upon presentation and surrender to the Company at its
principal offices, for another Warrant or other Warrants, of
different denominations but containing the same terms and
conditions as this Warrant, entitling the Holder to purchase
the same aggregate number of Warrant Shares that were
purchasable pursuant to the Warrant or Warrants presented and
surrendered. At the time of presentation and surrender by the
Holder to the Company, the Holder shall also deliver to the
Company a written notice, signed by the Holder, specifying the
denominations in which new Warrants are to be issued to the
Holder.
(c) The Company shall execute and deliver to the
Holder a new Warrant containing the same terms and conditions
as this Warrant upon receipt by the Company of evidence
reasonably satisfactory to it of the loss, theft, destruction
or mutilation of this Warrant, provided that: (i) in the case
of loss, theft or destruction, the Company receives from the
Holder a reasonably satisfactory indemnification; and (ii) in
the case of mutilation, the Company receives from the Holder
a reasonably satisfactory form of indemnity and the Holder
presents and surrenders this Warrant to the Company for
cancellation. Any new Warrant executed and delivered shall
constitute an additional contractual obligation on the part of
the Company regardless of whether the Warrant that was lost,
stolen, destroyed, or mutilated is enforceable by anyone at
any time.
(d) The Company will, at the time of or at any time
after each exercise of this Warrant, upon the request of the
Holder hereof or of any Warrant Shares issued upon such
exercise, acknowledge in writing its continuing obligation to
afford to such Holder all rights to which such Holder shall
continue to be entitled after such exercise in accordance with
the terms of this Warrant, provided, that if any such Holder
shall fail to make any such request, the failure shall not
affect the continuing obligation of the Company to afford such
rights to such Holder.
3. ADJUSTMENTS OF EXERCISE PRICE
(a) Except as provided herein, upon the occurrence
of any of the events specified in this Section 3, the Exercise
Price in effect at the time of such event and the number of
Warrant Shares then purchasable pursuant to this Warrant at
that time shall be proportionately adjusted as provided
herein.
(b) If the number of shares of Common Stock
outstanding at any time after the date hereof is increased by
a stock dividend payable in shares of Common Stock or by a
subdivision or split-up of shares of Common Stock, then, on
the date such payment is made or such change is effective, the
Exercise Price shall be appropriately decreased so that the
number of Warrant Shares issuable on exercise of this Warrant
shall be increased in proportion to such increase of
outstanding shares.
(c) If the number of shares of Common Stock
outstanding at any time after the date hereof is decreased by
a combination of the outstanding shares of Common Stock, then,
on the effective date of such combination, the Exercise Price
shall be appropriately increased so that the number of Warrant
Shares issuable on exercise of this Warrant shall be decreased
in proportion to such decrease in outstanding shares.
(d) In case of any capital reorganization, or any
reclassification of the stock of the Company (other than as a
result of a stock dividend or subdivision, split-up or
combination of shares), the Warrant shall, after such capital
reorganization or reclassification, be exercisable into the
kind and number of shares of stock or other securities or
property of the Company or otherwise to which such Holder
would have been entitled if immediately prior to such capital
reorganization or reclassification such Holder had exercised
this Warrant. The provisions of this clause (d) shall
similarly apply to successive reorganizations and
reclassifications.
(e) If the Company distributes to all or
substantially all holders of its Common Stock evidences of its
indebtedness or assets (excluding cash dividends or
distributions out of earnings) or rights, options, warrants or
convertible securities containing the right to subscribe for
or purchase Common Stock, then in each case the number of
Warrant Shares thereafter purchasable upon the exercise of the
Warrants shall be determined by multiplying the number of
Warrant Shares theretofore purchasable upon exercise of the
Warrants by a fraction, of which the numerator shall be then
Current Market Price (as defined in Section 7) on the date of
such distribution, and of which the denominator shall be such
Current Market Price on such date minus the then fair value
(determined as provided in paragraph 3(f) below) of the
portion of the assets or evidences of indebtedness so
distributed or of such subscription rights, options, warrants
or convertible securities applicable to one share. Such
adjustment shall be made whenever any such distribution is
made and shall become effective on the date of distribution.
(f) For purposes of the adjustments covered by
paragraph 3(e), the Common Stock which the holders of any
rights, options, warrants or convertible securities shall be
entitled to subscribe for or purchase shall be deemed issued
and outstanding as of the date of such sale or issuance and
the consideration received by the Company therefor shall be
deemed to be the consideration received by the Company for
such rights, options, warrants or convertible securities, plus
the consideration or premiums stated in such rights, options,
warrants or convertible securities to be paid for the Common
Stock covered thereby. If the Company sells or issues Common
Stock or rights, options, warrants or convertible securities
containing the right to subscribe for or purchase Common Stock
for a consideration consisting, in whole or in part, of
property other than cash or its equivalent, then in
determining the "price per share" of Common Stock and the
"consideration received by the Company" for purposes of the
first sentence of this paragraph 3(f), the Board of Directors
shall determine the fair value of said property, and such
determination, if reasonable and based upon the Board of
Directors' good faith business judgment, shall be binding upon
the Holder. In determining the "price per share" of Common
Stock, any underwriting discounts or commissions shall not be
deducted from the price received by the Company for sales of
securities registered under the Securities Act of 1933, as
amended.
(g) All calculations under this Section 3 shall be
made to the nearest one hundredth (1/100) cent or to the
nearest one hundredth (1/100) of a share, as the case may be.
In no event shall the Exercise Price be reduced to less than
$.01.
(h) No adjustment in the Exercise Price need be
made if such adjustment would result in a change in the
Exercise Price of less than $0.01. Any adjustment of less
than $0.01 which is not made shall be carried forward and
shall be made at the time of and together with any subsequent
adjustment which, on a cumulative basis, amounts to an
adjustment of $0.01 or more in the Exercise Price.
(i) The Company will not, by amendment of its
Articles of Incorporation or otherwise, through any
reorganization, recapitalization, transfer of assets,
consolidation, merger, dissolution, issue or sale of
securities or any other voluntary action, avoid or seek to
avoid the observance or performance of any of the terms to be
observed or performed hereunder by the Company, but will at
all times in good faith assist in the carrying out of all the
provisions of this Section 3 and in the taking of all such
action as may be necessary or appropriate in order to protect
the exercise rights of the Holder hereof against impairment.
(j) Upon the occurrence of each adjustment or
readjustment of the Exercise Price pursuant to this Section 3,
the Company at its expense shall promptly compute such
adjustment or readjustment in accordance with the terms hereof
and prepare and furnish to the Holder hereof a certificate of
the Chief Financial Officer of the Company setting forth such
adjustment or readjustment and showing in detail the facts
upon which such adjustment or readjustment is based. The
Company shall, upon written request at any time of any Holder
hereof, furnish or cause to be furnished to such Holder a like
certificate setting forth (i) such adjustments and
readjustments, (ii) the Exercise Price at the time in effect,
and (iii) the number of Warrant Shares and the amount, if any,
of other property which at the time would be received upon the
exercise of this Warrant.
(k) In the event of any taking by the Company of a
record of the holders of any class of securities for the
purpose of determining the holders thereof who are entitled to
receive any dividend (other than a cash dividend) or other
distribution, any right to subscribe for, purchase or
otherwise acquire any shares of stock of any class or any
other securities or property or to receive any right, the
Company shall mail to the Holder hereof at least ten (10) days
prior to such record date, a notice specifying the date on
which any such record is to be taken for the purpose of such
dividend or distribution or right, and the amount and
character of such dividend, distribution or right.
(l) For purposes of this Section 3, equity
securities owned or held at any relevant time by or for the
account of the Company in its treasury shall not be deemed to
be outstanding for purposes of the calculations and
adjustments described.
(m) In case of any consolidation of the Company
with or merger of the Company into another corporation or in
case of any sale or conveyance to another corporation of the
property, assets or business of the Company as an entirety or
substantially as an entirety, the Company or such successor or
purchasing corporation, as the case may be, shall execute with
the Holder an agreement that the Holder shall have the right
thereafter upon payment of the Exercise Price in effect
immediately prior to such action to purchase, upon exercise of
the Warrants, the kind and amount of shares and other
securities and property which it would have owned or have been
entitled to receive after the happening of such consolidation,
merger, sale or conveyance had the Warrants been exercised
immediately prior to such action. In the event of a merger
described in Section 368(a)(2)(E) of the Internal Revenue Code
of 1986, as amended, in which the Company is the surviving
corporation, the right to purchase Warrant Shares under the
Warrants shall terminate on the date of such merger and
thereupon the Warrants shall become null and void, but only if
the controlling corporation shall agree to substitute for the
Warrants its warrant which entitles the holder thereof to
purchase upon its exercise the kind and amount of shares and
other securities and property which it would have owned or
been entitled to receive had the Warrants been exercised
immediately prior to such merger. Any such agreements
referred to in this paragraph 3(m) shall provide for
adjustments, which shall be as nearly equivalent as may be
practicable to the adjustments provided for in this Section 3.
The provisions of this paragraph 3(m) shall similarly apply to
successive consolidations, mergers, sales or conveyances. The
Company will not merge or consolidate with or into any other
corporation or sell all or substantially all of its property
to another corporation, unless the foregoing provisions of
this paragraph 3(m) are complied with.
4. STOCK FULLY PAID; RESERVATION OF WARRANT STOCK
The Company covenants and agrees that all Warrant Shares
that may be issued upon the exercise of this Warrant will,
upon issuance, be fully paid and non-assessable and free from
all taxes, liens and charges with respect to issuance. The
Company further covenants and agrees that during the period
within which this Warrant may be exercised, the Company will
at all times have authorized and reserved for the purpose of
the issue upon exercise of the rights evidenced by this
Warrant a sufficient number of shares of Common Stock to
provide for the exercise of this Warrant.
5. RIGHT OF THE COMPANY TO CALL THE WARRANTS
Commencing on the later of nine months from the date of
issuance hereof or the date that a registration statement
relating to the resale of the Warrant Shares is declared
effective by the SEC, the Company may, upon at least 30 days'
written notice ("Call Notice") at any time after the last sale
price of a share of the Company's Common Stock as reported
either on the OTC Bulletin Board or the Nasdaq SmallCap Market
(or any other exchange or quotation system on which the
Company's Common Stock may be traded) equals or exceeds 175%
(subject to the same adjustments to the Exercise Price as
described in Section 3) of the then effective Exercise Price
for twenty (20) consecutive trading days ending within five
(5) days of the date of delivery of the Call Notice, demand
that the Holder exercise all of the Warrants. If the Warrants
are not exercised within thirty (30) days after the Call
Notice, the Warrants shall automatically expire.
6. TRANSFER TO COMPLY WITH THE SECURITIES ACT OF 1933
(a) This Warrant, the Warrant Shares, and all other
equity securities issued or issuable upon exercise of this
Warrant, may not be offered, sold or transferred, in whole or
in part, in the absence of an effective registration statement
under the Securities Act of 1933, as amended (the "Act"), and
all applicable state securities statutes, or an opinion of
counsel acceptable to the Company to the effect that such
registration is not required.
(b) The Company shall cause the following legend to
be set forth on each certificate representing this Warrant,
the Warrant Shares, or any other equity security issued or
issuable upon exercise of this Warrant, not theretofore
distributed to the public or sold to underwriters, as defined
in the Act:
"THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 OR UNDER THE LAWS OF ANY STATE,
AND MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION UNDER SUCH LAWS OR AN OPINION OF
COUNSEL ACCEPTABLE TO THE COMPANY TO THE EFFECT THAT SUCH
REGISTRATION IS NOT REQUIRED."
"THIS WARRANT AND THE WARRANT SHARES (AS DEFINED HEREIN)
ARE NOT TRANSFERABLE WITHOUT THE PRIOR CONSENT OF THE
VANCOUVER STOCK EXCHANGE UNTIL (ONE YEAR FROM THE DATE OF
ISSUANCE)"
7. FRACTIONAL SHARES
No fractional shares of Warrant Shares or scrip
representing fractional shares of Warrant Shares shall be
issued upon the exercise of all or any part of this Warrant.
With respect to any fraction of a unit or any security called
for upon any exercise of this Warrant, the Company shall pay
to the Holder an amount in money equal to that fraction
multiplied by the then Current Market Price. For purposes of
this Agreement, the term "Current Market Price" shall mean the
average for the 20 consecutive trading days immediately
preceding the date in question of the daily per share closing
prices of the Common Stock as reported by the OTC Bulletin
Board or the Nasdaq SmallCap Market or the principal
securities exchange on which it is listed, as the case made
be. The closing price referred to above shall be the last
reported sale price or, if no such reported sale takes place
on such day, the average of the reported closing bid and asked
prices, in either case as reported by the OTC Bulletin Board
of the Nasdaq SmallCap Market or the principal securities
exchange on which it is listed, as the case may be.
8. RIGHTS OF THE HOLDER
Prior to the exercise hereof, the Holder shall not be
entitled to any rights as a shareholder of the Company by
reason of this Warrant, either at law or equity.
9. NOTICES
Except as may be otherwise expressly provided herein, any
notice, consent, or other communication required or permitted
to be given hereunder shall be in writing and shall be deemed
to have been given: (i) three days after the date sent by
United States certified mail, return receipt requested, with
proper postage thereon; (ii) one day after sent if sent by
overnight courier of national cognition; or (iii) when
transmitted or delivered, if sent by facsimile or personally
delivered (as the case may be), and shall be addressed as
follows:
(a) if to the Company, at Suite 300, 9740 Scranton
Road, San Diego, California 92121, Attention: Chief Executive
Officer; and
. Attention:
or, in any such case, at such other address or addresses as
shall have been furnished in writing by such party to the
others.
10. APPLICABLE LAW
Washington law shall govern the interpretation,
construction, and enforcement of this Warrant and all
transactions and agreements contemplated hereby,
notwithstanding any state's choice of law rules to the
contrary.
11. MISCELLANEOUS PROVISIONS
(a) Subject to the terms and conditions contained
herein, this Warrant shall be binding on the Company and its
successors and shall inure to the benefit of the original
Holder, its successors and assigns and all holders of Warrant
Shares.
(b) This Warrant may not be modified or terminated,
nor may any performance or condition hereof be waived in whole
or in part except by an agreement in writing signed by the
party against whom enforcement of such modification,
termination, or waiver is sought.
(c) If any provision of this Warrant is held by a
court of competent jurisdiction to be invalid, illegal or
unenforceable, such provision shall be severed, enforced to
the extent possible, or modified in such a way as to make
it enforceable, and the invalidity, illegality or
unenforceability thereof shall not affect the remainder of
this Warrant.
(d) Paragraph headings used in this Warrant are for
convenience only and shall not be taken or construed to define
or limit any of the terms or of this Warrant. Unless
otherwise provided herein, or unless the context otherwise
requires, the use of the singular shall include the plural and
the use of any gender shall include all genders.
ISSUED and executed this day of ,
1996.
ALLEGIANT TECHNOLOGIES, INC.
By:
Its: President
<PAGE>
EXHIBIT A
NOTICE OF EXERCISE
(To be executed by a Holder desiring to exercise the right to
purchase Warrant Shares pursuant to the Warrant.)
The undersigned Holder of the Warrant hereby:
(i) irrevocably elects to exercise the Warrant to the
extent of purchasing Warrant Shares;
(ii) makes payment in full of the aggregate Exercise
Price for those Warrant Shares in the amount of
$ by certified check or wire transfer
of immediately available funds;
(iii) requests, if the number of Warrant Shares purchased
are not all the Warrant Shares purchasable pursuant
to the Warrant, that a new Warrant of like tenor
for the remaining Warrant Shares purchasable
pursuant to the Warrant be issued and delivered to
the undersigned at the address indicated below.
Dated: Holder:
By:
Its:
Address:
NEITHER THIS WARRANT NOR THE SHARES ISSUABLE UPON EXERCISE OF
THIS WARRANT HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933 AS AMENDED, OR UNDER THE LAWS OF ANY STATE, AND THUS MAY
NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION UNDER SUCH LAWS OR AN OPINION OF COUNSEL
ACCEPTABLE TO THE COMPANY TO THE EFFECT THAT SUCH REGISTRATION
IS NOT REQUIRED.
___________________________________
TRANSFER OF THIS WARRANT IS PROHIBITED, EXCEPT AS PROVIDED IN
SECTION 2.
___________________________________
THIS WARRANT AND THE WARRANT SHARES (AS DEFINED HEREIN) ARE
NOT TRANSFERABLE WITHOUT THE PRIOR CONSENT OF THE VANCOUVER
STOCK EXCHANGE UNTIL (ONE YEAR FROM THE DATE OF ISSUANCE).
WARRANT
Warrant No. 19 Warrant to purchase 81,500
Warrant Shares (subject to
adjustment)
ALLEGIANT TECHNOLOGIES INC.
a Washington corporation
Allegiant Technologies Inc., a Washington corporation
(the "Company"), for value received, hereby grants to L.H.
Friend, Weinress, Frankson & Presson, Inc. (the "Holder"), the
right, subject to the terms and conditions set forth herein,
to purchase from the Company, at any time and from time to
time, up to Eighty One Thousand Five Hundred (81,500) duly
authorized, validly issued, fully paid and non-assessable
shares (the "Warrant Shares") of the Common Stock, $.01 par
value, of the Company (the "Common Stock"), at an initial
purchase price on a per share basis, subject to adjustment as
provided in Section 3 hereof, equal to Two Dollars and 30/100
($2.30) ("Exercise Price"); provided, however, that this
Warrant must be exercised, if at all, in whole or in part, on
or before the earlier of (i) April 25, 1998; and (ii) 30 days
following the delivery by the Company of a Call Notice
pursuant to the provisions of Section 5 hereof. The number
and character of the securities purchasable upon exercise of
such rights of purchase, and the Exercise Price, are subject
to adjustment as provided herein. The term "Warrant" as used
herein shall include this Warrant, any Warrant or Warrants
issued in substitution for or replacement of this Warrant, or
any Warrant or Warrants into which this Warrant may be divided
or exchanged. The term "Warrant Shares" shall mean the Common
Stock issuable upon exercise of this Warrant. For purposes
hereof, the term "Person" shall include any natural person,
corporation, limited liability company, joint venture,
partnership, trust or other entity.
1. METHOD OF EXERCISE; PAYMENT OF EXERCISE PRICE
(a) Subject to the other terms and conditions of
this Warrant, the purchase rights evidenced by this Warrant
may be exercised in whole or, from time to time, in part, at
the times and subject to the conditions set forth above, by
the Holder's presentation of this Warrant to the Company at
its principal offices, accompanied by a duly executed Notice
of Exercise, in the form attached hereto as Exhibit A and by
this reference incorporated herein, and by payment of the
aggregate Exercise Price in the manner specified in
Section 1(b) hereof, for the number of Warrant Shares
specified in the Notice of Exercise.
(b) The aggregate Exercise Price for the number of
Warrant Shares specified in any Notice of Exercise may be paid
in cash by certified check or bank cashier's check or wire
transfer of immediately available funds.
(c) In the event of any exercise of the rights
represented by this Warrant, a certificate or certificates for
the Warrant Shares so purchased shall be dated the date of
such exercise and delivered to the Holder hereof within a
reasonable time, not exceeding fifteen (15) days after such
exercise. If this Warrant is exercised in part only, as soon
as is practicable after the presentation and surrender of this
Warrant to the Company for exercise, the Company shall execute
and deliver to the Holder a new Warrant, containing the same
terms and conditions as this Warrant, evidencing the right of
the Holder to purchase the number of Warrant Shares as to
which this Warrant has not been exercised. Upon receipt of
this Warrant by the Company at its principal offices
accompanied by the items required for exercise specified in
subsection (a) above, the Holder shall be deemed to be the
holder of record of the Warrant Shares issuable upon such
exercise and a shareholder of the Company, notwithstanding
that the stock transfer books of the Company may then be
closed or that certificates representing such Warrant Shares
may not then be actually delivered to the Holder.
2. TRANSFERABILITY, EXCHANGE OR LOSS OF WARRANT
(a) Except as provided herein, the Warrants shall
not be transferable, in whole or in part. The Warrants may be
transferred to any person receiving the Warrants from the
Holder at the Holder's death pursuant to a will or trust or
the laws of intestate succession.
(b) This Warrant, alone or with any other Warrant
owned by the same Holder containing substantially the same
terms and conditions, is exchangeable at the option of the
Holder but at the Company's sole expense, at any time prior to
its expiration either by its terms or by its exercise in full,
upon presentation and surrender to the Company at its
principal offices, for another Warrant or other Warrants, of
different denominations but containing the same terms and
conditions as this Warrant, entitling the Holder to purchase
the same aggregate number of Warrant Shares that were
purchasable pursuant to the Warrant or Warrants presented and
surrendered. At the time of presentation and surrender by the
Holder to the Company, the Holder shall also deliver to the
Company a written notice, signed by the Holder, specifying the
denominations in which new Warrants are to be issued to the
Holder.
(c) The Company shall execute and deliver to the
Holder a new Warrant containing the same terms and conditions
as this Warrant upon receipt by the Company of evidence
reasonably satisfactory to it of the loss, theft, destruction
or mutilation of this Warrant, provided that: (i) in the case
of loss, theft or destruction, the Company receives from the
Holder a reasonably satisfactory indemnification; and (ii) in
the case of mutilation, the Company receives from the Holder
a reasonably satisfactory form of indemnity and the Holder
presents and surrenders this Warrant to the Company for
cancellation. Any new Warrant executed and delivered shall
constitute an additional contractual obligation on the part of
the Company regardless of whether the Warrant that was lost,
stolen, destroyed, or mutilated is enforceable by anyone at
any time.
(d) The Company will, at the time of or at any time
after each exercise of this Warrant, upon the request of the
Holder hereof or of any Warrant Shares issued upon such
exercise, acknowledge in writing its continuing obligation to
afford to such Holder all rights to which such Holder shall
continue to be entitled after such exercise in accordance with
the terms of this Warrant, provided, that if any such Holder
shall fail to make any such request, the failure shall not
affect the continuing obligation of the Company to afford such
rights to such Holder.
3. ADJUSTMENTS OF EXERCISE PRICE
(a) Except as provided herein, upon the occurrence
of any of the events specified in this Section 3, the Exercise
Price in effect at the time of such event and the number of
Warrant Shares then purchasable pursuant to this Warrant at
that time shall be proportionately adjusted as provided
herein.
(b) If the number of shares of Common Stock
outstanding at any time after the date hereof is increased by
a stock dividend payable in shares of Common Stock or by a
subdivision or split-up of shares of Common Stock, then, on
the date such payment is made or such change is effective, the
Exercise Price shall be appropriately decreased so that the
number of Warrant Shares issuable on exercise of this Warrant
shall be increased in proportion to such increase of
outstanding shares.
(c) If the number of shares of Common Stock
outstanding at any time after the date hereof is decreased by
a combination of the outstanding shares of Common Stock, then,
on the effective date of such combination, the Exercise Price
shall be appropriately increased so that the number of Warrant
Shares issuable on exercise of this Warrant shall be decreased
in proportion to such decrease in outstanding shares.
(d) In case of any capital reorganization, or any
reclassification of the stock of the Company (other than as a
result of a stock dividend or subdivision, split-up or
combination of shares), the Warrant shall, after such capital
reorganization or reclassification, be exercisable into the
kind and number of shares of stock or other securities or
property of the Company or otherwise to which such Holder
would have been entitled if immediately prior to such capital
reorganization or reclassification such Holder had exercised
this Warrant. The provisions of this clause (d) shall
similarly apply to successive reorganizations and
reclassifications.
(e) If the Company distributes to all or
substantially all holders of its Common Stock evidences of its
indebtedness or assets (excluding cash dividends or
distributions out of earnings) or rights, options, warrants or
convertible securities containing the right to subscribe for
or purchase Common Stock, then in each case the number of
Warrant Shares thereafter purchasable upon the exercise of the
Warrants shall be determined by multiplying the number of
Warrant Shares theretofore purchasable upon exercise of the
Warrants by a fraction, of which the numerator shall be then
Current Market Price (as defined in Section 7) on the date of
such distribution, and of which the denominator shall be such
Current Market Price on such date minus the then fair value
(determined as provided in paragraph 3(f) below) of the
portion of the assets or evidences of indebtedness so
distributed or of such subscription rights, options, warrants
or convertible securities applicable to one share. Such
adjustment shall be made whenever any such distribution is
made and shall become effective on the date of distribution.
(f) For purposes of the adjustments covered by
paragraph 3(e), the Common Stock which the holders of any
rights, options, warrants or convertible securities shall be
entitled to subscribe for or purchase shall be deemed issued
and outstanding as of the date of such sale or issuance and
the consideration received by the Company therefor shall be
deemed to be the consideration received by the Company for
such rights, options, warrants or convertible securities, plus
the consideration or premiums stated in such rights, options,
warrants or convertible securities to be paid for the Common
Stock covered thereby. If the Company sells or issues Common
Stock or rights, options, warrants or convertible securities
containing the right to subscribe for or purchase Common Stock
for a consideration consisting, in whole or in part, of
property other than cash or its equivalent, then in
determining the "price per share" of Common Stock and the
"consideration received by the Company" for purposes of the
first sentence of this paragraph 3(f), the Board of Directors
shall determine the fair value of said property, and such
determination, if reasonable and based upon the Board of
Directors' good faith business judgment, shall be binding upon
the Holder. In determining the "price per share" of Common
Stock, any underwriting discounts or commissions shall not be
deducted from the price received by the Company for sales of
securities registered under the Securities Act of 1933, as
amended.
(g) All calculations under this Section 3 shall be
made to the nearest one hundredth (1/100) cent or to the
nearest one hundredth (1/100) of a share, as the case may be.
In no event shall the Exercise Price be reduced to less than
$.01.
(h) No adjustment in the Exercise Price need be
made if such adjustment would result in a change in the
Exercise Price of less than $0.01. Any adjustment of less
than $0.01 which is not made shall be carried forward and
shall be made at the time of and together with any subsequent
adjustment which, on a cumulative basis, amounts to an
adjustment of $0.01 or more in the Exercise Price.
(i) The Company will not, by amendment of its
Articles of Incorporation or otherwise, through any
reorganization, recapitalization, transfer of assets,
consolidation, merger, dissolution, issue or sale of
securities or any other voluntary action, avoid or seek to
avoid the observance or performance of any of the terms to be
observed or performed hereunder by the Company, but will at
all times in good faith assist in the carrying out of all the
provisions of this Section 3 and in the taking of all such
action as may be necessary or appropriate in order to protect
the exercise rights of the Holder hereof against impairment.
(j) Upon the occurrence of each adjustment or
readjustment of the Exercise Price pursuant to this Section 3,
the Company at its expense shall promptly compute such
adjustment or readjustment in accordance with the terms hereof
and prepare and furnish to the Holder hereof a certificate of
the Chief Financial Officer of the Company setting forth such
adjustment or readjustment and showing in detail the facts
upon which such adjustment or readjustment is based. The
Company shall, upon written request at any time of any Holder
hereof, furnish or cause to be furnished to such Holder a like
certificate setting forth (i) such adjustments and
readjustments, (ii) the Exercise Price at the time in effect,
and (iii) the number of Warrant Shares and the amount, if any,
of other property which at the time would be received upon the
exercise of this Warrant.
(k) In the event of any taking by the Company of a
record of the holders of any class of securities for the
purpose of determining the holders thereof who are entitled to
receive any dividend (other than a cash dividend) or other
distribution, any right to subscribe for, purchase or
otherwise acquire any shares of stock of any class or any
other securities or property or to receive any right, the
Company shall mail to the Holder hereof at least ten (10) days
prior to such record date, a notice specifying the date on
which any such record is to be taken for the purpose of such
dividend or distribution or right, and the amount and
character of such dividend, distribution or right.
(l) For purposes of this Section 3, equity
securities owned or held at any relevant time by or for the
account of the Company in its treasury shall not be deemed to
be outstanding for purposes of the calculations and
adjustments described.
(m) In case of any consolidation of the Company
with or merger of the Company into another corporation or in
case of any sale or conveyance to another corporation of the
property, assets or business of the Company as an entirety or
substantially as an entirety, the Company or such successor or
purchasing corporation, as the case may be, shall execute with
the Holder an agreement that the Holder shall have the right
thereafter upon payment of the Exercise Price in effect
immediately prior to such action to purchase, upon exercise of
the Warrants, the kind and amount of shares and other
securities and property which it would have owned or have been
entitled to receive after the happening of such consolidation,
merger, sale or conveyance had the Warrants been exercised
immediately prior to such action. In the event of a merger
described in Section 368(a)(2)(E) of the Internal Revenue Code
of 1986, as amended, in which the Company is the surviving
corporation, the right to purchase Warrant Shares under the
Warrants shall terminate on the date of such merger and
thereupon the Warrants shall become null and void, but only if
the controlling corporation shall agree to substitute for the
Warrants its warrant which entitles the holder thereof to
purchase upon its exercise the kind and amount of shares and
other securities and property which it would have owned or
been entitled to receive had the Warrants been exercised
immediately prior to such merger. Any such agreements
referred to in this paragraph 3(m) shall provide for
adjustments, which shall be as nearly equivalent as may be
practicable to the adjustments provided for in this Section 3.
The provisions of this paragraph 3(m) shall similarly apply to
successive consolidations, mergers, sales or conveyances. The
Company will not merge or consolidate with or into any other
corporation or sell all or substantially all of its property
to another corporation, unless the foregoing provisions of
this paragraph 3(m) are complied with.
4. STOCK FULLY PAID; RESERVATION OF WARRANT STOCK
The Company covenants and agrees that all Warrant Shares
that may be issued upon the exercise of this Warrant will,
upon issuance, be fully paid and non-assessable and free from
all taxes, liens and charges with respect to issuance. The
Company further covenants and agrees that during the period
within which this Warrant may be exercised, the Company will
at all times have authorized and reserved for the purpose of
the issue upon exercise of the rights evidenced by this
Warrant a sufficient number of shares of Common Stock to
provide for the exercise of this Warrant.
5. RIGHT OF THE COMPANY TO CALL THE WARRANTS
Commencing on the later of nine months from the date of
issuance hereof or the date that a registration statement
relating to the resale of the Warrant Shares is declared
effective by the SEC, the Company may, upon at least 30 days'
written notice ("Call Notice") at any time after the last sale
price of a share of the Company's Common Stock as reported
either on the OTC Bulletin Board or the Nasdaq SmallCap Market
(or any other exchange or quotation system on which the
Company's Common Stock may be traded) equals or exceeds 175%
(subject to the same adjustments to the Exercise Price as
described in Section 3) of the then effective Exercise Price
for twenty (20) consecutive trading days ending within five
(5) days of the date of delivery of the Call Notice, demand
that the Holder exercise all of the Warrants. If the Warrants
are not exercised within thirty (30) days after the Call
Notice, the Warrants shall automatically expire.
6. TRANSFER TO COMPLY WITH THE SECURITIES ACT OF 1933
(a) This Warrant, the Warrant Shares, and all other
equity securities issued or issuable upon exercise of this
Warrant, may not be offered, sold or transferred, in whole or
in part, in the absence of an effective registration statement
under the Securities Act of 1933, as amended (the "Act"), and
all applicable state securities statutes, or an opinion of
counsel acceptable to the Company to the effect that such
registration is not required.
(b) The Company shall cause the following legend to
be set forth on each certificate representing this Warrant,
the Warrant Shares, or any other equity security issued or
issuable upon exercise of this Warrant, not theretofore
distributed to the public or sold to underwriters, as defined
in the Act:
"THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 OR UNDER THE LAWS OF ANY STATE,
AND MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION UNDER SUCH LAWS OR AN OPINION OF
COUNSEL ACCEPTABLE TO THE COMPANY TO THE EFFECT THAT SUCH
REGISTRATION IS NOT REQUIRED."
"THIS WARRANT AND THE WARRANT SHARES (AS DEFINED HEREIN)
ARE NOT TRANSFERABLE WITHOUT THE PRIOR CONSENT OF THE
VANCOUVER STOCK EXCHANGE UNTIL (ONE YEAR FROM THE DATE OF
ISSUANCE)"
7. FRACTIONAL SHARES
No fractional shares of Warrant Shares or scrip
representing fractional shares of Warrant Shares shall be
issued upon the exercise of all or any part of this Warrant.
With respect to any fraction of a unit or any security called
for upon any exercise of this Warrant, the Company shall pay
to the Holder an amount in money equal to that fraction
multiplied by the then Current Market Price. For purposes of
this Agreement, the term "Current Market Price" shall mean the
average for the 20 consecutive trading days immediately
preceding the date in question of the daily per share closing
prices of the Common Stock as reported by the OTC Bulletin
Board or the Nasdaq SmallCap Market or the principal
securities exchange on which it is listed, as the case made
be. The closing price referred to above shall be the last
reported sale price or, if no such reported sale takes place
on such day, the average of the reported closing bid and asked
prices, in either case as reported by the OTC Bulletin Board
of the Nasdaq SmallCap Market or the principal securities
exchange on which it is listed, as the case may be.
8. RIGHTS OF THE HOLDER
Prior to the exercise hereof, the Holder shall not be
entitled to any rights as a shareholder of the Company by
reason of this Warrant, either at law or equity.
9. NOTICES
Except as may be otherwise expressly provided herein, any
notice, consent, or other communication required or permitted
to be given hereunder shall be in writing and shall be deemed
to have been given: (i) three days after the date sent by
United States certified mail, return receipt requested, with
proper postage thereon; (ii) one day after sent if sent by
overnight courier of national cognition; or (iii) when
transmitted or delivered, if sent by facsimile or personally
delivered (as the case may be), and shall be addressed as
follows:
(a) if to the Company, at Suite 300, 9740 Scranton
Road, San Diego, California 92121, Attention: Chief Executive
Officer; and
(b) if to the Holder, at 3333 Michelson Drive,
Suite 650, Irvine, CA 92715.
or, in any such case, at such other address or addresses as
shall have been furnished in writing by such party to the
others.
<PAGE>
10. APPLICABLE LAW
Washington law shall govern the interpretation,
construction, and enforcement of this Warrant and all
transactions and agreements contemplated hereby,
notwithstanding any state's choice of law rules to the
contrary.
11. MISCELLANEOUS PROVISIONS
(a) Subject to the terms and conditions contained
herein, this Warrant shall be binding on the Company and its
successors and shall inure to the benefit of the original
Holder, its successors and assigns and all holders of Warrant
Shares.
(b) This Warrant may not be modified or terminated,
nor may any performance or condition hereof be waived in whole
or in part except by an agreement in writing signed by the
party against whom enforcement of such modification,
termination, or waiver is sought.
(c) If any provision of this Warrant is held by a
court of competent jurisdiction to be invalid, illegal or
unenforceable, such provision shall be severed, enforced to
the extent possible, or modified in such a way as to make
it enforceable, and the invalidity, illegality or
unenforceability thereof shall not affect the remainder of
this Warrant.
(d) Paragraph headings used in this Warrant are for
convenience only and shall not be taken or construed to define
or limit any of the terms or of this Warrant. Unless
otherwise provided herein, or unless the context otherwise
requires, the use of the singular shall include the plural and
the use of any gender shall include all genders.
ISSUED and executed this day of ,
1996.
ALLEGIANT TECHNOLOGIES, INC.
By:
Its: President
<PAGE>
EXHIBIT A
NOTICE OF EXERCISE
(To be executed by a Holder desiring to exercise the right to
purchase Warrant Shares pursuant to the Warrant.)
The undersigned Holder of the Warrant hereby:
(i) irrevocably elects to exercise the Warrant to the
extent of purchasing Warrant Shares;
(ii) makes payment in full of the aggregate Exercise
Price for those Warrant Shares in the amount of
$ by certified check or wire transfer
of immediately available funds;
(iii) requests, if the number of Warrant Shares purchased
are not all the Warrant Shares purchasable pursuant
to the Warrant, that a new Warrant of like tenor
for the remaining Warrant Shares purchasable
pursuant to the Warrant be issued and delivered to
the undersigned at the address indicated below.
Dated: Holder:
By:
Its:
Address:
This Debenture and the common shares of Allegiant Technologies
Inc. issuable upon the conversion of this Debenture and upon
the exercise of the warrants have not been registered under
the Securities Act of 1933, as amended, of the United States
of America (the "Act") or the securities laws of any state
("State") of the United States of America and may not be sold,
transferred, pledged, hypothecated or distributed, directly or
indirectly, to a U.S. person (as defined in Regulation S
adopted by the U.S. Securities and Exchange Commission under
the Act) or within the United States unless such shares are
(i) registered under the Act and any applicable State
securities act (a "State Act"), or (ii) exempt from
registration under the Act and any applicable State Act and
Allegiant has received an opinion of counsel to such effect
reasonably satisfactory to it, or (iii) sold in accordance
with Regulation S and Allegiant Technologies, Inc. has
received an opinion of counsel to such effect reasonably
satisfactory to it.
This Debenture and the securities to be issued upon the
conversion of this Debenture are not transferable until one
year after the date of this Debenture without the prior
consent of the Vancouver Stock Exchange.
ALLEGIANT TECHNOLOGIES INC.
(Incorporated under the laws of the State of Washington)
CONVERTIBLE DEBENTURE
FOR VALUE RECEIVED ALLEGIANT TECHNOLOGIES INC. (the
"Company"), a company incorporated under the laws of the State
of Washington having an office at 9740 Scranton Road, Suite
300, San Diego, California, 92121, hereby acknowledges itself
indebted and promises to pay to * (the "Holder") or to the
order of the Holder, having an address of 3333 Michelson
Drive, Suite 650, Irvine, California 92715-1686, Attention:
Greg Presson, the sum of US$* (the "Principal Sum"), in lawful
money of the United States, in accordance with the terms of
this Debenture.
1. INTEREST
1.1 Interest free period - No interest shall accrue or be
payable on the Principal Sum:
(a) during the first six months following the date of
this Debenture, and
(b) at any time after the date (the "Registration
Date") that a Registration Statement for the resale
of the common shares in the capital of the Company
to be issued upon the conversion of this Debenture
and the common shares to be issued upon the
exercise of the warrants which will be issued upon
the conversion of this Debenture (collectively, the
"Shares") has been declared effective by the
Securities and Exchange Commission ("SEC") or the
resale of the Shares is otherwise exempt from
registration.
1.2 Interest payable - In the event that a Registration
Statement for the resale of the Shares has not been
declared effective by the SEC or the resale of the Shares
is not otherwise exempt from registration, prior to the
end of the sixth month following the date of this
Debenture, interest shall accrue, commencing in the
seventh month after the date of this Debenture, at the
rate of 8% per annum, calculated annually, not in advance
and payable monthly until such time as this Debenture has
been fully converted in accordance with Part 5 or the
Principal Sum has been repaid in full.
1.3 Increase in rate of interest - In the event that a
Registration Statement for the resale of the Shares in
the United States has not been declared effective by the
SEC or the resale of the Shares is not otherwise exempt
from registration prior to the end of the twelfth month
following the date of this Debenture, interest shall
accrue, commencing in the thirteenth month after the date
of this Debenture, at the rate of 14% per annum,
calculated annually, not in advance and payable monthly
until such time as this Debenture has been fully
converted in accordance with Part 5 or the Principal Sum
has been repaid in full.
1.4 Definition of "Interest" - Any interest payable hereunder
is hereinafter referred to as "Interest".
2. PAYMENT OF PRINCIPAL SUM
2.1 Due date for repayment - The Company will repay the
outstanding Principal Sum, and any accrued but unpaid
Interest, to the Holder at the address set out above on
the earlier of:
(a) any date which is 12 months after the date of this
Debenture provided that (i) a Registration
Statement for the resale of the Shares has not been
declared effective by the SEC or the resale of the
Shares is not otherwise exempt from registration
and (ii) the Holder has requested that the Company
make such repayment;
(b) the occurrence of an event of default which is not
cured within the time specified in Part 8 hereof;
or
(c) that date which is 24 months after the date of this
Debenture.
2.2 Pre-payment - The Principal Sum and any accrued but
unpaid Interest may be pre-paid by the Company to the
Holder without penalty at any time after the Registration
Date, upon 30 days prior written notice to the Holder.
The Holder may convert this Debenture within the 30 day
notice period by complying with section 5.4 hereof,
exclusive of paragraph 5.4(a).
2.3 Merger, amalgamation or sale - Notwithstanding the
foregoing, in the event of a merger or amalgamation of
the Company with or into any other corporation where the
Company is not the surviving entity, or in the event of
a sale of all or substantially all of the assets of the
Company at any time while this Debenture is outstanding,
the Principal Sum and any accrued but unpaid Interest
will become due and payable to the Holder, at his option,
on the effective date of the merger, amalgamation or
sale. The Company agrees that, at the option of the
Holder, as a term of any merger, amalgamation or sale
where the Company is not the surviving entity, it will
cause the entity formed by such consolidation or
resulting from such merger, or which acquires such
assets, as the case may be, to execute and deliver to the
Holder a supplemental indenture providing that the Holder
of each Debenture then outstanding will have the right,
during the period such Debenture will be convertible, to
convert such Debenture into Units of the new entity or
the purchaser, as the case may be, as provided for
herein. Such supplemental indenture will provide for
adjustments which, for events subsequent to the effective
date of such supplemental indenture, will be as nearly
equivalent as may be practicable to the adjustments
provided for in this Debenture.
3. GRANT OF SECURITY
3.1 Security interest - The Company mortgages, charges,
assigns and transfers to the Holder, and grants to the
Holder a security interest (the "Security Interest") in
all the Company's right, title and interest in and to all
presently owned and after acquired personal property,
assets and undertakings of the Company of whatever nature
or kind and wherever situate, and all proceeds and
renewals thereof and therefrom, accretions thereto and
substitutions therefor including, without limiting the
generality of the foregoing, all intangible personal
property which is either currently owned by the Company
or acquired by the Company after the date of this
Debenture, goodwill, contractual rights, leasehold
interests, and ownership of or rights in (by license or
otherwise) patents, trademarks, copyrights, industrial
designs and other industrial or intellectual property
(the "Collateral").
3.2 Registration - The Company will register the Security
Interest set out in this Debenture under the Uniform
Commercial Code of California forthwith upon the
execution of this Debenture. The Holder acknowledges
that the Security Interest granted herein and registered,
as set out herein, will not restrict the ability of the
Company to conduct its business in the ordinary course.
3.3 Ranking pari passu - The Security Interest granted herein
ranks pari passu with the security interests granted
under the debentures the Company issued to other persons
on the same date as this Debenture.
3.4 Release of Security Interest - The Company will be
entitled to a release and discharge of the Security
Interest on the first to occur of the Registration Date,
the date that full payment is made to the Holder of the
outstanding Principal Sum and all accrued Interest, or
the date that this Debenture is converted in full in
accordance with Part 5 hereof. The date the Security
Interest is released is hereinafter known as the "Release
Date".
4. PRIORITY
4.1 Subordination to Senior Debt - Until the Release Date,
the payment of the Principal Sum and Interest and the
Security Interest granted under this Debenture is
subordinated, subject and junior in right of payment, to
the extent and in the manner provided in this Part 4, to
the prior payment in full of the principal and interest
on all monies borrowed from institutional lenders (the
"Senior Debt") following the date of this Debenture until
the Release Date provided that at any time prior to the
Registration Date, the Company shall first obtain the
consent of those Holders comprising a majority of the
value of the debentures issued on the same date (the
"Majority Holders") to borrow in excess of US$500,000
from any lender or lenders. The Holder shall execute
such subordination agreements or other documents from
time to time required to give effect to this section.
4.2 Distribution on insolvency of Company - Upon any
distribution of cash, securities or other property to
creditors of the Company in a liquidation or dissolution
of the Company or in a bankruptcy, reorganization,
insolvency, receivership or similar proceeding relating
to the Company or its property, the Holder will rank as
a secured creditor of the Company entitled to payment
after the Senior Debt. After the Release Date, the
Holder will rank as an unsecured creditor of the Company
in the event that any amount of the Principal Sum or
Interest remains outstanding.
4.3 Distribution of property - Once the Senior Debt has been
paid in full, any distribution of cash, securities or
other property will be divided among the Holder and the
other holders of debentures issued by the Company on the
date of this Debenture pro rata based upon the Principal
Sum of each Holder's debenture then outstanding.
4.4 Waiver of payment - The Company may not pay the Principal
Sum or Interest if a default under the terms of the
Senior Debt has occurred and is continuing that permits
the acceleration of the maturity of the Senior Debt, or
such default is the subject of judicial proceedings, or
the Company has received notice of acceleration from a
holder of Senior Debt. The Company may resume payments
under this Debenture when any such default is cured or
waived, if this Part 4 permits payment at that time.
Notwithstanding the foregoing, in the case of Senior Debt
in excess of US$500,000, the non-payment of the Principal
Sum or Interest will only occur if this is required by
the provisions of the Senior Debt which has been approved
by the Majority Holders.
<PAGE>
4.5 Rights of Holder - Nothing in this Debenture will:
(a) impair, as between the Company and the Holder, the
obligation of the Company, which is absolute and
unconditional, to pay the Principal Sum and
Interest in accordance with the terms of this
Debenture;
(b) affect the relative rights of the Holder and
creditors of the Company other than holders of
Senior Debt; and
(c) prevent the Holder from exercising his available
remedies upon an Event of Default (as defined in
Part 8), subject to the rights of the holders of
the Senior Debt to receive distributions of cash,
securities or other property otherwise payable to
the Holder.
5. CONVERSION INTO UNITS
5.1 Right of conversion - During the term of this Debenture,
the Holder may convert the Principal Sum then outstanding
into Units of the Company (the "Units") in accordance
with this Part 5 at the rate of one Unit for each US$1.70
of indebtedness being converted in the first year
following the date of this Debenture and one Unit for
each US$1.96 of indebtedness being converted in the
second year following the date of this Debenture. Any
calculation of Units deliverable upon conversion of this
Debenture which results in a fraction will be rounded to
the nearest full number.
5.2 Description of Units - Each Unit will consist of one
common share (the "Common Share") and one non-
transferable, detachable share purchase warrant (the
"Warrants") entitling the Holder to purchase an
additional Common Share in the capital of the Company at
any time within the two years following the date of this
Debenture at a price of US$1.70 per Common Share if
exercised in the first year following the date of this
Debenture and US$1.96 per Common Share if exercised in
the second year following the date of this Debenture.
5.3 Conversion in increments - If the Holder at any time
elects to convert less than the full Principal Sum then
outstanding, such conversion will be permitted only in
US$75,000 increments unless the Company otherwise
consents to a lesser amount. The provisions of this
Debenture that apply to conversion of all of the
Principal Sum will also apply to conversion of a portion
of it. Upon surrender of this Debenture for conversion
in part, the Company will issue a new Debenture in
substantially the same form as this Debenture, except
that the Principal Sum will be reduced by the amount so
converted.
5.4 Conversion procedure - In order to convert this
Debenture, the Holder must:
(a) give the Company 10 days' prior written notice of
the Holder's intention to convert all or any
portion of the outstanding Principal Sum of this
Debenture into Units, specifying the amount to be
converted;
(b) if such Units are to be registered in the name of a
person other than the Holder, furnish to the
Company the name, address and social security or
taxpayer identification number of such person and
otherwise comply with all applicable laws, rules
and policies of any stock exchange on which the
Company's common shares are listed for trading;
(c) surrender this Debenture to the Company for
cancellation at the address set forth above or to
Montreal Trust Company of Canada (the "Transfer
Agent"), the Company's registrar and transfer
agent;
(d) furnish appropriate endorsements or transfer
documents as required by the Company or the
Transfer Agent; and
(e) furnish such other information as the Company may
reasonably require.
5.5 Documents delivered on conversion - The effective date of
any conversion (the "Conversion Date") will be the date
on which the Holder satisfies all the requirements of
section 5.4. As soon as practicable following the
Conversion Date, the Company will deliver directly or
through the Transfer Agent (i) certificates representing
the Common Shares and Warrants issuable upon the amount
so converted and (ii) if the entire Principal Sum is
being converted, a cheque for any accrued but unpaid
Interest as of the Conversion Date. The certificates
will contain legends required under applicable laws and
in accordance with all applicable policies of any stock
exchange on which the Company's common shares are listed
for trading. The person in whose name the certificates
for the Common Shares are registered will be treated as
a shareholder of record from and after the Conversion
Date.
5.6 Adjustment upon capital alterations - The number of Units
deliverable upon the conversion of this Debenture will be
subject to adjustment in the events and in the manner
following:
(a) in the event of any subdivision or subdivisions of
the common shares of the Company as such common
shares are constituted on the date of this
Debenture, at any time while this Debenture is
outstanding, into a greater number of common
shares, the Company will thereafter deliver and the
Holder will accept at the time of conversion of
this Debenture, in addition to the number of Units
in respect of which the right to convert is then
being exercised, such additional number of Units as
result from such subdivision or subdivisions
without the Holder making any additional payment or
giving any other consideration therefor;
(b) in the event of any consolidation or consolidations
of the common shares of the Company as such common
shares are constituted on the date of this
Debenture, at any time while this Debenture is
outstanding, into a lesser number of common shares,
the Company will thereafter deliver and the Holder
will accept at the time of conversion of this
Debenture, in lieu of the number of Units in
respect of which the right to convert is then being
exercised, the lesser number of Units as result
from such consolidation or consolidations;
(c) in the event of any change of the common shares of
the Company as such common shares are constituted
on the date of this Debenture, at any time while
this Debenture is outstanding, the Company will
thereafter deliver and the Holder will accept at
the time of conversion of this Debenture, the
number of shares of the appropriate class resulting
from the said change as the Holder would have been
entitled to receive in respect of the number of
Units so converted had the right to convert been
exercised before such change;
(d) in the event of any capital reorganization,
reclassification or change of outstanding common
shares (other than change in the par value thereof)
of the Company or in the event of any
consolidation, merger or amalgamation of the
Company with or into any other corporation or in
the event of any sale of the property of the
Company as or substantially as an entirety at any
time while this Debenture is outstanding, the
Holder will thereafter have the right to receive,
in lieu of the Units immediately theretofore
acquirable and receivable upon the conversion of
this Debenture, the kind and amount of Units and
other securities and property receivable upon such
capital reorganization, reclassification, change,
consolidation, merger, amalgamation or sale which
the holder of a number of Units equal to the number
of Units immediately theretofore receivable upon
the conversion of this Debenture would have
received as a result of such capital
reorganization, reclassification or change of
outstanding shares.
The subdivision or consolidation of common shares at any
time outstanding into a greater or lesser number of
common shares (whether with or without par value) will
not be deemed to be a capital reorganization or a
reclassification or a change of the capital of the
Company for the purposes of section 5.6(d). The
adjustments provided for in this Part 5 are cumulative.
5.7 Determination of Units on conversion - If any questions
shall at any time arise with respect to the number of
Units deliverable upon conversion of this Debenture, such
questions will be conclusively determined by the
Company's auditors acting in good faith and applying
United States generally accepted accounting principles in
the determination of the issue, or, if they decline to so
act, any other firm of certified public accountants that
the Company may designate and who will have access to all
appropriate records and such determination will be
binding upon the Company and the Holder.
5.8 Payment of U.S. Tax - The Company will pay any and all
documentary stamp or similar issue or transfer taxes
payable to the United States of America or any State, or
any political subdivision thereof, in respect of the
conversion of this Debenture or the issue or delivery of
Units on conversion of this Debenture; provided, however,
that the Company will not be required to pay any tax
which may be payable in respect of any transfer involved
in the issue or delivery of Units in a name other than
that of the registered Holder of this Debenture upon
conversion and no such issue or delivery will be made
unless and until the person requesting such issue has
paid to the Company the amount of any such tax or has
established to the satisfaction of the Company that such
tax has been paid; and further provided that the Company
will not bear or pay any tax or levy which may arise
under the laws of any country other than the United
States as a result of the transaction.
6. REPORTS AND NOTICES
6.1 Documents to be Delivered to Holder - So long as this
Debenture is outstanding, the Company will deliver to the
Holder hereof:
(a) as soon as practicable and in any event within 60
days after the end of each of the first three
quarters of each of its fiscal years, a copy of the
Company's quarterly report filed with the British
Columbia Securities Commission and the Company's
Form 10-Q filed with the SEC;
(b) as soon as practicable and in any event within 140
days after the end of each of its fiscal years, a
copy of the Company's audited annual financial
statements filed with the British Columbia
Securities Commission and the Company's Form 10-K
as filed with the SEC;
(c) a copy of the Company's Annual Report sent to the
holders of its common shares each year; and
(d) all press releases issued by the Company subsequent
to the date of this Debenture.
6.2 Notices to be delivered - In case at any time the Company
shall propose:
(a) to fix a record date for the making of any
distribution (other than a cash dividend or cash
distribution paid out of consolidated current or
retained earnings or rights under any periodic
dividend reinvestment plan) to all holders of
common shares;
(b) to effect a subdivision or consolidation of the
outstanding common shares or any reclassification
or change of outstanding common shares;
(c) to effect any consolidation, merger or sale of all
or substantially all of its assets; or
(d) to effect any liquidation, dissolution or
winding-up of the Company;
the Company will mail to the Holder, at least 30 days
before the applicable record date, a notice stating the
proposed record date for any such distribution or the
proposed effective date for any such reclassification,
change, consolidation, merger, sale, liquidation,
dissolution or winding-up.
7. REPRESENTATIONS, WARRANTIES AND COVENANTS
7.1 Representations and warranties - The Company hereby
represents and warrants to the Holder that:
(a) it is duly organized and validly existing under the
laws of the jurisdiction of its incorporation,
(b) it is duly qualified to conduct its business in the
jurisdictions in which it carries on business,
(c) the execution, delivery and performance of this
Debenture is within its corporate powers, has been
duly authorized and does not contravene, violate or
conflict with any laws, with the terms of its
constating documents, or with any indenture or
agreement to which it is a party;
(d) except for the Security Interest and the Senior
Debt, the Company is or will be the owner of the
Collateral, free and clear of all security
interests, encumbrances, equities or other claims
of any kind;
(e) the Collateral does not include any goods that are
consumer goods.
7.2 Covenants - The Company hereby covenants and agrees with
the Holder that it will:
(a) use its best efforts to promptly and in good faith
perform and fulfil all of the terms contained in
this Debenture;
(b) at all times reserve and keep available out of its
authorized but unissued capital, enough common
shares to effect the conversion of the outstanding
Principal Sum and the exercise of the Warrants,
which such shares shall be issued as fully paid and
non-assessable;
(c) maintain and preserve its charter and corporate
organization in good standing and, subject to all
the provisions herein contained, diligently
preserve all the rights, powers, privileges and
goodwill owned by it;
(d) not, without the consent of the Majority Holders,
do or cause to be done anything that would result
in a change of the control of the Company or a
change of a majority of the directors of the
Company as part of one transaction or a series of
transactions at any time prior to the Registration
Date;
(e) conduct its business in a proper and businesslike
manner;
(f) insure and keep insured against all risks or
hazards to their full insurable value all of its
property and assets which are of an insurable
nature, and pay the premiums for all such
insurance, and on request deliver to the Holder a
copy of the policy or policies of such insurance;
(g) duly and punctually pay, perform and observe all
rent, taxes, local improvement rates, assessments,
covenants and obligations whatsoever which ought to
be paid, performed or observed by the Company in
respect of all or any part of the Collateral;
(h) duly and punctually pay all taxes, levies and
assessments, and all debts and obligations to
labourers, workmen, employees, contractors, sub-
contractors, suppliers of material and others
which, if unpaid, might under the law of United
States or any State have priority over the security
hereby created or any part thereof;
(i) make all payments and perform each and every
covenant, agreement and obligation under any lease
now held or hereafter acquired by the Company and
any mortgage, debenture, trust deed or agreement
charging any property or assets of the Company as
and when the same are required to be paid or
performed;
(j) not declare or pay any cash dividends or cash
distributions to holders of common shares, or
purchase or redeem any of its shares, or otherwise
reduce its share capital without the prior consent
of the Majority Holders if such actions are to be
taken prior to the Registration Date;
(k) file, within 90 days from the date of this
Debenture, absent any third party impositions
(excluding regulatory impositions) and such delays
are accepted as reasonable by the Holder, such
disclosure documents as may be required to effect
the registration in the United States of the Shares
and the bonus warrants granted to the Holder
pursuant to Part 4 of a subscription agreement
dated December , 1995 between the Holder and
the Company (the "Subscription Agreement"), and
will respond diligently and in a timely manner to
comments received from the SEC regarding such
disclosure documents;
(l) use its commercially reasonable best efforts to
establish a United States transfer agent and branch
registry concurrently with the filing of its
application for listing on NASDAQ;
(m) file with the SEC in a timely manner all reports
and other documents required to be filed by an
issuer of securities registered under the Act, or
the Securities Exchange Act of 1934, as amended;
and
(n) use its best efforts to maintain in effect the
registration of the Shares under the Act, as
amended, for a period of two years from the date of
this Debenture.
8. EVENTS OF DEFAULT AND REMEDIES
8.1 Events of Default - As used herein, an "Event of Default"
occurs if:
(a) the Company defaults in the payment of the
Principal Sum or Interest when the same becomes due
and payable and such default continues for a period
of 15 days;
(b) the Company is in breach of any term, condition,
obligation, or covenant to the Holder, or there
exists a material misrepresentation in any of the
documents listed in Part 7 of the Subscription
Agreement, and such breach is not cured within 15
days after the Company receives written demand from
the Holder to remedy the same;
(c) the Company carries on any business other than its
software development and marketing business or
ceases to carry on business;
(d) all or any material part of the Collateral which is
not covered by adequate insurance is lost, stolen,
damaged or destroyed and steps to recover, replace
or repair the Collateral have not been commenced
within 15 days;
(e) any execution or other process of any Court of
competent jurisdiction becomes enforceable against
the Company and is not satisfied within 15 days;
(f) any distress or analogous process is levied upon
the Collateral or any part thereof unless the
process is in good faith disputed by the Company
and the Company has adequate security to pay in
full the amount claimed;
(g) an order is made or an effective resolution is
passed for the winding up of the Company;
(h) the Company commences a voluntary proceeding under
the bankruptcy legislation of the United States or
any similar federal or state law for the relief of
debtors; consents to the entry of an order for
relief against it in an involuntary case commenced
under any such law; consents to the appointment of
any receiver, trustee, assignee, liquidator or
similar official of it or for all or substantially
all of its property under any such law; makes a
general assignment for the benefit of creditors
under any such law; or admits in writing its
inability to pay its debts generally as they become
due; or
(i) a court of competent jurisdiction enters an order
or decree under the bankruptcy legislation of the
United States or any similar federal or state law
for the relief of debtors against the Company in an
involuntary case commenced under any such law;
appoints any receiver, trustee, assignee,
liquidator or similar official of the Company; or
orders the liquidation of the Company; and, in any
such case, the order, decree or appointment remains
unstayed and in effect for 60 days.
8.2 Acceleration - If any Event of Default exists, the Holder
may, in addition to the exercise of any right, power or
remedy permitted by law, declare (by written notice to
the Company) the entire Principal Sum and Interest then
outstanding to be due and payable, and such Principal Sum
and Interest will thereupon become forthwith due and
payable pari passu with the holders of other Debentures
who have delivered a notice as provided for herein.
8.3 Enforcement and appointment of Receiver - To enforce and
realize on the security constituted by this Debenture,
the Holder may take any action permitted by law or in
equity, as it may deem expedient, and in particular
without limiting the generality of the foregoing, the
Holder may by instrument in writing appoint any person to
be a receiver or receiver-manager (the "Receiver") of the
Collateral and may remove any Receiver so appointed and
appoint another in his stead.
8.4 Powers of Receiver - A Receiver appointed pursuant to
this Debenture will be the agent of the Company and not
of the Holder and, to the extent permitted by law or to
such lesser extent permitted by its appointment, will
have all the powers of the Holder hereunder, and in
addition will have the power to carry on the business of
the Company and for such purpose from time to time to
borrow money either secured or unsecured, and if secured
by a security interest on any of the Collateral; such
security interest may rank before or pari passu with or
behind any security interest created by this Debenture,
and if it does not so specify such security interest will
rank before the Security Interest created by this
Debenture.
8.5 Dealing in Collateral - Subject to retaining sufficient
assets to satisfy the Company' obligations to the holders
of Senior Debt, any Receiver so appointed shall have the
power:
(a) to take possession of, collect and get in the
Collateral and for that purpose to take any
proceedings in the name of the Company or
otherwise;
(b) to sell or lease or concur in the selling or
leasing of the whole or any part of the Collateral
and to convert the same or any part thereof into
money, with full power to sell any Collateral
either together or in parcels and either by public
auction or private contract and either for a lump
sum or for a sum payable by instalments or for a
sum on account and a mortgage or charge for the
balance (and the Receiver will not be accountable
for any moneys until actually received), and with
full power upon every such sale to make any special
or other stipulation as to title or otherwise which
the Receiver may deem proper, and with full power
to buy in or rescind any contract for sale of the
Collateral or any part thereof and to resell the
same without being responsible for any loss which
may be occasioned thereby; and
(c) to make any arrangement or compromise which he may
think expedient to the interests of the Holder.
8.6 Receiver as Attorney - Subject to the prior rights of the
holders of the Senior Debt, in order to enable any
Receiver so appointed to exercise the powers granted to
him by this Part 8, the Company hereby appoints each such
Receiver to be its attorney to effect a sale or lease of
any of the Collateral by conveying or leasing in the name
of or on behalf of the Company or otherwise, and under
his own seal; and any deed, lease, agreement or other
instrument signed by any such Receiver under his seal
pursuant hereto will have the same effect as if it were
under the corporate seal of the Company.
8.7 Third party purchasers - No purchaser of any sale
purporting to be made by such Receiver pursuant hereto
will be bound to enquire whether any notice required
hereunder has been given or otherwise as to the propriety
of the sale or regularity of its proceedings, or be
affected by notice that no default has been made or
continues or notice that the sale is otherwise
unnecessary, improper or irregular; and despite any
impropriety or irregularity or notice thereof to any
purchaser, the sale as regards such purchaser will be
deemed to be within the aforesaid powers and be valid
accordingly and the remedy (if any) of the Company in
respect of any impropriety or irregularity whatsoever in
any such sale will be in damages only.
8.8 Distribution of realized monies - Subject to the claims
of the holders of the Senior Debt, all amounts realized
from the disposition of Collateral pursuant to this
Debenture will be applied as the Holder, in his absolute
discretion, may direct as follows:
(a) in payment of all costs, charges and expenses
(including legal fees and disbursements on a
solicitor and his own client basis) incurred by the
Holder in connection with or incidental to:
(i) the exercise by the Holder of all or any of
the powers granted to him pursuant to this
Debenture; and
(ii) the appointment of the Receiver and the
exercise by the Receiver of all or any of
the powers granted to him pursuant to this
Debenture, including the Receiver's
reasonable remuneration and all outgoings
properly payable by the Receiver;
(b) in or toward payment to the Holder of the Principal
Sum then outstanding;
(c) in or toward payment to the Holder of the Interest
remaining unpaid;
(d) subject to applicable law and the claims, if any,
of other creditors of the Company, any surplus will
be paid to the Company.
8.9 Waiver - The Holder may waive any default by the Company
in the observance or performance of any covenant,
agreement or condition contained in this Debenture or any
other event which without such waiver would cause the
Principal Sum to be immediately due and payable but no
such waiver or other act or omission of a Holder will
extend to or affect any subsequent default or event or
the rights resulting therefrom.
8.10 Impairment - A delay or omission by the Holder in
exercising any right or remedy arising upon an Event of
Default shall not impair such right or remedy or
constitute a waiver of or an acquiescence in the Event of
Default. All remedies are cumulative to the extent
permitted by law.
9. GENERAL
9.1 Replacement of Debenture - If the Holder claims that this
Debenture has been lost, destroyed or wrongfully taken,
the Company will issue a replacement Debenture upon:
(a) receipt of an indemnity bond or other assurance
requested by the Company to protect it from any
loss which it may suffer by reason of such
replacement or subsequent presentment of the
original Debenture; and
(b) payment by the Holder of any expenses incurred by
the Company in replacing the Debenture.
9.2 Surrender of Debenture - After full payment or
conversion, the Debenture will be surrendered to the
Company forthwith for cancellation.
9.3 Individual liability - A director, officer, employee or
shareholder of the Company will not have any liability
for any obligations of the Company under this Debenture
or for any claim based on, in respect of, or by reason
of, such obligations or their creation.
9.4 Amendments - The Debenture may, with the written consent
of the Company and the Holder, be amended or any
provision hereof waived by agreement in writing duly
executed by the Company and the Holder. After an
amendment or waiver becomes effective, the Company will
mail to the Holder a copy of such amendment or waiver.
The Company may require the Holder to surrender this
Debenture so that an appropriate notation concerning the
amendment or waiver may be placed thereon or a new
debenture, reflecting the amendment or waiver, may be
issued.
9.5 Time - Time is of the essence of this Debenture.
9.6 Notices - Any notice under this Debenture must be:
(a) in writing;
(b) delivered or sent by registered or certified
mail, postage prepaid; and
(c) addressed to the party to which notice is to be
given at the address for such party indicated
herein or at another address designated by such
party in writing.
Notice which is delivered will be deemed to have been
given at the time of delivery. If notice is given by
mail it will be deemed to have been given five business
days following the date of mailing. If there is an
interruption in normal mail service at or prior to the
time a notice is mailed, the notice must be delivered.
9.7 Severance - If any provision of this Debenture is
determined to be illegal or unenforceable, such provision
shall be ineffective to the extent of such illegality or
unenforceability, but shall not invalidate or affect the
validity or enforceability of the remaining provisions of
this Debenture.
9.8 Gender - Wherever a singular or masculine expression is
used in this Debenture, that expression is deemed to
include the plural, feminine or the body corporate where
required by the context.
9.9 Enurement - This Debenture and the charge created hereby
and all its provisions shall enure to the benefit of the
Holder, its heirs, executors, successors and assigns, and
shall be binding upon the Company, its successors and
assigns.
9.10 Governing Law - This Debenture will be construed in
accordance with and governed by the laws of the State of
California.
IN WITNESS WHEREOF ALLEGIANT TECHNOLOGIES INC. has executed
this Debenture this ____________ day of December, 1995.
ALLEGIANT TECHNOLOGIES INC.
Per: ____________________________
Authorized Signatory
REGISTRATION RIGHTS AGREEMENT
between
ALLEGIANT TECHNOLOGIES INC.
and
THE SEVERAL INVESTORS NAMED IN SCHEDULE I
Dated as of March ___, 1996
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT ("Agreement") is entered
into as of the _____ day of March, 1996, by and between each of the
investors named in Schedule I hereto (each an "Investor" and
collectively the "Investors") and Allegiant Technologies Inc., a
Washington corporation (the "Company").
Preliminary Statement
Pursuant to those certain Subscription Agreements of even date
herewith between the Company and each of the Investors (the
"Subscription Agreements"), the Investors purchased an aggregate of
________ shares (the "Shares") of Common Stock, $0.01 par value, of
the Company ("Common Stock") and stock purchase warrants (the
"Warrants") to acquire an aggregate of ____ additional shares of
Common Stock (the "Warrant Shares"). The Investors' agreement to
purchase the Common Stock and the Warrants was on the condition
that the Company agree to certain terms and conditions related to
the registration of securities of the Company, as set forth in this
Agreement.
NOW, THEREFORE, for and in consideration of the mutual
covenants and agreements contained in this Agreement and the
Subscription Agreements, and other good and valuable consideration,
the receipt, sufficiency and adequacy of which is hereby
acknowledged, the parties agree as follows:
1. Definitions. As used in this Agreement, the following
terms have the meanings indicated below or in the referenced
sections of this Agreement:
"Common Stock" shall mean the Company's Common Stock, $.01 par
value, as the same may be constituted from time to time.
"Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended, and the rules and regulations of the SEC promulgated
thereunder, all as the same shall be in effect at the time.
"Person" shall mean an individual, a partnership, a
corporation, a limited liability company, an association, a joint
stock company, a trust, a joint venture, an unincorporated
organization, and a government entity or any department, agency, or
political subdivision thereof.
"Registrable Securities" shall mean the Shares, the Warrant
Shares and any securities issued or issuable with respect to such
Shares and Warrant Shares by way of a stock dividend or stock split
or in connection with a combination of shares, recapitalization,
merger, consolidation or other reorganization.
"Registration Expenses" shall have the meaning provided in
Section 4.
"Restricted Securities" shall mean the Registrable Securities,
subject to the provisions of Section 2(a).
"SEC" shall mean the Securities and Exchange Commission of the
United States, or any other Federal agency at the time
administering the Securities Act.
"Securities Act" shall mean the Securities Act of 1933, as
amended, and the rules and regulations of the SEC promulgated
thereunder, all as the same shall be in effect at the time.
"Shares" shall have the meaning set forth in the recitals to
this Agreement.
"Warrant Shares" shall mean the shares of Common Stock
issuable upon exercise of the Warrants.
"Warrants" shall mean the Warrants purchased pursuant to the
Subscription Agreements as the same may be amended, modified or
supplemented from time to time.
2. Securities Subject to this Agreement.
(a) Registrable Securities. The securities entitled to
the benefits of this Agreement are those Registrable Securities
that are Restricted Securities. A Registrable Security ceases to
be a Restricted Security when: (i) it has been both registered
under the Securities Act and disposed of in accordance with the
registration statement covering it; or (ii) it is sold or
transferred in accordance with the requirements of Rule 144 (or
similar provisions then in effect) promulgated by the SEC under the
Securities Act ("Rule 144").
(b) Holders of Registrable Securities. A Person is
deemed to be a holder of Registrable Securities whenever that
Person owns, directly or beneficially, or has the right to acquire
Registrable Securities, disregarding any legal restrictions upon
the exercise of that right.
3. Registration Procedures.
(a) Best Efforts. The Company shall use its
commercially reasonable best efforts to register and to permit the
sale of the Registrable Securities in accordance with the intended
method of disposition. To carry out this obligation, the Company
shall as expeditiously as possible:
(i) prepare and file with the SEC a registration
statement covering the Registrable Securities on the appropriate
form and use its commercially reasonable best efforts to cause such
registration statement to become effective within 120 days after
the date hereof;
(ii) notify immediately each seller of Registrable
Securities of any stop order threatened or issued by the SEC and
take all actions reasonably required to prevent the entry of a stop
order or if entered to have it rescinded or otherwise removed;
(iii) prepare and file with the SEC such amendments
and supplements to the registration statement and the corresponding
prospectus necessary to keep the registration statement effective
for two (2) years from the date hereof or such shorter period as
may be required to sell all Registrable Securities covered by the
registration statement; and comply with the provisions of the
Securities Act with respect to the disposition of all securities
covered by the registration statement during each period in
accordance with the sellers' intended methods of disposition as set
forth in the registration statement;
(iv) furnish to each seller of Registrable
Securities a sufficient number of copies of the registration
statement, each amendment and supplement thereto (in each case
including all exhibits), the corresponding prospectus (including
each preliminary prospectus), and such other documents as a seller
may reasonably request to facilitate the disposition of the
seller's Registrable Securities;
(v) use its best efforts to register or qualify the
Registrable Securities under securities or blue sky laws of
jurisdictions in the United States of America as any seller
requests and will do any and all other acts and things that may be
necessary or advisable to enable the seller to consummate the
disposition of the seller's Registrable Securities;
(vi) use its best efforts to cause the Registrable
Securities covered by the registration statement to be registered
with or approved by those governmental agencies or authorities
necessary to enable each seller to consummate the disposition of
its Registrable Securities;
(vii) notify each seller of Registrable Securities,
at any time when a prospectus is required to be delivered under the
Securities Act, of any event as a result of which the prospectus or
any document incorporated therein by reference contains an untrue
statement of a material fact or omits to state any material fact
necessary to make the statements therein not misleading, and will
prepare a supplement or amendment to the prospectus or any such
document incorporated therein by reference so that thereafter the
prospectus will not contain an untrue statement of a material fact
or omit to state any material fact necessary to make the statements
therein not misleading;
(viii) cause all registered Registrable Securities to
be listed on each securities exchange, if any, on which similar
securities issued by the Company are then listed;
(ix) provide an institutional transfer agent and
registrar and a CUSIP number for all Registrable Securities on or
before the effective date of the registration statement;
(x) make available for inspection by any seller of
Registrable Securities, any underwriter participating in any
disposition pursuant to the registration statement, and any
attorney, accountant, or other agent of any seller or underwriter,
all financial and other records, pertinent corporate documents, and
properties of the Company, and cause the Company's officers,
directors, and employees to supply all information requested by any
seller, underwriter, attorney, accountant, or agent in connection
with the registration statement; provided that an appropriate
confidentiality agreement is executed by any seller, underwriter,
attorney, accountant or other agent; and
(xi) use its best efforts to comply with all
applicable rules and regulations of the SEC, and make available to
its security holders, as soon as practicable, an earnings statement
complying with the provisions of Section 11(a) of the Securities
Act and covering the period of at least twelve months, but not more
than eighteen months, beginning with the first month after the
effective date of the Registration Statement.
(xii) enter into such customary agreements and take
all such other actions as holders of Registrable Securities
reasonably request in order to expedite or facilitate the
disposition of such Registrable Securities.
(b) Distribution of Securities. From time to time, the
Company may require, in a reasonable manner and upon reasonable
notice, each seller of Registrable Securities subject to the
registration to furnish to the Company information regarding the
distribution of the securities subject to the registration.
(c) Prospectus. Each holder of Registrable Securities
agrees by acquisition of those securities that, upon receipt of
reasonable notice from the Company of any event of the kind
described in Section 3(a)(vii), the holder will promptly
discontinue disposition of Registrable Securities until the holder
receives copies of the supplemented or amended prospectus
contemplated by Section 3(a)(vii). In addition, if the Company
requests in connection with the recirculation of the prospectus,
the holder will deliver to the Company (at the Company's expense)
all copies, other than permanent file copies then in the holder's
possession, of the prospectus covering the Registrable Securities
current at the time of receipt of the notice.
(d) Duty to Provide Information. A holder shall notify
the Company, at any time when a prospectus relating to the
Registrable Securities is required to be delivered under the
Securities Act, of the happening of any event, which as to any
holder of Registrable Securities is: (i) to his, her or its
respective knowledge; (ii) uniquely within his, her or its
respective knowledge; and (iii) solely as to matters concerning
that holder of the Registrable Securities, as a result of which the
prospectus included in the registration statement contains an
untrue statement of a material fact or omits any fact necessary to
make the statements therein not misleading.
4. Registration Expenses.
(a) Payment. All Registration Expenses incident to the
Company's performance of or compliance with this Agreement shall be
paid by the Company. The term "Registration Expenses" includes
without limitation all registration filing fees, professional fees,
and other expenses of compliance with Federal, state, and other
securities laws; printing expenses; messenger, telephone, and
delivery expenses; fees and disbursements of counsel for the
Company; fees and disbursements of independent certified public
accountants retained by the Company; rating agency fees; securities
act liability insurance premiums (if the Company so desires); fees
and expenses of other Persons retained by the Company; the
Company's internal expenses (including, without limitation, all
salaries and expenses of its officers and employees performing
legal or accounting duties), the expense of any annual audit, and
the fees and expenses incurred in connection with the listing of
the securities to be registered on each securities exchange on
which similar securities issued by the Company are then listed.
Registration Expenses shall not include any underwriting or
broker's commissions, fees or discounts incurred by the holders in
the sale of the Registrable Securities, or any other expenses
incurred by the holders in the course of selling the Registrable
Securities unless such expenses are specifically the responsibility
of the Company hereunder.
(b) Escrow Fund. The Company hereby agrees to set aside
and maintain in escrow from the proceeds of the sale of the Units
of Common Stock and Warrants pursuant to the Subscription
Agreements an amount equal to $50,000 to be used solely for the
payment of such Registration Expenses.
5. Indemnification.
(a) Indemnification by Company. To the full extent
permitted by law, the Company agrees to indemnify each holder of
Registrable Securities, its officers and directors, and each Person
who controls the holder (within the meaning of the Securities Act
and the Exchange Act) and underwriter against all losses, claims,
damages, liabilities, and expenses caused by any untrue or
allegedly untrue statement of material fact contained in any
registration statement, prospectus, or preliminary prospectus or
any omission or alleged omission to state a material fact required
to be stated therein or necessary to make the statements therein
not misleading, except to the extent the untrue statement or
omission resulted from information that the holder furnished in
writing to the Company expressly for use therein or by the holder's
failure to deliver a copy of the registration statement or
prospectus or any amendments or supplements thereto to any
purchaser after the Company has furnished the holder with a
sufficient number of copies of the relevant documents.
(b) Indemnification by Holders of Securities. In
connection with any registration statement, each participating
holder of Registrable Securities will furnish to the Company in
writing the information and affidavits that the Company reasonably
requests for use in connection with any registration statement or
prospectus and each holder agrees to indemnify, to the extent
permitted by law, the Company, its directors and officers, and each
Person who controls the Company (within the meaning of the
Securities Act and the Exchange Act) against any losses, claims,
damages, liabilities, and expenses resulting from any untrue or
allegedly untrue statement of a material fact or any omission or
alleged omission of a material fact required to be stated in the
registration statement or prospectus or any amendment thereof or
supplement thereto necessary to make the statements therein not
misleading, but only to the extent that the untrue statement or
omission is contained in or omitted from any information or
affidavit the holder furnished in writing to the Company expressly
for use therein; provided, however, that the holder shall not be
liable to the Company under this Section 5(b) for any amounts
exceeding the product of the purchase price per Registrable
Security and the number of Registrable Securities being sold
pursuant to such registration statement or prospectus by the
holder.
(c) Indemnification Proceedings. Any Person entitled to
indemnification under this Agreement will (i) give prompt notice to
the indemnifying party of any claim with respect to which it seeks
indemnification, and (ii) unless in the indemnified party's
reasonable judgment a conflict of interest may exist between the
indemnified and indemnifying parties with respect to the claim,
permit the indemnifying party to assume the defense of the claim
with counsel reasonably satisfactory to the indemnified party. If
the indemnifying party does not assume the defense, the
indemnifying party will not be liable for any settlement made
without its consent (but that consent may not be unreasonably
withheld or delayed). No indemnifying party will consent to entry
of any judgment or will enter into any settlement without the
indemnified party's consent that does not include as an
unconditional term the claimant's or plaintiff's release of the
indemnified party from all liability concerning the claim or
litigation. An indemnifying party who is not entitled to or elects
not to assume the defense of a claim will not be obligated to pay
the fees and expenses of more than one counsel for all parties
indemnified by the indemnifying party with respect to the claim,
unless in the reasonable judgment of any indemnified party a
conflict of interest may exist between the indemnified party and
any other indemnified party with respect to the claim, in which
event the indemnifying party shall be obligated to pay the fees and
expenses of additional counsel.
6. Rule 144.
The Company covenants that it will file in a timely manner the
reports required to be filed by it under the Securities Act and the
Exchange Act and the rules and regulations adopted by the SEC
thereunder (or, if the Company is not required to file such
reports, it will, upon the request of any holder of Registrable
Securities, make publicly available other information), and it will
take such further action as any holder of Registrable Securities
reasonably may request, all to the extent required from time to
time, to enable the holder to sell Registrable Securities without
registration under the Securities Act within the limitation of the
exemptions provided by (i) Rule 144 under the Securities Act as
amended from time to time, or (ii) any similar rule or regulation
hereafter adopted by the SEC. Upon the request of any holder of
Registrable Securities, the Company will deliver to the holder a
written statement as to whether it has complied with the Rule 144
or any successor rule requirements.
7. Miscellaneous.
(a) Adjustments Affecting Securities. The Company will
not take any action, or permit any change to occur, with respect to
the Registrable Securities that would affect adversely the ability
of the holders to include those securities in a registration
undertaken pursuant to this Agreement or the marketability of the
Registrable Securities in any registration. If, and as often as,
there is any change in the Common Stock or the Preferred Stock by
way of a stock split, stock dividend, combination or
reclassification, or through a merger, consolidation,
reorganization, or by any other means, appropriate adjustment shall
be made in the provisions hereof so that the fight and privileges
granted hereby shall continue with respect to the Common Stock and
the Preferred Stock.
(b) Amendment; Waivers. This Agreement may not be
amended or modified, and no provision hereof may be waived, without
written agreement or consent of the Company and the holders of at
least eighty percent (80%) of the Registrable Securities. Neither
any waiver of any breach of, nor any failure to enforce any term or
condition of, this Agreement shall operate as a waiver of any other
breach of any term or condition, nor constitute nor be deemed a
waiver or release of any other fights, in law or at equity, or
claims that any party may have against any other party for anything
arising out of, connected with, or based upon this Agreement. No
waiver shall be deemed to occur as a result of the failure of any
party to enforce any term or condition of this Agreement.
(c) Attorneys' Fees. In any legal action or proceeding
brought to enforce any provision of this Agreement, the prevailing
party shall be entitled to recover all reasonable expenses,
charges, court costs, and attorneys' fees in addition to any other
available remedy at law or in equity.
(d) Benefit of Parties; Assignability. All of the terms
and provisions of this Agreement shall be binding upon and inure to
the benefit of the parties and their respective successors and
assigns, including without limitation all subsequent holders of
securities entitled to the benefits of this Agreement who agree in
writing to become bound by the terms of this Agreement; provided,
however, the Company may not delegate its responsibilities or
assign its rights under this Agreement without the prior written
consent of the holders of a majority of the Registrable Securities.
(e) Cooperation. The parties agree that after execution
of this Agreement they will from time to time, upon the reasonable
request of any other party and without further consideration,
execute, acknowledge, and deliver in proper form any further
documents and instruments and take such other action as any other
party may reasonably require to carry out effectively the intent of
this Agreement.
(f) Cumulative Remedies and Survival. The rights and
remedies specified in this Agreement shall not be exclusive of any
other right or remedy and shall be cumulative and in addition to
every other right or remedy now or hereafter existing at law or in
equity or by statute or otherwise.
(g) Counterparts. This Agreement may be executed
simultaneously in two or more counterparts, each of which shall be
deemed an original, but all of which together shall constitute one
and the same instrument.
(h) Entire Agreement. This Agreement contains the
entire understanding of the parties with respect to the subject
matter of this Agreement. There are no representations, promises,
warranties, covenants, or undertakings other than those expressly
set forth or provided for in this Agreement.
(i) Governing Law. California law shall govern the
interpretation, construction, and enforcement of this Agreement and
all transactions and agreements contemplated hereby,
notwithstanding any state's choice of law rules to the contrary.
(j) Interpretation. The terms and conditions of this
Agreement represent the results of bargaining and negotiations
among the parties, each of which has been represented by counsel of
its own selection, and none of which has acted under duress or
compulsion, whether legal, economic or otherwise, and represent the
results of a combined draftsmanship effort. Consequently, the
terms and conditions hereof shall be interpreted and construed in
accordance with their usual and customary meanings and the parties
hereby expressly waive and disclaim in connection with the
interpretation and construction hereof any rule of law or
procedures requiring otherwise, specifically including but not
limited to any rule of law to the effect that ambiguous or
conflicting terms or conditions contained herein shall be
interpreted or construed against the party whose counsel prepared
this Agreement or any earlier draft hereof.
(k) Listing. If the Common Stock is listed for trading
on any national securities exchange, that listing shall include all
of the Registrable Securities (to the extent permitted by the rules
of the exchange).
(l) No Inconsistent Agreements. Except with the prior
written consent of the holders of a majority of the Registrable
Securities, the Company will not enter into any agreement with
respect to its securities that shall grant to any Person
registration rights that are senior to, are in conflict with, or
will interfere with the practical realization of the rights
provided under this Agreement.
(m) Notices. Except as may be otherwise expressly
provided herein, any notice, consent, or other communication
required or permitted to be given hereunder shall be in
writing and shall be deemed to have been given: (i) three days
after the date sent by United States certified mail, return receipt
requested, with proper postage thereon; (ii) one day after sent if
sent by overnight courier of national recognition; or (iii) when
transmitted or delivered, if sent by facsimile or personally
delivered (as the case may be), and shall be addressed to the
addresses set forth in the Subscription Agreement or to such other
addresses as the respective parties hereto shall from time to time
designate to the others in writing.
(n) Severability. Whenever possible, each provision of
this Agreement shall be interpreted in such a manner as to be
effective and valid under applicable law, but if any provision of
this Agreement is held to be prohibited by or invalid under
applicable law, that provision will be ineffective only to the
extent of the prohibition or invalidity, without invalidating the
remainder of this Agreement.
(o) Specific Performance. Each of the parties agrees
that damages for a breach of or default under this Agreement would
be inadequate and that in addition to all other remedies available
at law or in equity the parties and their successors and assigns
shall be entitled to specific performance or injunctive relief, or
both, in the event of a breach or a threatened breach of this
Agreement.
(p) Table of Contents and Captions. The Table of
Contents and captions of the sections and subsections of this
Agreement are solely for convenient reference and shall not be
deemed to affect the meaning or interpretation of any provision of
this Agreement.
(q) Validity of Provisions. Should any part of this
Agreement for any reason be declared by any court of competent
jurisdiction to be invalid, that decision shall not affect the
validity of the remaining portion, which shall continue in full
force and effect as if this Agreement had been executed with the
invalid portion eliminated, it being the intent of the parties that
they would have executed the remaining portion of the Agreement
without including any part or portion that may for any reason be
declared invalid.
(r) Set-Off. Each party hereto shall be entitled to
set-off against any amount it may owe to any other party under this
Agreement or any other agreement executed in connection herewith
any and all amounts that are due to that party by such other party
under or in connection with the terms of this Agreement.
IN WITNESS WHEREOF, the parties have caused this Registration
Rights Agreement to be executed as of the date set forth in the
preamble paragraph of this Agreement.
ALLEGIANT TECHNOLOGIES INC.
By: _________________________________
Its: ____________________________
[SIGNATURES CONTINUE ON NEXT PAGE]
[TO BE ADDED)
STUART HENIGSON
(Employee's Name)
ALLEGIANT TECHNOLOGIES INC.
EMPLOYMENT AGREEMENT
I, the undersigned employee, and ALLEGIANT TECHNOLOGIES INC.,
its successors and assigns ("Company"), mutually agree to the
following terms and conditions of my employment by Company.
1. EMPLOYMENT. Company hereby employs me and I hereby
accept employment with Company, upon the terms and conditions
contained in this Agreement. While employed by Company, I shall
devote my entire working time and efforts to Company's business and
affairs, shall faithfully and diligently serve Company's interests,
and shall not engage in any business, employment or software
development activity that is not on Company's behalf, except as may
be approved by Company in advance in writing. My precise services
for Company may be established or modified, from time to time, at
the direction of Company, and I shall assume and perform such
further reasonable responsibilities and duties as may be assigned
to me from time to time by Company.
2. TERM. This Agreement shall become effective on the date
set forth on the signature page hereof and shall continue for a
term of four (4) years. This Agreement may be terminated before
the expiration of the four year term as provided below. If I
remain employed by Company after the expiration of the four year
term of this Agreement, then my continued employment shall be for
an indefinite period, terminable as provided below.
3. COMPENSATION. During the four year term of this
Agreement my compensation shall be: (a) a salary, which shall
begin at the rate of $_______ per year, which shall be reviewed
annually by Company on the anniversary of the commencement of this
Agreement and increased if deemed appropriate in Company's sole
discretion, plus (b) the fringe benefits that Company from time to
time provides generally to its other employees performing
comparable services for Company. If I remain employed by Company
after the expiration of the four year term of this Agreement, my
compensation thereafter shall be determined by Company in its
discretion.
4. GRANT OF SHARES. As additional compensation for my
employment, the Company shall permit me to purchase _______ shares
(the "Shares") of the Company's common stock at a price of $.01 per
share and, if I elect to purchase the Shares, the Company shall pay
me a bonus in the amount of $_______ which shall be used for the
purchase price of the Shares. The grant of the Shares set forth
above is expressly conditional on my remaining an employee of the
Company. In the event that my employment with the Company is
terminated by me for any reason or by the Company for "cause" (as
defined in Section 5.1) prior to the fourth anniversary of this
Agreement, the Shares shall be forfeited to the Company in
accordance with the following schedule:
TERMINATION DURING PERCENT FOREFEITED
First two years 100%
Third year 50%
Fourth year 25%
After fourth year 0%
In the event that my employment with the Company is terminated by
the Company without "cause" as defined in Section 5.1), the Shares
shall be forfeited to the Company in accordance with the
percentages set forth in the following schedule:
TERMINATION DURING: PERCENTAGE FORFEITED
First two years 50%
Third year 25%
After third year 0%
During such four year period, so long as I am an employee of the
Company, I will be the owner of the Shares for all proper corporate
purposes. The grant of the Shares shall be subject to any transfer
restrictions or escrow requirements under applicable securities
laws.
5. TERMINATION.
5.1 GENERAL. I have the right to terminate my
employment at any time, with or without cause, subject to the
provisions of Section 6 below. The Company may terminate my
employment during the term of this Agreement with or without cause.
"Cause" shall be deemed to be present if (i) I materially breach
this Agreement, (ii) fail to achieve the performance criteria set
forth in Section 5.2 or (iii) I am convicted of a felony. If
without cause, the Company shall provide 30 days prior written
notice of termination. Termination of this Agreement by Company
without cause shall render the provisions of Section 6 hereof and
Company's rights thereunder null and void.
5.2 PERFORMANCE CRITERIA. I acknowledge that it is
imperative for the success of the Company that its key employees
achieve the performance standards set by management of the Company.
In this regard, the general standards of performance for the
Company's key employees shall be to achieve new product development
goals within an agreed schedule and budget and to document software
within agreed time frames and in agreed formats. In addition, with
respect to my employment, there are specific performance criteria
which are:
a. Ship a new SuperCard Version 1.7 by May 31, 1994, and a
new SuperCard Version 2.0 by November 30, 1994;
b. Build a new, fully documented SuperCard Architecture by
September 30, 1995;
c. Complete the Golden Master of Windows 3.1 version of the
SuperCard application (the runtime player) by October 31, 1994; and
d. To establish a technical support "profit center" which
operates at break even or better by December 31, 1994.
Failure to perform to the general standards or failure to
achieve a specific performance criteria shall be cause for
termination of my employment at the option of the Company.
6. NON-COMPETITION, CONFIDENTIALITY AND INVENTIONS.
6.1 DEFINITIONS. For purposes of this Agreement:
(a) "Confidential Information" means any type of
information or material disclosed to or known by me as a
consequence of or through my employment or other retention by
Company (including information conceived, originated,
discovered, or developed in whole or in part by me), which is
not generally known by non-Company personnel and including but
not limited to information which relates to research,
development, trade secrets, know how, Inventions, technical
data, software, manufacture, purchasing, accounting,
engineering, marketing, merchandising or selling, and
information entrusted to Company or its principal officers and
employees by third parties. Such Confidential Information
shall also include but is not limited to the type of
information which may be listed on EXHIBIT A of this
Agreement. INFORMATION GENERALLY KNOWN OR READILY
ASCERTAINABLE BY PROPER MEANS AT OR AFTER THE TIME THE
UNDERSIGNED FIRST LEARNS OF SUCH INFORMATION, OR GENERAL
INFORMATION OR KNOWLEDGE WHICH I WOULD HAVE LEARNED IN THE
COURSE OF SIMILAR EMPLOYMENT OR WORK ELSEWHERE IN THE TRADE,
SHALL NOT BE DEEMED TO BE CONFIDENTIAL INFORMATION. In any
dispute over whether information is Confidential Information
or not, it shall be my burden to show that such information is
not Confidential Information.
(b) "Inventions" means original works of authorship,
discoveries, concepts, ideas and improvements to existing
technology, and all other subject matter ordinarily
comprehended by the term "invention", whether or not
copyrightable or patentable, including, but not limited to,
computer programs, processes, machines, products, compositions
of matter, formulae, algorithms, and techniques, as well as
improvements thereof, and expressions thereof, which, in whole
or in part, are conceived, discovered or developed by me,
either alone or with others, and which (i) relate directly to
the business of Company or to Company's actual or demonstrably
anticipated research or development; or (ii) incorporate, are
developed using, or are otherwise based upon any Confidential
Information; or (iii) are made, conceived, discovered or
developed during times other than my own time or with the use
of any Company equipment, supplies or facilities, including
Company resources or personnel; or (iv) result from any work
performed by me for Company.
6.2 RECORDS OF INVENTIONS AND CONFIDENTIAL INFORMATION.
I shall promptly, in such form and detail as is prescribed by
Company, record and keep a complete and permanent written record of
information relating to the conception, origination, discovery or
development of Confidential Information and Inventions.
6.3 OBLIGATIONS OF EMPLOYEE REGARDING INVENTIONS.
(a) I shall disclose to Company promptly and fully and
by a written report completely describing each in detail all
of my original works of authorship, discoveries, concepts,
ideas and improvements to existing technology, and all other
subject matter ordinarily comprehended by the term
"invention", whether or not within the definition of
Inventions.
(b) With respect to Inventions, and without additional
or further consideration, (i) I shall apply, at Company's
request and expense, for United States and foreign design or
letters patent or other legal protection of intellectual
property either in my name or otherwise as Company shall
direct; and (ii) I shall assign (and do hereby assign) to
Company all of my rights to such Inventions, and to
applications for United States copyright and foreign design or
letters patent or other legal protection of intellectual
property granted upon such Inventions, and hereby agree that
Company and/or its authorized agent shall have full control
over all such applications for patents or other legal
protection of intellectual property, including without
limitation the right to amend or abandon the same; and (iii)
I shall sign and deliver promptly to Company such written
instruments, testify in any legal proceedings, and do such
other acts, as may be necessary in the opinion of Company to
secure and maintain for Company exclusive rights in United
States and foreign copyrights, design or letters patent or
other legal protection of intellectual property for all such
Inventions; and (iv) I shall waive (and hereby do waive) any
moral rights I have or may have in Inventions.
EXCEPT AS PROVIDED IN SECTION 6.3(A) ABOVE, THIS
AGREEMENT DOES NOT APPLY TO AN INVENTION FOR WHICH NO
EQUIPMENT, SUPPLIES, FACILITY, OR TRADE SECRET INFORMATION OF
COMPANY WAS USED AND WHICH WAS DEVELOPED ENTIRELY ON MY OWN
TIME, UNLESS (A) THE INVENTION RELATES (I) DIRECTLY TO THE
BUSINESS OF COMPANY, OR (II) TO COMPANY'S ACTUAL OR
DEMONSTRABLY ANTICIPATED RESEARCH OR DEVELOPMENT, OR (B) THE
INVENTION RESULTS FROM ANY WORK PERFORMED BY ME FOR THE
COMPANY.
(c) With respect to any invention which does not
constitute an Invention, upon the written request of Employee,
Company will acknowledge in writing that Company does not have
any interest in such invention as described in the request.
6.4 RIGHTS OF COMPANY REGARDING INVENTIONS. Company
shall have the exclusive right to all Inventions, without
additional or further consideration to me, including but not
limited to the right to own, make, use, sell, have made, rent,
lease or lend, copy, prepare derivative works of, perform or
display publicly all Inventions.
6.5 CONFIDENTIALITY. Except as required in my duties to
Company, I shall never directly or indirectly use, disseminate,
lecture upon, publish articles concerning, make known, or otherwise
disclose or make available to any person, firm, corporation or
other entity not confidentially bound to Company, any Confidential
Information (including Confidential Information related to
Inventions) without written permission from Company. If I am
served with any subpoena or other compulsory judicial or
administrative process calling for production of Confidential
Information, I will immediately notify Company in order that it may
take such action as it deems necessary to protect its interest.
I understand it is Company's policy not to improperly obtain
or use confidential, proprietary or trade secret information that
belongs to third parties (including my former employers and anyone
who entrusted confidential, proprietary or trade secret information
to me or my former employers). I shall never knowingly improperly
obtain, attempt to obtain, use, disseminate, disclose or transfer
to Company confidential, proprietary or trade secret information
that belongs to third parties. This paragraph shall not limit my
right to use my general knowledge and experience, whether or not
gained while employed by any third party.
6.6 NONRAIDING OF EMPLOYEES. I recognize that Company's
workforce is a vital part of its business. Therefore, so long as
I am an employee of Company, or am retained by Company as an
independent contractor or consultant, and for twenty-four (24)
months after my employment, independent contractor and/or
consulting relationships with Company terminate (regardless of the
reason they terminate), I will not solicit, directly or indirectly,
any employee to leave his or her employment with Company. For the
purposes of this Agreement, the phrase "shall not solicit, directly
or indirectly," includes, without limitation, that I (a) shall not
disclose to any third party the names, backgrounds or
qualifications of any Company employees or otherwise identify them
as potential candidates for employment; (b) shall not personally or
through any other person approach, recruit or otherwise solicit
employees of Company to work for any other employer; and (c) shall
not participate in any pre-employment interviews with any person
who was employed by Company while I was employed or retained by
Company.
6.7 NONCOMPETITION. I recognize and agree that Company
has many substantial, legitimate business interests that can be
protected only by my agreeing not to compete with Company under
certain circumstances. These interests include, without
limitation, Company's contacts and relationships with its
customers, Company's reputation and goodwill in the industry, the
financial and other support Company provides me, and Company's
rights in its Confidential Information. I therefore agree as
follows:
(a) NONCOMPETITION WHILE RELATED TO COMPANY. So long as
I am an employee of Company, or am retained by Company as an
independent contractor or consultant, I will not, directly or
indirectly, compete with Company in any way.
(b) NONCOMPETITION AFTER RELATIONSHIPS WITH COMPANY
TERMINATE. After my employment, independent contractor and/or
consulting relationships with Company terminate (regardless of
the reason they terminate), and for the length of time
provided in Section 6.7(e) below, I will not, directly or
indirectly, in any geographic area where Company's software
products are then marketed, sold or distributed: (a) publish
or propose to publish Competing Software, (b) design or
develop Competing Software, or (c) work for or with, or
provide services or information to, any person or entity that
(i) publishes or proposed to publish Competing Software, or
(ii) is designing or developing Competing Software.
(c) COMPETING SOFTWARE. For purposes of this Agreement,
Competing Software means computer software that competes or
will compete with any of Company's then existing or reasonably
anticipated software products with which I have personal
involvement in the course of my employment and/or retention as
a consultant or independent contractor by the Company.
(d) COMPETING COMPANIES WITH MULTIPLE DIVISIONS.
Companies that (i) publish or propose to publish Competing
Software, or (ii) are designing or developing Competing
Software are referred to as "Competing Companies." Where a
Competing Company has multiple divisions, business units or
product work groups, the noncompetition provisions of Section
5.7(b) above shall apply only to those divisions, business
units or product work groups that are involved with Competing
Software, provided that I and the competitor provide written
assurances satisfactory to Company that the information and
work product I provide to other divisions, business units or
product work groups of the competitor will not be shared,
directly or indirectly, or intentionally or unintentionally,
with the divisions, business units or product work groups
involved with Competing Software.
(e) TERM OF NONCOMPETITION. The noncompetition
provisions of Section 6.7(b) above shall apply for a period of
twelve (12) months after my relationships with Company
terminate, regardless of the reasons they terminate.
(f) OTHER RIGHTS. I understand that in cases where the
noncompetition provisions of this Section 6 do not apply, I am
still subject to all other obligations I have to the Company,
including my obligations related to the Company's Inventions,
copyrights and Confidential Information.
6.8 DISCLOSURE OF PROPOSED EMPLOYMENT. Before I
undertake or agree to undertake any other employment, consultancy
or independent contractor relationship, for myself or with a third
party, that will utilize or involve subject matter related to
activities of the type in which Company is involved, I shall give
Company reasonable advance notice and fully disclose the proposed
employment, consultancy or independent contractor relationship to
Company. My duty to give notice and disclose under this paragraph
shall apply during my employment or retention as an employee,
independent contractor or consultant by Company, and during the
period of time the noncompetition provisions of Section 6.7(b)
above are in effect.
6.9 OWNERSHIP OF RECORDS. Upon termination of my
employment, independent contractor or consulting relationship(s)
with Company, or earlier if Company requests, I will deliver to and
leave with Company any and all objects, materials, devices, or
substances (including without limitation all documents, records,
notebooks, recordings, drawings, prototypes, models, schematic
diagrams, computer programs (regardless of the media on which they
are stored) and similar repositories or objects) which describe,
depict, contain, constitute, reflect or record Confidential
Information, and all copies thereof, then in my possession or under
my control, whether or not prepared by me.
6.10 SAVING PROVISION. I agree that the terms of this
Agreement, including the duration, scope and geographic extent of
the nonraiding and noncompetition provisions, is fair and
reasonably necessary to protect Company's client relationships,
employee relationships, goodwill, Confidential Information and
other protectable interests in light of all of the facts and
circumstances of my relationship with Company. In the event a
court declines to enforce any of the terms of this Agreement they
shall be deemed to be modified to restrict me to the maximum extent
that the court finds enforceable.
6.11 INJUNCTIVE RELIEF. I acknowledge that the breach or
threatened breach of this Agreement would cause irreparable injury
to Company that could not be adequately compensated by money
damages. Accordingly, Company may obtain a restraining order
and/or injunction prohibiting my breach or threatened breach of
this Agreement, in addition to any other legal or equitable
remedies that may be available. I acknowledge that, if my
employment or other relationships with Company end, my experience
and capabilities are such that I can obtain employment in business
activities that do not violate this Agreement, and that an
injunction to enforce this Agreement will not prevent me from
earning a reasonable livelihood.
6.12 CONSENT TO NOTIFICATION. I consent to Company
giving notification to third parties of the existence and terms of
this Agreement.
7. GOVERNING LAW. The rights and obligations under this
Agreement shall be governed by the internal laws of the state of
California without regard to the provisions thereof related to
choice of laws or conflict of laws.
8. LEGAL EXPENSE. The prevailing party in any action
arising out of or relating to this Agreement or my employment,
including without limitation any action arising out of any alleged
tort or statutory violation, shall be entitled to recover from the
other party reasonable sums as attorneys fees and expenses,
including expert witness fees, at trial and on appeal.
9. WAIVER OF BREACH. The waiver of any breach of this
Agreement or failure to enforce any provision of this Agreement
shall not waive any later breach.
10. GENERAL. This Agreement may be modified, supplemented
and/or amended only by a writing that both the Company and I sign.
This Agreement, as it may be so amended, is the complete and final
expression of my agreement with Company on the subjects covered,
supersedes all prior agreements, and shall control over any other
statement, representation or agreement on these subjects.
IN WITNESS WHEREOF, the parties have caused this Agreement to
be executed this __ day of May, 1994.
COMPANY: ALLEGIANT TECHNOLOGIES INC.
By _________________________________
Its President
EMPLOYEE: ____________________________________
____________________________________
(Print Name)
June 11, 1996
Mr. Joel Staadecker
245 South Helix Avenue #2
Solana Beach, California
U.S.A. 92075
Dear Joel:
This letter sets forth our mutual understanding
regarding your continued employment with the Company.
Acceptance of this letter shall constitute a legal and binding
agreement betweenyourself and the Company notwithstanding our
intention to negotiate a more comprehensive agreement based
upon the terms, conditions and representations hereof and
containing the additional terms, conditions and
representations usually contained in employment agreements
which are reasonable in relation to standards and practices
within the software industry.
1. You shall continue to hold the office of President
of the Company, subject to paragraph 5 below, for two years
(the "Employment Period") under this letter agreement
commencing on February 1, 1995.
2. At the first annual meeting of the shareholders,
subject to paragraph 5 below directors of the Company shall
propose that you be elected to the Board of Directors for a
term of two years.
3. During the Employment Period, you shall be
entitled to receive monthly aggregate remuneration, inclusive
of salary and direct reimbursement for housing costs, equal to
$6,900 per month or such greater amount mutually agreed upon
from time-to-time and evidenced in writing (the "Guaranteed
Amount"). For greater certainty, the Guaranteed Amount shall
be paid by the Company regardless of whether or not you hold
the office of President over the Employment Period, subject to
the paragraph 5 below.
4. During the Employment Period, subject to paragraph
5 below, you shall be entitled to continue as a participant in
the Company's medical benefits package as currently offered to
all of its employees.
5. This agreement may be terminated by the Company in
the following circumstances:
(a) you plead guilty to or are convicted of a
felony;
(b) you are prohibited or disqualified under any
securities or corporate legislation from acting as a director
or officer of a public company;
(c) you have a petition of bankruptcy issued
against you or you make a voluntary assignment in bankruptcy;
or
(d) you commit a material breach of your
fiduciary duties as a director and officer of the Company.
6. If you are removed from office by a vote of the
majority of the Board of Directors and you are subsequently
awarded damages by a competent authority for wrongful
dismissal, the Company agrees to reimburse to you all
reasonable legal fees that were incurred by you to prosecute
your claim against the Company.
Yours truly,
_______________________
Director
I hereby agree with the terms set out in this letter
agreement.
_______________________
Joel Staadecker
AMENDMENT TO AGREEMENT
This AMENDMENT TO AGREEMENT (this "Amendment") is made
as of this 4th day of March, 1996, by and between Joel B.
Staadecker (hereinafter "you"), and Allegiant
Technologies,Inc., a Washington corporation (the "Company"),
with respect to the following:
RECITALS
WHEREAS, you and the Company have entered into a letter
agreement dated December 21,1994 (the "Agreement"), with
respect to the terms, conditions and representations regarding
your continued employment with the Company; and
WHEREAS, you and the Company desire to amend the
Agreement, as more particularly set forth herein.
NOW, THEREFORE, in consideration of the foregoing
premises, the following mutual covenants and agreements, and
other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged by each of the
parties hereto, the parties hereto hereby agree as follows:
AGREEMENT
1. Definitions. Defined terms used herein and not
otherwise defined herein shall havethe respective meanings
ascribed thereto in the Agreement.
2. Amendment. The Agreement is hereby amended by
adding thereto the following newparagraph 7, which shall read
in its entirety as follows:
"7. You recognize and agree that the Company has many
substantial, legitimate business interests that can be
protected only by your agreeing not to compete with the
Company under certain circumstances. These interest include
the Company's contracts and relationships with its customers,
the Company's reputation and goodwill in the industry, the
financial and other support the Company provides me, and the
Company's rights in its invention, copyrights and confidential
information. You therefore agree as follows:
(a) So long as you are an employee of the
Company, or are retained by the Company as an independent
contractor or consultant, you will not, directly or
indirectly, compete with the Company in any way.
(b) After your employment, independent
contractor and/or consulting relationships with the Company
terminate due to your voluntary termination of such
relationships, and for the length of time provided in
subparagraph (e) below, you will not, directly or indirectly,
in any geographic area where the Company's products are then
marketed, sold or distributed: (i) publish or propose to
publish Competing Software or (ii) design or develop Competing
Software.
(c) For purposes of this Agreement, "Competing
Software" means computer software that competes or will
compete with any of the Company's then existing or reasonably
anticipated software products with which you have personal
involvement in the course of your employment and/or retention
as a consultant or independent contractor by the Company.
(d) Companies that (i) publish or propose to
publish Competing Software or (ii) are designing or developing
Competing Software are referred to as "Competing Companies."
Where a Competing Company has multiple divisions, business
units or product work groups, the noncompetition provisions of
subparagraph (b) above shall apply only to those divisions,
business units or product work groups that are involved with
Competing Software.
(e) The noncompetition provisions of
subparagraph (b) above shall apply for a period of twelve (12)
months after your relationships with the Company terminate due
to your voluntary termination of such relationships.
(f) You understand that in cases where the
noncompetition provisions of this paragraph 7 do not apply,
you are still subject to all other obligations you have to the
Company, including your obligations related to the Company's
inventions, copyrights and confidential information."
3. Miscellaneous. Except as expressly provided
herein, the Agreement shall remain unchanged and in full force
and effect. This Amendment shall be governed by and construed
in accordance with the laws of the State of California,
without reference to the choice of law principles thereof.
This Amendment may be executed in counterparts, each of which
shall be deemed an original and all of which when taken
together shall constitute but one and the same instrument and
any of the parties hereto may execute this Amendment by
signing any such counterpart.
IN WITNESS WHEREOF, each of the parties hereto has
caused this Amendment to be duly executed as of the date first
above written.
________________________
Joel B. Staadecker
ALLEGIANT TECHNOLOGIES, INC,
By:_____________________
William D. McCartney,
Chief Financial Officer
David L. Baron__
(Employees Name)
ALLEGIANT TECHNOLOGIES INC.
EMPLOYMENT AGREEMENT
I, the undersigned employee, and ALLEGIANT TECHNOLOGIES INC.,
its successors and assigns ("Company"), mutually agree to the
following terms and conditions of my employment by Company.
1. Employment. Company hereby employs me and I hereby
accept employment with Company, upon the terms and conditions
contained in this Agreement. While employed by Company, I shall
devote my full time (generally 8 hours per day and 5 days per week)
and best efforts to Company's business and affairs, shall
faithfully and diligently serve Company's interests, and shall not
engage in any other software business, employment or development
activity that is not on Company's behalf, except as may be approved
by Company in advance in writing. My precise services for Company
may be established or modified, from time to time, at the direction
of Company, and I shall assume and perform such further reasonable
responsibilities and duties as may be assigned to me from time to
time by Company.
2. Term. This Agreement shall become effective on the date
set forth on the signature page hereof and shall continue for a
term of four (4) years. This Agreement may be terminated before
the expiration of the four year term as provided below. If I
remain employed by Company after the expiration of the four year
term of this Agreement, then my continued employment shall be for
an indefinite period, terminable as provided below.
3. Compensation. During the four year term of this
Agreement my compensation shall be: (a) a salary, which shall
begin at the rate of $100,000 per year, which shall be reviewed
annually by Company on the anniversary of the commencement of this
Agreement and increased if deemed appropriate in Company's sole
discretion, plus (b) the fringe benefits that Company from time to
time provides generally to its other employees performing
comparable services for Company, plus (c) a year end bonus (First
Year Bonus)in the amount of $15,000. The First Year bonus shall
be subject to and predicated upon the satisfactory accomplishment
of the following first year milestones:
(a) By January 1, l996, Company shall have achieved
satisfactory independance from its reliance upon the continued
employment of Gary Poppitz to support the SuperCard product
code base,
(b) By January 1, l996, both the Macintosh and Windows
code bases shall have been documented.
(c) By May 22, l996, an agreed, documented strategy shall
have been adopted for evolving a cross-platform code base.
(d) By May 22, l996, Company shall have shipped a Windows
version of its product SuperCard.
(e) By May 22, l996, company shall have shipped a Windows
version of its product code named Blackhole.
It is further agreed that the Company shall reimburse me
for relocation costs in connection with my relocation to San Diego,
California, up to an amount not to exceed $2,000. If I remain
employed by Company after the expiration of the four year term of
this Agreement, my compensation thereafter shall be determined by
Company in its discretion.
4. Termination.
4.1 General. I have the right to terminate my
employment at any time, with or without cause, subject to the
provisions of Section 5 below. The Company may terminate my
employment during the first four years of this Agreement with or
without cause. "Cause" shall be deemed to be present if (i) I
materially breach this Agreement, (ii) fail to achieve the
performance criteria set forth in Section 4.2 or (iii) I am
convicted of a felony. If without cause, the Company shall provide
30 days prior written notice of termination. Termination of this
Agreement by Company without cause shall render the provisions of
Section 5 hereof and Company's rights thereunder null and void.
4.2 Performance Criteria. I acknowledge that it is
imperative for the success of the Company that its key employees
achieve the performance standards set by management of the Company.
In this regard, the general standards of performance for the
Company's key employees shall be to achieve new product development
and/or custom software implementation goals within an agreed
schedule and budget and to document software within agreed time
frames and in agreed formats. In addition, with respect to my
employment, I acknowledge the specific performance criteria set out
as first year milestones in Section 3, (a), (b), (c), (d) and (e)
hereof, and further, that I may be subject to additional specific
performance criteria which may be agreed upon, from time to time,
in writing.
Failure to perform to the general standards or failure to
achieve a specific performance criteria shall be cause for
termination of my employment at the option of the Company.
5. Non-Competition, Confidentiality and Inventions.
5.1 Definitions. For purposes of this Agreement:
(a) "Confidential Information" means any type of
information or material disclosed to or known by me as a
consequence of or through my employment or other retention by
Company (including information conceived, originated,
discovered, or developed in whole or in part by me), which is
not generally known by non-Company personnel and including but
not limited to information which relates to research,
development, trade secrets, know how, Inventions, technical
data, software, manufacture, purchasing, accounting,
engineering, marketing, merchandising or selling, and
information entrusted to Company or its principal officers and
employees by third parties. Such Confidential Information
shall also include but is not limited to the type of
information which may be listed on Exhibit A of this
Agreement. INFORMATION GENERALLY KNOWN OR READILY
ASCERTAINABLE BY PROPER MEANS AT OR AFTER THE TIME THE
UNDERSIGNED FIRST LEARNS OF SUCH INFORMATION, OR GENERAL
INFORMATION OR KNOWLEDGE WHICH I WOULD HAVE LEARNED IN THE
COURSE OF SIMILAR EMPLOYMENT OR WORK ELSEWHERE IN THE TRADE,
SHALL NOT BE DEEMED TO BE CONFIDENTIAL INFORMATION. In any
dispute over whether information is Confidential Information
or not, it shall be my burden to show that such information is
not Confidential Information.
(b) "Inventions" means original works of authorship,
discoveries, concepts, ideas and improvements to existing
technology, and all other subject matter ordinarily
comprehended by the term "invention", whether or not
copyrightable or patentable, including, but not limited to,
computer programs, processes, machines, products, compositions
of matter, formulae, algorithms, and techniques, as well as
improvements thereof, and expressions thereof, which, in whole
or in part, are conceived, discovered or developed by me,
either alone or with others, and which (i) relate directly to
the business of Company or to Company's actual or demonstrably
anticipated research or development; or (ii) incorporate, are
developed using, or are otherwise based upon any Confidential
Information; or (iii) are made, conceived, discovered or
developed during times other than my own time or with the use
of any Company equipment, supplies or facilities, including
Company resources or personnel; or (iv) result from any work
performed by me for Company.
5.2 Records of Inventions and Confidential Information.
I shall promptly, in such form and detail as is prescribed by
Company, record and keep a complete and permanent written record of
information relating to the conception, origination, discovery or
development of Confidential Information and Inventions.
5.3 Obligations of Employee Regarding Inventions.
(a) I shall disclose to Company promptly and fully and
by a written report completely describing each in detail all
of my original works of authorship, discoveries, concepts,
ideas and improvements to existing technology, and all other
subject matter ordinarily comprehended by the term
"invention", whether or not within the definition of
Inventions.
(b) With respect to Inventions, and without additional
or further consideration, (i) I shall apply, at Company's
request and expense, for United States and foreign design or
letters patent or other legal protection of intellectual
property either in my name or otherwise as Company shall
direct; and (ii) I shall assign (and do hereby assign) to
Company all of my rights to such Inventions, and to
applications for United States copyright and foreign design or
letters patent or other legal protection of intellectual
property granted upon such Inventions, and hereby agree that
Company and/or its authorized agent shall have full control
over all such applications for patents or other legal
protection of intellectual property, including without
limitation the right to amend or abandon the same; and (iii)
I shall sign and deliver promptly to Company such written
instruments, testify in any legal proceedings, and do such
other acts, as may be necessary in the opinion of Company to
secure and maintain for Company exclusive rights in United
States and foreign copyrights, design or letters patent or
other legal protection of intellectual property for all such
Inventions; and (iv) I shall waive (and hereby do waive) any
moral rights I have or may have in Inventions.
EXCEPT AS PROVIDED IN SECTION 6.3(A) ABOVE, THIS
AGREEMENT DOES NOT APPLY TO AN INVENTION FOR WHICH NO
EQUIPMENT, SUPPLIES, FACILITY, OR TRADE SECRET INFORMATION OF
COMPANY WAS USED AND WHICH WAS DEVELOPED ENTIRELY ON MY OWN
TIME, UNLESS (A) THE INVENTION RELATES (I) DIRECTLY TO THE
BUSINESS OF COMPANY, OR (II) TO COMPANY'S ACTUAL OR
DEMONSTRABLY ANTICIPATED RESEARCH OR DEVELOPMENT, OR (B) THE
INVENTION RESULTS FROM ANY WORK PERFORMED BY ME FOR THE
COMPANY.
(c) With respect to any invention which does not
constitute an Invention, upon the written request of Employee,
Company will acknowledge in writing that Company does not have
any interest in such invention as described in the request.
5.4 Rights of Company Regarding Inventions. Company
shall have the exclusive right to all Inventions, without
additional or further consideration to me, including but not
limited to the right to own, make, use, sell, have made, rent,
lease or lend, copy, prepare derivative works of, perform or
display publicly all Inventions.
5.5 Confidentiality. Except as required in my duties to
Company, I shall never directly or indirectly use, disseminate,
lecture upon, publish articles concerning, make known, or otherwise
disclose or make available to any person, firm, corporation or
other entity not confidentially bound to Company, any Confidential
Information (including Confidential Information related to
Inventions) without written permission from Company. If I am
served with any subpoena or other compulsory judicial or
administrative process calling for production of Confidential
Information, I will immediately notify Company in order that it may
take such action as it deems necessary to protect its interest.
I understand it is Company's policy not to improperly obtain
or use confidential, proprietary or trade secret information that
belongs to third parties (including my former employers and anyone
who entrusted confidential, proprietary or trade secret information
to me or my former employers). I shall never knowingly improperly
obtain, attempt to obtain, use, disseminate, disclose or transfer
to Company confidential, proprietary or trade secret information
that belongs to third parties. This paragraph shall not limit my
right to use my general knowledge and experience, whether or not
gained while employed by any third party.
5.6 Nonraiding of Employees. I recognize that Company's
workforce is a vital part of its business. Therefore, so long as
I am an employee of Company, or am retained by Company as an
independent contractor or consultant, and for twenty-four (24)
months after my employment, independent contractor and/or
consulting relationships with Company terminate (regardless of the
reason they terminate), I will not solicit, directly or indirectly,
any employee to leave his or her employment with Company. For the
purposes of this Agreement, the phrase "shall not solicit, directly
or indirectly," includes that I shall not personally or through any
other person approach, recruit or otherwise solicit employees of
Company to work for any other employer.
5.7 Noncompetition. I recognize and agree that Company
has many substantial, legitimate business interests that can be
protected only by my agreeing not to compete with Company under
certain circumstances. These interests include Company's contacts
and relationships with its customers, Company's reputation and
goodwill in the industry, the financial and other support Company
provides me, and Company's rights in its Confidential Information.
I therefore agree as follows:
(a) Noncompetition While Related to Company. So long as
I am an employee of Company, or am retained by Company as an
independent contractor or consultant, I will not, directly or
indirectly, compete with Company in any way.
(b) Noncompetition After Relationships with Company
Terminate. After my employment, independent contractor and/or
consulting relationships with Company terminate (regardless of
the reason they terminate), and for the length of time
provided in Section 5.7(e) below, I will not, directly or
indirectly, in any geographic area where Company's software
products are then marketed, sold or distributed: (a) publish
or propose to publish Competing Software, (b) design or
develop Competing Software.
(c) Competing Software. For purposes of this Agreement,
Competing Software means computer software that competes or
will compete with any of Company's then existing or reasonably
anticipated software products with which I have personal
involvement in the course of my employment and/or retention as
a consultant or independent contractor by the Company.
(d) Competing Companies with Multiple Divisions.
Companies that (i) publish or propose to publish Competing
Software, or (ii) are designing or developing Competing
Software are referred to as "Competing Companies." Where a
Competing Company has multiple divisions, business units or
product work groups, the noncompetition provisions of Section
5.7(b) above shall apply only to those divisions, business
units or product work groups that are involved with Competing
Software.
(e) Term of Noncompetition. The noncompetition
provisions of Section 5.7(b) above shall apply for a period of
twelve (12) months after my relationships with Company
terminate, regardless of the reasons they terminate.
(f) Other Rights. I understand that in cases where the
noncompetition provisions of this Section 5 do not apply, I am
still subject to all other obligations I have to the Company,
including my obligations related to the Company's Inventions,
copyrights and Confidential Information.
5.8 Disclosure of Proposed Employment. Before I
undertake or agree to undertake any other employment, consultancy
or independent contractor relationship, for myself or with a third
party, I shall give Company six weeks advance notice. My duty to
give notice and disclose under this paragraph shall apply during my
employment or retention as an employee, independent contractor or
consultant by Company, and during the period of time the
noncompetition provisions of Section 5.7(b) above are in effect.
5.9 Ownership of Records. Upon termination of my
employment, independent contractor or consulting relationship(s)
with Company, or earlier if Company requests, I will deliver to and
leave with Company any and all objects, materials, devices, or
substances (including without limitation all documents, records,
notebooks, recordings, drawings, prototypes, models, schematic
diagrams, computer programs (regardless of the media on which they
are stored) and similar repositories or objects) which describe,
depict, contain, constitute, reflect or record Confidential
Information, and all copies thereof, then in my possession or under
my control, whether or not prepared by me.
5.10 Saving Provision. I agree that the terms of this
Agreement, including the duration, scope and geographic extent of
the nonraiding and noncompetition provisions, is fair and
reasonably necessary to protect Company's client relationships,
employee relationships, goodwill, Confidential Information and
other protectable interests in light of all of the facts and
circumstances of my relationship with Company. In the event a
court declines to enforce any of the terms of this Agreement they
shall be deemed to be modified to the extent that the court finds
enforceable.
5.11 Injunctive Relief. I acknowledge that the breach or
threatened breach of this Agreement would cause irreparable injury
to Company that could not be adequately compensated by money
damages. Accordingly, Company may obtain a restraining order
and/or injunction prohibiting my breach or threatened breach of
this Agreement, in addition to any other legal or equitable
remedies that may be available.
5.12 Consent to Notification. I consent to Company
giving notification to third parties of the existence and terms of
this Agreement.
6. Governing Law. The rights and obligations under this
Agreement shall be governed by the internal laws of the state of
California without regard to the provisions thereof related to
choice of laws or conflict of laws.
7. Legal Expense. The prevailing party in any action
arising out of or relating to this Agreement or my employment,
including without limitation any action arising out of any alleged
tort or statutory violation, shall be entitled to recover from the
other party reasonable sums as attorneys fees and expenses,
including expert witness fees, at trial and on appeal.
8. Waiver of Breach. The waiver of any breach of this
Agreement or failure to enforce any provision of this Agreement
shall not waive any later breach.
9. General. This Agreement may be modified, supplemented
and/or amended only by a writing that both the Company and I sign.
This Agreement, as it may be so amended, is the complete and final
expression of my agreement with Company on the subjects covered,
supersedes all prior agreements, and shall control over any other
statement, representation or agreement on these subjects
IN WITNESS WHEREOF, the parties have caused this Agreement to
be executed as of the ___ day of _____________, 1995.
COMPANY: ALLEGIANT TECHNOLOGIES, INC.
By __________________________
Joel B. Staadecker
Its President
EMPLOYEE: _____________________________
David L. Baron
MANAGEMENT AGREEMENT
THIS AGREEMENT made effective the 1st day of April 1994.
AMONG:
ALLEGIANT TECHNOLOGIES INC., a Washington State company having
an address at 6496 Weathers Place, Suite 100, San Diego, CA
92121.
(the "Company")
ON THE FIRST PART
AND:
PEMCORP MANAGEMENT INC., a British Columbia company having an
address. at 1270 - 609 Granville Street, Vancouver, B.C., V7Y
IG6
("Pemcorp")
ON THE SECOND PART
AND:
WILLIAM McCARTNEY, businessman, having an address at 1270--
609 Granville Street, Vancouver, B.C., V7Y IG6
("McCartney")
ON THE THIRD PART
AND:
LEONARD PETERSEN, businessman, having an address at 1270 - 609
Granville Street, Vancouver, B.C., V7Y IG6
("Petersen")
ON THE FOURTH PART
WHEREAS:
A. Pemcorp is in the business of providing consulting services to
public companies;
B. McCartney and Petersen are the directors, officers and
shareholders of Pemcorp, and are employees of Pemcorp;
C. The Company wishes to engage Pemcorp and Pemcorp has agreed to
be engaged to provide management and administrative services to the
Company in accordance with the terms and conditions of th@s
Agreement;
NOW THEREFORE THIS AGREEMENT WITNESSETH that in consideration of
the premises and mutual covenants herein contained, the parties
hereto agree as follows:
1. Engagement of Manager
The Company hereby engages Pemcorp to provide management and
administrative services to the Company as required by the Company
from time to time. Pemcorp hereby accepts the engagement as
manager and agrees to faithfully serve the Company and use its best
efforts to satisfy the Company's requirements for the services
described above in a timely and efficient manner.
Pemcorp agrees to supply the services of McCartney and/or Petersen,
or such other person as may be acceptable to the Board of Directors
of the Company, to provide the management and administrative
services to the Company.
2. Scope of Authority
Pemcorp shall not have authority to enter into contracts as agent
for the Company in the ordinary course.
3. Use of Information
McCartney, Petersen and Pemcorp agree that they;
a) shall use their best efforts to promote the interests of the
Company;
b) shall not disclose the private affairs of the Company, or any
secret of the Company, to any person other than the directors
without the prior consent of the Board of Directors; and
c) shall not use for their own purposes or for any purposes other
that those of the Company, any information they may acquire
with respect to the Company's affairs.
4. Management Fee
During the first year of the term of this Agreement, the Company
shall pay to Pemcorp a management fee equal to $2,500 U.S. per
month, payable on the first day of each month commencing on
April 1, 1994.
The management fee shall be mutually agreed upon between the
Company and Pemcorp in any renewal term of this Agreement.
5. Administrative Fees and Other Expenses
In addition to the management fee payable hereunder to Pemcorp, the
Company agrees to reimburse Pemcorp for all travelling and other
direct expenses actually and properly incurred by McCartney and
Petersen or any other employee or agent of Pemcorp in connection
with fulfilling the duties and responsibilities of Pemcorp
hereunder.
The Company shall pay such amounts to Pemcorp on a monthly basis,
forthwith upon receipt of an invoice therefor plus all related
statements and vouchers.
6. Term and Termination
This Agreement shall be in effect for a term of one year from and
after the date hereof, unless terminated earlier in accordance with
the terms of this Agreement, and shall be automatically renewed at
the end of each year for an additional year unless either party
gives notice of termination in accordance with this Agreement.
Either party may give to the other party one month's notice in
writing of its intention to terminate this Agreement. Upon the
expiration of one month's notice, this Agreement and all
obligations between the parties shall be terminated, except for the
Company's obligation to pay any monies due and owing to Pemcorp.
7. Further Assurances
The parties shall deliver to each other such further documentation
and shall perform such further acts as and when the same may be
required to carry out and give effect to the terms and intent of
this Agreement.
8. Notices
All notices given in connection with this Agreement shall be in
writing and shall be personally delivered or faxed to the parties
at the address set out above. Any such notices personally
delivered or faxed shall be deemed delivered on the day of
delivery. Any party hereto may change its address for service by
notice in writing to the other parties hereto.
9. Waiver and Amendment
This Agreement may only be amended by further written agreement
executed and delivered by all of the parties. No waiver or consent
by a party of or to any breach or default by any other party shall
be effective unless evidenced in writing, executed and delivered by
the party so waiving or consenting and no waiver or consent
effectively given as aforesaid shall operate as a waiver of or
consent to any further or other breach of default in relation to
the same or any other provision of this Agreement.
10. Assignment
This Agreement may not be assigned by Pemcorp without the prior
written consent of the Company.
11. Entire Agreement
This Agreement contains the entire agreement among the parties
pertaining to the subject matter hereof, and supersedes and
replaces all previous written and oral agreements among the parties
with respect to the subject matter hereof.
12. Enurement
This Agreement shall ensure to the benefit of the parties hereto,
their respective successors, personal representatives, executors
and permitted assigns.
IN WITNESSETH WHEREOF this Agreement has been executed as of the
day and year first above written.
THE CORPORATE SEAL OF )
ALLEGIANT TECHNOLOGIES )
INC. was hereunto affixed )
in the presence of: )
)
)
__________________________ ) c/s
Authorized Signatory )
)
)
__________________________ )
Authorized Signatory )
)
THE CORPORATE SEAL OF )
PEMCORP MANAGEMENT INC. )
was hereunto affixed )
in the presence of: )
)
)
____________________________ ) c/s
Authorized Signatory )
)
SIGNED, SEALED AND DELIVERED )
by WILLIAM McCARTNEY in the )
presence of: )
)
)
____________________________ ) _____________________
Witness ) William McCartney
)
SIGNED, SEALED AND DELIVERED )
by LEONARD PETERSEN in the )
presence of: )
)
)
____________________________ ) _____________________
Witness ) Leonard Petersen
ALLEGIANT TECHNOLOGIES INC.
INCENTIVE STOCK OPTION PLAN
1. INTERPRETATION
1.1 Defined terms - For the purposes of this Plan, the following
terms shall have the following meanings:
(a) "Act" means the Securities Act (British Columbia);
(b) "Associate" has the meaning ascribed to that term under
section 1(1) of the Act;
(c) "Affiliated" has the meaning ascribed to that term under
section 1(2) of the Act;
(d) "Board" means the Board of Directors of the Corporation;
(e) "Common Shares" means the common shares with a par value
of US$0.01 of the Corporation as currently constituted;
(f) "Corporation" means Allegiant Technologies Inc.;
(g) "Eligible Person" means, subject to all applicable laws,
any director, officer or employee of the Corporation or
any of its affiliated companies;
(h) "Insider" means an insider as defined under section 1(1)
of the Act;
(i) "Option" means an option to purchase Common Shares
granted to an Eligible Person pursuant to the terms of
the Plan;
(j) "Participant" means Eligible Persons to whom Options have
been granted;
(k) "Plan" means this Incentive Stock Option Plan of the
Corporation;
(l) "Share Compensation Arrangement" means any stock option,
stock option plan, employee stock purchase plan or any
other compensation or incentive mechanism involving the
issuance or potential issuance of Common Shares,
including a share purchase from treasury which is
financially assisted by the Corporation by way of a loan,
guarantee or otherwise; and
(m) "Termination Date" means the date on which a Participant
ceases to be an Eligible Person.
1.2 Use of terms - Words importing the singular number only shall
include the plural and vice versa and words importing the masculine
shall include the feminine.
1.3 Governing law - This Plan and all matters to which reference
is made herein shall be governed by and interpreted in accordance
with the laws of the State of Washington and the federal laws of
the United States applicable therein.
2. PURPOSE AND ADMINISTRATION
2.1 Purpose - The purpose of the Plan is to advance the interests
of the Corporation by:
(a) providing Eligible Persons with additional incentive,
(b) encouraging stock ownership by such Eligible Persons,
(c) increasing the proprietary interest of Eligible Persons
in the success of the Corporation,
(d) encouraging the Eligible Person to remain with the
Corporation or its affiliated companies, and
(e) attracting new employees and officers.
2.2 Administration - The Plan shall be administered by the Board
or a committee of the Board duly appointed for this purpose by the
Board and consisting of not less than three directors. If a
committee is appointed for this purpose, all references to the
Board will be deemed to be references to the committee. Subject to
the limitations of the Plan, the Board shall have the authority:
(a) to grant Options to purchase Common Shares to Eligible
Persons,
(b) to determine the terms, limitations, restrictions and
conditions respecting such grants,
(c) to interpret the Plan and to adopt, amend and rescind
such administrative guidelines and other rules and
regulations relating to the Plan as it shall from time to
time deem advisable, and
(d) to make all other determinations and to take all other
actions in connection with the implementation and
administration of the Plan as it may deem necessary or
advisable.
<PAGE>
The Board's guidelines, rules, regulations, interpretations and
determinations shall be conclusive and binding upon the Corporation
and all other persons.
3. RESERVATION OF SHARES
3.1 Maximum number - The maximum number of Common Shares which may
be reserved for issuance for all purposes under the Plan shall be
1,972,200 Common Shares or such greater number as may be approved
from time to time by the shareholders of the Corporation.
Any Common Shares subject to an Option which for any reason is
cancelled or terminated without having been exercised, shall again
be available for grant under the Plan.
3.2 Per person - The maximum number of Common Shares which may be
reserved for issuance under Options to any one person at any time
under the Plan shall be 5% of the Common Shares outstanding at the
time of the grant (on a non-diluted basis) less the aggregate
number of Common Shares reserved for issuance to such person under
any other option to purchase Common Shares from treasury granted to
a compensation or incentive mechanism.
3.3 Capital alterations - If there is a change in the outstanding
Common Shares by reason of any stock dividend or any
recapitalization, amalgamation, subdivision, consolidation,
combination or exchange of shares, or other corporate change, the
Board shall make, subject to the prior approval of the relevant
stock exchanges, appropriate substitution or adjustment in
(a) the number or kind of shares or other securities reserved
for issuance pursuant to the Plan, and
(b) the number and kind of shares subject to unexercised
Options theretofore granted and in the option price of
such shares;
provided, however, that no substitution or adjustment shall
obligate the Corporation to issue or sell fractional shares. If
the Corporation is reorganized, amalgamated with another
corporation or consolidated, the Board shall make such provisions
for the protection of the rights of Participants at the Board in
its discretion deems appropriate.
4. TERM AND TERMINATION
4.1 Effective Date - The Plan shall be effective upon the approval
of the Plan by the Vancouver Stock Exchange. All incentive stock
options granted by the Corporation prior to the approval date shall
<PAGE>
be deemed to form part of and to comply with the provisions of this
Plan.
4.2 Amend or terminate Plan - The Board may amend, suspend or
terminate the Plan or any portion thereof at any time in accordance
with applicable legislation, and subject to any required regulatory
or shareholder approval. No such amendment, suspension or
termination shall alter or impair any Options or any rights
pursuant thereto granted previously to any Participant without the
consent of such Participant.
4.3 Continuing effect - If the Plan is terminated, the provision
of the Plan and any administrative guidelines, and other rules and
regulations adopted by the Board and in force at the time of the
Plan shall continue in effect during such time as an Option or any
rights pursuant thereto remain outstanding.
4.4 Amend existing Option - With the consent of the affected
Participants, the Board may amend or modify any outstanding Option
in any manner to the extent that the Board would have had the
authority to initially grant such award as so modified or amended,
including without limitation, to change the date or dates as of
which an Option becomes exercisable, subject to the prior approval
of the relevant stock exchanges.
5. COMPLIANCE WITH LEGISLATION
5.1 Applicable laws - The Plan, the grant and exercise of Options
hereunder and the Corporation's obligation to sell and deliver
Common Shares upon exercise of Options, shall be subject to all
applicable federal, state, provincial and foreign laws, rules and
regulations, the rules and regulations of any stock exchange on
which the Common Shares are listed for trading and to such
approvals by any regulatory or governmental agency as may, in the
opinion of counsel to the Corporation, be required.
The Corporation shall not be obliged by provision of the Plan or
the grant of any Option hereunder to issue or sell Common Shares in
violation of such laws, rules and regulations or any condition of
such approvals.
5.2 Void where applicable - No Option shall be granted and no
Common Shares issued or sold hereunder where such grant, issue or
sale would require registration of the Plan or of Common Shares
under the securities laws of any foreign jurisdiction and any
purported grant of any Option nor issue or sale of Common Shares
hereunder in violation of this provision shall be void.
5.3 Listing on stock exchange - The Corporation shall have no
obligation to issue any Common Shares pursuant to the Plan unless
such Common Shares shall have been duly listed, upon official
notice of issuance, with all stock exchanges on which the Common
Shares are listed for trading.
5.4 Resale restrictions - Common Shares issued and sold to
Participants pursuant to the exercise of Options may be subject to
limitations on sale or resale under applicable securities laws. In
particular, if Options are granted to any resident or citizen of
the United States, the Board and the Corporation will use their
best efforts to ensure that all matters pertaining to such Option
shall be made in compliance with applicable United States
securities laws.
6. TERMS OF OPTIONS
6.1 Grant of Options - Subject to the provisions of the Plan, the
Board shall have the authority to determine the limitations,
restrictions and conditions, if any, in addition to those set forth
in this Part, applicable to the exercise of an Option, including,
without limitation:
(a) the nature and duration of the restrictions, if any, to
be imposed upon the exercise of the Option or the sale or
other disposition of Common Shares acquired upon exercise
of the Option, and
(b) the nature of the events, if any, and the duration of the
period in which any Participant's rights in respect of
Common Shares acquired upon exercise of an Option may be
forfeited, with the discretion in the Board to modify or
rescind such restrictions in the event of certain
corporate development such as a take over bid,
reorganization, merger, change in capital or
amalgamations.
An Eligible Person may receive Options on more than one occasion
under the Plan and may receive separate Options on any one
occasion.
6.2 Option Price - The Board shall establish the option price at
the time each Option is granted, which shall in all cases be not
less than the closing price of the Common Shares on the Vancouver
Stock Exchange on the trading day immediately preceding the date of
the grant. The Option price shall be subject to adjustment in
accordance with the provisions of section 3.3.
6.3 Term of Options - Options granted must terminate no later than
10 years after the date of grant or such lesser period as may be
determined by the Board.
6.4 When exercisable - The Board may determine when any Option
will become exercisable, provided that each Option must be subject
to a vesting schedule under which not more than 25% of the initial
aggregate number of Common Shares which may be purchased under the
Option may vest in any 12 month period, on a cumulative basis.
6.5 No fractional shares - No fractional Common Shares shall be
issued upon the exercise of options granted under the Plan and
accordingly, if a Participant would become entitled to a fractional
Common Share upon the exercise of an Option, such Participant shall
only have the right to purchase the next lowest whole number of
Common Shares and no payment or other adjustment will be made with
respect to the fractional interest so disregarded.
6.6 Non-transferable - Options shall not be transferable by the
Participant otherwise than by will or the laws of descent and
distribution, and shall be exercisable during the lifetime of a
Participant only by the Participant and after death only by the
Participant's legal representative.
6.7 Cease to be Eligible Person - Subject to section 6.3 and
except as otherwise determined by the Board:
(a) if a Participant ceases to be an Eligible Person for any
reason whatsoever other than death, each Option held by
the Participant will cease to be exercisable 30 days
after the Termination Date. If any portion of an Option
is not vested by the Termination Date, that portion of
the Option may not under any circumstances be exercised
by the Participant;
(b) if a Participant dies, the legal representative of the
Participant may exercise the Participant's Options within
twelve months after the date of the Participant's death,
but only to the extent the Options were by their terms
exercisable on the date of death.
Without limitation, and for greater certainty only, paragraph (a)
of this section will apply regardless of whether the Participant
was dismissed without or without cause and regardless of whether
the Participant received compensation in respect of dismissal or as
entitled to a period of notice of termination which would otherwise
have permitted a greater portion of the Option to vest with the
Participant.
6.8 Option agreement - Each Option shall be confirmed by an option
agreement executed by the Corporation and by the Participant.
6.9 Payment of exercise price - The exercise price of each Common
Share purchased under an Option shall be paid in full in cash or by
bank draft or certified cheque at the time of such exercise, and
upon receipt of payment in full, but subject to the terms of the
Plan, the number of Common Shares in respect of which the Option is
exercised shall be duly issued as fully paid and non-assessable.
7. GENERAL
7.1 Other arrangements - Nothing contained herein shall prevent
the Board from adopting other or additional compensation
arrangements, subject to any required approval.
7.2 No rights as shareholder - Nothing contained in the Plan nor
in any Option granted thereunder shall be deemed to give any
Participant any interest or title in or to any Common Shares of the
Corporation or any rights as a shareholder of the Corporation or
any other legal or equitable right against the Corporation
whatsoever other than as set forth in the Plan and pursuant to the
exercise of any Option.
7.3 Continuing services as director or employee - The Plan does
not give any Participant or any employee of the Corporation or any
of its associated, affiliated, subsidiary or controlled companies
the right or obligation to or to continue to serve as a director,
officer of employee, as the case may be, of the Corporation or any
of its affiliated companies.
7.4 No fettering of discretion - The awarding of Options to any
Eligible Person is a matter to be determined solely in the
discretion of the Board. The Plan shall not in any way fetter,
limit, obligate, restrict or constrain the Board with regard to the
allotment or issue of any Common Shares or any other securities in
the capital of the Corporation or any of its subsidiaries other
than as specifically provided for in the Plan.
ROYALTY TERMINATION AGREEMENT
THIS AGREEMENT is entered into this ___ day of January, 1995
between ALLEGIANT TECHNOLOGIES INC. (the "Company") and
WILLIAM C. APPLETON ("Appleton").
RECITALS
A. The Company and Appleton entered into a Consulting
Agreement on the 8th day of July, 1994 (the "Consulting
Agreement") which provides, in part, for the payment of a
royalty by the Company to Appleton equal to 4% of Net Product
Revenues from the sale or licence of the Program (as those
terms are defined in the Consulting Agreement); and
B. The Company has elected, pursuant to section 2(c) of the
Consulting Agreement, to terminate Appleton's right to receive
royalties and Appleton has agreed to such termination, upon
and subject to the terms and conditions of this Agreement.
AGREEMENT
NOW THEREFORE for good and valuable consideration (the receipt
and sufficiency of which are hereby acknowledged), the parties
agree as follows:
1. Termination of Royalty
The Company and Appleton agree that Appleton's right to
receive royalties pursuant to section 2(b) of the Consulting
Agreement shall terminate effective January 31, 1995.
2. Termination Payment
The Company shall pay the sum of $100,000 (the "Termination
Payment") to Appleton. Notwithstanding section 2(c) of the
Consulting Agreement, the Termination Payment shall be made in
equal monthly instalments of $4,568 on the first day of each
month, inclusive of interest calculated at nine percent per
annum, commencing on March 1, 1995 and ending on February 1,
1997.
3. Promissory Note
As evidence of its indebtedness to Appleton, the Company
hereby delivers to Appleton a promissory notice (the "Note")
in the principal amount of $100,000 in favour of Appleton.
Appleton agrees to surrender the Note to the Company for
cancellation upon receipt of the Termination Payment in full.
4. Default
If the Company fails to make any payment within 30 days after
its due date, Appleton may declare the then outstanding
principal balance of the Termination Payment, together with
interest accrued thereon, to be immediately due and payable.
5. Accrued Royalties
The Company shall prepare and deliver to Appleton, on or
before April 3, 1995, a report of all sales of SuperCard and
all royalties due to Appleton under the Consulting Agreement
for the period from January 5, 1994 through January 31, 1995.
All royalties accrued pursuant to section 2(b) of the
Consulting Agreement up to the close of business on January
31, 1995, less adjustments for any refunds or credits made for
returned or defective products through March 31, 1995, will be
due for payment to Appleton at the close of business on April
3, 1995.
6. Release by Appleton
Contingent and effective upon Appleton's receipt of the
Termination Payment in full, Appleton hereby releases, waives
and forever discharges the Company from any and all claims,
demands, liabilities of any kind or nature whatsoever arising
from this Agreement and from section 2(b) of the Consulting
Agreement.
7. Consulting Agreement
Except as provided for herein, the Consulting Agreement
remains in full force and effect as a binding and enforceable
agreement.
8. Enurement
This Agreement is binding on the parties and their respective
heirs, executors, successors and assigns.
9. Governing Law
This Agreement shall be governed by the laws of the State of
California.
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first above written.
__________________________
William C. Appleton
ALLEGIANT TECHNOLOGIES INC.
per:
__________________________
Joel B. Staadecker, President ALL200.140<PAGE>
PROMISSORY NOTE
FOR VALUE RECEIVED Allegiant Technologies Inc. (the "Company")
acknowledges that it is indebted and hereby promises to pay to
William C. Appleton ("Appleton"), having an office at 4 Market
Square, Knoxville, TN 37902, in accordance with the provisions
of the Royalty Termination Agreement (the "Agreement") dated
the ___ day of January, 1995, between the Company and
Appleton, the principal sum of ONE HUNDRED THOUSAND DOLLARS
($100,000) with interest thereon calculated at nine (9%)
percent per annum.
Interest is payable at the said rate both before and after
maturity and both before and after default. The principal
amount due hereunder may be prepaid at any time, without
notice, bonus or penalty.
This note evidences indebtedness incurred under, and is
subject to the terms and provisions of the Agreement and all
amendments thereto, pursuant to which the indebtedness
evidenced hereby may become payable at any time.
Presentment, protest, notice of protest and notice of
dishonour are hereby waived.
ALLEGIANT TECHNOLOGIES INC.
per:
___________________________
Joel B. Staadecker
ESCROW AGREEMENT
THIS AGREEMENT is dated for reference March ________, 1994
AMONG:
MONTREAL TRUST COMPANY OF CANADA, a British
Columbia company having an office at 510
Burrard Street, Vancouver, British Columbia,
V6C 3B9
(the "Escrow Agent")
AND:
ALLEGIANT TECHNOLOGIES, INC., a company
incorporated under the laws of the State of
Washington having an office at Suite 1325,
1411 Fourth Avenue Building, Seattle,
Washington, 98101
(the "Issuer")
AND: EACH SHAREHOLDER, as defined in this Agreement
(collectively, the "Parties").
WHEREAS the Shareholder has acquired or is about to acquire shares
of the Issuer;
AND WHEREAS the Escrow Agent has agreed to act as escrow agent in
respect of the shares upon the acquisition of the shares by the
Shareholder;
NOW THEREFORE THIS AGREEMENT WITNESSES that in consideration of the
covenants contained in this agreement and other good and valuable
consideration (the receipt and sufficiency of which is
acknowledged), the Parties agree as follows:
1. INTERPRETATION
In this agreement:
(a) "Acknowledgement" means the acknowledgement and agreement
to be bound in the form attached as Schedule A to this
agreement;
(b) "Act" means the Securities Act, S.B.C. 1985, c. 83;
(c) "Exchange" means the Vancouver Stock Exchange;
(d) "IPO" means the initial public offering of common shares
of the Issuer under a prospectus which has been filed
with, and for which a receipt has been obtained from, the
Superintendent under section 42 of the Act;
(e) "Local Policy Statement 3-07" means the Local Policy
Statement 3-07 in effect as of the date of reference of
this agreement and attached as Schedule B to this
agreement;
(f) "Shareholder" means a holder of shares of the Issuer who
executes this agreement or an Acknowledgement;
(g) "Shares" means the shares of the Shareholder described in
Schedule C to this agreement, as amended from time to
time in accordance with section 9;
(h) "Superintendent" means the Superintendent of Brokers
appointed under the Act; and
(i) "Superintendent or the Exchange" means the
Superintendent, if the shares of the Issuer are not
listed on the Exchange, or the Exchange, if the shares of
the Issuer are listed on the Exchange.
2. PLACEMENT OF SHARES IN ESCROW
The Shareholder places the Shares in escrow with the Escrow Agent
and shall deliver the certificates representing the Shares to the
Escrow Agent as soon as practicable.
3. VOTING OF SHARES IN ESCROW
Except as provided by section 4(a), the Shareholder may exercise
all voting rights attached to the Shares.
4. WAIVER OF SHAREHOLDER'S RIGHTS
The Shareholder waives the rights attached to the Shares
(a) to vote the Shares on a resolution to cancel any of the
Shares,
(b) to receive dividends, and
(c) to participate in the assets and property of the Issuer
on a winding up or dissolution of the Issuer.
5. ABSTENTION FROM VOTING AS A DIRECTOR
A Shareholder that is or becomes a director of the Issuer shall
abstain from voting on a directors' resolution to cancel any of the
Shares.
6. TRANSFER WITHIN ESCROW
(1) The Shareholder shall not transfer any of the Shares except in
accordance with Local Policy Statement 3-07 and with the
consent of the Superintendent or the Exchange.
(2) The Escrow Agent shall not effect a transfer of the Shares
within escrow unless the Escrow Agent has received
(a) a copy of an Acknowledgement executed by the person to
whom the Shares are to be transferred, and
(b) a letter from the Superintendent or the Exchange
consenting to the transfer.
(3) Upon the death or bankruptcy of a Shareholder, the Escrow
Agent shall hold the Shares subject to this agreement for the
person that is legally entitled to become the registered owner
of the Shares.
(4) A Shareholder who ceases to be a principal, as that term is
defined in Local Policy Statement 3-07, dies or becomes
bankrupt, shall be entitled to retain any Shares then held by
him and shall not be obligated to transfer or surrender the
Shares to the Company or any other person except as provided
for in any additional agreements the Shareholder may have
entered into.
7. RELEASE FROM ESCROW
(1) The Shareholder irrevocably directs the Escrow Agent to retain
the Shares until the Shares are released from escrow pursuant
to subsection (2) or surrendered for cancellation pursuant to
section 8.
(2) The Escrow Agent shall not release the Shares from escrow
unless the Escrow Agent has received a letter from the
Superintendent or the Exchange consenting to the release.
(3) The approval of the Superintendent or the Exchange to a
release from escrow of any of the Shares shall terminate this
agreement only in respect of the Shares so released.
8. SURRENDER FOR CANCELLATION
The Shareholder shall surrender the Shares for cancellation and the
Escrow Agent shall deliver the certificates representing the Shares
to the Issuer:
(a) at the time of a major reorganization of the Issuer, if
required as a condition of the consent to the
reorganization by the Superintendent or the Exchange,
(b) where the Issuer's shares have been subject to a cease
trade order issued under the Act for a period of 2
consecutive years,
(c) 10 years from the later of the date of issue of the
Shares and the date of the receipt for the Issuer's
prospectus on its IPO, or
(d) where required by section 6(4).
9. AMENDMENT OF AGREEMENT
(1) Subject to subsection (2), this agreement may be amended only
by a written agreement among the Parties and with the written
consent of the Superintendent or the Exchange.
(2) Schedule C to this agreement shall be amended upon
(a) a transfer of Shares pursuant to section 6,
(b) a release of Shares from escrow pursuant to section 7, or
(c) a surrender of Shares for cancellation pursuant to
section 8,
and the Escrow Agent shall note the amendment on the Schedule C in
its possession.
10. INDEMNIFICATION OF ESCROW AGENT
The Issuer and the Shareholders, jointly and severally, release,
indemnify and save harmless the Escrow Agent from all costs,
charges, claims, demands, damages, losses and expenses resulting
from the Escrow Agent's compliance in good faith with this
agreement.
11. RESIGNATION OF ESCROW AGENT
(1) If the Escrow Agent wishes to resign as escrow agent in
respect of the Shares, the Escrow Agent shall give notice to
the Issuer.
(2) If the Issuer wishes the Escrow Agent to resign as escrow
agent in respect of the Shares, the Issuer shall give notice
to the Escrow Agent.
(3) A notice referred to in subsection (1) or (2) shall be in
writing and delivered to
(a) the Issuer at:
Allegiant Technologies, Inc.
Suite 1325, 1411 Fourth Avenue Building
Seattle, Washington
98101
Attention: The President
(b) the Escrow Agent at:
Montreal Trust Company of Canada
510 Burrard Street
Vancouver, British Columbia
V6C 3B9
Attention: Stock Transfer
and the notice shall be deemed to have been received on the
date of delivery. The Issuer or the Escrow Agent may change
its address for notice by giving notice to the other party in
accordance with this subsection.
(4) A copy of a notice referred to in subsection (1) or (2) shall
concurrently be delivered to the Superintendent or the
Exchange.
(5) The resignation of the Escrow Agent shall be effective and the
Escrow Agent shall cease to be bound by this agreement on the
date that is 180 days after the date of receipt of the notice
referred to in subsection (1) or (2) or on such other date as
the Escrow Agent and the Issuer may agree upon (the
"resignation date").
(6) The Issuer shall, before the resignation date and with the
written consent of the Superintendent or the Exchange, appoint
another escrow agent and that appointment shall be binding on
the Issuer and the Shareholders.
12. FURTHER ASSURANCES
The Parties shall execute and deliver any documents and perform any
acts necessary to carry out the intent of this agreement.
13. TIME
Time is of the essence of this agreement.
14. GOVERNING LAWS
This agreement shall be construed in accordance with and governed
by the laws of British Columbia and the laws of Washington
applicable in British Columbia
15. COUNTERPARTS
This agreement may be executed in two or more counterparts, each of
which shall be deemed to be an original and all of which shall
constitute one agreement.
16. LANGUAGE
Wherever a singular expression is used in this agreement, that
expression is deemed to include the plural or the body corporate
where required by the context.
17. ENUREMENT
This Agreement enures to the benefit of and is binding on the
Parties and their heirs, executors, administrators, successors and
permitted assigns.
IN WITNESS WHEREOF the Parties have executed and delivered this
agreement as of the date of reference of this agreement.
The Corporate/Common Seal of )
MONTREAL TRUST COMPANY OF )
CANADA was affixed in the )
presence of: )
)
) c/s
Authorized Signatory )
)
)
Authorized Signatory )
The Corporate/Common Seal of )
ALLEGIANT TECHNOLOGIES, was )
INC. affixed in the presence )
of: )
)
) c/s
Authorized Signatory )
)
)
Authorized Signatory )
SIGNED, SEALED and DELIVERED )
by in the )
presence of: )
)
_________________________ ) _____________________
Witness )
SIGNED, SEALED and DELIVERED )
by in the )
presence of: )
)
_________________________ ) _____________________
Witness )
SIGNED, SEALED and DELIVERED )
by in the )
presence of: )
)
_________________________ ) _____________________
Witness )
SIGNED, SEALED and DELIVERED )
by in the )
presence of: )
)
_________________________ ) _____________________
Witness )
SIGNED, SEALED and DELIVERED )
by in the )
presence of: )
)
_________________________ ) _____________________
Witness )
SIGNED, SEALED and DELIVERED )
by in the )
presence of: )
)
_________________________ ) _____________________
Witness )
SIGNED, SEALED and DELIVERED )
by in the )
presence of: )
)
_________________________ ) _____________________
Witness )
SIGNED, SEALED and DELIVERED )
by in the )
presence of: )
)
_________________________ ) _____________________
Witness )
SIGNED, SEALED and DELIVERED )
by in the )
presence of: )
)
_________________________ ) _____________________
Witness )
SIGNED, SEALED and DELIVERED )
by in the )
presence of: )
)
_________________________ ) _____________________
Witness )
SIGNED, SEALED and DELIVERED )
by in the )
presence of: )
)
_________________________ ) _____________________
Witness )
SIGNED, SEALED and DELIVERED )
by in the )
presence of: )
)
_________________________ ) _____________________
Witness )
SIGNED, SEALED and DELIVERED )
by in the )
presence of: )
)
_________________________ ) _____________________
Witness )
SIGNED, SEALED and DELIVERED )
by in the )
presence of: )
)
_________________________ ) _____________________
Witness )
SIGNED, SEALED and DELIVERED )
by in the )
presence of: )
)
_________________________ ) _____________________
Witness )
EXECUTED by 388469 B.C. LTD. ) 388469 B.C. LTD.
in the presence of: ) per:
)
_________________________ ) _____________________
Witness ) Authorized Signatory
EXECUTED by PETERSEN ) PETERSEN MANAGEMENT INC.
MANAGEMENT INC. in the ) per:
presence of: )
)
_________________________ ) _____________________
Witness ) Authorized Signatory
SCHEDULE A TO ESCROW AGREEMENT
ACKNOWLEDGEMENT AND AGREEMENT TO BE BOUND
TO: Superintendent of Brokers or Vancouver Stock Exchange
#1100-865 Hornby Street 609 Granville Street
Vancouver, B. C. Vancouver, B. C.
V6Z 2H4 V7Y 1H1
(if the shares are not (if the shares are listed
listed on the VSE) on the VSE)
I acknowledge that
(a) I have entered into an agreement with
under which shares of Allegiant Technologies,
Inc. (the "Shares") will be transferred to me upon receipt of
regulatory approval, and
(b) the Shares are held in escrow subject to an escrow agreement
dated for reference , 19 (the "Escrow
Agreement"), a copy of which is attached as Schedule A to this
acknowledgement.
In consideration of $1.00 and other good and valuable consideration
(the receipt and sufficiency of which is acknowledged) I agree,
effective upon receipt of regulatory approval of the transfer to me
of the Shares, to be bound by the Escrow Agreement in respect of
the Shares as if I were an original signatory to the Escrow
Agreement.
Dated at on 19 .
Where the transferee is an individual:
Signed, sealed and delivered )
by [transferee] in the )
presence of: )
)
)
Name )
)
)
Address ) [Shareholder]
)
)
)
)
Occupation
Where the transferee is a company:
The Corporate/Common Seal of )
[transferee] was affixed )
in the presence of: )
)
) c/s
Authorized Signatory )
)
)
Authorized Signatory )
SCHEDULE B TO ESCROW AGREEMENT
Local Policy Statement 3-07
(full copy to be appended)
SCHEDULE C TO ESCROW AGREEMENT
NAME OF SHAREHOLDER NUMBER OF SHARES HELD IN ESCROW
Joel B. Staadecker 350,000
Stuart Henigson 300,000
Gary Poppitz 100,000
Tommy J. H. Lee 175,000
Christopher Watson 75,000
Roger Locke 90,000
Wei Tan 40,000
C. Kevin La Rue 60,000
Kevin Ostrom 10,000
William Appleton 100,000
388469 B.C. Ltd. 350,000
Petersen Management Inc. 350,000
2,000,000
INDEMNITY AGREEMENT
This Indemnity Agreement is made and entered into as of the ____ day of
December, 1995 by and between ALLEGIANT TECHNOLOGIES, INC., a Washington
corporation (the "Company"), and ____________________ ("Indemnitee").
WHEREAS, Indemnitee is currently serving as a director, officer,
employee and the Company wishes Indemnitee to continue in such capacity(ies);
WHEREAS, the Articles of Incorporation (the "Articles") and the Bylaws
(the "Bylaws") of the Company each provide that the Company shall indemnify,
in the manner and to the fullest extent permitted by the Washington Business
Corporation Act (the "WBCA"), certain persons, including directors, officers,
employees or agents of the Company, against specified expenses and losses
arising out of certain threatened, pending or completed actions, suits or
proceedings;
WHEREAS, the Company, in order to induce Indemnitee to continue to serve
in such capacity, has agreed to provide Indemnitee with the benefits
contemplated by this Indemnity Agreement, and as a result of the provision
of such benefits, Indemnitee has agreed to continue to serve in such
capacity; and
WHEREAS, the Articles and Bylaws each expressly recognizes that such
indemnification provisions shall not be deemed exclusive of, and shall not
affect, any other rights to which a person seeking indemnification may be
entitled under any agreement, including this Indemnity Agreement.
NOW, THEREFORE, in consideration of the promises, conditions and
representations set forth herein, the Company and Indemnitee hereby agree
as follows:
Section 1. Definitions. The following terms, as used herein, shall
have the following meanings:
(a) "Covered Claim" shall mean any threatened, pending or completed
claim, action, suit or proceeding against Indemnitee based upon or arising
out of any past, present or future act, omission, neglect or breach of duty,
including, without limitation, any actual or alleged error, omission,
misstatement or misleading statement, that Indemnitee may commit or suffer
while serving in his or her capacity as a director, officer, employee
and/or agent of the Company and/or, at the Company's request, as a director,
officer, employee, trustee and/or agent of another corporation, partnership,
joint venture, trust or other enterprise (including, without limitation,
employee benefit plans and administrative committees thereof), provided
that such claim:
(i) is not solely based upon and does not arise solely out of
Indemnitee gaining in fact any personal profit or advantage to which
Indemnitee is not legally entitled;
(ii) is not for an accounting of profits made from the purchase
or sale by Indemnitee of securities of the Company within the meaning of
Section 16(b) of the Securities Exchange Act of 1934, as amended, or
similar provisions of any state law; and
(iii)is not based solely upon and does not arise solely out of
Indemnitee's knowingly fraudulent, deliberately dishonest or willful
misconduct.
(b) "Determination" shall mean a determination, based upon the
facts known at the time, made by:
(i) the Board of Directors of the Company, by the vote of a
majority of the directors who are not parties to the action, suit or proceeding
in question, at a meeting at which there is a quorum consisting solely of such
disinterested directors;
(ii) if such a quorum is not obtainable, or, even if
obtainable, if directed by a majority of such disinterested directors at a
meeting of the Board of Directors of the Company at which there is a quorum
consisting solely of such disinterested directors, by independent legal
counsel in a written opinion;
(iii) the stockholders of the Company; or
(iv) a court of competent jurisdiction in a final,
nonappealable adjudication.
(c) "Payment" shall mean any and all amounts that Indemnitee is or
becomes legally obligated to pay in connection with a Covered Claim, including,
without limitation, damages, judgments, amounts paid in settlement, reasonable
costs ofinvestigation, reasonable fees of attorneys, costs of investigative,
judicial or administrative proceedings or appeals, costs of attachment or
similar bonds, fines, penalties, excise taxes assessed with respect to employee
benefit plans, and any expenses of establishing a right to indemnification
under this Indemnity Agreement.
Section 2. Indemnification. The Company shall indemnify and
hold harmless Indemnitee against and from any and all Payments to the
extent that:
(a) The Company shall not have advanced expenses to Indemnitee
pursuant to the provisions of Article IX of the Company's Bylaws or
otherwise and no determination shall have been made pursuant to
such Article or the WBCA that the Indemnitee is not entitled to
indemnification;
(b) Indemnitee shall not already have received payment on account of
such Payments pursuant to one or more valid and collectible insurance policies;
and
(c) Such indemnification by the Company is not unlawful.
Notwithstanding anything contained in this Indemnity Agreement to the contrary,
except for proceedings to enforce rights to indemnification or advancement of
expenses pursuant to Section 4 hereof, the Company shall have no obligation
to indemnify Indemnitee in connection with a proceeding (or part thereof)
initiated by Indemnitee unless such proceeding (or part thereof) was
authorized or consented to by the Board of Directors of the Company. Further,
the Company shall have no obligation to indemnify Indemnitee under this
Indemnity Agreement for any amounts paid in a settlement of any action,
suit or proceeding effected without the Company's prior written consent,
which consent shall not be unreasonably withheld. The Company shall not
settle any claim in any manner that would impose any obligation on
Indemnitee without Indemnitee's prior written consent. Indemnitee shall
not unreasonably withhold his or her consent to any proposed settlement.
Section 3. Indemnification Procedure; Advancements of Costs and Expenses.
(a) Promptly after receipt by Indemnitee of notice of the
commencement or threat of commencement of any action, suit or proceeding,
Indemnitee shall, if indemnification with respect thereto may be sought
from the Company under this Indemnity Agreement, notify the Company
thereof in writing in the manner set forth in Section 9 hereof.
(b) If at the time of receipt of such notice the Company has
directors' and officers' liability insurance in effect, the Company shall
give prompt notice of the commencement of such action, suit or proceeding
to the insurers in accordance with the procedures set forth in the
respective policies in favor of Indemnitee. The Company shall
thereafter take all necessary or desirable action to cause such insurers to
pay, on behalf of Indemnitee, all Payments payable as a result of such action,
suit or proceeding in accordance with the terms of such policies.
(c) All costs and expenses, including reasonable fees of
attorneys, incurred by Indemnitee in defending or investigating such
action, suit or proceeding shall be paid by the Company in advance of
the final disposition of such action, suit or proceeding; provided,
however, that no such costs or expenses shall be paid by the Company if,
with respect to such action, suit or proceeding, a Determination is
made that:
(i) Indemnitee did not act in good faith and in a
manner Indemnitee reasonably believed to be in or not opposed to the
best interests of the Company;
(ii) in the case of any criminal action or proceeding,
Indemnitee had reasonable cause to believe his or her conduct was
unlawful; or
(iii)Indemnitee intentionally breached his or her duty to the
Company or its stockholders.
Indemnitee hereby undertakes to and agrees that he or she will repay the
Company for any costs or expenses advanced by or on behalf of the
Company pursuant to this Section 3(c) if it shall ultimately be determined
by a court of competent jurisdiction in a final, nonappealable adjudication
that Indemnitee is not entitled to indemnification under this Indemnity
Agreement.
(d) If the Company shall advance the costs and expenses of any
such action, suit or proceeding pursuant to Section 3(c) of this Indemnity
Agreement, it shall be entitled to assume the defense of such action, suit or
proceeding, if appropriate, with counsel reasonably satisfactory to
Indemnitee, upon delivery to Indemnitee of written notice of its
election so to do. After delivery of such notice, the Company shall not be
liable to Indemnitee under this Indemnity Agreement for any costs or expenses
subsequently incurred by Indemnitee in connection with such defense other than
reasonable costs and expenses of investigation; provided, however, that:
(i) Indemnitee shall have the right to employ separate counsel
in any such action, suit or proceeding provided that the fees and expenses of
such counsel incurred after delivery of notice by the Company of its assumption
ofsuch defense shall be at Indemnitee's own expense; and
(ii) the fees and expenses of counsel employed by Indemnitee
shall be at the expense of the Company if (aa) the employment of counsel by
Indemnitee has previously been authorized by the Company, (bb) Indemnitee shall
have reasonably concluded that there may be a conflict of interest between
the Company and Indemnitee in the conduct of any such defense (provided
that the Company shall not be required to pay for more than one counsel to
represent two or more Indemnitees where such Indemnitees have reasonably
concluded that there is no conflict of interest among them in the conduct
of such defense), or (cc) the Company shall not, in fact, have employed
counsel to assume the defense of such action, suit or proceeding.
(e) All payments on account of the Company's advancement
obligations under Section 3(c) of this Indemnity Agreement shall be made
within twenty (20) days of Indemnitee's written request therefor. All
other payments on account of the Company's obligations under this
Indemnity Agreement shall be made within sixty (60) days of Indemnitee's
written request therefor, unless a Determination is made that the claims
giving rise to Indemnitee's request are not payable under this Indemnity
Agreement. Each request for payment hereunder shall be accompanied by
evidence reasonably satisfactory to the Company of Indemnitee's incurrence
of the costs and expenses for which such payment is sought.
Section 4. Enforcement of Indemnification; Burden of Proof.
(a) Notwithstanding that Section 1(b) grants to the Board of
Directors or the stockholders of the Company the power to make a
Determination, Indemnitee shall not be precluded from bringing an
action seeking a judicial determination that the Board of Directors or
stockholders of the Company did not act reasonably in making a determination,
including, but not limited to, a Determination to deny indemnification
pursuant to Section 3(c) hereof.
(b) If a claim for indemnification or advancement of costs and
expenses under this Indemnity Agreement is not paid in full by or on
behalf of the Company within the time period specified in Section 3(e)
of this Indemnity Agreement, Indemnitee may at any time thereafter
bring suit against the Company to recover the unpaid amount of such claim.
In any such action, the Company shall have the burden of proving that
indemnification is not required under this Indemnity Agreement. If it
is determined that the Company is required to pay some or all of the
unpaid amount of such claim to Indemnitee, the Company shall also pay to
Indemnitee, at the time the amount of such unpaid claim found to be
owing to Indemnitee is paid, interest on such amount at the "prime rate" in
effect at the time of such payment as announced by Seattle-First National
Bank plus 2% per annum from the date or dates such amount should have
been paid to Indemnitee pursuant to Section 3(e).
Section 5. Partial Indemnification. If the Indemnitee is entitled
under any provision of this Indemnity Agreement to indemnification by
the Company for some portion of any Payments, but not, however, for the
total amount thereof, the Company shall nevertheless indemnify the
Indemnitee for the portion of any such Payments to which the Indemnitee
is entitled.
Section 6. Employee Benefit Plans. The term "other enterprises," as
used in this Indemnity Agreement, shall include employee benefit plans
and any administrative committees thereof. All references in this
Indemnity Agreement to "serving ... at the Company's request"
shall include any service by Indemnitee as a director, officer, employee,
trustee and/or agent of the Company which imposes duties on, or
involves services by, Indemnitee with respect to an employee benefit
plan, its participants or beneficiaries. If Indemnitee acts in good
faith and in a manner he or she reasonably believes to be in the
interests of the participants and beneficiaries of any employee benefit
plan, then, for purposes of Section 3(c)(i) hereof, Indemnitee shall be
deemed to have acted in a manner he or she "reasonably believed to be
in or not opposed to the best interests of the Company."
Section 7. Rights Not Exclusive. The rights to indemnification
and advancement of costs and expenses provided hereunder shall not be
deemed exclusive of any other rights to which Indemnitee may be entitled
under any charter document, bylaw, agreement, vote of
stockholders or disinterested directors or otherwise.
Section 8. Subrogation. In the event of payment under this
Indemnity Agreement by or on behalf of the Company, the Company shall
be subrogated to the extent of such payment to all of the rights of
recovery of Indemnitee, who shall execute all papers that may be required
and shall do all things that may be necessary to secure such rights,
including, without limitation, the execution of such documents as may
be necessary to enable the Company effectively to bring suit to enforce
such rights.
Section 9. Notice of Claim. The Indemnitee, as a condition
precedent to his or her right to be indemnified under this Indemnity
Agreement, shah give to the Company notice in writing as soon as
practicable of any claim made against him or her for which indemnity
will or could be sought under this Indemnity Agreement. Notice to the
Company shall be given at its principal office and shall be directed to
the Corporate Secretary (or such other address as the Company shall
designate in writing to the Indemnitee); notice shall be deemed received
if sent by prepaid mail properly addressed, the date of such notice being
the date postmarked. In addition, the Indemnitee shall give the Company
such information and cooperation as it may reasonably require and as shall
be within the Indemnitee's power.
Section 10. Choice of Law. This Indemnity Agreement shall be
governed by and construed and enforced in accordance with the laws of
the State of Washington.
Section 11. Jurisdiction. The Company and Indemnitee hereby
irrevocably consent to the jurisdiction of the courts of the State of
Washington for all purposes in connection with any action, suit or
proceeding which arises out of or relates to this Indemnity Agreement,
and agree that any action instituted under this Indemnity Agreement
shall be brought only in the state courts of the State of Washington.
Section 12. Coverage. The provisions of this Indemnity Agreement
shall apply to the Indemnitee's service as a director, officer,
employee and/or agent of the Company and/or at the Company's request,
as a director, officer, employee, trustee and/or agent of another
corporation, trust or other enterprise with respect to all periods of
such service prior to and after the date of this Indemnity Agreement,
even though the Indemnitee may have ceased such service at the time
of indemnification hereunder.
Section 13. Attorneys' Fees. If any action, suit, or proceeding
is commenced in connection with or related to this Indemnity Agreement,
the prevailing party shall be entitled to have its costs and expenses,
including, without limitation, reasonable attorneys' fees and
reasonable out-of-pocket expenses of investigation, paid by the
losing party.
Section 14. Severability. In the event that any provision of
this Indemnity Agreement is determined by a court to require the
Company to do or to fail to do an act that is in violation of any
applicable law, such provision shall be limited or modified in its
application to the minimum extent necessary to avoid a violation of
law, and, as so limited or modified, such provision and the balance
of this Indemnity Agreement shall be enforceable in accordance with
their terms.
Section 15. Successors and Assigns. This Indemnity Agreement
shall be binding upon all successors and assigns of the Company,
including any transferee of all or substantially all of its assets
and any successor by merger or otherwise by operation of law, and shall
be binding upon and inure to the benefit of the heirs, executors and
administrators of Indemnitee.
Section 16. Descriptive Headings. The descriptive headings in
this Indemnity Agreement are included for the convenience of the
parties only and shall not affect the construction of this Indemnity
Agreement.
Section 17. Counterparts. This Indemnity Agreement may be executed
in two counterparts, both of which taken together shall constitute one
document.
Section 18. Amendment. No amendment, modification, termination or
cancellation of this Indemnity Agreement shall be effective unless
made in writing and signed by each of the parties hereto.
IN WITNESS WHEREOF, the Company and Indemnitee have executed this
Indemnity Agreement as of the day and year first above written.
ALLEGIANT TECHNOLOGIES INC.
By:_________________________________________
Name:_______________________________________
Title:______________________________________
INDEMNITEE
_____________________________________________
ALLEGIANT TECHNOLOGIES INC.
LOSS PER SHARE
DECEMBER 31, 1995
Shares Days Shares for
Issued Outstanding Calculation
Issued
December 31, 1993 1 - 1
February 4, 1994 1,999,999 330 1,808,218
March 31, 1994 644,000 275 485,205
May 31, 1994 410,000 214 240,384
December 31, 1994 580,000 1 1,589
---------- ----------
December 31, 1994 3,634,000 2,535,397
========== ==========
Issued
December 31, 1994 3,634,000 365 3,634,000
May 19, 1995 875,000 226 541,781
May 19, 1995 64,545 226 39,965
July 11, 1995 186,250 173 88,277
September 29, 1995 250,000 94 64,384
November 11, 1995 32,500 47 4,185
--------- ---------
5,042,295 4,372,592
========= =========
Loss per share: 1994 $ 626,698 + 2,535,397 = $0.25
1995 $1,057,366 + 4,372,592 = $0.24
Excludes the issuance of $2 million performance shares
May 29, 1996
Securities and Exchange Commission
450 Fifth Street N.W.
Judiciary Plaza
Washington, D.C.
U.S.A. 20549
Re: Allegiant Technologies, Inc.
Gentlemen:
We have read the disclosure contained in the Registration Statement
on Form SB-2 of Allegiant Technologies, Inc. under the heading
"Change of Accountants" and hereby inform you that we agree with
the statements contained therein.
Very truly yours,
/s/ Baker & Company
Baker & Company
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts"
and to the use of our report dated February 7, 1996, in the
Registration Statement (Form SB-2) and related Prospectus of
Allegiant Technologies, Inc. for the registration of 2,130,469
shares of its common stock.
/s/ Ernst & Young LLP
ERNST & YOUNG LLP
San Diego, California
June 28, 1996
CONSENT OF BAKER & COMPANY, INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts"
in the Registration Statement (Form SB-2) and related Prospectus of
Allegiant Technologies, Inc. and to the inclusion of our report
dated January 27, 1995, with respect to the financial statements
and schedules of Allegiant Technologies, Inc. for the year ended
December 31, 1994.
Baker & Company
/s/ Baker & Company
Vancouver, British Columbia
May 26, 1996