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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
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(Mark One)
[x] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934 [FEE REQUIRED]-For the fiscal year ended December 31, 1996.
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 [NO FEE REQUIRED]
Commission File Number: 0-26302
VIDEOLAN TECHNOLOGIES, INC.
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(Name of small business issuer in its charter)
Delaware 61-1283466
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(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
100 Mallard Creek Road Suite 250, Louisville, KY 40207
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(Address of principal executive offices) (Zip Code)
(502) 895-4858
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(Issuer's telephone number)
Securities registered under Section 12(b) of the Exchange Act: None
Securities registered under Section 12(g) of the Exchange Act:
Name of Each Exchange
Title of Each Class on Which Registered
- ------------------- -------------------
Common Stock, $0.01 par value per share Nasdaq
Redeemable Common Stock Purchase Warrants Nasdaq
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes x No
--- ---
Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B contained in this form, and no disclosure will be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB [x]
State issuer's revenues for its most recent fiscal year: $327,803
State the aggregate market value of the voting stock held by nonaffiliates of
the registrant computed by reference to the last sales price of the Common Stock
at March 14, 1997: $16,719,974
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: 14,050,398 shares of Common Stock
outstanding at March 14, 1997, and 3,134,000 Redeemable Common Stock Purchase
Warrants outstanding at March 14, 1997.
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INDEX
Page
PART I
Item 1. Description of Business............................................13
Item 2. Description of Property.............................................6
Item 3. Legal Proceedings...................................................6
Item 4. Submission of Matters to a Vote of Stockholders.....................6
PART II
Item 5. Market for Common Equity and Related Stockholder Matters............7
Item 6. Management's Discussion and Analysis or Plan of Operations..........7
Item 7. Financial Statements...............................................10
Item 8. Changes in and Disagreements With Accountants on Accounting
and Financial Disclosure.......................................10
PART III
Item 9. Directors, Executive Officers, Promoters and Control Persons;
Compliance with Section 16 (a) of the Exchange Act.............11
Item 10. Executive Compensation.............................................13
Item 11. Security Ownership of Certain Beneficial Owners and Management.....17
Item 12. Certain Relationships and Related Transactions.....................17
Item 13. Exhibits and Reports on Form 8-K...................................18
SIGNATURES 22
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This Form 10-KSB contains statements which may constitute "forward looking
statements" within the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as amended.
Those statements include statements regarding the intent, belief or current
expectations of the Company its management team. Prospective investors are
cautioned that any such forward-looking statements are not guarantees of future
performance and involve risks and uncertainties, and that actual results may
differ materially from those contemplated by such forward-looking statements.
Important factors currently known to management that could cause actual results
to differ materially from those in forward-looking statements are set forth in
the Safe Harbor Compliance Statement included as Exhibit 99 to this Form 10-KSB.
The Company undertakes no obligation to update or revise forward-looking
statements to reflect changed assumptions, the occurrence of unanticipated
events or changes to future operating results over time.
Item 1. Description of Business
VideoLan Technologies, Inc., ("the Company") has developed and is engaged
in the continuing development of transport and switch and communications
products which utilize the Company's proprietary technology to transmit and
receive real time, interactive, video, voice and data signals over two pairs of
unshielded twisted pair copper wire ("UTP"). The Company's initial product is a
stand-alone video, voice and data communications network solution (the "VideoLan
System") for the desktop personal computer ("PC"). The Company's business
strategy is to market the VideoLan System and to develop additional products
utilizing its proprietary technology. Since the Company's technology could be
adaptable to additional applications, including home to home video, voice and
data conferencing, it may undertake other initiatives in the future.
The VideoLan System consists of a package of components integrated into a
local area network ("LAN") or wide area network ("WAN") environment. Once
installed, users at their PCs can initiate and control multi-party, real time,
interactive, video, voice and data conferences. Up to four full motion (30
frames per second) video images can be displayed on the PC monitor, and multiple
real time data applications can be performed interactively. Users also can
access and control at their PCs the functionality of remote multimedia devices,
such as cameras, video monitors, video cassette recorders ("VCRs") and laser
discs. The VideoLan System is a PBX-like hub network, integrated into a LAN
environment, which transports uncompressed real time analog video, voice and
data signals independently of and parallel to the LAN. A communications network
solution, the VideoLan System accesses data from a client/server and transports
the data signals, along with the video and voice signals, using the existing LAN
UTP infrastructure. UTP has four pairs of wires (8 individual wires). The
VideoLan System transmits video, voice and data signals over one of the pairs,
while real time video, voice and data signals are received interactively over a
second pair. The LAN can use the remaining two pairs for data only applications.
The Company believes that the VideoLan System has a greater array of
features and is simpler and less expensive to install and integrate along side
of, and independent of, the LAN environment than competitive products. It allows
more users simultaneously to access and participate in conferences, using
multiple data and multimedia applications, without compromising the performance
of the LAN or the quality of the signals received. Designed with an open
architecture, the VideoLan System operates on IBM compatible PCs running
Microsoft(C) Windows(TM) operating software, and is capable of being equipped
with application programming interfaces which also adapt to support
MacIntosh(TM) and Unix(TM) software platforms.
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Marketing of the VideoLan System
The Company intends to market the VideoLan System to original equipment
manufacturers("OEMs"), value added resellers("VARs"), systems integrators and
distributors whose markets and market presence will provide significant sales
channels. The Company will also market directly to end users in targeted niche
markets. The Company has completed the initial phase of an extensive marketing
and competitive analysis survey in conjunction with a leading consulting firm.
As a result of the information derived from this study, the Company has targeted
specific vertical markets that should benefit from its broadband video
technology. These markets include telemedicine, distance learning and high end
business applications. As a result of targeting these markets, the Company has
systems presently sold to, or in evaluation at, a leading technology hospital, a
midwestern university and several military bases. The Company believes that by
targeting a broader market than the traditional desktop video conferencing
market, it can better position itself against the competition. In addition to
this traditional market, the Company's technology provides new opportunities for
image file transfer and real time business applications. These markets provide
the greatest opportunity for rapid growth at sustainable high margins.
Attributes of the VideoLan System
The Company believes that the desktop PC video, voice and data conferencing
products presently marketed use transport and switching technologies which
result in a wide range of performance characteristics, including differences in
video and voice quality, real time interactivity, the ability to run multiple
conferences or data applications simultaneously, the number of users that can
participate in a conference, and the degree of control which the users have over
the various elements of the conference. These products connect desktop PCs
through an integrated services digital network ("ISDN"), asynchronous transfer
mode ("ATM"), a LAN, or a PBX-like hub network in combination with a LAN, using
UTP, coaxial cable or fiber as a transmission medium.
ISDN and ATM connections require the costly installation of telephone lines
and hardware to transport the input signals, and result in tariff charges for
user access, even when the conferencing parties are in the same building. These
connections are not a network solution and are not ideal for multiple users,
since additional lines must be installed to connect each person in a user group.
LAN connections can transmit only a finite amount of data, and the
transmission of continuous video images uses a substantial portion of this
capacity. Accordingly, LAN connections currently tend to overload the LAN, which
causes data applications to run slower, affecting the conference participants as
well as other users. Therefore, there are limitations on the number of
simultaneous video conferences and data applications which can be used. Most
LANs presently installed use UTP infrastructure as a transmission medium. The
installation of fiber improves performance, but not sufficiently to overcome the
limitations of a LAN connection.
Existing PBX-like hub networks transport video and voice signals over a
network separate and parallel to the LAN. These products require the
installation of coaxial cable or fiber as a transmission medium. Data
applications are transmitted through a LAN connection, which could affect the
performance of the LAN.
One of the advantages of the VideoLan System compared to existing products
is its ability to transport real time, interactive, full motion video (30 frames
per second), voice and data signals over UTP. This should significantly lower
the cost and simplify the installation of the VideoLan System, since UTP
infrastructure exists in most LAN environments. No ISDN or ATM installation and
usage costs are incurred and it is not necessary to install coaxial cable or
fiber.
4
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The VideoLan System transmits the data signals, along with video and voice
signals, independently of a LAN. Consequently, multiple video conferencing and
data applications can be used simultaneously without overloading and degrading
the performance of the LAN.
In addition, the Company believes that no existing product permits users to
access and control at their PCs remote multimedia devices such as cameras, video
monitors, VCRs and laser disks. The Company also believes that the VideoLan
System can transport signals, without degradation, over longer distances than
competitive products, without the need to boost the signals which tends to
diminish performance and reduce the number of potential conference participants.
However, there can be no assurance that the Company is aware of all of the other
technologies presently under development some of which could have similar or
other attributes.
Manufacturing
The Company has limited manufacturing facilities and is subcontracting its
board assembly to contractors. To ensure system integrity and quality, the
Company performs assembly and final test in its own facilities.
Patents
The claims under VideoLan's U.S. Patent application for "bi-directional
transport of video bandwidth signals have been approved by the U.S. Patent and
Trademark Office. The U.S. Patent (No. 5537142) was issued July 16, 1996. The
United States Patent claims an efficient network for the real time,
simultaneous, bi-directional transmission of voice, video, and data among a
plurality of users connected to a plurality of hubs, a method for the
simultaneous transmission of analog video and digital data on twisted pair
cable, and a method for automatically equalizing a signal sent over UTP.
The Company has international patent applications pending in 56 foreign
countries.
Patents and patent applications involve complex legal and factual issues. A
number of companies have filed applications for, or have been issued, patents
relating to products or technology that is similar to some of the products or
technology being developed or used by the Company. There can be no assurance
that the Company's patent will afford protection against the development of
similar or related technology by competitors. Although the Company believes that
its VideoLan System and technology do not and will not infringe on patents or
proprietary rights of others, it is possible that such infringement or violation
has occurred or may occur, or that others may infringe on the Company's patents.
The Company also will attempt to protect its proprietary intellectual
property rights with confidentiality agreements with its employees, licensees,
marketing partners and vendors. There can be no assurance that such rights will
be adequately protected by such agreements.
Government Regulation
The VideoLan System is not directly subject to federal regulation; however,
products into which it may be integrated are subject to federal laws relating to
radiation and conduction levels to prevent interference with radio and
television communication.
5
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Competition
The market for desktop PC video conferencing products is fragmented. A
number of video conferencing products are being marketed, and new entrants into
the market are anticipated. There are numerous well established competitors,
including joint ventures involving major communications companies that possess
substantially greater financial, personnel and other resources than the Company.
The Company believes that the advantages of the VideoLan System and the
technology of the Company are the principal factors differentiating the VideoLan
System from competing products and their underlying technologies. The Company
intends to compete by demonstrating the price/performance advantages of the
VideoLan System.
Employees
As of March 14, 1997, the Company employed 45 persons including research
and development employees, management and administrative employees. As the
Company proceeds with full scale commercial marketing of the VideoLan System and
continued development of other potential applications of its technology, the
Company will need to employ additional qualified marketing, technical and other
personnel.
Item 2. Description of Property
On May 15, 1995, the Company entered into a five-year lease agreement for
approximately 6,700 square feet of space in Louisville, Kentucky at an annual
rental of $102,480. The premises consist of administrative and sales offices.
In May 1996, the Company leased a 9,778 square foot facility in
Jeffersontown, Kentucky. The Company relocated the product engineering, research
and development, and operations departments from the corporate office to this
new facility.
Item 3. Legal Proceedings
In June 1996, Datapoint Corporation ("Datapoint") filed a lawsuit against
the Company in the United State District Court for the District of New Jersey
claiming patent infringement, contributory infringement and inducing
infringement. No claims are made in the lawsuit regarding the validity of the
Company's patent. Datapoint, which is currently experiencing financial
difficulties, has made similar claims in lawsuits filed against other
videoconferencing companies. However, to the Company's knowledge, Datapoint has
not obtained a final verdict of infringement against any of these companies. The
Company's independent outside patent counsel has reviewed Datapoint's claims and
believes that they are without merit. Accordingly, management does not believe
the lawsuit will have a material adverse effect on the Company's results of
operations or financial condition.
From time to time the Company is also party to what it believes is routine
litigation and proceedings that may be considered as part of the ordinary course
of its business. Currently, the Company is not aware of any other current or
pending litigation or proceedings that would have a material or adverse effect
on the Company's results of operations or financial condition.
Item 4. Submission of Matters to a Vote of Security Holders
None
6
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PART II
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Item 5. Market for Common Equity and Related Stockholder Matters
Commencing with the Company's initial public offering on August 10, 1995,
the Company's Common Stock and Redeemable Common Stock Purchase Warrants (the
"Warrants") have been traded on the Nasdaq Small Cap Market under the trading
symbols "VLNT", and "VLNTW" respectively.
The following table sets forth high and low prices for the Company's Common
Stock and the warrants on as reported on the Nasdaq Small Cap Market System.
These prices reflect inter-dealer quotations and may not represent actual
transactions and do not include retail mark-ups, mark-downs or commissions.
Common Stock Warrants
Quarter Ended High Low High Low
August 10, to September 30,1995 $ 12.00 $ 6.00 $ 7.875 $ 1.50
December 31, 1995 $ 47.50 $ 9.875 $ 41.25 $ 6.50
March 31, 1996 $ 38.50 $ 8.75 $ 31.25 $ 5.50
June 30, 1996 $ 23.00 $ 14.00 $ 17.00 $ 10.25
September 30, 1996 $ 21.00 $ 5.00 $ 15.75 $ 2.25
December 31, 1996 $ 6.50 $ 1.25 $ 2.75 $ .22
As of March 14, 1997, there were approximately 244 registered holders of
record of the Company's Common Stock approximately 29 registered holders of the
Company's Warrants.
The Company has never paid dividends on its Common Stock. The Company plans
to retain any earnings to provide for the development and growth of the Company.
Item 6. Management's Discussion and Analysis or Plan of Operations
FISCAL YEARS ENDED DECEMBER 31, 1996 AND 1995
Revenues. The Company has engaged in limited marketing of the VideoLan
VL2000 System and is currently beginning to implement its marketing strategy.
During 1996, the Company commenced shipping the VideoLan VL2000 System which
provided revenues of $327,803 as compared with $50,053 in 1995. The Company's
marketing efforts in the 1996 were significantly impaired by the sharp decline
in the trading price of the Company's common stock due to problems with the
underwriter and the Company's low cash position experienced prior to the private
placement in October 1996. As a result, the Company anticipates that revenues
during the first and second quarters of 1997 will be nominal.
7
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Operating Expenses:
Total operating expenses for the year ended December 31, 1996 were
$7,752,353 as compared with $6,881,715 for the year ended December 31, 1995.
Salaries and payroll taxes increased by $972,213 to $1,690,876 during the
year ended December 31, 1996 compared to $565,722 in the year ended December 31,
1995. As of March 15, 1996 VideoLan had 27 employees. These employees were
engaged in research and development and selling and administrative capacities.
As of March 14, 1997 VideoLan had 45 employees. These employees are in
production, marketing, sales, administrative, research and development, and
customer service organizations. In 1995 the Company was in a strictly research
and development mode. In 1996 the Company was, and still is, developing its
production and selling capabilities.
Compensation expense. In 1995, there were non-cash compensation expenses of
$3,233,000 relating to the issuance of stock and stock options to employees and
consultants. In 1996, the compensation expense decreased to $288,390. The 1996
compensation expense was the net of the credit from 1995 compensation expense
for options that were canceled and the expense for accrued compensation.
Research and development expenses for the year ending December 31, 1996
were $2,639,702 as compared with $1,423,916 for the same period in 1995. In 1995
the Research and Development department was developing the original product, the
VL2000. In 1996 the efforts expanded to the development of VideoLan software and
a Gateway. This required additional personnel such as engineers, programmers,
and technicians. It also required additional equipment and consulting services.
Marketing costs were $297,575 in 1996 as compared with $158,716 for the
same period in 1995. The marketing cost increased from 1995 due to additional
personnel and customer relations cost.
Consulting and Professional Fees increased $512,062 to $1,032,870 in 1996
from $520,080 in 1995. The majority of the increase in this area is due to legal
fees incurred in the process of defending the Company against lawsuits and legal
compliance activities required by a publicly held company.
Travel and Entertainment for the year ending December 31, 1996 was $504,810
as compared with $396,568 for the same period in 1995. The increase in travel
and entertainment is mainly due to increase in sales personnel and the
relocation expenses for some key personnel.
Rent and Office expenses during 1996 were $398,054. They increased by
$204,512 from $193,542 during 1995. During 1996, the Company moved its research
and development and its operations departments from the corporate offices to a
larger, better equipped facility. The Company also added an outside sales office
in Massachusetts. Currently, the rent and office expenses include the expenses
of three facilities. The Company has intentions of combining the corporate
offices and the research and development/operations facility in the first half
of 1997 to minimize overhead.
Insurance increased by $191,592 from $40,257 for the period ending December
31, 1995 to $231,849 for the period ending December 31, 1996. The majority of
this increase is due to a significant increase in the officers and directors
insurance coverage to comply with industry standards. An increase in personnel
has also caused increases in health and workers compensation premiums..
Stock administration charges were $81,158 for the period ending December
31, 1996. The Company began tracking the charges incurred to be a publicly held
company on January 1, 1996. The Company went public in August 1995. Most of the
charges in 1995 were related to the public offering and were offset against the
proceeds.
Other expenses increased from $43,008 in 1995 to $151,140 in 1996. This
increase is in line with the increase in the size of the Company. The
significant expenses in this category are supplies, repairs and maintenance,
employee relations and training, bad debts expense, and other miscellaneous
expenses.
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Net Loss.
The net loss of the Company for the year ended December 31, 1996 was
$8,122,116 ($0.58 per share) as compared with $6,742,289 ($0.56 per share) for
the year ended December 31, 1995. The Company expects to incur continuing losses
until significant quantities of the VideoLan VL2000 System are sold.
Liquidity and Capital Resources.
Through December 31, 1996, an aggregate of $12,440,277 has been expended in
the operating and development stage activities of the Company, principally for
research and development, salaries and professional fees. An additional $662,943
has been used primarily to acquire the Company's proprietary technology, prepare
the Company's patent applications and purchase certain equipment. Additional
funds will be necessary to pay for additional engineers, technical people and
increased marketing costs in connection with the sale of the Company's products.
Through December 31, 1995, the Company financed its operations primarily
through investments by individual investors, a 1995 private placement which
raised net proceeds of approximately $1,900,000, and from its initial public
offering which was completed in August 1995 and generated net proceeds of
$9,600,000. The Company initially sought to raise additional funds as early as
April 1996 in a public offering through Kensington Wells Incorporated, the
underwriter for the Company's IPO. Kensington Wells was unable to complete this
public offering. In September 1996, the Company sought to raise additional funds
through a common stock private placement also through Kensington Wells.
However, Kensington Wells was unable to complete this offering as well in
part because of the sharp decline in the trading price of the Company's common
stock and the circulation of adverse information concerning Kensington Wells in
various media. Management believes the decline in the trading price was largely
attributable to substantial short selling of the Company's stock and the absence
of support by the Company's principal market-maker, Kensington Wells.
During October and November 1996, the Company completed a $5,500,000
financing through the sale of convertible preferred shares in a private
placement under Regulation D. The net proceeds of the $5,500,000 private
placement after commissions and offering cost was $4,978,342. The Preferred
Stock sold in the Offering was convertible into Common Stock on or after January
17, 1997 at the lesser of $4.88 or the five day average trading price of the
Common Stock at the time of conversion less a discount of between 15% and 20%.
The Company may redeem the Preferred Stock upon conversion under certain
circumstances. The Company was required to register for public resale the Common
Stock issuable upon conversion of the Preferred Stock on or before January 17,
1997, or issue increasingly higher amounts. The Company has not yet registered
the Common Stock but intends to do so in the next two months. In connection with
the private placement, the Company issued a warrant to the broker for 6% of the
aggregate amount raised at $4.88 per share.
As of March 14, 1997 the Company's current cash position is $2,600,000. The
Company is utilizing approximately $450,000 of that cash per month for operating
and research and development activities. It is anticipated that the Company's
current cash position will be sufficient to fund the Company's operations
through the second quarter of 1997. The Company is actively seeking additional
financing to fund its activities for the balance of 1997 and into 1998. The
Company cannot anticipate what the terms of this additional funding will be.
There can be no assurance that such financing will be available. Failure to
receive such financing would likely require the Company to cease operations.
As of this date, the Company has no long-term debt or material commitments
for capital expenditures.
The Company believes that, during the past year, inflation has not had a
significant impact on the Company's operating results.
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Item 7. Financial Statements
See pages F-1 to F-15
Item 8. Changes in and Disagreements with Accountants or Accounting and
Financial Disclosure
There have been no changes in, or reported disagreements with, the
Company's accountants on any matter of accounting principles, practices or
financial statement disclosure.
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PART III
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Item 9. Directors, Executive Officers, Promoters and Control Persons, Compliance
with Section 16(a) of the Exchange Act.
Directors and Executive Officers
Set forth below are the names of each of the directors and executive
officers of the Company and their respective ages and positions with the
Company:
NAME AGE POSITION WITH THE COMPANY
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John Ruggiero 61 Chairman of the Board
Jack Shirman 62 Chief Executive Officer and Director
Steven Rothenberg 51 Vice President Finance, Chief Financial
Officer, Treasurer, Secretary, and Director
Jacques de Labry 57 Director
Norman Barkeley 65 Director
John Glankler 39 Director
Peter Beck 54 V.P. of Market Development
All directors hold office until their successors have been duly elected and
qualified or until their earlier resignation or removal. Directors are elected
annually.
John Ruggiero has been Chairman of the Board and a director of the Company
since January 1997. Mr. Ruggiero is currently the Vice Chairman of Telco
Systems. Mr. Ruggiero has held various positions with Telco Systems, Inc.
including Chief Executive Officer, President and Chief Financial Officer. Prior
to that time, Mr. Ruggiero was Corporate Vice President and Chief Financial
Officer of Sanders Associates, Inc. Mr. Ruggiero received his BS and MBA from
Boston College.
Jack Shirman became a board member when he became Chief Executive Officer
of VideoLan Technologies. Jack Shirman has been Chief Executive Officer of the
Company since September 30, 1996. From 1988 until 1996, Mr. Shirman served as
Corporate Vice President and Group President of Dynatech Corporation, a designer
and manufacturer of a diversified line of instruments, equipment, and software
used to support voice, data and video communications. Prior to such time, Mr.
Shirman served as President and Chief Executive Officer of Telco Systems, Inc.,
a manufacturer of fiber optic and customer premise transmission equipment. Mr.
Shirman received his BS and MS degrees in Electrical Engineering from Cornell
University, and his MBA from Rochester Institute of Technology.
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Steven B. Rothenberg has been Vice President Finance, Chief Financial
Officer and Treasurer since September, 1995. In January, 1996, he was elected to
the Board of Directors and elected Corporate Secretary. During the two year
period prior to joining VideoLan Technologies, Inc., Mr. Rothenberg was a
financial consultant to the telecommunications industry. From 1992 to 1994, Mr.
Rothenberg was Chief Financial Officer of H2O Plus, L.P., a specialty retailer
in the cosmetics and skincare business. From 1988 to 1991, Mr. Rothenberg was
Chief Financial Officer of Ellesse USA, a subsidiary of Reebok International,
Ltd. In addition, Mr. Rothenberg has held senior financial management positions
with Warner Communications, Inc., Revlon Inc., and Ernst and Young, LLP. Mr.
Rothenberg received a BS in accounting and finance from The American University
in 1968.
Jacques de Labry has been a director of the Company since April 1996. Mr.
de Labry has been a consultant to the telecommunications industry since 1995.
From 1988 until its sale in 1995, Mr. de Labry served as President and Chief
Executive Officer of Raynet International, Inc., a supplier of fiber optic
telecommunications systems. Mr. de Labry has held executive positions at ITT
Corporation as President of ITT Corporation's Asia Pacific Group and
subsequently was responsible for ITT Corporation's Business Systems in Europe.
He previously held various venture, sales/marketing and executive positions with
General Electric Company, GTE Corporation and International Business Machines
Corporation. Mr. de Labry is currently a director of MultiLink, Inc., a company
engaged in manufacturing and marketing multipoint audio teleconferencing
systems. Mr. de Labry received a BA from Yale University in 1960.
Norman Barkeley became a member of the Board of Directors on March 20,
1997. Mr. Barkeley is the Chairman of Ducommun Incorporated(NYSE). Ducommun is a
manufacturer of components and assemblies for the aerospace and wireless
telecommunications industries. Mr. Barkeley has been with Ducommun since 1988.
Prior to joining Ducommun, Mr. Barkeley had 30 years experience with Lear
Siegler, Inc., a manufacturer of aerospace, automotive, and commercial
industrial products. He attained the position of Chairman and Chief Executive
Officer in 1986. Mr. Barkeley received his bachelor's degree from Michigan State
University in 1953.
John R. Glankler has been a director of the Company since August 1995. He
has been associated with the law firm of Sebaly, Shillito & Dyer, a Legal
Professional Association, Dayton, Ohio, counsel to the Company, since April 1,
1995 and has been a shareholder and director of Sebaly, Shillito, & Dyer, a
legal professional association since July 1, 1996. For more than five years
prior to April, 1995, Mr. Glankler was associated with another firm in Ohio. Mr.
Glankler obtained a BA in economics from Duke University and a JD from the
University of Cincinnati.
Peter Beck was the Chief Operating Officer of the Company from April 1995
until October 1996 at which time he assumed the responsibilities of Vice
President Market Development in addition to being a Corporate Officer. For ten
years prior, he was the founder and Chief Executive Officer of Digital Access
Corporation, a telecommunications equipment developer and manufacturer. Prior to
such time, Mr. Beck served as director of business development planning for MCI
Communications, Inc. Mr. Beck received his MBA in finance from the University of
Chicago in 1971 and his BA from Harvard University in 1964.
Compliance With Section 16(a) of the Securities Exchange Act of 1934
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's executive officers and directors, and persons who own more that
ten percent (10%) of a registered class of the Company's equity securities, to
file reports of ownership and changes in ownership with the Securities and
Exchange Commission (the "Commission"). Executive officers, directors and
greater than ten percent (10%) shareholders are required by the Commission's
regulations to furnish the Company with copies of all Section 16(a) forms they
filed. Based solely on the Company's review of the Section 16 Reports furnished
to the Company, all Section 16(a) requirements applicable to its officers,
directors and greater than 10% beneficial owners were complied with.
12
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Item 10. Executive Compensation
The following table summarizes compensation paid by the Company during
fiscal 1996 and 1995 to the Company's Chairman of the Board and other executive
officers who received compensation in excess of $100,000.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Long-Term
Compensation
--------------------
Annual Compensation Awards
------------------- ------
Securities
Name and Underlying
Principal Other Annual Options/ All Other
Position Year Salary($) Compensation($) SARs (#) Compensation($)
-------- ---- --------- --------------- -------- ---------------
<S> <C> <C> <C> <C> <C>
Jack Shirman, 1996 $ 50,997 - 300,000 (7) 0
Chief Executive Officer
Ted Ralston, 1996 0 - 0 $ 100,000(13)
Chief Executive Officer 1995 $ 75,000(1) - 100,000 (2) $ 40,000 (3)
Chairman of the Board
John Haines, 1996 $ 178,700(4)
Chief Executive Officer 1995 $ 67,742(4) - 150,000 (5) $ 30,000 (6)
Steven B. Rothenberg 1996 $ 153,333 - 10,000 (9)
Chief Financial Officer 1995 $ 24,167 - 100,000 (8) $ 47,467(10)
Peter Beck 1996 $ 106,250 $ 241,494 (12) 10,000 (9)
Vice President Market 1995 $ 69,421 75,000(11)
Development
Vernon L. Jackson 1996 $ 235,767
1995 $ 166,250 - 375,000(14)
- --------------------------
</TABLE>
(1) Mr. Ted Ralston resigned as Chief Executive Officer in August 1995.
(2) Reflects options to purchase shares of Common Stock at $2.00 per share
granted on March 1, 1995. These options are not exercisable until the Company
has cumulative net income before income taxes of $1,000,000. These options were
canceled pursuant to Mr. Ralston's resignation as CEO in August 1995.
(3) Reflects consulting fees paid to Mr. Ralston for the period September 1,
1995 to December 31, 1995 pursuant to a consulting agreement with the company.
This consulting agreement required Mr. Ralston to provide at least thirty hours
of service per week and provided for a monthly payment to Mr. Ralston of $10,000
in consideration of his performance of services.
(4) Mr. John Haines' employment as CEO ceased in January 1996.
(5) Reflects options to purchase shares of Common Stock at $3.00 per share
granted on August 18, 1995. Such options are exercisable semi-annually over a 30
month period in five equal installments. All options were granted to Mr. Haines
as part of his severance agreement. These options vested as of his severance
date, January 17, 1996.
13
<PAGE>
(6) Reflects consulting fees paid to Mr. Haines for the period of June 1, 1995
to August 31, 1995.
(7) Reflects options to purchase shares of Common Stock at $6.12 per share
granted on September 27, 1996. The options are exercisable as follows: 100,000
(8) Reflects options to purchase shares of Common Stock at $3.00 per share
granted on August 18, 1995. These options become exercisable in 25,000 share
increments on March 1, and September 1, 1996 and March 1, and August 15, 1997.
(9) Reflects options to purchase shares of Common Stock at $9.875 per share
granted on August 9, 1996. 50% of these options become exercisable on August 9,
1998 and the remaining 50% become exercisable on August 9, 1999.
(10) Reflects consulting fees paid to Mr. Rothenberg during 1995.
(11) Reflects options to purchase shares of Common Stock at $2.00 per share
granted on April 17, 1995. These options were exercisable on October 18, 1995.
(12) Reflects net proceeds received by Mr. Beck from exercising his options for
shares of common stock and then selling those shares.
(13) Reflects consulting fees paid to Mr. Ralston for the period January 1, 1996
to December 31, 1996 pursuant to a consulting agreement with the company. This
consulting agreement required Mr. Ralston to provide at least thirty hours of
service per week and provided for a monthly payment to Mr. Ralston of $10,000 in
consideration of his performance of services.
(14) Reflects options to purchase shares of Common Stock at $2.00 per share
granted on March 1, 1995. 187,500 of these options are not exercisable until the
Company has cumulative net income before income taxes of $1,000,000. The
remaining 187,500 of these options were canceled pursuant to Mr. Ralston's
resignation as CEO in August 1995.
The following table sets forth certain information regarding option grants
to executive officers during the fiscal year ended December 31, 1996.
OPTION GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS
-----------------
% of Total
Options Exercise
Granted to or Base
Employees in Price Expiration
Name Options Granted Fiscal Year ($/sh) Date
- -------------------------------------------------------------------------------
Jack Shirman 300,000 (1)(2) 30.6% $6.12 9/26/01
Ted Ralston 0 0 0 0
John Haines 0 0 0 0
Steven Rothenberg 10,000 (3)(4) 1.1% $9.875 8/8/01
Peter Beck 10,000 (3)(4) 1.1% $9.875 8/8/01
14
<PAGE>
(1) Reflects options to purchase shares of Common Stock at $6.12 per share
granted on September 27, 1996. The options are exercisable as follows: 100,000
on September 27, 1997, 100,000 on September 27,1998, 50,000 on September 27,
1999 and 50,000 on September 27, 2000.
(2) These options were exchanged on January 23, 1997 for options for 246,000
shares at an exercise price of $1.56. The newer options vest at a later date
than the prior options.
(3) Reflects options to purchase shares of Common Stock at $9.875 per share
granted on August 9, 1996. 50% of these options become exercisable on August 9,
1998 and the remaining 50% become exercisable on August 9, 1999.
(4) These options were exchanged on January 23, 1997 for options for 8,200
shares at an exercise price of $1.56. The newer options vest at a later date
than the prior options.
Aggregated Option/SAR Exercises in Last Fiscal Year
---------------------------------------------------
and FY-End Option/SAR Values
----------------------------
Number of
Securities Value of
Underlying Unexercised
Unexercised In-the-Money
Shares Options/SARs at Options/SARs
Acquired FY-End (#) at FY-End($)
on Value
Exercise Realized Exercisable/ Exercisable/
Name (#) ($) Unexercisable Unexercisable
- ---- --- --- ------------- -------------
Jack Shirman - - 0/300,000(1) 0/0
Ted Ralston - - 0/100,000(2) 0/0
John Haines 50,000 $475,800 100,000/0 0/0
Steven B. Rothenberg - - 75,000/35,000(3) 0/0
Peter Beck 14,000 $241,494 61,000/10,000(4) 0/0
(1) These options were exchanged on January 23, 1997 for options for 246,000
shares at an exercise price of $1.56. The newer options vest at a later date
than the prior options.
(2) Reflects options to purchase shares of Common Stock at $2.00 per share
granted on March 1, 1995. These options are not exercisable until the Company
has cumulative net income before income taxes of $1,000,000. These options were
canceled pursuant to Mr. Ralston's resignation as CEO in August 1995.
(3) 10,000 of these options were exchanged on January 23, 1997 for options for
8,200 shares at an exercise price of $1.56. The newer options vest at a later
date than the prior options.
(4) These options were exchanged on January 23, 1997 for options for 58,220
shares at an exercise price of $1.56. The newer options vest at a later date
than the prior options.
15
<PAGE>
Board of Directors Compensation
- -------------------------------
The Company does not currently compensate directors who are also executive
officers of the Company for service on the Board of Directors. Under Company
policy, each non-employee director of the Company is entitled to reimbursement
of expenses incurred in connection with attending meetings of the Board.
Non-employee directors also receive immediately exercisable options to purchase
10,000 shares of Common Stock, at the then fair market value, on the date of
their initial election to the Board and on each of the first and second
anniversary dates of their election to the Board, if they are re-elected.
Change in Control Agreements
- ----------------------------
On February 14, 1997 the Company entered into agreements with Jack Shirman
and Steven B. Rothenberg. The agreements provide that upon a "change in control"
accompanied by a dilution of the executive's power, the executive may terminate
his employment and receive a lump sum severance payment in an amount equal to
his then current salary for 24 months in addition to other benefits. A "change
in control" is deemed to occur when a person acquires 40% beneficial ownership
of the voting power of the Company's outstanding stock; over a two-year period,
the members of the Board of Directors at the start of the period cease to be a
majority thereof without a two-thirds vote of those directors remaining on the
Board who were directors at the start of the two-year period; or the dissolution
of the Company.
Long-Term Incentive and Pension Plans
- -------------------------------------
As of December 31, 1996, the Company did not have any long-term incentive
or defined benefit pension plans.
Employment Agreements
- ---------------------
On January 17, 1996, Mr. John Haines' employment as CEO of the Company
ceased. As a result of his termination and release agreement with the Company,
Mr. Haines received $15,625 per calendar month, prorated for partial months,
through September 24, 1996. The termination and release agreement allows Mr.
Haines to retain vested options to purchase 150,000 shares of common stock at $3
per share granted to him under his consulting agreement. The termination and
release agreement also required the Company to register 50,000 of the 150,000
shares on June 20, 1996 and provides Mr. Haines certain piggyback registration
rights for the remaining 100,000 options. Upon entering the termination and
release agreement, Mr. Haines resigned as a director of the Company.
On September 27, 1996 Mr. Jack Shirman joined the Company as CEO. His
employment contract is for a two year term. Mr. Shirman's annual base salary
will be $200,000 with possible bonuses which are to be determined at a later
date. Mr. Shirman was also granted 300,000 stock options at an exercise price of
$6.12 per share. Mr. Shirman may exercise 100,000 stock options on September 27,
1997 and 1998 and 50,000 shares on September 27, 1999 and 2000. The options
expire on September 27, 2001. Effective with Mr. Shirman taking over as CEO, Mr.
Ted Ralston resigned as interim CEO.
In December of 1996 Mr. Vernon Jackson's employment with VideoLan
Technologies ceased. Terms of Mr. Jackson's severance agreement are still being
negotiated.
16
<PAGE>
Item 11. Security Ownership of Certain Beneficial Owners and Management
The voting securities of the Company outstanding on March 14, 1997
consisted of 14,050,398 shares of Common Stock. The following table sets forth
information concerning ownership of the Company's Common Stock, as at March 14,
1996 by (i) each director, (ii) each executive officer, (iii) all directors and
executive officers as a group, and (iv) each person who, to the knowledge of
management, owned beneficially more than 5% of the Common Stock.
Beneficial Owner
Shares Beneficially Percent of Outstanding
Name and Address Owned (7) Common Stock
- ---------------- --------- ------------
Ted Ralston (1)..................... 1,389,308 9.8%
Jack de Labry(6).................... 10,000 * %
Steven B. Rothenberg (2)............ 75,000 * %
Peter Beck (3)...................... 61,000 * %
John R. Glankler(4)................. 45,000 * %
John Ruggiero(5).................... 10,000 * %
Executive Officers and Directors
as a Group.......................... 1,580,308 11.1%
(5 persons)
- ---------------------------
* Less than 1%
The persons named in the table, to the Company's knowledge, have sole voting and
investment power with respect to all shares shown as beneficially owned by them,
subject to Community property laws where applicable and the information
contained in the footnotes hereunder.
1. The address of each of Mr. Ted Ralston is 1941 S. Kemp, Lima, OH 45806
2. Represents 75,000 shares of Common Stock subject to options exercisable
within 60 days of March 14, 1997. The address for Mr. Rothenberg is 100 Mallard
Creek Road, Louisville, Kentucky 40207.
3. Represents 61,000 shares of Common Stock subject to options exercisable
within 60 days of March 14, 1997 The address for Mr. Beck is 100 Mallard Creek
Road, Louisville, Kentucky 40207.
4. The address of Mr. Glankler is 1300 Courthouse Plaza NE, Dayton, Ohio
45402. Represents 35,000 shares of Common Stock subject to options exercisable
within 60 days of March 14, 1997.
5. The address of Mr. Ruggiero is 100 Mallard Creek Road, Louisville, KY
40207. Represents 10,000 shares of Common Stock subject to options exercisable
within 60 days of March 14, 1997.
6. Does not include shares subject to options which are not exercisable and
will not become exercisable with in 60 days of March 14, 1997.
Item 12. Certain Relationships and Related Transactions
None.
17
<PAGE>
Item 13. Exhibits
3.1 - Certificate of Incorporation of the Company(1)
3.2 - Certificate of Amendment to Certificate of Incorporation of the Company
3.3 - Certificate of Designation, Number, Powers, Preferences and Relative,
Participating, Optional, and Other Special Rights and the Qualifications,
Limitations, Restrictions, and Other Distinguishing Characteristics of
Preferred Stock of the Company
3.2 - By-Laws of the Company, as amended and restated(7)
4.1 - Specimen certificate for Common Stock(1)
4.2 - Specimen certificate for Warrants (included in 10.10)(1)
4.3 - Rights Agreement between the Company and Continental Stock Transfer &
Trust Company dated January 29, 1997(7)
4.4 - Form of Rights Certificate (included in Exhibit 4.3)(7)
10.1 - Employment Agreement between the Company and Ted Ralston(2)
10.2 - Employment Agreement between the Company and Remy Fenouil dated May 3,
1994(1)
10.3 - Registration Rights Agreement between Ruben Levy and the Company dated
September 30, 1994(1)
10.4 - Employment Agreement between the Company and Vernon L. Jackson dated
October 10, 1994(1)
10.5 - Amendment to Employment Agreement between the Company and Vernon L.
Jackson dated October 10, 1994(1)
10.6 - Release executed by Richard Dean Jackson dated October 27, 1994(4)
10.7 - Form and Registration Rights Agreement among the purchasers of shares of
Common Stock in the private placement(1)
10.8 - Placement Agency Agreement between the Company and Kensington Wells
Incorporated dated December 22, 1994(1)
10.9 - Form of Custody Agreement between the Selling Stockholders and
Continental Stock Transfer & Trust Co.(1)
10.10 - Form of Kensington Wells Incorporated Warrant Agreement(1)
10.11 - Form of Kensington Wells Incorporated Warrant(1)
10.12 - Form of Consulting Agreement between Kensington Wells Incorporated and
the Company(1)
10.13 - Consulting Agreement between Ruben Levy and the Company(1)
18
<PAGE>
10.14 - Consulting Agreement between the Company and Ted Ralston(2)
10.15 - Form of Non Qualified Stock Option Agreement between the Company and
Aaron Wolfson, Abraham Wolfson and Arielle Wolfson(1)
10.16 - Employment Agreement between the Company and Peter Beck dated April 17,
1995(1)
10.17 - Lease between the Company and HFH Commercial Real Estate Limited
Partnership dated May 15, 1995(1)
10.18 - Employment Agreement between the Company and John E. Haines(2)
10.19 - Option Agreement between the Company and John R. Glankler dated August
28, 1995
10.20 - Exclusive Distribution Agreement between the Company and Samsung
America, Inc. and Samsung Corporation(2)
10.21 - Employment Agreement and Employment Agreement Addendum between the
Company and Steven B. Rothenberg(2)
10.22 - Lease between the Company and NTS/BBCI dated April 23, 1996
10.23 - Lease between the Company and Corporate Business Connection, Inc. dated
May 1, 1996
10.24 - Consulting Agreement between Jacques O. de Labry and the Company dated
June 1, 1996
10.25 - Termination and Release Agreement between the Company and John E. Haines
dated May 14, 1996(4)
10.26 - Registration Rights Agreement between the Company and John E. Haines
dated May 14, 1996(4)
10.27 - Option Agreement between the Company and John E. Haines dated May 14,
1996(4)
10.28 - Option Agreement between Jacques O. de Labry and the Company dated June
14, 1996
10.29 - Option Agreement between the Company and Quest Enterprises, Inc. dated
June 14, 1996
10.30 - Piggyback Registration Rights Agreement between the Company and Quest
Enterprises, Inc. dated June 14, 1996
10.31 - 1995 Stock Option Plan of the Company(3)
10.32 - Form of Option Agreement - Incentive Stock Option
10.33 - Form of Director Option Agreement - Non-Qualified Stock Option
10.34 - Consulting Agreement between Video Network Inc. and the Company dated
July 1, 1996
10.35 - Option Agreement between the Company and Video Network Inc. dated
August 5, 1996
10.36 - Option Agreement between the Company and Howard S. Jacobs dated
August 28, 1996
19
<PAGE>
10.37 - Employment Agreement between the Company and Jack Shirman dated
September 27, 1996(5)
10.38 - Option Agreement between the Company and Jack Shirman dated
September 27, 1996(5)
10.39 - Form of Registration Rights Agreement dated October 17, 1996(5)
10.40 - Form of Subscription Agreement dated October 17, 1996(5)
10.41 - Form of Registration Rights Agreement the Company dated October 17,
1996(5)
10.42 - Form of Subscription Agreement dated October 17, 1996(5)
10.43 - Warrant Agreement between the Company and First Bermuda Securities
Limited dated October 17, 1996
10.44 - Form of First Bermuda Securities Warrant
10.45 - Registration Rights Agreement between the Company and Goodbody
International, Inc. dated November 15, 1996
10.46 - Form of Goodbody International Inc. Warrant
10.47 - Registration Rights Agreement between the Company and RIC Investment
Fund Ltd. dated November 26, 1996
10.48 - Subscription Agreement between the Company and RIC Investment Fund Ltd.
10.49 - Stock Option Agreement between the Company and Jack Shirman dated
January 23, 1997
10.50 - Executive Severance Agreement between the Company and Jack Shirman dated
February 14, 1997
10.51 - Executive Severance Agreement between the Company and Steven B.
Rothenberg dated February 14, 1997
27 - Financial Data Schedule
99 - Private Securities Litigation Reform Act of 1995 Safe Harbor Compliance
Statement for Forward-Looking Statements
---------------------
(1) Incorporated by reference to the exhibits to the registration statement on
Form SB-2 filed by the Company, as amended (File No. 33-93086).
(2) Incorporated by reference to the exhibits to the report on Form 10-KSB
filed by the Company for the fiscal year ended December 31, 1995 (File No.
0-26302).
(3) Incorporated by reference to the exhibits to the registration statement on
Form S-8 filed by the Company on June 20, 1996 (File No. 333-6449).
(4) Incorporated by reference to the exhibits of Post-Effective Amendment No. 1
to Registration Statement on Form SB-2 filed by the Company on May 28, 1996
(File No. 33-93086).
20
<PAGE>
(5) Incorporated by reference to the exhibits to the report on Form 10-QSB
filed by the Company on November 11, 1996 (File No. 0-26302).
(6) Incorporated by reference to the exhibits to the report on Form 8-K filed
by the Company on January 29, 1997 (File No. 0-26302).
(7) Incorporated by reference to the exhibits to the Registration Statement on
Form 8-A filed by the Company on January 29, 1997 (File No. 0-26302).
21
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d)of the Exchange Act of 1934, the
Registrant caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
VideoLan Technologies, Inc.
Dated: March 21, 1997 /s/Jack Shirman
-----------------------------------
Jack Shirman
Chief Executive Officer
Dated: March 21, 1997 /s/Steven B. Rothenberg
-----------------------------------
Steven B. Rothenberg
Vice President, Chief Financial
Officer, and Chief Accounting
Officer
In accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the Registrant in the capacities and on the dates
indicated.
Signature Title Date
--------- ----- ----
/s/John Ruggiero Chairman of the Board March 21, 1997
--------------
- ---------------------------
John Ruggiero
/s/ Jack Shirman Chief Executive Officer March 21, 1997
--------------
- ---------------------------
Jack Shirman
/s/ Steven B. Rothenberg Director, Vice President, Chief March 21, 1997
--------------
- ---------------------------
Steven B. Rothenberg Financial Officer, and Chief
Accounting Officer
/s/ Norman Barkeley Director March 21, 1997
- --------------------------- --------------
Norman Barkeley
/s/Jacques de Labry Director March 21, 1997
- --------------------------- --------------
Jacques de Labry
/s/John Glankler Director March 21, 1997
- --------------------------- --------------
John Glankler
22
<PAGE>
TABLE OF CONTENTS
Page
----
Report of Independent Certified Public Accountants.................. F-2
Financial Statements
Balance Sheet.................................................. F-3
Statements of Operations....................................... F-4
Statement of Stockholders' Deficiency.......................... F-5 - F-6
Statements of Cash Flows....................................... F-7 - F-8
Notes to Financial Statements.................................. F-9 - F-22
<PAGE>
REPORT OF INDEPENDENT CERTIFIED
PUBLIC ACCOUNTANTS
Board of Directors
VIDEOLAN Technologies, Inc.
We have audited the accompanying balance sheet of VIDEOLAN Technologies, Inc. (a
development stage enterprise) as of December 31, 1996, and the related
statements of operations, stockholders' deficiency and cash flows for each of
the two years ended December 31, 1996, and the period May 11, 1994 (inception)
through December 31, 1996. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of VIDEOLAN Technologies, Inc. (a
development stage enterprise) as of December 31, 1996, and the results of its
operations and its cash flows for each of the two years ended December 31, 1996,
and the period May 11, 1994 (inception) through December 31, 1996, in conformity
with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. The Company has been in the
development stage since its inception on May 11, 1994, and has suffered
significant losses which have been funded with resources from bridge loan
financing, proceeds from private placements, and proceeds from an initial public
offering. As shown in the financial statements, the Company incurred a net loss
of $8,122,116 during the year ended December 31, 1996. These factors, among
others, as discussed in Note A to the financial statements, raise substantial
doubt about the Company's ability to continue as a going concern. Continuation
is dependent upon the success of future operations and obtaining additional
financing. Management's plans in regard to these matters are also described in
Note A. The financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
New York, New York
February 14, 1997
F-2
<PAGE>
VIDEOLAN Technologies, Inc.
(a development stage enterprise)
BALANCE SHEET
December 31, 1996
ASSETS
Current assets
Cash and cash equivalents $ 3,985,470
Restricted cash 18,000
Accounts receivable 81,242
Inventories 786,415
Prepaid expenses and other current assets 64,429
------------
Total current assets $4,935,556
Property and equipment, net 494,863
Other assets
Patents pending or granted 89,722
Security deposits 30,207
Restricted cash 72,000 191,929
------------ ----------
$5,622,348
==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable and accrued liabilities $ 775,125
Capital lease obligations - current 49,723
------------
Total current liabilities $ 824,848
Long-term liabilities
Capital lease obligations - noncurrent 14,401
Commitments and contingencies
Stockholders' equity
Preferred stock, $.01 par value; 5,000,000
shares authorized; 5,500 shares issued 55
Common stock, $.01 par value; 20,000,000
shares authorized; 14,046,398 shares
issued and outstanding 140,464
Additional paid-in capital
Common stock 16,859,632
Preferred stock 4,978,287
Deficit accumulated during the
development stage (17,195,339) 4,783,099
----------- ----------
$5,622,348
==========
The accompanying notes are an integral part of this statement.
F-3
<PAGE>
VIDEOLAN Technologies, Inc.
(a development stage enterprise)
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Period from
May 11, 1994
(inception)
Year ended Year ended through
December 31, December 31, December 31,
1995 1996 1996
--------------- --------------- ---------------
<S> <C> <C> <C>
Net sales $ 50,053 $ 327,803 $ 377,856
Cost of sales 37,372 735,026 772,398
------------ ------------ ------------
Gross profit (loss) 12,681 (407,223) (394,542)
Selling, general and administrative expenses
Salaries 605,233 1,546,657 2,311,328
Compensation expense 3,233,000 385,980 3,640,855
Payroll taxes 113,430 144,219 288,933
Consulting fees 206,113 498,774 1,369,887
Marketing cost 158,716 297,574 496,364
Professional fees 313,967 534,097 974,308
Travel and entertainment 396,568 504,810 973,724
Research and development 1,423,916 2,639,702 5,153,692
Equipment expense 122,086 325,080 481,024
Rent 70,570 170,850 289,768
Insurance 40,257 231,849 276,790
Office 123,032 227,203 402,172
Depreciation and amortization 31,819 110,850 144,239
Stock administration charges 81,158 81,158
Other 43,008 151,140 178,350
------------ ------------ ------------
Total expenses 6,881,715 7,849,943 17,062,592
Other income (expense)
Interest income (expense) - net 126,745 178,242 304,987
Other income (43,192) (43,192)
------------ ------------ ------------
126,745 135,050 261,795
------------ ------------ ------------
NET LOSS $ (6,742,289) $ (8,122,116) $(17,195,339)
============ ============ ============
Loss per share $(0.56) $(0.58) $(1.37)
============ ============ ============
Weighted average common shares outstanding 12,094,868 13,945,299 12,523,559
============ ============ ============
</TABLE>
The accompanying notes are an integral part of these statements.
F-4
<PAGE>
VIDEOLAN Technologies, Inc.
(a development stage enterprise)
STATEMENT OF STOCKHOLDERS' DEFICIENCY
Period from May 11, 1994 (inception) through December 31, 1996
and the year ended December 31, 1996
<TABLE>
<CAPTION>
Deficit
Additional Additional accumulated
Common stock paid-in paid-in during Total
Preferred ---------------------- preferred common development stockholders'
stock Shares Amount stock stock stage deficiency
-------- ---------- ------ --------- ---------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Issuance on May 11, 1994 3,677,000 $ 36,770 $ (36,370) $ 400
Issuances of common stock
for cash 1,023,000 10,230 394,770 405,000
Issuances of common stock
for services rendered 437,500 4,375 17,500 21,875
Issuances of common stock
for cash and consulting
services rendered 950,000 9,500 703,000 712,500
Issuances of common stock
for purchased research
and development 2,662,500 26,625 682,500 709,125
Net loss $(2,330,934) (2,330,934)
------- ---------- --------- --------- ---------- ----------- ----------
Balances at December 31, 1994 8,750,000 87,500 1,761,400 (2,330,934) (482,034)
Issuances of common stock
in private placement 1,468,498 14,685 1,861,799 1,876,484
Issuance of common stock
for release of royalty rights 750,000 7,500 1,117,500 1,125,000
Issuance of common stock through
an Initial Public Offering 2,875,000 9,576,281 9,605,031
Issuance of stock options
to consultants 2,108,000 2,108,000
Net loss (6,742,289) (6,742,289)
------- ---------- --------- --------- ---------- ----------- ----------
Balances at December 31, 1995 13,843,498 138,435 16,424,980 (9,073,223) 7,490,192
</TABLE>
F-5
<PAGE>
VIDEOLAN Technologies, Inc.
(a development stage enterprise)
STATEMENT OF STOCKHOLDERS' DEFICIENCY (continued)
Period from May 11, 1994 (inception) through December 31, 1996
and the year ended December 31, 1996
<TABLE>
<CAPTION>
Deficit
Additional Additional accumulated
Common stock paid-in paid-in during Total
Preferred ---------------------- preferred common development stockholders'
stock Shares Amount stock stock stage deficiency
-------- ---------- ------ --------- ---------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Warrants converted to
common stock 5,000 $ 50 $ 34,950 $ 35,000
Employee stock options
exercised 197,900 1,979 309,922 311,901
Private placement of
preferred stock $55 $4,978,287 4,978,342
Issuance of stock options
to consultants 554,780 554,780
Cancelled stock options
to consultants (465,000) (465,000)
Net loss $ (8,122,116) (8,122,116)
------- ---------- --------- ----------- ----------- ------------- ----------
Balance at December
31, 1996 $55 14,046,398 $140,464 $4,978,287 $16,859,632 $(17,195,339) $ 4,783,099
====== ========== ======== ========== =========== ============ ===========
</TABLE>
The accompanying notes are an integral part of this statement.
F-6
<PAGE>
VIDEOLAN Technologies, Inc.
(a development stage enterprise)
STATEMENTS OF CASH FLOWS
<TABLE>
Period from
May 11, 1994
(inception)
Year ended Year ended through
December 31, December 31, December 31,
1995 1996 1996
------------- --------------- -------------
<S> <C> <C> <C>
Cash flows from operating and development stage activities
Net loss $ (6,742,289) $(8,122,116) $(17,195,339)
Adjustments to reconcile net loss to net cash used in
operating activities
Issuances of common stock for services rendered 1,125,000 1,146,875
Issuances of common stock for consulting services rendered 665,000
Issuances of common stock for purchased research and
development 709,125
Issuances of stock options to consultants 2,108,000 89,780 2,197,780
Depreciation and amortization 31,819 110,850 144,239
Loss on sale of assets 45,411 45,411
Changes in certain operating activities
Accounts receivable (24,664) (56,578) (81,242)
Notes receivable 33,800 33,800
Inventories (820,369) 33,954 (786,415)
Prepaid expenses and other current assets (128,289) 94,052 (64,429)
Security deposits (19,661) (4,546) (30,207)
Accounts payable and accrued liabilities 34,071 430,283 775,125
------------- ----------- -------------
Net cash used in operating and development
stage activities (4,436,382) (7,345,110) (12,440,277)
------------- ----------- -------------
Cash flows from investing activities
Acquisition of property and equipment (224,845) (244,185) (484,951)
Investment in certificate of deposit (90,000) (90,000)
Proceeds from sale of assets 1,730 1,730
Patent application costs (5,086) (54,507) (89,722)
------------- ----------- -------------
Net cash used in investing activities (229,931) (386,962) (662,943)
------------- ----------- -------------
Cash flows from financing activities
Proceeds from issuance of common stock in private placement 2,202,747 2,655,647
Offering costs (288,703) (326,263)
Proceeds from the exercise of employee stock options
and warrants 346,900 346,900
Proceeds from initial public offering 11,500,000 11,500,000
Underwriter's commissions and expense allowances (1,449,000) (1,449,000)
Offering costs (445,970) (445,970)
Proceeds from issuance of preferred stock in private
placement 5,500,000 5,500,000
Offering costs (521,658) (521,658)
Proceeds from notes payable (331,000) 331,000
Repayment of notes payable (331,000)
Repayment of capital lease obligations (17,071) (116,697) (137,166)
Proceeds from bridge loans 900,000 900,000
Repayment of bridge loans (900,000) (900,000)
Loans to employees, net 35,310 (33,800)
Cash overdraft (31,003)
------------- ----------- -------------
Net cash provided by financing activities 11,175,310 5,208,545 17,088,690
------------- ----------- -------------
</TABLE>
F-7
<PAGE>
VIDEOLAN Technologies, Inc.
(a development stage enterprise)
STATEMENTS OF CASH FLOWS (continued)
<TABLE>
<CAPTION>
Period from
May 11, 1994
(inception)
Year ended Year ended through
December 31, December 31, December 31,
1995 1996 1996
--------------- --------------- ------------
<S> <C> <C> <C>
INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS $ 6,508,997 $(2,523,527) $ 3,985,470
Cash and cash equivalents at beginning of period - 6,508,997 -
------------ ----------- -------------
Cash and cash equivalents at end of period $ 6,508,997 $ 3,985,470 $ 3,985,470
============ =========== =============
</TABLE>
Supplemental disclosure of cash flow information:
Capital lease obligations of $17,000, $70,000 and $164,815 were incurred in
1994, 1995 and 1996, respectively, when the Company entered into new leases
for testing and computer equipment.
Interest expense paid in cash was $8,498 in 1995 and $27,145 in 1996.
The accompanying notes are an integral part of these statements.
F-8
<PAGE>
VIDEOLAN Technologies, Inc.
(a development stage enterprise)
NOTES TO FINANCIAL STATEMENTS
December 31, 1996
NOTE A - DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION
VIDEOLAN Technologies, Inc. (the "Company") is a development stage
enterprise established to acquire certain technology and the rights to a
U.S. patent application and several pending foreign patent applications for
an analog video distribution communications system designed to provide
real-time, interactive video to and from a desktop personal computer over
local and wide area networks ("VIDEOLAN Technology"). Since inception, the
Company has primarily been engaged in research and development.
The Company's financial statements have been prepared assuming that the
Company will continue as a going concern. The Company has been in the
development stage since its inception on May 11, 1994, has suffered
significant losses and has an accumulated deficit that raises substantial
doubt about its ability to continue as a going concern. The losses have been
funded with resources from bridge loan financing, proceeds from private
placements, and proceeds from an initial public offering. During October
1996, the Company completed a $5,500,000 financing through the sale of
preferred shares in a Regulation D private placement. The net proceeds of
the private placement after commissions and offering costs was $4,938,192.
As shown in the financial statements, the Company incurred a net loss of
$8,122,116 during the year ended December 31, 1996. Unless income from sales
of the VIDEOLAN VL2000 System is obtained, the timing, sufficiency and
receipt of which the Company cannot predict, future development and
commercialization of the Company's technology will depend upon arrangements
with third parties to finance research and development projects, or the
Company's ability to obtain other additional financing on terms satisfactory
to the Company. The Company's inability to obtain such financing could have
a material adverse effect on the Company's operations. The Company's ability
to continue as a going concern is dependent upon the success of future sale
of the VIDEOLAN VL2000 System and obtaining additional financing on terms
satisfactory to the Company.
The financial statements do not include any adjustments that might result
from the outcome of this uncertainty.
F-9
<PAGE>
VIDEOLAN Technologies, Inc.
(a development stage enterprise)
NOTES TO FINANCIAL STATEMENTS (continued)
December 31, 1996
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
1. Research and Development Costs
Research and development costs are expensed as incurred.
2. Net Loss Per Share of Common Stock
The computation of loss per common share is based on the weighted
average number of outstanding shares. Stock options and warrants have
not been included in the calculation as their inclusion would be
antidilutive.
3. Cash and Cash Equivalents
The Company considers highly liquid investments with an original
maturity of three months or less to be cash and cash equivalents.
4. Inventories
Inventories consist of the Company's finished products and subcomponents
necessary to manufacture the Company's product and are valued at the
lower of average actual cost or market. The Company has entered into an
arrangement to subcontract the assembly of certain parts of the product.
5. Patents Pending or Issued
Patent pending applications consist of filing fees and certain legal
costs relating to the filing of domestic and international patent
applications for the VIDEOLAN technology. Patents are stated at cost
less amortization on the straight-line method over the estimated useful
lives.
F-10
<PAGE>
VIDEOLAN Technologies, Inc.
(a development stage enterprise)
NOTES TO FINANCIAL STATEMENTS (continued)
December 31, 1996
NOTE B (continued)
6. Property and Equipment
Property and equipment are stated at cost. Depreciation and amortization
are computed using the straight-line method over the estimated useful
lives of the respective assets.
7. Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities
and the disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from
those estimates.
8. Fair Value of Financial Instruments and Concentration of Credit Risk
The carrying value of financial instruments potentially subject to
valuation risk, consisting of cash and cash equivalents, accounts
receivable, and accounts payable and accrued liabilities, approximate
fair value, principally because of the short maturity of these items.
The Company maintains its cash balances in one financial institution
located in the United States, which at times, may exceed federally
insured limits. The Company has not experienced any losses in such
account and believes it is not exposed to any significant credit risk on
cash and cash equivalents.
9. Stock-Based Compensation
Stock-based compensation is accounted for under the intrinsic value
based method as prescribed by Accounting Principles Board ("APB")
Opinion No. 25, "Accounting for Stock Issued to Employees." Included in
these notes to the financial statements are the pro forma disclosures
required by SFAS No. 123, "Accounting for Stock-Based Compensation,"
which assumes the fair value based method of accounting had been
adopted.
F-11
<PAGE>
VIDEOLAN Technologies, Inc.
(a development stage enterprise)
NOTES TO FINANCIAL STATEMENTS (continued)
December 31, 1996
NOTE C - RESTRICTED CASH
On April 12, 1996, the Company invested $90,000 in a certificate of deposit
at Bank One as collateral for the lease on their new facility. The
certificate of deposit will mature on April 12, 1997 at an annual interest
rate of 4.4%. At that time, the amount invested in the certificate of
deposit required for collateral can be reduced by $18,000 and reduced by
$18,000 per year until maturity.
NOTE D - PROPERTY AND EQUIPMENT
Property and equipment at December 31, 1996 consist of the following:
Estimated
useful life
-----------
Furniture and fixtures $ 14,011 5 years
Equipment 420,147 5 years
Leasehold improvements 132,163 5 years
Computer software 62,343 3 years
--------
628,664
Less accumulated depreciation 133,801
--------
$494,863
========
f-12
<PAGE>
VIDEOLAN Technologies, Inc.
(a development stage enterprise)
NOTES TO FINANCIAL STATEMENTS (continued)
December 31, 1996
NOTE E - CAPITAL LEASE OBLIGATIONS
The Company leases certain computer equipment.
Future minimum lease payments on these capital leases are as follows:
Year ending December 31,
1997 $25,101
1998 35,345
1999 11,476
-------
71,922
Less amount representing interest 7,798
-------
$64,124
=======
The carrying value of assets under capital leases was $149,684 at December
31, 1996 and is included in property and equipment. Amortization of these
assets is included in depreciation expense.
NOTE F - INCOME TAXES
The Company applies the asset and liability method of accounting for income
taxes. Under this method, deferred income taxes are recognized for the tax
consequences of temporary differences by applying enacted statutory rates
applicable to future years to differences between the financial statement
carrying amounts and the tax bases of existing assets and liabilities.
The temporary differences which result in deferred tax assets primarily
consist of compensation deductions and net operating loss carryforwards. The
tax effects of these temporary differences are as follows:
F-13
<PAGE>
VIDEOLAN Technologies, Inc.
(a development stage enterprise)
NOTES TO FINANCIAL STATEMENTS (continued)
December 31, 1996
NOTE F (continued)
Net operating loss and other carryforwards $ 4,144,000
Compensation 630,000
Inventory 226,000
Other 103,000
-----------
5,103,000
Valuation allowance (5,103,000)
-----------
$ --
===========
Due to losses incurred by the Company in the development stage, a full
valuation of the deferred tax asset has been provided because realization of
this future benefit cannot currently be assured. The valuation allowance
increased by $2,884,000 in 1996. The Company's net operating loss
carryforwards of approximately $11,577,000 will expire from 2009 through
2011, if not utilized. The Company's ability to utilize net operating losses
to offset future taxable income is limited due to the change in control as
defined in Internal Revenue Code Section 382.
NOTE G - ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
Accounts payable and accrued liabilities as of December 31, 1996 consist of:
Accrued compensation $296,200
Accounts payable 275,327
Other accrued expenses 64,403
Accrued professional fees 118,340
Customer security deposits 20,855
--------
$775,125
========
F-14
<PAGE>
VIDEOLAN Technologies, Inc.
(a development stage enterprise)
NOTES TO FINANCIAL STATEMENTS (continued)
December 31, 1996
NOTE H - CAPITAL STOCK TRANSACTIONS
Private Placement
During October 1996, the Company completed a $5,500,000 financing through
the sale of convertible preferred shares in a private placement under
Regulation D. The net proceeds of the private placement after commissions
and other offering costs were $4,978,342. The preferred stock sold in the
offering is convertible into common stock on or after January 17, 1997 at
the lesser of $4.88 or the five-day average trading price of the common
stock at the time of conversion less a discount of between 15% and 20%. The
Company may redeem the preferred stock upon conversion under certain
circumstances. The Company was required to register the common stock
issuable upon conversion of the preferred stock on or before January 17,
1997. The Company failed to register the common stock by such date. In
connection with the private placement, the Company issued a warrant to the
broker for 6% of the aggregate amount raised at $4.88 per share. It is
anticipated that the proceeds from this offering will be sufficient to fund
the Company's operations into the second quarter of 1997.
Stock Option Plan
Stock options and performance awards have been granted to officers, key
employees, consultants and directors. Stock options are granted at exercise
prices equal to the fair market value of the Company's stock at the dates of
grant. Generally, options vest 100 percent three years from the grant date
and have a term of five years.
At December 31, 1996, the Company had a 1995 Stock Option Plan ("Plan")
which provides for issuance, to officers, key employees, directors,
advisors, independent contractors, consultants and such other persons as the
Board of Directors believes valuable to the Company, of nontransferable
stock options to purchase up to 2,000,000 shares of common stock.
F-15
<PAGE>
VIDEOLAN Technologies, Inc.
(a development stage enterprise)
NOTES TO FINANCIAL STATEMENTS (continued)
December 31, 1996
NOTE H (continued)
The Company has elected to follow Accounting Principles Board Opinion
("APB") No. 25, "Accounting for Stock Issued to Employees" and related
Interpretations in accounting for its stock options. Under APB No. 25,
because the exercise price of the company's employee stock options equals
the market price of the underlying stock on the date of grant, no
compensation expense is recognized. Total compensation expense for
consultants reflected in income on a pretax basis was $89,780 and $3,233,000
in 1996 and 1995, respectively. However, SFAS No. 123, "Accounting for
Stock-Based Compensation," requires presentation of pro forma net income and
earnings per share as if the Company had accounted for its employee stock
options granted subsequent to December 31, 1994, under the fair value method
of that statement. For purposes of pro forma disclosure, the estimated fair
value of the options is amortized to expense over the vesting period. Under
the fair value method, the Company's net loss and loss per share would have
been increased (decreased) as follows:
1996 1995
---------- --------
Net loss $1,319,689 $443,917
Loss per share (.03) (.01)
The options have a three- to four-year vesting period.
The weighted-average fair value of the individual options granted during
1996 and 1995 is estimated as $1.65 and $1.18, respectively, on the date of
grant. The fair values for both years were determined using a Black-Scholes
option-pricing model with the following assumptions:
1996 1995
-------- ------
Volatility 80.0% 80.0%
Risk-free interest rate 4.4 3.5
Expected life 4 years 2 years
Expected dividends - -
F-16
<PAGE>
VIDEOLAN Technologies, Inc.
(a development stage enterprise)
NOTES TO FINANCIAL STATEMENTS (continued)
December 31, 1996
NOTE H (continued)
Stock option activity during 1995-1996 is summarized below:
Shares Weighted
of common average
stock exercise
attributable price
to options of options
------------ ----------
Unexercised at January 1, 1995 - $ -
Granted 805,000 3.47
Exercised - -
Forfeited 235,000 3.34
-------
Unexercised at December 31, 1995 570,000 3.34
Granted 850,500 8.33
Exercised - -
Forfeited 100,000 4.22
-----------
Unexercised at December 31, 1996 1,320,500 6.05
=========
The following table summarizes information concerning outstanding and
exercisable options at December 31, 1996:
<TABLE>
<CAPTION>
Options outstanding Options exercisable
--------------------------------------------- -----------------------------
Weighted
average Weighted Weighted
remaining average average
Range of Number contractual exercise Number exercise
exercise prices outstanding life price exercisable price
--------------- ----------- ----------- -------- ----------- --------
<S> <C> <C> <C> <C> <C>
$ 2.00 - $ 5.99 470,500 4.02 $ 2.40 243,000 $ 2.40
6.00 - 10.99 595,000 4.70 9.91 555,000 7.85
11.00 - 20.50 255,000 4.77 16.70 48,200 16.82
</TABLE>
Shares exercisable at December 31, 1996 and 1995, were 846,200 and 67,500,
respectively.
F-17
<PAGE>
VIDEOLAN Technologies, Inc.
(a development stage enterprise)
NOTES TO FINANCIAL STATEMENTS (continued)
December 31, 1996
NOTE H (continued)
Increase of Authorized Shares of Common Stock
At the annual meeting of stockholders in June 1996, the Company's
stockholders approved a proposal to increase the Company's authorized shares
of common stock from 20,000,000 to 80,000,000. The proposal permitted the
Company's management to defer the effectiveness of the increase to a later
date.
Subsequent Event
As part of a shareholders' rights agreement, on January 29, 1997, the board
of directors approved for issuance a series of preferred stock of the
Corporation to be designated "1997A Junior Participating Preferred Stock"
initially consisting of 200,000 shares. The Company authorized and declared
a dividend distribution of one right to purchase one one-hundredth of a
share of junior preferred stock for each share of the Company's common stock
outstanding at the close of business on February 8, 1997.
NOTE I - COMMITMENTS AND CONTINGENCIES
Employee Compensation
On January 17, 1996, Mr. John Haines' employment as CEO of the Company
ceased. As a result of his termination and release agreement with the
Company, Mr. Haines received $15,625 per calendar month, prorated for
partial months, through September 24, 1996. The termination and release
agreement allows Mr. Haines to retain vested options to purchase 150,000
shares of common stock at $3 per share granted to him under his consulting
agreement. The termination and release agreement also required the Company
to register 50,000 of the 150,000 shares on June 20, 1996 and provides Mr.
Haines certain piggyback registration rights for the remaining 100,000
options. Upon entering the termination and release agreement, Mr. Haines
resigned as a director of the Company.
Effective February 15, 1996, Richard Dean Jackson resigned as Executive
Vice President of the Company. As part of his severance and release
agreement with the Company, Mr. Jackson received $125,000 paid over a
four-month period, commencing March 1996. Mr. Jackson concurrently
F-18
<PAGE>
VIDEOLAN Technologies, Inc.
(a development stage enterprise)
NOTES TO FINANCIAL STATEMENTS (continued)
December 31, 1996
NOTE I (continued)
signed a marketing representative agreement to serve as a commissioned
marketing representative of the Company. Additionally, he was issued options
to purchase 150,000 shares of the Company's common stock at $12 per share.
On September 27, 1996, Mr. Jack Shirman joined the Company as CEO. His
employment contract is for a two-year term. Mr. Shirman's annual base
salary will be $200,000 with possible bonuses which are to be determined at
a later date. Mr. Shirman was also granted 300,000 stock options at an
exercise price of $6.12 per share. Mr. Shirman may exercise 100,000 stock
options on September 27, 1997 and 1998 and 50,000 shares on September 27,
1999 and 2000. The options expire on September 27, 2001. Effective with
Mr. Shirman taking over as CEO, Mr. Ted Ralston resigned as interim CEO.
Leases
In May 1996, the Company leased a 9,778 square foot facility in
Jeffersontown, Kentucky. The Company relocated the Product Engineering and
the Research and Development Departments from the Corporate Office to this
new facility.
On May 15, 1995, the Company entered into a five-year lease agreement for
approximately 6,700 square feet of space in Louisville, Kentucky, at an
annual rental of $102,480. The space is utilized for the corporate and sales
offices.
Future minimum lease payments on noncancellable operating leases are as
follows:
Year ending December 31,
1997 $163,608
1998 175,608
1999 179,608
2000 119,288
2001 28,376
--------
$666,488
========
F-19
<PAGE>
VIDEOLAN Technologies, Inc.
(a development stage enterprise)
NOTES TO FINANCIAL STATEMENTS (continued)
December 31, 1996
NOTE I (continued)
Patents Pending or Issued
The claims under VIDEOLAN's U.S. Patent application for "bi-directional
transport of video bandwidth signals" have been approved by the U.S. Patent
and Trademark Office. The U.S. Patent (No. 5537142) was issued on July 16,
1996.
The Company's remaining pending international patent applications claim is
an efficient network for the real time, simultaneous, bi-directional
transmission of voice, video, and data among a plurality of users connected
to a plurality of hubs.
Patents and patent applications involve complex legal and factual issues. A
number of companies have filed applications for, or have been issued,
patents relating to products or technology that is similar to some of the
products or technology being developed or used by the Company. There can be
no assurance that the Company's patent will afford protection against the
development of similar or related technology by competitors.
Although the Company believes that its VIDEOLAN VL2000 System and technology
do not and will not infringe on patents or proprietary rights of others, it
is possible that such infringement or violation has occurred or may occur or
that others may infringe on the Company's patents.
In the event that the Company's products or technologies infringe on patents
or other proprietary rights of others, the Company could be required to
discontinue the sale of its products, including the VIDEOLAN VL2000 System,
and redesign its product or obtain licenses. There can be no assurance that
the Company would be able to do so in a timely manner, upon acceptable terms
and conditions, or at all, or that the failure to do any of the foregoing
would not have a material adverse effect on the Company. If any of the
Company's products or technologies are deemed to infringe on patents or
other proprietary rights of others, the Company could, under certain
circumstances, become liable for damages, which could also have a material
adverse effect on the Company.
F-20
<PAGE>
VIDEOLAN Technologies, Inc.
(a development stage enterprise)
NOTES TO FINANCIAL STATEMENTS (continued)
December 31, 1996
NOTE I (continued)
In June 1996, Datapoint Corporation ("Datapoint") filed a lawsuit against
the Company in the United States District Court for the District of New
Jersey claiming patent infringement, contributory infringement and inducing
infringement. No claims are made in the lawsuit regarding the validity of
the Company's patent. The Company's independent outside patent counsel has
reviewed Datapoint's claims and believes that they are without merit.
Accordingly, management does not believe the lawsuit will have a material
adverse effect on the Company's results of operations or financial
condition.
Litigation
From time to time, the Company is also party to what it believes is routine
litigation and proceedings that may be considered as part of the ordinary
course of its business. Currently, the Company is not aware of any other
current or pending litigation or proceedings that would have a material
effect on the Company's results of operations or financial condition.
Sales Agency Agreement
In July of 1996, the Company entered into a Sales Agency Agreement with
Quest Enterprises, Inc. ("QEI"). QEI was appointed a nonexclusive authorized
sales agent of the Company to sell to approved accounts in the United
States. The Company will pay a sales commission equal to five percent of net
sales to QEI on these approved accounts. The Company also granted to QEI an
option to purchase 75,000 shares of common stock at an exercise price of $16
per share. The option to purchase 25,000 of these shares is irrevocable and
is exercisable at any time prior to its expiration and is not affected by
the termination of the Sales Agency Agreement. The option to purchase any or
all of the remaining shares will not be exercisable until and unless prior
to the termination of the Sales Agency Agreement (i) the Company has
received net sales from approved accounts of at least $5,000,000 or (ii) the
Company obtains equity financing of at least $5,000,000 through QEI on terms
that are acceptable to the Company.
F-21
<PAGE>
VIDEOLAN Technologies, Inc.
(a development stage enterprise)
NOTES TO FINANCIAL STATEMENTS (continued)
December 31, 1996
NOTE I (continued)
Software Development Consulting Agreement
In July of 1996, the Company signed a one-year consulting agreement with
Video Network Service, Inc. ("VNS") to provide full-time software
supervision and development. The consulting agreement calls for VNS to be
paid $280,000 over the term of the one-year contract. Additionally, 40,000
stock options were granted to VNS and become executable at specific
increments once mutually agreed-upon milestones are met.
<PAGE>
Exhibit 3.2
CERTIFICATE OF AMENDMENT TO
CERTIFICATE OF INCORPORATION
OF
VIDEOLAN TECHNOLOGIES, INC.
The undersigned Chief Executive Officer of VideoLan Technologies, Inc. (the
"Corporation") hereby certifies that the amendment to the Certificate of
Incorporation of VideoLan Technologies, Inc. set forth below has been duly
adopted in accordance with the provisions of Section 242(b) of the Delaware
General Corporation Law:
Article Fourth, Section 1 is amended and restated in its entirety to read
as follows:
1. The aggregate number of shares which the Corporation shall have
authority to issue is $85,000,000 of which 80,000,000 shares shall have a
par value of $.01 per share and shall be designated "Common Stock", and
5,000,000 shares shall have a par value of $.01 per share and shall be
designated "Preferred Stock".
The amendment set forth above was adopted by the Board of Directors of the
Corporation as of June 17, 1996 by unanimous written consent as provided in the
Delaware General Corporation Law.
The amendment set forth above was adopted by a majority of the
Corporation's shareholders at the Corporation's Annual Meeting of Shareholders
on June 20, 1996 as provided in the Delaware General Corporation Law.
Dated: October 15, 1996
By:________________________________
Steven B. Rothenberg,
Chief Financial Officer
<PAGE>
COMMONWEALTH OF KENTUCKY )
) SS.
COUNTY OF JEFFERSON )
I, Notary Public in and for the Commonwealth and County aforesaid, do
hereby certify that on this day there personally appeared before me, Steven B.
Rothenberg, who, being by me first duly sworn, declared that he is Chief
Financial Officer of VideoLan Technologies, Inc., that he signed the foregoing
document as Chief Financial Officer of the Corporation and that the statements
contained therein are true and correct.
IN TESTIMONY WHEREOF, witness my signature and notarial seal this ___ day
of October, 1996.
(SEAL) _________________________
Notary Public
My commission expires: _________________________
2
<PAGE>
Exhibit 3.3
CERTIFICATE OF DESIGNATION, NUMBER, POWERS,
PREFERENCES AND RELATIVE, PARTICIPATING,
OPTIONAL, AND OTHER SPECIAL RIGHTS AND THE
QUALIFICATIONS, LIMITATIONS, RESTRICTIONS,
AND OTHER DISTINGUISHING CHARACTERISTICS OF
PREFERRED STOCK
OF
VIDEOLAN TECHNOLOGIES, INC.
Jack Shirman and Steven B. Rothenberg hereby certify that:
I. They are the Chief Executive Officer and Secretary, respectively, of
VideoLan Technologies, Inc., a Delaware corporation (the "Corporation").
II. The certificate of incorporation of the Corporation authorizes the
issuance of 5,000,000 shares of Preferred Stock, $.01 par value per share, and
expressly vests in the Board of Directors of the Corporation the authority
provided herein to issue any or all of said shares in one or more series and by
resolution or resolutions to establish the designation, number, full or limited
voting powers, or the denial of voting powers, preferences and relative,
participating, optional, and other special rights and the qualifications,
limitations, restrictions, and other distinguishing characteristics of each
series to be issued.
III. The Board of Directors of the Corporation, pursuant to the authority
expressly vested in it as aforesaid, has adopted the following resolutions
creating an issue of Preferred Stock:
RESOLVED, that Seven Thousand Five Hundred (7,500) of the Five Million
(5,000,000) authorized shares of Preferred Stock of the Corporation shall be
designated "Series 1996A Convertible Preferred Stock" (the "Preferred Stock")
and shall possess the rights and privileges set forth below:
A. Par Value. Each share of Preferred Stock shall have a par value of
$.01.
B. Dividend Rights. Holders of Preferred Stock shall be entitled to
receive cumulative dividends at the annual rate of sixty dollars ($60.00) per
share, when and as declared by the Board of Directors.
C. Liquidation Preference.
1. In the event of any liquidation, dissolution or winding-up of
the Corporation, either voluntary or involuntary (a "Liquidation"), the holders
of shares of the Preferred Stock then issued and outstanding shall be entitled
to be paid out of the assets of the Corporation
<PAGE>
available for distribution to its shareholders, whether from capital, surplus or
earnings, before any payment shall be made to the holders of shares of the
Common Stock or upon any other series of Preferred Stock of the Corporation with
a liquidation preference subordinate to the liquidation preference of the
Preferred Stock, an amount per share equal to the sum of (i) One Thousand
Dollars ($1,000) (the "Original Issue Price") for each outstanding share of
Preferred Stock, and (ii) an amount equal to six percent (6%) of the Original
Issue Price for each outstanding share of Preferred Stock multiplied by the
fraction N/365, where N equals the number of days elapsed since full payment for
the shares of Preferred Stock was deposited with the escrow agent. If, upon any
Liquidation of the Corporation, the assets of the Corporation available for
distribution to its shareholders shall be insufficient to pay the holders of
shares of the Preferred Stock and the holders of any other series of Preferred
Stock with a liquidation preference equal to the liquidation preference of the
Preferred Stock the full amounts to which they shall respectively be entitled,
the holders of shares of the Preferred Stock and the holders of any other series
of Preferred Stock with liquidation preference equal to the liquidation
preference of the Preferred Stock shall receive all of the assets of the
Corporation available for distribution and each such holder of shares of the
Preferred Stock and the holders of any other series of Preferred Stock with a
liquidation preference equal to the liquidation preference of the Preferred
Stock shall share ratably in any distribution in accordance with the amounts due
such shareholders. After payment shall have been made to the holders of shares
of the Preferred Stock of the full amount to which they shall be entitled, as
aforesaid, the holders of shares of the Preferred Stock shall be entitled to no
further distributions thereon and the holders of shares of the Common Stock and
of shares of any other series of stock of the Corporation shall be entitled to
share, according to their respective rights and preferences, in all remaining
assets of the Corporation available for distribution to its shareholders.
2. A merger or consolidation of the Corporation with or into
any other corporation, or a sale, lease, exchange, or transfer of all or any
part of the assets of the Corporation which shall not in fact result in the
liquidation (in whole or in part) of the Corporation and the distribution of its
assets to its shareholders shall not be deemed to be a voluntary or involuntary
liquidation (in whole or in part), dissolution, or winding-up of the
Corporation.
D. Conversion of Preferred Stock.
The holders of Preferred Stock shall have the following
conversion rights:
1. Right to Convert. Subject to paragraph 7 of this Section D,
each share of Preferred Stock shall be convertible, on the Conversion Dates and
at the Conversion Prices set forth below, into fully paid and nonassessable
shares of Common Stock (sometimes referred to herein as "Conversion Shares").
2. Mechanics of Conversion. Each holder of Preferred Stock who
desires to convert the same into shares of Common Stock shall provide notice
("Conversion Notice") via telecopy (facsimile) to the Corporation. The original
Conversion Notice and the certificate or certificates representing the Preferred
Stock for which conversion is elected, shall be delivered to the Corporation by
international courier, duly endorsed. The date upon which a Conversion Notice is
received by the Corporation shall be a "Notice Date."
<PAGE>
Upon receipt by the Corporation of a facsimile copy of a Conversion Notice,
the Corporation shall immediately send to the holder, via telecopy (facsimile),
a confirmation of receipt of the Conversion Notice which shall specify that the
Conversion Notice has been received and the name and telephone number of a
contact person at the Corporation whom the holder should contact regarding
information related to the conversion. The Corporation shall use all reasonable
efforts to issue and deliver within three (3) business days after the Notice
Date, to such holder of Preferred Stock at the address of the holder on the
stock books of the Corporation, a certificate or certificates for the number of
shares of Common Stock to which the holder shall be entitled as aforesaid;
provided that the original shares of Preferred Stock to be converted are
received by the transfer agent or the Corporation within three (3) business days
after the Notice Date and the person or persons entitled to receive the shares
of Common Stock issuable upon such conversion shall be treated for all purposes
as the record holder or holders of such shares of Common Stock on such date. If
the original certificate(s) representing the shares of Preferred Stock to be
converted are not received by the transfer agent or the Corporation within five
business days after the Notice Date, the Conversion Notice shall become null and
void.
3. Lost or Stolen Certificates. Upon receipt by the Corporation
of evidence of the loss, destruction, theft or mutilation of any Preferred Stock
certificates (the "Certificates") and (in the case of loss, theft or
destruction) of indemnity or security reasonably satisfactory to the
Corporation, and upon surrender and cancellation of the Certificates, if
mutilated, the Corporation shall execute and deliver new Preferred Stock
Certificates of like tenor and date. However, the Corporation shall not be
obligated to re-issue such lost or stolen Preferred Stock Certificates if the
holder thereof contemporaneously requests the Corporation to convert such
Preferred Stock into Common Stock, in which event the Corporation shall be
entitled to rely on an affidavit of loss, destruction or theft of the Preferred
Stock Certificate or, in the case of mutilation, tender of the mutilated
certificate, and shall issue the Conversion Shares.
4. Conversion Period. The Preferred Stock shall become
convertible into shares of Common Stock at any time commencing the earlier of
(i) the effective date of a registration statement covering the Conversion
Shares; or (ii) January 15, 1997.
5. Conversion Formula/Conversion Price. Each share of Preferred
Stock shall be convertible into the number of shares of Common Stock determined
by dividing the Original Issue Price by the Conversion Price (the "Conversion
Formula"). For purposes hereof, the term "Conversion Price" shall mean the
lesser of (x) 115% of the average Closing Bid Price (as that term is defined
below) for the five (5) trading days immediately preceding October 17, 1996 (the
"Closing Date"), or (y) the average Closing Bid Price for the five (5) trading
days immediately preceding the Notice Date multiplied by the Applicable
Percentage as of the Notice Date.
For purposes hereof, the term "Closing Bid Price" shall mean the closing
bid price of the Common Stock on the Nasdaq SmallCap Stock Market, or if no
longer traded on the Nasdaq SmallCap Stock Market, the closing bid price on the
Over-The Counter Market or the closing bid price on the principal national
securities exchange on which the Common Stock is so traded, all as reported in
the Wall Street Journal.
<PAGE>
For purposes hereof, the term "Applicable Percentage" shall mean:
Period Applicable Percentage
------ ---------------------
On or before March 1, 1997 85.0%
March 2, 1997 through April 16, 1997 82.5%
On or after April 17, 1997 80.0%
6. Conversion by the Corporation. On or after the earlier of June
30, 1997 at the election of the Corporation, any outstanding share of Preferred
Stock may be converted into Common Stock on such date in accordance with the
Conversion Formula and the Conversion Price then in effect. If the Corporation
desires to convert any shares of Preferred Stock it shall provide notice via
telecopy (facsimile) to the holder of such shares. Such notice shall be
delivered to the holder of such shares by international courier, duly endorsed.
The date upon which a Conversion Notice is received by the Holder shall be
deemed the "Notice Date" for purposes of determining the Conversion Price.
7. Redemption Option. If the Corporation receives a Conversion
Notice with respect to any shares of Preferred Stock for which the Conversion
Price would be less than the average Closing Bid Price for the five (5) trading
days immediately preceding the Closing Date, at the election of the Corporation,
each such share may be redeemed by the Company rather than converted. The
redemption price (the "Redemption Price") for shares to be redeemed shall be the
Original Issue Price divided by the Applicable Percentage as of the Notice Date.
The Redemption Price shall be paid to the holder of the redeemed shares of
Preferred Stock within five (5) business days of the Notice Date.
8. No Fractional Shares. If any conversion of the Preferred Stock
would create a fractional share of Common Stock or a right to acquire a
fractional share of Common Stock, such fractional share shall be disregarded and
the number of shares of Common Stock issuable upon conversion, if the aggregate,
shall be the next higher number of shares.
9. Reservation of Stock Issuable Upon Conversion. The Corporation
shall at all times reserve and keep available out of its authorized but unissued
shares of Common Stock, solely for the purpose of effecting the conversion of
the shares of the Preferred Stock, such number of its shares of Common Stock as
shall from time to time be sufficient to effect the conversion of all then
outstanding shares of the Preferred Stock; and if any time the number of
authorized but unissued shares of Common Stock shall not be sufficient to effect
the conversion of all then outstanding shares of the Preferred Stock, the
Corporation will take such corporate action as may be necessary to increase its
authorized but unissued shares of Common Stock to such number of shares as shall
be sufficient for such purpose.
<PAGE>
10. Adjustment to Conversion Price.
(a) If, prior to the conversion of all shares of Preferred
Stock, the number of outstanding shares of Common Stock is increased by a stock
split, stock dividend, or other similar event, the Conversion Price shall be
proportionately reduced, or if the number of outstanding shares of Common Stock
is decreased by a combination or reclassification of shares, or other similar
event, the Conversion Price shall be proportionately increased.
(b) If, prior to the conversion of all shares of Preferred
Stock, there shall be any merger, consolidation, exchange of shares,
recapitalization, reorganization, or other similar event, as a result of which
shares of Common Stock of the Corporation shall be changed into the same or a
different number of shares of the same or another class or classes of stock or
securities of the Corporation or another entity, then the holders of Preferred
Stock shall thereafter have the right to purchase and receive upon conversion of
shares of Preferred Stock, upon the basis and upon the terms and conditions
specified herein and in lieu of the shares of Common Stock immediately
theretofore issuable upon conversion, such shares of stock and/or securities as
may be issued or payable with respect to or in exchange for the number of shares
of Common Stock immediately theretofore purchasable and receivable upon the
conversion of shares of Preferred Stock held by such holders had such merger,
consolidation, exchange of shares, recapitalization or reorganization not taken
place, and in any such case appropriate provisions shall be made with respect to
the rights and interests of the holders of the Preferred Stock to the end that
the provisions hereof (including, without limitation, provisions for adjustment
of the Conversion Price and of the number of shares issuable upon conversion of
the Preferred Stock) shall thereafter be applicable, as nearly as may be
practicable in relation to any shares of stock or securities thereafter
deliverable upon the exercise hereof. The Corporation shall not effect any
transaction described in this subsection unless the resulting successor or
acquiring entity (if not the Corporation) assumes by written instrument the
obligation to deliver to the holders of the Preferred Stock such shares of stock
and/or securities as, in accordance with the foregoing provisions, the holders
of the Preferred Stock may be entitled to purchase.
(c) If any adjustment under this subsection would create a
fractional share of Common Stock or a right to acquire a fractional share of
Common Stock, such fractional share shall be disregarded the number of shares of
Common Stock issuable upon conversion shall be the next higher number of shares.
E. Voting. Except as otherwise provided below or by the General
Corporation Law of the State of Delaware, the holders of the Preferred Stock
(the "Holders") shall have no voting power whatsoever, and no holder of
Preferred Stock shall vote or otherwise participate in any proceeding in which
actions shall be taken by the Corporation or the shareholders thereof or be
entitled to notification as to any meeting of the Board of Directors or the
shareholders.
To the extent that under Delaware law and vote of the Holders, voting
separately as a class, is required to authorize a given action of the
Corporation, the affirmative vote or consent of the Holders of at least a
majority of the shares of the Preferred Stock represented at a duly held meeting
at which a quorum is present or by written consent of a majority of the shares
of Preferred Stock
<PAGE>
(except as otherwise may be required under Delaware law) shall constitute the
approval of such action by the class. To the extent that under Delaware law the
Holders are entitled to vote on a matter with holders of Common Stock, voting
together as one (1) class, each share of Preferred Stock shall be entitled to a
number of votes equal to the number of shares of Common Stock into which it is
then convertible using the record date for the taking of such vote of
stockholders as the date as of which the Conversion Price is calculated. The
Holders also shall be entitled to notice of all shareholder meetings or written
consents with respect to which they would be entitled to vote, which notice
would be provided pursuant to the Corporation's by-laws and applicable statues.
F. Status of Converted Stock. In the event any shares of Preferred
Stock shall be converted or redeemed as contemplated by this Designation, the
shares so converted or redeemed shall be canceled, shall return to the status of
authorized but unissued Preferred Stock of no designated class or series, and
shall not be issuable by the Corporation as Preferred Stock.
G. Taxes. All shares of Common Stock issued upon conversion of
Preferred Stock will be validly issued, fully paid and nonassessable. The
Corporation shall pay any and all documentary stamp or similar issue or transfer
taxes that may be payable in respect of any issue or delivery of shares of
Common Stock on conversion of Preferred Stock pursuant hereto. The Corporation
shall not, however, be required to pay any tax which may be payable in respect
of any transfer involved in the issue and delivery of shares of Common Stock in
a name other than that in which the Preferred Stock so converted were
registered, and no such issue or delivery shall be made unless and until the
person requesting such transfer has paid to the Corporation the amount of any
such tax or has established to the satisfaction of the Corporation that such tax
has been paid or that no such tax is payable. The Corporation shall adjust the
amount of dividends paid or accrued so as to indemnity the holders of Preferred
Stock against any withholding or similar tax in respect of such dividends.
FURTHER RESOLVED, that the statements contained in the foregoing
resolutions creating and designating the said Preferred Stock and fixing the
number, powers, preferences and relative, optional, participating, and other
special rights and the qualifications, limitations, restrictions, and other
distinguishing characteristics thereof shall, upon the effective date of said
series, be deemed to be included in and be a part of the Certificate of
Incorporation of the Corporation pursuant to the provisions of the General
Corporation Law of the State of Delaware.
IV. This Certificate of Designation of the Corporation has been duly
approved by the Board of Directors.
V. The total number of outstanding shares of Common Stock of the
Corporation is 14,026,398. There are no outstanding shares of Preferred Stock of
the Corporation. There are no other shares of any other class of stock
outstanding. No vote of any class of stock of the Corporation is required for
the adoption and approval of this Certificate of Designations.
<PAGE>
We further declare under penalty of perjury under the laws of the State of
Delaware that the matters set forth in this Certificate are true and correct of
our own knowledge.
Date: October 16, 1996 /s/ JACK SHIRMAN
--------------------------------------
Jack Shirman, Chief Executive Officer
/s/ STEVEN B. ROTHENBERG
--------------------------------------
Steven B. Rothenberg, Secretary
<PAGE>
Exhibit 10.19
STOCK OPTION AGREEMENT dated as of August 28, 1995 between VideoLan
Technologies, Inc., a Delaware corporation with its principal office at
10101 Linn Station Road, Suite 620, Louisville, Kentucky 40223
(hereinafter called the "Corporation"), and John R. Glankler
(hereinafter called the "Optionee").
The Optionee is a director of the Corporation and it is recognized
that the best interests of the Corporation would be served if the Optionee is
given the right to acquire a proprietary interest in the Corporation.
Therefore, the Corporation and the Optionee mutually agree as follows:
1. Stock Option. The Corporation hereby grants to the Optionee
an option (the "Option") to purchase up to 10,000 shares (the "Shares")
of the Common Stock, par value $.01 per share, of the Corporation
("Common Stock") at an exercise price of $4.00 per share (the "Exercise
Price Per Share"). The Option shall become exercisable as provided in
Section 3 hereof and may be exercised in whole or in part until
terminated in accordance with Section 4 hereof. The Option has been
issued pursuant to, and is subject to the terms and provisions of, the
1995 Stock Option Plan of VideoLan Technologies, Inc., as the same may
be amended from time to time (the "Plan"). The Options granted
hereunder are deemed to be nonqualified stock options under the Plan.
<PAGE>
2. Exercise Dates. Subject to Section 4 hereof, the Option
hereunder shall become exercisable with respect to all 10,000 Shares on
or after August 28, 1995.
3. Manner of Exercise of the Option. The Option may be exercised by the
Optionee by giving written notice to the Corporation in the form of Exhibit A
attached hereto (an "Exercise Notice") specifying the number of Shares
with respect to which the Option is being exercised. Upon any exercise
of the Option, the number of Shares with respect to which the Option may
thereafter be exercised by the Optionee shall no longer include the
number of Shares with respect to which the Option has been exercised.
On the tenth business day following receipt of an Exercise Notice
by the Corporation, or at any other time mutually agreed upon by the
Corporation and the Optionee, a closing shall be held (the "Closing").
At the Closing:
(a) the Optionee shall pay to the Corporation, by certified or
cashier's check, the aggregate Exercise Price per Share for the Shares; and
(b) the Corporation shall deliver to the Optionee a stock
certificate representing the Shares.
Prior to the Closing, the Corporation shall inform the Optionee of
the amount of any federal, state and local income and taxes which it
determines it is required to withhold from the Optionee by reason of
such exercise of the Option, and the Optionee, as a condition to the
2
<PAGE>
Closing, shall make provision satisfactory to the Corporation for the
payment of such taxes to the Corporation.
4. Termination, Cancellation, Modification and Adjustment of Option.
(a) Termination. The Option and all rights of the Optionee hereunder,
to the extent not previously exercised, shall terminate on the earliest of the
following dates:
(i) August 27, 2005;
(ii) The date of termination of the Optionee's directorship for any
reason whatsoever other than death; provided, however, that any
options which were immediately exercisable by the Optionee hereunder
at the date of such termination of Optionee's directorship may be
exercised by the Optionee during the period ending five (5) years
after the date of such termination, but in no event after the date
set forth in Section 4(a)(i) hereof;
(iii) The date of termination of the Optionee's directorship by
reason of his death, provided, however, that the Options, if any,
which were immediately exercisable by the Optionee at the date of his
death may be exercised by the Optionee's legal representatives during
the period ending three (3) years after the date of the Optionee's
death, but in no event after the date set forth in Section 4(a)(i)
hereof; or
3
<PAGE>
(iv) Thirty days following the date on which the Optionee receives
a Cancellation Notice from the Corporation as provided in Section 4(b)
hereof.
(b) Cancellation of Option. Notwithstanding the foregoing provisions
of this Section, the Corporation shall have the right to terminate the
right of the Optionee to exercise the Option, effective thirty (30) days
after receipt by the Optionee of a written notice from the Corporation
informing the Optionee that this Option is to be cancelled (the
"Cancellation Notice"). The Corporation may issue a Cancellation Notice
only in connection with (i) the sale of substantially all of the
Corporation's assets, or (ii) a merger, consolidation or other corporate
transaction in which the Corporation would not be the surviving entity.
Following receipt of a Cancellation Notice and during the period prior
to the effective date of the termination, the Optionee shall have the
right to exercise the Option (to the extent not previously exercised)
with respect to all Shares covered hereby (even if under Section 2 the
Option would not otherwise have become exercisable with respect to all
Shares at that time).
(c) Modification of Agreement. The Optionee hereby consents to
any amendment of the Plan and of this Agreement which the Board of
Directors in its sole discretion and upon advice of legal counsel, may
deem necessary or advisable to enable the exercise of the Option to
comply with any applicable rules and
4
<PAGE>
regulations of the Securities and Exchange Commission, including,
without intending any limitation, any amendment which would exempt such
exercise from the operation of Section 16 of the Securities Exchange Act
of 1934. Except as otherwise provided herein, this agreement may not be
amended or modified except pursuant to an agreement in writing signed by
Corporation and the Optionee.
(d) Adjustment of Option. In the event that prior to the exercise in
full of the Option, the Corporation shall have effected one or more
stock dividends, stock splits, reorganizations, recapitalizations,
combinations of shares, mergers, consolidations, or other changes in the
corporate structure or stock of the Corporation, the Board of Directors
shall equitably adjust the number, kind and Exercise Price per Share of
the Shares remaining subject to the Option in accordance with the Plan.
(e) Sales of Shares Acquired Upon Exercise of the Option. Shares of
Common Stock acquired upon exercise of the Option, cannot be sold unless they
are registered pursuant to a registration statement filed with the
Securities and Exchange Commission or if an exemption from registration
is available.
5. No Rights in Shares. The Optionee shall not have any of
the rights and privileges of a stockholder of the Corporation in respect
of any Shares covered by the Option until the Optionee shall have become
the holder of record of any such Shares.
5
<PAGE>
6. Nontransferability. The Option shall not be transferable by
the Optionee, except by will or the laws of descent and distribution,
and is exercisable during the Optionee's lifetime only by him, except
as set forth in Section 4 hereof. Any sale, donation, pledge,
hypothecation, assignment or other transfer contrary to the provisions
of this Agreement is null and void.
7. Effect upon Service as a Director. Nothing contained in this
Agreement or in the Plan shall confer upon the Optionee any right with
respect to Optionee continuing to serve as a director of the
Corporation.
8. Determination. Each determination, interpretation or other
action made or taken pursuant to the provisions of this Agreement by the
Board of Directors shall be final and conclusive for all purposes and
shall be binding upon all persons, including, without limitation, the
Corporation and the Optionee, and their respective successors and
assigns.
9. Reference to the Plan. The Option has been granted pursuant to and
subject to the provisions of the Plan, which is hereby incorporated
herein by reference. Anything herein to the contrary notwithstanding,
each and every provision of this Agreement shall be subject to the terms
and conditions of the Plan.
10. Governing Law. This Agreement and all determinations made and
actions taken pursuant hereto shall be governed by the internal laws of
the State of Delaware and construed in
6
<PAGE>
accordance therewith, without giving effect to the principles of
conflict of laws thereof.
IN WITNESS WHEREOF, the parties have executed this Agreement the date and
year first above written.
VIDEOLAN TECHNOLOGIES, INC.
By:_/s/_Steve Rothenberg_______
Title: Chief Financial Officer
/s/_John_R._Glankler_________
John R. Glankler, Optionee
7
<PAGE>
EXHIBIT A
EXERCISE NOTICE
______________, _____
VideoLan Technologies, Inc.
10101 Linn Station Road
Suite 620
Louisville, Kentucky 40223
Gentlemen:
Reference is made to that certain Stock Option Agreement dated as
of August 28, 1995 between the undersigned and VideoLan Technologies,
Inc. (the "Corporation") , pursuant to which the undersigned was granted
an option (the "Option") to purchase shares of the Common Stock (the
"Shares") of the Corporation (the "Option Agreement"). The undersigned
hereby elects to exercise the Option to the extent of _____ Shares.
The undersigned hereby acknowledges that he has been informed by
the Corporation that the Shares to be acquired upon this exercise of the
Option have not been registered under the Securities Act of 1933, as
amended (the "Act"). In the event the Shares are not registered at the
time the Option is exercised, the Shares may have to be held
indefinitely unless they are subsequently registered under the Act or an
exemption from registration is available. The undersigned understands
that any sale of the any of such Shares made in reliance upon Rule 144,
promulgated by the Securities and Exchange Commission under the Act, can
be made only in limited amounts in accordance with the terms and
conditions of that Rule, and in the event that Rule 144 is not
applicable to any such sale,
<PAGE>
public resale may require compliance with the registration provisions,
Regulation A, or some other disclosure provision or exemption under the
Act. In the event the Shares are not registered under the Act, the
undersigned agrees he will make no sale or other transfer of such Shares
unless the Corporation receives an opinion of its counsel to the effect
that registration thereof is a prerequisite to such sale or that an
exemption from such registration is available.
The undersigned agrees that if the Shares are not registered, the
certificates representing such Shares shall bear the following legend:
"THE SHARES MAY NOT BE SOLD OR TRANS-
FERRED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT FOR THE SHARES UNDER
THE SECURITIES ACT OF 1933 OR AN OPINION OF
COUNSEL TO THE CORPORATION THAT REGISTRATION
IS NOT REQUIRED UNDER SAID ACT."
Very truly yours,
_____________________________________
Optionee
<PAGE>
Exhibit 10.22
BLANKENBAKER BUSINESS CENTER II
11403 Bluegrass Parkway
Louisville, Kentucky 40299
LEASE
This lease is made this 23rd day of April, 1996, by and between NTS/BBCI, A
KENTUCKY LIMITED PARTNERSHIP, BLAKENBAKER BUSINESS CENTER II, A Kentucky Limited
Partnership, herein called LESSOR, and VIDEOLAN TECHNOLOGIES, INC., herein
called LESSEE.
1. FUNDAMENTAL EXHIBITS TO LEASE.
The exhibits listed below and attached to this lease are incorporated herein by
this reference.
"EXHIBIT A". FINAL PLANS AND SPECIFICATIONS FOR INTERIOR FINISH TO
PREMISES.
"EXHIBIT B". SITE PLAN.
"EXHIBIT C". OFFICE AND SERVICE AREA SPECIFICATIONS AND
ALLOWANCES.
"EXHIBIT D". LEASE RULES AND REGULATIONS.
2. DEMISED PREMISES.
For and in consideration of the rent hereinafter reserved and the mutual
covenants hereinafter contained, LESSOR does hereby lease and demise unto
LESSEE, and LESSEE does hereby hire, lease and accept, from LESSOR, Suite No.
400 containing approximately 9,778 net rentable square feet of space (the "Gross
Area") in Blankenbaker Business Center II, (the "Building") situated within
Blankenbaker Crossings, located in Louisville, Jefferson County, Kentucky, (the
"Property") all upon the terms and conditions hereinafter set forth. That
portion of the Gross Area which LESSEE shall be entitled to occupy is
hereinafter referred as the "Premises" or "Demised Premises", and is outlined in
red on the floor plan attached hereto as Exhibit B and by this reference made a
part hereof. It is specifically understood that for purposes of calculating and
payments or prorations hereunder, the number of net rentable square feet set
forth above shall control.
3. TERM.
To have and to hold the same for a term of 60 months; commencing on MAY 1, 1996
and ending April 30, 2001. LESSEE acknowledges that it has inspected the Demised
Premises and conclusively accepts the Demised Premises, in their present
condition as suitable and satisfactory for the purpose for which the Demised
Premises are leased and further acknowledges that no representations as to the
condition or repair of the Demised Premises nor promises to alter, remodel or
improve the Demised Premises have been made by LESSOR, unless such are expressly
set forth on Exhibit "C". If this lease is executed before the Demised Premises
become vacant or otherwise available and ready for occupancy, or if any present
tenant or occupant of the Demised Premises holds over, and LESSOR cannot acquire
possession of the Demised Premises prior to the date above recited as the
commencement date of this lease, LESSOR shall not be deemed to be in default
hereunder, nor be liable for any damages resulting from such delay, and LESSEE
agrees to accept possession of the Demised Premises at such time as LESSOR is
able to tender the same; and LESSOR hereby waives payment of rent covering any
period prior to the tendering of possession to LESSEE hereunder. In the event
said premises shall not be ready for occupancy on the commencement date set
forth above, this lease shall remain in effect and the term thereof shall begin
on the first day the premises are ready for occupancy and run for a period of 60
months from the first day of the next occurring calendar month. If, in such
event, the commencement of the lease term does not coincide with the first day
of a calendar month, the monthly rental payments for the first month of the term
shall be paid in a prorated amount which shall be computed on the number of days
the LESSEE occupies the premises during the months in question. If LESSOR
permits LESSEE to enter into possession of the Demised Premises prior to
commencement date, all of the terms and conditions of this lease shall apply to
such prior period.
- 1 -
<PAGE>
4. RENT.
LESSEE shall pay as Initial Base Rent for the Demised Premises the net sum of
$85,128.00 annually, payable $7,094.00 per month. All rent payments shall be
made to BLANKENBAKER BUSINESS CENTER II and paid in advance on the first day of
each and every month. Rent payment and all sums hereinafter designated as
additional rent shall be hand-delivered or mailed to LESSOR at the management
office of NTS/BBCI, Suite 200, 10172 Linn Station Road, Louisville, Kentucky
40223, all of which LESSEE hereby covenants and agrees to pay without demand,
deduction, set-off or notice. Mailing address may change at LESSOR's sole
discretion. Should the commencement of the lease term not coincide with the
first day of a calendar month, the monthly rental for the first month shall be
paid in a prorated amount which shall be computed on the number of days this
lease is in effect during the month in question. If in the event any Federal,
State or local Governmental body imposes any tax or levy on any rent, LESSEE
hereby agrees to pay as additional rent the amount of any such tax or levy, and
such tax or levy will be added to the rent.
5. RENT ADJUSTMENT.
LESSEE shall pay to LESSOR the "CPI Adjustment" (as hereinafter defined) as
additional rent to reflect increases in the "Consumer Price Index" (as
hereinafter defined). For purposes hereof, "Consumer Price Index" or "CPI" shall
mean "Consumer Price Index for all Urban Consumers" published by the Bureau of
Labor Statistics of the United States Department of Labor, U.S. City Average,
All Items (1982-84 = 100). If the manner in which the CPI is determined by the
Department of Labor shall be substantially revised, an adjustment shall be made
by LESSOR for purposes of this Lease in such revised index or the calculation
hereunder to produce results equivalent, as nearly as possible, to those which
would have resulted if the CPI had not been so revised. If the CPI shall become
unavailable to the public because publication is discontinued, or otherwise,
LESSOR will substitute therefor a comparable index based upon changes in the
cost of living or purchasing power of the consumer dollar published by a
governmental agency, or, if no such index shall then be available, a comparable
index published by a major bank or other financial institution or by a
university or a financial publication of multi-state or national circulation.
"CPI Base", as used herein, shall mean the CPI published most recently prior to
the Commencement Date.
At the end of each calendar year, LESSOR shall calculate and communicate to
LESSEE the amount of the CPI Adjustment to be paid during each subject calendar
year. "CPI Adjustment" shall mean an amount equal to the product of (a) the
Initial Base Rent payable during the subject calendar year, multiplied by (b)
the percentage by which the CPI published then most recently prior to the
beginning of the subject calendar year exceeds the CPI Base, if any. LESSEE
shall pay to LESSOR each month during the subject calendar year, at the same
time as payments of Monthly Base Rent are due for such subject calendar year, an
amount equal to one-twelfth (1/12) of the CPI Adjustment calculated with regard
to such subject calendar year. Prorated adjustments, if any, from January 1
through the month of delivery of the notice of CPI Adjustment for the then
current calendar year will also be due upon receipt and LESSEE shall immediately
pay the total amount of such deficiency to LESSOR.
6. ANNUAL OPERATING COSTS.
(a) LESSEE agrees to pay LESSOR, as additional rent, its Pro-Rata Share (as
hereinafter defined) of Annual Operating Costs (as hereinafter defined).
(b) LESSEE shall pay to LESSOR on the first day of each calendar month as its
estimated payment for the Annual Operating Costs the sum $977.80, calculated at
the rate of $1.20 per square foot per year. Within one hundred twenty (120) days
following each December 31st, during the term hereof, LESSOR shall submit to
LESSEE a statement (the "Annual Statement") in reasonable detail of the actual
Annual Operating Costs for the twelve month period ending December 31st of each
year ("Fiscal Year"). If such statement shows that LESSEE's share of the actual
Annual Operating Costs exceeded LESSEE's monthly payments, then LESSEE shall
immediately pay the total amount of such deficiency to LESSOR. If such statement
shows that LESSEE's share of the actual Annual Operating Costs is less than the
total of LESSEE's monthly payments, then LESSOR shall, within sixty (60)
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days of the Annual Statement, refund the difference to LESSEE. The Annual
Statement shall be used as the basis for calculating LESSEE's monthly payments
for the then current calendar year. Prorated adjustments, if any, from January 1
through the month of delivery of the Annual Statement for the then current year
will also be due upon receipt and LESSEE shall immediately pay the total amount
of such deficiency to LESSOR.
(c) All monthly payments as may be required hereunder shall be payable in full
on the first day of the next occurring calendar month. Failure of the LESSOR to
provide an Annual Statement within the said one-hundred-twenty (120) day period
shall not constitute a waiver by LESSOR of its rights to payment due pursuant to
this paragraph, and the obligation hereunder shall survive the expiration or
other termination of this Lease.
(d) For any applicable Fiscal Year that begins prior to the Rent Commencement
Date or ends after the expiration date of this Lease, the amount due for that
Fiscal Year shall be apportioned on a per diem basis so that only that portion
attributable to the portion of such Fiscal Year that occurs during the term of
the Lease, shall be payable by LESSEE.
(e) The LESSEE's Pro-rata Share as used herein shall not exceed 14.91%,
determined by the net rentable square footage of the Premises, excluding any
mezzanine service space, divided by the total square footage of the Building.
The total square footage of the Building shall be equal to the total mezzanine
level office square footage leased in the subject Fiscal Year plus the total
ground floor square footage of the Building.
(f) Annual Operating Costs as used herein shall mean all costs of operation,
maintenance and repair of the Property, (except structural repair, and shall
include the following by way of illustration but not limitation: Insurance, Real
Estate Taxes (as hereinafter defined), the cost of all materials and services
for the operation, maintenance and repair of the Building and its appurtenances
(including service roads and parking areas), including not limited to, water and
sewer charges; refuse and rubbish disposal; permits and inspection fees;
maintenance and service contracts; all landscaping costs (including upgrades and
replacements thereto): parking lot lights, watchmen, guards, and any personnel
engaged in the operation, maintenance or repair of the Property and its
appurtenances together with payroll taxes and employee benefits applicable
thereto.
(g) The term "Real Estate Taxes" means all taxes, rates and assessments, general
and special, levied or imposed with respect to the land, buildings and
improvements comprising the Property, including all taxes, rates and assessments
general and special, levied or imposed general or local improvement and
operations and taxes imposed in connection with any special taxing district. If
the system of real estate taxation is altered or varied and any new tax or levy
shall be levied or imposed on said land, building and improvements, and/or
LESSOR in substitution for estate taxes presently levied or imposed on immovable
in the jurisdiction where the Building is located, then any such tax or levy
shall be included within the term "Real Estate Taxes". Should any governmental
taxing authority acting under any regulation, levy, assess or impose an excise
and/or assessment however descried (other than an income or franchise tax) upon,
against, on account of or measured by, in whole or in part, the rent expressly
reserved hereunder, or upon the rent expressly reserved under any other leases
or leasehold interests in the Property, as a substitute (in whole or in part) or
in addition to any existing real estate taxes on land and buildings and
otherwise, such tax or excise on rents shall be included within the term "Real
Estate Taxes". In the event LESSOR is required to pay real estate taxes in
advance, LESSEE agrees that LESSOR shall immediately be entitled to
reimbursement therefore. Reasonable expenses (consisting of attorneys' fees,
consulting fees, expert witness fees and similar costs) incurred by LESSOR in
obtaining or attempting to obtain a reduction of any Real Estate Taxes shall be
added to and included in the amount of any such Real Estate Taxes. Real Estate
Taxes which are being contested by LESSOR shall nevertheless be included for
purposes of the computation of the liability of LESSEE under this paragraph,
provided, however, that in the event that LESSEE shall have paid any amount of
increased rent pursuant to this Paragraph 5 and the LESSOR shall thereafter
receive a refund of any portion of any Real Estate Taxes on which such payment
shall have been based, LESSOR shall pay to LESSEE its proportionate share (after
deducting expenses relating to said contest) of such refund. LESSOR shall have
no obligation to contest, object to or litigate the levying or imposition of any
Real Estate Taxes and may settle,
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compromise, consent to waive or otherwise determine in its discretion to abandon
any contest with respect to the amount of any Real Estate Taxes without consent
or approval of the LESSEE.
7. ADDITIONAL RENT.
Any amounts required to be paid by LESSEE hereunder and any charges or expenses
incurred by LESSOR on behalf of LESSEE under the terms of this Lease shall be
considered additional rental payable in the same manner and upon the same terms
and conditions as the rent reserved hereunder. Failure on the part of LESSEE to
pay such additional rental when and as the same shall become due shall entitle
LESSOR to the remedies available to it for non-payment of rent.
8. TAXES AND LEASEHOLD IMPROVEMENTS.
LESSEE shall pay before delinquency any and all taxes and assessments upon
LESSEE's leasehold improvements, equipment, furniture, fixtures and other
personal property located on or used in connection with the demised premises.
9. USE.
(a) LESSEE shall occupy and use the Demised Premises for general office light
manufacturing, research and storage purposes and for no other purpose. LESSEE
shall at the termination and/or expiration of this lease return said Demised
Premises to LESSOR in as good condition as when received, loss by accidental
fire or other casualty not occurring through negligence of LESSEE and ordinary
wear and tear excepted. As a material consideration hereto the LESSEE covenants
that LESSEE shall not permit the Demised Premises to be occupied by any person,
firm or corporation other than the LESSEE whose name appears on this lease.
(b) LESSEE shall not use or permit upon said Demised Premises anything that will
invalidate or alter the classification of the policy of insurance now or
hereafter carried on the building or which the Demised Premises are a part, or
that will increase the rate of insurance on said Demised Premises or on said
building; LESSEE shall not use or permit upon said Demised Premises anything
that may be dangerous to life or limb; LESSEE shall not in any manner deface or
injure said building or any part thereof, or overload the floors of said Demised
Premises. LESSEE shall not permit any objectionable noise or odor to escape or
be entitled from said Demised Premises or do anything or permit anything to be
done upon said Demised Premises in any way tending to create a nuisance or
tending to disturb any tenant in said building or the occupants of neighboring
properties. LESSEE shall not use the parking areas in any manner for the storage
of materials, parts, supplies, trailers, equipment or machinery, nor shall
LESSEE use the parking areas in any manner which could obstruct or interfere
with the rights and safety of other tenants or persons. LESSEE will not use the
premises for any illegal purpose or in violation of any government regulations
or embarrass LESSOR or any other tenant.
(c) LESSEE will maintain a room temperature of greater than 40 degrees
Fahrenheit in the service area and office area of the Demised Premises.
(d) LESSEE shall comply with all governmental laws, ordinances and regulations
and shall obtain and maintain all necessary licenses and permits applicable to
LESSEE and to the use of the Demised Premises, and shall promptly comply with
all governmental orders and directives for the correction, prevention and
abatement of nuisances in, upon, or connected with the Demised Premises, all at
LESSEE's sole expense.
(e) LESSEE shall be solely responsible for all janitorial needs and expenses in
connection with the Demised Premises.
10. REPAIRS BY LESSEE.
LESSEE shall keep the Demised Premises clean and free from all dirt and other
refuse; keep all waste and drain pipes open within the Demised Premises; make
all necessary repairs to plumbing,
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heating, ventilating, and air conditioning; and all other utility lines within
the Premises; continuously keep and maintain every part and portion of the
Demised Premises, in good order and repair, excluding structural repairs, the
roof, gutters, downspout and exterior walls. It is understood that "exterior
walls" does not include overhead doors, personnel doors or any glass. LESSEE
shall keep their sidewalk from suite to the parking area clean and unobstructed
in any way. It is also understood that LESSOR retains the right to enter
LESSEE's suite whenever LESSOR deems necessary to install or repair utility
lines to or from adjacent suites in the building.
LESSEE shall maintain throughout the Lease Term and any renewals thereof a
service contract for routine maintenance and inspection of all heating and air
conditioning equipment within the Premises. Such contract shall be secured and
maintained at LESSEE's expense, through a licensed contractor acceptable to
LESSOR and shall provide for inspection and routine maintenance (e.g. filter
changes, belt tightening, etc.) of all systems three times per year. LESSOR
shall warrant and make any other repairs to the heating and air conditioning for
one (1) year from the Commencement Date. LESSEE shall submit a copy of such
contract to LESSOR prior to the Commencement Date and every twelve months
thereafter evidencing coverage for the Premises for the upcoming twelve month
period. If at any time LESSEE has not maintained the coverage provided herein,
or if such repairs are occasioned by the negligence of LESSEE, its employees,
agents, or invitees, LESSOR shall have no obligations for the cost of any
repairs hereunder.
11. REPAIRS BY LESSOR.
LESSOR shall have no duty to LESSEE to make any repairs or improvements to the
interior of the Demised Premises except structural repairs necessary for safety
and tenantability, and then only if not brought about by any act or neglect of
LESSEE, its agents, employees or invitees. LESSEE agrees to report immediately
in writing to LESSOR any defective condition in or about the Demised Premises
known to LESSEE which LESSOR is required to repair, and a failure to so report
shall make LESSEE liable to LESSOR for any expense, damage or liability
resulting from such defects.
12. ALTERATIONS.
LESSEE shall make no alterations in, or additions to, said Demised Premises
without first obtaining LESSOR's written consent. At the termination and/or
expiration of this lease or any renewal thereof, if LESSOR so elects, LESSEE
shall, at LESSEE's expense, remove all alterations, additions, improvements and
partitions erected by LESSEE and restore the Demised Premises to their original
condition; otherwise such improvements shall be delivered up to LESSOR with the
Demised Premises, and shall become the absolute property of the LESSOR without
payment or offset. The LESSEE shall, at LESSEE's expense, at the termination
and/or expiration of this lease, remove all of LESSEE's personal property (and
those improvements made by LESSEE which have not become the property of the
LESSOR), including, but not limited to trade fixtures, bins, equipment,
machinery and shall repair all damage done by or in connection with the
installation or removal of said personal property and improvements, and restore
the Demised Premises to their original condition ordinary wear and tear
excepted. All property of LESSEE remaining on the Demised Premises at the
termination and/or expiration of this lease shall conclusively be deemed
abandoned and may be removed by LESSOR and LESSEE shall reimburse LESSOR for the
cost of such removal. LESSOR may have any such property stored at LESSEE's
expense. All such removals and restoration shall be accomplished in a good and
workmanlike manner so as not to damage the primary structure or structural
qualities and other improvements situated on the Demised Premises and the
building in which the Demised Premises are located.
13. SIGNS.
LESSEE shall not be permitted to paint, place, erect or cause to be painted,
placed or erected signs on the front, back or side portions of any building, the
property, or on the grounds of the Demised Premises without first obtaining
written consent from the LESSOR. At or prior to the termination and/or
expiration of this lease, LESSEE shall remove any signs so painted, placed or
erected, and shall restore the walls and other portions of the Demised Premises
which any of the said signs were attached to their former condition, ordinary
wear and tear excepted. LESSOR will provide a uniform
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lettered sign to be installed at the front and rear entrance of each suite, said
sign and installation will be at LESSOR's expense and purchased through LESSOR's
vendor.
14. ROOF RIGHTS.
Except as otherwise provided in this Lease, LESSOR shall have the exclusive
right to use all or any portion of the roof of the Building for any purpose.
15. LAWS AND ORDINANCES.
LESSEE will, at its own cost, promptly comply with and carry out all orders,
requirements or conditions now or hereafter imposed upon it by the ordinances,
laws and/or regulations of the municipality, county and/or state in which the
Demised Premises are located whether required of LESSOR or otherwise, in the
conduct of LESSEE's business, except that LESSOR shall comply with any orders
affecting structural walls and columns unless due to LESSEE's particular
business or use of the Premises. LESSEE will indemnify and hold LESSOR harmless
from all penalties, claims, and demands resulting from LESSEE's failure or
negligence in this respect.
16. FURNITURE; FIXTURES; ELECTRICAL EOUIPMENT.
(a) LESSEE shall not place a load upon the second floor, if any, of the Demised
Premises exceeding fifty (50) pounds per square foot without LESSOR's prior
written consent. Business machines, mechanical equipment and materials belonging
to LESSEE which cause vibration, noise, cold, heat or fumes that may be
transmitted to the Building or to any other leased space therein to such a
degree as to be objectionable to LESSOR or to any other tenant in the Building
shall be placed, maintained, isolated, stored and/or vented by LESSEE at its
sole expense so as to absorb and prevent such vibration, noise, cold, heat or
fumes. LESSEE shall not keep within or about the Demised Premises any dangerous,
inflammable, toxic or explosive material. LESSEE shall indemnify LESSOR and hold
it harmless against any and all damage, injury, or claims resulting from the
moving of LESSEE's equipment, furnishings and/or materials into or out of the
Demised Premises or from the storage or operation of the same. Any and all
damage or injury to the Demised Premises, the Building, or the Property caused
by such moving, storage or operation shall be repaired by LESSEE at LESSEE's
sole cost and expense.
(b) LESSEE shall not install any equipment whatsoever which will or may
necessitate any changes, replacements or additions to the water system, plumbing
system, heating system, air conditioning system or the electrical system of the
Demised Premises without the prior written consent of LESSOR. LESSEE shall, at
its sole cost and expense, pay all charges for electricity used by the LESSEE
during the term of this Lease, including that used for interior lighting and the
operation of the heating and air conditioning system in the Demised Premises.
17. DAMAGE.
(a) If the Demised Premises should by damaged or destroyed by fire, tornado, or
other casualty, LESSEE shall give immediate written notice thereof to LESSOR.
(b) If the Demised Premises should be totally destroyed by fire, tornado,
hurricane or other casualty, or if they should be so damaged that rebuilding or
repairs cannot be completed within one hundred eighty (180) days after the date
upon which LESSOR is notified by LESSEE of such damage, this lease shall
terminate and the rent shall be abated during the unexpired portion of this
lease, effective upon the date of the occurrence of such damage.
(c) If the Demised Premises should be damaged by fire, tornado, or other
casualty, and such damage being not caused by the negligence or default of the
LESSEE or the LESSEE's agents, servants, employees or visitors, but only to
such extent that rebuilding or repairs can be completed within one hundred
eighty (180) days after the date upon which LESSOR is notified by LESSEE of such
damage, this lease shall not terminate, but LESSOR shall proceed with reasonable
diligence to rebuild and repair the Demised Premises, to substantially the same
condition in which they existed
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prior to such damage, except that LESSOR shall not be required to rebuild,
repair or replace any part of the partitions, fixtures and other improvements
which may have been placed on the Demised Premises by LESSEE. If the Demised
Premises are untenantable in whole or in part following such damage, the rent
payable hereunder during the period in which they are untenantable shall be
proratably reduced to the extent of the usable square footage of the Demised
Premises. In the event that LESSOR should fail to complete such repairs and
rebuilding within one hundred eighty(180) days after the date upon which LESSOR
is notified by LESSEE of such damage, subject to force majeure LESSEE may at its
option terminate this lease by delivering written notice of termination to
LESSOR as LESSEE's exclusive remedy, whereupon all fights and obligations
hereunder shall cease and terminate as of the date of the notice of termination.
(d) Notwithstanding anything herein to the contrary, in the event the holder of
any indebtedness secured by a mortgage to secure debt covering the Demised
Premises requires that any portion of the insurance proceeds be applied to such
indebtedness, then LESSOR shall have the right to terminate this lease by
delivering written notice of termination to LESSEE, whereupon all rights and
obligations hereunder shall cease.
(e) Any insurance which may be carried by LESSOR or LESSEE against loss or
damage to the Demised Premises and other improvements situated on the Demised
Premises shall be for the sole benefit of the party carrying such insurance and
under its sole control.
(f) Each of LESSOR and LESSEE hereby releases the other from any and all
liability or responsibility to the other or anyone claiming through or under
them by way of subrogation or otherwise for any loss or damage to property
caused by fire or any of the casualties covered by the insurance maintained
hereunder, even if such fire or other casualty shall have been caused by the
fault or negligence of the other party, or anyone for whom such party may be
responsible; provided, however, that this release shall be applicable and in
force and effect only with respect to loss or damage occurring during such times
as the releasor's policies shall contain a clause or endorsement to the effect
that any release shall not adversely affect or impair said policies or prejudice
the right of the releasor to recover thereunder and shall be applicable only up
to amount of said insurance. Each of LESSOR and LESSEE agrees that it will
request its insurance carriers to include in its policies such a clause or
endorsement.
(g) LESSOR shall maintain standard fire and extended coverage insurance covering
the building of which the Demised Premises are in part in an amount not less
than one hundred (100%) per cent of the replacement cost thereof.
18. OTHER INSURANCE.
The LESSEE, during the demised term or any renewal thereof, shall maintain, at
its expense, glass insurance and public liability and property damage insurance
written by a company or companies licensed in Kentucky and acceptable to LESSOR,
naming LESSOR as an additional insured. The liability policy shall be one which
shall afford protection in the minimum sum of ($1,000,000.00) in the event of
injury or death to a single person and in the minimum sum of ($1,000,000.00) in
the event of any one accident and for property damage in the minimum sum of
($1,000,000.00). LESSEE shall furnish to LESSOR certificates evidencing that
such insurance is in effect continuously during the demised term or any renewal
thereof. The certificate shall require thirty (30) days written notice from the
insurer to LESSOR of any cancellation or reduction in coverage. Provided,
however, in the event LESSEE fails to provide LESSOR with a certificate
evidencing the existence of glass insurance, LESSOR may conclusively presume
that LESSEE has in fact self-insured itself from any expenses and/or liabilities
as a result of not maintaining said glass insurance.
19. INSPECTION.
LESSOR and LESSOR's agents and representatives shall have the right with
reasonable prior notice, except in case of emergency, to enter and inspect the
Demised Premises any time during reasonable business hours, for the purpose of
ascertaining the condition of the Demised Premises or in order to make such
repairs as may be required to be made by LESSOR under the terms of this
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lease. During the period that is six months prior to the end of the term hereof,
or any renewal hereof, LESSOR and LESSOR's agents and representatives shall have
the right to enter the Demised Premises at any time during reasonable business
hours for the purpose of showing the Demised Premises and shall have the right
to erect on the Demised Premises a suitable sign indicating the Demised Premises
are available.
20. LIENS.
If any mechanic's or materialmen's liens or other liens or order for the payment
of money shall at any time be filed against the Demised Premises herein demised,
the building or land on which the Demised Premises are located, or any
improvement thereon, or against LESSOR as owner thereof, by reason of, or
arising out of, any labor or materials furnished or alleged to have been
furnished or to be furnished to or for the LESSEE at the Demised Premises,
LESSEE shall promptly, or in any event within fifteen (15) days after the
recording of such lien or the entering of such order, cause the same to be
canceled and discharged of record, by bond or otherwise at the expense of
LESSEE, and shall also defend, on behalf of LESSOR, but at LESSEE's sole cost
and expense, any action, suit or proceedings which may be brought thereon or for
the enforcement of such lien, liens or orders, and LESSEE hereby agrees to pay
any damages and to discharge any entered therein and to save the LESSOR harmless
from any claims or damages resulting therefrom. Should LESSEE fail to bond or
otherwise discharge such liens or orders then LESSOR reserves the right to do
so, and, the cost thereof or any sums which may thereafter become due and
payable by the LESSOR shall be deemed additional rent and shall be payable on
demand. Provided, however, notwithstanding anything to the contrary herein
contained, LESSOR and LESSEE hereby agree that no such lien or order hereinabove
described shall constitute a claim, lien, or encumbrance on the title of LESSOR
in and to the Demised Premises, the building wherein the Demised Premises are
located, and the land upon which said building is erected.
21. ASSIGNMENT AND SUBLETTING.
LESSEE shall not have the right to transfer or assign this lease or to sublet
the whole or any part of the Demised Premises or to mortgage, pledge or
otherwise encumber its interest in this lease or its interest, if any, in the
Demised Premises, without the prior written consent of LESSOR, it being agreed
that LESSEE has only a usufruct, not subject to levy and sale or otherwise
transferable, whether voluntarily or by operation of law, except as otherwise
set fort herein. In determining whether to grant consent to the LESSEE'S sublet
or assignment request, the LESSOR may consider any reasonable factor. LESSOR and
LESSEE agree that failure to meet any one of the following standards, or any
other reasonable factor, will be reasonable grounds for denying the LESSEE'S
request:
(a) Financial strength of the proposed sublessee/assignee must be at last equal
to that of the existing LESSEE;
(b) Business reputation of the proposed sublessee/assignee must be in accordance
with generally acceptable commercial standards;
(c) Use of the Premises by the proposed sublessee/assignee must be identical to
the use permitted by this lease,
(d) Managerial and operational skills of the proposed sublessee/ assignee must
be the same as those of the existing LESSEE;
(e) Use of the Premises by the proposed sublessee/assignee will not violate or
create any potential violation of any laws;
(f) Use of the Premises will not violate any other agreements affecting the
premises, the LESSOR or other LESSEE'S.
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LESSEE shall at all times, notwithstanding any permitted transfer, assignment,
subletting or encumbrance, and notwithstanding the acceptance of rents by the
LESSOR from such transferee, assignee, subtenant or mortgagee, remain fully
responsible and liable for the payment of the rent herein specified and for
compliance with all of LESSEE's other obligations under the terms, provisions,
and covenants of this lease, nor shall the giving of such consent to a transfer,
assignment, subletting or encumbrance be deemed a complete performance of the
said covenants contained herein, so as to permit any subsequent transfer,
assignment, subletting or encumbrance without like written consent. Any
permitted transfer, assignment, subletting or encumbrance shall be subject to
all the terms, conditions of this lease or any mortgage to secure debt on the
Demised Premises, and the term of any such subletting shall expire on or prior
to the date of termination of this lease. Upon the occurrence of any "event of
default" as hereinafter defined, if the Demised Premises or any part thereof are
then transferred, assigned or sublet, LESSOR, in addition to any other remedies
herein provided or provided by law, may at its option collect directly from such
transferee, assignee or subtenant all rents becoming due to LESSEE under such
transfer, assignment or sublease and apply such rent against any sums due to
LESSOR from LESSEE hereunder, and no such collection shall be construed to
constitute a novation or a release of LESSEE from the further performance of
LESSEE's obligations hereunder. LESSOR shall have the right to assign any of its
rights and obligations under this lease. LESSOR shall further have the right at
LESSOR's option upon an "event of default" to take over any and all subleases or
any part thereof and further to succeed to all rights and privileges and any
sums held by LESSEE of said subleases or such of them as LESSOR may elect to
take over and assume. In the event LESSOR consents to LESSEE subletting all or a
portion of the Demised Premises any rent accruing to LESSEE as the result of
such subletting, which rent is in excess of the rent then being paid by LESSEE,
and any other economic consideration received by or to be received by LESSEE in
connection with any subletting or assignment shall be paid to LESSOR as
additional rent.
22. BROKERAGE.
LESSEE represents and warrants that neither LESSEE nor any of LESSEE's
representatives, employees or agents has dealt or consulted with any real estate
broker in connection with this Lease other than Re/Max Professionals Inc., and
LESSEE hereby agrees to indemnify and hold LESSOR harmless from and against any
claim or demand made by any real estate broker or agent claiming to have dealt
or consulted with LESSEE or any of LESSEE's representatives, employees or agents
contrary to the foregoing representation and warranty.
23. CONDEMNATION.
If the whole or a part of the Demised Premises shall be taken under the power of
eminent domain, or shall be conveyed to a governmental agency to avoid such
taking, and such taking shall cause the remaining portion of the Demised
Premises to be unsuitable for use by LESSEE for the purpose for which the same
are leased, either LESSOR or LESSEE shall have the option to terminate this
lease as of the date LESSEE is required to yield possession. If a part of the
Demised Premises shall be so taken that the remaining part of the Demised
Premises shall be adequate for use by LESSEE, then this lease shall terminate as
to the part so taken or conveyed on the day when LESSEE is required to yield
possession thereof and LESSOR shall make such repairs and alterations as may be
necessary in order to restore the part not taken to useable condition and the
rental payable hereunder shall be reduced in proportion to the part of the
Demised Premises so taken. All compensation awarded for any taking (or the
proceeds of sale under threat thereof) whether for the whole or a part of the
Demised Premises, shall be the property of LESSOR, whether such award is
compensation for damages to LESSOR's or LESSEE's interest in the Demised
Premises, and LESSEE hereby assigns all of its interest in any such award to
LESSOR; provided, however, LESSOR shall have no interest in any award made to
LESSEE for loss of business or for the taking of LESSEE's fixtures and personal
property within the Demised Premises, if a separate award for such items is made
to LESSEE.
24. EVENTS OF DEFAULT.
The following events shall be deemed to be events of default by LESSEE under
this lease:
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(a) LESSEE fails to pay any installment of the rent hereby reserved when due, or
any sum of money due or payable as additional rent under the provisions of this
lease, or any other payment or reimbursement to LESSOR required herein, and such
failure continues for a period of 10 days from the date such installment was
due; or
(b) LESSEE becomes insolvent, or makes a transfer in fraud of creditors, or
makes an assignment for the benefit of creditors; or
(c) A petition, voluntary or involuntary, is filed by or against LESSEE under
any section or chapter of the National Bankruptcy Act, as amended, or under any
similar law or statute of the United States or any State thereof, or LESSEE is
adjudged bankrupt or insolvent in proceedings filed against LESSEE thereunder;
or
(d) A receiver or trustee is appointed for all or substantially all of the
assets of LESSEE; or
(e) LESSEE abandons or vacates of the Demised Premises, LESSEE fails to comply
with any terms, provisions or covenants of this lease and does not cure such
failure within 15 days after LESSOR's written notice thereof to LESSEE; or
(g) LESSEE in any way attempts to transfer or other devolution of the interests
or any part thereof of the LESSEE, or any assignee hereunder, to any other
person or corporation either by reason of the several acts and things
hereinabove enumerated, or if LESSEE, or any assignee be dissolved.
25. CUMULATIVE REMEDIES.
Upon the occurrence of any of such events of default described in paragraph 24
hereof, LESSOR shall have the option to pursue any one or more of the following
remedies with or without any notice or demand whatsoever:
(a) Terminate this lease, in which event LESSEE shall immediately surrender the
Demised Premises to LESSOR, and if LESSEE fails to do so, LESSOR may, without
prejudice to any other remedy which it may have for possession or arrearages in
rent, enter upon and take possession of the Demised Premises and expel or remove
LESSEE or any other person who may be occupying such or any part thereof, by
reasonable force if necessary, in accordance with applicable law, without being
liable for prosecution or any claim of damages therefor; and LESSEE agrees to
pay LESSOR on demand the amount of any loss and damage which LESSOR may suffer
by reason of such termination, whether through inability to rent the Demised
Premises on satisfactory terms or otherwise.
(b) Enter upon and take possession of the Demised Premises and expel or remove
LESSEE and any other person who may be occupying such Demised Premises or any
part thereof, by reasonable force if necessary, without being liable for
prosecution or any claim for damages therefor, and repair, alter and relet the
Demised Premises for the term of the original term or for any part thereof or
for a longer period and receive the rent therefor applying the same to the
payments of such expenses as the LESSOR may be put to by reason thereof
including, without limitation, advertising, refurbishing expenses and attorney
fees and then to the fulfillment of LESSEE's covenants and agreements hereunder;
and LESSEE agrees to pay LESSOR on demand any deficiency that may arise by
reason of such reletting.
(c) Enter upon the Demised Premises, by reasonable force if necessary, without
being liable for prosecution or any claim for damages therefor, and do whatever
LESSEE is obligated to do under the term of this lease: and LESSEE agrees to
reimburse LESSOR on demand for any expenses which LESSOR may incur in thus
effecting compliance with LESSEE's obligations under this lease, and LESSEE
further agrees that LESSOR shall not be liable for any damages resulting to
LESSEE from any reasonable action taken in connection therewith.
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<PAGE>
In the event LESSEE fails to pay any installment of rent hereunder or any sum of
money due or payable as additional rent as and when such installment is due,
LESSEE shall pay to LESSOR a late charge in an amount equal to Five (5%) per
cent of such installment or $50.00 whichever amount is greater; and the failure
to pay such amount within five days after demand therefor, shall be an event of
default hereunder. LESSEE shall further pay to LESSOR the sum of $25.00 for any
returned checks. The provision for such late charges and returned check charges
shall be in addition to all of any returned checks. The provision for such late
charges and returned check charges shall be in addition to all of LESSOR's other
rights and remedies hereunder or at law and shall not be construed as liquidated
damages or as limiting LESSOR's remedies in any manner. Pursuit of any of the
foregoing remedies shall not preclude pursuit of any of the other remedies
herein provided or any other remedies provided by law, nor shall pursuit of any
remedy herein provided constitute a forfeiture or waiver of any rent or
additional rent due to LESSOR hereunder for the unexpired lease term or any
renewal thereof, or of any damages occurring to LESSOR by reason of the
violation of any of the terms, provisions and covenants herein contained. No act
or thing done by LESSOR or its agents in a reasonable manner to discharge the
obligations or to exercise the rights of LESSOR hereunder during the term hereby
granted shall be deemed to absolve or discharge the LESSEE from liability
hereunder or shall be deemed a termination of this lease or an acceptance of the
surrender of the Demised Premises, and no agreement to terminate this lease or
to accept a surrender of said Demised Premises shall be valid unless in writing
and signed by LESSOR. No waiver by LESSOR of any violation or breach by LESSEE
of any of the terms, provisions and covenants herein contained shall be deemed
to constitute a waiver of a subsequent breach of any of the terms, provisions or
covenants herein contained. Forbearance by LESSOR to enforce one or more of the
remedies herein provided upon an event of default shall not be deemed or
construed to constitute a waiver or such default. All rights of the LESSOR
hereunder are hereby reserved and conferred upon LESSOR as distinct, separate
and cumulative remedies. If, on account of any breach or default by LESSEE in
LESSEE's obligations under the terms and conditions of this lease, it shall
become necessary or appropriate for LESSOR to employ or consult with an attorney
concerning or to enforce or defend any of LESSOR's right or remedies hereunder,
LESSEE agrees to pay any reasonable attorney's fees so incurred.
26. UTILITIES.
LESSEE shall pay all charges incurred for any utility services used on or from
the Demised Premises and any maintenance charges for utilities and shall furnish
all electric light bulbs and tubes. LESSOR shall in no event be liable for any
interruption or failure of utility services on the Demised Premises.
27. LIABILITY.
(a) LESSEE covenants and agrees that it will protect and save and keep the
LESSOR forever harmless and indemnified against and from any penalty or damage
or charges imposed for any violation of any laws or ordinances resulting from
the use or occupancy of the Demised Premises by LESSEE or those holding under
LESSEE, or the employees, guests, licensees or invitees thereof; and that LESSEE
will at all times protect, indemnify and save and keep harmless the LESSOR
against and from any and all loss, cost, damage or expense, arising out of or
from any accident or other occurrence on or about said Demised Premises, causing
injury to any pawn or property whomsoever or whatsoever except for such accident
or other occurrence directly and solely resulting from the gross negligence of
LESSOR; and will protect, indemnify and save and keep harmless the LESSOR
against and from any and all claims and against and from any and all loss, cost,
damage or expense, including attorneys fees and court costs arising out of any
failure of LESSEE, its agents, employees and representatives, in any respect to
comply with and perform all the requirements and provisions of lease. LESSEE
shall not be obligated to indemnify LESSOR for any claim due to injury or death
of any person or persons due to the sole negligence of LESSOR, its employees or
agents.
(b) LESSOR shall not be liable for any damage, either to person or property
sustained by LESSEE or sustained by LESSEE's employees, guest, licensees, or
invitees, including loss of business, due to the building of which the Demised
Premises are a part, or any part thereof, or any
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<PAGE>
appurtenances thereof, becoming out of repair or due to the happenings of any
accident in or about said building, or due to any act or neglect of any tenant
or occupant of said building, or any other person. The LESSEE agrees to
indemnify and save LESSOR harmless from any and all liability for any damage to
any person, property or effects of LESSEE or any other person during the term of
this Lease and any renewal hereof occasioned by or resulting from the breakage,
leakage or obstruction of the water, gas or sewer pipes or of the roof or
rainducts or any fire sprinkler or other quenching system or other leakage or
overflow or otherwise in or about the said premises or from any carelessness,
negligence or improper conduct on the part of the LESSEE or the LESSEE's
employees, guests, agents, representatives, invitees, licensees, or otherwise
arising out of or in connection with the LESSEE's operation in, on or about said
premises or the driveways, sidewalks or public areas adjoining the same and the
LESSOR shall not be liable for any damage, loss or injury to the person,
property or effects of the LESSEE or any other person suffered on, in or about
the premises by reason of any present, future, latent or other defects in the
form, character or condition of said premises or any part or portion thereof, or
by reason of any rain, water, fire, storms, accident or any other cause or
reason and the rent shall not be diminished or withheld by reason or on account
of any such loss or damage. LESSEE agrees that all personal property and all
alterations, additions and improvements made by LESSEE upon the Demised Premises
shall be there at the risk of LESSEE only and that LESSOR shall not be liable
for any damage thereto or theft thereof.
28. PROPERTY AT LESSEE'S RISK.
It is understood and agreed that all personal property in the Demised Premises,
of whatever nature, whether owned by LESSEE or any other person, shall be and
remain at LESSEE's sole risk and LESSOR shall not assume any liability or be
liable for any damage to or loss of such personal property, arising from the
bursting, overflowing, or leaking of the roof or of water or sewer pipes, or
from heating or plumbing fixtures or from the handling of electric wires or
fixtures or from any other cause whatsoever.
29. RULES AND REGULATIONS.
LESSEE shall at all times comply with the rules and regulations set forth on
Exhibit D attached hereto, and with any additions thereto and modifications
thereof adopted from time to time by LESSOR and each such rule or regulation
shall be deemed to be a covenant of this Lease to be performed and observed by
LESSEE.
30. PARKING.
LESSOR grants LESSEE the non-exclusive, unassigned, right to use the parking
area or areas designated by the LESSOR from time to time. LESSEE hereby agrees
to comply with all traffic and parking rules and regulations imposed by LESSOR
from time to time.
31. MODIFICATIONS DUE TO FINANCING.
If, in connection with obtaining temporary or permanent financing for the
Building or the land upon which the Building is located, any such lender shall
request reasonable modifications of this Lease as a condition to such financing.
LESSEE agrees that LESSEE will not unreasonably withhold, delay or defer the
execution of any agreement of modification of this Lease provided such
modifications do not increase the financial obligations of LESSEE hereunder or
materially adversely affect the leasehold interest hereby created or LESSEE's
reasonable use and enjoyment of the Demised Premises.
32. ATTORNEYS' FEES.
In the event LESSEE defaults in the performance of any of the terms, covenants,
agreements or conditions contained in this Lease, and LESSOR places the
enforcement of all or any part of this Lease, the collection of any rent due or
to become due or recovery of the possession of the Demised Premises in the hands
of an attorney, LESSEE agrees to pay LESSOR reasonable attorneys' fees
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<PAGE>
and court costs (including appeals) for the services of the attorney, whether
suit is actually filed or not.
33. APPLICABLE LAW.
This Lease shall be construed under the laws of the State in which the Demised
Premises is located.
34. NO RESERVATIONS.
The submission of this Lease for examination does not constitute a reservation
of or option for the Demised Premises, and this Lease becomes effective only
upon execution and delivery thereof by LESSOR and LESSEE.
35. SEVERABILITY.
If any term, covenant or condition of this Lease or the application thereof to
any person or circumstance shall to any extent be held invalid or unenforceable,
the remainder of this Lease or the application of such term, covenant or
condition to persons or other than those as to which it is held invalid or
unenforceable, shall not be affected thereby and each term, covenant and
condition of this Lease shall be valid and enforced to the fullest extent
permitted by law.
36. RENT TAX.
If applicable in the jurisdiction where the Demised Premises are situated,
LESSEE shall pay and be liable for all rental, sales and use taxes, or other
similar taxes, if any levied or imposed by any City, State, County or other
governmental body having authority, such payments to be in addition to all other
payments required to be paid to LESSOR by LESSEE under the terms of this Lease.
Any such payments shall be paid concurrently with the payment of the rent upon
which the tax is based as set forth above.
37. ACTS OF GOD.
LESSOR shall not be required to perform any covenant or obligation in this
Lease, or be liable in damages to LESSEE, so long as the performance or
non-performance of the covenant or obligation is delayed, caused by or prevented
by an act of God or force majeure.
38. REMEDIES CUMULATIVE; NO WAIVER.
All rights and remedies given herein and/or by law or in equity to LESSOR are
separate, distinct and cumulative, and no one of them, whether exercised by
LESSOR or not, shall be deemed to be in exclusion of any of the others. No
failure of LESSOR to exercise any power given LESSOR hereunder, or to insist
upon strict compliance by LESSEE with his obligations hereunder, and no custom
or practice of the parties at variance with the terms hereof shall constitute a
waiver of LESSOR's right to demand exact compliance with the terms hereof
39. MODIFICATIONS.
This writing is intended by the parties as the final expression of their
agreement and as a complete and exclusive statement of the terms thereof, all
negotiations, considerations and representations between the parties having been
incorporated herein. No course of prior dealing between the parties or their
affiliates shall be relevant or admissible to supplement, explain or vary any of
the terms of this Lease. Acceptance of or acquiescence in, a course of
performances rendered under this or any prior agreement between the parties of
their affiliates shall not be relevant or admissible to determine the meaning of
any of the terms of this Lease. No representations, understandings or
agreements have been made or relied upon in the making of this Lease other than
those specifically set forth herein. This Lease can only be modified by a
written agreement signed by all of the parties hereto.
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<PAGE>
40. WAIVER OF JURY TRIAL.
LESSOR and LESSEE each hereby waives all rights to trial by jury in any claim,
action proceeding or complaint by either party against the other on any matter
arising out of or in any way connected with this Lease, the relationship of
LESSOR and LESSEE and/or LESSEE's use or occupancy of the Demised Premises.
LESSEE further agrees that it will not interpose any counter claim or
counterclaims in a summary proceeding or in any action based upon non-payment of
rent or any other payment required of LESSEE hereunder.
41. HOLDOVER TENANCY.
Any holding over after the expiration of the term herein will be granted only
with the expressed written consent of LESSOR and shall be construed to be a
tenancy from month to month, at a rental rate per month which is twice the
amount LESSEE paid for the last full month prior to the expiration of the term
herein. All other terms and conditions herein specified, so far as applicable,
will remain in effect during holdover tenancy period.
42. OUIET ENJOYMENT.
LESSOR represents and warrants that it has full right and authority to enter
into this lease and that LESSEE, upon paying the rental herein set forth and
performing the other covenants and agreements herein set forth, shall peaceably
and quietly for the term hereof without hindrance or molestation, subject to the
terms and have, hold and enjoy the Demised provisions of this lease.
43. SECURITY DEPOSIT.
LESSEE has paid to LESSOR upon execution of this lease the sum of Seven Thousand
NinetyFour and 00/100 Dollars ($7,094.00) as security for the performance of
LESSEE's obligations hereunder. In the event of a default by LESSEE, LESSOR at
its option may apply such part of the deposit as may be necessary to cure the
default, and if LESSOR does so, LESSEE shall upon demand redeposit with LESSOR
an amount equal to that so applied so that LESSOR will have the full security
deposit on hand at all times during the term of this Lease. Within 30 days after
the expiration of this Lease (provided that LESSEE is not in default hereunder),
LESSOR shall refund to LESSEE any then remaining balance of the deposit without
interest. In the event of a sale of the land and building or leasing of the
building, of which the Demised Premises form a part, LESSOR shall have the right
to transfer the deposit to the buyer or tenant and LESSOR shall thereupon be
released by LESSEE from all liability for the return of such deposit; and LESSEE
agrees to look to the new landlord solely for the return of said deposit; and it
is agreed that the provisions hereof shall apply to every transfer or assignment
made of the deposit to a new landlord.
44. NOTICES.
All notices required herein to be given by LESSEE to LESSOR shall be given by
hand delivery or by registered or certified mall, postage prepaid, and sent to
LESSOR in care of NTS CORPORATION, 10172 Linn Station Road, Louisville, Kentucky
40299, or to such other person or places as shall be designated in writing by
the LESSOR. All notices required herein to be given by LESSOR to LESSEE shall be
given by hand delivery or by registered or certified mall, postage prepaid, and
shall be sent to Videolan Technologies. Inc., 11403 Bluegrass Parkway - Suite
400, Louisville, Kentucky 40299 or to such other person or places as shall be
designated in writing by LESSEE. All notices shall be deemed given when accepted
or refused.
45. SUMS EXPENDED BY LESSOR TO BE ADDITIONAL RENT.
In the event that LESSOR shall pay any sum of money or do any act which will
require the expenditure of any sums by reason of the failure of the LESSEE to
perform any of the covenants, terms or conditions herein contained, the LESSEE
covenants to repay promptly such sums to the LESSOR upon demand, and in default
thereof the sums so paid by the LESSOR, together with interest thereon at the
rate of eighteen (18%) per cent per annum, may be added as additional rent
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<PAGE>
to the basic rent becoming due upon the next rent payment day, or any subsequent
rent payment day and shall be payable as such. Nothing contained herein shall be
construed to postpone the fight of the LESSOR immediately upon expending, such
to collect such sums with interest by action or otherwise.
46. MORTGAGES.
LESSEE accepts this lease subject and subordinate to any mortgage to secure debt
now or at any time hereafter constituting a lien or charge upon the Demised
Premises are constituting a lien or charge upon the Demised Premises or the land
improvements on which the Demised Premises are situated; provided, however, that
in the event of a transfer of title to the Demised Premises pursuant to the
exercise of any right or remedy granted by any such mortgage to Secure Debt or
similar security instrument, or in lieu thereof, LESSEE shall, upon the request
of such transferee, attorn to and recognize such transferee as its landlord
hereunder, and this Lease such transferee. LESSOR agrees, upon request from
LESSEE, to make reasonable best efforts to obtain a non-disturbance agreement
from any current or future mortgage.
47. MISCELLANEOUS.
(a) Words of any gender used in this lease shall be held and construed to
include any other gender and words in the singular number shall be held to
include the plural, unless the context otherwise requires.
(b) The terms, provisions, covenants, and conditions contained in this lease
shall apply to, inure to the benefit of, and be binding upon, the parties hereto
and upon their respective heirs, legal representatives, successors and permitted
assigns except as otherwise herein expressly provided.
(c) The captions in this lease are for convenience only and in no way define,
limit or otherwise describe the scope or intent of this lease, or any provision
hereof, nor in any way affect the interpretation of this lease.
(d) LESSEE agrees, from time to time, within ten days after request of LESSOR,
to deliver to LESSOR, or LESSOR's designee, an estoppel certificate stating that
this lease is in full force and effect, the date to which rent has been paid,
the unexpired term of this lease and such other matters pertaining to this lease
as may be reasonably requested by LESSOR.
(e) This lease may only be altered, changed or amended by an instrument in
writing signed by both parties hereto.
(f) The invalidity or unenforceability of any provisions of this lease shall
have no effect on the validity or enforceability of any other provision of this
lease.
IN WITNESS WHEREOF, the parties hereunto have set their hands on the day and
year first above written.
LESSOR: NTS/BBCI, A KENTUCKY LIMITED PARTNERS
DBA, BLANKENBAKER BUSINESS CENTER II
By: NTS Capital Corporation,
General Partner
By: _____________________________________
H.L. Heiner
Title: Executive Vice President
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<PAGE>
COMMONWEALTH OF: KENTUCKY
COUNTY OF: JEFFERSON
The foregoing lease was acknowledged before me on _______________, 19__ by
______________________________, ________________ of NTS Capital Corporation, in
its capacity as general partner for NTS/BBCI, a Kentucky Limited Partnership.
- ---------------------------------------
Notary Public
Commission Expires: ___________________
LESSEE: VIDEOLAN TECHNOLOGIES, INC.
By:________________________________
Title:________________________________
STATE OF:
COUNTY OF:
The foregoing lease was acknowledged before me on _______________, 19__, by
__________________________, ______________ of ____________ a ____corporation, on
behalf of the corporation.
- ---------------------------------------
Notary Public
Commission Expires: ___________________
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<PAGE>
BLANKENBAKER BUSINESS CENTER II
EXHIBIT "B"
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<PAGE>
BLANKENBAKER BUSINESS CENTER II
EXHIBIT "C"
SERVICE AREA INTERIOR
Drywall, fire taped and unpainted; unsealed concrete.
AIR CONDITIONING
Heating and air conditioning to all portions of the Premises, except
warehouse/service area which shall not be air conditioned.
RESTROOM
Commode, sink, light, fan, medicine cabinet, paper towel dispenser, vinyl tile
floor.
INSULATION
Six inch (6) batt over ceiling in office area and three and a half (3 1/2) in
suite party walls.
SIGNAGE
LESSEE pays for standard.
WINDOW TREATMENTS
Mini-blinds provided on office windows.
ADDITIONAL FINISH
LESSEE shall pay for all additional work above stated Tenant finishes. LESSEE
shall pay contractor's cost plus 15% overhead
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<PAGE>
BLANKENBAKER BUSINESS CENTER II
EXHIBIT "D"
LEASE RULES AND REGULATIONS
LESSEE shall pay for all additional work above stated Tenant finishes. LESSEE
shall pay contractor's cost plus 15% overhead.
UTILITY CONSERVATION
LESSEE shall exercise care and caution to insure that all water faucets or water
apparatus are carefully and entirely shut off before LESSEE or its employees
leave the Building so as to prevent waste or damage.
MACHINERY
The LESSOR's written consent shall be first obtained for the use or installation
of any large or heavy office machinery, generally described as, but not limited
to, machinery equipment; mainframe computer; refrigeration equipment; heating
equipment; air conditioning apparatus; and all other types of heavy machine
equipment. This clause is not meant to refer to the use or installation of such
equipment as personal computers, typewriters and similar office equipment.
UNSIGHTLY PLACEMENT OF EQUIPMENT
Unless expressly permitted by the LESSOR, the LESSEE shall not place or allow
anything to be against or near the glass or partitions or doors or windows of
the Premises which may diminish the light in, or be unsightly from the exterior
of the building.
LOCKS
Unless expressly permitted by the LESSOR, no additional locks or similar devices
shall be attached to any door and no keys other than those provided by the
LESSOR shall be made for any door. If more than two keys for one lock are
desired by the LESSEE, the LESSOR may provide the same upon payment by the
LESSEE. Upon termination of this lease or of the LESSEE's possession, the LESSEE
shall surrender all keys of the Premises and shall explain to the LESSOR all
combination locks on safes, cabinets and vaults which are a part of the demised
Premises.
NOISES AND OTHER NUISANCES
The LESSEE shall not make or permit any noise or odor that is objectionable to
the LESSOR or other occupants of the building to emanate from the Premises, and
shall not create or maintain a nuisance therein, and shall not disturb, solicit
or canvass any occupant of the building, and shall not do any act tending to
injure the reputation of the building. Any newspaper, magazine or other
advertising done from the said Premises, or referring to the said Premises,
which in the opinion of the LESSOR is objectionable shall be immediately
discontinued upon notice from the LESSOR.
OBSTRUCTIONS
Unless expressly permitted by the LESSOR the LESSEE shall not obstruct, or use
for storage or for any purpose other than ingress and egress, the sidewalks,
entrances, passages, courts, and vestibules of the building.
SAFES OR HEAVY ARTICLES
The LESSEE shall not overload any floor. The LESSOR may direct the routing and
placement of safes and other heavy articles. Safes, furniture and all large
articles shall be brought into the Premises
<PAGE>
Blankenbaker Business Center II
EXHIBIT "D"
Lease Rules and Regulations
Page 2
or removed therefrom at such times and in such manner as the LESSOR
shall direct and at the LESSEE's sole risk and responsibility.
BICYCLES AND ANIMALS
Except as provided in this lease, no bicycle or other vehicle and no animal
shall be brought or permitted to be in building without the prior consent of the
LESSOR.
TELEPHONE AND TELEGRAPH
No electric wires, telephones, telegraphs, telegraph call boxes, antennae,
aerial wires or other electrical equipment or apparatus shall be installed
outside of the building without approval of the LESSOR.
SOLICITORS
The LESSOR reserves the fight, but shall not be held obligated, to exclude or
eject from the building any or all solicitor, canvassers, or peddlers, and any
class of persons and individuals who conduct themselves in such a manner as in
the judgment of the LESSOR constitutes an annoyance to any tenant of the
building or an interference with the LESSOR's operation of the building or who
are otherwise undesirable. The LESSEE shall cooperate with the LESSOR in
preventing soliciting an peddling in the building.
APPLICATION FOR SERVICES
The LESSEE shall make application to LESSOR for all the repairs, alterations or
special services. Employees of the LESSOR shall not perform any work or do
anything outside of the regular duties unless under special instruction from the
LESSOR.
VIOLATION OF RULES
LESSOR reserves the fight to exclude or expel from the Building any person who,
in the judgment of the LESSOR, is under the influence of liquor or drugs, or who
shall in any manner do any act in violation of any of the rules and regulations
of the Building.
SIGNAGE
No advertisement, sign, lettering notice or device shall be placed in or upon
Premises or building including windows, walls, and exterior doors except such as
may be approved in writing by LESSOR.
EXTERIOR SIGNAGE
Where applicable, all maintenance for building exterior Signage will be the
responsibility of the LESSEE. This includes removing burned out light bulbs
immediately upon their failure. LESSOR reserves the right to instigate any
maintenance not performed by LESSEE and bill the same for the labor and
materials involved.
LOSS OF PROPERTY
It is understood and agreed that the LESSOR shall not be responsible to any
LESSEE for any loss of property from rented Premises, however occurring.
HAZARDOUS DEVICES/MATERIAL
<PAGE>
Blankenbaker Business Center II
EXHIBIT "D"
Lease Rules and Regulations
Page 3
The LESSEE shall not, (without the LESSOR's prior written consent) install or
operate any electric heating device, steam engine, boiler, machinery or stove
upon the Premises, or carry on any mechanical business thereon, or do any
cooking thereon, or use or allow to be used upon the Demised Premises oil,
burning fluids, camphene, gasoline or kerosene for heating, warning or lighting.
No article deemed extra hazardous on account of fire and no explosives shall be
brought into said Premises. No offensive gases or liquids will be permitted.
VENDING RIGHTS
LESSOR reserves all vending fights. Request for such service will be made to
LESSOR.
STORAGE
Except for the storage of trash or rubbish in dumpsters provided by LESSOR,
LESSEE shall not permit storage of any kind outside of the Premises.
TRAFFIC REGULATIONS
LESSEE and occupants shall observe and obey all parking and traffic regulations
as imposed by LESSOR on the Property. LESSOR in all cases retains the power to
designate "No Parking" zones, traffic fight of ways, and general parking area
procedures; to change the location and arrangement of parking areas; to restrict
parking; to close all or any portion of the parking areas; and to impose charges
and to do and perform any other acts or impose any other rules with respect
thereto.
DELIVERIES
LESSEE shall instruct all delivery companies that any vehicles making deliveries
to the Demised Premises shall use the truck access roads provided for such use
and park only in designated loading areas.
ACCESS TO ROOF
Unless otherwise approved by LESSOR, in writing, neither LESSEE, nor LESSEE's
agents, employees, representatives, invitees, or contractors shall be permitted
access to the roof of the Building.
ADDITIONAL RULES
LESSOR reserves the right to make such other and further rules and regulations
as in its judgment may from time to time be needed or desired for the safety,
care and cleanliness of the leased Premises and the building and for the
preservation of good order therein, but shall not impair the use and enjoyment
of the leased Premises under the other provisions of the within lease.
Violations of these rules, or any amendments thereof or additions thereto, shall
be sufficient cause for termination of this Lease at the option of LESSOR.
<PAGE>
Blankenbaker Business Center II
EXHIBIT "D"
Lease Rules and Regulations
Page 4
ADDENDUM TO LEASE
THIS ADDENDUM TO LEASE ("Addendum") is made and entered into as of this 23rd day
of April, 1996, by and among, NTS/BCCI, A KENTUCKY LIMITED PARTNERSHIP, DBA
BLAKENBAKER BUSINESS CENTER, II, a Kentucky Limited Partnership, herein called
LESSOR, and VIDEOLAN TECHNOLOGIES, INC., herein called LESSEE.
PRELIMINARY STATEMENT
LESSOR and LESSEE are contemporaneously herewith entering into a Lease of even
date (the "Lease") and desire to modify, amend and supplement the Lease pursuant
to the terms of this Addendum.
NOW, THEREFORE, in consideration of the premises, the mutual covenants herein
contained and for other good and valuable consideration, receipt and sufficiency
of which are hereby acknowledged, the parties hereto hereby agree as follows:
1) RE: Paragraph 4. "RENT". The Base Rent shall be modified according to
the following schedule:
May 1, 1996 - December 31, 1997 = $5,094.00 Per Month
January 1, 1998 - August 31, 1999 = $6,094.00 Per Month
September 1, 1999 - April 30, 2001 = $7,094.00 Per Month
2) Tenant Finish. LESSOR agrees to provide, at its expense, the renovations
to the Demised Premises as set forth on the attached Exhibit "A".
3) Ratification. Except as expressly amended or modified hereby, LESSOR and
LESSEE hereby expressly ratify and confirm the terms and provisions of the
Lease, as amended by this Addendum.
<PAGE>
Blankenbaker Business Center II
EXHIBIT "D"
Lease Rules and Regulations
Page 5
IN WITNESS WHEREOF, the Parties hereto have executed this Addendum to Lease on
the day, month and year first above written.
LESSOR: NTS/BBCI, A KENTUCKY LIMITED
PARTNERSHIP DBA
BLANKENBAKER BUSINESS CENTER II
By: NTS Capital Corporation,
General Partner
By: _____________________________________________
H.L. Heiner
Title: Executive Vice President
_____________________________________________
LESSEE: VIDEOLAN TECHNOLOGIES, INC.
By:__________________________________________
Title:__________________________________________
<PAGE>
Blankenbaker Business Center II
EXHIBIT "D"
Lease Rules and Regulations
Page 6
BLANKENBAKER BUSINESS CENTER II
LEASE
BY AND BETWEEN
NTS/BBCI,
A KENTUCKY LIMITED PARTNERSHIP,
DBA
BLANKENBAKER BUSINESS CENTER II ("LESSOR")
AND
VIDEOLAN TECHNOLOGIES, INC. ("LESSEE")
DATED _____________
<PAGE>
Blankenbaker Business Center II
EXHIBIT "D"
Lease Rules and Regulations
Page 7
BLANKENBAKER BUSINESS CENTER II
TABLE OF CONTENTS
Page No.
--------
1. FUNDAMENTAL EXHIBITS TO LEASE.............................. 1
2. DEMISED PREMISES........................................... 1
3. TERM....................................................... 1
4. RENT....................................................... 2
5. RENT ADJUSTMENT............................................ 2
6. ANNUAL OPERATING COSTS..................................... 3
7. ADDITIONAL RENT............................................ 5
8. TAXES AND LEASEHOLD IMPROVEMENTS........................... 5
9. USE........................................................ 5
10. REPAIRS BY LESSEE.......................................... 6
11. REPAIRS BY LESSOR.......................................... 6
12. ALTERATIONS................................................ 7
13. SIGNS...................................................... 7
14. ROOF RIGHTS................................................ 7
15. LAWS AND ORDINANCES........................................ 7
16. FURNITURE; FIXTURES; ELECTRICAL EQUIPMENT.................. 8
17. DAMAGE..................................................... 8
18. OTHER INSURANCE............................................ 9
19. INSPECTION................................................. 10
20. LIENS...................................................... 10
21. ASSIGNMENT AND SUBLETTING.................................. 10
22. BROKERAGE.................................................. 12
23. CONDEMNATION............................................... 12
24. EVENTS OF DEFAULT.......................................... 12
25. CUMULATIVE REMEDIES........................................ 13
<PAGE>
Blankenbaker Business Center II
EXHIBIT "D"
Lease Rules and Regulations
Page 8
26. UTILITIES.................................................. 14
27. LIABILITY.................................................. 15
28. PROPERTY AT LESSEE'S RISK.................................. 15
29. RULES AND REGULATIONS...................................... 16
30. PARKING.................................................... 16
31. MODIFICATIONS DUE TO FINANCING............................. 16
32. ATTORNEYS' FEES............................................ 16
33. APPLICABLE LAW............................................. 16
34. NO RESERVATIONS............................................ 16
35. SEVERABILITY............................................... 17
36. RENT TAX................................................... 17
37. ACTS OF GOD................................................ 17
38. REMEDIES CUMULATIVE; NO WAIVER............................. 17
39. MODIFICATIONS.............................................. 17
40. WAIVER OF JURY TRIAL....................................... 18
41. HOLDOVER TENANCY........................................... 18
42. QUIET ENJOYMENT............................................ 18
43. SECURITY DEPOSIT........................................... 18
44. NOTICES.................................................... 19
45. SUMS EXPENDED BY LESSOR TO BE ADDITIONAL RENT.............. 19
46. MORTGAGES.................................................. 19
47. MISCELLANEOUS.............................................. 19
<PAGE>
Exhibit 10.23
L E A S E
1. PARTIES: CORPORATE BUSINESS CONNECTION, INC., a Massachusetts corporation
duly organized and existing according to law, with a principal place of business
at 221 East Main Street, Milford, Massachusetts, hereinafter referred to as
LESSOR, which expression shall include its successors and assigns where the
context admits, do hereby lease to VIDEOLAN TECHNOLOGIES, INC. of 100 Mallard
Creek Road, Louisville, Kentucky 40207, hereinafter referred to as LESSEE, which
expression shall include successors or assigns, and the LESSEE hereby leases the
following described premises:
2. PREMISES: SUITES #227 AND 227B in a building known and numbered 221 East
Main Street, Milford, Massachusetts.
The LESSEE shall also have the right to use in common with others entitled
thereto the hallways and stairways necessary for access to said leased premises,
lavatories and the kitchen facilities.
3. TERM: The term of this Lease shall coincide with the initial term of your
original lease. New Lease term shall take effect on May 15, 1996 and shall end
December 14, 1996. The initial term of said Lease shall automatically renew
each year, (at the new rate $1486.50 per month) unless either party provides
written notice to the other party, no less than ninety days prior to the
expiration of said term, of its desire not to have Lease automatically renew.
4. RENT: The LESSEE shall pay to the LESSOR rent at the rate of FOURTEEN
HUNDRED EIGHTY-SIXTY DOLLARS AND FIFTY CENTS ($1486.50) per month, payable in
advance of the FIFTEENTH of every month for each month of the term of this
LEASE. The monthly rent shall include parking, subject to the provisions of
Paragraph 18 hereof, one telephone (exclusive of telephone answering service),
one desk and one desk chair, all utilities, maintenance, kitchen privileges,
front desk reception and waiting room, together with unlimited use, subject only
to availability, of the conference room.
A late payment fee of FIVE AND NO/100 ($5.00) DOLLARS PER DAY shall be
assessed for every day the rent is not received beyond five (5) calendar days
from the date due.
5. SECURITY DEPOSIT: LESSEE has deposited SEVEN HUNDRED SIXTY-FIVE DOLLARS
($765.00), to be held, without liability for interest, as security for the
LESSEE'S performance herein provided, and to be returned to the LESSEE upon the
expiration of the term of this LEASE, provided that the office and contents are
in the same condition as when LESSEE took possession, allowing for reasonable
use and wear, casualty excepted, and that LESSEE has paid in full any and all
additional billings.
6. DELIVERY, ACCEPTANCE, USE AND SURRENDER OF PREMISES: LESSOR hereby agrees
to deliver the Leased Premises in a clean and attractive condition. LESSOR
agrees that all common areas shall be maintained in a clean and safe condition
at all times. Ventilation, air conditioning and heating as necessary to provide
a comfortable environment for all regular business days from 8:30 o'clock a.m.
to 5:00 o'clock p.m. shall be provided by the LESSOR. Acceptance by the LESSEE
of the Leased Premises shall be construed as recognition that the Leased
Premises are clean and in good condition. LESSEE shall use the Leased Premises
only for general office purposes and in accordance with the uses permitted under
the applicable zoning regulations. LESSEE shall surrender the Leased Premises
in the same condition as when LESSEE took possession, reasonable wear and tear
and casualty excepted.
<PAGE>
7. COMPLIANCE WITH LAWS: The LESSEE acknowledges that no trade or occupation
shall be conducted in the leased premises or use made thereof which will be
unlawful, improper, noisy or offensive, or contrary to any law or any municipal
by-law or ordinance in force in the town of Milford.
8. FIRE INSURANCE: The LESSEE shall not permit any use of the leased
premises which will make voidable any insurance on the property of which the
leased premises are a part, or on the contents of said property or which shall
be contrary to any law or regulation from time to time established by the New
England Fire Insurance Rating Association, or any similar body succeeding to its
powers. The LESSEE shall on demand reimburse the LESSOR, and all other tenants,
all extra insurance premiums caused by the LESSEE'S use of the premises.
9. MAINTENANCE OF PREMISES: LESSOR will provide and pay for regular cleaning
services for the Leased Premises. LESSOR shall furnish regular cleaning service
to the common areas of the building of which the leased premises are a part.
The LESSEE agrees to maintain the Leased Premises in the same condition as
they are in at the commencement of the term of this Lease, or as they may be put
in during the term of this lease, reasonable wear and tear, damage by fire and
other casualty only excepted. The LESSEE shall not permit the leased premises
to be overloaded, damaged, stripped or defaced, nor suffer any waste.
10. ALTERATIONS-ADDITIONS: The LESSEE shall not make any alterations or
additions to the leased premises.
11. ASSIGNMENT-SUBLEASING: The LESSEE shall not assign or sublet the whole
or any part of the leased premises, without Lessor's prior written consent.
12. LESSOR'S ACCESS: The LESSOR or agents of the LESSOR may, at reasonable
times, enter to view the leased premises and may remover placards and signs not
approved and affixed as herein provided, and make repairs and alterations as
LESSOR should elect to do and may show the leased premises to others, and at any
time within three (3) months before the expiration of the term.
13. INDEMNIFICATION AND LIABILITY: LESSEE will indemnify LESSOR and save it
harmless and defend it from and against any and all claims, actions, damages,
liability and expense in connection with loss of life, personal injury and/or
damage to property arising from or out of any occurrence in, upon or at the
leased premises, or any part thereof, or occasioned wholly or in part by any act
of gross negligence or any misconduct by LESSEE, its agents, contractors or
employees. LESSEE shall also pay all costs, expenses and reasonable attorney's
fees that may be incurred or paid by LESSOR in enforcing the covenants and
agreements in this Lease, provided LESSEE shall be adjudged liable by a court of
competent jurisdiction.
14. FIRE, CASUALTY, EMINENT DOMAIN: Should a substantial portion of the
leased premises, or of the property of which they are a part, be substantially
damaged by fire or other casualty, or be taken by eminent domain, the LESSOR may
elect to terminate this Lease. When such fire, casualty or taking renders the
leases premises substantially unsuitable for their intended use, a just and
proportionate abatement of rent shall be made, and the LESSEE may elect to
terminate this Lease if:
<PAGE>
2
a. the LESSOR fails to give written notice within thirty (30) days of
said fire, casualty or taking, indicating his intention to restore the leased
premises, or
b. the LESSOR fails to restore the leased premises to a condition
substantially suitable for their intended use within ninety (90) days of said
fire, casualty or taking.
The LESSOR reserves, and the LESSEE grants to the LESSOR, all rights which
the LESSEE may have for damages or injury to the leased premises for any taking
by eminent domain, except for damage to the LESSEE'S property or equipment.
15. DEFAULT AND BANKRUPTCY: In the event that:
(a) the LESSEE shall default in the payment of any installment of rent
or other sum herein specified and such default shall continue for
ten (10) days after written notice thereof; or
(b) the LESSEE shall default in the observance or performance of any
other of the LESSEE'S covenants, agreements, or obligations
hereunder and such default shall not be corrected within thirty (30)
days after written notice thereof; or
(c) the LESSEE shall be declared bankrupt or insolvent according to
law, or if any assignment shall be made of LESSEE'S property for
the benefit of creditors; then
the LESSOR shall have the right thereafter, while such default continues, to
re-enter and take complete possession of the leased premises, to declare the
term of this Lease ended, but shall store LESSEE's effects for a period of up to
45 days, at LESSEE's expense, in accordance with customary business practices.
The LESSEE shall indemnify the LESSOR against all loss of rent and other
payments which the LESSOR may incur by reason of such termination during the
residue of the term. If the LESSOR makes any expenditures or incurs any
obligations for the payment of money in connection therewith, including but not
limited to, reasonable attorney's fees in instituting, prosecuting or defending
any action or proceeding, such sums paid or obligations incurred, with interest
at the rate of ten (10%) percent per annum and costs, shall be paid to the
LESSOR by the LESSEE as additional rent.
16. NOTICE AND PAYMENT OF RENT: Any notice from the LESSOR to the LESSEE
relating to the leased premises or to the occupancy thereof, shall be deemed
duly served if delivered by hand or if mailed to the leased premises, postage
prepaid, addressed to the LESSEE. Any notice from the LESSEE to the LESSOR
relating to the leased premises or to the occupancy thereof, shall be deemed
duly served, if delivered by hand or if mailed postage prepaid, addressed to the
LESSOR at 221 EAST MAIN STREET, MILFORD, MASSACHUSETTS 01757, or at such address
as the LESSOR may from time to time advise in writing. All rent and notices
shall be paid to the LESSOR AT 221 EAST MAIN STREET, MILFORD, MASSACHUSETTS
01757, or at such other address as the LESSOR may from time to time advise in
writing.
17. SURRENDER: The LESSEE shall at the expiration or other determination of
this Lease remove all LESSEE'S goods and effects from the leased premises.
LESSEE shall deliver to the LESSOR the leased premises, and all keys to the
leased premises. In the event of the LESSEE'S failure to remove any of LESSEE'S
property from the premises, LESSOR is hereby authorized, without liability to
LESSEE for loss or damage thereto, and at the sole risk of LESSEE, to remove and
store any of the property at LESSEE'S expense, or to retain same under LESSOR'S
control or to sell at public or private sale, without
<PAGE>
3
notice any or all of the property not so removed and to apply the net proceeds
of such sale to the payment of any sum due hereunder, or to destroy such
property.
18. COMPLIANCE WITH RULES AND REGULATIONS: The LESSEE, and its invitees
shall observe the reasonable rules and regulations of Lessor's Landlord, as may
be from time to time imposed, including without limitation, (i) the designation
of specific areas in which automobiles owned or operated by LESSEE must be
parked and (ii) those rules and regulations set by LESSOR regarding the use of
the premises.
IN WITNESS WHEREOF, the LESSOR and LESSEE have hereunto set their hands and
common seals this 1st day of May, 1996.
LESSOR: LESSEE:
CORPORATE BUSINESS VIDEO LAN TECHNOLOGIES, INC.
CONNECTION, INC.
BY:-------------------- BY: /s/ Steve Rothenberg
Its ----------------------------
Its Vice President Finance
<PAGE>
Exhibit 10.24
CONSULTING AGREEMENT
THIS CONSULTING AGREEMENT ("Agreement") dated as of the 1st day of June,
1996, is entered into by and between VIDEOLAN TECHNOLOGIES, INC., a Delaware
corporation (the "Company") and JACQUES O. DE LABRY (the "Consultant") under the
following circumstances:
A. The Consultant desires to provide certain consulting services to
the Company on an individual basis; and
B. The Company desires to obtain such services directly from the
Consultant, as more fully set forth below.
NOW, THEREFORE, based on the foregoing and the mutual promises set forth
below, the Company and the Consultant hereby agree as follows:
1. Services. The Consultant shall, upon reasonable request of the Chairman
of the Board of the Company, or such other person designated by the Chairman of
the Board, provide services (the "Services") to the Company in Louisville,
Kentucky or other locations as directed by the Board relating to international
market development, strategic planning, operational guidance to the Company's
chief executive officer, alliances and partnering, and acquisitions. The
Consultant shall perform the services as reasonably requested by the Company in
a professional manner within the time frames agreed to by the Company and the
Consultant, to the extent that the performance of such services would not
require more than 12 full working days during any calendar month or such
different number of working days as are agreed to by the Company and the
Consultant.
2. Independent Contractor. The Consultant acknowledges and agrees that he
shall be acting as an independent contractor and shall not be considered or
deemed to be an agent, employee, joint venturer or partner of the Company. The
Consultant shall not have the authority to contract for or bind the Company in
any manner, and he shall not represent himself as an agent of the Company or as
otherwise authorized to act for or on behalf of the Company. The Consultant
shall have no status as an employee of the Company, nor shall he any right to
any benefits that the Company grants its employees. The Consultant acknowledges
and agrees that he is fully responsible for paying federal, state and local
taxes assessed by reason of any claims that he is rendering services pursuant to
this Agreement as an employee of the Company. The Company and the Consultant
expressly agree that he shall not be deemed to be an employee of the Company,
and the Company agrees that it shall not withhold any amount that would normally
be withheld from an employee's pay.
<PAGE>
3. Compensation for Services.
A. The Company hereby agrees to pay the Consultant in consideration
for his performance of Services Eight Thousand Three Hundred Thirty-Four
Dollars ($8,334.00) per month during the term of this Agreement. At least
semiannually, the Board of Directors of the Company shall review the
compensation payable hereunder and may in its sole discretion increase the
amount thereof. Any compensation payable hereunder shall be paid in regular
intervals in accordance with the Company's payroll practices.
B. Provided that this Agreement is approved by the Board of Directors
of the Company, the Company will grant the Consultant options to purchase
30,000 shares of Company's Common Stock (the "Options") on a date (the
"Grant Date") selected by the Board of Directors on or before September 1,
1996 provided the Consultant executes and delivers an Option Agreement in
the form of Exhibit A attached hereto. The exercise price of the shares
shall be the closing price of the Company's Common Stock on the Grant Date
as reported by Nasdaq. Options with respect to 10,000 shares (the "Initial
Options") shall vest and be exercisable on June 1, 1997; provided, however,
if this Agreement is terminated pursuant to Section 7.D or 7.E hereof prior
to June 1, 1997, the Initial Options shall vest on the date of such
termination and shall be exercisable on June 1, 1997. Options with respect
to an additional 10,000 shares shall vest and be exercisable on June 1,
1998. Options with respect to the remaining 10,000 shares shall vest and be
exercisable on June 1, 1999. Upon termination of this Agreement for any
reason, all unvested Options (other than the Initial Options in the event
this Agreement is terminated pursuant to Section 7.D or 7.E hereof) shall
be cancelled effective upon the date of such termination and all vested
Options shall terminate on the later of (a) July 1, 1997 or (b) thirty (30)
days after the date of such termination.
4. Expenses. Subject to the Company's prior approval, which approval shall
not be unreasonably withheld, the Company shall reimburse the Consultant for
reasonable out-of-pocket expenses incurred by the Consultant in performing the
Services under this Agreement. Upon request, the Consultant shall provide the
Company with receipts for such expenses.
5. Effective Date. The term of this Agreement shall commence on the date
first written above (the "Effective Date").
6. Term. The term of this Agreement shall commence on the Effective Date
and shall continue until June 1, 1999, unless sooner terminated pursuant to
Section 7 hereof.
7. Termination. This Agreement shall be terminated:
A. Upon the death of the Consultant;
2
<PAGE>
B. By the Consultant, upon at least thirty (30) days prior notice;
C. By the Company because of the Consultant's inability to perform his
duties on account of disability or incapacity for a period of thirty (30)
or more consecutive days;
D. By the Company at any time after December 1, 1996, upon at least
six (6) months prior notice;
E. By the Company at any time after December 1, 1996, upon less than
six (6) months prior notice provided, however, if this Agreement is
terminated pursuant to this Section 7.E, the Consultant shall be entitled
to continue to receive compensation pursuant to Section 3.A for six (6)
months following such notice; and
F. By the Company at any time "for cause," such termination to take
effect immediately upon written notice from the Company to the Consultant.
The following actions, failures or events by or affecting the Consultant
shall constitute "cause" for termination within the meaning of the foregoing
paragraph: (1) conviction of having committed a felony, (2) acts of dishonesty
or moral turpitude that are materially detrimental to the Company, (3) acts or
omissions which the Consultant knew or should have reasonably known were likely
to materially damage the business of the Company and did in fact materially
damage the Company, (4) failure by the Consultant to obey the reasonable and
lawful directions of the Company's Board of Directors or Chief Executive
Officer, (5) gross negligence by the Consul tant in the performance of his
obligations hereunder, or continuing failure by the Consultant to perform his
obligations hereunder more than 30 days after the Consultant has been provided
with written notice of his failure to perform such obligations, or (6) the
Consultant's willful breach of any material agreement or covenant of this
Agreement or any fiduciary duty owed to the Company.
8. Confidentiality, etc. The Consultant hereby covenants, agrees and
acknowledges as follows:
A. "Proprietary Information" means information disclosed to or
otherwise made available to the Consultant or known by him as a consequence
of or through the Consultant's providing Services to the Company and
related to any technologies, applications, patents, patent applications
and/or claims, products, processes or services in which the Company is
currently or is likely to become engaged, and which gives the Company a
competitive advantage, including, without limitation, information relating
to patents, patent applications, research, development and inventions.
B. The Consultant recognizes and acknowledges that all information
defined herein as Proprietary Information, is valuable, special and unique
belonging solely to the Company. The Consultant shall not, during the term
of this Agreement or at any time
3
<PAGE>
thereafter, directly or indirectly, use or disclose Proprietary Information
whether or not specifically described above except (i) as required in
connection with the performance of Services or (ii) as permitted, in
writing, by the Board of Directors of the Company.
C. The obligation of the Consultant to protect and not to disclose the
Proprietary Information disclosed to him shall not apply to information
that is:
(1) Actually known by the Consultant before being obtained from
the Company;
(2) Independently developed by, known or in the possession of the
Consultant at the time of disclosure hereunder;
(3) Generally available to the public prior to its disclosure by
the Company or that becomes generally available to the public after
disclosure by the Company through no fault of the Consultant;
(4) Obtained or acquired by the Consultant from a third party in
possession of such information who is not under obligation to the
Company not to disclose the information; or
(5) Ordered by a court of competent jurisdiction or governmental
agency to be produced by the Consultant; provided, however, that upon
the receipt of any such order, the Consultant shall immediately notify
the Company of such order so that an appropriate protective agreement
or order can be sought.
9. Competition, etc. During the term of this Agreement and (a) during the
two (2) year period following the termination of this Agreement pursuant to
Section 7.A, 7.B or 7.C hereof and (b) during the six month period following the
termination of this Agreement pursuant to Section 7.D or 7.E hereof:
A. The Consultant will not make any statement or perform any act
intended to advance an interest of any existing or prospective competitor
of the Company in any way that will or may injure an interest of the
Company in its relationship and dealings with existing or potential
suppliers, customers or clients, or solicit or encourage any other employee
of the Company to do any act that is disloyal to the Company or
inconsistent with the interest of the Company or in violation of any
provision of this Agreement;
B. The Consultant will not make any statement or do any act intended
to cause any existing or potential customers or clients of the Company to
make use of the services or purchase the products of any existing or future
business in which the Consultant has or expects to acquire a proprietary
interest or in which the Consultant is or expects to be made an employee,
officer, director, manager, consultant, independent contractor, advisor or
4
<PAGE>
otherwise, if such services or products in any way compete with the
services or products sold or provided or expected to be sold or provided by
the Company to any existing or potential customer or client;
C. The Consultant will not directly or indirectly (as an employee,
officer, director, manager, consultant, independent contractor, advisor or
otherwise) engage in competition with, or acquire any proprietary interest
in, perform any services for, lend his name to, participate in or be
connected with any business involved in the research, development,
commercialization, manufacture, assembly, sale, licensing, sublicensing,
distribution, supplying or marketing of any service or product which in any
way compete with the services or products sold or provided or expected to
be sold or provided to any existing or potential customer or client, as
such services or products currently exist or are developed in the future,
including, without limitation, desktop video conferencing and video
services products, from any location in the United States of America or
elsewhere where the Company conducts business during the term of this
Agreement; provided, however, the Consultant may continue to serve as a
director of or consultant to MultiLink Inc. so long as such corporation
only engages in the activities set forth on Addendum A hereto.
D. The Consultant agrees that, when the Consultant has or expects to
acquire a proprietary interest in, or is or expects to be made an employee,
officer, director, manager, consultant, independent contractor, advisor or
otherwise of, any existing or future business that provides or may provide
services or products which in any way compete with the services or products
sold or provided or expected to be sold or provided by the Company to any
existing or potential customer or client, the Consultant will immediately
furnish to the Company all information that may reasonably be of assistance
to the Company in acting promptly to protect its relationships with any
existing or potential suppliers, customers or clients with whom the
Consultant has had any dealings as a result of his employment by the
Company;
E. The Consultant will not directly or indirectly solicit for
employment, or advise or recommend to any other person that they employ or
solicit for employment, any employee of the Company; and
F. The Consultant will not directly or indirectly hire, engage, send
any work to, place orders with, or in any manner be associated with any
supplier, contractor, subcontractor or other person or firm which rendered
manufacturing or other services, or sold any products, to the Company if
such action by him would have a material adverse effect on the business,
assets or financial condition of the Company.
In connection with the foregoing provisions of this Section 9, the
Consultant represents that his experience, capabilities and circumstances are
such that such provisions will not prevent him from earning a livelihood. The
Consultant further agrees that the limitations set forth in this Section 9
(including, without limitation, any time or territorial limitations) are
reasonable and properly
5
<PAGE>
required for the adequate protection of the businesses of the Company. It is
understood and agreed that the covenants made by the Consultant in Sections 8
and 9 hereof shall survive the expiration or termination of this Agreement.
For purposes of this Section 9, proprietary interest in a business is
ownership, whether through direct or indirect stock holdings or otherwise, of
one percent (1%) or more of such business. The Consultant shall be deemed to
expect to acquire a proprietary interest in a business or to be made an
employee, officer, director, manager, consultant, independent contractor,
advisor or otherwise of such business if such possibility has been discussed
with any officer, director, employee, agent, or promoter of such business.
The Consultant acknowledges and agrees that a remedy at law for any breach
or threatened breach of the provisions of Sections 8 and 9 hereof would be
inadequate and, therefore, agrees that the Company shall be entitled to
injunctive relief in addition to any other available rights and remedies in
cases of any such breach or threatened breach; provided, however, that nothing
contained herein shall be construed as prohibiting the Company from pursuing any
other rights and remedies available for any such breach or threatened breach.
10. Data. Upon termination of this Agreement for any reason, the Consultant
or his personal representative shall promptly deliver to the Company all books,
memoranda, plans, records, information and written data, and all copies of same,
of every kind relating to the business and affairs of the Company which are then
in his possession.
11. Waiver of Breach. Any waiver of any breach of this Agreement shall not
be construed to be a continuing waiver or consent to any subsequent breach on
the part either of the Consultant or of the Company.
12. Notices. Any notice required or desired to be given under this
Agreement shall be deemed given if in writing and delivered in person or sent by
certified mail or overnight express courier to the Company at its then current
principal place of business to the attention of the President or to the
Consultant at his residence as shown on the Company's records.
13. Assignment. Neither party hereto may assign his or its rights or
delegate his or its duties under this Agreement without the prior written
consent of the other party.
14. Severability. If any provision of this Agreement is held to be
unenforceable for any reason, the remainder of this Agreement shall,
nevertheless, remain in full force and effect.
15. Entire Agreement. On the Effective Date, the terms and provisions of
this Agreement and the Option Agreement constitute the entire agreement between
the Company and the Consultant with respect to the subject matter hereof and
thereof, and shall supersede any and all prior agreements or understandings
between the Company and the Consultant, with respect to the subject
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<PAGE>
matter hereof and thereof, whether in writing or oral. This Agreement may be
amended or modified only by a written instrument executed by the Consultant and
the Company.
16. Governing Law. This Agreement shall be governed by, and its provisions
construed and enforced in accordance with, the laws of the Commonwealth of
Kentucky.
17. Release. The Consultant hereby releases any and all rights which he may
have with respect to the Company's Proprietary Information, technology, patents
and patent applications.
18. Affiliates. For purposes of Sections 8 and 9 of this Agreement, any
reference to the "Company" includes the Company and/or any entity which (i)
directly or indirectly controls the Company, (ii) is controlled, directly or
indirectly, by the Company, or (iii) is under common control, directly or
indirectly, with the Company.
19. Actions as Director. The Consultant shall not participate in any
discussions of the Board of Directors or vote as a director of the Company with
respect to any matter as to any proposed action recommended by the Consultant.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year first written above.
VIDEOLAN TECHNOLOGIES, INC.
By: _____________________________________
Title:_____________________________________
-------------------------------------------
Jacques O. de Labry
7
<PAGE>
Exhibit 10.28
OPTION AGREEMENT
THIS OPTION AGREEMENT (this "Agreement") is made as of the 14th day of June
1996, by and between VIDEOLAN TECHNOLOGIES, INC., a Delaware corporation (the
"Company") and JACQUES O. DE LABRY (the "Optionee").
WHEREAS, pursuant to that certain Consulting Agreement dated June 1, 1996
between the Company and Optionee (the "Consulting Agreement"), Optionee was
granted options (the "Options") to purchase up to 30,000 shares of the Company's
common stock (the "Shares");
WHEREAS, Optionee and the Company desire to set forth the terms and
conditions of the Options;
NOW, THEREFORE, in consideration of the promises and other good and
valuable consideration, the receipt, mutuality and sufficiency of which is
acknowledged, the parties hereto agree as follows:
1. Option. On the terms and subject to the conditions of this Agreement,
Optionee shall have the right to purchase up to 30,000 Shares, subject to
adjustment in accordance with Section 6 of this Agreement and subject to the
exercise requirements set forth in Section 4(a) and (b) of this Agreement.
2. Option Exercise Price. The exercise price of the Option (the "Exercise
Price") shall be $__________ per Share, subject to adjustment in accordance with
Section 6 of this Agreement.
3. Duration of Option. The Option shall expire five years from the date
hereof.
4. Exercise of Option.
(a) Options with respect to 10,000 shares (the "Initial Options")
shall vest and be exercisable on June 1, 1997; provided, however, if the
Consulting Agreement is terminated pursuant to Section 7(d) thereof prior to
November 30, 1996, the Initial Options shall vest on the date of such
termination and shall be exercisable on June 1, 1997;
(b) Options with respect to an additional 10,000 shares shall vest and
be exercisable on June 1, 1998;
(c) Options with respect to the remaining 10,000 shares shall vest and
be exercisable on June 1, 1999;
(d) Upon termination of the Consulting Agreement for any reason, all
unvested Options shall be cancelled effective upon the date of such termination
and all vested Options shall terminate thirty (30) days after the date of such
termination;
<PAGE>
(e) This Option may be exercised by delivery of written notice to the
Company at its executive offices, addressed to the attention of the Chief
Financial Officer. Such notice: (i) shall be accompanied by all necessary
corporate authorization and signed by the president of Optionee or its legal
representatives; (ii) shall specify the number of full Shares then elected to be
purchased with respect to the Option; and (iii) shall be accompanied by payment
in full of the Exercise Price of the Shares to be purchased.
(f) The Exercise Price upon exercise of this Option shall be payable
to the Company in cash or its equivalent.
(g) As promptly as practicable after the receipt of notice and payment
upon exercise, the Company shall cause to be delivered to Optionee certificates
for the Shares so purchased. If the Option shall have been exercised in full,
this Agreement shall be returned to the Company and canceled.
5. Registration of Shares. The Company shall register the Shares under the
Securities Act of 1933, as amended, on or prior to June 30, 1997.
6. Adjustments in Authorized Shares and the Option. (a) In the event of a
merger, reorganization, consolidation, recapitalization, reclassification,
split-up, spin-off, separation, liquidation, share dividend, share split,
reverse share split, share combination, share exchange or other change in the
capital structure of the Company affecting the Shares, the Board of Directors of
the Company may substitute or adjust the total number and class of Shares or
other securities that may be issued hereunder, and the Exercise Price, as it
determines to be appropriate and equitable to prevent dilution or enlargement of
the rights of Optionee and to preserve, without diluting or exceeding, the value
of the Option.
(b) Upon (i) the merger or consolidation of the Company with or into
another corporation, if the agreement of merger or consolidation does not
provide for (x) the continuation of the Option or (y) the substitution of a new
option for the Option or for the assumption of the Option by the surviving
corporation, or (ii) the dissolution, liquidation or sale of substantially all
the assets of the corporation, Optionee shall have the right immediately prior
to the effective date of such merger, consolidation, dissolution, liquidation or
sale of assets to exercise the Option without regard to the restriction, on
exercise set forth in Section 4. The Company, to the extent practicable, shall
give advance notice to Optionee of such merger, consolidation, dissolution,
liquidation or sale of assets. To the extent the Option is not so exercised, it
shall be forfeited as of the effectiveness of such merger, consolidation,
dissolution, liquidation or sale of assets.
7. Miscellaneous.
(a) Tax Withholding. The parties acknowledge and agree that any and
all compensation received by Optionee pursuant to any exercise of the Option
will be self-employment
2
<PAGE>
income, and that Optionee shall bear the sole responsibility with respect to
withholding and estimated tax payments on such compensation.
(b) Amendment. This Agreement may not be changed or terminated except
by written instrument signed by the parties.
(c) Successors; Binding Agreement. The Company agrees that:
(i) The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company, by agreement in
form and substance satisfactory to Optionee, to expressly assume and agree to
perform this Agreement in the same manner and to the same extent that the
Company would be required to perform if no succession had taken place; and
(ii) This Agreement and all rights of Optionee hereunder shall
inure to the benefit of and be enforceable by Optionee or its successors or
assignees.
(d) Severability. In the event any provision of this Agreement shall
be held illegal or invalid for any reason, the illegality or invalidity shall
not affect the remaining parts of this Agreement, and this Agreement shall be
construed and enforced as if the illegal or invalid provision had not been
included.
(e) Entire Agreement. This Agreement and the Consulting Agreement
constitute the entire agreement between the parties with respect to the subject
matter hereof and thereof and supersede all prior agreements, arrangements or
understandings with respect to its subject matter.
(f) Governing Law. This Agreement, and the application or
interpretation thereof, shall be governed by the laws of the Commonwealth of
Kentucky.
IN WITNESS WHEREOF, the parties have signed this Agreement as of the date
first above written.
VIDEOLAN TECHNOLOGIES, INC.
(the "Company")
By:_____________________________________
Title:__________________________________
By:_____________________________________
3
<PAGE>
JACQUES O. DE LABRY
("Optionee")
4
<PAGE>
Exhibit 10.29
OPTION AGREEMENT
THIS OPTION AGREEMENT (this "Agreement") is made as of the 14th day of June
1996, by and between VIDEOLAN TECHNOLOGIES, INC., a Delaware corporation (the
"Company") and QUEST ENTERPRISES, INC., a New York corporation ("QEI").
WHEREAS, pursuant to that certain Sales Agency Agreement dated June 14,
1996 between the Company and QEI (the "Sales Agency Agreement"), QEI was granted
an option (the "Option") to purchase 75,000 shares of the Company's common stock
(the "Shares");
WHEREAS, QEI and the Company desire to set forth the terms and conditions
of the Option;
NOW, THEREFORE, in consideration of the promises and other good and
valuable consideration, the receipt, mutuality and sufficiency of which is
acknowledged, the parties hereto agree as follows:
1. Option. On the terms and subject to the conditions of this Agreement,
QEI shall have the right to purchase up to 75,000 Shares, subject to adjustment
in accordance with Section 6 of this Agreement and subject to the exercise
requirements set forth in Section 4(a) and (b) of this Agreement.
2. Option Exercise Price. The exercise price of the Option (the "Exercise
Price") shall be $16.00 per Share, subject to adjustment in accordance with
Section 6 of this Agreement.
3. Duration of Option. The Option shall expire five years from the date
hereof.
4. Exercise of Option.
(a) The Option to purchase up to 25,000 of the Shares shall be
irrevocable and shall be exercisable at any time prior to its expiration and
shall not be affected by the termination of the Sales Agency Agreement.
(b) The Option to purchase any or all of the additional 50,000 Shares
will not be exercisable until and unless prior to the termination of the Sales
Agency Agreement (i) the Company has received Net Sales (as defined in the Sales
Agency Agreement) of at least $5,000,000 or (ii) the Company obtains equity
financing of at least $5,000,000 through QEI on terms that are acceptable to the
Company.
(c) This Option may be exercised by delivery of written notice to the
Company at its executive offices, addressed to the attention of the Chief
Financial Officer. Such notice: (i) shall be accompanied by all necessary
corporate authorization and signed by the president of QEI or its legal
representatives; (ii) shall specify the number of full Shares then elected to be
purchased
<PAGE>
with respect to the Option; and (iii) shall be accompanied by payment in full of
the Exercise Price of the Shares to be purchased.
(d) The Exercise Price upon exercise of this Option shall be payable
to the Company in cash or its equivalent.
(e) As promptly as practicable after the receipt of notice and payment
upon exercise, the Company shall cause to be delivered to QEI certificates for
the Shares so purchased. If the Option shall have been exercised in full, this
Agreement shall be returned to the Company and canceled.
5. Registration of Shares.
(a) The Shares shall be registered under the Securities Act of 1933,
as amended on or before October 23, 1996. In the event that QEI should acquire
any Shares which, at the time of acquisition, are not duly registered under the
Act and, as necessary, applicable state securities law, certificates evidencing
the unregistered Shares shall bear the following legends:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR UNDER THE
SECURITIES LAWS OF ANY STATE. THEY MAY NOT BE OFFERED FOR SALE, SOLD,
TRANSFERRED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF, AND WILL
NOT BE TRANSFERRED ON THE BOOKS AND RECORDS OF THE COMPANY, UNLESS (i)
THEY HAVE BEEN REGISTERED UNDER THE ACT AND UNDER APPLICABLE STATE
SECURITIES LAWS, OR (ii) REGISTRATION UNDER THE ACT AND APPLICABLE
STATE SECURITIES LAWS IS NOT REQUIRED.
Upon the registration of any shares represented by a certificate bearing this
legend, the Company shall issue replacement certificates free of this legend.
(b) No more than 10,000 Shares may be sold in any one calendar month
and no more than 2,000 Shares may be sold in any one day. The certificates
evidencing the Shares shall bear a legend referring to such restriction.
6. Adjustments in Authorized Shares and the Option. In the event of a
merger, reorganization, consolidation, recapitalization, reclassification,
split-up, spin-off, separation, liquidation, share dividend, share split,
reverse share split, share combination, share exchange or other change in the
capital structure of the Company affecting the Shares, the Board of Directors of
the Company may substitute or adjust the total number and class of Shares or
other securities that may be issued hereunder, and the Exercise Price, as it
determines to be appropriate and equitable to prevent dilution or enlargement of
the rights of QEI and to preserve, without diluting or
2
<PAGE>
exceeding, the value of the Option, provided, however, that such adjustments
shall be equivalent to that imposed equally upon all other option holders and/or
shareholders in the Company.
7. Miscellaneous.
(a) Tax Withholding. The parties acknowledge and agree that any and
all compensation received by QEI pursuant to any exercise of the Option will be
self-employment income, and that QEI shall bear the sole responsibility with
respect to withholding and estimated tax payments on such compensation.
(b) Amendment. This Agreement may not be changed or terminated except
by written instrument signed by the parties.
(c) Successors; Binding Agreement. The Company agrees that:
(i) The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company, by agreement in
form and substance satisfactory to QEI, to expressly assume and agree to perform
this Agreement in the same manner and to the same extent that the Company would
be required to perform if no succession had taken place; and
(ii) This Agreement and all rights of QEI hereunder shall inure
to the benefit of and be enforceable by QEI or its successors or assignees.
(d) Severability. In the event any provision of this Agreement shall
be held illegal or invalid for any reason, the illegality or invalidity shall
not affect the remaining parts of this Agreement, and this Agreement shall be
construed and enforced as if the illegal or invalid provision had not been
included.
(e) Entire Agreement. This Agreement constitutes the entire agreement
between the parties with respect to the subject matter hereof and thereof and
supersedes all prior agreements, arrangements or understandings with respect to
its subject matter. Without limiting the generality of the foregoing, that
certain Memorandum dated March 7, 1996 from Ted Ralston to Tuvia Barak shall be
and is null, void and of no further force and effect.
(f) Governing Law. This Agreement, and the application or
interpretation thereof, shall be governed by the laws of the Commonwealth of
Kentucky.
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<PAGE>
IN WITNESS WHEREOF, the parties have signed this Agreement as of the date
first above written.
VIDEOLAN TECHNOLOGIES, INC.
(the "Company")
By:_________________________________________
Title:______________________________________
QUEST ENTERPRISES, INC.
("QEI")
By:_________________________________________
Title:______________________________________
4
<PAGE>
Exhibit 10.30
PIGGYBACK REGISTRATION RIGHTS AGREEMENT
This Agreement dated as of June 14, 1996 is entered into by and among
VIDEOLAN TECHNOLOGIES, INC., a Delaware corporation (the "Company"), and QUEST
ENTER PRISES, INC., a __________ corporation ("QEI").
WHEREAS, the Company and QEI have entered into an Option Agreement of even
date herewith (the "Option Agreement") pursuant to which QEI has the right to
acquire common stock of the Company; and
WHEREAS, the Company and QEI desire to provide for certain arrangements
with respect to the registration of such shares of capital stock of the Company
under the Securities Act of 1933 ;
NOW, THEREFORE, in consideration of the mutual promises and covenants
contained in this Agreement, the parties hereto agree as follows:
1. Certain Definitions. As used in this Agreement, the following terms
shall have the following respective meanings:
"Commission" means the Securities and Exchange Commission, or any
other Federal agency at the time administering the Securities Act.
"Common Stock" means the common stock, $.01 par value per share, of
the Company.
"Registration Statement" means a registration statement filed by the
Company with the Commission for a public offering and sale of Common Stock
(other than a registration statement on Form S-8 or Form S-4, or their
successors, or any other form for a similar limited purpose, or any registration
statement covering only securities proposed to be issued in exchange for
securities or assets of another corporation); with equivalent state filings.
"Registration Expenses" means the expenses described in Section 4.
"Registrable Shares" means (i) the Shares and (ii) any other shares of
Common Stock issued in respect of the Shares (because of stock splits, stock
dividends, reclassifications, recapitalizations, or similar events); provided,
however, that Shares which are Registrable Shares shall cease to be Registrable
Shares at such time that the Shares become eligible for resale pursuant to Rule
144(k) under the Securities Act.
"Securities Act" means the Securities Act of 1933, as amended, or any
similar Federal statute, and the rules and regulations of the Commission issued
under such Act, as they each may, from time to time, be in effect.
"Shares" means the shares of Common Stock issued upon exercise of the
Option (as defined in the Option Agreement).
<PAGE>
2. Incidental Registration.
(a) Whenever the Company proposes to file a Registration Statement at
any time and from time to time, it will, prior to such filing, give written
notice to QEI of its intention to do so and, upon the written request of QEI
given within 20 days after the Company provides such notice (which request shall
state the intended method of disposition of such Registrable Shares), the
Company shall use its best efforts to cause all Registrable Shares which the
Company has been requested by QEI to register to be registered under the
Securities Act to the extent necessary to permit their sale or other disposition
in accordance with the intended methods of distribution specified in the request
of QEI; provided that the Company shall have the right to postpone or withdraw
any registration effected pursuant to this Section 2 without obligation to QEI
and provided further that the Company shall only be required to register the
Registrable Shares under the securities laws of one state.
(b) In connection with any registration under this Section 2 involving
an underwriting, the Company shall not be required to include any Registrable
Shares in such registration unless the holders thereof accept the terms of the
underwriting as agreed upon between the Company and the underwriters selected by
it (provided that such terms must be consistent with this Agreement). If in the
opinion of the managing underwriter it is appropriate because of marketing
factors to limit the number of Registrable Shares to be included in the offering
(a "Share Cutback"), then the Company shall be required to include in the
registration only that number of Registrable Shares, if any, which the managing
underwriter believes should be included therein. If the number of Registrable
Shares to be included in the offering in accordance with the foregoing is less
than the total number of shares which QEI has requested to be included, then QEI
and other holders of securities entitled to include them in such registration
shall participate in the registration pro rata based upon their total ownership
of shares of Common Stock (giving effect to the conversion into Common Stock of
all securities convertible thereinto). If any holder would thus be entitled to
include more securities than such holder requested to be registered, the excess
shall be allocated among other requesting holders pro rata in the manner
described in the preceding sentence.
(c) Upon the first registration of the Shares pursuant to this Section
2, QEI shall not be entitled to any further registration rights under this
Agreement, unless the number of Shares to be included in the offering made
pursuant to such registration is limited in accordance with Section 2(b) to a
number less than the total number of Registrable Shares which QEI has requested
to be included.
3. Registration Procedures. If and whenever the Company is required by the
provisions of this Agreement to use its best efforts to effect the registration
of any of the Registrable Shares under the Securities Act, the Company shall:
(a) file with the Commission a Registration Statement with respect to
such Registrable Shares and use its best efforts to cause that Registration
Statement to become and remain effective;
(b) as expeditiously as possible prepare and file with the Commission
any amendments and supplements to the Registration Statement and the prospectus
included in the
2
<PAGE>
Registration Statement as may be necessary to keep the Registration Statement
effective, in the case of a firm commitment underwritten public offering, until
each underwriter has completed the distribution of all securities purchased by
it and, in the case of any other offering, until the earlier of the sale of all
Registrable Shares covered thereby or 90 days after the effective date thereof;
(c) as expeditiously as possible furnish to QEI such reasonable
numbers of copies of the prospectus, including a preliminary prospectus, in
conformity with the requirements of the Securities Act, and such other documents
as QEI may reasonably request in order to facilitate the public sale or other
disposition of the Registrable Shares owned by QEI; and
(d) as expeditiously as possible use its best efforts to register or
qualify the Registrable Shares covered by the Registration Statement under the
securities or Blue Sky laws of the states designated by QEI, and do any and all
other acts and things that may be necessary or desirable to enable QEI to
consummate the public sale or other disposition in such states of the
Registrable Shares owned by QEI; provided, however, that the Company shall not
be required in connection with this paragraph (d) to qualify as a foreign
corporation or execute a consent to service of process, other than a consent to
service limited to claims or matters arising out of or in connection with the
offering of securities in connection with the Registration Statement, in any
jurisdiction.
If the Company has delivered preliminary or final prospectuses to QEI and
after having done so the prospectus is amended to comply with the requirements
of the Securities Act, the Company shall promptly notify QEI and, if requested,
QEI shall immediately cease making offers of Registrable Shares and return all
prospectuses to the Company. The Company shall promptly provide QEI with revised
prospectuses and, following receipt of the revised prospectuses, QEI shall be
free to resume making offers of the Registrable Shares.
4. Allocation of Expenses. The Company will pay all Registration Expenses
of all registrations under this Agreement. For purposes of this Section 4, the
term "Registration Expenses" shall mean all expenses incurred by the Company in
complying with this Agreement, including, without limitation, all registration
and filing fees, exchange listing fees, printing expenses, fees and expenses of
counsel for the Company, state Blue Sky fees and expenses, and the expense of
any special audits incident to or required by any such registration, but
excluding underwriting fees, discounts and selling commissions attributable to
the sale of Registrable Shares and the fees and expenses of counsel retained by
QEI.
5. Information from QEI. QEI shall furnish to the Company such information
regarding QEI and the distribution proposed by QEI as the Company may reasonably
request in writing and as shall be required in connection with any registration,
qualification or compliance referred to in this Agreement.
6. Mergers, Etc. The Company shall not, directly or indirectly, enter into
any merger, consolidation or reorganization in which the Company shall not be
the surviving corporation unless the proposed surviving corporation shall, prior
to such merger, consolidation or reorganization, agree in writing to assume the
obligations of the Company under this Agreement, and for that purpose references
hereunder to "Registrable Shares" shall be deemed to be references to the
securities which QEI would be entitled to receive in exchange for Registrable
Shares under any such
3
<PAGE>
merger, consolidation or reorganization; provided, however, that the provisions
of this Section 6 shall not apply in the event of any merger, consolidation or
reorganization in which the Company is not the surviving corporation if QEI is
entitled to receive in exchange for its Registrable Shares consideration
consisting solely of (i) cash, (ii) securities of the acquiring corporation
which may be immediately sold to the public without registration under the
Securities Act, or (iii) securities of the acquiring corporation which the
acquiring corporation has agreed to register within 90 days of completion of the
transaction for resale to the public pursuant to the Securities Act.
7. Termination. All of the Company's obligations to register Registrable
Shares under this Agreement shall terminate five years from the date of this
Agreement.
8. General.
(a) Notices. All notices, requests, consents, and other communications
under this Agreement shall be in writing and shall be delivered by hand or
mailed by first class certified or registered mail, return receipt requested,
postage prepaid:
If to the Company, at 100 Mallard Creek Road, Suite 250, Louisville,
Kentucky 40207, Attention: President, or at such other address or addresses as
may have been furnished in writing by the Company to QEI, with a copy to Brown,
Todd & Heyburn PLLC, 3200 Providian Center, Louisville, Kentucky, 40202-3363,
Attention: William G. Strench; or
If to QEI, at ____________________, or at such other address or addresses
as may have been furnished to the Company in writing by QEI, with a copy to
____________________, Attention: _______________.
Notices provided in accordance with this Section 8(a) shall be deemed
delivered upon personal delivery or two business days after deposit in the mail.
(b) Entire Agreement. This Agreement embodies the entire agreement and
understanding between the parties hereto with respect to the subject matter
hereof and supersedes all prior agreements and understandings relating to such
subject matter.
(c) Amendments and Waivers. Any term of this Agreement may be amended
and the observance of any term of this Agreement may be waived (either generally
or in a particular instance and either retroactively or prospectively), with the
written consent of the Company and QEI. No waivers of or exceptions to any term,
condition or provision of this Agreement, in any one or more instances, shall be
deemed to be, or construed as, a further or continuing waiver of any such term,
condition or provision.
(d) Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original, but all of which
shall be one and the same document.
(e) Severability. The invalidity or unenforceability of any provision
of this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement.
4
<PAGE>
(f) Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the Commonwealth of Kentucky.
Executed as of the date first written above.
VIDEOLAN TECHNOLOGIES, INC.
("Company")
By:_________________________________________
Title:______________________________________
QUEST ENTERPRISES, INC.
("QEI")
By:_________________________________________
Title:______________________________________
5
<PAGE>
Exhibit 10.32
VideoLan Technologies, Inc.
OPTION AGREEMENT
Incentive Stock Option
Name of Optionee ("Optionee"): ___ Social Security No.: _______
Date of Grant: ___________ No. of Shares: _____ Exercise per Share: $___
By accepting the grant of the option (the "Option") referred to above, the
optionee named above (the "Optionee") hereby agrees to the terms of this Option
Agreement. The Option has been granted pursuant to the Amended and Restated 1995
Stock Option Plan (the "Plan") of VideoLan Technologies, Inc. (the
"Corporation"). All capitalized terms herein shall have the meanings set forth
in the Plan.
Vesting Schedule
Subject to the earlier termination provisions set forth below, the Option
shall vest and become exercisable according to the following schedule:
Aggregate No. of Shares
Date Which May Be Exercised
---- ----------------------
On or after February 09, 1999 2,050
On or after February 09, 2000 2,050
Manner of Exercise of the Option. The Option may be exercised by the
Optionee by giving written notice to the Corporation specifying the number of
Shares with respect to which the Option is being exercised.
Termination. The Option and all rights of the Optionee hereunder, to the
extent not previously exercised, shall terminate on the earliest of the
following dates:
(1) August 08, 2001;
(2) The date of termination of the Optionee's employment by the
Corporation (for any reason other than death); provided, however, that, in the
case of the termination of employment of the Optionee by the Corporation, the
rights, if any, which were immediately exercisable by the Optionee hereunder and
under the Plan at the date of such termination of employment may be exercised by
the
<PAGE>
Optionee during the period ending thirty (30) days after the date of such
termination, but in no event after August 08, 2001;
(3) The date of termination of the Optionee's employment by reason of
his death; provided, however, that the rights, if any, which were immediately
exercisable by the Optionee at the date of his death may be exercised by the
Optionee's legal representatives during the period ending ninety (90) days after
the date of the Optionee's death, but in no event after August 08, 2001;
(4) Thirty days following the date on which the Optionee receives a
Cancellation Notice from the Corporation as provided below.
Cancellation of Option. The Corporation shall have the right to terminate
the right of the Optionee to exercise the Option, effective thirty (30) days
after receipt by the Optionee of a written notice from the Corporation informing
the Optionee that this Option is to be cancelled (the "Cancellation Notice").
The Corporation may issue a Cancellation Notice only in connection with (i) the
sale of substantially all of the Corporation's assets, or (ii) a merger,
consolidation or other corporate transaction in which the Corporation would not
be the surviving entity. Following receipt of a Cancellation Notice and during
the period prior to the effective date of the termination, the Optionee shall
have the right to exercise the Option (to the extent not previously exercised)
with respect to all Shares, if any, which were immediately exercisable by the
Optionee hereunder during the period following receipt of a Cancellation Notice
until the effective date of the termination.
Modification of Agreement. The Optionee consent to any amendment of the
Plan and of this Agreement which the Board of Directors in its sole direction
and upon advice of legal counsel, may deem necessary or advisable to enable the
exercise of the Option to comply with any applicable rules and regulations of
the Securities and Exchange Commission, including, without intending any
limitation, any amendment which would exempt such exercise from the operation of
Section 16 of the Securities Exchange Act of 1934. Except as otherwise provided
herein, this Agreement may not be amended or modified except pursuant to an
agreement in writing signed by the Corporation and the Optionee.
VIDEOLAN TECHNOLOGIES, INC.
By: ____________________________
Steven B. Rothenberg
<PAGE>
Exhibit 10.33
VideoLan Technologies, Inc.
DIRECTOR OPTION AGREEMENT
Non-Qualified Stock Option
Name of Optionee ("Optionee"): ____________ Social Security No.: _________
Date of Grant: ________ No. of Shares: _____ Exercise per Share: $____
By accepting the grant of the option (the "Option") referred to above, the
optionee named above (the "Optionee") hereby agrees to the terms of this Option
Agreement. The Option has been granted pursuant to the Amended and Restated 1995
Stock Option Plan (the "Plan") of VideoLan Technologies, Inc. (the
"Corporation"). All capitalized terms herein shall have the meanings set forth
in the Plan.
Vesting Schedule
Subject to the earlier termination provisions set forth below, the Option
shall vest and become exercisable according to the following schedule:
Aggregate No. of Shares
Date Which May Be Exercised
---- ----------------------
On or after March 20, 1997 10,000
Manner of Exercise of the Option. The Option may be exercised by the
Optionee by giving written notice to the Corporation specifying the number of
Shares with respect to which the Option is being exercised.
Termination. The Option and all rights of the Optionee hereunder, to the
extent not previously exercised, shall terminate on the earliest of the
following dates:
(1) March 19, 2007;
(2) Thirty days following the date on which the Optionee receives a
Cancellation Notice from the Corporation as provided below.
<PAGE>
Cancellation of Option. The Corporation shall have the right to terminate
the right of the Optionee to exercise the Option, effective thirty (30) days
after receipt by the Optionee of a written notice from the Corporation informing
the Optionee that this Option is to be cancelled (the "Cancellation Notice").
The Corporation may issue a Cancellation Notice only in connection with (i) the
sale of substantially all of the Corporation's assets, or (ii) a merger,
consolidation or other corporate transaction in which the Corporation would not
be the surviving entity. Following receipt of a Cancellation Notice and during
the period prior to the effective date of the termination, the Optionee shall
have the right to exercise the Option (to the extent not previously exercised)
with respect to all Shares, if any, which were immediately exercisable by the
Optionee hereunder during the period following receipt of a Cancellation Notice
until the effective date of the termination.
Modification of Agreement. The Optionee consent to any amendment of the
Plan and of this Agreement which the Board of Directors in its sole direction
and upon advice of legal counsel, may deem necessary or advisable to enable the
exercise of the Option to comply with any applicable rules and regulations of
the Securities and Exchange Commission, including, without intending any
limitation, any amendment which would exempt such exercise from the operation of
Section 16 of the Securities Exchange Act of 1934. Except as otherwise provided
herein, this Agreement may not be amended or modified except pursuant to an
agreement in writing signed by the Corporation and the Optionee.
Tax Withholding. The Optionee shall remit to the Corporation an amount
sufficient to satisfy his portion of Federal, state and local taxes (including
his FICA obligation) required by law to be withheld with respect to any exercise
of the Option.
VIDEOLAN TECHNOLOGIES, INC.
By: ____________________________
Steven B. Rothenberg
<PAGE>
Exhibit 10.34
CONSULTING AGREEMENT
This is a Consulting Agreement ("Consulting Agreement") dated as of August
5, 1996, between Video Network Services, Inc. ("Video Network"), a New York
corporation, and VideoLan Technologies, Inc. ("VideoLan"), a Delaware
corporation.
Recitals
A. Video Network has experience in supervising the development of computer
software programs.
B. VideoLan desires to develop computer software for the VideoLan VL2000
System (the "Software") and desires to employ Video Network as a consultant in
connection with the supervision over the development of the Software.
NOW, THEREFORE, the parties agree as follows:
1. Consulting Services.
(a) VideoLan hereby employs Video Network to provide consulting
services to VideoLan in connection with the development of the Software.
(b) In performing such services, Video Network shall be under the
direction of VideoLan's acting Vice President of Engineering or his designee as
determined by VideoLan's Chief Executive Officer.
(c) Video Network's consulting services will relate to the following:
(i) subject to VideoLan's approval, hiring the necessary personnel in order to
form a qualified and competent software team for VideoLan; (ii) supervise the
development of the Software; (iii) provide training to VideoLan 's personnel
with respect to the operation of the Software; and (iv) provide technical
assistance with respect to the Software.
2. Term. Subject to earlier termination pursuant to Section 8 hereof, the
term of this Consulting Agreement shall commence as of the date of this
Consulting Agreement and shall terminate on August 6, 1997, unless extended
and/or renewed upon the mutual agreement of Video Network and VideoLan.
<PAGE>
3. Video Network Personnel. VideoLan shall approve all personnel used by
Video Network (the "Video Network Personnel") in performing consulting services
under this Consulting Agreement. VideoLan shall provide Video Network with a
plan setting forth (1) the consulting services to be provided by the Video
Network Personnel, and (2) the number of Video Network Personnel (and estimated
hours) required and the time period during which such personnel will be
utilized.
4. Compensation.
(a) VideoLan shall compensate Video Network for its consulting
services under this Consulting Agreement in accordance with Exhibit A which is
based on the milestones ("Milestones") set forth on Exhibit B attached hereto.
Furthermore, provided that this Consulting Agreement is approved by the Board of
Directors of VideoLan, VideoLan will grant to Video Network options ("Options')
to purchase up to 40,000 in shares of VideoLan's Common Stock in accordance with
the form of Option Agreement attached hereto as Exhibit C. 14,000 of these
Options will be granted upon the execution of this Consulting Agreement with the
remaining 26,000 Options to be granted upon Video Network's request within
twelve months after the Company has notified Video Network that it has
determined that Video Network has achieved the First Milestone (as defined on
Exhibit B attached hereto).
(b) VideoLan shall pay Video Network for those pre-approved reasonable
interim resource costs listed on Exhibit D attached hereto which are required
for Video Network to expeditiously reach the Milestones.
(c) Pursuant to this Consulting Agreement entered into in connection
herewith between VideoLan and Video Network, VideoLan shall pay the reasonable
out-of-pocket expenses incurred by Video Network and its personnel in connection
with the providing of its consulting services. Reasonable out-of-pocket expenses
shall include travel expenses, including the cost of meals, lodging, related
telephone expenses, rental car, and parking and tolls, but shall not include
entertainment expenses. Video Network shall not incur out-of-pocket expenses in
excess of $2000 per month without the prior written approval of VideoLan.
5. Video Network Representations and Warranties; Disclaimers.
(a) Video Network represents and warrants that the Video Network
Personnel used in the performance of its consulting services shall perform such
services in a professional and workmanlike manner.
(b) Except for a claim by VideoLan arising out of a breach of Video
Network's representations and warranties in this Consulting Agreement and for
damages incurred by VideoLan arising out of Video Network's gross negligence or
willful misconduct with respect to the performance of Video Network's consulting
services under this Consulting Agreement, neither Video Network nor its
affiliates, officers, attorneys, agents, employees or directors shall be liable
to VideoLan or any party claiming through VideoLan for, and VideoLan hereby
releases Video
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<PAGE>
Network and its affiliates, agents, employees, officers, attorneys and directors
with respect to, any direct damages, or indirect, special or consequential
damages, including lost profits, allegedly incurred in connection with or
arising out of the performance of Video Network's consulting services under this
Consulting Agreement.
(c) VideoLan agrees to indemnify, defend, and hold Video Network, and
its affiliates, employees, directors, officers, agents and attorneys, harmless
from and against any claim arising out of or with respect to the performance of
Video Network's consulting services under this Consulting Agreement unless such
claim arises out of Video Network's gross negligence or willful misconduct with
respect to the performance of Video Network's consulting services under this
Consulting Agreement.
(d) Video Network agrees to indemnify, defend, and hold VideoLan, and
its affiliates, employees, directors, officers, agents and attorneys, harmless
from and against any claim arising out of or with respect to the damages arising
out of Video Network's gross negligence or willful misconduct with respect to
the performance of Video Network's consulting services under this Consulting
Agreement
6. Confidentiality.
(a) Video Network acknowledges that as a consequence of the
performance of its consulting services under this Consulting Agreement, and
otherwise through the relationship between VideoLan and Video Network
established by this Consulting Agreement, certain trade secrets and information
of a proprietary or confidential nature will be disclosed to Video Network and
its personnel, relating to the VideoLan VL2000 System, which is of commercial
value to VideoLan and is not known generally or publicly outside of VideoLan's
business (collectively, the "Confidential Information").
(b) Video Network acknowledges that the Confidential Information is of
considerable importance to VideoLan and the result of the incurrence by VideoLan
and its affiliates of substantial costs and expenses and the expenditure of
substantial development time and agrees that its relationship to VideoLan with
respect to such Confidential Information shall be fiduciary in nature. Video
Network agrees to hold in confidence and not disclose and not make use of
Confidential Information.
7. Technological Developments. Video Network and VideoLan agree that any
invention, formula, method, pattern, device, apparatus, product, product
enhancement or application, material, design, drawing, know-how or service
developed by Video Network Personnel while performing their consulting services
for VideoLan shall belong to VideoLan.
8. Termination. The term of this Consulting Agreement shall be terminated:
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<PAGE>
(a) By Video Network, upon at least sixty (60) days prior notice;
(b) By VideoLan at any time after May 1, 1997, upon at least sixty
(60) days prior notice; and
(c) By VideoLan at any time "for cause," such termination to take
effect immediately upon written notice from VideoLan to Video Network.
The following actions, failures or events by or affecting any Video
Network Personnel shall constitute "cause" for termination within the meaning of
the foregoing paragraph: (1) conviction of having committed a felony, (2) acts
of dishonesty or moral turpitude that are materially detrimental to VideoLan,
(3) acts or omissions which any Video Network Personnel knew or should have
reasonably known were likely to materially damage the business of VideoLan and
did in fact materially damage VideoLan, (4) failure by any Video Network
Personnel to obey the reasonable and lawful directions of VideoLan's Board of
Directors, Chief Executive Officer, or Vice President of Engineering (or his
designee), (5) gross negligence by any Video Network Personnel in the
performance of his or her obligations hereunder, or continuing failure by any
Video Network Personnel to perform his or her obligations hereunder more than 30
days after the particular Video Network Personnel has been provided with written
notice of his or her failure to perform such obligations, or (6) any Video
Network Personnel's willful breach of any material agreement or covenant of this
Consulting Agreement or any fiduciary duty owed to VideoLan.
9. Data. Upon termination of this Consulting Agreement for any reason,
Video Network and all Video Network Personnel shall promptly deliver to VideoLan
all books, memoranda, plans, records, information and written data, and all
copies of same, of every kind relating to the business and affairs of the
Company which are then in their possession.
10. Notices. All notices, approvals, consents and demands required or
permitted under this Consulting Agreement shall be in writing and sent by hand
delivery, facsimile, overnight mail, certified mail or registered mail, postage
prepaid, to the parties at their addresses set forth below, and shall be deemed
given when delivered by hand delivery, transmitted by facsimile or mailed by
overnight, certified or registered mail. Any party may specify a different
address by notifying the other party in writing of the different address.
If to Video Network: Video Network Services, Inc.
99 Wheeler Road
Hollis, NH 03049
Attention: Edward E. Weston, President
Telecopy No. (603) 465-9350
If to VideoLan : VideoLan Technologies, Inc.
100 Mallard Creek Road, Suite 250
Louisville, KY 40207
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<PAGE>
Attention: Steven B. Rothenberg
Telecopy No. (502) 895-9073
With a copy to: William G. Strench, Esq.
Brown, Todd & Heyburn PLLC
3200 Providian Center
Louisville, KY 40202
Telecopy No. (502) 581-1087
11. Governing Law. This Consulting Agreement and the rights of the parties
hereto shall be governed by and interpreted in accordance with the laws of the
Commonwealth of Kentucky.
12. Benefit and Binding Effect. Except as otherwise specifically provided
herein, this Consulting Agreement shall be binding upon and shall inure to the
benefit of the parties and their successors and permitted assigns.
13. Headings. The headings contained in this Consulting Agreement are
inserted only as a matter of convenience, and in no way define, limit or extend
the scope or intent of this Consulting Agreement or any provision hereof.
14. Partial Enforceability. If any provision of this Consulting Agreement,
or the application of any provision to any Person or circumstance shall be held
invalid, illegal or unenforceable, then the remainder of this Consulting
Agreement, or the application of that provision to persons or circumstances
other than those with respect to which it is held invalid, illegal or
unenforceable, shall not be affected thereby.
15. Entire Agreement. This Agreement, including the preambles and exhibits,
together with the Option Agreement, sets forth the entire agreement between the
parties as to the subject matter hereof and merges all prior discussions between
them, and neither of the parties shall be bound by any conditions, definitions,
understandings, or representations with respect to such subject matter other
than as expressly provided herein and in the Option Agreement, or as duly set
forth subsequent to the effective date hereof in writing and signed by the duly
authorized representatives of both parties. Without limiting the generality of
the foregoing, that certain Letter of Intent dated June 7, 1996 between Video
Network and the Company shall be and is null, void and of no further force and
effect. This Consulting Agreement shall supersede all previous agreements of the
parties with respect to the matters to which this Consulting Agreement pertains.
16. Enforcement. In the event of a breach or threatened breach by a party
of any of the provisions of this Consulting Agreement, the other party shall be
entitled to obtain a temporary
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<PAGE>
restraining order and temporary and permanent injunctive relief without the
necessity of proving actual damages by reason of such breach or threatened
breach, and to the extent permissible under the applicable statutes and rules of
procedure, a temporary injunction or restraining order may be granted
immediately upon the commencement of any such suit and without notice. Nothing
in this Consulting Agreement may be construed as prohibiting a party from
pursuing any other remedy or remedies, including without limitation, the
recovery of damages. A party who is successful in an action against the other
party with respect to this Consulting Agreement shall be entitled to reasonable
legal fees and expenses.
17. Scope. If any one or more of the provisions of this Consulting
Agreement shall for any reason be held to be excessively broad as to time,
duration, geographical scope, activity, or subject, each such provision shall be
construed, by limiting and reducing it, so as to be enforceable to the extent
compatible with applicable law then in force.
18. No Waiver. No waiver by any party hereto at any time of a breach by a
party of any provision of this Consulting Agreement to be performed by such
other party shall be deemed a waiver of any similar or dissimilar provisions
hereof at the same or any prior or subsequent time.
19. Amendments. Any amendments to this Consulting Agreement shall be in
writing and shall be executed by authorized representatives of each of the
parties.
20. Effect of Termination The termination of this Consulting Agreement for
any reason shall not extinguish those obligations of Video Network described in
Sections 6, 7 and 9, nor shall the same extinguish the right of either party to
bring an action, either in law or in equity, for breach of this Consulting
Agreement by the other party.
21. No Third Party Beneficiary. It is specifically agreed between the
parties executing this Consulting Agreement that it is not intended by any of
the provisions of any part of the Consulting Agreement to create the public or
any member thereof a third party beneficiary under the Consulting Agreement, or
to authorize anyone not a party to this Consulting Agreement to maintain a suit
for damages pursuant to the terms or provisions of this Consulting Agreement.
The duties, obligations, and responsibilities of the parties to this Consulting
Agreement with respect to third parties shall remain as imposed by law.
IN WITNESS WHEREOF, the parties have executed this Consulting Agreement as
of the date first set forth above.
VIDEO NETWORK SERVICES, INC.
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<PAGE>
By:_________________________
Edward E. Weston, President
VIDEOLAN TECHNOLOGIES, INC.
By:_________________________
Title:______________________
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<PAGE>
EXHIBIT A
Consulting Fees
Consulting Fees. During the term of this Consulting Agreement, Video Network
shall receive the following fees for its consulting services provided under this
Consulting Agreement (prorated for partial periods):
(a) During the period beginning July 1, 1996 and ending September 30, 1996,
Video Network shall be paid $15,000 per calendar month, payable within fifteen
(15) days of the end of each month;
(b) During the period beginning October 1, 1996 and ending December 31,
1996, Video Network shall be paid $18,330 per calendar month, payable within
fifteen (15) days of the end of each month;
(c) During the period beginning January 1, 1997 and ending March 31, 1997,
Video Network shall be paid $30,000 per calendar month, payable within fifteen
(15) days of the end of each month; and
(d) During the period beginning April 1, 1997 and ending June 30, 1997,
Video Network shall be paid $30,000 per calendar month, payable within fifteen
(15) days of the end of each month.
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<PAGE>
EXHIBIT B
Milestones
(a) First Milestone - Completion Date: August 31, 1996
o Software development organization functional: hired and/or
subcontracted resources, actively developing VL2000 software
product
o Intra-HUB communications capabilities integrated into current
Gateway application software; developed and tested
o Gateway software functional and ready for field installation;
including ISDN (1, 2 and 3 BRI), T1 and Intra-HUB trunking
o VL2000 Version 2.0 applications software GPF and "bug list"
tested and functionally operational (dependencies: Seven Lands
Software on-time delivery as per negotiated contract).
(b) Second Milestone - Completion Date: November 15, 1996
To be determined.
(c) Third Milestone - Completion Date: January 31, 1997
To be determined.
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<PAGE>
EXHIBIT C
OPTION AGREEMENT
THIS OPTION AGREEMENT (this "Agreement") is made as of the 5th day of
August 1996, by and between VIDEOLAN TECHNOLOGIES, INC., a Delaware corporation
(the "Company") and VIDEO NETWORKS, INC., a New York corporation (the
"Optionee").
WHEREAS, pursuant to that certain Consulting Agreement dated August 5, 1996
between the Company and Optionee (the "Consulting Agreement"), Optionee was
granted options (the "Options") to purchase up to 40,000 shares of the Company's
common stock (the "Shares") over a certain period of time;
WHEREAS, Optionee and the Company desire to set forth the terms and
conditions of the Options;
NOW, THEREFORE, in consideration of the promises and other good and
valuable consideration, the receipt, mutuality and sufficiency of which is
acknowledged, the parties hereto agree as follows:
1. Option. On the terms and subject to the conditions of this Agreement,
Optionee shall have the right to purchase up to 40,000 Shares, subject to
adjustment in accordance with Section 6 of this Agreement and subject to the
exercise requirements set forth in Sections 4(a), (b), (c) and (d) of this
Agreement.
2. Option Exercise Price. The exercise price of the Option (the "Exercise
Price") shall be $15.50 per Share, subject to adjustment in accordance with
Section 6 of this Agreement.
3. Duration of Option. The Option shall expire five years from the date
hereof.
4. Exercise of Option.
(a) Options with respect to 14,000 Shares shall vest and be
exercisable six months after the Company has notified the Optionee that it has
determined the Optionee has achieved the First Milestone (as defined on Exhibit
B of the Consulting Agreement);
(b) Options with respect to an additional 13,000 Shares shall vest and
be exercisable six months after the Company has notified the Optionee that it
has determined the Optionee has achieved the Second Milestone (as defined on
Exhibit B of the Consulting Agreement); and
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<PAGE>
(c) Options with respect to the remaining 13,000 Shares shall vest and
be exercisable six months after the Company has notified the Optionee that it
has determined the Optionee has achieved the Third Milestone (as defined on
Exhibit B of the Consulting Agreement).
(d) Upon termination of this Agreement for any reason, all unvested
Options shall be canceled effective upon the date of such termination and all
vested Options shall terminate thirty (30) days after the date of such
termination.
(e) This Option may be exercised by delivery of written notice to the
Company at its executive offices, addressed to the attention of the Chief
Financial Officer. Such notice: (i) shall be accompanied by all necessary
corporate authorization and signed by the president of Optionee or its legal
representatives; (ii) shall specify the number of full Shares then elected to be
purchased with respect to the Option; and (iii) shall be accompanied by payment
in full of the Exercise Price of the Shares to be purchased.
(f) The Exercise Price upon exercise of this Option shall be payable
to the Company in cash or its equivalent.
(g) As promptly as practicable after the receipt of notice and payment
upon exercise, the Company shall cause to be delivered to Optionee certificates
for the Shares so purchased. If the Option shall have been exercised in full,
this Agreement shall be returned to the Company and canceled.
5. Registration of Shares. In the event that Optionee should acquire any
Shares which, at the time of acquisition, are not duly registered under the Act
and, as necessary, applicable state securities law, certificates evidencing the
unregistered Shares shall bear the following legends:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR UNDER THE
SECURITIES LAWS OF ANY STATE. THEY MAY NOT BE OFFERED FOR SALE, SOLD,
TRANSFERRED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF, AND WILL
NOT BE TRANSFERRED ON THE BOOKS AND RECORDS OF THE COMPANY, UNLESS (i)
THEY HAVE BEEN REGISTERED UNDER THE ACT AND UNDER APPLICABLE STATE
SECURITIES LAWS, OR (ii) REGISTRATION UNDER THE ACT AND APPLICABLE
STATE SECURITIES LAWS IS NOT REQUIRED.
Upon the registration of any shares represented by a certificate bearing this
legend, the Company shall issue replacement certificates free of this legend.
6. Adjustments in Authorized Shares and the Option. In the event of a
merger, reorganization, consolidation, recapitalization, reclassification,
split-up, spin-off, separation,
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<PAGE>
liquidation, share dividend, share split, reverse share split, share
combination, share exchange or other change in the capital structure of the
Company affecting the Shares, the Board of Directors of the Company may
substitute or adjust the total number and class of Shares or other securities
that may be issued hereunder, and the Exercise Price, as it determines to be
appropriate and equitable to prevent dilution or enlargement of the rights of
Optionee and to preserve, without diluting or exceeding, the value of the
Option, provided, however, that such adjustments shall be equivalent to that
imposed equally upon all other option holders and/or shareholders in the
Company.
7. Miscellaneous.
(a) Tax Withholding. The parties acknowledge and agree that any and
all compensation received by Optionee pursuant to any exercise of the Option
will be self-employment income, and that Optionee shall bear the sole
responsibility with respect to withholding and estimated tax payments on such
compensation.
(b) Amendment. This Agreement may not be changed or terminated except
by written instrument signed by the parties.
(c) Successors; Binding Agreement. The Company agrees that:
(i) The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company, by agreement in
form and substance satisfactory to Optionee, to expressly assume and agree to
perform this Agreement in the same manner and to the same extent that the
Company would be required to perform if no succession had taken place; and
(ii) This Agreement and all rights of Optionee hereunder shall
inure to the benefit of and be enforceable by Optionee or its successors or
assignees.
(d) Severability. In the event any provision of this Agreement shall
be held illegal or invalid for any reason, the illegality or invalidity shall
not affect the remaining parts of this Agreement, and this Agreement shall be
construed and enforced as if the illegal or invalid provision had not been
included.
(e) Entire Agreement. This Agreement, including the preambles and
exhibits, together with the Consulting Agreement, sets forth the entire
agreement between the parties as to the subject matter hereof and merges all
prior discussions between them, and neither of the parties shall be bound by any
conditions, definitions, understandings, or representations with respect to such
subject matter other than as expressly provided herein and in the Consulting
Agreement, or as duly set forth subsequent to the effective date hereof in
writing and signed by the duly authorized representatives of both parties.
Without limiting the generality of the foregoing, that certain Letter of Intent
dated June 7, 1996 between Video Network and the Company shall be and is null,
void and of no further force and effect.
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<PAGE>
(f) Governing Law. This Agreement, and the application or
interpretation thereof, shall be governed by the laws of the Commonwealth of
Kentucky.
IN WITNESS WHEREOF, the parties have signed this Agreement as of the date
first above written.
VIDEOLAN TECHNOLOGIES, INC.
(the "Company")
By:
Title:
VIDEO NETWORK, INC.
("Optionee")
By:
Title:
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<PAGE>
Exhibit 10.35
OPTION AGREEMENT
THIS OPTION AGREEMENT (this "Agreement") is made as of the 5th day of
August 1996, by and between VIDEOLAN TECHNOLOGIES, INC., a Delaware corporation
(the "Company") and VIDEO NETWORKS, INC., a New York corporation (the
"Optionee").
WHEREAS, pursuant to that certain Consulting Agreement dated August 5, 1996
between the Company and Optionee (the "Consulting Agreement"), Optionee was
granted options (the "Options") to purchase up to 40,000 shares of the Company's
common stock (the "Shares") over a certain period of time;
WHEREAS, Optionee and the Company desire to set forth the terms and
conditions of the Options;
NOW, THEREFORE, in consideration of the promises and other good and
valuable consideration, the receipt, mutuality and sufficiency of which is
acknowledged, the parties hereto agree as follows:
1. Option. On the terms and subject to the conditions of this Agreement,
Optionee shall have the right to purchase up to 40,000 Shares, subject to
adjustment in accordance with Section 6 of this Agreement and subject to the
exercise requirements set forth in Sections 4(a), (b), (c) and (d) of this
Agreement.
2. Option Exercise Price. The exercise price of the Option (the "Exercise
Price") shall be $15.50 per Share, subject to adjustment in accordance with
Section 6 of this Agreement.
3. Duration of Option. The Option shall expire five years from the date
hereof.
4. Exercise of Option.
(a) Options with respect to 14,000 Shares shall vest and be
exercisable six months after the Company has notified the Optionee that it has
determined the Optionee has achieved the First Milestone (as defined on Exhibit
B of the Consulting Agreement);
(b) Options with respect to an additional 13,000 Shares shall vest and
be exercisable six months after the Company has notified the Optionee that it
has determined the Optionee has achieved the Second Milestone (as defined on
Exhibit B of the Consulting Agreement); and
(c) Options with respect to the remaining 13,000 Shares shall vest and
be exercisable six months after the Company has notified the Optionee that it
has determined the Optionee has achieved the Third Milestone (as defined on
Exhibit B of the Consulting Agreement).
<PAGE>
(d) Upon termination of this Agreement for any reason, all unvested
Options shall be canceled effective upon the date of such termination and all
vested Options shall terminate thirty (30) days after the date of such
termination.
(e) This Option may be exercised by delivery of written notice to the
Company at its executive offices, addressed to the attention of the Chief
Financial Officer. Such notice: (i) shall be accompanied by all necessary
corporate authorization and signed by the president of Optionee or its legal
representatives; (ii) shall specify the number of full Shares then elected to be
purchased with respect to the Option; and (iii) shall be accompanied by payment
in full of the Exercise Price of the Shares to be purchased.
(f) The Exercise Price upon exercise of this Option shall be payable
to the Company in cash or its equivalent.
(g) As promptly as practicable after the receipt of notice and payment
upon exercise, the Company shall cause to be delivered to Optionee certificates
for the Shares so purchased. If the Option shall have been exercised in full,
this Agreement shall be returned to the Company and canceled.
5. Registration of Shares. In the event that Optionee should acquire any
Shares which, at the time of acquisition, are not duly registered under the Act
and, as necessary, applicable state securities law, certificates evidencing the
unregistered Shares shall bear the following legends:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR UNDER THE
SECURITIES LAWS OF ANY STATE. THEY MAY NOT BE OFFERED FOR SALE, SOLD,
TRANSFERRED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF, AND WILL
NOT BE TRANSFERRED ON THE BOOKS AND RECORDS OF THE COMPANY, UNLESS (i)
THEY HAVE BEEN REGISTERED UNDER THE ACT AND UNDER APPLICABLE STATE
SECURITIES LAWS, OR (ii) REGISTRATION UNDER THE ACT AND APPLICABLE
STATE SECURITIES LAWS IS NOT REQUIRED.
Upon the registration of any shares represented by a certificate bearing this
legend, the Company shall issue replacement certificates free of this legend.
6. Adjustments in Authorized Shares and the Option. In the event of a
merger, reorganization, consolidation, recapitalization, reclassification,
split-up, spin-off, separation, liquidation, share dividend, share split,
reverse share split, share combination, share exchange or other change in the
capital structure of the Company affecting the Shares, the Board of Directors of
the Company may substitute or adjust the total number and class of Shares or
other securities that may be issued hereunder, and the Exercise Price, as it
determines to be appropriate and equitable to prevent dilution or enlargement of
the rights of Optionee and to preserve, without diluting or
<PAGE>
exceeding, the value of the Option, provided, however, that such adjustments
shall be equivalent to that imposed equally upon all other option holders and/or
shareholders in the Company.
7. Miscellaneous.
(a) Tax Withholding. The parties acknowledge and agree that any and
all compensation received by Optionee pursuant to any exercise of the Option
will be self-employment income, and that Optionee shall bear the sole
responsibility with respect to withholding and estimated tax payments on such
compensation.
(b) Amendment. This Agreement may not be changed or terminated except
by written instrument signed by the parties.
(c) Successors; Binding Agreement. The Company agrees that:
(i) The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company, by agreement in
form and substance satisfactory to Optionee, to expressly assume and agree to
perform this Agreement in the same manner and to the same extent that the
Company would be required to perform if no succession had taken place; and
(ii) This Agreement and all rights of Optionee hereunder shall
inure to the benefit of and be enforceable by Optionee or its successors or
assignees.
(d) Severability. In the event any provision of this Agreement shall
be held illegal or invalid for any reason, the illegality or invalidity shall
not affect the remaining parts of this Agreement, and this Agreement shall be
construed and enforced as if the illegal or invalid provision had not been
included.
(e) Entire Agreement. This Agreement, including the preambles and
exhibits, together with the Consulting Agreement, sets forth the entire
agreement between the parties as to the subject matter hereof and merges all
prior discussions between them, and neither of the parties shall be bound by any
conditions, definitions, understandings, or representations with respect to such
subject matter other than as expressly provided herein and in the Consulting
Agreement, or as duly set forth subsequent to the effective date hereof in
writing and signed by the duly authorized representatives of both parties.
Without limiting the generality of the foregoing, that certain Letter of Intent
dated June 7, 1996 between Video Network and the Company shall be and is null,
void and of no further force and effect.
(f) Governing Law. This Agreement, and the application or
interpretation thereof, shall be governed by the laws of the Commonwealth of
Kentucky.
<PAGE>
IN WITNESS WHEREOF, the parties have signed this Agreement as of the date
first above written.
VIDEOLAN TECHNOLOGIES, INC.
(the "Company")
By:
Title:
VIDEO NETWORK, INC.
("Optionee")
By:
Title:
<PAGE>
Exhibit 10.36
STOCK OPTION AGREEMENT dated as of August 28, 1995 between VideoLan
Technologies, Inc., a Delaware corporation with its principal office at 10101
Linn Station Road, Suite 620, Louisville, Kentucky 40223 (hereinafter called the
"Corporation"), and Howard S. Jacobs (hereinafter called the "Optionee").
The Optionee is a director of the Corporation and it is recognized that the
best interests of the Corporation would be served if the Optionee is given the
right to acquire a proprietary interest in the Corporation. Therefore, the
Corporation and the Optionee mutually agree as follows:
1. Stock Option. The Corporation hereby grants to the Optionee an
option (the "Option") to purchase up to 10,000 shares (the "Shares") of the
Common Stock, par value $.01 per share, of the Corporation ("Common Stock") at
an exercise price of $4.00 per share (the "Exercise Price Per Share"). The
Option shall become exercisable as provided in Section 3 hereof and may be
exercised in whole or in part until terminated in accordance with Section 4
hereof. The Option has been issued pursuant to, and is subject to the terms and
provisions of, the 1995 Stock Option Plan of VideoLan Technologies, Inc., as the
same may be amended from time to time (the "Plan"). The Options granted
hereunder are deemed to be nonqualified stock options under the Plan.
2. Exercise Dates. Subject to Section 4 hereof, the Option hereunder
shall become exercisable with respect to all 10,000 Shares on or after August
28, 1995.
3. Manner of Exercise of the Option. The option may be exercised by the
Optionee by giving written notice to the Corporation in the form of Exhibit A
attached hereto (an "Exercise Notice") specifying the number of Shares with
respect to which the Option is being exercised. Upon any exercise of the
Option, the number of Shares with respect to which the Option may thereafter be
exercised by the Optionee shall no longer include the number of Shares with
respect to which the Option has been exercised.
On the tenth business day following receipt of an Exercise Notice by the
Corporation, or at any other time mutually agreed upon by the Corporation and
the Optionee, a closing shall be held (the "Closing"). At the Closing:
(a) the Optionee shall pay to the Corporation, by certified or
cashier's check, the aggregate Exercise Price per Share for the Shares; and
(b) the Corporation shall deliver to the Optionee a stock
certificate representing the Shares.
Prior to the Closing, the Corporation shall inform the Optionee of the amount of
any federal, state and local income and taxes which it determines it is required
to withhold from the Optionee by reason of such exercise of the Option, and the
Optionee, as a condition to the Closing, shall make provision satisfactory to
the Corporation for the payment of such taxes to the Corporation.
4. Termination, Cancellation, Modification and Adjustment of Option.
(a) Termination. The Option and all rights of the Optionee
hereunder, to the extent not previously exercised, shall terminate on
the earliest of the following dates:
(i) August 27, 2005;
(ii) The date of termination of the Optionee's directorship
for any reason whatsoever other than death; provided, however, that any
options which were immediately exercisable by the Optionee hereunder at
the date of such termination of Optionee's directorship may be exercised
by the Optionee during the period ending five (5) years after the date of
such termination, but in no event after the date set forth in Section 4(a)
(i) hereof;
(iii) The date of termination of the Optionee's directorship by
reason of his death, provided, however, that the options, if any, which
were immediately exercisable by the Optionee at the date of his death may
be exercised by the Optionee's
2
<PAGE>
legal representatives during the period ending three (3) years after the
date of the Optionee's death, but in no event after the date set forth in
Section 4(a)(i) hereof; or
(iv) Thirty days following the date on which the Optionee
receives a Cancellation Notice from the Corporation as provided in Section
4(b) hereof.
(b) Cancellation of Option. Notwithstanding the foregoing
provisions of this Section, the Corporation shall have the right to terminate
the right of the Optionee to exercise the Option, effective thirty (30) days
after receipt by the Optionee of a written notice from the Corporation informing
the Optionee that this option is to be cancelled (the "Cancellation Notice").
The Corporation may issue a Cancellation Notice only in connection with (i) the
sale of substantially all of the Corporation's assets, or (ii) a merger,
consolidation or other corporate transaction in which the Corporation would not
be the surviving entity. Following receipt of a Cancellation Notice and during
the period prior to the effective date of the termination, the Optionee shall
have the right to exercise the Option (to the extent not previously exercised)
with respect to all Shares covered hereby (even if under Section 2 the Option
would not otherwise have become exercisable with respect to all Shares at that
time).
(c) Modification of Agreement. The Optionee hereby consents to any
amendment of the Plan and of this Agreement which the Board of Directors in its
sole discretion and upon advice of legal counsel, may deem necessary or
advisable to enable the exercise of the Option to comply with any applicable
rules and regulations of the Securities and Exchange Commission, including,
without intending any limitation, any amendment which would exempt such exercise
from the operation of Section 16 of the Securities Exchange Act of 1934. Except
as otherwise provided herein, this agreement may not be amended or modified
except pursuant to an agreement in writing signed by Corporation and the
Optionee.
(d) Adjustment of Option. In the event that prior to the exercise
in full of the Option, the Corporation shall have effected one or more stock
dividends, stock splits, reorganizations,
3
<PAGE>
recapitalizations, combinations of shares, mergers, consolidations, or other
changes in the corporate structure or stock of the Corporation, the Board of
Directors shall equitably adjust the number, kind and Exercise Price per Share
of the Shares remaining subject to the Option in accordance with the Plan.
(e) Sales of Shares Acquired Upon Exercise of the Option. Shares of
Common Stock acquired upon exercise of the Option, cannot be sold unless they
are registered pursuant to a registration statement filed with the Securities
and Exchange Commission or if an exemption from registration is available.
5. No Rights in Shares. The Optionee shall not have any of the rights
and privileges of a stockholder of the Corporation in respect of any Shares
covered by the Option until the Optionee shall have become the holder of record
of any such Shares.
6. Nontransferability. The Option shall not be transferable by the
Optionee, except by will or the laws of descent and distribution, and is
exercisable during the Optionee's lifetime only by him, except as set forth in
Section 4 hereof. Any sale, donation, pledge, hypothecation, assignment or
other transfer contrary to the provisions of this Agreement is null and void.
7. Effect upon Service as a Director. Nothing contained in this
Agreement or in the Plan shall confer upon the Optionee any right with respect
to Optionee continuing to serve as a director of the Corporation.
8. Determination. Each determination, interpretation or other action
made or taken pursuant to the provisions of this Agreement by the Board of
Directors shall be final and conclusive for all purposes and shall be binding
upon all persons, including, without limitation, the Corporation and the
Optionee, and their respective successors and assigns.
9. Reference to the Plan. The Option has been granted pursuant to and
subject to the provisions of the Plan, which is hereby incorporated herein by
reference. Anything herein to the contrary
4
<PAGE>
notwithstanding, each and every provision of this Agreement shall be subject
to the terms and conditions of the Plan.
10. Governing Law. This Agreement and all determinations made and
actions taken pursuant hereto shall be governed by the internal laws of the
State of Delaware and construed in accordance therewith, without giving effect
to the principles of conflict of laws thereof.
IN WITNESS WHEREOF, the parties have executed this Agreement the date and
year first above written.
VIDEOLAN TECHNOLOGIES, INC.
BY: /s/_Steve_Rothenberg_______
Title: Chief Financial Officer
/s/_Howard_Jacobs______________
Howard S. Jacobs, Optionee
5
<PAGE>
EXHIBIT A
EXERCISE NOTICE
______________, _____
VideoLan Technologies, Inc.
10101 Linn Station Road
Suite 620
Louisville, Kentucky 40223
Gentlemen:
Reference is made to that certain Stock Option Agreement dated as
of August 28, 1995 between the undersigned and VideoLan Technologies,
Inc. (the "Corporation") , pursuant to which the undersigned was granted
an option (the "Option") to purchase shares of the Common Stock (the
"Shares") of the Corporation (the "Option Agreement"). The undersigned
hereby elects to exercise the Option to the extent of _____ Shares.
The undersigned hereby acknowledges that he has been informed by
the Corporation that the Shares to be acquired upon this exercise of the
Option have not been registered under the Securities Act of 1933, as
amended (the "Act"). In the event the Shares are not registered at the
time the Option is exercised, the Shares may have to be held
indefinitely unless they are subsequently registered under the Act or an
exemption from registration is available. The undersigned understands
that any sale of the any of such Shares made in reliance upon Rule 144,
promulgated by the Securities and Exchange Commission under the Act, can
be made only in limited amounts in accordance with the terms and
conditions of that Rule, and in the event that Rule 144 is not
applicable to any such sale, public resale may require compliance with
the registration provisions, Regulation A, or some other disclosure
provision or exemption under the Act. In the event the Shares are not
registered under the Act, the undersigned agrees he will make no sale or
other transfer of such Shares unless the Corporation receives an opinion
of its counsel to the effect that registration thereof is a prerequisite
to such sale or that an exemption from such registration is available.
6
<PAGE>
The undersigned agrees that if the Shares are not registered, the
certificates representing such Shares shall bear the following legend:
"THE SHARES MAY NOT BE SOLD OR TRANSFERRED
IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT FOR THE SHARES UNDER THE SECURITIES ACT
OF 1933 OR AN OPINION OF COUNSEL TO THE CORPORATION
THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT."
Very truly yours,
____________________________
Optionee
<PAGE>
Exhibit 10.43
WARRANT AGREEMENT
WARRANT AGREEMENT dated as of October 17, 1996, between VideoLan
Technologies, Inc., a Delaware corporation (the "Company"), and First Bermuda
Securities Limited ("First Bermuda").
WHEREAS, the Company proposes to issue to First Bermuda xxx,xxx warrants
(the "Warrants"), each such Warrant entitling the holder thereof to purchase one
share of Common Stock, par value $.01 per share, of the Company (the "Shares" or
the "Common Stock") at an exercise price of $4.375; and
WHEREAS, the Warrants which are the subject of this Agreement will be
issued by the Company to First Bermuda in exchange for services already rendered
in full by First Bermuda in a capital-raising transaction for the Company and
upon the basis of the representations and warranties, and subject to the terms
and conditions, set forth in this Agreement, First Bermuda covenants and agrees
to accept from the Company on the Closing Date the Warrants as payment in full
for said services.
NOW, THEREFORE, in consideration of the premises and the mutual agreements
herein set forth, the parties hereto agree as follows:
SECTION Warrant Certificates The warrant certificates to be delivered
pursuant to this Agreement (the "Warrant Certificates") shall be in the form set
forth in Exhibit A, attached hereto and made a part hereof. The warrant
certificates shall be executed on behalf of the Company by its Chief Executive
Officer, President or any Vice President under its corporate seal reproduced
thereon and attested by its Corporate Secretary or one of its Assistant
Secretaries. Warrant Certificates may be exchanged at the Warrantholder's
option, when surrendered to the Company for another Warrant Certificate or other
Warrant Certificates of like tenor and representing in the aggregate a like
number of Warrants.
SECTION Right to Exercise Warrants Each Warrant may be exercised from the
date of this Agreement until 11:59 P.M. (Louisville, Kentucky time) on October
16, 2001 (the "Expiration Date") pursuant to the provisions set forth in Section
3 hereof. Each Warrant not exercised on or before the Expiration Date shall
expire. Subject to the provisions of this Warrant Agreement, including Section
11 hereof, the holder of each Warrant shall have the right to purchase from the
Company, and the Company shall issue and sell to each such Warrantholder, at an
initial price of $4.375 per Share, provided that subject to adjustment as
provided herein (the "Exercise Price"), one fully paid and nonassessable Share
upon surrender to the Company of the Warrant Certificate evidencing such
Warrant, with the form of election to purchase duly completed and signed and
evidence of payment of the Exercise Price.
Upon surrender of such Warrant Certificate and payment of the Exercise
Price, the Company shall cause to be issued and delivered promptly to the
Warrantholder a certificate for the Shares issuable upon the exercise of the
Warrant or Warrants evidenced by such Warrant Certificate. The Warrants
evidenced by a Warrant Certificate shall be exercisable at the election of the
Warrantholder thereof, subject to the provisions of Section 3 hereof.
<PAGE>
SECTION 3. Reservation of Shares The Company will at all times reserve and
keep available, free from preemptive rights, out of the aggregate of its
authorized but unissued Shares or its authorized and issued Shares held in its
treasury for the purpose of enabling it to satisfy any obligation to issue
Shares upon exercise of Warrants, the full number of Shares deliverable upon the
exercise of all outstanding Warrants. The Company covenants that all Shares
which may be issued upon exercise of Warrants will be validly issued, fully paid
and nonassessable outstanding Shares of the Company.
SECTION 4. Registration under the Securities Act of 1933 First Bermuda
represents and warrants to the Company that First Bermuda is acquiring the
Warrants for investment and with no present intention of distributing or
reselling any of the Warrants. The Shares and the certificate or certificates
evidencing any such Shares shall bear the following legend:
"THE SHARES (OR OTHER SECURITIES) REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933. THE SHARES MAY NOT BE
SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN OPINION OF
COUNSEL THAT AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT IS AVAILABLE.
Certificates for Shares without such legend shall be issued if such shares are
sold pursuant to an effective registration statement under the Act or if the
Company has received an opinion from counsel reasonably satisfactory to counsel
for the Company, that such legend is no longer required under the Act.
Certificates for Warrants or Shares shall also bear such legends as may be
required from time to time by law.
SECTION 5. Registration Rights. Rule 144 The Company shall be obligated to
register the shares issuable upon an exercise of the Warrants ("Shares")
pursuant to the Registration Rights Agreement attached hereto as Exhibit "B",
the terms of which are herein incorporated by reference. If the Company shall be
subject to the reporting requirements of Section 13 of the 1934 Act, the Company
will use its best efforts to timely file all reports required to be filed from
time to time with the Commission (including but not limited to the reports under
Section 13 and 15(d) of the 1934 Act referred to in subparagraph (c)(1) of Rule
144 adopted by the Commission under the Act). If there is a public market for
any Shares of the Company at any time that the Company is not subject to the
reporting requirements of either of said Section 13 or 15(d), the Company will,
upon the request of any holder of any Shares or Warrants, use its best efforts
to make publicly available the information concerning the Company referred to in
subparagraph (c)(2) of said Rule 144. The Company will furnish to each holder of
any shares or Warrants, promptly upon request, (i) a written statement of the
Company's compliance with the requirements of subparagraphs (c)(1) or (c)(2), as
the case may be, of said Rule 144, and (ii) written information concerning the
Company sufficient to enable such holder to complete any Form 144 required to be
filed with the Commission pursuant to said Rule 144.
SECTION 6. Adjustment of Exercise Price and Number of Shares and Class of
Capital Stock Purchasable The Exercise Price and the number of Shares and
classes of capital stock of the Company purchasable upon the exercise of each
Warrant are subject to adjustment from time to time as set forth in this Section
6.
Adjustment for Change in Capital Stock If the Company (i) pays a
dividend or makes a distribution on its Common Stock, in each case, in
shares of its Common Stock; (ii) subdivides its outstanding shares of
Common Stock into a greater number of shares; (iii)
<PAGE>
combines its outstanding shares of Common Stock into a smaller number of
shares; (iv) makes a distribution on its Common Stock in shares of its
capital stock other than Common Stock; or (v) issues by reclassification of
its shares of Common Stock any shares of its capital stock; then the number
and classes of shares purchasable upon exercise of each Warrant in effect
immediately prior to such action shall be adjusted so that the holder of
any Warrant thereafter exercised may receive the number and classes of
shares of capital stock of the Company which such holder would have owned
immediately following such action if such holder had exercised the Warrant
immediately prior to such action.
Adjustment for Other Distributions If the Company distributes to
all holders of shares of its Common Stock any of its assets or debt
securities or any rights or warrants to the purchase assets, debt
securities or other securities of the Company, the Company shall, at the
option of each Warrantholder, either:
distribute to each Warrantholder, on the date of distribution
to the shareholders, the amount of such assets or debt securities or the
number of such rights or warrants, pro rata, determined in accordance the
following formula:
X' = X x W
--
O + W
where
X'= the amount of assets or debt securities or the number of rights or
warrants to be distributed to such Warrant holder, as the case may be.
X = the total amount of assets or debt securities or the total number of
rights or warrants to be distributed, as the case may be.
W = the number of shares of Common Stock purchasable upon exercise of the
Warrants held by such Warrantholder outstanding on the record date set
forth in paragraph (ii) below.
O = the number of shares of Common Stock outstanding on the record date
set forth in paragraph (ii) below; or
adjust the Exercise Price in accordance with the following
formula:
C' = C x (O x M) - F
----------
O x M
where
C'= the adjusted Exercise Price.
C = the Exercise Price on the record date set forth below. O = the number
of shares of Common Stock outstanding on the record date set forth
below.
O = the number of shares of Common Stock outstanding on the record
date set forth below.
M = the Current Market Price per share of Common Stock on the date set
forth below.
F = the fair market value on the record date of the distribution of the
assets, securities, rights or warrants. The Board of Directors of the
Company shall in good faith determine such fair market value.
Consolidation, Merger or Sale of the Company If the Company is a party
to a consolidation, merger or transfer of assets which reclassifies or
changes its outstanding Common Stock, the successor corporation (or
corporation controlling the successor corporation or the Company, as the
case may be) shall by operation of law assume the Company's obligations
under
<PAGE>
this Warrant Agreement. Upon consummation of such transaction the Warrants
shall automatically become exercisable for the kind and amount of
securities, cash or other assets which the holder of a Warrant would have
owned immediately after the consolidation, merger or transfer if the holder
had exercised the Warrant immediately before the effective date of such
transaction. As a condition to the consummation of such transaction, the
Company shall arrange for the person or entity obligated to issue
securities or deliver cash or other assets upon exercise of the Warrant to,
concurrently with the consummation of such transaction, assume the
Company's obligations hereunder by executing an instrument so providing and
further providing for adjustments which shall be as nearly equivalent as
may be practical to the adjustments provided for in this Section.
SECTION 7. Notices to Company and First Bermuda Any notice or demand
authorized by this Agreement to be given or made by any registered holder of any
Warrant Certificate to or on the Company shall be sufficiently give or made if
sent by registered mail, postage prepaid, addressed (until another address is
filed in writing by the Company with the holders) to the Company as follows:
VideoLan Technologies, Inc.
100 Mallard Creek Road, Suite 250
Louisville, Kentucky 40207
Attn. Chief Executive Officer
Any notice pursuant to this Agreement to be given by the Company to First
Bermuda shall be sufficiently given if sent by registered mail, postage prepaid,
addressed (until another address is filed in writing by First Bermuda with the
Company) to First Bermuda as follows:
First Bermuda Securities Limited
Jardine House, 33-35 Reid Street, 3rd Floor
Hamilton HM12, Bermuda
Attn. Chief Operating Officer
SECTION 8. Supplements and Amendments The Company and First Bermuda may
from time to time supplement or amend this Agreement without the approval of any
Warrantholders (other than First Bermuda) in order to cure any ambiguity, to
correct or supplement any provision contained herein which may be defective or
inconsistent with any provisions herein, or to make any other provisions in
regard to matters or questions arising hereunder which the Company and First
Bermuda may deem necessary or desirable and which the Company and First Bermuda
deem shall not adversely affect the interests of the Warrantholders.
SECTION 9. Successors All the covenants and provisions of this Agreement by
or for the benefit of the Company or First Bermuda shall bind and inure to the
benefit of their respective successors and assigns hereunder.
SECTION 10. This Agreement and each Warrant Certificate issued hereunder
shall be deemed to be a contract made under the laws of the State of Delaware
and for all proposes shall be governed by and construed in accordance with the
laws of said State.
SECTION 11. Counterparts This Agreement may be executed in any number of
counterparts and each of such counterpart shall for all purposes be deemed to be
an original, and such counterparts shall together constitute one and the same
instrument.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed, as of the date and year first above written.
VideoLan Technologies, Inc.
By:
Its:
First Bermuda Securities Limited:
By: Maxwell R. Roberts
Its: Chief Operating Officer
<PAGE>
EXHIBIT A
WARRANT CERTIFICATE
THE WARRANTS REPRESENTED BY THIS CERTIFICATE AND THE SHARES OF COMMON STOCK (OR
OTHER SECURITIES) ISSUABLE UPON EXERCISE THEREOF HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933. THE WARRANTS, SHARES OR OTHER SECURITIES MAY NOT BE
SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN OPINION OF COUNSEL
THAT AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT IS AVAILABLE.
EXERCISABLE FROM 12:00 P.M. LOUISVILLE, KENTUCKY TIME,
ON OCTOBER 17, 1996 UNTIL
11:59 P.M., LOUISVILLE, KENTUCKY TIME ON OCTOBER 16, 2001
No. _____ xxx,xxx Warrants
WARRANT CERTIFICATE
VIDEOLAN TECHNOLOGIES, INC.
This Warrant Certificate certifies that First Bermuda Securities Limited or
registered assigns, is the registered holder of xxx,xxx Warrants (the
"Warrants") expiring October 16, 2001 (the "Expiration Date"), to purchase
Common Stock, par value $.01 per share (the "Common Stock") of VideoLan
Technologies, Inc., a Delaware corporation (the "Company"). Each Warrant
entitles the holder to purchase from the Company before 11:59 p.m. (Louisville,
Kentucky time) on the "Expiration Date" one fully paid and nonassessable share
of Common Stock of the Company at the initial exercise price for each Warrant,
subject to adjustment in certain events (the "Exercise Price"), of $4.375
provided that upon surrender of this Warrant Certificate and payment of the
Exercise Price at an office or agency of the Company, but only subject to the
terms and conditions set forth herein and in the Warrant Agreement and
Registration Rights Agreement. As used herein, "Share" or "Shares" refers to the
Common Stock of the Company and, where appropriate, to the other securities or
property issuable upon exercise of a Warrant as provided for in the Warrant
Agreement upon the happening of certain events. The Exercise Price and the
number of Shares and classes of capital stock purchasable upon exercise of the
Warrants are subject to adjustment upon the occurrence of certain events set
forth in the Warrant Agreement. In the event that upon any exercise of Warrants
evidenced hereby, the number of Warrants exercised shall be less than the total
number of Warrants evidenced hereby, there shall be issued to the holder hereof
or his or her assignee a new Warrant Certificate evidencing the number of
Warrants not exercised. No adjustment shall be made for any cash dividends on
any Shares issuable upon exercise of this Warrant.
No Warrant may be exercised after 11:59 P.M. (Louisville, Kentucky Time) on
the Expiration Date. All Warrants evidenced hereby shall thereafter be void.
The Warrants evidenced by this Warrant Certificate are part of a duly
authorized issue of Warrants issued pursuant to a Warrant Agreement, dated as of
October 17, 1996 (the "Warrant Agreement"), and a Registration Rights Agreement
(the "Registration Rights Agreement") duly executed by the Company and First
Bermuda which Warrant Agreement and Registration Rights Agreement are hereby
incorporated by reference in and made a part of this instrument and are hereby
referred to for a description of the rights, limitation of rights, obligations,
duties and immunities thereunder of the Company and the holders (the words
"holders" or "holder" meaning the registered holders or registered holder of the
Warrant Certificates of Shares).
<PAGE>
The Company may deem and treat the person(s) registered in the Company's
register as the absolute owner(s) of this Warrant Certificate (notwithstanding
any notation of ownership or other writing hereon made by anyone), for the
purpose of any exercise hereof, and of any distribution to the holder(s) hereof,
and for all purposes, and the Company shall not be affected by any notice to the
contrary.
All terms used in this Warrant Certificate which are defined in the Warrant
Agreement shall have the meaning assigned to them in the Warrant Agreement.
THE WARRANTS REPRESENTED BY THIS CERTIFICATE AND THE SHARES OF COMMON STOCK
(OR OTHER SECURITIES) ISSUABLE UPON EXERCISE THEREOF HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933. THE WARRANTS, SHARES OR OTHER
SECURITIES MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH
REGISTRATION OR AN OPINION OF COUNSEL THAT AN EXEMPTION FROM REGISTRATION
UNDER SUCH ACT IS AVAILABLE.
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to be
duly executed under its corporate seal.
Dated: VIDEOLAN TECHNOLOGIES, INC.
Attested
_________________________ By: ______________________
Secretary Its: Chief Executive Officer
<PAGE>
ELECTION TO PURCHASE
The undersigned hereby irrevocably elects to exercise this Warrant and to
purchase ____________ shares of VideoLan Technologies, Inc. Common Stock
issuable upon the exercise of this Warrant, and requests that certificates for
such shares shall be issued in the name of:
________________________________________________________________________________
(Name)
________________________________________________________________________________
(Address)
________________________________________________________________________________
(United States Social Security or other taxpayer
identifying number, if applicable)
and, if different from above, be delivered to:
________________________________________________________________________________
(Name)
________________________________________________________________________________
(Address)
and, if the number of Warrant Shares so purchased are not all of the Warrant
Shares issuable upon exercise of this Warrant, that a Warrant to purchase the
balance of such Warrant Shares be registered in the name of, and delivered to,
the undersigned at the address stated below.
Date:___________________, 19_
Name of Registered Owner:_______________________________________________________
________________________________________________________________________________
Address:________________________________________________________________________
________________________________________________________________________________
Signature:______________________________________________________________________
<PAGE>
Exhibit 10.44
WARRANT CERTIFICATE
THE WARRANTS REPRESENTED BY THIS CERTIFICATE AND THE SHARES OF COMMON STOCK (OR
OTHER SECURITIES) ISSUABLE UPON EXERCISE THEREOF HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933. THE WARRANTS, SHARES OR OTHER SECURITIES MAY NOT BE
SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN OPINION OF COUNSEL
THAT AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT IS AVAILABLE.
EXERCISABLE FROM 12:00 P.M. LOUISVILLE, KENTUCKY TIME,
ON OCTOBER 17, 1996 UNTIL
11:59 P.M., LOUISVILLE, KENTUCKY TIME ON OCTOBER 16, 2001
No. _____ xxx,xxx Warrants
WARRANT CERTIFICATE
VIDEOLAN TECHNOLOGIES, INC.
This Warrant Certificate certifies that First Bermuda Securities Limited or
registered assigns, is the registered holder of xxx,xxx Warrants (the
"Warrants") expiring October 16, 2001 (the "Expiration Date"), to purchase
Common Stock, par value $.01 per share (the "Common Stock") of VideoLan
Technologies, Inc., a Delaware corporation (the "Company"). Each Warrant
entitles the holder to purchase from the Company before 11:59 p.m. (Louisville,
Kentucky time) on the "Expiration Date" one fully paid and nonassessable share
of Common Stock of the Company at the initial exercise price for each Warrant,
subject to adjustment in certain events (the "Exercise Price"), of $4.375
provided that upon surrender of this Warrant Certificate and payment of the
Exercise Price at an office or agency of the Company, but only subject to the
terms and conditions set forth herein and in the Warrant Agreement and
Registration Rights Agreement. As used herein, "Share" or "Shares" refers to the
Common Stock of the Company and, where appropriate, to the other securities or
property issuable upon exercise of a Warrant as provided for in the Warrant
Agreement upon the happening of certain events. The Exercise Price and the
number of Shares and classes of capital stock purchasable upon exercise of the
Warrants are subject to adjustment upon the occurrence of certain events set
forth in the Warrant Agreement. In the event that upon any exercise of Warrants
evidenced hereby, the number of Warrants exercised shall be less than the total
number of Warrants evidenced hereby, there shall be issued to the holder hereof
or his or her assignee a new Warrant Certificate evidencing the number of
Warrants not exercised. No adjustment shall be made for any cash dividends on
any Shares issuable upon exercise of this Warrant.
No Warrant may be exercised after 11:59 P.M. (Louisville, Kentucky Time) on
the Expiration Date. All Warrants evidenced hereby shall thereafter be void.
The Warrants evidenced by this Warrant Certificate are part of a duly
authorized issue of Warrants issued pursuant to a Warrant Agreement, dated as of
October 17, 1996 (the "Warrant Agreement"), and a Registration Rights Agreement
(the "Registration Rights Agreement") duly executed by the Company and First
Bermuda which Warrant Agreement and Registration Rights Agreement are hereby
incorporated by reference in and made a part of this instrument and are hereby
referred to for a description of the rights, limitation of rights, obligations,
duties and immunities thereunder of the Company and the holders (the words
<PAGE>
"holders" or "holder" meaning the registered holders or registered holder of the
Warrant Certificates of Shares).
The Company may deem and treat the person(s) registered in the Company's
register as the absolute owner(s) of this Warrant Certificate (notwithstanding
any notation of ownership or other writing hereon made by anyone), for the
purpose of any exercise hereof, and of any distribution to the holder(s) hereof,
and for all purposes, and the Company shall not be affected by any notice to the
contrary.
All terms used in this Warrant Certificate which are defined in the Warrant
Agreement shall have the meaning assigned to them in the Warrant Agreement.
THE WARRANTS REPRESENTED BY THIS CERTIFICATE AND THE SHARES OF COMMON STOCK
(OR OTHER SECURITIES) ISSUABLE UPON EXERCISE THEREOF HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933. THE WARRANTS, SHARES OR OTHER
SECURITIES MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH
REGISTRATION OR AN OPINION OF COUNSEL THAT AN EXEMPTION FROM REGISTRATION
UNDER SUCH ACT IS AVAILABLE.
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to be
duly executed under its corporate seal.
Dated: VIDEOLAN TECHNOLOGIES, INC.
Attested
_________________________ By: ______________________
Secretary Its: Chief Executive Officer
<PAGE>
ELECTION TO PURCHASE
The undersigned hereby irrevocably elects to exercise this Warrant and to
purchase ____________ shares of VideoLan Technologies, Inc. Common Stock
issuable upon the exercise of this Warrant, and requests that certificates for
such shares shall be issued in the name of:
(Name)
(Address)
(United States Social Security or other taxpayer
identifying number, if applicable)
and, if different from above, be delivered to:
(Name)
(Address)
and, if the number of Warrant Shares so purchased are not all of the Warrant
Shares issuable upon exercise of this Warrant, that a Warrant to purchase the
balance of such Warrant Shares be registered in the name of, and delivered to,
the undersigned at the address stated below.
Date: , 19_
Name of Registered Owner:
Address:
Signature:
<PAGE>
Exhibit 10.45
REGISTRATION RIGHTS AGREEMENT
This Agreement dated as of November 15, 1996 is entered into by and among
VIDEOLAN TECHNOLOGIES, INC., a Delaware corporation (the "Company"), and
GOODBODY INTERNATIONAL, INC. ("Goodbody").
WHEREAS, the Company and Goodbody have entered into a Warrant Agreement of
even date herewith (the "Warrant Agreement") pursuant to which Goodbody has the
right to acquire common stock of the Company; and
WHEREAS, the Company and Goodbody desire to provide for certain
arrangements with respect to the registration of such shares of common stock of
the Company under the Securities Act of 1933 ;
NOW, THEREFORE, in consideration of the mutual promises and covenants
contained in this Agreement, the parties hereto agree as follows:
1. Certain Definitions. As used in this Agreement, the following terms
shall have the following respective meanings:
"Commission" means the Securities and Exchange Commission, or any
other Federal agency at the time administering the Securities Act.
"Common Stock" means the common stock, $.01 par value per share, of
the Company.
"Holder" shall include Goodbody and any permitted transferee of
Registrable Securities which have not been sold to the public to whom the
registration rights conferred by this Agreement have been transferred in
compliance with Section 7 of this Agreement.
"Registration Statement" means a registration statement filed by the
Company with the Commission for a public offering and sale of Common Stock
(other than a registration statement on Form S-8 or Form S-4, or their
successors, or any other form for a similar limited purpose, or any registration
statement covering only securities proposed to be issued in exchange for
securities or assets of another corporation); with equivalent state filings.
"Registration Expenses" means the expenses described in Section 4.
"Registrable Shares" means (i) the Shares and (ii) any other shares of
Common Stock issued in respect of the Shares (because of stock splits, stock
dividends, reclassifications, recapitalizations, or similar events); provided,
however, that Shares which are Registrable Shares shall cease to be Registrable
Shares at such time that the Shares become eligible for resale pursuant to Rule
144(k) under the Securities Act.
<PAGE>
"Securities Act" means the Securities Act of 1933, as amended, or any
similar Federal statute, and the rules and regulations of the Commission issued
under such Act, as they each may, from time to time, be in effect.
"Shares" means the shares of Common Stock issued upon exercise of the
Warrant (as defined in the Warrant Agreement).
2. Incidental Registration.
(a) Whenever the Company proposes to file a Registration Statement at
any time and from time to time, it will, prior to such filing, give written
notice to the Holder of its intention to do so and, upon the written request of
the Holder given within 20 days after the Company provides such notice (which
request shall state the intended method of disposition of such Registrable
Shares), the Company shall use its best efforts to cause all Registrable Shares
which the Company has been requested by the Holder to register to be registered
under the Securities Act to the extent necessary to permit their sale or other
disposition in accordance with the intended methods of distribution specified in
the request of the Holder; provided that the Company shall have the right to
postpone or withdraw any registration effected pursuant to this Section 2
without obligation to the Holder and provided further that the Company shall be
required to register the Registrable Shares under the securities laws of the
states of only Georgia, Kentucky and one other state designated by the Holder.
(b) In connection with any registration under this Section 2 involving
an underwriting, the Company shall not be required to include any Registrable
Shares in such registration unless the holders thereof accept the terms of the
underwriting as agreed upon between the Company and the underwriters selected by
it (provided that such terms must be consistent with this Agreement). If in the
opinion of the managing underwriter it is appropriate because of marketing
factors to limit the number of Registrable Shares to be included in the offering
(a "Share Cutback"), then the Company shall be required to include in the
registration only that number of Registrable Shares, if any, which the managing
underwriter believes should be included therein. If the number of Registrable
Shares to be included in the offering in accordance with the foregoing is less
than the total number of shares which the Holder has requested to be included,
then the Holder and other holders of securities entitled to include them in such
registration shall participate in the registration pro rata based upon their
total ownership of shares of Common Stock (giving effect to the conversion into
Common Stock of all securities convertible thereinto). Further, it is agreed
that, with respect to any shareholder who, as of the date of this Agreement, is
a director or executive officer of the Company, the Holder shall have the right,
without expense, to take unto himself that portion of any registration rights
which may be granted such director or executive officer in any registration in
which the Holder would otherwise be subject to Share Cutback. If any holder
would thus be entitled to include more securities than such holder requested to
be registered, the excess shall be allocated among other requesting holders pro
rata in the manner described in the preceding sentence.
(c) Upon the first registration of the Shares pursuant to this Section
2, the Holder shall not be entitled to any further registration rights under
this Agreement, unless (i) the
2
<PAGE>
offering price per Share pursuant to the offering is less than 175% of the
"Exercise Price" (as that term is defined in the Warrant Agreement) or (ii) the
number of Shares to be included in the offering made pursuant to such
registration is limited in accordance with Section 2(b) to a number less than
the total number of Registrable Shares which the Holder has requested to be
included.
(d) If in connection with any registration under this Section 2, the
Holder is not able to include all of the Registrable Shares in the offering
because of a Share Cutback, and the Registrable Shares not so registered (the
"Excluded Shares") are not subsequently registered under this Section 2 on or
before ___________________, within thirty days thereafter, the Company shall
register the Excluded Shares under the Securities Act and under the securities
laws of the states of Georgia, Kentucky and one other state designated by the
Holder.
3. Registration Procedures. If and whenever the Company is required by the
provisions of this Agreement to use its best efforts to effect the registration
of any of the Registrable Shares under the Securities Act, the Company shall:
(a) file with the Commission a Registration Statement with respect to
such Registrable Shares and use its best efforts to cause that Registration
Statement to become and remain effective;
(b) as expeditiously as possible prepare and file with the Commission
any amendments and supplements to the Registration Statement and the prospectus
included in the Registration Statement as may be necessary to keep the
Registration Statement effective, in the case of a firm commitment underwritten
public offering, until each underwriter has completed the distribution of all
securities purchased by it and, in the case of any other offering, until the
earlier of the sale of all Registrable Shares covered thereby or 90 days after
the effective date thereof;
(c) as expeditiously as possible furnish to the Holder such reasonable
numbers of copies of the prospectus, including a preliminary prospectus, in
conformity with the requirements of the Securities Act, and such other documents
as the Holder may reasonably request in order to facilitate the public sale or
other disposition of the Registrable Shares owned by the Holder; and
(d) as expeditiously as possible use its best efforts to register or
qualify the Registrable Shares covered by the Registration Statement under the
securities or Blue Sky laws of such states as the Holder shall reasonably
request, and do any and all other acts and things that may be necessary or
desirable to enable the Holder to consummate the public sale or other
disposition in such states of the Registrable Shares owned by the Holder;
provided, however, that the Company shall not be required in connection with
this paragraph (d) to qualify as a foreign corporation or execute a consent to
service of process, other than a consent to service limited to claims or matters
arising out of or in connection with the offering of securities in connection
with the Registration Statement, in any jurisdiction.
If the Company has delivered preliminary or final prospectuses to the
Holder and after having done so the prospectus is amended to comply with the
requirements of the Securities Act,
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<PAGE>
the Company shall promptly notify the Holder and, if requested, the Holder shall
immediately cease making offers of Registrable Shares and return all
prospectuses to the Company. The Company shall promptly provide the Holder with
revised prospectuses and, following receipt of the revised prospectuses, the
Holder shall be free to resume making offers of the Registrable Shares.
4. Allocation of Expenses. The Company will pay all Registration Expenses
of all registrations under this Agreement. For purposes of this Section 4, the
term "Registration Expenses" shall mean all expenses incurred by the Company in
complying with this Agreement, including, without limitation, all registration
and filing fees, exchange listing fees, printing expenses, fees and expenses of
counsel for the Company, state Blue Sky fees and expenses, and the expense of
any special audits incident to or required by any such registration, but
excluding underwriting fees, discounts and selling commissions attributable to
the sale of Registrable Shares and the fees and expenses of counsel retained by
the Holder.
5. Information from the Holder. The Holder shall furnish to the Company
such information regarding the Holder and the distribution proposed by the
Holder as the Company may reasonably request in writing and as shall be required
in connection with any registration, qualification or compliance referred to in
this Agreement.
6. Mergers, Etc. The Company shall not, directly or indirectly, enter into
any merger, consolidation or reorganization in which the Company shall not be
the surviving corporation unless the proposed surviving corporation shall, prior
to such merger, consolidation or reorganization, agree in writing to assume the
obligations of the Company under this Agreement, and for that purpose references
hereunder to "Registrable Shares" shall be deemed to be references to the
securities which the Holder would be entitled to receive in exchange for
Registrable Shares under any such merger, consolidation or reorganization;
provided, however, that the provisions of this Section 6 shall not apply in the
event of any merger, consolidation or reorganization in which the Company is not
the surviving corporation if the Holder is entitled to receive in exchange for
his Registrable Shares consideration consisting solely of (i) cash, (ii)
securities of the acquiring corporation which may be immediately sold to the
public without registration under the Securities Act, or (iii) securities of the
acquiring corporation which the acquiring corporation has agreed to register
within 90 days of completion of the transaction for resale to the public
pursuant to the Securities Act. Furthermore, and notwithstanding any other
provision of this Section 6, in the event that the Company should, either
directly or indirectly, enter into any merger, consolidation or reorganization
in which the net capital of the Company should increase or decrease by more than
25% from that immediately before such transaction, all rights of the Holder
hereunder shall be and become immediately exercisable, and the Company shall be
obligated to immediately perform its obligations hereunder.
7. Transfer or Assignment of Registration Rights. The rights granted to the
Holder by the Company under this Registration Rights Agreement to cause the
Company to register Registrable Securities, may be transferred or assigned to a
transferee or assignee of not less than 50 shares of Preferred Stock, provided
that the Company is given written notice by the Holder at the time of or within
a reasonable time after said transfer or assignment, stating the name and
4
<PAGE>
address of said transferee or assignee and identifying the securities with
respect to which such registration rights are being transferred or assigned, and
provided further that the transferee or assignee of such rights is not deemed by
the board of directors of the Company, in its reasonable judgment, to be a
competitor of the Company; and provided further that the transferee or assignee
of such rights agrees to be bound by this Registration Rights Agreement.
8. Termination. All of the Company's obligations to register Registrable
Shares under this Agreement shall terminate five years from the date of this
Agreement.
9. General.
(a) Notices. All notices, requests, consents, and other communications
under this Agreement shall be in writing and shall be delivered by hand or
mailed by first class certified or registered mail, return receipt requested,
postage prepaid:
If to the Company, at 100 Mallard Creek Road, Suite 250, Louisville,
Kentucky 40207, Attention: President, or at such other address or addresses as
may have been furnished in writing by the Company to the Holder, with a copy to
Brown, Todd & Heyburn PLLC, 3200 Providian Center, Louisville, Kentucky 40202,
Attention: William G. Strench; or
If to the Holder, at 4514 Chamblee Dunwoody Road, Suite 333, Atlanta,
Georgia, 30338, or at such other address or addresses as may have been furnished
to the Company in writing by the Holder.
Notices provided in accordance with this Section 9(a) shall be deemed
delivered upon personal delivery or two business days after deposit in the mail.
(b) Entire Agreement. This Agreement embodies the entire agreement and
understanding between the parties hereto with respect to the subject matter
hereof and supersedes all prior agreements and understandings relating to such
subject matter.
(c) Amendments and Waivers. Any term of this Agreement may be amended
and the observance of any term of this Agreement may be waived (either generally
or in a particular instance and either retroactively or prospectively), with the
written consent of the Company and the Holder. No waivers of or exceptions to
any term, condition or provision of this Agreement, in any one or more
instances, shall be deemed to be, or construed as, a further or continuing
waiver of any such term, condition or provision.
(d) Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original, but all of which
shall be one and the same document.
(e) Severability. The invalidity or unenforceability of any provision
of this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement.
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<PAGE>
(f) Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the Commonwealth of Kentucky.
Executed as of the date first written above.
VIDEOLAN TECHNOLOGIES, INC.
("Company")
By:_________________________________________
Steven B. Rothenberg
Title:Chief Financial Officer
--------------------------------------
GOODBODY INTERNATIONAL, INC.
("Goodbody")
By:_________________________________________
Joseph H. Hale
Title:___________________________________
6
<PAGE>
Exhibit 10.46
THIS WARRANT AND THE SECURITIES RECEIVABLE UPON EXERCISE HEREOF HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"),
OR ANY STATE SECURITIES LAW, AND MAY NOT BE SOLD, TRANSFERRED, PLEDGED,
HYPOTHECATED OR OTHERWISE DISPOSED OF UNLESS (i) A REGISTRATION STATEMENT UNDER
THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS SHALL HAVE BECOME
EFFECTIVE WITH REGARD THERETO, OR (ii) AN EXEMPTION FROM REGISTRATION UNDER THE
SECURITIES ACT OR APPLICABLE STATE SECURITIES LAWS IS AVAILABLE IN CONNECTION
WITH SUCH OFFER, SALE OR TRANSFER.
Warrant to Purchase
________ Shares
WARRANT TO PURCHASE COMMON STOCK
of
VIDEOLAN TECHNOLOGIES, INC.
THIS CERTIFIES that _______________________ ("___________") or any
subsequent holder hereof ("Holder"), has the right to purchase from VideoLan
Technologies, Inc. (the "Company"), not more than __________ fully paid and
nonassessable shares of the Company's Common Stock, $0.01 par value ("Common
Stock"), at a price of $____ per share subject to adjustment as provided below
(the "Exercise Price"), at any time on or before 5:00 p.m., Louisville, Kentucky
time, on _____________.
The Holder of this Warrant agrees with the Company that this Warrant is
issued and all rights hereunder shall be held subject to all of the conditions,
limitations and provisions set forth herein.
1. Date of Issuance.
This Warrant shall be deemed to be issued on ________________.
2. Exercise.
(a) Manner of Exercise. This Warrant may be exercised as to all or any
lesser number of full shares of Common Stock covered hereby upon surrender of
this Warrant, with the Exercise Form attached hereto as Exhibit A ("Exercise
Form") duly executed, together with the full Exercise Price (as defined in
Section 3) for each share of Common Stock as to which this Warrant is exercised,
at the office of the Company, Attn: Chief Financial Officer, VideoLan
Technologies, Inc., 100 Mallard Creek Road, Suite 250, Louisville, KY 40207 or
at such other office or agency as the Company may designate in writing, by
overnight mail, with an advance copy of the Exercise Form by facsimile (such
surrender and payment of the Exercise Price hereinafter called the "Exercise of
this Warrant").
<PAGE>
(b) Date of Exercise. The "Date of Exercise" of the Warrant shall be
defined as the date that the advance copy of the Exercise Form is sent by
facsimile to the Company, provided that the original Warrant and Exercise Form
are received by the Company within five (5) business days thereafter. The
original Warrant and Exercise Form must be received within five (5) business
days of the Date of Exercise, or the Exercise Form may, at the Company's option,
be considered void. Alternatively, the Date of Exercise shall be defined as the
date of the original Exercise Form is received by the Company, if Holder has not
sent advance notice by facsimile.
(c) Cancellation of Warrant. This Warrant shall be cancelled upon its
Exercise, and, as soon as practical after the Date of Exercise, the Holder
hereof shall be entitled to receive Common Stock for the number of shares
purchased upon such Exercise, and if this Warrant is not exercised in full, the
Holder shall be entitled to receive a new Warrant or Warrants (containing terms
identical to this Warrant) representing any unexercised portion of this Warrant
in addition to such Common Stock.
(d) Holder of Record. Each person in whose name any Warrant for shares
of Common Stock is issued shall, for all purposes, be deemed to have become the
holder of record of such shares on the Date of Exercise of this Warrant,
irrespective of the date of delivery of such Warrant. Nothing in this Warrant
shall be construed as conferring upon the Holder hereof any rights as a
shareholder of the Company.
3. Payment of Warrant Exercise Price.
The Exercise Price ("Exercise Price") shall equal $___ ("Initial Exercise
Price") or, if the Date of Exercise is more than one (1) year after the Date of
Issuance, the lesser of (i) the Initial Exercise Price or (ii) the "Reset
Price", which shall equal one hundred percent (100%) of the Market Price of the
Company's Common Stock for the five (5) trading days ending on the first
anniversary date of the Date of Issuance, taking into account, as appropriate,
any adjustments made pursuant to Section 5 hereof.
For purposes of this Agreement, the term "Market Price" shall mean the
average closing bid price of the Common Stock for the five trading days prior to
the Date of Exercise of this Warrant (the "Average Closing Bid Price"), as
reported by the National Association of Securities Dealers Automated Quotation
System ("Nasdaq") or if the Common Stock is not traded on Nasdaq, the average of
the daily high and low sales prices in the over-the-counter market; provided,
however, that if the Common Stock is listed on a stock exchange, the Market
Price shall be the average of the daily high and low sales prices on such
exchange. If the Common Stock was not traded during the five trading days prior
to the Date of Exercise, then the closing bid price for the last publicly traded
day shall be deemed to be the closing bid price for any and all (if applicable)
days during such five trading day period, or the average of the daily high and
low sales prices (if no closing bid prices are reported).
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<PAGE>
Payment of the Exercise Price may be made by either of the following, or a
combination thereof, at the election of Holder:
(i) Cash Exercise: cash, certified check or cashiers check or wire
transfer; or
(ii) Cashless Exercise: surrender of this Warrant at the principal
office of the Company together with notice of cashless election, in which event
the Company shall issue Holder a number of shares of Common Stock computed using
the following formula:
X = Y (A-B)/A
where: X = the number of shares of Common Stock to be issued to Holder.
Y = the number of shares of Common Stock for which this Warrant is being
exercised.
A = the Market Price.
B = the Exercise Price.
It is intended that the Common Stock issuable upon exercise of this Warrant in a
cashless exercise transaction shall be deemed to have been acquired at the time
this Warrant was issued, for purposes of Rule 144(d)(3)(ii).
4. Transfer.
Subject to the provisions of Section 8 of this Warrant, this Warrant may be
transferred on the books of the Company, in whole but not in part, in person or
by attorney, upon surrender of this Warrant properly endorsed. This Warrant
shall be canceled upon such surrender and, as soon as practicable thereafter,
the person to whom such transfer is made shall be entitled to receive a new
Warrant or Warrants.
5. Anti-Dilution Adjustments.
(a) Stock Dividend. If the Company shall at any time declare a
dividend payable in shares of Common Stock, then the Holder hereof, upon
Exercise of this Warrant after the record date for the determination of holders
of Common Stock entitled to receive such dividend, shall be entitled to receive
upon Exercise of this Warrant, the additional shares of Common Stock that such
Holder would have received had this Warrant been Exercised immediately prior to
such record date.
(b) Recapitalization or Reclassification. If the Company shall at any
time effect a recapitalization, reclassification or other similar transaction of
such character that the shares of Common Stock shall be changed into or become
exchangeable for a larger or smaller number of shares, then upon the effective
date thereof, the number of shares of Common Stock which the Holder hereof shall
be entitled to purchase upon Exercise of this Warrant shall be increased or
decreased, as the case may be, in direct proportion to the increase or decrease
in the number of shares of Common Stock by reason of such recapitalization,
reclassification or similar transaction.
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<PAGE>
(c) Distributions. If the Company shall at any time distribute to
holders of Common Stock cash, evidences of indebtedness or other securities or
assets (other than cash dividends or distributions payable out of earned surplus
or net profits for the current or preceding year) then, in any such case, the
Holder of this Warrant shall be entitled to receive upon exercise of this
Warrant, with respect to each share of Common Stock issuable upon such Exercise,
the amount of cash or evidences of indebtedness or other securities or assets
which such Holder would have been entitled to receive with respect to each such
share of Common Stock as a result of the happening of such event had this
Warrant been Exercised immediately prior to the record date or other date fixing
shareholders to be affected by such event (the "Determination Date") or, in lieu
thereof, if the Board of Directors of the Company should so determine at the
time of such distribution, reducing the Exercise Price by the value of such
distribution applicable to one share of Common Stock (such value to be
determined by the Board in its discretion).
(d) Notice of Consolidation or Merger. If the Company shall at any
time consolidate or merge with any other corporation or transfer all or
substantially all of its assets, then the Company shall deliver written notice
to the Holder of such merger, consolidation or sale of assets at least thirty
(30) days prior to the closing of such merger, consolidation or sale of assets
and this Warrant shall terminate and expire immediately prior to the closing of
such merger, consolidation or sale of assets.
(e) Exercise Price Defined. As used in this Warrant, the term
"Exercised Price" shall mean the purchase price per share specified in this
Warrant until the occurrence of an event stated in subsection (c) of this
Section 5 and thereafter shall mean said price as adjusted from time to time in
accordance with the provisions of such subsection. No such adjustment shall be
made unless such adjustment would change the Exercise Price at the time by $.01
or more; provided, however, that all adjustments not so made shall be deferred
and made when the aggregate thereof would change the Exercise Price at the time
by $.01 or more.
(f) Adjustments: Additional Shares, Securities or Assets. In the event
that at any time, as a result of an adjustment made pursuant to this Section 5,
the Holder of this Warrant shall, upon Exercise of this Warrant, become entitled
to receive shares and/or other securities or assets (other than Common Stock)
then, wherever appropriate, all references herein to shares of Common Stock
shall be deemed to refer to and include such shares and/or other securities or
assets; and thereafter the number of such shares and/or other securities or
assets shall be subject to adjustments from time to time in a manner and upon
terms as nearly equivalent as practicable to the provisions of this Section 5.
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<PAGE>
6. Fractional Interest.
No fractional shares or scrip representing fractional shares shall be
issuable upon the Exercise of this Warrant, but on Exercise of this Warrant, the
Holder hereof may purchase only a whole number of shares of Common Stock. The
Company shall make a payment in cash in respect of any fractional shares which
might otherwise be issuable upon Exercise of this Warrant, calculated by
multiplying the fractional share amount by the Market Price on the Date of
Exercise as reported by the Nasdaq SmallCap or National Market or such other
exchange as Company's Common Stock is traded on.
7. Reservation of Shares.
The Company shall at all times reserve for issuance such number of
authorized and unissued shares of Common Stock (or other securities substituted
therefor as herein above provided) as shall be sufficient for Exercise of this
Warrant. The Company covenants and agrees that upon Exercise of this Warrant,
all shares of Common Stock issuable upon such Exercise shall be duly and validly
issued, fully paid, nonassessable, and not subject to rights of first refusal or
similar rights of any person or entity.
8. Restrictions of Shares.
(a) Registration or Exemption Required. This Warrant and the Common
Stock issuable on Exercise hereof have not been registered under the Securities
Act of 1933, as amended (the "Securities Act"), and may not be offered, sold,
transferred, assigned, pledged, hypothecated or otherwise disposed of in the
absence of registration or the availability of an exemption from registration
under such Act. All shares of Common Stock issued upon Exercise of this Warrant
shall bear an appropriate legend to such effect, if applicable.
(b) Assignment. Assuming the conditions of (a) above regarding
registration or exemption have been satisfied, the Holder may offer, sell,
transfer, assign, pledge, hypothecate or otherwise dispose of this Warrant, in
whole or in part. The Holder shall deliver a written notice to Company,
substantially in the form of the Assignment attached hereto as Exhibit B,
indicating the person or persons to whom the Warrant shall be assigned and the
respective number of Warrants to be assigned to each assignee. The Company shall
effect the assignment within ten days, and shall deliver to the assignee(s)
designated by the Holder a Warrant or Warrants of like tenor and terms for the
appropriate number of shares.
(c) The Warrant and Common Stock issuable upon conversion are intended
to be held for investment purposes and not with an intent to distribution, as
defined in the Act.
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<PAGE>
9. Registration.
(a) Registration Rights.
(i) Whenever the Company proposes to file a registration
statement with the Securities and Exchange Commission (other than a registration
statement on Form S-8 or Form S-4, or their successors, or any other form for a
similar limited purpose, or any registration statement covering only securities
proposed to be issued in exchange for securities or assets of another
corporation) for a public offering of Common Stock (a "Registration Statement"),
at any time and from time to time, it will, prior to such filing, give written
notice to the Holder of its intention to do so and, upon the written request of
the Holder given within 20 days after the Company provides such notice (which
request shall state the intended method of disposition of the shares of Common
Stock issuable upon exercise of the Warrant ("Registrable Shares")), the Company
shall use its best efforts to cause all Registrable Shares to be registered
under the Securities Act to the extent necessary to permit their sale or other
disposition in accordance with the intended methods of distribution specified in
the request of the Holder; provided that the Company shall have the right to
postpone or withdraw any registration effected pursuant to this Section 9
without obligation to the Holder and provided further that the Company shall
only be required to register the Registrable Shares under the securities laws of
the State of Georgia and one other state designated by the Holder.
(ii) In connection with any registration under this Section 9
involving an underwriting, the Company shall not be required to include any
Registrable Shares in such registration unless the holders thereof accept the
terms of the underwriting as agreed upon between the Company and the
underwriters selected by it (provided that such terms must be consistent with
this Warrant). If in the opinion of the managing underwriter it is appropriate
because of marketing factors to limit the number of Registrable Shares to be
included in the offering (a "Share Cutback"), then the Company shall be required
to include in the registration only that number of Registrable Shares, if any,
which the managing underwriter believes should be included therein. If the
number of Registrable Shares to be included in the offering in accordance with
the foregoing is less than the total number of shares which the Holder has
requested to be included, then the Holder and other holders of securities
entitled to include them in such registration shall participate in the
registration pro rata based upon their total ownership of shares of Common Stock
(giving effect to the conversion into Common Stock of all securities convertible
thereinto).
(iii) Upon the first registration of the Registrable Shares
pursuant to this Section 9, the Holder shall not be entitled to any further
registration rights under this Warrant unless the number of Registrable Shares
to be included in the offering made pursuant to such registration is limited in
accordance with Subsection 9(b)(ii) to a number less than the total number of
Registrable Shares.
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<PAGE>
(b) Registration Procedures. If and whenever the Company is required
by the provisions of this Warrant to use its best efforts to effect the
registration of any of the Registrable Shares under the Securities Act, the
Company shall:
(i) file with the Commission a Registration Statement with
respect to such Registrable Shares and use its best efforts to cause that
Registration Statement to become and remain effective;
(ii) as expeditiously as possible prepare and file with the
Commission any amendments and supplements to the Registration Statement and the
prospectus included in the Registration Statement as may be necessary to keep
the Registration Statement effective, in the case of a firm commitment
underwritten public offering, until each underwriter has completed the
distribution of all securities purchased by it and, in the case of any other
offering, until the earlier of the sale of all Registrable Shares covered
thereby or 90 days after the effective date thereof;
(iii) as expeditiously as possible furnish to the Holder such
reasonable numbers of copies of the prospectus, including a preliminary
prospectus, in conformity with the requirements of the Securities Act, and such
other documents as the Holder may reasonably request in order to facilitate the
public sale or other disposition of the Registrable Shares owned by the Holder;
and
(iv) as expeditiously as possible use its best efforts to
register or qualify the Registrable Shares covered by the Registration Statement
under the securities laws of the State of Georgia and one other state designated
by the Holder, and do any and all other acts and things that may be necessary or
desirable to enable the Holder to consummate the public sale or other
disposition in such states of the Registrable Shares owned by the Holder;
provided, however, that the Company shall not be required in connection with
this Subsection (b)(iv) to qualify as a foreign corporation or execute a consent
to service of process, other than a consent to service limited to claims or
matters arising out of or in connection with the offering of securities in
connection with the Registration Statement, in any jurisdiction.
If the Company has delivered preliminary or final prospectuses to the
Holder and after having done so the prospectus is amended to comply with the
requirements of the Securities Act, the Company shall promptly notify the Holder
and, if requested, the Holder shall immediately cease making offers of
Registrable Shares and return all prospectuses to the Company. The Company shall
promptly provide the Holder with revised prospectuses and, following receipt of
the revised prospectuses, the Holder shall be free to resume making offers of
the Registrable Shares.
(c) Allocation of Expenses. The Company will pay all Registration
Expenses of all registrations under this Warrant. For purposes of this Section
9, the term "Registration Expenses" shall mean all expenses incurred by the
Company in complying with this Warrant, including, without limitation, all
registration and filing fees, exchange listing fees, printing expenses, fees and
expenses of counsel for the
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<PAGE>
Company, state Blue Sky fees and expenses, and the expense of any special audits
incident to or required by any such registration, but excluding underwriting
fees, discounts and selling commissions attributable to the sale of Registrable
Shares and the fees and expenses of counsel retained by the Holder.
(d) Information from the Holder. The Holder shall furnish to the
Company such information regarding the Holder and the distribution proposed by
the Holder as the Company may reasonably request in writing and as shall be
required in connection with any registration, qualification or compliance
referred to in this Warrant.
(e) Mergers, Etc. The Company shall not, directly or indirectly, enter
into any merger, consolidation or reorganization in which the Company shall not
be the surviving corporation unless the proposed surviving corporation shall,
prior to such merger, consolidation or reorganization, agree in writing to
assume the obligations of the Company under this Warrant, and for that purpose
references hereunder to "Registrable Shares" shall be deemed to be references to
the securities which the Holder would be entitled to receive in exchange for
Registrable Shares under any such merger, consolidation or reorganization;
provided, however, that the provisions of this Subsection (e) shall not apply in
the event of any merger, consolidation or reorganization in which the Company is
not the surviving corporation if the Holder is entitled to receive in exchange
for his Registrable Shares consideration consisting solely of (i) cash, (ii)
securities of the acquiring corporation which may be immediately sold to the
public without registration under the Securities Act, or (iii) securities of the
acquiring corporation which the acquiring corporation has agreed to register
within 90 days of completion of the transaction for resale to the public
pursuant to the Securities Act.
(f) Termination. All of the Company's obligations to register
Registrable Shares under this Agreement shall terminate on ________________.
10. Benefits of this Warrant.
Nothing in this Warrant shall be construed to confer upon any person other
then the Company and the Holder of this Warrant any legal or equitable right,
remedy or claim under this Warrant and this Warrant shall be for the sole and
exclusive benefit of the Company and the Holder of this Warrant.
11. Applicable Law.
This Warrant is issued under and shall for all purposes be governed by and
construed in accordance with the laws of the Commonwealth of Kentucky, without
giving effect to conflict of law provisions thereof. Jurisdiction for any
dispute regarding this Warrant lies in the Commonwealth of Kentucky, Jefferson
County.
12. Loss of Warrant.
Upon receipt by the Company of evidence of the loss, theft, destruction or
mutilation of this Warrant, and (in the case of loss, theft or destruction) of
indemnity or security reasonably satisfactory to the Company,
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<PAGE>
and upon surrender and cancellation of this Warrant, if mutilated, the Company
shall execute and deliver a new Warrant of like tenor and date.
13. Notice or Demands.
Notices or demands pursuant to this Warrant to be given or made by the
Holder of this Warrant to the Company shall be sufficiently given or made if
sent by certified or registered mail, return receipt requested, postage prepaid,
and addressed to Steven B. Rothenberg, Chief Financial Officer, VideoLan
Technologies, Inc., 100 Mallard Creek Road, Suite 250, Louisville, Kentucky
40207 until another address is designated in writing by the Company. Notices or
demands pursuant to this Warrant to be given or made to the Holder shall be
sufficiently given or made if sent by certified or registered mail, return
receipt requested, postage prepaid, and addressed to the Holder, Attn:
______________________________ until another address is designated in writing by
Holder.
IN WITNESS WHEREOF, this Warrant issued to ______________________ is hereby
executed and effective as of the date set forth below.
Dated as of _______________.
VIDEOLAN TECHNOLOGIES, INC.
By:
_________________________________________
Steven B. Rothenberg, Chief Financial Officer
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<PAGE>
EXHIBIT A
EXERCISE FORM
TO:
The undersigned hereby irrevocably exercises the right to purchase
___________ shares of Common Stock of VideoLan Technologies, Inc. (the
"Shares"), pursuant to the attached warrant (the "Warrant"), and herewith makes
payment of the Exercise Price with respect to such Shares in full, all in
accordance with the conditions and provisions of such Warrant.
The undersigned agrees not to offer, sell, transfer, assign, pledge,
hypothecate or otherwise dispose of any of such Shares, except in accordance
with the provisions of Section 8 of the Warrant, and consents that the following
legend may be affixed to the certificates for the Shares hereby subscribed for,
if such legend is applicable:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE
SECURITIES LAW, AND MAY NOT BE SOLD, TRANSFERRED, PLEDGED, HYPOTHECATED OR
OTHERWISE DISPOSED OF UNTIL EITHER (i) A REGISTRATION STATEMENT UNDER THE
SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS SHALL HAVE BECOME EFFECTIVE
WITH REGARD THERETO, OR (ii) AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES
ACT OR APPLICABLE PROVINCIAL OR STATE SECURITIES LAWS IS AVAILABLE IN CONNECTION
WITH SUCH OFFER, SALE OR TRANSFER."
The undersigned requests that the Shares be issued, and a warrant
representing any unexercised portion be issued, pursuant to the Warrant in the
name of the registered holder and delivered to the undersigned at the address
set forth below:
Date:
____________________________________________________________
Signature of Registered Holder
____________________________________________________________
Name of Registered Holder (print)
____________________________________________________________
Address
____________________________________________________________
____________________________________________________________
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<PAGE>
EXHIBIT B
ASSIGNMENT
(To be executed by the registered holder
desiring to transfer the Warrant)
FOR VALUE RECEIVED, the undersigned holder of the attached Warrant hereby sells,
assigns and transfers unto the person or persons below named the right to
purchase ______ shares of the Common Stock of VideoLan Technologies, Inc.
evidenced by the attached Warrant and does hereby irrevocably constitute and
appoint ____________________________ attorney to transfer such Warrant on the
books of the Company, with full power of substitution in the premises.
Date:
Name and Address of Transferee of Warrant:
_______________________________________
Name
_______________________________________
Address
_______________________________________
Name and address of assignee
including zip code number
- ------------------------------------------------------------------------------
NOTICE
The signature to the foregoing Exercise Form or Assignment must correspond to
the name as written upon the face of the attached Warrant in every particular,
without alteration or enlargement or any change whatsoever.
<PAGE>
Exhibit 10.47
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT ("Registration Rights Agreement"),
entered into as of November 26, 1996 by and between RIC INVESTMENT FUND LTD.
with offices at _____________________________________________ (the "Purchaser"),
and VIDEOLAN TECHNOLOGIES, INC., a Delaware corporation with offices at 100
Mallard Creek Road, Suite 250, Louisville, Kentucky 40207, U.S.A. (the
"Company").
W I T N E S S E T H:
WHEREAS, pursuant to a Subscription Agreement, dated as of the date
hereof (the "Agreement"), by and between the Company and the Purchaser, the
Company has agreed to sell and the Purchaser has agreed to purchase 150 shares
of the Company's Series 1996A Convertible Preferred Stock (the "Preferred
Stock") convertible into shares of the Company's Common Stock, $.01 par value
(the "Shares");
WHEREAS, pursuant to the terms of, and in partial consideration for,
the Purchaser's agreement to enter into the Agreement, the Company has agreed to
provide the Purchaser with certain registration rights with respect to the
Shares as set forth in this Registration Rights Agreement;
NOW, THEREFORE, in consideration of the mutual promises,
representations, warranties, covenants and conditions set forth in the Agreement
and this Registration Rights Agreement, the Company and the Purchaser agree as
follows:
1. Certain Definitions. As used in this Agreement, the following terms
shall have the following respective meanings:
"Commission" shall mean the Securities and Exchange Commission or any
other federal agency at the time administering the Securities Act.
"Registrable Securities" shall mean the Shares issued to Purchaser or
its designee upon conversion of the Preferred Stock or upon any stock split,
stock dividend, recapitalization or similar event with respect to such Shares;
provided, however, that Registrable Securities shall cease to be Registrable
Securities when they may be sold pursuant to Rule 144 under the Securities Act.
Registrable Securities shall not include the Preferred Stock.
The terms "register", "registered" and "registration" shall refer to
a registration effected by preparing and filing a registration statement in
compliance with the Securities Act and applicable rules and regulations
thereunder, and the declaration or ordering of the effectiveness of such
registration statement.
"Registration Expenses" shall mean all expenses to be incurred by the
Company in connection with Purchaser's exercise of its registration rights under
this Agreement, including,
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<PAGE>
without limitation, all registration and filing fees, printing expenses, fees
and disbursements of counsel for the Company, blue sky fees and expenses,
reasonable fees and disbursements of one counsel to the Holder and the other
securityholders participating in the registration for a review of the
Registration Statement and related documents, and the expense of any special
audits incident to or required by any such registration (but excluding the
compensation of regular employees of the Company, which shall be paid in any
event by the Company).
"Selling Expenses" shall mean all underwriting discounts and selling
commissions applicable to the sale of Registrable Securities and all fees and
disbursements of counsel for Holder not included with "Registration Expenses".
"Holder" shall include the Purchaser and any permitted transferee of
Preferred Stock, Shares or Registrable Securities which have not been sold to
the public to whom the registration rights conferred by this Agreement have been
transferred in compliance with Section 11 of this Agreement.
"Registration Statement" shall have the meaning set forth in Section
2(a) herein.
"Regulation D" shall mean Regulation D as promulgated pursuant to the
Securities Act, and as subsequently amended.
"Rule 144" shall mean Rule 144 under the Securities Act, as such rule
may be amended from time to time, or any similar rule or regulation hereafter
adopted by the Commission.
"Securities Act" shall mean the Securities Act of 1933, as amended.
2. Demand Registration
(a) After the Closing Date the Company shall use its best efforts
to effect such registration (including, without limitation, the execution of an
undertaking to file post-effective amendments, appropriate qualification under
applicable blue sky or other state securities laws and appropriate compliance
with applicable regulations issued under the Securities Act) as may be so
requested and as would permit or facilitate the sale and distribution of all or
such portion of such Registrable Securities as are specified in such request in
the states specified in such request.
Subject to the previous paragraph, the Company shall file (i) a
registration statement with the Commission pursuant to Rule 415 under the
Securities Act on Form S-3 under the Securities Act (or in the event that the
Company in ineligible to use such form, such other form as the Company is
eligible to use under the Securities Act) covering the Registrable Securities so
requested to be registered ("Registration Statement") ; (ii) such blue sky
filings as shall have been requested by the Holder; and (iii) any required
filings with the National Association of Securities Dealers, Inc. or exchange
where the Shares are traded, as soon as practicable, after receipt of the
request of the Holder. Thereafter the Company shall use its best efforts to have
such Registration Statement and other filings declared effective no later than
90 days from the Closing Date, as that term is defined in the Subscription
Agreement.
(b) (i) Subject to the conditions contained in Section 2(a)
above, if the Company fails to have such Registration Statement declared
effective by the Commission
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<PAGE>
within ninety (90) days from the Closing Date as a result of the Company's
failure to use its best efforts to effect such registration, the Holder shall
have, in addition to and without limiting any other rights it may have at law,
in equity or under the Preferred Stock, the Agreement, or this Registration
Rights Agreement (including the right to specific performance), the right to
receive, as liquidated damages, additional shares of common stock of the Company
as provided in subparagraph (ii) of this section.
(ii) If after ninety (90) days from the Closing Date, the
Registration Statement has not been declared effective by the Commission as a
result of the Company's failure to use its best efforts to effect such
registration, then the Company shall issue to the Purchaser an additional amount
of common stock shares (the "Additional Shares") upon conversion of such
Holder's Preferred Stock. For each 30-day period that the Company is late in
having its Registration Statement declared effective by the Commission as a
result of the Company's failure to use its best efforts to effect such
registration, the Company shall issue a number of Additional Shares equal to 2%
(which Additional Shares shall be issued pro rata for any period of less than 30
days) of the original principal amount of Preferred Stock held by Purchaser,
which Additional Shares shall be issued to the Purchaser upon its conversion of
Preferred Stock. The number of Additional Shares shall increase to 4% of the
original principal amount of Preferred Stock if the Registration Statement is
not declared effective after 150 days following the Closing Date as a result of
the Company's failure to use its best efforts to effect such registration per
each 30-day period (which Additional Shares shall be issued pro rata for any
period of less than 30 days), and to 6% of the original principal amount of
Preferred Stock, if the Registration Statement is not declared effective after
210 days after the Closing Date as a result of the Company's failure to use its
best efforts to effect such registration per each additional 30- day period
thereafter (which Additional Shares shall be issued pro rata for any period of
less than 30 days), until the effective date of the Registration Statement.
(iii) The Company acknowledges that its failure to register
the Registrable Securities in accordance with this Registration Rights Agreement
as a result of the Company's failure to use its best efforts to effect such
registration will cause the Holder to suffer damages in an amount that will be
difficult to ascertain. Accordingly, the parties agree that it is appropriate to
include in this Registration Rights Agreement a provision for liquidated
damages. The parties acknowledge and agree that the liquidated damages
provisions set forth in paragraph 2(b)(ii) above represent the parties' good
faith effort to quantify such damages and, as such, agree that the form and
amount of such liquidated damages are reasonable and will not constitute a
penalty. The payment of liquidated damages shall not relieve the Company from
its obligations to register the Registrable Securities pursuant to this
Agreement.
(c) If there is more than one Holder, such Holders shall act with
respect to their rights under this Registration Rights Agreement according to
the vote of a majority-in-interest.
(d) The Company shall make available for inspection by a
representative or representatives of the Holder, and any attorney or accountant
retained by such Holder, all financial and other records customary for such
purposes, pertinent corporate documents and properties of the Company, and cause
the Company's officers, directors and employees to supply all information
reasonably requested by any such representative, attorney or accountant in
connection with such Registration Statement. The Holder will agree to keep all
non-public information supplied
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<PAGE>
to it confidential until such information is included in a Registration
Statement which has been made publicly available.
(e) The Company shall not be obligated to keep such Registration
Statement continuously effective for a period of more than two years from the
date it is declared effective by the Commission; provided, however, that if so
requested by the holders of a majority-in-interest of the Registrable Securities
the Company shall agree to extend the period for which the Registration
Statement remains effective to the same extent that "suspension periods" are
imposed pursuant to the next paragraph, but only so long as the then unsold
Registrable Securities covered by such Registration are too numerous to be sold
under the volume limitations of Rule 144 in any applicable three month period by
any Holder.
Following the effectiveness of the Registration Statement
pursuant to this Registration Rights Agreement, the Company may, at any time,
suspend the effectiveness of such Registration Statement and sales thereunder
for up to ten (10) days, as appropriate (a "Suspension Period"), by giving
notice to each Holder (or underwriter, if any) selling thereunder, if the
Company shall have determined that the Company may be required to disclose any
material corporate development which disclosure (i) may have a material adverse
effect on the Company, (ii) may have a material adverse affect on the
transaction or matter to be disclosed, or (iii) would be detrimental to the
Company or its stockholders. Notwithstanding the foregoing, no more than two
Suspension Periods (i.e., twenty (20) days) may occur in immediate succession,
and the Company shall use its best efforts to limit the duration and number of
any suspension periods. Holder agrees (and shall require that any underwriter
agree) that, upon receipt of any notice from the Company of any Suspension
Period, Holder shall forthwith discontinue disposition of shares covered by the
Registration Statement or Prospectus until such Holder (i) is advised in writing
by the Company that the use of the applicable Prospectus may be resumed, (ii)
has received copies of a supplemental or omitted Prospectus, if applicable, and
(iii) has received copies of any additional or supplemental filings which are
incorporated or deemed to be incorporated by reference in such Prospectus.
3. Company Registration. If at any time, or from time to time prior to
the registration of the Registrable Securities, the Company shall determine to
register any of its securities, either for its own account or the account of a
security holder or holders exercising their respective demand registration
rights, other than (i) a registration on Form S-8 or (ii) a registration on Form
S-4 relating solely to a transaction pursuant to Rule 145, the Company will
promptly give to each Holder written notice thereof and include in such
registration statement all the Registrable Securities specified in a written
request made within 30 days after mailing of written notice by the Company.
4. Expenses of Registration. All Registration Expenses incurred in
connection with any registration, qualification or compliance with registration
pursuant to this Agreement shall be borne by the Company, and all Selling
Expenses shall be borne by the Holder.
5. Registration on Form S-3. Although the Company shall use its best
efforts to qualify for registration on Form S-3 or any comparable or successor
form or forms, or in the event that the Company is ineligible to use such form,
such form as the Company is eligible to use under the Securities Act, nothing in
the Agreement or this Registration Rights Agreement is intended to require the
Company to pay dividends in order to use Form S-3.
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<PAGE>
6. Registration Procedures. In the case of each registration effected
by the Company pursuant to this Agreement, the Company will keep the Holder
advised in writing as to the initiation of each registration and as to the
completion thereof. At its expense, the Company will use its best efforts to:
(a) Keep such Registration Statement effective for the period
ending twenty-four (24) months after the registration has been declared
effective by the Commission or until the Holder has completed the distribution
described in the Registration Statement relating thereto, whichever first
occurs.
(b) Furnish such number of prospectuses and other documents
incident thereto as the Holder from time to time may reasonably request.
7. Indemnification.
(a) Company Indemnity. The Company will indemnify the Holder,
each of its officers, directors and partners, and each person controlling
Holder, within the meaning of Section 15 of the Securities Act and the rules and
regulations thereunder with respect to which registration, qualification or
compliance has been effected pursuant to this Agreement, against all claims,
losses, damages and liabilities (or actions in respect thereof) arising out of
or based on any untrue statement (or alleged untrue statement) of a material
fact contained in any prospectus, (including any related registration statement,
notification or the like) incident to any such registration, qualification or
compliance, or based on any omission (or alleged omission) to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, or any violation by the Company of the Securities Act or
any state securities law or in either case, any rule or regulation thereunder
applicable to the Company and relating to action or inaction required of the
Company in connection with any such registration, qualification or compliance,
and will reimburse the Holder, each of its officers, directors and partners, and
each person controlling such Holder, for any legal and any other expenses
reasonably incurred in connection with investigating and defending any such
claim, loss, damage, liability or action, provided that the Company will not be
liable in any such case to the extent that any such claim, loss, damage,
liability or expense arises out of or is based on any untrue statement or
omission based upon written information furnished to the Company by Holder and
stated to be specifically for use therein. The indemnity agreement contained in
this Section 7(a) shall not apply to amounts paid in settlement of any such
loss, claim, damage, liability or action if such settlement is effected without
the consent of the Company (which consent will not be unreasonably withheld).
(b) Holder Indemnity. The Holder will, if Registrable Securities
held by it are included in the securities as to which such registration,
qualification or compliance is being effected, indemnify the Company, each of
its directors, officers, partners, and each underwriter, if any, of the
Company's securities covered by such a registration statement, each
person who controls the Company or such underwriter within the meaning of
Section 15 of the Securities Act and the rules and regulations thereunder, each
other Holder (if any), and each of their officers, directors and partners, and
each person controlling such other Holder against all claims, losses, damages
and liabilities (or actions in respect thereof) arising out of or based on any
untrue statement (or alleged untrue statement) of a material fact contained in
any such registration statement, prospectus, offering circular or other
document, or any omission (or alleged omission) to state therein a material fact
required to be stated therein or necessary to make the statement therein not
misleading, and will
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reimburse the Company and such other Holders and their directors, officers and
partners, underwriters or control persons for any legal or any other expenses
reasonably incurred in connection with investigating and defending any such
claim, loss, damage, liability or action, in each case to the extent, but only
to the extent, that such untrue statement (or alleged untrue statement) or
omission (or alleged omission) is made in such registration statement,
prospectus, offering circular or other document in reliance upon and in
conformity with written information furnished to the Company by Holder and
stated to be specifically for use therein, and provided that the maximum amount
for which the Holder shall be liable under this indemnity shall not exceed the
net proceeds received by the Holder from the sale of the Registrable Securities.
The indemnity agreement contained in this Section 7(b) shall not apply to
amounts paid in settlement of any such claims, losses, damages or liabilities if
such settlement is effected without the consent of Holder (which consent shall
not be unreasonably withheld).
(c) Procedure. Each party entitled to indemnification under this
Article (the "Indemnified Party") shall give notice to the party required to
provide indemnification (the "Indemnifying Party") promptly after such
Indemnified Party has actual knowledge of any claim as to which indemnity may be
sought, and shall permit the Indemnifying Party to assume the defense of any
such claim in any litigation resulting therefrom, provided that counsel for the
Indemnifying Party, who shall conduct the defense of such claim or any
litigation resulting therefrom, shall be approved by the Indemnified Party
(whose approval shall not be unreasonably withheld), and the Indemnified Party
may participate in such defense at such party's expense, and provided further
that the failure of any Indemnified Party to give notice as provided herein
shall not relieve the Indemnifying Party of its obligations under this Article
except to the extent that the Indemnifying Party is materially and adversely
affected by such failure to provide notice. No Indemnifying Party, in the
defense of any such claim or litigation, shall, except with the consent of each
Indemnified Party, consent to entry of any judgment or enter into any settlement
which does not include as an unconditional term thereof the giving by the
claimant or plaintiff to such Indemnified Party of a release from all liability
in respect to such claim or litigation. Each Indemnified Party shall furnish
such information regarding itself or the claim in question as an Indemnifying
Party may reasonably request in writing and as shall be reasonably required in
connection with the defense of such claim and litigation resulting therefrom.
8. Contribution. If the indemnification provided for in Section 7 herein is
unavailable to the Indemnified Parties in respect of any losses, claims, damages
or liabilities referred to herein (other than by reason of the exceptions
provided therein), then each such Indemnifying Party, in lieu of indemnifying
such Indemnified Party, shall contribute to the amount paid or payable by such
Indemnified Party as a result of such losses, claims, damages or liabilities (i)
as between the Company and the Holder on the one hand and the underwriters on
the other, in such proportion as is appropriate to reflect the relative benefits
received by the Company and the Holder on the one hand or underwriters, as the
case may be, on the other from the offering of the Registrable Securities, or if
such allocation is not permitted by applicable law, in such proportion as is
appropriate to reflect not only such relative benefits but also the relative
fault of the Company on the one hand and of the Holder or underwriters, as the
case may be, on the other in connection with the statements or omissions which
resulted in such losses, claims, damages or liabilities, as well as any other
relevant equitable considerations and (ii) as between the Company on the one
hand and the Holder on the other, in such proportion as is appropriate to
reflect the relative fault of the Company and of the Holder in connection with
the statements or omissions which resulted in such losses, claims, damages or
liabilities, as well as any other relevant equitable considerations.
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The relative benefits received by the Company on the one hand and the
Holder or the underwriters, as the case may be, on the other shall be deemed to
be in the same proportion as the proceeds from the offering (net of underwriting
discounts and commissions but before deducting expenses) received by the Company
from the initial sale of the Preferred Stock which can be converted into
Registrable Securities by the Company to the Holder pursuant to the Subscription
Agreement which corresponds to this Registration Rights Agreement bear to the
gain realized by such Holder or the total underwriting discounts and commissions
received by the underwriters as set forth in the table on the cover page of the
prospectus, as the case may be. The relative fault of the Company on the one
hand and of the Holder or underwriters, as the case may be, on the other shall
be determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or omission or alleged omission to state a
material fact relates to information supplied by the Company, by the Holder or
by the underwriters.
In no event shall the obligation of any Indemnifying Party to
contribute under this Section 7 exceed the amount that such Indemnifying Party
would have been obligated to pay by way of indemnification if the
indemnification provided for under Section 7(a) or 7(b) hereof had been
available under the circumstances.
The Company and the Holder agree that it would not be just and
equitable if contribution pursuant to this Section 8 were determined by pro rata
allocation (even if the Holder or the underwriters were treated as one entity
for such purpose) or by any other method of allocation which does not take
account of the equitable considerations referred to in the immediately preceding
paragraphs. The amount paid or payable by an Indemnified Party as a result of
the losses, claims, damages and liabilities referred to in the immediately
preceding paragraphs shall be deemed to include, subject to the limitations set
forth above, any legal or other expenses reasonably incurred by such Indemnified
Party in connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this section, no Holder or underwriter shall
be required to contribute any amount in excess of the amount by which (i) in the
case of the Holder, the net proceeds received by the Holder from the sale of
Registrable Securities or (ii) in the case of an underwriter, the total price at
which the Registrable Securities purchased by it and distributed to the public
were offered to the public exceeds, in any such case, the amount of any damages
that the Holder or underwriter has otherwise been required to pay by reason of
such untrue or alleged untrue statement or omission or alleged omission. No
person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation.
9. Survival. The indemnity and contribution agreements contained in
Sections 6 and 7 shall remain operative and in full force and effect regardless
of (i) any termination of the Agreement or any underwriting agreement, (ii) any
investigation made by or on behalf of any Indemnified Party or by or on behalf
of the Company and (iii) the consummation of the sale or successive resales of
the Registrable Securities.
10. Information by Holder. The Holder shall furnish to the Company
such information regarding such Holder and the distribution proposed by such
Holder as the Company may reasonably request in writing and as shall be
reasonably required in connection with any registration, qualification or
compliance referred to in this Agreement.
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<PAGE>
11. Transfer or Assignment of Registration Rights. The rights, granted
to Purchaser by the Company under this Registration Rights Agreement, to cause
the Company to register Registrable Securities, may be transferred or assigned
to a transferee or assignee of not less than 50 shares of Preferred Stock,
provided that the Company is given written notice by Holder at the time of or
within a reasonable time after said transfer or assignment, stating the name and
address of said transferee or assignee and identifying the securities with
respect to which such registration rights are being transferred or assigned, and
provided further that the transferee or assignee of such rights is not deemed by
the board of directors of the Company, in its reasonable judgment, to be a
competitor of the Company; and provided further that the transferee or assignee
of such rights agrees to be bound by this Registration Rights Agreement.
Purchaser is one of a group of holders of Registrable Securities
issued or issuable pursuant to a total aggregate amount of up to $7.5 million of
Preferred Stock purchased by Purchaser and others in a transaction designed to
qualify as an offering pursuant to Section 4(2), Section 4(6) and Regulation D.
Any action to be taken under this Registration Rights Agreement or any term of
this Registration Rights Agreement may be amended or waived only with written
action by the Company and the holders of at least a majority-in-interest of the
total of the Registrable Securities. Any action, amendment or waiver effected in
accordance with this paragraph shall be binding upon each of the other holders
of Registrable Securities at the time then outstanding.
12. Miscellaneous.
(a) Entire Agreement. This Registration Rights Agreement
contains the entire understanding and agreement of the parties, and may not be
modified or terminated except by a written agreement signed by both parties.
(b) Notices. Any notice or other communication given or permitted
under this Agreement shall be in writing and shall be deemed to have been duly
given if personally delivered or sent by registered or certified mail, return
receipt requested, postage prepaid or by air courier, (a) if to Purchaser, at
its address hereinabove set forth, (b) if to the Company, at its address
hereinabove set forth, and (c) if to a holder other than Purchaser, at the
address thereof furnished by like notice to the Company, or (d) to any such
addresses at such other address or addresses as shall be so furnished to the
other parties by like notice.
(c) Gender of Terms. All terms used herein shall be deemed to
include the feminine and the neuter, and the singular and the plural, as the
context requires.
(d) Governing Law; Consent of Jurisdiction. This Registration
Rights Agreement and the validity and performance of the terms hereof shall be
governed by and construed in accordance with the laws of the State of Delaware.
The parties hereto hereby consent to, and waive any objection to the exercise
of, personal jurisdiction in the State of New York with respect to any action or
proceeding arising out of this Registration Rights Agreement.
(e) Titles. The titles used in this Registration Rights
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Registration Rights Agreement.
(f) Prospectus Delivery Requirements. Holder agrees, on Holder's
behalf, and shall require any transferee or assignee pursuant to Section 10
above to agree, to comply
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with all prospectus delivery requirements applicable to resales of the
securities pursuant to the Registration Statement.
(g) Termination. The rights of Holder to require the Company to
request a Registration pursuant to this Registration Rights Agreement shall
terminate on the date which is five (5) years from the date of this Registration
Rights Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Registration
Rights Agreement to be duly executed as of the date first above written.
RIC INVESTMENT FUND LTD.
By: ____________________________________
Title:
VideoLan Technologies, Inc.
a Delaware Corporation
By: ____________________________________
Title:
<PAGE>
Exhibit 10.48
Execution Copy
THE SECURITIES DESCRIBED IN THIS AGREEMENT HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR THE SECURITIES LAWS OF
CERTAIN STATES, AND MAY NOT BE OFFERED, SOLD, TRANSFERRED, PLEDGED, HYPOTHECATED
OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO (i) AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE ACT AND ANY APPLICABLE STATE LAWS, (ii) TO THE EXTENT
APPLICABLE, RULE 144 UNDER THE ACT (OR ANY SIMILAR RULE UNDER THE ACT RELATING
TO THE DISPOSITION OF SECURITIES), OR (iii) AN OPINION OF COUNSEL, IF SUCH
OPINION SHALL BE REASONABLY SATISFACTORY TO COUNSEL TO THE ISSUER, THAT AN
EXEMPTION FROM REGISTRATION UNDER THE ACT AND APPLICABLE STATE LAW IS AVAILABLE.
INVESTMENT IN THESE SECURITIES INVOLVES A HIGH DEGREE OF RISK. IN MAKING AN
INVESTMENT DECISION, INVESTORS MUST RELY ON THEIR OWN EXAMINATION OF THE COMPANY
AND THE TERMS OF THE OFFERING, INCLUDING THE MERITS AND THE RISKS INVOLVED.
THESE SECURITIES HAVE NOT BEEN RECOMMENDED BY ANY FEDERAL OR STATE SECURITIES
COMMISSION OR REGULATORY AUTHORITY. FURTHERMORE, THE FOREGOING AUTHORITIES HAVE
NOT CONFIRMED OR DETERMINED THE ACCURACY OR ADEQUACY OF THIS DOCUMENT. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
SUBSCRIPTION AGREEMENT
This Subscription Agreement (the "Agreement"), dated November 26, 1996, is
entered into by and between VideoLan Technologies, Inc., a Delaware corporation
(the "Company"), and RIC Investment Fund Ltd. (the "Buyer").
The Company has offered for sale pursuant to applicable provisions of Sections
4(2) and 4(6), and Regulation D under the United States Securities Act of 1933,
as amended (the "Act") up to 7,500 shares of Series 1996A Convertible Preferred
Stock (the "Preferred Stock" or "Securities"), convertible into common stock of
the Company ("Common Stock"). The Buyer has been offered 150 shares of the
Preferred Stock, at $1,000 per each share. The terms on which the Preferred
Stock may be converted into shares of Common Stock (such shares of Common Stock
underlying the Preferred Stock being referred to herein as "Shares")and the
other terms of the Preferred Stock are set forth in the Certificate of
Designation in the form attached hereto as Exhibit "A" (the "Certificate of
Designation"), the terms of which are hereby incorporated by reference.
Capitalized terms used herein and not defined herein shall have the meanings
given to them in Regulation D as the same may be amended from time to time.
The parties hereto agree as follows:
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1. Purchase and Sale of Securities Upon the basis of the representations and
warranties, and subject to the terms and conditions, set forth in this
Agreement, the Company covenants and agrees to sell to the Buyer on the Closing
Date (as hereinafter defined) 150 shares of the Preferred Stock at a price of
$1,000 per share, and upon the basis of the representations and warranties, and
subject to the terms and conditions, set forth in this Agreement, the Buyer
covenants and agrees to purchase from the Company, on the Closing Date 150
shares of the Preferred Stock of the Company at $1,000 per share.
2. Closing Instructions to Escrow Agent
(a) The closing of the purchase and sale of the Preferred Stock pursuant to
Section 1 hereof shall take place on or before ____________, 199__ (the "Closing
Date") after the Company has delivered to the offices of First Bermuda
Securities Limited (the "Escrow Agent") located at Jardine House, 3rd Floor,
33/35 Reid Street, Hamilton, HM 12 Bermuda certificates representing 150 shares
of Preferred Stock registered in the names provided by the Buyer (representing
the number of shares of Preferred Stock to be purchased by the Buyer hereunder).
(b) The Company and the Buyer agree that they shall instruct the Escrow
Agent as provided in Exhibit "B" and as follows:
(i) On the Closing Date, for each share of Preferred Stock subscribed
for and delivered to the Escrow Agent pursuant to paragraph 2(a) above, the
Escrow Agent shall, upon confirmation in the form of a Federal funds wire number
that First Bermuda Securities Limited ("First Bermuda") has wired payment of the
Purchase Price for the Preferred Stock (less any fees Company has authorized
Escrow Agent to deduct) in immediately available funds to the Company's account
as provided in the escrow instructions attached as Exhibit "B", release the
certificates of Preferred Stock described in paragraph 2(a) above. The Escrow
Agent shall return to the Company any shares of Preferred Stock that the Buyer
does not purchase on the Closing Date.
(ii) The Escrow Agent will make delivery of the number of shares of
Preferred Stock set forth in clause 2(a) above in accordance with the
instructions of the Buyer subject to customary settlement procedures upon
confirmation of the wiring of funds to the Company as described in clause
2(b)(i) above.
3. Representations and Warranties of the Buyer: The Buyer understands and
represents and warrants to, and agrees with the Company that:
(a) The Buyer understands that no federal or state agency has passed
on, or made any recommendation or endorsement of the Securities.
(b) The Buyer acknowledges that, in making the decision to purchase
the Securities, it has relied solely upon independent investigations made by it
and not upon any representations made by the Company with respect to the Company
or the Securities, except for the representations and warranties in this
Agreement, the Certificate of Designation, the Registration Rights Agreement and
the Officers Certificate, except that the Buyer has received, reviewed and
relied upon the Opinion of Counsel, the Company Memorandum dated October 1, 1996
(the "Company Memorandum") and copies of the report on Form 10-QSB for the
quarter ended June 30, 1996, the report Form 10-KSB for the year ended December
31, 1995, filed by the Company pursuant to the
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<PAGE>
Securities Exchange Act of 1934, as amended, and all other filings, which
together with any filings by Company after the date hereof and prior the
Closing, are defined as "Exchange Act Reports".
(c) The Buyer understands that the Securities are being offered and
sold to it in reliance on specific exemptions from or non-application of the
registration requirements of Federal and state securities laws and that the
Company is relying upon the truth and accuracy of the representations,
warranties, agreements, acknowledgments and understandings of the Buyer set
forth herein in order to determine the applicability of such exemptions and the
suitability of the Buyer to acquire the Securities.
(d) The Buyer is aware that the Securities and the Shares issuable
upon exercise of conversion rights have not been and will not be registered
under the Act (except as may be required under the Registration Rights
Agreement) and may only be offered or sold pursuant to registration under the
Act or an available exemption therefrom.
The Buyer has the full right, power and authority to enter into this
Agreement and to carry out and consummate the transactions contemplated herein.
This Agreement constitutes the legal, valid and binding obligation of the Buyer.
The Buyer is an "Accredited Investor" as that term is defined in
Section 501(a) of Regulation D promulgated under the Act, because the
undersigned meets one or more of the following requirements: PLEASE CHECK AS
MANY BOXES THAT APPLY:
_ He or she is a natural person whose individual net worth, or joint net
worth with such investor's spouse, exceeds $1,000,000;
_ He or she is a natural person who had individual income in excess of
$200,000 in each of the two most recent years, or (except in California) joint
income with such investor's spouse in excess of $300,000 in each of those years
and reasonably expects to reach the same income level in the current year;
_ It is an organization described in ss. 501(c)(3) of the Internal
Revenue Code of 1986 as amended, (i.e., tax exempt entities), corporation,
Massachusetts or similar business trust, or partnership, not formed for the
specific purpose of acquiring the proposed investment, with total assets in
excess of $5,000,000;
_ It is a trust, with total assets in excess of $5,000,000, not formed
for the specific purpose of acquiring the proposed investment, whose purchases
are directed by a sophisticated person as described;
_ It is a bank as defined in ss. 3(a)(2) of the Act, or a savings and
loan association or other institution as defined in ss. 3(a)(5)(A) of the Act
whether acting in its individual or fiduciary capacity;
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<PAGE>
_ It is a broker registered pursuant to ss. 15 of the Securities
Exchange Act of 1934 (the Exchange Act");
_ It is an insurance company as defined in ss. 2(13) of the Act;
_ It is an investment company registered under the Investment Company
Act of 1940 or a business development company as defined in ss. 2(a)(48) of that
Act;
_ It is a Small Business Investment Company licensed by the U.S. Small
Business Administration under ss. 301 (c) or (d) of the Small Business
Investment Act of 1958;
_ It is a private business development company as defined in ss.
202(a)(22) of the Investment Advisers Act of 1940;
_ It is an employee benefit plan within the meaning of Title I of the
Employee Retirement Income Security Act of 1974, if the investment decision is
made by a plan fiduciary, as defined in ss. 3(21) of such Act, which is either a
bank, savings and loan association, insurance company, or registered investment
adviser, or if the employee benefit plan has total assets in excess of
$5,000,000 or, if a self-directed plan, with investment decisions made solely by
persons that are Accredited Investors as described above;
_ He or she is a director or executive officer of the Company;
_ It is an entity in which all the equity owners are Accredited
Investors since they are all described above.
(g) The Buyer has reviewed this Agreement and each Exhibit hereto.
(h) The Buyer has the financial ability to bear the economic risk of
the Buyer's investment, can afford to sustain a complete loss of such
investment, has adequate means of providing for the Buyer's current needs and
personal contingencies and has no need for liquidity in the Buyer's investment
in the Company.
(i) The Buyer will acquire the Securities for its own account (or for
the joint account of the Buyer and the Buyer's spouse either in joint tenancy,
tenancy by the entirety or tenancy in common) for investment and not with a view
to the sale or distribution thereof or the granting of any participation
therein, and the Buyer has no present intention of distributing or selling to
others any of such interest or granting any participation therein, other than
pursuant to an effective registration statement under the Act.
(j) The Buyer has read the Company Memorandum and the Exchange Act
Reports, has been given the opportunity to ask questions of and to receive
answers from persons acting on the
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<PAGE>
Company's behalf concerning the terms and conditions of this transaction and
also has been given the opportunity to obtain any additional information which
the Company possesses or can acquire without unreasonable effort or expense. As
a result, the Buyer is cognizant of the financial condition, capitalization, use
of proceeds from this transaction and the operations and financial condition of
the Company, has available full information concerning its affairs and has been
able to evaluate the merits and risks of the investment in the Securities.
(k) The Buyer represents that an investment in the Securities is a
suitable investment for the Buyer, taking into consideration the restrictions on
transferability affecting the Securities.
(l) The Buyer understands and agrees that the Preferred Stock as well
as the Shares issuable upon conversion of Preferred Stock have not been
registered under the Act or any state or foreign securities laws and are
restricted securities within the meaning of Rule 144 of the General Rules and
Regulations under the Act and under applicable state statutes.
(m) The Buyer is not an associated person or affiliate of any member
firm of the National Association of Securities Dealers, Inc.
(n) In making the purchase of the Securities, Buyer understands that
the information set forth in the Company Memorandum and the Exchange Act Reports
and this Agreement was accurate as of its date with respect to the Company.
(o) Without the prior written consent of the Company, the Buyer and
any subsequent transferee shall not sell the Securities or the Shares in a
transaction that is exempt from the registration requirements of the Act
pursuant to Regulation S thereunder.
4. Registration Rights On or prior to the Closing Date, the Company and the
Buyer agree to execute a Registration Rights Agreement in the form substantially
set out in Exhibit "C" attached hereto (the "Registration Rights Agreement"),
the terms of which are herein incorporated by reference.
Conversion of Preferred Stock The Buyer of Preferred Stock shall be
entitled to convert the Preferred Stock into Shares in accordance with the terms
set forth in the Certificate of Designation. In addition to the conversion
rights set forth in the Certificate of Designations, the Buyer of Preferred
Stock purchased pursuant to this Agreement shall be entitled to the following
additional rights:
(a) Buyer's Right to Elect to Receive Notice of Cash Redemption by
Company. A Buyer of Preferred Stock purchased pursuant to this Agreement shall
have the right to require the Company to provide advance notice stating whether
the Company will elect to redeem such Buyer's shares in cash pursuant to the
Company's redemption rights discussed in Section 7 of the Certificate of
Designations.
(b) Mechanics of Buyer's Election Notice. A Buyer shall send notice to
the Company by facsimile ("Election Notice") stating Buyer's intention to
require the Company to disclose if the Buyer were to exercise his, her or its
right of conversion (pursuant to Section 2 of the Certificate of Designations)
whether the Company would elect to redeem the Buyer's Preferred Stock for cash
in lieu of issuing Common Stock. Within three (3) business days of receipt of
the Election Notice, the Company shall disclose to the Buyer what action the
Company would take over the subsequent fifteen (15) day period (the "15 Day
Period"), including the date the Company receives
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<PAGE>
such Election Notice. If the Company does not respond to the Buyer within such
three (3) business day period indicating it would elect to redeem the Buyer's
Preferred Stock for cash in lieu of issuing Common Stock, the Company shall be
required to issue to the Buyer Common Stock upon the Buyer's conversion if made
during the 15 Day Period.
5. Conversion of Preferred Stock The holders of Preferred Stock shall be
entitled to convert the Preferred Stock into Shares in accordance with the terms
set forth in the Certificate of Designation.
6. Representations and Warranties of the Company The Company represents and
warrants to, and agrees with, the Buyer that:
(a) The Company has been duly incorporated and is validly existing as
a corporation in good standing under the laws of Delaware.
(b) This Agreement has been duly authorized, executed and delivered by
the Company and is a valid and binding agreement enforceable in accordance with
its terms, subject to bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium and similar laws of general applicability relating to
or affecting creditors' rights generally and to general principles of equity;
and the Company has full corporate power and authority necessary to enter into
this Agreement and to perform its obligations thereunder.
(c) No consent, approval, authorization or order of any court,
governmental agency or body or arbitrator having jurisdiction over the Company
or any of its affiliates is required for execution of this Agreement, including,
without limitation, the issuance and sale of the Securities, or the performance
of its obligations hereunder.
(d) Except as disclosed to the Buyer or its representatives in
writing, neither the sale of Securities pursuant to, nor the performance of its
obligations under this Agreement by the Company will (i) violate or conflict
with, result in a breach of, or constitute a default (or an event which with the
giving of notice or the lapse of time or both would be reasonably likely to
constitute a default) under (A) the Certificate of Incorporation (the
"Certificate of Incorporation") or By-laws (the "By-laws") of the Company or any
of its affiliates, (B) any decree, judgment, order, law, treaty, rule,
regulation or determination applicable to the Company or any of its affiliates
of any court, governmental agency or body, or arbitrator having jurisdiction
over the Company or any of its affiliates or over the properties or assets of
the Company or any of its affiliates, (C) the terms of any bond, debenture, note
or any other evidence of indebtedness, or any material agreement, stock option
or other similar plan, indenture, lease, mortgage, deed of trust or other
material instrument to which the Company or any of its affiliates is a party, by
which the Company or any of its affiliates is bound, or to which any of the
properties of the Company or any of its affiliates is subject, or (D) the terms
of any "lock-up" or similar provision of any underwriting or similar agreement
to which the Company or any of its affiliates is a party to; or (ii) result in
the creation or imposition of any lien, charge or encumbrance upon the
Securities or any of the assets of the Company or any of its affiliates.
(e) The Company has an authorized capitalization consisting of
80,000,000 shares of Common Stock, par value $.01 per share, and 5,000,000
shares of Preferred Stock, par value $.01 per share ("Preferred Stock"). The
Company has issued and outstanding 14,026,398 shares of Common Stock and no
shares of Preferred Stock on the date hereof. All of the issued shares of
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<PAGE>
capital stock of the Company have been duly and validly authorized and issued,
are fully paid and non-assessable; prior to the Closing Date, the authorized
capitalization shall include the Shares to be issued upon conversion of the
Securities. The Shares issuable upon conversion of the Securities, when issued
and delivered in accordance with the terms of the Securities, will be duly and
validly issued, fully paid and nonassessable. The issuance of the Shares will
not be in violation of any preemptive or similar rights of the holders of any
securities of the Company. The Securities (i) are free and clear of any security
interests, liens, claims or other encumbrances, (ii) have been duly and validly
authorized and on the Closing Date will be duly and validly issued, fully paid
and non assessable, (iii) will not have been, individually and collectively,
issued or sold in violation of any preemptive or other similar rights of the
holders of any securities of the Company, (iv) will not subject the holders
thereof to personal liability by reason of being such holders, and (v) the
Shares underlying the Securities are quoted on, and will be, following the
registration of the Shares as set forth in the Registration Rights Agreement be
eligible for trading on, the National Association of Securities Dealers Inc.
SmallCap Market ("Nasdaq").
(f) The Company complies with the eligibility requirements for use of
Form S-3, as set forth in the Act. The Company's stock is listed on Nasdaq and
the Company has received no notice, oral or written, with respect to its
continued eligibility for such listing. The Company hereby agrees, promptly
following the closing of the transactions contemplated by this Agreement, to
take such action as is necessary to cause the Shares issued upon exercise of
conversion rights under the Preferred Stock to be listed on Nasdaq upon such
conversion following the effective date of the registration statement, as
provided in the Registration Rights Agreement (subject, if required, to notice
to Nasdaq of the actual number of shares issued). The Company further agrees, if
the Company applies to have the Common Stock traded on any other principal stock
exchange or market, it will include in such application the Shares and will take
such other action as is necessary or desirable to cause the Shares to be listed
on such other exchange or market upon effective date of the registration
statement.
(g) The Exchange Act Reports are the only filings made by the Company
since December 31, 1995 pursuant to Sections 13(a), 13(c), 14 and 15(d) of the
Exchange Act, and the Company will cause its Common Stock to continue to be
registered under Section 12(g) or 12(b) of the Securities Exchange Act of 1934,
will comply in all respects with its reporting and filing obligations under said
Act, and will not take any action or file any document (whether or not permitted
by said Act or the rules thereunder) to terminate or suspend such registration
or to terminate or suspend its reporting and filing obligations under the
Exchange Act. The Company will take all action necessary to continue the listing
and trading of its Common Stock on Nasdaq and will comply in all respects with
the Company's reporting, filing and other obligations under the by-laws or rules
of the NASD and Nasdaq.
(h) The Company has the requisite corporate power to own its
properties and to carry on its business as now being conducted. The Company does
not have any subsidiaries. The Company is duly qualified as a foreign
corporation to do business and is in good standing in every jurisdiction in
which the nature of the business conducted or property owned by it makes such
qualification necessary other than those in which the failure so to qualify
would not have a Material Adverse Effect. "Material Adverse Effect" means any
adverse effect on the business, operations, properties, prospects, or financial
condition of the entity with respect to which such term is used and which is
material to such entity.
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(i) The Company has furnished or made available to the Buyer true and
correct copies of the Company's Certificate of Incorporation as in effect on the
date hereof, and the Company's By-laws, as in effect on the date hereof.
(j) The Company has delivered or made available to the Buyer true and
complete copies of the Exchange Act Reports (including, without limitation,
proxy information and solicitation materials excluding any preliminary proxy not
distributed). The Company has not provided to the Buyer any information which,
according to applicable law, rule or regulation, should have been disclosed
publicly by the Company but which has not been so disclosed. As of their
respective dates, the Exchange Act Reports complied in all material respects
with the requirements of the Exchange Act and the rules and regulations of the
SEC promulgated thereunder and other federal, state and local laws, rules and
regulations applicable to such Exchange Act Reports, and none of the Exchange
Act Reports contained any untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they were
made, not misleading. The financial statements of the Company included in the
Exchange Act Reports comply as to form in all material respects with applicable
accounting requirements and the published rules and regulations of the SEC or
other applicable rules and regulations with respect thereto. Such financial
statements have been prepared in accordance with generally accepted accounting
principles applied on a consistent basis during the periods involved (except (i)
as may be otherwise indicated in such financial statements or the notes thereto
or (ii) in the case of unaudited interim statements, to the extent they may not
include footnotes or may be condensed or summary statements) and fairly present
in all material respects the financial position of the Company as of the dates
thereof and the results of operations and cash flows for the periods then ended
(subject, in the case of unaudited statements, to normal year-end audit
adjustments).
(k) Except as set forth in the financial statements and other
documents filed by the Company under the Exchange Act, the Company has no
liabilities, contingent or otherwise, other than (i) liabilities incurred in the
ordinary course of business subsequent to December 31, 1995 and (ii) obligations
under contracts and commitments incurred in the ordinary course of business and
not required under generally accepted accounting principles to be reflected in
such financial statements, which individually or in the aggregate, are not
material to the financial condition or operating results of the Company. The
Company has not provided to the Buyer any information which, according to
applicable law, rule or regulation, should have been disclosed publicly by the
Company but which has not been so disclosed.
(l) Since December 31, 1995 there has been no material adverse change
and no material adverse development in the business, properties, operations,
financial condition, results of operations or prospects of the Company, except
as disclosed in accordance with the Exchange Act Reports or the Company
Memorandum and except that the Company continues to incur losses.
(m) There is no material action, suit, proceeding, inquiry or to the
knowledge of the Company or any of its subsidiaries, investigation before or by
any court, public board, government agency, self-regulatory organization or body
pending, or to the knowledge of the Company or any of its subsidiaries,
threatened against or affecting the Company or any of its subsidiaries, except
as disclosed in the Exchange Act Reports or the Company Memorandum.
(n) Neither the Company, nor any or its affiliates, nor any person
acting on its or their behalf has, directly or indirectly, made any offers or
sales of any security or solicited any offers
8
<PAGE>
to buy any security, under circumstances that would require registration of the
Securities under the Act.
(o) The Company has taken no action which would give rise to any claim
by any person for brokerage commissions, finder's fees or similar payments by
the Buyer relating to this Agreement of the transactions contemplated hereby,
except for dealings with First Bermuda Securities Limited, whose commissions and
fees will be paid for by the Company.
(p) As of the date hereof, the Company has reserved and the Company
shall continue to reserve and keep available at all times, free of preemptive
rights, shares of Common Stock for the purpose of enabling the Company to
satisfy any obligation to issue shares of its Common Stock upon conversion of
the Securities; provided, however, that the number of shares so reserved shall
at all times be at least 3,000,000. The number of shares so reserved may be
reduced by the number of shares actually delivered pursuant to the conversion of
the Securities (provided that in no event shall the number of shares so reserved
be less than the number required to satisfy the remaining conversion rights on
the unconverted Securities) and the number of shares so reserved shall be
increased to reflect stock splits and stock dividends and distributions.
(q) The Preferred Stock and the Shares have not been registered under
the Securities Act of 1933, as amended (the "Act"). Each of the Securities shall
bear the following legend:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR THE SECURITIES
LAWS OF CERTAIN STATES, AND MAY NOT BE OFFERED, SOLD, TRANSFERRED, PLEDGED,
HYPOTHECATED OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO (i) AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE ACT AND ANY APPLICABLE STATE LAWS, (ii) TO
THE EXTENT APPLICABLE, RULE 144 UNDER THE ACT (OR ANY SIMILAR RULE UNDER
THE ACT RELATING TO THE DISPOSITION OF SECURITIES), OR (iii) AN OPINION OF
COUNSEL, IF SUCH OPINION SHALL BE REASONABLY SATISFACTORY TO COUNSEL TO THE
ISSUER, THAT AN EXEMPTION FROM REGISTRATION UNDER THE ACT (OTHER THAN
PURSUANT TO REGULATION S) AND APPLICABLE STATE LAW IS AVAILABLE.
Certain registration rights with respect to the Securities are set
forth in the Registration Rights Agreement. This offering is not a public
offering and is intended to be made pursuant to Section 4(2) and 4(6) of the Act
and Regulation D as promulgated by the Securities and Exchange Commission
("SEC") under the Act. This offering is also intended to be exempt from the
registration requirements of various state securities laws. A substantial number
of state securities commissions and securities industry associations have
established investor suitability standards for marketing private offerings of
securities within their respective jurisdictions. Some have also established
minimum dollar levels for purchases in their states. The Company shall comply
with these restrictions to the extent applicable.
(r) With a view to making available the benefits of certain rules and
regulations of the SEC that may permit the sale of certain of the Securities, to
the public without registration, the Company shall use its best efforts to:
9
<PAGE>
(i) make and keep public information regarding the Company available,
as those terms are understood and defined in Rule 144 under the Act, at all
times following the Closing Date (as hereinafter defined);
(ii) file with the SEC in a timely manner all reports and other
documents required of the Company under the Act and the Exchange Act;
(iii) so long as the Buyer owns any Securities, furnish to the Buyer
forthwith upon written request a written statement by the Company as to its
compliance with the reporting requirements of Rule 144, and of the Act and the
Exchange Act, a copy of the most recent annual or quarterly report of the
Company and such other reports and documents so filed as the Buyer may
reasonably request in availing itself of any rule or regulation of the SEC
allowing the Buyer to sell any such securities without registration.
(iv) make all necessary filings in connection with this offering as
required by the laws and regulations of all appropriate jurisdictions and
securities exchanges in the United States of America.
(s) Each party shall indemnify the other against any loss, cost or
damages (including reasonable attorney's fees and expenses) incurred as a result
of such parties' breach of any representation, warranty, covenant or agreement
in this Agreement.
7. Offering Materials. All offering materials and documents used in connection
with offers and sales of the Securities prior to the registration of the
Securities as provided in the Registration Rights Agreement shall include
statements to the effect that the Securities and the Shares issuable upon the
exercise of conversion rights have not been registered under the Act and that
the Buyer, may not sell the Securities or Shares unless the Securities or Shares
are registered under the Act, or to the extent applicable under Rule 144, or an
exemption from the registration requirements of the Act is available. Such
statements shall appear (1) on the cover of any prospectus or offering circular
used in connection with the offer or sale of the Securities and (2) in the
underwriting section of any prospectus or offering circular used in connection
with the offer or sale of the Securities. The Company represents that all
offering materials and documents used in connection with the offers and sales of
the Securities prior to the Closing of the transactions contemplated herein have
complied with the foregoing.
8. Covenants of the Company. (a) The Company agrees that during the period
beginning on the date hereof and ending 90 days following the Closing Date, the
Company will not, without the prior written consent of a "majority-in-interest"
of the Buyers, negotiate or contract with any party to obtain additional equity
financing (including debt financing with an equity component) in any form
pursuant to an exemption from the Act under Regulation D or Regulation S of the
Act (the "Future Offerings"). In addition, the Company will not conduct any
Future Offerings during the period beginning on the 90th day following the date
hereof and ending 180 days following the Closing Date unless it shall have first
delivered to the Buyer at least ten (10) business days prior to the closing of
such Future Offering, written notice describing the proposed Future Offering,
including the terms and conditions thereof, and providing the Buyer an option
during such ten (10) day period to purchase all or any portion of its "pro-rata"
share of the securities being offered in the Future Offerings on the same terms
as contemplated by such Future Offering (the limitations referred to in this and
the immediately preceding sentence are collectively referred to as the "Capital
Raising Limitation"). The Capital Raising Limitation shall not apply to any
transaction involving the
10
<PAGE>
Company's commercial banking arrangements or issuances of securities in
connection with a merger, consolidation or sale of assets, or in connection with
any strategic partnership or joint venture (the primary purpose of which is not
to raise equity capital), or in connection with the disposition or acquisition
of a business, product or license by the Company (so long as the securities so
issued are "restricted securities" within the meaning of Rule 144 under the 1933
Act and do not carry registration or piggyback rights for at least 360 days from
the date of this Agreement), the issuance of securities to settle securities
litigation, or exercise of options by or the grant of performance shares to
employees, consultants or directors. The terms (i) "majority-in-interest" means
holders of Preferred Stock holding more than 50% of the Common Stock underlying
the Securities (treating the Securities on an as converted basis) and (ii)
"pro-rata share" means the number of the Securities initially purchased divided
by the aggregate number of all Securities sold hereunder.
(b) The parties shall use their best efforts timely to satisfy each of the
conditions described in Section 9 of this Agreement.
(c) So long as the Buyer beneficially owns any of the Securities, the
Company shall timely file all reports required to be filed with the SEC pursuant
to the Exchange Act, and the Company shall satisfy the conditions described in
Section 6(r).
(d) The Company agrees to send the following reports to Buyer until Buyer
transfers, assigns, or sells all of the Securities: (i) within ten (10) days
after the filing with the SEC, a copy of its Annual Report on Form 10-KSB, its
Quarterly Reports on Form 10-QSB and any Current Reports on Form 8-K; and (ii)
within two (2) business days after release, copies of all press releases issued
by the Company or any of its subsidiaries.
(e) The Company shall at all times have authorized, and reserved for the
purpose of issuance, a sufficient number of shares of Common Stock to provide
for the full conversion of the outstanding Securities and issuance of the Shares
in connection therewith (based on the Conversion Price of the Securities in
effect from time to time). In that regard, on the Closing Date, the Company
shall have at least 3,000,000 shares reserved for issuance upon conversion of
the Securities (subject to adjustment in order to comply with the immediately
preceding sentence); provided that the Company shall not reduce the number of
shares of Common Stock reserved for issuance upon conversion of the Securities
without the consent of a majority-in-interest of the Buyers, which consent will
not be unreasonably withheld.
(f) So long as the Buyer beneficially owns any Securities, the Company
shall maintain its corporate existence, except in the event of a merger,
consolidation or sale of all or substantially all of the Company's assets, as
long as the surviving or successor entity in such transaction (i) assumes the
Company's obligations hereunder and under the agreements and instruments entered
into in connection herewith and (ii) is a publicly traded corporation whose
Common Stock is listed for trading on the AMEX, the NYSE or the Nasdaq.
The Company and the Buyer agree that the Closing Date, when certified by
Escrow Agent as the Closing shall be deemed to be a conclusion of the offering
of the Securities contemplated hereby.
(h) The Shares and the certificates evidencing the same shall at all times
be free of legends (except as provided in Section 10 below), "stock transfer
restrictions," or other restrictions, except for covenants of the Buyer
expressly set forth in this Agreement.
11
<PAGE>
9. Conditions Precedent to the Buyer's Obligation. The obligations of the Buyer
hereunder are subject to the performance by the Company of its obligations
hereunder and to the satisfaction of the following additional conditions
precedent:
(a) The Buyer shall receive, on the Closing Date, an opinion of
independent counsel to the Company, dated the Closing Date, as to the
representations made by the Company in Sections 6(a) through and including 6(f)
hereof, and in Sections 6(m) and 6(n) hereof, and such other matters as Buyer
reasonably requests. The form of such opinion shall be as set forth in Exhibit 1
hereof.
(b) Delivery of the certificates representing the Preferred Stock with
restrictive legends to the Escrow Agent as set forth herein.
(c) The Company shall have delivered to the Buyer a certificate in
form and substance reasonably satisfactory to the Buyer, executed by an
executive officer of the Company, to the effect that all the conditions to the
Closing shall have been satisfied and the representations and warranties of the
Company herein are true and correct as of the date when made and as of the
Closing Date, and certifying as to the Company's Certificate of Incorporation,
By-laws, resolutions authorizing transaction, and incumbency of Company
officers.
(d) The Company and the Buyer shall have entered into the Registration
Rights Agreement contemplated by Section 4.
10. Legends (a) The certificates representing the Securities and the Shares
issued prior to the effective date of the registration statement or availability
of an exemption from registration, shall bear the legend set forth in Section
6(q) herein (the "Legend").
(b) Following the effective date of the registration statement or
availability of an exemption from registration requirements under Rule 144 of
the Act, the Company will remove or will promptly instruct its transfer agent
(the "Transfer Agent") to remove the Legend from the Securities and, if
applicable, from the Shares issued prior to the effective date of the
registration statement (and will instruct the Transfer Agent to issue without
the Legend, the Shares issuable upon any conversion).
(c) Upon the submission, at any time after the effective date of the
registration statement or applicability of an exemption from the registration
requirements, under Rule 144 of the Act by the Buyer of a written request for
legend removal for the purpose of a bona fide pledge or deposit of the
Securities with a margin account, together with the certificates for which the
legend removal is being requested, the Company will reissue or will promptly
instruct the Transfer Agent to reissue the certificates representing the
Securities to be so pledged or deposited without the Legend.
11. Transfer Agent Instructions The Transfer Agent will be instructed to reserve
for issuance such number of shares of the Company's Common Stock as would be
issuable if the Preferred Stock were converted on the Closing Date and such
additional number of shares as, from time to
time, shall be necessary to provide for the issuance of Shares upon the
conversion of the Preferred Stock. Additionally, the Company shall deliver to
the Transfer Agent at closing irrevocable instructions substantially in the form
set forth in Exhibit "D" attached hereto, pursuant to which the Transfer Agent
shall be instructed to issue upon conversion the number of shares provided for
in the Preferred Stock being converted on the terms provided for therein without
restrictive legend, registered in the
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<PAGE>
names provided by the Holders. The Company warrants and covenants that no
instructions restricting the transferability of the Securities and the Shares
other than the instructions in the immediately preceding sentence and
instructions for a "stop transfer" instruction until the effective date of the
registration statement have been given, or shall be given, to the Transfer
Agent, and that the Securities and the Shares shall otherwise be freely
transferable on the books and records of the Company. Nothing in this section,
however, shall affect in any way the obligations and agreement of the Buyer to
comply with all applicable federal, state and foreign securities laws upon
resale of the Securities.
12. Miscellaneous. (a) This Agreement may be executed in one or more
counterparts and it is not necessary that signatures of all parties appear on
the same counterpart, but such counterparts together shall constitute but one
and the same agreement.
(b) This Agreement shall be governed by and constructed in accordance
with the laws of the State of Delaware.
(c) This Agreement shall inure to the benefit of and be binding upon
the parties hereto, their respective successors, and no other person shall have
any right or obligation hereunder. This Agreement shall not be assignable by
either party without the prior written consent of the other, and any assignment
in violation hereof shall be void. Notwithstanding the foregoing, the Buyer may
assign its rights in this Agreement to, and the provisions of this Agreement
shall inure to the benefit of, and be enforceable by, any transferee of any of
the Securities or Shares.
(d) This Agreement together with the Certificate of Designation and
the Registration Rights Agreement constitutes the entire agreement of the
parties with respect to the subject matter hereof and supersede all prior oral
or written proposals or agreements related thereto. This Agreement may not be
amended or any provision hereof waived, in whole or in part, except by a written
amendment signed by both of the parties hereto.
IN WITNESS WHEREOF, the parties hereto have duly executed and delivered
this Agreement, all as of the day and year above written.
BY: VIDEOLAN TECHNOLOGIES, INC.
__________________________________
Name: Jack Shirman
Title: Chief Executive Officer
or
Name: Steven B. Rothenberg
Title: Vice President Finance, Treasurer and Secretary
BY: RIC INVESTMENT FUND LTD.
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__________________________________
Name:
Title:
<PAGE>
Exhibit 10.49
STOCK OPTION AGREEMENT
THIS STOCK OPTION AGREEMENT (this "Agreement") is made and entered into as
of January 23, 1997 (the "Effective Date"), by and between VIDEOLAN
TECHNOLOGIES, INC., a Delaware corporation (the "Company") and JACK SHIRMAN, an
employee of the Company (the "Optionee").
RECITALS:
WHEREAS, the Company and the Optionee have entered into an Employment
Agreement of even date herewith (the "Employment Agreement") pursuant to which
the Optionee will become Chief Executive Officer of the Company;
WHEREAS, under the Employment Agreement, the Board of Directors of the
Company has agreed to grant to the Optionee an option to purchase shares of the
common stock, $.01 par value (the "Common Stock"), of the Company;
NOW, THEREFORE, in consideration of the premises, mutual covenants
hereinafter set forth, and other good and valuable consideration, the Company
and the Optionee agree as follows:
Grant of the Option. The Company hereby grants to the Optionee, as a matter of
separate inducement and agreement in connection with the Optionee's employment
by the Company and the Employment Agreement, and not in lieu of any salary or
other compensation for the Optionee's services, the right and option to purchase
(the "Option") all or any part of an aggregate of 246,000 Shares (the "Shares"),
on the terms and conditions set forth herein, subject to adjustment as provided
in Section 8 hereof, at a purchase price as established under Section 2. The
Option shall constitute an "Incentive Stock Option" within the meaning of
Section 422 of the Internal Revenue Code of 1986, as amended.
Option Exercise Price. The exercise price of the Option (the "Exercise Price")
shall be $1.56 per Share, subject to adjustment in accordance with Section 8
hereof.
Duration of Option. Unless earlier terminated, pursuant to Section 7 hereof, the
Option shall expire on September 26, 2001 (the "Termination Date").
Exercise of Option.
The Option shall vest and become exercisable with respect to 82,000 Shares on
March 27, 1998.
The Option shall vest and become exercisable with respect to an additional
82,000 Shares on March 27, 1999.
The Option shall vest and become exercisable with respect to an additional
41,000 Shares on March 27, 2000.
<PAGE>
The Option shall vest and become exercisable with respect to the remaining
41,000 Shares on March 27, 2001.
If the Optionee ceases to be employed by the Company for any reason, the
Optionee shall have no rights with respect to that portion of the Option which
is not then exercisable.
Conditions to Exercise of the Option.
Exercise of the Option. Subject to the provisions of Section 4 hereof, the
Optionee may exercise the Option by delivering written notice ("Notice") of
exercise to the Company in the form of Annex A hereto specifying the number of
Shares to be purchased accompanied by payment in full of the Exercise Price in
accordance with Section 5(b) hereof.
Payment of Exercise Price. The Company shall accept as payment for the Exercise
Price either a check payable to the order of the Company in the amount of the
Exercise Price multiplied by the number of Shares for which the Option is being
exercised or any other form of payment acceptable to the Board of Directors of
the Company.
Partial Exercise. Subject to the limitations expressed herein, the Option may be
exercised with respect to all or a part of the Shares that are currently
exercisable; provided, however, that no partial exercise of the Option shall
result in the issuance of less than 100 Shares.
Delivery of Shares on Exercise. As soon as practicable after receipt of the
Notice and payment of the Exercise Price, the Company shall deliver to the
Optionee, without transfer or issuance tax or other incidental expense to the
Optionee, at the office of the Company, or at such other place as may be
mutually acceptable, or, at the election of the Company, by certified mail
addressed to the Optionee at the Optionee's address shown in the employment
records of the Company, a certificate or certificates for the number of Shares
set forth in the Notice and for which the Company has received payment in the
manner prescribed herein.
Option Not Transferable Except in Event of Death. During the Optionee's
lifetime, the Option shall be exercisable only by the Optionee or his duly
appointed guardian or personal representative, and neither the Option nor any
right hereunder shall be transferable other than by will or the laws of decent
and distribution. The Option may not be subject to execution or other similar
process. If the Optionee attempts to alienate, assign, pledge, hypothecate or
otherwise dispose of the Option or any of the Optionee's rights hereunder,
except as provided herein, or in the event of any levy or any attachment,
execution or similar process upon the rights or interests hereby conferred, the
Company may terminate the Option by notice to the Optionee and it shall
thereupon become null and void.
Exercise of the Option upon Termination of Employment. In the event the Optionee
shall cease to be employed by the Company, the Option shall expire at the
earlier of the expiration of the Termination Date or the following:
<PAGE>
three months after termination due to normal retirement, or earlier retirement
with consent of the Board of Directors of the Company, under a formal plan or
policy of the Company;
three months after the Optionee's termination pursuant to Section 6(a)(v) of the
Employment Agreement;
one year after termination due to disability within the meaning of section
105(d)(4) of the Internal Revenue Code of 1986, as amended (the "Code"), as
determined by the Board of Directors of the Company;
one year after the Optionee's death; or
coincident with the date of termination if due to any other reason.
Adjustments in Authorized Shares and the Option. In the event of a merger,
reorganization, consolidation, recapitalization, reclassification, split-up,
spin-off, separation, liquidation, share dividend, share split, reverse share
split, share combination, share exchange or other change in the capital
structure of the Company affecting the Common Stock, the Board of Directors of
the Company may substitute or adjust the total number and class of Shares or
other securities that may be issued hereunder, and the Exercise Price, as it
determines to be appropriate and equitable to prevent dilution or enlargement of
the rights of the Optionee and to preserve, without diluting or exceeding, the
value of the Option.
Cancellation of Option. The Company shall have the right to terminate the right
of the Optionee to exercise the Option, effective thirty (30) days after receipt
by the Optionee of a written notice from the Company informing the Optionee that
this Option is to be cancelled (the "Cancellation Notice"). The Company may
issue a Cancellation Notice only in connection with (i) the sale of
substantially all of the Company's assets, or (ii) a merger, consolidation or
other corporate transaction in which the Company would not be the surviving
entity. Following receipt of a Cancellation Notice and during the period prior
to the effective date of the termination, the Optionee shall have the right to
exercise the Option (to the extent not previously exercised) with respect to all
Shares, if any, which were immediately exercisable by the Optionee hereunder
during the period following receipt of a Cancellation Notice until the effective
date of the termination.
Agreement Does Not Grant Employment Rights. The grant of the Option shall not be
construed as giving the Optionee the right to be retained in the employ by the
Company. Further, the Company expressly reserves the right, at any time, to
dismiss the Optionee with or without cause, free from any liability, or any
claim, except as provided herein or in the Employment Agreement.
Limitation of Company's Liability for Nonissuance. The inability of the Company
to obtain, from any regulatory body having jurisdiction, authority reasonably
deemed by the Company's counsel to be necessary for the lawful issuance and sale
of any Shares under this Agreement shall relieve the Company of any liability in
respect of the nonissuance or sale of such Shares as to which such requisite
authority shall not have been obtained.
<PAGE>
1995 Option Plan. The Option has been granted pursuant to the Amended and
Restated 1995 Stock Option Plan of the Company, as amended from time to time,
and is subject to all of the provisions thereof.
Miscellaneous.
No Rights as Shareholder. The Optionee shall have no rights to dividends (other
than the adjustment rights described in Section 8 of this Agreement) or other
rights of a shareholder with respect to Shares unless and until the Optionee has
given the Notice and paid in full for such Shares.
Captions. The captions and section headings used herein are for convenience
only, shall not be deemed part of this Agreement and shall not in any way
restrict or modify the context and substance of any section or paragraph of this
Agreement.
Governing Law; Construction. This Agreement shall be governed by, and construed
in accordance with, the laws of the Commonwealth of Kentucky.
Counterparts. This Agreement may be executed in counterparts, each of which
shall be deemed an original and both of which together shall be deemed an
Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year first written above.
VIDEOLAN TECHNOLOGIES, INC.
By: ______________________________
Steve Rothenberg
Vice President Finance
______________________________
Jack Shirman
<PAGE>
Exhibit 10.50
EXECUTIVE SEVERANCE AGREEMENT
This Executive Severance Agreement dated as of the 14th day of February,
1997 (the "Agreement") is made by and between VideoLan Technologies, Inc., a
Delaware corporation (the "Company"), and Jack Shirman (the "Executive"), who is
presently Chief Executive Officer of the Company, in consideration of the mutual
covenants herein contained and in further consideration of services performed
and to be performed by the Executive for the Company.
Recitals
A. The Company considers the establishment and maintenance of sound and
vital management of the Company and its subsidiaries to be essential to
protecting and enhancing the best interests of the Company and its shareholders.
B. The Company recognizes that, as is the case with many companies, the
possibility of a change of control may exist. Such possibility, and the
uncertainty and questions which it may raise among management of the Company and
its subsidiaries may result in the departure or distraction of key members of
management to the detriment of the Company's shareholders.
C. The Company's Board of Directors has determined that appropriate steps
should be taken to encourage key members of management of the Company, such as
the Executive, to remain in the employ of the Company and perform their assigned
duties without distraction in the face of potentially disturbing circumstances
arising from the possibility of a change of control of the Company.
NOW, THEREFORE, in consideration of the foregoing and of the covenants
herein contained, the parties hereto agree as follows:
Section 1 --Definitions
For purposes of this Agreement, the following words and terms shall have the
following meanings:
1.1 The following actions, failures or events by or affecting the Executive
shall constitute "Cause" (1) conviction of having committed a felony; (2) acts
of dishonesty or moral turpitude that are materially detrimental to the Company
and/or its Affiliates; (3) acts or omissions which the Executive knew or should
have reasonably known were likely to materially damage the business of the
Company and/or any Affiliate of the Company; (4) failure by the Executive to
obey the reasonable and lawful directions of the Board of Directors (or, in the
case of an Executive other than the President, the directives of the President)
of the Company; (5) gross negligence by the Executive in the performance of, or
continuing failure by the Executive to perform, the duties of his position
<PAGE>
with the Company; or (6) the Executive's willful breach of any material
agreement or covenant in a contract between the Executive and the Company or any
fiduciary duty owed to the Company.
1.2 A "Change in Control" of the Company shall mean (i) an event or series
of events which have the effect of any "person" as such term is used in Section
13(d) and 14(d) of the Exchange Act becoming the "beneficial owner" as defined
in Rule 13d-3 under the Exchange Act, directly or indirectly, of securities of
the Company representing than 40% or more of the combined voting power of the
Company's then outstanding stock; or (ii) during any period of two consecutive
years, individuals who at the beginning of such period constitute the Board of
Directors of the Company cease for any reason to constitute a majority thereof,
unless the election, or the nomination for election by the stockholders, of each
new director was approved by a vote of at least two-thirds of the directors then
still in office who were directors at the beginning of the period or who were
nominated by members of the Board so approved for nomination; or (iii) the
business of the Company is being disposed of by the Company pursuant to a
partial or complete liquidation of the Company, sale of assets of the Company,
or otherwise. A Potential Change in Control shall be deemed to occur if (i) the
Company or the Company enters into an agreement, the consummation of which would
result in the occurrence of a Change in Control, (ii) any person (including the
Company) publicly announces an intention to take or to consider taking actions
which have consummated would constitute a Change in Control, or (iii) the
Company Board adopts a resolution to the effect that a Potential Change in
Control for purposes of this Agreement has occurred.
1.3 "Compensation" shall mean the Executive's annual base salary at the
greater of (A) the highest rate in effect at any time during the twelve months
immediately preceding the applicable Date of Termination, or (B) the rate in
effect immediately prior to the applicable Change in Control.
1.4 "Contract Period" shall mean the period defined in Section 2 hereof.
1.5 "Date of Termination" shall mean (A) if the Executive's employment is
terminated for Good Reason, as defined below, the date specified in the Notice
of Termination, as defined in this Section 1.8 below; and (B) if the Executive's
employment is terminated for any other reason, the date on which a Notice of
Termination is given.
1.6 "Disability" shall mean a physical or mental incapacity of the
Executive which entitles the Executive to benefits under any long-term
disability plan or wage continuation plan applicable to him and maintained by
the Company as in effect immediately prior to the applicable Change in Control.
If no such plan exists at the date of a Change in Control, then Disability shall
mean an injury or illness that renders (or is certain to render) Executive
unable to perform his duties for a period of 90 or more days or for shorter
periods aggregating a period of ninety or more days, whether or not consecutive,
occurring within any period of 12 consecutive months.
1.7 "Good Reason" shall mean:
(a) without the Executive's express written consent, the assignment to
Executive of any duties inconsistent with, or the reduction of powers or
functions associated with, his
<PAGE>
positions, duties, responsibilities and status with the Company immediately
prior to a Change in Control, or any removal of Executive from, or any failure
to reelect Executive to, any positions or offices Executive held immediately
prior to a Potential Change in Control, except in connection with the
termination of Executive's employment at death, for Cause or Disability pursuant
to the requirements of this Agreement;
(b) the failure by the Company to obtain an assumption of the
obligations of the Company under this Agreement by any successor to the Company
which does not assume it by operation of law;
(c) a reduction by the Company in the Executive's base salary as in
effect on the date hereof or as the same may be increased from time to time,
except as part of an across-the-board reduction of base salaries applicable to
all salaried employees of the Company, provided the reduction (or series of
reductions) does not exceed 10% of the Executive's base salary prior to such
change;
(e) the Disability of the Executive; or
(f) any purported termination of the Executive's employment during the
Contract Period which is not effected pursuant to a Notice of Termination
satisfying the requirements of Section 3 below; and for purposes of this
Agreement, no such purported termination shall be effective.
1.8 A "Notice of Termination" shall mean a notice, from the Company or from
the Executive, which shall indicate the specific termination provision in this
Agreement relied upon and shall set forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of the Executive's
employment under the provision so indicated.
Section 2 --Application of Agreement
This Agreement shall apply only to termination of employment of the
Executive during a period (the "Contract Period") commencing on the date
immediately preceding the date of a Change in Control and terminating on the
second anniversary of the date of that Change in Control; provided, however,
that each such Change in Control occurs during the period commencing as of
January 23, 1997 and terminating at midnight on December 31, 1998 or as further
extended pursuant to the following sentence (the "Coverage Period"). At midnight
on December 31, 1998, and on each annual anniversary of that time and date
thereafter, the Coverage Period shall be automatically extended for two
additional years, unless on or before such anniversary the Company notifies the
Executive in writing that it elects not to extend such period. There is one
Contract Period for each Change in Control and there may be multiple Change(s)
in Control. With respect to a termination pursuant to Section 3.2 only, the
Contract Period shall also include the period from and after a Potential Change
in Control. If a Potential Change in Control occurs but a Change in Control does
<PAGE>
not follow within one year of the Potential Change in Control, the Contract
Period shall expire on the one year anniversary of the Potential Change in
Control.
Section 3 --Termination
3.1 Procedure for Termination. Any termination by the Company or by the
Executive, pursuant to this Agreement, shall be communicated by Notice of
Termination to the other parties hereto. The Executive shall not be deemed to
have been terminated for Cause unless and until there shall have been delivered
to the Executive a copy of a resolution duly adopted by the affirmative vote of
not less than a majority of the entire membership of the Board of Directors of
the Company (the "Company Board") at a meeting of the Company Board called and
held for that purpose (after reasonable notice to the Executive and an
opportunity for the Executive, together with his counsel, to be heard before the
Company Board), finding that in the good faith opinion of the Company Board, the
Executive was guilty of conduct set forth in Section 1.1 and specifying the
particulars thereof in detail.
3.2 Termination By the Company. Upon a termination of the Executive's
employment for Cause before or during the Contract Period, the Executive shall
have no right to receive any compensation or benefits hereunder. Upon a
termination of the Executive's employment without Cause during the Contract
Period, the Executive shall be entitled to receive the benefits provided in
Section 3.4 hereof. This Agreement shall not apply to, and the Executive shall
have no right to receive any compensation or benefits hereunder in connection
with any termination of the Executive's employment by the Company other than
during a Contract Period, and Executive shall remain an "at will" employee until
a Contract Period begins, except as may be otherwise provided by a written
employment contract between the Executive and the Company.
3.3 Termination By Executive. During the Contract Period, the Executive
shall be entitled to terminate his employment with the Company and, if such
termination is for Good Reason, to receive the benefits provided in Section 3.4
hereof. The Executive shall give the Company Notice of Termination of his
employment pursuant to this Section 3.3, and termination of the Executive's
employment shall be effective five business days after the Executive gives
notice thereof to the Company. This Agreement shall not apply to, and the
Executive shall have no right to receive any compensation or benefits hereunder
in connection with, any termination of the Executive's employment by the
Executive other than during a Contract Period, and shall not apply to
termination of the Executive's employment on account of the Executive's death,
whether or not during the Contract Period.
3.4 Compensation Upon Termination or During Disability. If during a
Contract Period the Executive's employment shall be terminated by the Company
other than pursuant to death or for Cause, or if the Executive shall terminate
his employment for Good Reason, then the Company shall pay, or the Company shall
cause the Company to pay, to the Executive as severance compensation in a lump
sum (discounted to present value using the prime rate of interest as published
in the Wall Street Journal) on the fifth day following the Date of Termination:
<PAGE>
(a) the unpaid balance of the Executive's full base salary through the
Date of Termination at the rate in effect at the time Notice of
Termination is given; and
(b) an amount equal the Executive's Compensation if paid for 24 months
following the Date of Termination, plus an additional 20% of his
Compensation for lost bonus potential (or the maximum bonus he could
have received for the year of termination under any written bonus plan
of the Company in effect at the Date of Termination, if greater).
In addition to the severance benefits set forth in (a) and (b) of this
Section 3.4, the Company shall, or the Company shall cause the Company to:
(c) pay all legal fees and expenses incurred by the Executive
resulting from termination (including all such fees and expenses, if
any, incurred in contesting any such termination or in seeking to
obtain or enforce any right or benefit provided by this Agreement, if
the Executive is successful in that enforcement);
(d) maintain in full force and effect, for the continued benefit of
the Executive for the shorter of two years after the Date of
Termination, or (2) until the Executive's death (provided that
benefits payable to his beneficiaries shall not terminate upon his
death), or (3) with respect to any particular plan, the date he is
afforded a comparable benefit at a comparable cost to the Executive by
a subsequent employer, all employee pension and welfare benefit plans
(as defined in Section 3(1) and 3(2) of the Employer Retirement Income
Security Act of 1974, as amended) in which Executive was entitled to
participate immediately prior to the Change of Control (unless plans
generally available to employees of the Company have been modified
since the Change in Control, in which case the plans to be continued
shall be those in effect at the Date of Termination, at the level most
comparable to that available to the Executive at the Change in
Control). In the event that the Executive's participation in any plan
of the Company is prohibited, the Company shall arrange to provide the
Executive with benefits substantially similar to those which the
Executive is entitled to receive under plan, for such period. At the
end of the period of coverage, the Executive shall have the option to
have assigned to him at no cost and with no apportionment of prepaid
premiums, any assignable insurance policy owned by the Company
relating specifically to the Executive; and
(e) cause all stock options and stock appreciation rights and/or the
rights held by the Executive with respect to stock in the Company
immediately prior to the termination, if not otherwise presently
exercisable, to become presently exercisable.
<PAGE>
3.5 Disability. If during the Contract Period, the Executive's employment
shall be terminated, either by the Company or by the Executive, due to the
Executive's Disability, the Company shall pay the Executive as severance
compensation the same benefits as set forth in Section 3.4(a)-(e).
3.6 No Mitigation. The Executive shall not be required to mitigate the
amount of any payment provided for in this Section 3 by seeking other employment
or otherwise, nor shall the amount of any payment provided for in this Section 3
be reduced by any compensation earned by the Executive as the result of
employment by another employer after the Date of Termination, or otherwise.
Section 4 --Miscellaneous
4.1 Successors Shall Assume. The Company will require any successor
(whether direct or indirect, by purchase, merger, consolidation or otherwise) to
all or substantially all of the business and/or assets of the Company or the
Company, by agreement in form and substance satisfactory to the Executive,
expressly to assume and agree to perform this Agreement in the same manner and
to the same extent that the Company or the Company would be required to perform
it if no such succession had taken place. Failure of the Company to obtain such
agreement prior to the effectiveness of any such succession shall be a breach of
this Agreement and shall entitled the Executive to compensation from the Company
in the same amount and on the same terms as the Executive would be entitled
hereunder if the Executive terminated the Executive's employment for Good
Reason, except that for purposes of implementing the foregoing, the date on
which any such succession becomes effective shall be deemed the Date of
Termination. As used in this Agreement, "Company" shall mean the Company as
defined in the preamble hereto and any successor to its business and/or assets
as aforesaid or which otherwise becomes bound by all the terms and provisions of
this Agreement by operation of law.
4.2 Binding Effect. This Agreement shall inure to the benefit of and be
enforceable by the Executive's personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees and legatees. If the
Executive should die while any amounts would still be payable to the Executive
hereunder if the Executive had continued to live, all such amounts, unless
otherwise provided herein, shall be paid in accordance with the terms of this
Agreement to the Executive's devisee, legatee, or other designee or, if there be
no such designee, to the Executive's estate.
4.3 Reduction of Amounts Payable. In no event shall any amount payable
under any provision of this Agreement equal or exceed an amount which would
cause the Company to forfeit, pursuant to Section 280G(a) of the Internal
Revenue Code of 1986, as amended, its deduction for any or all such amounts
payable. Pursuant to this Section 4.3, the Company's Board of Directors (or a
Committee of the Board to which compensation matters are delegated) has the
power to reduce severance benefits payable under this
<PAGE>
Agreement, if such benefits alone or in conjunction with termination benefits
provided under any other Company plan or program, would cause the Company to
forfeit otherwise deductible payments; provided, however that no benefits
payable under this Agreement shall be reduced pursuant to this Section 4.3 to
less than $1.00 below the amount of benefits which the Company can properly
deduct under Section 280G(a) of the Internal Revenue Code of 1986, as amended,
and that the Committee; and further provided that the Executive shall choose
which of the payments and benefits to retain if some payments and benefits will
not be paid hereunder.
4.4 Notice. Any notice or request required or permitted to be given under
this Agreement shall be in writing and shall be deemed sufficiently given for
all purposes if mailed by certified mail, postage prepaid and return receipt
requested, addressed to the intended recipient at
(a) the addresses set forth below:
(i) If to the Company:
100 Mallard Creek Road
Suite 250
Louisville, Kentucky 40207
All notices to the Company shall be directed to the attention of the Chief
Executive Officer of the Company with a copy to the Secretary of the Company.
(ii) If to the Executive:
Jack Shirman
100 Mallard Creek Road
Suite 250
Louisville, Kentucky 40207
(b) Such other address as any of the parties shall specify by written
notice to the other parties of this Agreement.
4.5 Payment Obligations Absolute. The Company's obligation to pay the
Executive the amounts provided for hereunder shall be absolute and unconditional
and shall not be affected by any circumstances, including, without limitation,
any set-off, counterclaim, recoupment, defense or other right which the Company
may have against him or anyone else, except with respect to tax withholding
required pursuant to Section 4.11. All amounts payable by the Company hereunder
shall be paid without notice or demand. Except as expressly provided herein, the
Company waives all rights which it may now have or may hereafter have conferred
upon it, by statute or otherwise, to amend, terminate, cancel or rescind this
Agreement in whole or in part. Each and every payment made hereunder by
<PAGE>
the Company shall be final and the Company shall not seek to recover all or any
part of such payment from the Executive or from whomsoever may be entitled
thereto, for any reason whatsoever.
4.6 Modifications and Waivers. No provisions of this Agreement may be
modified, waived or discharged unless such waiver, modification or discharge is
agreed to in writing and signed by the Executive and such officer as may be
specifically designated by the Board of Directors of the Company. No waiver by
either party hereto at any time of any breach by the other party hereto of, or
compliance with, any condition or provision of this Agreement to be performed by
such other party shall be deemed a waiver of similar or dissimilar provisions or
conditions at the same or any prior or subsequent time.
4.7 Entire Agreement. In the event that Executive is entitled to receive
any payment under ss.3.4 of this Agreement, Executive shall not be entitled to
receive any payments pursuant to the Employment Agreement between the Executive
and the Company dated September 27, 1997 that relate to compensation payable
upon or after termination of employment. No agreements or representations, oral
or otherwise, express or implied, with respect to the subject matter hereof have
been made by either party which are not set forth expressly in this Agreement.
4.8 Governing Law. The validity, interpretation, construction and
performance of this Agreement shall be governed by the laws of the Commonwealth
of Kentucky.
4.9 Validity. The invalidity or unenforceability of any provisions of this
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement, which shall remain in full force and effect.
4.10 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
4.11 Payroll and Withholding Taxes. The Company may withhold from any
amounts payable to the Executive hereunder all federal, state, city or other
taxes that the Company may reasonably determine are required to be withheld
pursuant to any applicable law or regulation.
IN WITNESS WHEREOF the parties hereto have executed this Agreement, as of the
day and year first above written.
VIDEOLAN TECHNOLOGIES, INC.
_________________________ By________________________________
Jack Shirman Steven Rothenberg
<PAGE>
Title: Chief Financial Officer
Date: February 14, 1997
<PAGE>
Exhibit 10.51
EXECUTIVE SEVERANCE AGREEMENT
This Executive Severance Agreement dated as of the 14th day of February,
1997 (the "Agreement") is made by and between VideoLan Technologies, Inc., a
Delaware corporation (the "Company"), and Steven Rothenberg (the "Executive"),
who is presently Vice President -Finance, Chief Financial Officer, and Treasurer
of the Company, in consideration of the mutual covenants herein contained and in
further consideration of services performed and to be performed by the Executive
for the Company.
Recitals
A. The Company considers the establishment and maintenance of sound and
vital management of the Company and its subsidiaries to be essential to
protecting and enhancing the best interests of the Company and its shareholders.
B. The Company recognizes that, as is the case with many companies, the
possibility of a change of control may exist. Such possibility, and the
uncertainty and questions which it may raise among management of the Company and
its subsidiaries may result in the departure or distraction of key members of
management to the detriment of the Company's shareholders.
C. The Company's Board of Directors has determined that appropriate steps
should be taken to encourage key members of management of the Company, such as
the Executive, to remain in the employ of the Company and perform their assigned
duties without distraction in the face of potentially disturbing circumstances
arising from the possibility of a change of control of the Company.
NOW, THEREFORE, in consideration of the foregoing and of the covenants
herein contained, the parties hereto agree as follows:
Section 1 --Definitions
For purposes of this Agreement, the following words and terms shall have the
following meanings:
1.1 The following actions, failures or events by or affecting the Executive
shall constitute "Cause" (1) conviction of having committed a felony; (2) acts
of dishonesty or moral turpitude that are materially detrimental to the Company
and/or its Affiliates; (3) acts or omissions which the Executive knew or should
have reasonably known were likely to materially damage the business of the
Company and/or any Affiliate of the Company; (4) failure by the Executive to
obey the reasonable and lawful directions of the Board of Directors (or, in the
case of an Executive other than the President, the directives of the President)
of the Company; (5) gross negligence by the Executive
<PAGE>
in the performance of, or continuing failure by the Executive to perform, the
duties of his position with the Company; or (6) the Executive's willful breach
of any material agreement or covenant in a contract between the Executive and
the Company or any fiduciary duty owed to the Company.
1.2 A "Change in Control" of the Company shall mean (i) an event or series
of events which have the effect of any "person" as such term is used in Section
13(d) and 14(d) of the Exchange Act becoming the "beneficial owner" as defined
in Rule 13d-3 under the Exchange Act, directly or indirectly, of securities of
the Company representing than 40% or more of the combined voting power of the
Company's then outstanding stock; or (ii) during any period of two consecutive
years, individuals who at the beginning of such period constitute the Board of
Directors of the Company cease for any reason to constitute a majority thereof,
unless the election, or the nomination for election by the stockholders, of each
new director was approved by a vote of at least two-thirds of the directors then
still in office who were directors at the beginning of the period or who were
nominated by members of the Board so approved for nomination; or (iii) the
business of the Company is being disposed of by the Company pursuant to a
partial or complete liquidation of the Company, sale of assets of the Company,
or otherwise. A Potential Change in Control shall be deemed to occur if (i) the
Company or the Company enters into an agreement, the consummation of which would
result in the occurrence of a Change in Control, (ii) any person (including the
Company) publicly announces an intention to take or to consider taking actions
which have consummated would constitute a Change in Control, or (iii) the
Company Board adopts a resolution to the effect that a Potential Change in
Control for purposes of this Agreement has occurred.
1.3 "Compensation" shall mean the Executive's annual base salary at the
greater of (A) the highest rate in effect at any time during the twelve months
immediately preceding the applicable Date of Termination, or (B) the rate in
effect immediately prior to the applicable Change in Control.
1.4 "Contract Period" shall mean the period defined in Section 2 hereof.
1.5 "Date of Termination" shall mean (A) if the Executive's employment is
terminated for Good Reason, as defined below, the date specified in the Notice
of Termination, as defined in this Section 1.8 below; and (B) if the Executive's
employment is terminated for any other reason, the date on which a Notice of
Termination is given.
1.6 "Disability" shall mean a physical or mental incapacity of the
Executive which entitles the Executive to benefits under any long-term
disability plan or wage continuation plan applicable to him and maintained by
the Company as in effect immediately prior to the applicable Change in Control.
If no such plan exists at the date of a Change in Control, then Disability shall
mean an injury or illness that renders (or is certain to render) Executive
unable to perform his duties for a period of 90 or more days or for shorter
periods aggregating a period of ninety or more days, whether or not consecutive,
occurring within any period of 12 consecutive months.
1.7 "Good Reason" shall mean:
<PAGE>
(a) without the Executive's express written consent, the assignment to
Executive of any duties inconsistent with, or the reduction of powers or
functions associated with, his positions, duties, responsibilities and status
with the Company immediately prior to a Change in Control, or any removal of
Executive from, or any failure to reelect Executive to, any positions or offices
Executive held immediately prior to a Potential Change in Control, except in
connection with the termination of Executive's employment at death, for Cause or
Disability pursuant to the requirements of this Agreement;
(b) the failure by the Company to obtain an assumption of the
obligations of the Company under this Agreement by any successor to the Company
which does not assume it by operation of law;
(c) a reduction by the Company in the Executive's base salary as in
effect on the date hereof or as the same may be increased from time to time,
except as part of an across-the-board reduction of base salaries applicable to
all salaried employees of the Company, provided the reduction (or series of
reductions) does not exceed 10% of the Executive's base salary prior to such
change;
(e) the Disability of the Executive; or
(f) any purported termination of the Executive's employment during the
Contract Period which is not effected pursuant to a Notice of Termination
satisfying the requirements of Section 3 below; and for purposes of this
Agreement, no such purported termination shall be effective.
1.8 A "Notice of Termination" shall mean a notice, from the Company or from
the Executive, which shall indicate the specific termination provision in this
Agreement relied upon and shall set forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of the Executive's
employment under the provision so indicated.
Section 2 --Application of Agreement
This Agreement shall apply only to termination of employment of the
Executive during a period (the "Contract Period") commencing on the date
immediately preceding the date of a Change in Control and terminating on the
second anniversary of the date of that Change in Control; provided, however,
that each such Change in Control occurs during the period commencing as of
January 23, 1997 and terminating at midnight on December 31, 1998 or as further
extended pursuant to the following sentence (the "Coverage Period"). At midnight
on December 31, 1998, and on each annual anniversary of that time and date
thereafter, the Coverage Period shall be automatically extended for two
additional years, unless on or before such anniversary the Company notifies the
Executive in writing that it elects not to extend such period. There is one
Contract Period for each Change in Control and there may be multiple Change(s)
in Control. With respect to a termination pursuant to Section 3.2 only, the
Contract Period shall also include the period from and after a
<PAGE>
Potential Change in Control. If a Potential Change in Control occurs but a
Change in Control does not follow within one year of the Potential Change in
Control, the Contract Period shall expire on the one year anniversary of the
Potential Change in Control.
Section 3 --Termination
3.1 Procedure for Termination. Any termination by the Company or by the
Executive, pursuant to this Agreement, shall be communicated by Notice of
Termination to the other parties hereto. The Executive shall not be deemed to
have been terminated for Cause unless and until there shall have been delivered
to the Executive a copy of a resolution duly adopted by the affirmative vote of
not less than a majority of the entire membership of the Board of Directors of
the Company (the "Company Board") at a meeting of the Company Board called and
held for that purpose (after reasonable notice to the Executive and an
opportunity for the Executive, together with his counsel, to be heard before the
Company Board), finding that in the good faith opinion of the Company Board, the
Executive was guilty of conduct set forth in Section 1.1 and specifying the
particulars thereof in detail.
3.2 Termination By the Company. Upon a termination of the Executive's
employment for Cause before or during the Contract Period, the Executive shall
have no right to receive any compensation or benefits hereunder. Upon a
termination of the Executive's employment without Cause during the Contract
Period, the Executive shall be entitled to receive the benefits provided in
Section 3.4 hereof. This Agreement shall not apply to, and the Executive shall
have no right to receive any compensation or benefits hereunder in connection
with any termination of the Executive's employment by the Company other than
during a Contract Period, and Executive shall remain an "at will" employee until
a Contract Period begins, except as may be otherwise provided by a written
employment contract between the Executive and the Company.
3.3 Termination By Executive. During the Contract Period, the Executive
shall be entitled to terminate his employment with the Company and, if such
termination is for Good Reason, to receive the benefits provided in Section 3.4
hereof. The Executive shall give the Company Notice of Termination of his
employment pursuant to this Section 3.3, and termination of the Executive's
employment shall be effective five business days after the Executive gives
notice thereof to the Company. This Agreement shall not apply to, and the
Executive shall have no right to receive any compensation or benefits hereunder
in connection with, any termination of the Executive's employment by the
Executive other than during a Contract Period, and shall not apply to
termination of the Executive's employment on account of the Executive's death,
whether or not during the Contract Period.
3.4 Compensation Upon Termination or During Disability. If during a
Contract Period the Executive's employment shall be terminated by the Company
other than pursuant to death or for Cause, or if the Executive shall terminate
his employment for Good Reason, then the Company shall pay, or the Company shall
cause the Company to pay, to the Executive as severance
<PAGE>
compensation in a lump sum (discounted to present value using the prime rate of
interest as published in the Wall Street Journal) on the fifth day following the
Date of Termination:
(a) the unpaid balance of the Executive's full base salary through the
Date of Termination at the rate in effect at the time Notice of
Termination is given; and
(b) an amount equal the Executive's Compensation if paid for 24 months
following the Date of Termination, plus an additional 20% of his
Compensation for lost bonus potential (or the maximum bonus he could
have received for the year of termination under any written bonus plan
of the Company in effect at the Date of Termination, if greater).
In addition to the severance benefits set forth in (a) and (b) of this
Section 3.4, the Company shall, or the Company shall cause the Company to:
(c) pay all legal fees and expenses incurred by the Executive
resulting from termination (including all such fees and expenses, if
any, incurred in contesting any such termination or in seeking to
obtain or enforce any right or benefit provided by this Agreement, if
the Executive is successful in that enforcement);
(d) maintain in full force and effect, for the continued benefit of
the Executive for the shorter of two years after the Date of
Termination, or (2) until the Executive's death (provided that
benefits payable to his beneficiaries shall not terminate upon his
death), or (3) with respect to any particular plan, the date he is
afforded a comparable benefit at a comparable cost to the Executive by
a subsequent employer, all employee pension and welfare benefit plans
(as defined in Section 3(1) and 3(2) of the Employer Retirement Income
Security Act of 1974, as amended) in which Executive was entitled to
participate immediately prior to the Change of Control (unless plans
generally available to employees of the Company have been modified
since the Change in Control, in which case the plans to be continued
shall be those in effect at the Date of Termination, at the level most
comparable to that available to the Executive at the Change in
Control). In the event that the Executive's participation in any plan
of the Company is prohibited, the Company shall arrange to provide the
Executive with benefits substantially similar to those which the
Executive is entitled to receive under plan, for such period. At the
end of the period of coverage, the Executive shall have the option to
have assigned to him at no cost and with no apportionment of prepaid
premiums, any assignable insurance policy owned by the Company
relating specifically to the Executive; and
<PAGE>
(e) cause all stock options and stock appreciation rights and/or the
rights held by the Executive with respect to stock in the Company
immediately prior to the termination, if not otherwise presently
exercisable, to become presently exercisable.
3.5 Disability. If during the Contract Period, the Executive's employment
shall be terminated, either by the Company or by the Executive, due to the
Executive's Disability, the Company shall pay the Executive as severance
compensation the same benefits as set forth in Section 3.4(a)-(e).
3.6 No Mitigation. The Executive shall not be required to mitigate the
amount of any payment provided for in this Section 3 by seeking other employment
or otherwise, nor shall the amount of any payment provided for in this Section 3
be reduced by any compensation earned by the Executive as the result of
employment by another employer after the Date of Termination, or otherwise.
Section 4 --Miscellaneous
4.1 Successors Shall Assume. The Company will require any successor
(whether direct or indirect, by purchase, merger, consolidation or otherwise) to
all or substantially all of the business and/or assets of the Company or the
Company, by agreement in form and substance satisfactory to the Executive,
expressly to assume and agree to perform this Agreement in the same manner and
to the same extent that the Company or the Company would be required to perform
it if no such succession had taken place. Failure of the Company to obtain such
agreement prior to the effectiveness of any such succession shall be a breach of
this Agreement and shall entitled the Executive to compensation from the Company
in the same amount and on the same terms as the Executive would be entitled
hereunder if the Executive terminated the Executive's employment for Good
Reason, except that for purposes of implementing the foregoing, the date on
which any such succession becomes effective shall be deemed the Date of
Termination. As used in this Agreement, "Company" shall mean the Company as
defined in the preamble hereto and any successor to its business and/or assets
as aforesaid or which otherwise becomes bound by all the terms and provisions of
this Agreement by operation of law.
4.2 Binding Effect. This Agreement shall inure to the benefit of and be
enforceable by the Executive's personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees and legatees. If the
Executive should die while any amounts would still be payable to the Executive
hereunder if the Executive had continued to live, all such amounts, unless
otherwise provided herein, shall be paid in accordance with the terms of this
Agreement to the Executive's devisee, legatee, or other designee or, if there be
no such designee, to the Executive's estate.
<PAGE>
4.3 Reduction of Amounts Payable. In no event shall any amount payable
under any provision of this Agreement equal or exceed an amount which would
cause the Company to forfeit, pursuant to Section 280G(a) of the Internal
Revenue Code of 1986, as amended, its deduction for any or all such amounts
payable. Pursuant to this Section 4.3, the Company's Board of Directors (or a
Committee of the Board to which compensation matters are delegated) has the
power to reduce severance benefits payable under this Agreement, if such
benefits alone or in conjunction with termination benefits provided under any
other Company plan or program, would cause the Company to forfeit otherwise
deductible payments; provided, however that no benefits payable under this
Agreement shall be reduced pursuant to this Section 4.3 to less than $1.00 below
the amount of benefits which the Company can properly deduct under Section
280G(a) of the Internal Revenue Code of 1986, as amended, and that the
Committee; and further provided that the Executive shall choose which of the
payments and benefits to retain if some payments and benefits will not be paid
hereunder.
4.4 Notice. Any notice or request required or permitted to be given under
this Agreement shall be in writing and shall be deemed sufficiently given for
all purposes if mailed by certified mail, postage prepaid and return receipt
requested, addressed to the intended recipient at
(a) the addresses set forth below:
(i) If to the Company:
100 Mallard Creek Road
Suite 250
Louisville, Kentucky 40207
All notices to the Company shall be directed to the attention of the Chief
Executive Officer of the Company with a copy to the Secretary of the Company.
(ii) If to the Executive:
Steven Rothenberg
100 Mallard Creek Road
Suite 250
Louisville, Kentucky 40207
(b) Such other address as any of the parties shall specify by written
notice to the other parties of this Agreement.
4.5 Payment Obligations Absolute. The Company's obligation to pay the
Executive the amounts provided for hereunder shall be absolute and unconditional
and shall
<PAGE>
not be affected by any circumstances, including, without limitation, any
set-off, counterclaim, recoupment, defense or other right which the Company may
have against him or anyone else, except with respect to tax withholding required
pursuant to Section 4.11. All amounts payable by the Company hereunder shall be
paid without notice or demand. Except as expressly provided herein, the Company
waives all rights which it may now have or may hereafter have conferred upon it,
by statute or otherwise, to amend, terminate, cancel or rescind this Agreement
in whole or in part. Each and every payment made hereunder by the Company shall
be final and the Company shall not seek to recover all or any part of such
payment from the Executive or from whomsoever may be entitled thereto, for any
reason whatsoever.
4.6 Modifications and Waivers. No provisions of this Agreement may be
modified, waived or discharged unless such waiver, modification or discharge is
agreed to in writing and signed by the Executive and such officer as may be
specifically designated by the Board of Directors of the Company. No waiver by
either party hereto at any time of any breach by the other party hereto of, or
compliance with, any condition or provision of this Agreement to be performed by
such other party shall be deemed a waiver of similar or dissimilar provisions or
conditions at the same or any prior or subsequent time.
4.7 Entire Agreement. In the event that Executive is entitled to receive
any payment under ss.3.4 of this Agreement, Executive shall not be entitled to
receive any payments pursuant to the Employment Agreement between the Executive
and the Company dated September 6, 1995 that relate to compensation payable upon
or after termination of employment. No agreements or representations, oral or
otherwise, express or implied, with respect to the subject matter hereof have
been made by either party which are not set forth expressly in this Agreement.
4.8 Governing Law. The validity, interpretation, construction and
performance of this Agreement shall be governed by the laws of the Commonwealth
of Kentucky.
4.9 Validity. The invalidity or unenforceability of any provisions of this
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement, which shall remain in full force and effect.
4.10 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
4.11 Payroll and Withholding Taxes. The Company may withhold from any
amounts payable to the Executive hereunder all federal, state, city or other
taxes that the Company may reasonably determine are required to be withheld
pursuant to any applicable law or regulation.
<PAGE>
IN WITNESS WHEREOF the parties hereto have executed this Agreement, as of the
day and year first above written.
VIDEOLAN TECHNOLOGIES, INC.
_________________________ By________________________________
Steven Rothenberg Jack Shirman
Title: Chief Executive Officer
Date: February 14, 1997
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<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
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<SECURITIES> 3,949,951
<RECEIVABLES> 81,242
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<INVENTORY> 786,415
<CURRENT-ASSETS> 4,935,556
<PP&E> 628,664
<DEPRECIATION> 133,801
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0
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<COMMON> 140,464
<OTHER-SE> 4,642,580
<TOTAL-LIABILITY-AND-EQUITY> 5,622,348
<SALES> 327,803
<TOTAL-REVENUES> 533,190
<CGS> 167,248
<TOTAL-COSTS> 8,017,191
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<INTEREST-EXPENSE> 27,145
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<NET-INCOME> (8,122,116)
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<PAGE>
Exhibit 99
PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
SAFE HARBOR COMPLIANCE STATEMENT
FOR FORWARD-LOOKING STATEMENTS
In passing the Private Securities Litigation Reform Act of 1995 (the
"Reform Act"), Congress encouraged public companies to make "forward-looking
statements" (1) by creating a safe harbor to protect companies from securities
law liability in connection with forward-looking statements. VideoLan
Technologies, Inc. ("VideoLan" or the "Company") intends to qualify both its
written and oral forward-looking statements for protection under the Reform Act
and any other similar safe harbor provisions.
Forward-looking statement express expectations of future events. All
forward-looking statements are inherently uncertain as they are based on various
expectations and assumptions concerning future events and they are subject to
numerous known and unknown risks and uncertainties which could cause actual
events or results to differ materially from those projected. Due to those
uncertainties and risks, the investment community is urged not to place undue
reliance on written or oral forward-looking statements of VideoLan. In addition,
VideoLan undertakes no obligation to update or revise forward-looking statements
to reflect changed assumptions, the occurrence of unanticipated events or
changes to future operating results over time.
VideoLan provides the following risk factors disclosure in connection
with its continuing effort to qualify its written and oral forward-looking
statements for the safe harbor protection of the Reform Act and any other
similar safe harbor provisions. Important factors currently know to management
that could cause actual results to differ materially from those in
forward-looking statements include the following:
Need For Additional Capital
As of March 14, 1997, the Company's cash position was approximately $2,600,000.
The Company is currently utilizing approximately $450,000 of that cash per month
for operating and research and development activities. It is anticipated that
the Company's current cash position will be sufficient to fund the Company's
operations through the second quarter of 1997. The Company is actively seeking
additional financing to fund its activities for the balance of 1997 and into
1998. The Company cannot anticipate what the terms of this additional funding
will be or whether any such financing will be available at all. Failure to
receive such financing will likely require the Company to cease operations. Even
if such financing is obtained, unless and until adequate income from sales of
the VideoLan VL2000 System (the "VideoLan VL2000 System") is realized, the
timing, sufficiency and receipt of which cannot be predicted, future development
and commercialization of the Company's technology will require the Company to
obtain further financing.
<PAGE>
Dilution Resulting from Outstanding Preferred Stock
During October and November of 1996, the Company completed a $5,500,000
financing through the sale of convertible preferred shares in a private
placement under Regulation D. Preferred stock sold in the offering is
convertible into common stock at the lesser of $4.88 or the 5 day average
trading price of the common stock at the time of conversion less a discount of
between 15% and 20%. Additional shares are required to be issued to the extent
that the registration of the shares under the Securities Act of 1933 is delayed
past January 17, 1997. Because the Company's common stock price has declined
substantially from the original issuance date, the conversion of these shares at
this time would result in a substantial dilution of the Company's common stock.
Development Stage Enterprise; Losses Since Inception;
Expectation of Continuing Losses
The Company is a development stage enterprise and has incurred aggregate
losses of approximately $17 million from inception through December 31, 1996.
The Company expects to incur continuing losses until significant quantities of
the VideoLan VL2000 System are sold.
Lack of Revenues; Dependence on Initial Product
Revenue and profitability of the Company and future commercialization of
the Company's technology will be dependent upon the success of the VideoLan
VL2000 System. The Company only recently has begun to receive orders for the
VideoLan VL2000 System and there can be no assurance that the introduction and
marketing of the VideoLan VL2000 System will be successful, or that the Company
will have significant revenues or profitable operations. In addition, there can
be no assurance that unforeseen technical or other difficulties will not arise
which would interfere with the assembly, manufacture, integration or
installation of the VideoLan VL2000 System, or prevent or create delays in
marketing the product. The Company has engaged in limited field testing of the
VideoLan VL2000 System, and there can be no assurance that the product will
perform to the Company's expectations.
Uncertain Market Acceptance of Technology; Risk of Obsolescence
The success of the VideoLan VL2000 System will depend in large part upon
market acceptance of the Company's technology. There can be no assurance that
the Company's technology will be accepted in the marketplace, or will be
perceived as being competitive with other technologies, including technologies
which may be developed. The potential introduction of new technologies could
have a material adverse effect on the Company.
Lack of Marketing Experience and Reliance on Marketing Partners
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<PAGE>
The Company presently is beginning to implement its marketing program
for the VideoLan VL2000 System, has conducted no market studies and has limited
marketing experience, financial resources and marketing personnel. Successful
marketing of the VideoLan VL2000 System will depend upon the Company's ability
to demonstrate effectively the technological advantages of the VideoLan VL2000
System to original equipment manufacturers ("OEMs"), value added resellers
("VARs"), systems integrators and distributors whose markets and market presence
will provide significant distribution channels, and targeted distributors and
end users in niche markets. The failure of the Company to establish sufficient
distribution channels could have a material adverse effect on the Company.
In addition, the current market for desktop video conferencing and
distribution products is fragmented and growing, and other companies are
actively marketing or are expected to introduce competing products. One or more
competitors could establish significant market share before the Company's
distribution channels and product recognition are established. Also, potential
distributors may form other alliances or may develop competing products.
In the event that the Company ultimately is able to enter into
satisfactory distribution arrangements with any third party, the Company will be
dependent largely on such third party's marketing efforts and, in the case of
OEMs and VARs, the popularity and sales of the third party's own products
integrating the VideoLan VL2000 System. While the Company believes that
marketing the VideoLan VL2000 System through third party distribution channels
will avoid marketing costs and expenses, the Company's revenues will be less
than if it directly marketed the VideoLan VL2000 System.
Necessity of Developing New Applications
Even if the VideoLan VL2000 System is successfully marketed, the Company
anticipates that rapidly changing technology and new entrants into the desktop
video conferencing market could cause, over time, future revenues and
profitability of the VideoLan VL2000 System to decline. Therefore, the future
success of the Company could depend upon its ability to develop and successfully
commercialize its technology for other communications applications. The Company
cannot develop all of the potential commercial applications of its technology,
so it intends to target projects it believes have the most potential and which
it can afford. However, there can be no assurance that such projects will be
commercially successful, that the cost will not exceed the financial resources
available to the Company, or that the Company will not abandon projects which do
not meet its expectations.
Uncertain Protection of Intellectual Property Rights
3
<PAGE>
The Company has been issued a patent in the United States for an
efficient network for the real time, simultaneous, bi-directional transmission
of voice, video, and data among a plurality of users connected to a plurality of
hubs. In addition, an international patent application is pending designating 56
foreign countries as well as the United States. The Company intends to file
future United States and foreign patent applications if any patentable
inventions are created through continued development of the Company's
technology. No assurance can be given that the Company will receive patent
protection with respect to future patent applications relating to enhancements
of, and new applications for, the Company's technology. Further, there can be no
assurance that, if issued, such patents will afford protection against
competitive products or technologies, which could be superior to the Company's
products or technology. In addition, enforcement of patent rights could be
costly, and there can be no assurance that the Company would be successful in
enforcing such rights. Further, a successful challenge to a pending or issued
patent could jeopardize the Company's ability to engage in its contemplated
business activities. Therefore, there can be no assurance that the Company's
intellectual property rights are or will be adequately protected, which could
have a material adverse effect on the Company.
Although the Company believes that its products and technologies do not
and will not infringe on patents or other proprietary rights of others, it is
possible that such infringement or violation has occurred or may occur. There is
currently pending one lawsuit filed against the Company alleging patent
infringement. In the event that the Company's products or technologies are found
to infringe on patents or other proprietary rights of others, the Company could
be required to discontinue the sale of its products, including the VideoLan
VL2000 System, and redesign its product or obtain licenses. There can be no
assurance that the Company would be able to do so in a timely manner, upon
acceptable terms and conditions, or at all, or that the failure to do any of the
foregoing would not have a material adverse effect on the Company. If any of the
Company's products or technologies are found to infringe on patents or other
proprietary rights of others, the Company could, under certain circumstances,
become liable for damages, which could also have a material adverse effect on
the Company.
Dependence on Suppliers and Third-Party Manufacturers
The Company has arranged with Plexus Corp. ("Plexus") to assemble and
integrate sub-assemblies manufactured by it and other vendors according to the
Company's specifications. However, the Company and Plexus have not entered into
a contract, and the existing arrangement could be terminated at any time, which
could have an adverse effect on delivery schedules. In addition, the quality of
the components of the VideoLan VL2000 System and the Company's ability to meet
customers' delivery schedules will be dependent upon the ability of Plexus and
the other vendors to manufacture the components and to integrate the various
sub-assemblies in a timely manner, as well as the timely delivery by suppliers
of raw materials. To date, Plexus has delivered only limited production
quantities of the VideoLan VL2000 System to the Company. In the event
that Plexus or any other vendor or supplier fails to deliver quality components
or materials in a timely manner, the Company may
4
<PAGE>
not be able to satisfy customer delivery schedules, which could have a material
adverse effect on the Company.
Possible Inability to Successfully Compete
A number of video conferencing and distribution products presently are
being marketed, and new entrants into the market are anticipated. There are and
will be numerous well-established competitors, including joint ventures
involving major communications companies, that possess substantially greater
financial, marketing, personnel and other resources than the Company. There can
be no assurance that the VideoLan VL2000 System will be accepted in the
marketplace, or will be perceived as being competitive with other products,
including new products which may be developed. In addition, there is intense
competition among potential providers to establish video services. Various
alternative technologies such as ADSL digital compression technologies
(technologies that allows digital transmission on unshielded twisted pair copper
wire at various data rates and various distances) are being tested and there can
be no assurance that the Company's technology will be developed for video
services before other technologies are selected or that, if developed, will be
preferred over other technologies.
Possibility of Nasdaq Delisting and Decrease in Stock Price
The trading of the Company's stock on the Nasdaq SmallCap Market is
conditioned upon meeting certain asset, capital and surplus, earnings and stock
price tests. The requirements to maintain eligibility on the Nasdaq SmallCap
Market require the Company to maintain total assets in excess of $2,000,000,
capital and surplus in excess of $1,000,000, and (subject to certain exceptions)
a bid price of at least $1.00 per share. While the Company currently exceeds the
total assets and capital surplus requirements, it may fall below such required
amounts if it dos not obtain financing in the near future. The Company's stock
price has traded as low as $1.00. If the Company fails any of these tests, the
Company's common stock ("Common Stock") may be delisted from trading on the
Nasdaq SmallCap Market. The effects of delisting include the limited release of
the market prices of the Company's securities and limited news coverage of the
Company. Delisting may restrict investors' interest in the Company's securities
and materially adversely affect the trading market and prices for such
securities and the Company's ability to issue additional securities or to secure
additional financing. In addition to the risk of volatility of stock prices and
possible delisting, low price stocks are subject to the additional risks of
additional federal and state regulatory requirements and the potential loss of
effective trading markets. In particular, if the Common Stock was delisted from
trading on the Nasdaq SmallCap Market and the trading price of the Common Stock
were less than $5.00 per share, the Common Stock could be subject to Rule 15g-9
under the Exchange Act, which, among other things, requires that broker/dealers
satisfy special sales practice requirements, including making individualized
written suitability determinations and receiving any purchaser's written consent
prior to any transaction. In such case, the Company's securities could also be
deemed penny stocks under the Securities Enforcement and Penny Stock Reform Act
of 1990, which would require additional disclosure in connection with trades in
the Company's securities, including the delivery of a disclosure schedule
explaining the nature and risks of the penny stock market. Such requirements
could severely limit
5
<PAGE>
the liquidity of the Company's securities and the ability of purchasers in the
Offering to sell their securities in the secondary market.
Need for Additional Personnel
The success of the Company is dependent upon its ability to hire and
retain additional qualified marketing, technical and other personnel.
Competition for such personnel is intense and there can be no assurance that the
Company will be able to hire such additional personnel on a timely basis or
retain such personnel.
Uncertain Impact of FCC Statutes and Regulations
The Company cannot precisely predict what effect current or future
governmental regulations may have on the Company's products or technology. While
Congress and the Federal Communications Commission (the "FCC") are promoting the
development of a competitive video distribution industry, the enactment or the
interpretation of relevant statutes and administrative rules, regulations,
policies and procedures could have an adverse effect on the industry as a whole,
any one segment thereof, or on the Company in particular.
The Company's potential alliances with telephone companies and cable
companies to develop video services could be affected by the Telecommunications
Act of 1996 (the "Telecom Act"), pursuant to which the FCC repealed its rules
implementing the Cross-Ownership Ban, the statutory ban against telephone
companies providing video programming in their own service areas. As a result of
the Telecom Act, telephone companies now have four avenues for the provision of
video services. Specifically, telephone companies may (1) provide video
programming to subscribers through radio communication, (2) provide video
programming on a common carrier basis, (3) provide video programming as a cable
television system, or (4) provide video programming by means of an "open market
system," a new vehicle for entering the video marketplace, rules for which are
currently being considered by the FCC. The United States Supreme Court has
remanded to a lower court a case which questioned the constitutionality of the
Cross-Ownership Ban to determine whether or not it is moot in light of the
Telecom Act. Further proposals for additional or revised statutes and
regulations are considered by Congress and federal regulatory agencies,
respectively, from time to time. The Company cannot predict the effect of
possible changes in federal regulations, policies or laws on the business
strategy of the Company.
No Intention to Declare or Pay Cash Dividends
The Company does not currently intend to declare or pay any cash
dividends on the Common Stock in the foreseeable future and anticipates that
earnings, if any, will be used to finance the development and expansion of its
business. Any payment of future dividends and the
6
<PAGE>
amounts thereof will be dependent upon the Company's earnings, financial
requirements, and other factors deemed relevant by the Company's Board of
Directors, including the Company's contractual obligations.
Potential Adverse Impact of Preferred Stock on Rights of Common Stockholders
The Company's Certificate of Incorporation authorizes the issuance of
"blank check" preferred stock with such designations, rights and preferences as
may be determined from time to time by the Board of Directors. Accordingly, the
Board of Directors is empowered, without stockholder approval, to issue
preferred stock with dividend, liquidation, conversion, voting or other rights
which could adversely affect the voting power or other rights of the holders of
the Company's Common Stock. In the event of issuance, the preferred stock could
be utilized, under certain circumstances, as a method of discouraging, delaying
or preventing a change in control of the Company. The possible impact on
takeover attempts could adversely affect the price of the Common Stock.
Possible Volatility of Common Stock
Recently, there has been significant volatility in the market prices of
securities of companies in the computer and telecommunications industries,
including the Company. The price at which the Common Stock trades may be
influenced by many factors, including announcements of new legislative proposals
or laws relating to the telecommunications industry, the performance of, and
investor expectations for, the Company, the trading volume in the Common Stock,
and general economic and market conditions. There can be no assurance as to the
price at which the Common Stock will trade in the future.
