As filed with the Securities and Exchange Commission on September 12, 1997
Registration No. 333-_____
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
___________________
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
_________________
VIDEOLAN TECHNOLOGIES, INC.
(Exact Name of Registrant as Specified in Its Charter)
Delaware 59-1670533
(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
11403 Bluegrass Parkway, Jack Shirman
Suite 400 VideoLan Technologies, Inc.
Louisville, Kentucky 40299 11403 Bluegrass Parkway
(502) 266-0099 Suite 400
(Address, Including Zip Code, and Louisville, Kentucky 40299
Telephone Number, Including (502) 266-0099
Area Code, of Registrant's (Name, Address, Including Zip
Principal Executive Offices) Code, and Telephone Number,
Including Area Code, of Agent
For Service)
Copies to:
William G. Strench
Brown, Todd & Heyburn PLLC
3200 Providian Center
Louisville, Kentucky 40202
(502) 589-5400
Approximate date of commencement of proposed sale to the public: From
time to time after the effective date of this registration statement
("Registration Statement").
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the
following box. [ ]
If any of the securities being registered on this form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, other than securities offered only in connection
with dividend or interest reinvestment plans, check the following box.
[X]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the
following box and list the Securities Act registration statement number
of the earlier effective registration statement for the same offering.[ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier, effective
registration statement for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. [ ]
Calculation of Registration Fee
<TABLE>
<CAPTION> Proposed Proposed
Maximum Maximum
Title of Share Amount To Be Aggregate Price Aggregate Offering Amount of
to be registered Registered (1) Per Share (2) Price (2) Registration Fee
__________________ ______________ ______________ __________________ ________________
<S> <C> <C> <C> <C>
Common Stock, 14,946,104 $ .40625 $ 6,012,340 $1,822.00
$.01 par value shares
</TABLE>
(1) Includes 2,627,654 shares of the common stock of Registrant
("Common Stock") held by Selling Stockholders as well as
12,171,952 shares issuable to the Selling Stockholders upon
the conversion of up to 4,140 shares of the Company's Series
1996A Convertible Preferred Stock (the "Series 1996A Preferred
Stock"). In addition, included is an indeterminate number of
additional shares of Common Stock as may be issued because of
future stock dividends, stock distributions, stock splits or
similar capital readjustments or by reason of changes in the
conversion price of the Series 1996A Preferred Stock.
(2) Represents the average of the closing bid and ask prices of
the Common Stock of the Registrant on September 5, 1997.
Estimated solely for the purpose of calculating the
registration fee.
The registrant hereby amends this Registration Statement
on such date or dates as may be necessary to delay its
effective date until the registrant shall file a further
amendment which specifically states that this
Registration Statement shall thereafter become effective
in accordance with Section 8(a) of the Securities Act of
1933 or until the Registration Statement shall become
effective on such date as the U.S. Securities and
Exchange Commission, acting pursuant to said Section
8(a), may determine.
PROSPECTUS
14,946,104 Shares
of
VIDEOLAN TECHNOLOGIES, INC.
Common Stock
This prospectus ("Prospectus") relates to 14,946,104 shares (the
"Shares") of common stock, $.01 par value per share (the "Common
Stock"), of VideoLan Technologies, Inc. (the "Company") that may be
offered for sale by persons (the "Selling Stockholders") who have
acquired such Shares by the conversion of certain shares of the
Company's Series 1996A Convertible Preferred Stock, $.01 par value (the
"Series 1996A Preferred Stock"), acquired in a private placement transaction.
The Shares are being registered under the Securities Act of 1933, as
amended (the "Securities Act"), on behalf of the Selling Stockholders in
order to permit the public sale or other distribution of the Common
Stock. None of the proceeds from the sale of the Common Stock will be
received by the Company. See "Selling Stockholders," "Plan of
Distribution" and "Use of Proceeds." The Common Stock of the Company is
traded on the Nasdaq SmallCap Market under the symbol "VLNT".
Sales of the Common Stock may be sold from time to time to
purchasers directly by the Selling Stockholders in negotiated
transactions and in the over-the-counter market on Nasdaq. The Shares
may be sold by one or more of the following: (a) a block trade in which
the broker or dealer so engaged will attempt to sell the shares as
agent; and (b) ordinary brokerage transactions in which the broker
solicits purchasers. Alternatively, the Selling Stockholders may from
time to time offer the Shares offered hereby through underwriters,
dealers or agents, who may receive compensation in the form of
underwriting discounts, concessions or commissions from the Selling
Stockholders and/or the purchasers of securities for whom they may act
as agents. The Shares offered hereby may be sold from time to time in
one or more transactions at a fixed offering price, which may be
changed, or at varying prices determined at the time of sale or at
negotiated prices.
The Company will pay all expenses of this offering (the "Offering")
(estimated to be approximately $42,340), for the Selling Stockholders
and any underwriters, except for underwriting discounts, commissions or
transfer taxes. In addition, the Company has agreed to indemnify the
Selling Stockholders, including any director or officer of the Selling
Stockholders, against certain liabilities, including liabilities under the
Securities Act. The Selling Stockholders have agreed to indemnify the
Company, including any directors or officers of the Company, against certain
liabilities that might arise with regard to certain statements in this
Prospectus. See "Plan of Distribution."
The terms of any offering of the shares of Common Stock by the
Selling Stockholders, including the names of the underwriters, if any,
and the public offering price, underwriting discounts and proceeds to
the Selling Stockholders, will be set forth in an accompanying
Prospectus Supplement, to the extent required. The Selling Stockholders
and any agents or broker-dealers that participate in the distribution of
the shares of Common Stock may be deemed to be "underwriters" within the
meaning of the Securities Act, and any commissions received by them and
any profit on the resale of the Shares may be deemed to be underwriting
commissions or discounts under the Securities Act.
SEE "RISK FACTORS" BEGINNING ON PAGE 3 FOR CERTAIN CONSIDERATIONS
RELEVANT TO AN INVESTMENT IN THE COMMON STOCK OFFERED HEREBY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES
AND EXCHANGE COMMISSION (THE "COMMISSION") OR ANY STATE SECURITIES
COMMISSION NOR HAS THE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
This Prospectus also relates to such additional securities as may
be issued to the Selling Stockholders because of future stock dividends,
stock distributions, stock splits or similar capital readjustments or by
reason of changes in the conversion price.
The date of this Prospectus is September , 1997.
AVAILABLE INFORMATION
The Company has filed with the Commission a Registration
Statement on Form S-3 (together with all amendments and exhibits
thereto, the "Registration Statement") under the Securities Act
with respect to the Common Stock offered hereby. This Prospectus
does not include all the information set forth in the Registration
Statement, to which reference is made for further information with
respect to the Company.
The Company is subject to the informational requirements of
the Commission and the rules and regulations thereunder and in
accordance therewith files periodic reports, proxy and information
statements, and other information with the Commission (File No. 0-26302).
The Registration Statement and all reports, proxy and
information statements, and other information filed by the Company
with the Commission may be inspected at the public reference
facilities maintained by the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549 or at the Commission's Web site
(http://www.sec.gov), and may also be inspected and copied at the
regional offices of the Commission located at 7 World Trade Center,
13th Floor, New York, New York 10048, and 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661. Copies of such materials may
be obtained from the Public Reference Section of the Commission,
450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed
rates.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company with the
Commission pursuant to the Securities Exchange Act of 1934, as
amended (the "Exchange Act") are hereby incorporated by reference
herein:
(1) The Company's Annual Report on Form 10-KSB for its fiscal
year ended December 31, 1996 (the "1996 Annual Report");
(2) The Company's Quarterly Reports on Form 10-QSB for the
quarterly periods ended March 31, 1997, and June 30,
1997;
(3) The Company's Current Reports on Form 8-K dated January
29, 1997, May 2, 1997, and August 13, 1997; and
(4) The description of the shares of Common Stock contained
in the Company's Registration Statement on Form 8-A12G.
All documents filed by the Company pursuant to Section 13(a),
13(c), 14 or 15(d) of the Exchange Act prior to the termination of
the offering of the shares of Common Stock hereunder shall be
deemed to be incorporated by reference herein and to be a part
hereof from the date of filing of such documents. Any statement
contained in a document incorporated or deemed to be incorporated
herein shall be deemed to be modified or superseded for purposes of
this Prospectus to the extent that a statement contained herein or
in any other subsequently filed document that also is incorporated
or deemed to be incorporated by reference herein modifies or
supersedes such statement. Any such statement so modified or
superseded shall not be deemed, except as so modified or
superseded, to constitute a part of this Prospectus.
The Company will provide without charge to each person to whom
this Prospectus is delivered, on the written or oral request of
such person, a copy of any and all of the documents incorporated by
reference in this Prospectus (other than exhibits to such documents
unless such exhibits are specifically incorporated by reference
into the documents that this Prospectus incorporates). Written or
oral requests for such copies should be directed to VideoLan
Technologies, Inc., 11403 Bluegrass Parkway, Suite 400, Louisville,
Kentucky 40299, Attn: Steven B. Rothenberg. Telephone requests
may be directed to Mr. Rothenberg at (502) 266-0099.
Unless the context indicates otherwise, all references in this
Prospectus to the Company include the Company and its subsidiary,
IL Acquisition Corp. ("Subsidiary").
THE COMPANY
The Company has developed and is engaged in the continuing
development of transport and switch and communications products
which utilize the Company's technology to transmit and receive real
time, interactive, video, voice and data signals over two pairs of
unshielded twisted pair copper wire. The Company's initial product
is a stand-alone video, voice and data communications network
solution (the "VideoLan System") for the desktop personal computer.
The Company has recently developed the VL1000 ("VL1000"), a campus
wide full motion desk-top video conferencing system, the VL1500
("VL1500"), a multi-media desk-top video conferencing system,
including multi-party calling, and the VL3000 ("VL3000"), a full-featured
video communication exchange system providing desk-top video conferencing
for campus and wide area network applications. With its acquisition, through
its Subsidiary, of substantially all of the assets of Video and Communication
Solutions, Inc. (formerly known as ImageLink, Inc.) ("VCSI"), in July 1997,
the Company began to engage in the sale of desk-top, portable and conference
room video conferencing products (together, "Video Conferencing"). In
particular, through the acquisition of VCSI, the Company became the exclusive
licensor of Image Link Technology, Inc.'s coder/decoder printed circuit board
("Kodec") which is used in Video Conferencing (The VideoLan System, the
VL1000, the VL1500, the VL3000 and Kodec are sometimes referred to
collectively herein as the "VideoLan Products"). The Company's business
strategy is to market the VideoLan Products to original equipment
manufacturers ("OEMs"), value added resellers ("VARs"), systems integrators
and distributors and to develop additional products utilizing its
technology. Since the Company's technology could be adaptable to
additional applications, including home to home video and voice and
data conferencing, it may undertake other initiatives in the
future. The Company is located at 11403 Bluegrass Parkway, Suite
400, Louisville, Kentucky 40299. The Company's telephone number is
(502) 266-0099.
RISK FACTORS
Certain statements and information under the captions "The
Company" and "Recent Developments," and elsewhere in this
Prospectus (including documents incorporated herein by reference,
see "Incorporation of Certain Documents by Reference"), constitute
forward-looking statements as that term is defined in the
Securities Act. Such forward-looking statements involve known and
unknown risks and other factors that may cause the actual results
or performance of the Company to be materially different from any
future results or performance expressed or implied by such
forward-looking statements. Such risks and factors include, but
are not limited to, those described below and elsewhere in this
Prospectus.
In addition to reviewing the Company's 1996 Annual Report, the
other documents incorporated herein by reference and the other
information in this Prospectus, the following factors should be
considered carefully in evaluating the Company and its business
before purchasing the Common Stock offered hereby:
Need For Additional Capital
As of August 31, 1997, the Company's cash position was
less than $1,000,000. 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 into the fourth 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 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 Products or other sources 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 continue to seek further financing in the
future.
Losses Since Inception; Expectation of Continuing Losses
The Company has incurred aggregate losses of approximately $21
million from inception through August 31, 1997. The Company
expects to incur continuing losses until significant quantities of
the VideoLan Products are sold.
Lack of Revenues; Dependence on Initial Products
The revenues and profitability of the Company and the future
commercialization of the Company's technology will be largely
dependent upon the success of the VideoLan Products. The Company
only recently has begun to receive orders for the VideoLan Products
and there can be no assurance that the introduction and marketing
of the VideoLan Products 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
Products, or prevent or create delays in marketing the product.
Rapid Technological Changes; Uncertain Market Acceptance of
Technology; Evolving Industry Standards
The success of the VideoLan Products and other products the
Company will develop in the future 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 in the
future. The markets for the VideoLan Products are characterized by
rapidly changing technology, evolving industry standards and frequent
new products and product enhancements. The Company's success in its
business will depend upon its continued ability to enhance its products,
to introduce new products on a timely and cost effective basis to meet
evolving customer requirements, to achieve market acceptance for new
product offerings and to respond to emerging industry standards and other
technological changes. There can be no assurance that the Company
will be able to respond effectively to new industry standards or
technological changes. Moreover, there can be no assurance that
competitors of the Company will not develop competitive products,
or that any such competitive products will not have an adverse
effect upon the Company's operating results.
Lack of Marketing Experience and Reliance on Marketing Partners
The Company presently is beginning to implement its marketing
program for the VideoLan Products and is beginning to strengthen
its sales and marketing efforts and personnel. Successful
marketing of the VideoLan Products will depend upon the Company's
ability to demonstrate effectively the technological advantages of
the VideoLan Products to OEMs, 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 is able to enter into
satisfactory distribution arrangements with third parties, the
Company will be dependent largely on such third parties marketing
efforts and, in the case of OEMs and VARs, the popularity and sales
of the third parties own products that integrate the VideoLan
Products. While the Company believes that marketing the VideoLan
Products 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 Products.
Necessity of Developing New Applications
Even if the VideoLan Products are successfully marketed, the
Company anticipates that rapidly changing technology and new
entrants into the video conferencing market could cause, over time,
future revenues and profitability of the VideoLan Products 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
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 the Company's existing patent and future
patents, if issued, 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,
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 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 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
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 Products 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.
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. 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
dividends and the amounts thereof in the future 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.
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 does
not obtain financing in the near future. The stock price of the
Common Stock currently trades below $1.00. If the Company fails
any of these tests, the Common Stock may be delisted from trading
on the Nasdaq SmallCap Market. Additionally, the National
Association of Securities Dealers ("NASD") is presently considering
rules which, if adopted, would result in new minimum criteria which
a company must meet for inclusion in either the Nasdaq Stock Market
or the SmallCap Market. Under the recently proposed rules,
companies will be required to meet higher financial standards and
maintain a stock market price of at least $1.00 per share, or else
face automatic termination of their designation for inclusion in
either the Nasdaq Stock Market or SmallCap Market. While the
Common Stock is currently quoted on the Nasdaq SmallCap Market,
there can be no assurance that its designation of inclusion thereon
will not be terminated if the NASD adopts the proposed regulations
and the Company's stock market price is below $1.00 per share. To
enhance the likelihood the Company's stock will trade at or above
$1.00, the Company's Board of Directors and stockholders recently
approved a one-for-eight reverse stock split (the "Reverse Stock
Split"). The Reverse Stock Split is expected to be implemented
soon. Nonetheless, there can be no assurance that the stock price
of the Common Stock will remain at least $1.00 after the Reverse
Stock Split.
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 was 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 the liquidity of the Company's securities and the ability of
purchasers of the Shares to sell their securities in the secondary
market. Furthermore, as a result of delisting, a stockholder
would likely find it to be more difficult to obtain accurate
quotations as to the value of the Common Stock.
Potential Adverse Impact of Preferred Stock on Rights of Common
Stockholders
The Company's Certificate of Incorporation ("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. The Company
currently has 4,190 shares of Series 1996A Preferred Stock issued
and outstanding.
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. The
trading price of the Common Stock will also be impacted by sales,
or the possibility of sales, of the shares issuable upon the
conversion of the Series 1996A Preferred Stock, a convertible
debenture issued by the Company in July 1997 (the "Convertible
Debenture"), or any other convertible securities of the Company
issued in the future. There can be no assurance as to the price at
which the Common Stock will trade in the future.
Possible Unenforceability of Contractual Obligations
The Company has entered, or will, from time to time, enter
into long-term contracts with customers for the purchase of specified
quantities of VideoLan Products. However, because of explicit and
implied conditions in such agreements there can be no assurance that
the Company will actually receive the revenues expected from such
long-term contracts or that such contracts will remain in effect for
the full-term of the contracts.
Potential Dilution and Market Impact From Outstanding Capital Stock
and Options
As of September 5, 1997, the Company had 22,081,494 shares of
Common Stock issued and outstanding. In addition, as of that date,
approximately 1,000,000 shares of Common Stock were issuable upon
the exercise of outstanding options, 12,318,450 shares of Common
Stock were issuable upon the conversion of outstanding shares of
Series 1996A Preferred Stock, (based upon an assumed conversion
price of $.48504 as of August 23, 1997 and includes 3,679,986
shares issued in connection with certain registration rights), and
582,048 shares of Common Stock were issuable upon the conversion of
the Convertible Debenture (based upon an assumed conversion price
of $.48504 as of August 23, 1997). See "Description of Capital
Stock" and "Recent Developments". The voting power of each holder
of Common Stock would be diluted by the issuance of additional
shares of Common Stock. Moreover, the prevailing market price for
the Common Stock may be materially and adversely affected by the
addition of a substantial number of shares of Common Stock,
including the shares offered hereby, into the market or by the
registration under the Securities Act for the sale of the shares
offered thereby.
Upon consummation of this Offering, assuming the conversion of
all the Series 1996A Preferred Stock, the Company will have
37,027,598 shares of Common Stock issued and outstanding. Of those
shares, the 14,946,104 Shares sold in this Offering will be freely
transferable without restriction or registration under the
Securities Act, unless held by persons deemed to be "affiliates" of
the Company (as that term is defined under the Securities Act).
Antitakeover Effects of Certain Instruments, Agreements of the
Company, and Laws
The Company's Certificate of Incorporation, By-Laws,
Stockholders' Rights Plan, and the Delaware General Corporation Law
contain provisions that could delay or prevent a transaction that
results in a change of control of the Company or discourages a
tender offer or other plan to restructure the Company favored by a
significant portion of the Company's stockholders.
RECENT DEVELOPMENTS
Acquisition of VCSI
On July 11, 1997, the Company's Subsidiary acquired substantially
all of the assets of VCSI. The consideration for the acquisition was
4,000,000 shares of the Company's Common Stock, 3,000,000 of which are
subject to forfeiture or cancellation under certain circumstances. Subject
to certain exceptions, the Company did not assume any of VCSI's liabilities
in the acquisition.
Regulation D Offering
On July 31, 1997, the Company issued a $1,200,000 8%
Convertible Debenture due July 31, 1998 for $1,200,000 in cash.
The Company paid a finders fee in the amount of $180,000, resulting
in net proceeds to the Company of $1,020,000. The Convertible
Debenture is convertible into shares of the Company's Common Stock
at any time after September 10, 1997, at a conversion price for
each share of Common Stock equal to eighty percent (80%) of the
market price ("Market Price"). The Market Price is the average
closing bid price of the Common Stock on the five (5) trading days
immediately preceding the date the Convertible Debenture is
converted (the "Conversion Date), as reported by NASD for companies
trading on the over-the-counter market or, in the event the Common
Stock is listed on a stock exchange, the market price will be the
average closing bid price of the Common Stock on such stock
exchange on the five (5) trading days immediately preceding the
Conversion Date, as reported in The Wall Street Journal. See "Risk
Factors -- Potential Dilution and Market Impact From Outstanding
Capital Stock and Options."
USE OF PROCEEDS
This Prospectus relates to Shares being offered and sold for
the accounts of the Selling Stockholders. The Company will not
receive any of the proceeds of any sale by the Selling Stockholders
of the Shares.
SELLING STOCKHOLDERS
The Selling Stockholders will have acquired the shares of
Common Stock offered by this Prospectus in connection with the
conversion of the Series 1996A Preferred Stock. As of September 5,
1997, the Selling Stockholders owned 2,627,654 shares of Common
Stock and 4,140 shares of Series 1996A Preferred Stock convertible
into 12,171,952 shares of Common Stock (3,679,986 of which are issuable
in connection with certain registration rights of the Selling Stockholders
pursuant to registration rights agreements with the Company).
The following table sets forth the name of each Selling
Stockholder, the maximum aggregate number of shares of Common Stock
into which the Series 1996A Preferred Stock issued to the Selling
Stockholders is convertible and which each Selling Stockholder may
offer and sell pursuant to this Prospectus based on an assumed
conversion price of $.48504 (the "Conversion Price") which is 80%
of the average closing bid price of the Common Stock for the five
trading days before August 23, 1997, and based on an assumed effective
date of October 15, 1997 for the Registration Statement, of which the
Prospectus is a part. In accordance with Rule 416 under the
Securities Act, this Registration Statement also covers such
indeterminate number of additional shares of Common Stock as may
become issuable upon the conversion of the Series 1996A Preferred
Stock to prevent dilution resulting from stock splits, stock
dividends or similar transactions or by reason of changes in the
Conversion Price as aforesaid. Because the Selling Stockholders
may sell all or a portion of the Common Stock at any time and from
time to time after the date hereof, no estimate can be made of the
number of shares of Common Stock that each Selling Stockholder may
retain upon completion of the Offering. To the knowledge of the
Company, none of the Selling Stockholders has had within the past
three years any material relationship with the Company or any of
its predecessors or affiliates.
<TABLE>
<CAPTION>
Name Shares of Common Stock Owned Total
Prior to Offering Shares Offered
<S> <C> <C>
Buchanan Fund Limited 990,552 2,460,534(1)
Buchanan Partners Limited 990,552 2,460,534(1)
Legong Investments N.V. -0- 881,990(2)
Little Wing L.P. -0- 2,204,972(3)
Offshore Nominees Limited
A/C G5-21149 308,032 1,337,019(4)
The TailWind Fund Limited 129,143 981,733(5)
Windward Island Limited -0- 1,469,982(6)
Scotia McLeod Inc. -0- 1,469,982(6)
Offshore Investment Fund Ltd. -0- 440,995(7)
Offshore Nominees Limited
A/C G5-21148 -0- 440,995(7)
RIC Investment Fund, Ltd. 209,375 650,370(8)
_____________________
</TABLE>
(1) Includes 990,552 shares of Common Stock owned prior to the
Offering, 1,030,843 shares of Common Stock issuable upon the
conversion of 500 shares of Series 1996A Preferred Stock, and
an additional 439,139 shares of Common Stock issuable in
connection with certain registration rights pursuant to a
registration rights agreement with the Company.
(2) Includes 618,506 shares of Common Stock issuable upon the
conversion of 300 shares of Series 1996A Preferred Stock, and
an additional 263,484 shares of Common Stock issuable in
connection with certain registration rights pursuant to a
registration rights agreement with the Company.
(3) Includes 1,546,264 shares of Common Stock issuable upon the
conversion of 750 shares of Series 1996A Preferred Stock, and
an additional 658,708 shares of Common Stock issuable in
connection with certain registration rights pursuant to a
registration rights agreement with the Company.
(4) Includes 308,032 shares of Common Stock owned prior to the
Offering, 721,590 shares of Common Stock issuable upon the
conversion of 350 shares of Series 1996A Preferred Stock, and
an additional 307,397 shares of Common Stock issuable in
connection with certain registration rights pursuant to a
registration rights agreement with the Company.
(5) Includes 129,143 shares of Common Stock owned prior to the
Offering, 597,889 shares of Common Stock issuable upon the
conversion of 290 shares of Series 1996A Preferred Stock, and
an additional 254,701 shares of Common Stock issuable in
connection with certain registration rights pursuant to a
registration rights agreement with the Company.
(6) Includes 1,030,843 shares of Common Stock issuable upon the
conversion of 500 shares of Series 1996A Preferred Stock, and
an additional 439,139 shares of Common Stock issuable in
connection with certain registration rights pursuant to a
registration rights agreement with the Company.
(7) Includes 309,253 shares of Common Stock issuable upon the
conversion of 150 shares of Series 1996A Preferred Stock, and
an additional 131,742 shares of Common Stock issuable in
connection with certain registration rights pursuant to a
registration rights agreement with the Company.
(8) Includes 209,374 shares of Common Stock owned prior to the
Offering, 412,337 shares of Common Stock issuable upon the
conversion of 200 shares of Series 1996A Preferred Stock, and
an additional 175,656 shares of Common Stock issuable in
connection with certain registration rights pursuant to a
registration rights agreement with the Company.
PLAN OF DISTRIBUTION
The securities offered hereby may, upon compliance with
applicable "Blue Sky" laws, be sold from time to time to purchasers
directly by the Selling Stockholders in negotiated transactions and
in the over-the-counter market on Nasdaq. The Shares may be sold
by one or more of the following: (a) a block trade in which the
broker or dealer so engaged will attempt to sell the shares as
agent; and (b) ordinary brokerage transactions in which the broker
solicits purchasers. In addition, any securities covered by the
Prospectus which qualify for sale pursuant to Rule 144 may be sold
under Rule 144 rather than pursuant to this Prospectus.
Alternatively, the Selling Stockholders may from time to time
offer the securities offered hereby through underwriters, dealers
or agents, who may receive compensation in the form of underwriting
discounts, concessions or commissions from the Selling Stockholder
and/or the purchasers of securities for whom they may act as
agents.
In order to comply with the securities laws of certain states,
if required, the Shares will be sold in such jurisdictions only
through registered or licensed brokers or dealers. In addition, in
certain states the Shares may not be sold unless they have been
registered or qualified for sale in the applicable state or any
exemption from the registration or qualification requirement is
available and is complied with.
Under applicable rules and regulations under the Exchange Act,
any person engaged in the distribution of the Shares may not
simultaneously engage in market making activities with respect to
the Common Stock for a period of nine business days prior to the
commencement of such distribution. In addition and without
limiting the foregoing, each Selling Stockholder will be subject to
applicable provisions of the Exchange Act and the rules and
regulations thereunder, including, without limitation, Rules 10b-6
and 10b-7, which provisions may limit the timing of purchases and
sales of shares of the Common Stock by the Selling Stockholders.
The Selling Stockholders and any underwriters, dealers or
agents that participate in the distribution of securities offered
hereby may be deemed to be underwriters, and any profit on the sale
of such securities by them and any discounts, commissions or
concessions received by any such underwriters, dealers or agents
might be deemed to be underwriting discounts and commissions under
the Securities Act. At the time a particular underwritten offer of
securities is made, to the extent required, a supplement to this
Prospectus will be distributed which will set forth the aggregate
amount of securities being offered and the terms of the offering,
including the name or names of any underwriters, dealers or agents,
and discounts, commissions and other items constituting
compensation from the Selling Stockholders and any discounts,
commissions or concessions allowed or reallowed or paid to dealers.
The securities offered hereby may be sold from time to time in
one or more transactions at a fixed offering price, which may be
changed or at varying prices determined at the time of sale or at
negotiated prices.
The Company will pay all reasonable and necessary expenses in
connection with the preparation of the Registration Statement and
this Prospectus, including, without limitation, any and all legal,
accounting and filing fees, but not including underwriting discounts
and commissions to be paid by the Selling Stockholders.
The Company has agreed to indemnify the Selling Stockholders
against certain liabilities in connection with the Registration
Statement, of which this Prospectus is a part, including certain
liabilities under the Securities Act.
The Shares may be sold from time to time by the Selling
Stockholders, or by pledgees, donees, transferees or other
successors in interest. Such sales may be made on one or more
exchanges or in the over-the-counter market or otherwise, at prices
and at terms then prevailing or at prices related to the then
current market price, or in negotiated transactions. The Shares
may be sold by one or more of the following: (a) a block trade in
which the broker-dealer so engaged will attempt to sell the Shares
as agent but may position and resell a portion of the block as
principal to facilitate the transaction; (b) purchases by a broker-
dealer as principal and resale by such broker-dealer for its
account pursuant to this Prospectus; (c) an exchange distribution
in accordance with the rules of such exchange; and (d) ordinary
brokerage transactions and transactions in which the broker
solicits purchasers. At the time a particular offer is made, a
Prospectus supplement, if required, will be distributed that sets
forth the name or names of agents or broker-dealers, any
commissions and other terms constituting compensation and any other
required information. In effecting sales, broker-dealers engaged
by the Selling Stockholder may arrange for other broker-dealers to
participate in the resales.
In connection with distributions of the Shares or otherwise,
the Selling Stockholders may enter into hedging transactions with
broker-dealers. In connection with such transactions, broker-dealers
may engage in short sales of the Shares registered hereunder in the
course of hedging the positions they assume with Selling Stockholders.
The Selling Stockholders may also sell shares short and redeliver the
Shares registered hereunder to close out short positions. The Selling
Stockholders may also enter into options or other transactions with
broker-dealers which require the delivery to the broker-dealer of the
Shares registered hereunder, which the broker-dealer may resell or
otherwise transfer pursuant to this Prospectus. The Selling Stockholders
may also loan or pledge the Shares so loaned or upon a default the
broker-dealer may effect sales of the pledged Shares pursuant to this
Prospectus. As of the date of this Prospectus, to the Company's knowledge,
there are no selling arrangements between the Selling Stockholders and
any broker-dealer.
Broker-dealers or agents may receive compensation in the form
of commissions, discounts or concessions from Selling Stockholders
in amounts to be negotiated in connection with the sale. Such
broker-dealers and any other participating broker-dealers may be
deemed to be "underwriters" within the meaning of the Securities
Act in connection with such sales and any such commission, discount
or concession may be deemed to be underwriting discounts or
commissions under the Securities Act.
The Company has filed the Registration Statement, of which
this Prospectus forms a part, with respect to the sale of the
Shares. The Company has agreed to use its reasonable best efforts
to keep the Registration Statement current and effective until the
Shares have been sold.
The Company will not receive any of the proceeds from the sale
of the Shares by the Selling Stockholders. The Company will bear
the costs of registering the Shares under the Securities Act,
including the registration fee under the Securities Act, legal and
accounting fees and any printing expenses. The Selling
Stockholders will bear expenses in connection with this offering
for selling commissions and brokerage fees.
The Selling Stockholders may agree to indemnify any broker-dealer
or agent that participates in transactions involving the Shares against
certain liabilities, including liabilities arising under the Securities
Act. The Company and the Selling Stockholders have agreed to indemnify
each other and certain other persons (including, in the case of the Company,
broker-dealers) against certain liabilities in connection with the offering
of the Shares, including liabilities arising under the Securities Act.
DESCRIPTION OF CAPITAL STOCK
The Company is authorized to issue 80,000,000 shares of Common
Stock, $0.01 par value per share, and 5,000,000 shares of Preferred
Stock, $0.01 par value per share. As of September 5, 1997,
22,081,494 shares of Common Stock were outstanding and 4,190
shares of 1996 Series A Preferred Stock were outstanding. As of
such date, there were 236 holders of record of the outstanding
shares of Common Stock.
The following description of the capital stock of the Company
is a summary and is qualified in its entirety by the provisions of
the Company's Certificate of Incorporation and By-Laws, as amended,
copies of which are filed as exhibits to the Registration Statement
of which this Prospectus forms a part.
Common Stock
Holders of Common Stock are entitled to one vote for each
share of Common Stock beneficially owned, on each matter submitted
to a vote at a meeting of stockholders. The Common Stock does not
have cumulative voting rights, which means that the holders of a
majority of voting shares for the election of directors can elect
all of the members of the Board of Directors. The Common Stock has
no preemptive rights and no redemption or conversion privileges.
The holders of the outstanding shares of Common Stock are entitled
to receive dividends out of assets legally available at such times
and in such amounts as the Board of Directors may, from time to
time, determine, and upon liquidation and dissolution are entitled
to receive all assets available for distribution to the
stockholders. A majority vote of shares represented at a meeting at
which a quorum is present is sufficient for all actions that
require the vote of stockholders. All of the outstanding shares of
Common Stock are, and the shares to be sold by the Company or on
exercise of the Warrants will be, when issued and paid for,
fully-paid and nonassessable.
Preferred Stock
Pursuant to the Certificate of Incorporation, the Company is
authorized to issue "blank check" Preferred Stock, which may be
issued from time to time in one or more series upon authorization
by the Company's Board of Directors. The Board of Directors,
without further approval of the stockholders, will be authorized to
fix the dividend rights and terms, conversion rights, voting
rights, redemption rights and terms, liquidation preferences, and
any other rights, preferences, privileges and restrictions
applicable to each series of the Preferred Stock. The issuance of
Preferred Stock, while providing flexibility in connection with
possible acquisitions and other corporate purposes could, among
other things, adversely affect the voting power of the holders of
Common Stock and, in certain circumstances, make it more difficult
for a third party to gain control of the Company, discourage bids
for the company's Common Stock at a premium or otherwise adversely
affect the market price of the Common Stock. As of September 5,
1997, the Company had 4,190 shares of Series 1996A Preferred Stock
issued and outstanding.
Redeemable Warrants
Warrants to purchase an aggregate of 3,139,000 shares of
Common Stock were issued in connection with the Company's IPO. As
of August 31, 1997, IPO Warrants to purchase 7,000 shares of Common
Stock had been exercised.
The IPO Warrants were immediately separable from the shares of
Common Stock included in the IPO Units and are immediately exercisable.
Each IPO Warrant entitles the holder to purchase, at any time until
August 10, 2000 (the "Expiration Date"), one share of Common Stock at
an exercise price of $7.00 per share, subject to certain adjustments based
upon anti-dilution provisions. The IPO Warrants may be exercised in
whole or in part. Unless exercised, the IPO Warrants will
automatically expire on the Expiration Date, unless extended by the
Company.
The exercise price of the IPO Warrants and the number of
shares of Common Stock issuable upon exercise of the IPO Warrants
are subject to adjustment in certain circumstances, including the
event of a stock dividend, subdivision or combination of the Common
Stock and the issuance of Common Stock or rights, options or
warrants to subscribe for Common Stock at a price per share less
than the exercise price of the IPO Warrants in effect immediately
prior to such issuance.
The Company may at any time redeem the IPO Warrants, in whole
or in part, at the option of the Company, upon not less than 30
days' notice, at a price of $.20 per IPO Warrant, provided that (i)
the average of the closing prices of the Common Stock is at least
175% of the then current exercise price of the IPO Warrants for 20
consecutive business days ending within 30 days of the date of the
notice of redemption, and (ii) the Company is in compliance with
its obligations to register under the Securities Act the shares of
Common Stock issuable on exercise of the IPO Warrants. If the
Company exercises its right to redeem the IPO Warrants, such IPO
Warrants will be exercisable until the close of business on the
date fixed for redemption in such notice. If any IPO Warrant
called for redemption is not exercised by such time, it will cease
to be exercisable and the holder thereof will be entitled only to
the redemption price.
Special Provisions of Delaware Law and the Company's Restated
Certificate of Incorporation
The Company is a Delaware corporation and is subject to
Section 203 of the Delaware General Corporation Law ("DGCL"). In
general, Section 203 of the DGCL prevents an "interested
stockholder" (defined generally as a person owning 15% or more of
a corporation's outstanding voting stock) from engaging in a
"business combination" (as defined in Section 203) with a Delaware
corporation for three years following the date such person became
an interested stockholder unless: (i) before such person became an
interested stockholder, the board of directors of the corporation
approved the transaction in which the interested stockholder became
an interested stockholder or approved the business combination,
(ii) upon consummation of the transaction that resulted in the
interested stockholder becoming an interested stockholder, the
interested stockholder owned at least 85% of the voting stock of
the corporation outstanding at the time the transaction commenced
(excluding stock held by directors who are also officers of the
corporation and by employee stock plans that do not provide
employees with the rights to determine confidentially whether
shares held subject to the plan will be tendered in a tender or
exchange offer), or (iii) on or following the transaction in which
such person became an interested stockholder, the business
combination is approved by the board of directors of the
corporation and approved at a meeting of stockholders by the
affirmative vote of the holders of at least two-thirds of the
outstanding voting stock of the corporation not owned by the
interested stockholder. Under Section 203 of the DGCL, the
restrictions described above also do not apply to certain business
combinations proposed by an interested stockholder prior to the
consummation or abandonment of and subsequent to the earlier of the
public announcement or notification of one of certain extraordinary
transactions involving the corporation and a person who had not
been an interested stockholder during the previous three years or
who became an interested stockholder with the approval of a
majority of the corporation's directors, if such extraordinary
transaction is approved or not opposed by a majority of the
directors who were directors prior to any person becoming an
interested stockholder during the previous three years or who were
recommended for election or elected to succeed such directors by a
majority of such directors.
The foregoing provisions could delay or frustrate a change in
control of the Company. The provisions could also discourage or
make more difficult a merger, tender offer or proxy contest, even
if such event would be favorable to the interests of stockholders.
Section 102(a)(7) of the DGCL authorizes corporations to limit
or eliminate the personal liability of directors to corporations
and their stockholders for monetary damages for breach of the
directors' fiduciary duty of care. The duty of care requires that,
when acting on behalf of the corporation, directors must exercise
an informed business judgment based on all material information
reasonably available to them. Absent the limitations now
authorized by such legislation, directors are accountable to
corporations and their stockholders for monetary damages for
conduct constituting gross negligence in the exercise of their duty
of care. Although Section 102(a) does not change directors' duty
of care, it enables corporations to limit available relief to
equitable remedies such as injunction or rescission. The
Certificate of Incorporation limits the liability of the directors
to the Company or its stockholders (in their capacity as directors
but not in their capacity as officers) to the fullest extent
permitted by Section 102(a). Specifically, directors of the
Company will not be personally liable for monetary damages for
breach of a director's fiduciary duty as a director, except for
liability: (i) for any breach of the director's duty of loyalty to
the Company or its stockholders; (ii) for acts or omissions not in
good faith or which involve intentional misconduct or a knowing
violation of law; (iii) for unlawful payments of dividends or
unlawful stock repurchase or redemptions as provided in Section 174
of the DGCL; or (iv) for any transaction from which the director
derived an improper personal benefit.
LEGAL MATTERS
The validity of the Shares being offered hereby will be passed
upon for the Company by Brown, Todd & Heyburn PLLC, Louisville,
Kentucky.
EXPERTS
The balance sheet of the Company 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
1995, and the period May 11, 1994 (inception) through December 31,
1996 included in the Company's Annual Report on Form 10-KSB for the
year ended December 31, 1996, have been audited by Grant Thornton,
LLP, independent certified public accountants, as set forth in
their report included therein, and are incorporated herein by
reference in reliance upon such report of said firm as experts in
auditing and accounting.
No dealer, salesperson or other individual has been authorized to
give any information or to make any representations not contained
in, or incorporated by reference in, this Prospectus, in connection
with the offering covered by this Prospectus. If given or made,
such information or representations must not be relied upon as
having been authorized by the Company, the Selling Stockholders or
any selling agent. This Prospectus does not constitute an offer to
sell, or a solicitation of an offer to buy, the Common Stock in any
jurisdiction where, or to any person to whom, it is unlawful to
make such offer or solicitation. Neither the delivery of this
Prospectus nor any sale made hereunder shall, under any
circumstances, create an implication that there has not been any
change in the facts set forth in this Prospectus or incorporated by
reference herein or in the affairs of the Company since the date
hereof.
TABLE OF CONTENTS
Page
Available Information . . . . . . . . . . . . . . . . . . . . .
Incorporation of Certain Documents
by Reference. . . . . . . . . . . . . . . . . . . . . . . . .
The Company . . . . . . . . . . . . . . . . . . . . . . . . . .
Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . .
Recent Developments . . . . . . . . . . . . . . . . . . . . .
Use of Proceeds. . . . . . . . . . . . . . . . . . . . . . . .
Selling Stockholders . . . . . . . . . . . . . . . . . . . . .
Plan of Distribution . . . . . . . . . . . . . . . . . . . . .
Description of Capital Stock . . . . . . . . . . . . . . . . .
Legal Matters . . . . . . . . . . . . . . . . . . . . . . . .
Experts . . . . . . . . . . . . . . . . . . . . . . . . . . .
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
Expense Amount
SEC registration fee $ 1,840
"Blue Sky" filing fees and expenses
(including legal expenses)(1) 5,000
Legal fees and expenses(1) 25,000
Accounting fees and expenses(1) 7,500
Printing(1) 2,000
Transfer agent fees(1) 1,000
______
$42,340
__________________
(1) Estimated
All itemized fees and expenses of the offering are expected to
be paid by the Company.
Item 15. Indemnification of Directors and Officers.
Section 102(a)(7) of the DGCL authorizes corporations to limit
or eliminate the personal liability of directors to corporations
and their stockholders for monetary damages for breach of the
directors' fiduciary duty of care. The duty of care requires that,
when acting on behalf of the corporation, directors must exercise
an informed business judgment based on all material information
reasonably available to them. Absent the limitations now
authorized by such legislation, directors are accountable to
corporations and their stockholders for monetary damages for
conduct constituting gross negligence in the exercise of their duty
of care. Although Section 102(a) does not change directors' duty
of care, it enables corporations to limit available relief to
equitable remedies such as an injunction or rescission. The
Company's Certificate of Incorporation limits the liability of the
directors to the Company or its stockholders (in their capacity as
directors but not in their capacity as officers) to the fullest
extent permitted by Section 102(a). Specifically, a director of
the Company will not be personally liable for monetary damages for
breach of a director's fiduciary duty as a director, except for
liability: (i) for any breach of the director's duty of loyalty to
the Company or its stockholders; (ii) for acts or omissions not in
good faith or which involve intentional misconduct or a knowing
violation of law; (iii) for unlawful payments of dividends or
unlawful stock repurchases or redemptions as provided in Section
174 of the DGCL; or (iv) for any transaction from which the
director derived an improper personal benefit.
Under Section 145 of the DGCL, the Company has the power to
indemnify directors and officers under certain prescribed
circumstances and subject to certain limitations against certain
costs and expenses, including attorney's fees, actually and
reasonably incurred in connection with any action, suit or
proceeding, whether civil, criminal, administrative, or
investigative, to which any of them is a party by reason of his
being a director or officer of the Company if it is determined that
he acted in accordance with the applicable standard of conduct set
forth in such statutory provisions. The Company's By-Laws provide
that the Company shall indemnify each person who may be indemnified
pursuant to Section 145, as amended from time to time (or any
successor provision thereto), to the fullest extent permitted by
Section 145.
The Registrant maintains directors and officers liability
insurance.
Item 16. Exhibits.
3.1 - Certificate of Incorporation of the Company is hereby
incorporated by reference to the exhibits to the Form SB-2
Registration Statement (File No. 33-93086).
3.2 - Certificate of Amendment to Certificate of Incorporation
of the Company is hereby incorporated by reference to the
exhibits to the Form 10-KSB for the fiscal year ended
December 31, 1996 (File No. 0-26302).
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 is hereby incorporated by reference
to the exhibits to the Form 10-KSB for the fiscal year
ended December 31, 1996 (File No. 0-26302).
3.2 - By-Laws of the Company, as amended and restated, is
hereby incorporated by reference to the exhibits to the
Form 8-A12G Registration Statement dated January 29, 1997
(File No. 0-26302).
4.1 Specimen certificate for Common Stock is hereby
incorporated by reference to the exhibits to the Form
SB-2 Registration Statement (File No. 33-93086).
4.2 Specimen certificate for Warrants (included in Exhibit
10.4) is hereby incorporated by reference to the exhibits
of Form SB-2 Registration Statement (File No. 33-93086).
4.3 - Rights Agreement between the Company and Continental
Stock Transfer & Trust Company, dated January 29, 1997,
is hereby incorporated by reference to the exhibits to
the Form 8-A12G Registration Statement dated January 29,
1997 (File No. 0-26302).
4.4 - Form of Rights Certificate (included in Exhibit 4.3) is
hereby incorporated by reference to the exhibits to the
Form 8-A12G Registration Statement dated January 29, 1997
(File No. 0-26302).
4.5 - Form of 8% Convertible Debenture due July 31, 1998, is
hereby incorporated by reference to the exhibits to the
Form 8-K dated August 13, 1997.
5.1 - Legal Opinion of Brown, Todd & Heyburn PLLC
10.1 - Employment Agreement between the Company and Ted Ralston
is hereby incorporated by reference to exhibits to the
Form 10-KSB for the fiscal year ended December 31, 1995
(File No. 0-26302).
10.2 - Employment Agreement between the Company and Vernon L.
Jackson, dated October 10, 1994, is hereby incorporated
by reference to the exhibits to the Form SB-2
Registration Statement (File No. 33-93086).
10.3 - Amendment to Employment Agreement between the Company and
Vernon L. Jackson, dated October 10, 1994, is hereby
incorporated by reference to the exhibits to the Form SB-2
Registration Statement (File No. 33-93086).
10.4 - Form of Kensington Wells Incorporated Warrant Agreement
is hereby incorporated by reference to the exhibits to
the Form SB-2 Registration Statement (File No. 33-93086).
10.5 - Consulting Agreement between the Company and Ted Ralston
is hereby incorporated by reference to the exhibits to
the Form 10-KSB for the fiscal year ended December 31,
1995 (File No. 0-26302).
10.6 - Employment Agreement between the Company and Peter Beck,
dated April 17, 1995, is hereby incorporated by reference
to the exhibits to the Form SB-2 Registration Statement
(File No. 33-93086).
10.7 - Employment Agreement between the Company and John E.
Haines is hereby incorporated by reference to the
exhibits to the Form 10-KSB for the fiscal year ended
December 31, 1995 (File No. 0-26302).
10.8 - Option Agreement between the Company and John R.
Glankler, dated August 28, 1995, is hereby incorporated
by reference to the exhibits to the Form 10-KSB for the
year ended December 31, 1996 (File No. 0-26302).
10.9 - Exclusive Distribution Agreement between the Company and
Samsung America, Inc. and Samsung Corporation is hereby
incorporated by reference to the exhibits to the Form 10-KSB
for the year ended December 31, 1995 (File No. 0-26302).
10.10- Employment Agreement and Employment Agreement Addendum
between the Company and Steven B. Rothenberg is hereby
incorporated by reference to the exhibits to the Form 10-KSB
for the year ended December 31, 1995 (File No. 0-26302).
10.11- Lease between the Company and NTS/BBCI, dated April 23,
1996, is hereby incorporated by reference to the exhibits
to the Form 10-KSB for the fiscal year ended December 31,
1996 (File No. 0-26302).
10.12- Lease between the Company and Corporate Business Connection,
Inc., dated May 1, 1996, is hereby incorporated by reference to
the exhibits to the Form 10-KSB for the fiscal year ended
December 31, 1996 (File No. 0-26302).
10.13- Termination and Release Agreement between the Company and
John E. Haines, dated May 14, 1996, is hereby
incorporated by reference to the exhibits to the Post
Effective Amendment No. 1 to Form SB-2 Registration
Statement (File No. 33-93086).
10.14- Registration Rights Agreement between the Company and
John E. Haines, dated May 14, 1996, is hereby
incorporated by reference to the exhibits to the Post
Effective Amendment No. 1 to Form SB-2 Registration
Statement (File No. 33-93086).
10.15- Option Agreement between the Company and John E. Haines,
dated May 14,1996, is hereby incorporated by reference to
the exhibits to the Post Effective Amendment No. 1 to
Form SB-2 Registration Statement (File No. 33-93086).
10.16- Option Agreement between Jacques O. de Labry and the
Company, dated June 14, 1996, is hereby incorporated by
reference to the exhibits to the Form 10-KSB for the
fiscal year ended December 31, 1996 (File No. 0-26302).
10.17- Option Agreement between the Company and Quest Enterprises, Inc.,
dated June 14, 1996, is hereby incorporated by reference to the
exhibits to the Form 10-KSB for the fiscal year ended December 31,
1996 (File No. 0-26302).
10.18- Piggyback Registration Rights Agreement between the
Company and Quest Enterprises, Inc., dated June 14, 1996,
is hereby incorporated by reference to the exhibits to
the Form 10-KSB for the fiscal year ended December 31,
1996 (File No. 0-26302).
10.19- 1995 Stock Option Plan of the Company is hereby
incorporated by reference to the exhibits to the Form S-8
Registration Statement (File No. 333-6449).
10.20- Form of Option Agreement - Incentive Stock Option is
hereby incorporated by reference to the exhibits to the
Form 10-KSB for the fiscal year ended December 31, 1996
(File No. 0-26302).
10.21- Form of Director Option Agreement - Non-Qualified Stock
Option is hereby incorporated by reference to the
exhibits to the Form 10-KSB for the fiscal year ended
December 31, 1996 (File No. 0-26302).
10.22- Consulting Agreement between Video Network Inc. and the
Company, dated July 1, 1996, is hereby incorporated by
reference to the exhibits to the Form 10-KSB for the
fiscal year ended December 31, 1996 (File No. 0-26302).
10.23- Option Agreement between the Company and Video Network
Inc., dated August 5, 1996, is hereby incorporated by
reference to the exhibits to the Form 10-KSB for the
fiscal year ended December 31, 1996 (File No. 0-26302).
10.24- Option Agreement between the Company and Howard S.
Jacobs, dated August 28, 1996, is hereby incorporated by
reference to the exhibits to the Form 10-KSB for the
fiscal year ended December 31, 1996 (File No. 0-26302).
10.25- Employment Agreement between the Company and Jack
Shirman, dated September 27, 1996, is hereby incorporated
by reference to the exhibits to the Form 10-QSB dated
November 11, 1996 (File No. 0-26302).
10.26- Option Agreement between the Company and Jack Shirman,
dated September 27, 1996 is hereby incorporated by
reference to the exhibits to the Form 10-QSB dated
November 11, 1996 (File No. 0-26302).
10.27- Form of Registration Rights Agreement, dated October 17,
1996, is hereby incorporated by reference to the exhibits
to the Form 10-QSB dated November 11, 1996 (File No. 0-26302).
10.28- Form of Subscription Agreement, dated October 17, 1996,
is hereby incorporated by reference to the exhibits to
the Form 10-QSB dated November 11, 1996 (File No. 0-26302).
10.29- Form of Registration Rights Agreement the Company, dated
October 17, 1996, is hereby incorporated by reference to
the exhibits to the Form 10-QSB dated November 11, 1996
(File No. 0-26302).
10.30- Form of Subscription Agreement, dated October 17, 1996,
is hereby incorporated by reference to the exhibits to
the Form 10-QSB dated November 11, 1996 (File No. 0-26302).
10.31- Warrant Agreement between the Company and First Bermuda
Securities Limited, dated October 17, 1996, is hereby
incorporated by reference to the exhibits to the Form 10-KSB for
the fiscal year ended December 31, 1996 (File No. 0-26302).
10.32- Form of First Bermuda Securities Warrant is hereby
incorporated by reference to the exhibits to the Form 10-KSB for
the fiscal year ended December 31, 1996 (File No. 0-26302).
10.33- Registration Rights Agreement between the Company and
Goodbody International, Inc., dated November 15, 1996, is
hereby incorporated by reference to the exhibits to the
Form 10-KSB for the fiscal year ended December 31, 1996
(File No. 0-26302).
10.34- Form of Goodbody International Inc. Warrant is hereby
incorporated by reference to the exhibits to the Form 10-KSB for
the fiscal year ended December 31, 1996 (File No. 0-26302).
10.35- Registration Rights Agreement between the Company and RIC
Investment Fund Ltd., dated November 26, 1996, is hereby
incorporated by reference to the exhibits to the Form 10-KSB for
the fiscal year ended December 31, 1996 (File No. 0-26302).
10.36- Subscription Agreement between the Company and RIC
Investment Fund Ltd. is hereby incorporated by reference
to the exhibits to the Form 10-KSB for the fiscal year
ended December 31, 1996 (File No. 0-26302).
10.37- Stock Option Agreement between the Company and Jack
Shirman, dated January 23, 1997, is hereby incorporated
by reference to the exhibits to the Form 10-KSB for the
fiscal year ended December 31, 1996 (File No. 0-26302).
10.38 - Executive Severance Agreement between the Company and
Jack Shirman, dated February 14, 1997, is hereby
incorporated by reference to the exhibits to the Form 10-KSB
for the fiscal year ended December 31, 1996 (File No. 0-26302).
10.39 - Executive Severance Agreement between the Company and
Steven B. Rothenberg, dated February 14, 1997, is hereby
incorporated by reference to the exhibits to the Form 10-KSB for
the fiscal year ended December 31, 1996 (File No. 0-26302).
10.40 - Asset Purchase Agreement, dated July 10, 1997, by and
among IL Acquisition Corp., Video and Communication
Solutions, Inc., the Company, GCH Acquisition Partners,
Ltd., and Grown Capital Holdings, Inc.
21 - Subsidiary of the Company
23.1 - Consent of Brown, Todd & Heyburn PLLC is included in its
opinion filed herewith.
23.2 - Consent of Grant Thornton LLP
24 - Power of Attorney (included in the Signature Page to this
Registration Statement)
27 - Financial Data Schedule
Item 17. Undertakings.
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or
sales are being made, a post-effective amendment to this
registration statement:
(i) To include any material information with
respect to any plan of distribution not previously
disclosed in the registration statement or any
material change to such information in the
registration statement;
(2) That, for the purpose of determining any
liability under the Securities Act of 1933, each post-effective
amendment shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering
of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold
at the termination of the offering.
(b) The undersigned registrant hereby undertakes that,
for purposes of determining any liability under the Securities
Act of 1933, each filing of the registrant's annual report
pursuant to Section 13(a) or Section 15(d) of the Securities
Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section
15(d) of the Securities Exchange Act of 1934) that is
incorporated by reference in the registration statement shall
be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona
fide offering thereof.
(c) Insofar as indemnification for liabilities arising
under the Securities Act of 1933 may be permitted to
directors, officers and controlling persons of the registrant
pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is
against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the
payment by the registrant of expenses incurred or paid by a
director, officer or controlling person of the registrant in
the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in
connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in
the Act and will be governed by the final adjudication of such
issue.
(d) The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under
the Securities Act, of 1933 the information omitted from
the form of prospectus filed as part of this registration
statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the registrant under Rule
424(b)(1) or (4) or 497(h) under the Securities Act shall
be deemed to be part of this registration statement as of
the time it was declared effective.
(2) For the purposes of determining any liability
under the Securities Act of 1933, each post-effective
amendment that contains a form of prospectus shall be
deemed to be a new registration statement relating to the
securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial
bona fide offering thereof.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933,
the registrant certifies that it has reasonable grounds to believe
that it meets all of the requirements for filing on Form S-3 and
has duly caused this registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized in the City of
Louisville, Commonwealth of Kentucky.
VIDEOLAN TECHNOLOGIES, INC.
By: /s/ Jack Shirman
Jack Shirman, Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose
signature appears below hereby constitutes and appoints Jack
Shirman and Steven B. Rothenberg his true and lawful attorneys-in-fact
and agents, with full power of substitution, and each with
power to act alone, to sign and execute on behalf of the
undersigned any amendment or amendments (including post-effective
amendments) to this Registration Statement on Form S-3, and to
perform any acts necessary to be done in order to file such
amendment with exhibits thereto and other documents in connection
therewith with the Securities and Exchange Commission, and each of
the undersigned does hereby ratify and confirm all that said
attorneys-in-fact and agents, or their substitutes, shall do or
cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as
amended, this registration statement has been signed by the
following persons in the capacities and on the dates indicated.
Signature Title Date
/s/ Jack Shirman Chief Executive Officer September 8, 1997
Jack Shirman and Director
(Principal Executive Officer)
/s/ Steven Rothenberg Vice President Finance, September 8, 1997
Steven Rothenberg Chief Financial Officer,
(Chief Accounting Officer),
and Director
/s/ Norman Barkeley Director September 8, 1997
Norman Barkeley
/s/ John Glankler Director September 8, 1997
John Glankler
EXHIBIT 5.1
September 10, 1997
VideoLan Technologies, Inc.
11403 Bluegrass Parkway, Suite 400
Louisville, Kentucky 40299
Ladies and Gentlemen:
We have acted as legal counsel in connection with the
preparation of a Form S-3 Registration Statement under the
Securities Act of 1933, as amended ("Registration Statement"),
covering an aggregate of 14,946,104 shares of common stock, no par
value (the "Shares") of VideoLan Technologies, Inc., a Delaware
corporation (the "Company").
We have examined and are familiar with the Certificate of
Incorporation and Bylaws of the Company, as amended, and the various
corporate records and proceedings relating to the organization of
the Company and the issuance of the Shares pursuant to the
conversion of the Series 1996A Preferred Stock (the "Preferred
Stock"). We have also examined such other documents and proceedings
as we have considered necessary for the purpose of this opinion.
Based on the foregoing, it is our opinion that the Shares have
been duly authorized and, when issued and paid for in accordance
with the terms of the Preferred Stock, will be validly issued, fully
paid and nonassessable.
We are qualified to practice law only in the Commonwealth of
Kentucky. As to matter of Delaware law, we have reviewed the
statutes set forth in Title 8 of the Michie Company's Delaware
Corporation Laws Annotated, 1994-95 Edition (collectively, the
"Delaware Statutes"). Our opinion is based solely on our review of
the Delaware Statutes.
We hereby consent to the filing of this opinion as an exhibit
to the Registration Statement.
Very truly yours,
BROWN, TODD & HEYBURN PLLC
/s/ William G. Strench
By: William G. Strench, Member
Exhibit 10.40
ASSET PURCHASE AGREEMENT
This is an Asset Purchase Agreement (this "Agreement") dated
as of July 10, 1997 (the "Effective Date"), by and among IL
ACQUISITION CORP. ("Purchaser"), a Kentucky corporation, VIDEO AND
COMMUNICATION SOLUTIONS, INC.("Seller"), a Delaware corporation
formerly incorporated as IMAGELINK, INC., VIDEOLAN TECHNOLOGIES,
INC. ("VideoLan Parent"), the sole shareholder of Purchaser, and
GCH ACQUISITION PARTNERS, LTD, and GROWTH CAPITAL HOLDINGS, INC.
(collectively, the "Shareholder"), shareholders of Seller.
RECITALS
WHEREAS, Seller is engaged in the business of is engaged in
the business of marketing and selling desktop Kodec video
conferencing systems;
WHEREAS, Seller wishes to sell, and Purchaser wishes to purchase,
upon the terms and conditions set forth in this Agreement, substantially
all of Seller's assets; and
WHEREAS, the Shareholder will benefit from the transactions
contemplated by this Agreement and is joining in this Agreement for
the purposes of making the representations, warranties and
covenants referred to in, or provided to be done and performed by
it under, this Agreement.
WHEREAS, VideoLan Parent, as the sole owner of Purchaser, will
benefit from the transaction contemplated in this Agreement.
NOW, THEREFORE, in consideration of the mutual benefits and
covenants contained herein, and subject to the terms and conditions
set forth herein, the parties agree as follows:
Section 1
Definitions
1.01 Definitions. As used in this Agreement, the following
terms shall have the following meanings:
(a) "Accounts Receivable" shall mean all of Seller's
accounts receivable that exist on the Effective Date.
(b) "Assets" shall mean all of Seller's assets (other
than the assets described on Schedule 1.01(b)), including, without
limitation, the Accounts Receivable, Contracts, Equipment,
Inventory and Permits.
(c) "Assignment of Contracts" shall mean the Assignment
of Contracts, substantially in the form attached hereto as Schedule
1.01(c), pursuant to which Seller shall assign the Contracts to
Purchaser.
(d) "Bill of Sale" shall mean the bill of sale, sub-
stantially in the form attached hereto as Schedule 1.01(d),
pursuant to which Seller shall transfer to Purchaser the Accounts
Receivable, Equipment, Inventory and Permits.
(e) "Contracts" shall mean the contracts, leases and
other commitments, which are listed on Schedule 1.01(e).
(f) "Equipment" shall mean all of Seller's furniture,
fixtures, machinery, equipment and other tangible personal prop-
erty, as described on Schedule 1.01(f), together with all manu-
facturers' warranties pertaining to the same, to the extent that
such warranties may exist and be assignable.
(g) "Goodwill" shall mean Seller's goodwill and name,
and the going concern value of Seller's business.
(h) "Intellectual Property" shall mean trade names,
trademarks or service marks, together with the Goodwill associated
therewith; copyrights; pending or issued registrations for any of
the foregoing; patents and patent applications; unpatented
inventions; trade secrets and other confidential or proprietary
information, computer programs, processes, formulas and methods;
and all other intangible property rights of any kind.
(i) "Inventory" shall mean the raw materials, manufac-
turing supplies, packaging materials, purchased products, finished
goods and all other goods, merchandise and materials owned by Sel-
ler, as more particularly described (including storage locations)
on Schedule 1.01(i).
(j) "Liabilities" (whether or not capitalized) shall
mean all accounts payable, notes payable, liabilities, commitments,
indebtedness or obligations of any kind whatsoever, whether
absolute, accrued, contingent, matured or unmatured, direct or
indirect, of Seller, or to which any of Seller's properties or
assets are subject, all of which are listed on Schedule 1.01(j)
hereto.
(k) "Other Agreements" shall mean the Assignment of
Contracts, Bill of Sale, and all other agreements, certificates,
opinions, instruments or documents contemplated by, required by or
referred to in, this Agreement for the consummation of the
transactions contemplated hereby.
(l) "Permits" shall mean all permits, licenses, fran-
chises, approvals, certificates or authorizations of any federal,
state or local governmental or regulatory body required in order to
permit Seller to carry on its business, as described on Schedule
1.01(l).
(m) "Person" shall mean any person, firm, trust, part-
nership, corporation, limited liability company or other business
entity.
Section 2
Purchase and Sale
2.01 Purchase of the Assets. Subject to the terms and con-
ditions of this Agreement, Seller hereby agrees to sell, transfer
and deliver to Purchaser, and Purchaser hereby agrees to purchase,
the Assets. Purchaser hereby agrees to pay certain outstanding and
accrued vacation funds to Seller's employees as designated by
Seller on Schedule 2.01.
2.02 Purchase Price. The purchase price (the "Purchase
Price") for the Assets shall be 4,000,000 shares (the "Shares") of
VideoLan Parent's common stock, $.001 par value (the "VideoLan
Parent Common Stock"), 3,000,000 of which shall be subject to
cancellation in accordance with Section 2.03.
2.03 Cancellation.
(a) Of the Shares (the "Noncontingent Shares"),
1,000,000 shall not be subject to cancellation.
(b) In accordance with the table below, up to 3,000,000
of the remaining Shares (the "Contingent Shares") shall be
automatically canceled without any action on the part of Seller,
Purchaser, VideoLan Parent, or Shareholder if VideoLan Parent's
aggregate revenues during the 12 months ending July 10, 1998 (as
reported in VideoLan Parent's reports filed with the Securities and
Exchange Commission pursuant to the Securities Exchange Act of
1934) do not equal or exceed $12,000,000:
Aggregate Revenues Contingent Shares Canceled
$5,999,999 and below 3,000,000
$6,000,000-$7,999,999 2,000,000
$8,000,000-$11,999,999 1,000,000
$12,000,000 and above 0
2.04 Transfer Restrictions. On or prior to January 1, 2000,
the Shares may not be sold, conveyed, pledged, hypothecated or
otherwise transferred except as follows:
(a) Purchaser agrees to use its best efforts to promptly
register after the Closing up to 50,000 Noncontingent Shares under
the Securities Act of 1933, as amended.
(b) During each calendar month beginning on or after
January 1, 1998, up to 200,000 Noncontingent Shares, less any
Noncontingent Shares sold pursuant to paragraph (a) above, may be
sold in accordance with the manner of sale requirements set forth
in Rule 144(f) under the Securities Act of 1933 ("Ordinary
Brokerage Transactions").
(c) During each calendar month beginning on or after
July 1, 1998, the Noncontingent Shares may be sold in Ordinary
Brokerage Transactions in an amount not to exceed (i) 20% of the
noncanceled Contingent Shares less (ii) the number of Noncontingent
Shares sold during such month.
2.05 Exchange Rights.
(a) If on any day (the "Assessment Day") on or before
July 1, 1998, the Common Stock Price (as defined below) of VideoLan
Parent is worth less than $.25, then the Seller at its sole
discretion may exchange 4,000,000 shares of VideoLan Parent Common
Stock to VideoLan Parent in return for all of the common stock of
Purchaser, provided that the Seller has not sold any of its
VideoLan Common Stock pursuant to Section 2.04.
(b) For the purpose of this Section 2.05, the Common
Stock Price shall mean the average closing bid price of the
VideoLan Parent Common Stock on the Nasdaq market, or on any other
exchange on which the Shares are listed, as reported in the Wall
Street Journal for the five (5) trading days immediately preceding
the Assessment Day.
(c) In the event of a capital adjustment resulting from
a stock dividend, stock split, reverse stock split, reorganization,
merger, consolidation, combination or exchange of stock or other
change in corporate structure or capitalization affecting the
Shares, the number of Shares and the shares prices set forth in
Section 2.04 and this Section 2.05 shall be adjusted in a manner
consistent with such capital adjustment.
2.06 Allocation of Purchase Price. The Purchase Price shall
be allocated among the Assets as set forth on Schedule 2.06 hereto.
Purchaser and Seller shall report the transactions contemplated
herein for all tax purposes in accordance with such allocation and,
in any proceeding related to the determination of any tax, neither
Purchaser nor Seller shall contend or represent that such alloca-
tion is not a correct allocation.
2.07 Seller's Liabilities. Except as described on Schedule
2.07, Purchaser is not assuming, and the parties do not intend for
Purchaser to assume, pursuant to this Agreement or otherwise, any
of the Liabilities, and Seller agrees and confirms that it is, and
will remain, responsible for and will pay any and all of the
Liabilities that are not set forth on Schedule 2.07.
2.08 Employees of Seller.
(a) Pursuant to this Agreement or otherwise, Purchaser
will not purchase, recognize, assume or otherwise acquire any
rights, obligations, assets or liabilities under, arising from or
resulting from any employment agreement in existence between Seller
and any employee, or any person employed to consult with or perform
services for Seller, or otherwise. Seller agrees that VideoLan
Parent shall not be obligated to hire any of Seller's employees,
but that VideoLan Parent, in its sole discretion, may hire some or
all of such employees on such terms as VideoLan Parent and the
employees so hired may agree. Seller and the Shareholder agree to
cooperate with VideoLan Parent in VideoLan Parent's selection of
Seller's employees to be hired by VideoLan Parent.
(b) VideoLan Parent shall not be responsible to Seller
or to any current or former employee of Seller for any employee
benefits or deferred compensation plans (whether earned, accrued or
vested), due to Seller's employees with respect to their employment
prior to the date hereof. Seller agrees to immediately reimburse
VideoLan Parent for all amounts paid by VideoLan Parent to
discharge or satisfy employee benefit plan obligations (e.g.
vacation pay, sick leave pay, etc.) that are earned and vested as
of the date hereof under Seller's policies and plans applicable to
its employees; provided, however, that this provision shall not be
interpreted to create any obligation of VideoLan Parent to pay any
of Seller's employees such amounts due with respect to Seller's
employment of such employees prior to the date hereof.
(c) Seller shall provide all notices to its employees
and their dependents upon the termination of an employee's group
health care coverage required by the Consolidated Omnibus Reconcil-
iation Act of 1985 ("COBRA") as the result of the termination of
their employment, without regard to whether Purchaser rehires any
or all of such employees. Seller specifically undertakes to
provide any continuation coverage under COBRA elected by its
employees and their dependents whether or not VideoLan Parent
rehires any or all of such employees.
Section 3
Representations and Warranties
of Seller and the Shareholder
Seller and the Shareholder, jointly and severally, represent
and warrant to Purchaser as follows:
3.01 Organization. Seller is a corporation duly organized and
validly existing under the laws of the state of Delaware, and has
full corporate power and authority to own, lease and operate its
properties as such properties are now owned, leased and operated,
and to conduct its business as and where its business is now
conducted. Seller is qualified to do business and is in good
standing in all jurisdictions in which the character of the properties
owned or leased by it, or the nature of the activities conducted by
it, makes such qualification necessary. Schedule 3.01 lists the
jurisdictions in which Seller is qualified to do business.
3.02 Subsidiaries. Seller does not own or control, and never
has owned or controlled, directly or indirectly, any capital stock
of any other corporation or any interest in any other Person.
3.03 Authority.
(a) Seller and the Shareholder have full right, power,
authority, and capacity to execute and deliver this Agreement and
the Other Agreements as to which Seller or the Shareholder is a
party, and to perform their respective obligations under this
Agreement and such Other Agreements. This Agreement and the Other
Agreements as to which Seller or the Shareholder is a party
constitute valid and legally binding obligations of Seller and the
Shareholder, enforceable in accordance with their respective terms.
(b) The execution and delivery of this Agreement and the
Other Agreements as to which Seller or the Shareholder is a party,
the consummation of the transactions contemplated hereby and
thereby, and the performance and fulfillment of their respective
obligations and undertakings hereunder and thereunder by the Seller
and Shareholder will not, (i) violate any provision of, or result
in the breach of or accelerate or permit the acceleration of any
performance required by the terms of, the Articles of Incorporation
or Bylaws of Seller or Growth Capital Holdings or the Limited
Partnership Agreement of GCH Acquisition Partners, LTD; any
contract, agreement, arrangement or undertaking to which either
Seller or the Shareholder is a party or by which either of them may
be bound; any judgment, decree, writ, injunction, order or award of
any arbitration panel, court or governmental authority; or any
applicable law, ordinance, rule or regulation of any governmental
body; (ii) result in the creation of any claim, lien, charge or
encumbrance upon any of the properties or assets (whether real or
personal, tangible or intangible) of Seller; (iii) terminate or
cancel, or result in the termination or cancellation of, any agree-
ment or undertaking to which the Seller or the Shareholder is a
party; or (iv) in any way affect or violate the terms or conditions
of, or result in the cancellation, modification, revocation or
suspension of, any of the Permits.
3.04 Accredited Investor. The Seller is an "Accredited
Investor" as that term is defined in Section 501(a) of Regulation
D promulgated under the Securities Act of 1933.
3.05 Financial Statements. Seller has furnished to the
Purchaser true and complete copies of the unaudited financial
statements (including balance sheets, statements of income and
statements of changes in cash flows of Seller as of and for the
years ended December 31, 1995 and December 31, 1996 (collectively,
the "Financial Statements"). The Financial Statements fairly
present the financial position of Seller at the dates of, and the
results of the operations for Seller for the periods covered by,
such Financial Statements in accordance with generally accepted
accounting principles ("GAAP") consistently applied with prior
periods. Seller has furnished to the Purchaser true and complete
copies of the unaudited balance sheet of the Seller as of March 31,
1997 (the "Balance Sheet") and the related statements of income,
statements of changes in cash flows of Seller as of and for the
period then ended (collectively, the "Interim Financial Statements").
The Interim Financial Statements fairly present the financial position
of the Seller at the date thereof, and the results of the operations
and the changes in cash flows for Seller for the period then ended.
Such Interim Financial Statements have been prepared in accordance with
GAAP consistently applied with prior periods, except that the Interim
Financial Statements do not contain any or all of the footnotes required
by GAAP and are subject to year-end adjustments consistent with prior
practice.
3.06 Title to Assets. Seller has good and marketable title to
all of the Assets, free and clear of any claims, liens, charges,
mortgages, security interests or encumbrances whatsoever. The
execution and delivery of this Agreement, and the consummation of
the transactions contemplated by this Agreement, will not result in
the creation of any such encumbrance on the Assets.
3.07 Condition of Assets. The tangible real and personal
property owned or leased by Seller or used or employed by it in its
business, is (a) sufficient and adequate to carry on its business
as presently conducted; (b) in good condition and repair, ordinary
wear and tear excepted; and (c) in the state of maintenance, repair
and operating condition required for the proper operation and use
thereof in the ordinary course of business.
3.08 Inventory. The Inventory consists solely of good and
merchantable items which are usable or saleable at regular market
prices in the ordinary course of Seller's business.
3.09 Absence of Material Change. Except as set forth on
Schedule 3.09:
(a) Since June 30, 1997, the business and affairs of
Seller have been conducted only in the ordinary course.
(b) Since June 30, 1997, (i) there has been no change in
the condition (financial or otherwise), assets, liabilities,
earnings, business, operations, affairs or prospects of Seller,
other than minor changes in the ordinary course of business, none
of which either singly or in the aggregate has been materially
adverse; and (ii) there has been no damage, destruction, loss or
other occurrence or development (whether or not insured against),
that either singly or in the aggregate materially adversely affects
(and neither Seller nor the Shareholder knows, or has any reasonable
grounds to know, of any threatened occurrence or development that
could materially adversely affect) the assets, liabilities, earnings,
business, operations, affairs or prospects of Seller.
(c) Since December 31, 1996, Seller has not (i) created
or incurred any liability, commitment or obligation (absolute or
contingent), except unsecured current liabilities incurred for
other than money borrowed in the ordinary course of business; (ii)
mortgaged, pledged or subjected to any lien or otherwise encumbered
any of its assets, tangible or intangible; (iii) discharged or
satisfied any lien, security interest or encumbrance, or paid any
obligation or liability (absolute or contingent), other than
current liabilities due and payable in the ordinary course of
business; (iv) waived any rights of substantial value; canceled any
debts or claims; or terminated or amended, or suffered the
termination or amendment of, any contract, lease, agreement or
license to which Seller is or was a party; (v) made any capital
expenditures or any capital additions or betterments that in the
aggregate exceeded $5,000; (vi) sold or otherwise disposed of any
of its assets, tangible or intangible, except in the ordinary
course of business; (vii) declared or paid any dividends or made
any other distribution on or in respect of, or directly or
indirectly purchased, retired, redeemed, or otherwise acquired, any
shares of Seller's stock; (viii) paid or agreed to pay, conditionally or
otherwise, any bonus, extra compensation, pension or severance pay to
any of Seller's present or former stockholders, directors, officers,
agents or employees, whether under any existing pension or other plan or
otherwise, or increased the compensation (including salaries, fees,
commissions, bonuses, profit sharing, incentive, pension, retirement or
other similar payments) being paid as of December 31, 1996 to any of
Seller's stockholders, directors, officers, agents or employees; (ix)
renewed, amended, become bound by or entered into any contract,
commitment or transaction other than in the ordinary course of
business; or (x) changed any accounting practice followed or
employed in preparing the Financial Statements or the Interim
Financial Statements.
3.10 Tax Matters.
(a) With the exception of approximately $90,000 of
employment taxes, Seller has filed or caused to be filed all
federal income tax returns and all other federal, state, county,
local or city tax returns that have been required to be filed prior
to the date hereof; and Seller has paid or caused to be paid all
taxes shown on said returns or on any tax assessment received by it
to the extent that such taxes have become due, or has set aside on
its books reserves (segregated to the extent required by sound
accounting practice) deemed by it to be adequate with respect
thereto. To Seller's knowledge, and excluding the imposition of any
sales or use taxes, no events have occurred that could impose on
Purchaser any transferee liability for any taxes, penalties, or
interest due or to become due from Seller.
(b) There is no dispute or claim concerning any tax
liability of Seller either (i) claimed or raised by any authority
in writing, or (ii) as to which Seller or the Shareholder has
knowledge based upon personal contact with any agent of such
authority. Schedule 3.10 lists all federal, state, local, and
foreign income tax returns filed with respect to Seller for taxable
periods ended on or after December 31, 1992; indicates those tax
returns that have been audited; and indicates those tax returns
that currently are the subject of audit. Seller has delivered to
Purchaser correct and complete copies of all federal income tax
returns, examination reports, and statements of deficiencies
assessed against or agreed to by Seller since December 31, 1992.
3.11 Undisclosed Liabilities.
(a) Seller has no, and Seller's properties and assets
are not subject to any, liability, commitment, indebtedness or
obligation of any kind whatsoever, whether absolute, accrued,
contingent, known or unknown, matured or unmatured, that (i) is not
shown and adequately reserved against in the Financial Statements;
(ii) is not shown and adequately reserved against in the Interim
Financial Statements; or (iii) was incurred subsequent to the date
of the Interim Financial Statements other than in the ordinary
course of business and is disclosed on Schedule 1.01(j).
(b) Schedule 1.01(j) sets forth a true and complete list
of all Liabilities, including a description of (i) all of the terms
of such Liabilities; (ii) all of Seller's properties or assets that
are subject to a lien, mortgage or security interest related to
such Liabilities; and (iii) the terms of each such lien, mortgage
or security interest.
3.12 Contracts.
(a) Seller has performed all obligations required to be
performed by it to date under all contracts and commitments to
which it is a party, and neither Seller nor Shareholder knows, or
has any reasonable grounds to know, that any other party is in
default (or would be in default on the giving of notice or the
lapse of time or both) under any contract or commitment to which
Seller is a party.
(b) True and complete copies of all contracts and com-
mitments to which Seller is a party or which are otherwise referred
to in this Agreement, including any Schedule or Annex hereto, are
listed on Schedule 1.01(e) and have been delivered to Purchaser or
made available for Purchaser's inspection, and there are no
amendments to or modifications of, or significant agreements of the
parties relating to, any such contract, agreement or commitment
that has not been disclosed to Purchaser, and each such contract,
agreement or commitment is valid and binding on the parties thereto
in accordance with its respective terms. Schedule 1.01(e) includes
a true and complete description of the terms of any unwritten
contract or commitment to which Seller is a party or by which
Seller is bound.
3.13 Litigation and Pending Proceedings. Except as set forth
on Schedule 3.13, there are no claims of any kind or any actions,
suits, proceedings, arbitrations or investigations pending or
threatened in any court or before any governmental agency or
instrumentality or arbitration panel or otherwise against, by or
affecting Seller or the Shareholder, or Seller's business,
prospects or condition (financial or otherwise), or any of Seller's
properties or assets, or that would prevent the performance of this
Agreement or the Other Agreements or any of the transactions
contemplated hereby or thereby, or which declare the same unlawful
or cause the rescission thereof. Seller has complied with and is
not in default in any respect under (and has not been charged or
threatened with, and is not under an investigation with respect to,
any charge concerning any violation of any provision of) any
federal, state or local law, regulation, ordinance, rule or order
(whether executive, judicial, legislative or administrative), or
any order, writ, injunction or decree of any court, agency or
instrumentality.
3.14 Notes and Accounts Receivable. Seller has delivered to
the Purchaser a list of all Accounts Receivable as of the date
hereof attached hereto as Schedule 3.14, which list is true,
correct and complete in all material respects and sets forth the
aging of such Accounts Receivables.
3.15 Permits, Etc. Seller has all Permits that are necessary
for the conduct of its business, and all such Permits are listed on
Schedule 1.01(l). All such Permits are currently in full force and
effect, and no misrepresentations or willful or negligent omissions
were made of any material fact in obtaining any such Permits.
3.16 Intellectual Property. Schedule 3.16 sets forth a true
and complete identification and summary description of all Intel-
lectual Property either owned by Seller or utilized by Seller in
its business ("Seller's Intellectual Property"), including a
description of the nature of Seller's interest therein. Except as
set forth on Schedule 3.16, all of Seller's Intellectual Property
is owned by Seller and is free and clear of all liens, security
interests, charges, encumbrances, equities and other adverse
claims; Seller is not a party to any licenses, consents, settle-
ments or other agreements involving Seller's Intellectual Property;
there are, and have been, no claims, actions or judicial or adver-
sarial proceedings involving Seller's Intellectual Property, and no
such actions or proceedings are threatened or anticipated; Seller
has the right and authority to use Seller's Intellectual Property
in connection with the conduct of its business and such use has not
and will not infringe upon, constitute a misappropriation of, or
otherwise violate the rights of any other person in, any Intellec-
tual Property; and neither Seller nor the Shareholder know of any
past or present occurrences of any probable infringement or
misappropriation of, or violation of Seller's rights in, any of
Seller's Intellectual Property.
3.17 Proprietary Information. Prior to or in conjunction with
the execution of this Agreement, Seller and the Shareholder have
fully disclosed to Purchaser all customer lists, trade secrets,
processes, formulas, methods, know-how and other proprietary
information used or developed by Seller in connection with its
business. Neither Seller nor the Shareholder has disclosed or per-
mitted the disclosure of any such proprietary information to any
other Person, and the use by Seller of such proprietary information
does not violate any other Person's proprietary rights.
3.18 Customers, Etc. Listed on Schedule 3.18 are the names
and addresses of all of Seller's material customers with whom
Seller has done business since 1992, together with the amount of
such business in Seller's current fiscal year. Neither Seller nor
the Shareholder knows, or has any such reasonable grounds to know,
that any such customer has terminated or expects to terminate a
portion of its normal business with Seller or VideoLan Parent, as
a result of the transactions contemplated in this Agreement or
otherwise.
3.19 Employees of Seller. Schedule 3.19 sets forth the names
and job descriptions, and salaries of all of Seller's employees
whose total compensation from Seller for the fiscal year ending
December 31, 1997 will exceed $25,000, together with a statement of
the full amount paid or payable to each such person in respect of
such year.
3.20 Insurance. The tangible real and personal property and
assets, whether owned or leased, of Seller are insured against the
hazards and in the amounts stated in the policies of insurance
listed on Schedule 3.20. Seller carries insurance against personal
injury and property damage to third persons and in respect of its
services and operations and such other insurance as is stated in
the policies of insurance listed on Schedule 3.20. All such
insurance is in full force and effect, is carried with reputable
insurers and, in any event, the insurance carried by Seller in
respect of its physical properties is of an amount and character
such as to prevent Seller from being a co-insurer in respect of any
loss thereto.
3.21 Employment Matters. Except as set forth on Schedule 3.21,
Seller has no employees, employment agreements, collective
bargaining agreements, employee benefit plans or arrangements,
including pension or thrift plans, individual or supplemental
pension or accrued compensation arrangements, contributions to
hospitalization or other health or life insurance programs,
incentive plans, bonus arrangements and vacation, sick leave,
disability and termination arrangements or policies, including
workers' compensation policies.
3.22 Potential Competing Interests. Except as set forth on
Schedule 3.22, neither the Shareholder, nor any officer, director
or employee of Seller, has any direct or indirect interest in any
entity that competes with, is a supplier, customer or sales agent
of, or is engaged in any business of the kind being conducted by,
Seller, and neither the Shareholder, nor any officer, director or
employee of Seller, has any interest, direct or indirect, in any
contract or agreement with, commitment or obligation of or to, or
claim against, Seller. Except as set forth on Schedule 3.22, no
real or personal property in which the Shareholder or any officer,
director or employee of Seller has an interest is used by Seller in
the operation of its business, or located on or at any premises
used by Seller in its business, and no such property is significant
to the operation of Seller's business. On the Effective Date, all
indebtedness owed by, or to the Shareholder and any officer,
director or employee of Seller to, or by, Seller has been paid in
full. All such indebtedness is set forth on Schedule 3.22.
3.23 Health and Safety. Seller has duly complied with, and
its business, operations, assets, equipment, leaseholds and
facilities are in full compliance with, the provisions of all
federal, state and local environmental, health and safety laws,
codes and ordinances, and all rules and regulations promulgated
thereunder.
3.24 Completeness of Statements. No statement, Schedule,
Annex, certificate, information, representation or warranty of
Seller or the Shareholder contained in this Agreement or the Other
Agreements, or furnished by or on behalf of Seller or the Shareholder
to Purchaser or VideoLan Parent or any of their agents pursuant hereto
or thereto, or in connection with the transactions contemplated hereby
or thereby, contains or will contain any untrue statement of a material
fact, or omits or will omit to state a material fact necessary in order
to make a statement contained herein or therein not misleading. All
representations and warranties of Seller and the Shareholder contained
in this Agreement and in the Other Agreements are true and complete as of
the date hereof.
Section 4
Representations and Warranties of Purchaser
Purchaser represents and warrants to Seller as follows:
4.01 Organization. Purchaser is a corporation duly organized
and validly existing under the laws of the State of Kentucky, and
has full corporate power and authority to own and lease its
properties as such properties are now owned and leased, and to
conduct its business as and where its business is now conducted.
4.02 Authority. Purchaser has full right, power, authority
and capacity to execute and deliver this Agreement and the Other
Agreements to which it is a party, and to perform its obligations
under this Agreement and the Other Agreements to which it is a
party. This Agreement and the Other Agreements to which it is a
party constitute valid and legally binding obligations of Purchaser
and VideoLan Parent, enforceable in accordance with their terms.
4.03 SEC Reports. Copies of the reports filed by VideoLan
Parent with the SEC prior to the execution of this Agreement are
listed on Schedule 4.03 and have been delivered to Seller. Such
documents did not on their effective dates or the date of filing in
the case of reports, contain an untrue statement of a material fact
or omit to state a material fact required to be stated therein or
necessary to make the statement therein, in light of the circumstances
which it was made, not misleading.
Section 5
Closing
5.01 Dates: Place. The closing of the sale and purchase of
the Assets (the "Closing") shall be deemed to take place as of
5:00, p.m. E.S.T., on July 10, 1997. The Closing shall take place
at the offices of Brown, Todd & Heyburn PLLC at 5:00 o'clock p.m.,
E.S.T., on July 10, 1997, or at such other location, time and date
as shall be agreed to in writing by Seller and Purchaser and, if
deemed to be appropriate, the time at which the Closing is deemed
to take place shall also be changed by such writing.
5.02 Delivery by the Seller of Instruments of Transfer.
(a) At the Closing, Seller shall deliver, or cause to be
delivered, to Purchaser declarations duly executed by each of
Seller's employee's stating that each employee has been paid in
full all amounts outstanding or owing such employee by Seller on
the date of the Closing.
(b) At the Closing, Seller shall deliver, or
cause to be delivered, to Purchaser duly executed Officer's Certificates.
(c) At the Closing, Seller shall deliver to Purchaser
the following duly executed instruments:
(i) A general assignment and Bill of Sale to
transfer to Purchaser good and marketable title to all of the
personal property of the Seller to be transferred to Purchaser
pursuant to this Agreement, free and clear of all mortgages,
security interests, liens, claims, pledges, assessments, covenants,
encroachments, title defects and other encumbrances of any kind or
nature whatsoever ("Liens") other than those Liens listed on
Schedule 5.01(c)(i).
(ii) Assignments to the Purchaser of all Contracts
identified on Schedule 1.01(e) that are to be assigned to the
Purchaser pursuant to this Agreement.
(iii) Assignments and Bill of Sale to transfer
to Purchaser goods and marketable title to all of the Inventory in
substantially the form attached as Schedule 1.01(i).
(iv) Any other assignments or appropriate instruments
of transfer in order to transfer all other assets, properties and rights
to be transferred pursuant to this Agreement which would not be
appropriately transferred by the other instruments of transfer referred
to herein.
5.03 Delivery by Purchaser of Certain Instrument.
(a) At the Closing, Purchaser shall deliver to Seller
duly executed stock certificates evidencing the Shares.
(b) At the Closing, Purchaser shall deliver to Seller
copies of the reports filed by VideoLan Parent with the SEC as
listed on Schedule 4.03.
Section 6
Survival of Representations and Warranties--Indemnification
6.01 Survival. Each of the parties' representations, war-
ranties, covenants and agreements (including undisclosed liabili-
ties) set forth in this Agreement shall survive the execution of
this Agreement.
6.02 Indemnity by Seller and the Shareholders. Seller and the
Shareholder shall, jointly and severally, indemnify and hold
Purchaser and VideoLan Parent harmless from and against, and shall
pay to Purchaser and VideoLan Parent the full amount of, any loss,
claim, damage, liability or expense (including reasonable attorneys'
fees) resulting to Purchaser and VideoLan Parent, respectively, either
directly or indirectly, from (a) any litigation pending at the date hereof,
by or affecting Seller, its business or the Assets; (b) any claims against
Purchaser and VideoLan Parent for products liability that are based upon
acts or deeds of Seller or its agents or employees before the date hereof;
(d) any inaccuracy in any representation or warranty, or any breach of any
covenant or agreement, by Seller or the Shareholder contained in this
Agreement or in any of the Other Agreements; and (e) any of the Liabilities,
except for those described on Schedule 2.06.
6.03 Remedies; Right of Offset. Upon the occurrence of any
event for which Purchaser is entitled to indemnification under this
Agreement, it shall have all the rights and remedies in law and in
equity available to it. Without limiting the foregoing, Seller and
the Shareholder hereby agree to pay promptly upon receipt of notice
from Purchaser the amounts that Seller and the Shareholder may owe
to Purchaser from time to time by reason of the provisions of this
Agreement or otherwise. Should Seller or the Shareholder fail or
refuse to pay any such amounts promptly after the request of
Purchaser, then Purchaser, at its election, may from time to time
cancel the number of Contingent Shares and/or Noncontingent Shares
having a fair market value equal to the amounts thus due and owing
to Purchaser.
Section 7
Miscellaneous
7.01 Notices. Any notices or other communications required or
permitted hereunder shall be deemed to have been duly given (a) if
delivered in person and a receipt is given; or (b) if sent by
registered or certified mail, return receipt requested, postage
prepaid, and addressed as follows:
(a) If to Seller or the Shareholder:
Video and Communication Solutions, Inc.
3100 Arapahoe Avenue., Suite 503
Boulder, CO 80303
Attn: Steve Muzzo
with a copy to:
_______________________________
_______________________________
_______________________________
Attn: _________________________
(b) If to Purchaser:
IL Acquisition Corp.
11403 Bluegrass Parkway, Suite 400
Louisville, KY 40299
Attn: Jack Shirman
with a copy to:
Brown, Todd & Heyburn PLLC
3200 Providian Center
Louisville, Kentucky 40202-3363
Attn: William G. Strench
(c) If to VideoLan Parent:
VideoLan Technologies, Inc.
11403 Bluegrass Parkway, Suite 400
Louisville, KY 40299
Attn: Jack Shirman
with a copy to:
Brown, Todd & Heyburn PLLC
3200 Providian Center
Louisville, Kentucky 40202-3363
Attn: William G. Strench
or if sent to such substituted address as any of the parties has
given to the others in writing in accordance with this Section
7.01.
7.02 Waivers. No waiver or failure to insist upon strict
compliance with any obligation, covenant, agreement or condition
of this Agreement shall operate as a waiver of, or an estoppel
with respect to, any subsequent or other failure.
7.03 Expenses. Each party shall assume its respective
expenses incurred in connection with the transactions contem-
plated by this Agreement.
7.04 Headings; Interpretation. The headings in this Agree-
ment have been included solely for ease of reference and shall
not be considered in the interpretation or construction of this
Agreement. All references herein to the masculine, neuter or
singular shall be construed to include the masculine, feminine,
neuter or plural, as appropriate.
7.05 Annexes and Schedules. The Annexes and Schedules to
this Agreement are incorporated herein by reference and expressly
made a part hereof.
7.06 Entire Agreement. All prior negotiations and agree-
ments by and among the parties hereto with respect to the subject
matter hereof are superseded by this Agreement, and there are no
representations, warranties, understandings or agreements with
respect to the subject matter hereof other than those expressly
set forth herein or on an Annex or Schedule delivered in connec-
tion herewith.
7.07 Representations and Warranties, Etc. The representa-
tions and warranties of each party contained herein shall not be
deemed to be waived or otherwise affected by any investigation
made by any other party hereto. As used in this Agreement, the
terms "Shareholder's knowledge" and "Seller's knowledge," and all
other references to matters that are known by or to the Share-
holders or Seller, shall refer to matters that are known, or
that with the exercise of reasonable care should have been known,
by the Shareholder or Seller after consultation with Seller's
current corporate officers, directors, and managers and after
their due investigation of corporate records (except that if the
Shareholder or Seller are required to make "due inquiry" with
respect to any matter, they shall make such additional inquiry as
a reasonable person would make under the circumstances).
7.08 Governing Law. This Agreement shall be governed by,
and construed and interpreted in accordance with, the laws of the
Commonwealth of Kentucky. Each party agrees that any action
brought in connection with this Agreement against another shall
be filed and heard in Jefferson County, Kentucky, and each party
hereby submits to the jurisdiction of the Circuit Court of
Jefferson County, Kentucky, and the U.S. District Court for the
Western District of Kentucky, Louisville Division.
7.09 Brokers. The parties covenant and agree with one
another that they have not dealt with any broker or finder in
connection with any of the transactions contemplated in this
Agreement and, insofar as they know, no broker or other Person is
entitled to a commission or finders' fee in connection with these
transactions. Each party shall indemnify and hold the other par-
ties harmless from and against any claim by any agent or broker
claiming by or through it for any fee or other compensation due
or allegedly due that broker or agent.
7.10 Counterparts. This Agreement may be executed in any
number of counterparts, each of which shall be an original, but
all of which together shall constitute one and the same instrument.
7.11 Severability. If any provision of this Agreement or
its application will be invalid, illegal or unenforceable in any
respect, the validity, legality and enforceability of all other
applications of that provision, and of all other provisions and
applications hereof, will not in any way be affected or impaired.
If any court shall determine that any provision of this Agreement
is in any way unenforceable, such provision shall be reduced to
whatever extent is necessary to make such provision enforceable.
7.12 Benefit and Binding Effect. This Agreement shall be
binding upon, and shall inure to the benefit of, Purchaser,
VideoLan Parent, Seller and the Shareholder and each of their
successors and assigns; provided, however, that no party to this
Agreement shall assign his or its rights or obligations hereunder
without the express written consent of the other parties, which
consent shall not be unreasonably withheld.
7.13 Further Assurances. From time to time at another
party's request and without further consideration, a party shall
execute and deliver such further instruments of conveyance,
assignment and transfer, and take such other actions as the
requesting party may reasonably request, in order to more effec-
tively convey and transfer any of the Assets. In addition, any
monies collected by a party that are due and payable to another
party will be promptly remitted to such party upon receipt
thereof.
7.14 Prorations and Adjustments. All income and operating
expenses pertaining to the conduct and operation of Seller's
business have been prorated as of the date hereof, so that, as
between Seller, Purchaser and VideoLan Parent, Seller shall
receive all revenues and be responsible for all expenses, costs
and liabilities (including, but not limited to, accrued employee
vacation expenses, salaries, ad valorem property taxes, lease
payments, etc.) allocable to the period prior to the date hereof,
and Purchaser and VideoLan Parent shall receive all revenues and
be responsible for all expenses, costs and liabilities allocable
to the date hereof and thereafter.
7.15 Sales and Transfer Taxes and Fees. All sales and
transfer taxes, and all recording, filing and other fees (including
any penalties or interest), incurred in connection with this
Agreement and the transactions contemplated hereby will be borne
by Seller. The parties will assist each other in the filing of
all necessary tax returns and other documentation with respect to
all such taxes and fees, and, if required by applicable law, will
join in the execution of any such tax returns or other documentation.
IN WITNESS WHEREOF, the parties have executed and delivered
this Agreement as of the date set forth in the preamble hereto.
IL ACQUISITION CORP.
By:________________________________
Title:_____________________________
VIDEO AND COMMUNICATION
SOLUTIONS, INC.
By:________________________________
Paul Cummings, President
VIDEOLAN TECHNOLOGIES, INC.
By:________________________________
Jack Shirman, Chief Executive
Officer
GCH ACQUISITION PARTNERS, LTD.
Growth Capital Holdings,
Inc., General Partner
By:________________________________
Steve Muzzo, President
GROWTH CAPITAL HOLDINGS, INC.
By:________________________________
Steve Muzzo, President
EXHIBIT 21
The Company has one subsidiary, IL Acquisition Corp.
Exhibit 23.2
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We have issued our report dated February 14, 1997, accompanying the financial
statements of VIDEOLAN Technologies, Inc. appearing in the Annual Report on
Form 10-KSB for the year ended December 31, 1996, which is incorporated by
reference in this Registration Statement. We consent to the incorporation by
reference in the Registration Statement of the aforementioned reports and to
the use of our name as it appears under the caption "Experts."
GRANT THORTON LLP
/s/ Grant Thornton LLP
New York, New York
September 5, 1997
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<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
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<SECURITIES> 683,032
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<SALES> 295,720
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<CGS> 164,151
<TOTAL-COSTS> 3,413,868
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5,280
<INCOME-PRETAX> (3,064,713)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,064,713)
<EPS-PRIMARY> (0.22)
<EPS-DILUTED> (0.22)
</TABLE>
