UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-SB
GENERAL FORM FOR REGISTRATION OF SECURITIES OF SMALL BUSINESS ISSUERS
Under Section 12(b) or (g) of the Securities Exchange Act of 1934
mPhase Technologies, Inc.
(Formerly Tecma Laboratories, Inc.)
(Name of Small Business Issuer in its charter)
New Jersey 22-2287503
(State or other jurisdiction of (I.R.S.) (Employer Identification Number)
incorporation or organization)
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587 Connecticut Ave, Norwalk, CT 06854-0566
(Address of principal executive offices) (Zip Code)
Issuer's telephone number, (203) 838 - 2741
Securities to be registered under Section 12(b) of the Act:
Title of each class Name of each exchange on which to be so registered each class is to be registered
Securities to be registered under Section 12(g) of the Act:
Common stock, no par value per share, 50,000,000 shares authorized, 13,479,711 shares issued and outstanding as of June 25, 1998.
Part I......................................................................1
Item 1. Description of Business .........................................1
A1) Business Development, Organization and
Acquisition Activities................................................1
A2) Communications Industry and Potential
effect on the Company's Plan of Operation ............................3
A3) Management's Plan of Operation.........................................8
Item 2. Description of Property ........................................10
Item 3. Directors, Executive Officers and Significant Employees..........10
Item 4. Remuneration of Directors and Executive Officers.................11
Item 5. Security Ownership of Management and Certain Security holders....12
Item 6. Interest of Management and Others in Certain Transactions........13
Item 7. Description of Securities........................................14
Part II .................................................................15
Item 1 Market Price of and Dividends on the Registrant's Common Equity
and Other Stockholder Matters..................................15
Item 2 Legal Proceedings .............................................17
Item 3 Changes in and Disagreements With Accountants....................17
Item 4 Recent Sales of Unregistered Securities..........................17
Item 5 Indemnification of Directors and Officers........................18
Part F/S .................................................................19
Financial Statements.......................................................19
Part III .................................................................20
Item 1 Index to Exhibits (Pursuant to Item 601 of Regulation SB)........20
Part III ...............................................................20
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Item 2 Description of Exhibits ........................................27
Part I
Item 1. Description of Business
A(1) Business Development, Organization, and Acquisition Activities
mPhase Technologies, Inc., hereinafter sometimes referred to as "the Company", was organized as Tecma Laboratory, Inc. by the filing of certificate of incorporation with the Secretary of State of the State of New Jersey on December 18, 1979. As amended on August 28, 1987, the certificate of incorporation was amended to change its name to Tecma Laboratories, Inc. and the number of shares authorized to be issued was increased to 50,000,000 shares no par value common stock. On April 7, 1997, the Company amended its certificate of incorporation to change its name to Lightpaths TP Technologies, Inc. On June 2, 1997, the Company amended the certificate of incorporation and changed its name to mPhase Technologies, Inc. On March 31, 1997 the Company filed an amendment to its certificate of incorporation pursuant to which it effected a reverse split of its issued and outstanding shares of common stock on a one share for ten share basis.
Until the completion of the reverse acquisition and spinoff, discussed below, the Company conducted its business under the name of Tecma Laboratories, Inc. and was primarily engaged in research, development and the exploitation of certain patented products in the health care field.
On February 17, 1997, the stockholders of the Company approved the acquisition of Lightpaths, Inc., a Delaware Corporation, with the acquisition deemed to be effective as of that date.
As part of the transaction whereby the Company acquired Lightpaths, Inc. on January 29, 1997, the Company concurrently formed another wholly owned subsidiary called TLI Industries, Inc., hereinafter referred to as "TLI." The shares of TLI were spun off to the stockholders of the Company, effective March 31 ,1997, after transferring certain assets and liabilities, primarily fixed assets, patents and shareholder loans related to the prior business of Tecma Laboratories, Inc. Because liabilities transferred to TLI were in excess of the book value of the assets transferred there in a gain on the disposal of discontinued operations on March 31, 1997. This loss was treated as a decrease of the accumulated deficit by the Company prior to the spin-off.
As a consequence of the above described transactions, most of which required and obtained approval by the stockholders of the Company on February 17, 1997, the Company became the holding company of its wholly owned subsidiary, Lightpaths, Inc.
The primary business of Mphase Technologies, Inc. is to design, manufacture and market enabling technologies and telecommunications products to increase the speed of communications over existing conventional (twisted pair) copper telephone lines.
(1) Principal Products and Principal Markets
A New Twist To Twisted Pair
A sophisticated technology and the newest innovation in DSL (Digital Subscriber Line) technology is RADSL (Rate Adaptive Digital Subscriber Line), a unique method to enhance bandwidth over existing telecommunications infrastructure copper wire.
Embracing RADSL, the goal of the Company is to develop technologies to convert existing twisted pair telephone lines into programmable high speed access paths for multimedia and data communications which will be hereinafter referred to as "mPhase XDSL."
It is the opinion of the Company that mPhase XDSL offers the first affordable alternative to coaxial and fiber optic delivery system. It is, designed to transport voice, video and data over Plain Old Telephone Service ("POTS") without impacting traffic and without degrading voice on a cost-effective basis utilizing existing "twisted pair" telephone infrastructure.
mPhase XDSL supports symmetric and asymmetric data transmission for Internet and Intranet applications while providing uninterrupted POTS. Because transmission speed is rate adaptive, mPhase XDSL adjusts to length and signal quality of telephone line, automatically selecting the highest practical operating speed.
(ii) Status of Products and Services
mPhase XDSL products are being designed to allow high bandwidth access utilizing the installed twisted pair existing telephone infrastructure.
mPhase products in development include video teleconferencing and multi-conferencing systems, high bit rate Internet and Intranet delivery, distance learning, tele-medicine, network packet transferring and corporate date networks for banking and publishing.
Data Service Package - This product will consist of the mPhase modular components, designed as modular building blocks within the Central Office distribution system, and Customer Premises equipment. While listed as a secondary approach, mPhase plans to put strong emphasis on rolling out its Small Office-Home Office (SOHO) Business-to-Business data services to capitalize on short-term data delivery prospects.
Transmit/Receive Filters and POTS Splitter Product - The Company's POTS splitter product will be marketed as well as Drop In transmit and receive filters to XDSL vendors providing integrated XDSL equipment to their customers. Because of the Company's proposed Central Office distribution system, and other proprietary systems and components, the Company does not believe its inherent competitive advantage will be impaired by selling transmit/receive and POTS splitter products to potential competitors.
(iii) Research and Development Activities
The amount of research and development costs expended from October 2, 1996 (date of Inception) through June 30, 1997 was approximately $192,500. The Company is obligated to pay licensing fees (see Part 1, Item 1, A(2) D. Patents, Trademarks, Licenses, Franchises, Concessions, Royalty Agreements, Labor Contracts) on product licenses for patents held by others. As of March 31, 1998, the Company had not consummated any sales and has recorded only nominal revenue from licensing fees. Accordingly, none of the research and development costs have been borne by any customers.
During the fiscal year ending June 30, 1998, the Company plans to incur research and development expenses of approximately $1,533,333 with respect to the development of its current products.
(iv) Employees
The Company presently has 6 employees, one full-time and five part-time, who are concurrently employed by Microphase Corporation, a Connecticut corporation, that could be deemed to be an affiliate because of common officers although the two companies not identical with respect to their controlling stockholders.
(v) Impact of Environmental Laws
The Company is not aware of any federal, state or local environmental laws which would effect its operations.
A(2) Communications Industry and Potential Effect on the Company's Plan of Operation
A. Copper (The company's technology.)
There has been a total revolution in communications technology since the first copper cable was installed for telephone connectivity more than a century ago. Since then a rich copper infrastructure has been installed... in the earth and overhead,.. a collective asset totaling hundreds of billions of dollars that criss-crosses the United States and every other country in the world. Notwithstanding, only recently has technology been developed capable of transforming this expansive copper network originally designed for analog voice delivery into an affordable, high speed, data-intensive digital communications delivery system demands of today's advanced high-tech, high-volume use.
Utilizing proprietary technology, mPhase XDSL has converted existing twisted pair copper telephone lines into programmable high speed access paths for multimedia and data communications.
mPhase XDSL can now offer Regional Bell Operating Companies ("RBOC's"), local telephone exchange carriers and international local exchange carriers and cable TV providers (CATV) the first affordable alternative to coaxial and fiber optic delivery.
B. Various Forms of Competition
b.(1) ISDN
Emerging technologies for high speed data transmission over copper lines include ISDN (Integrated Services Digital Network), currently delivering 128 Kilo Bytes Per Second ("KBPS") computer networking connections four times faster than those available with fastest analog modems.
While ISDN does provide faster access (128 Kbps) than analog modems (33.6 kbps), it is expensive, difficult to install, not really fast enough to satisfy consumer demand and does not allow simultaneous data transmission while maintaining normal telephone service on the same line. In addition, it is not capable of delivering digital television.
By contrast, the newest mPhase XDSL transceiver increases data speed throughput up to 100 times faster than an ISDN connection!
b.(2) Fiber Optic Cable
Fiber Optic cable is another alternative which allows high bandwidth transmission. But requires a longer lead time to install and is very expensive to install. Of the estimated 160 plus million conventional telephone lines installed in the United States more than 700 million world wide fiber accounts for only a mere three (3%) percent.
This figure is expected to increase to ten (10%) percent a year, not many RBOCs or Service Providers are planning overhauls of their existing networks.
b.(3) Coaxial
Cable modems also promise the potential of wider bandwidth (up to 10 Mbps as compared to 33.6 Kbps analog modems). But coaxial cable is relatively expensive and it cannot deliver data efficiently without interfering with normal telephone and cable television services. mPhase XDSL, on the other hand, is fast, affordable and works with POTS.
B. Initial Customer Base and Marketing Plan
The growth of the DSL. industry is projected to ramp up within the next two or three year time frame. mPhase Technologies, Inc. is well positioned to capitalize on the expected increased demand for broadband services.
Growing Internet Market - The Internet continues to grow expotentially, with some 40 million plus users at the end of 1997.
Growing Data Market - Data service markets, are continuing to grow at rates higher than 100% annually.
Second PC Households - Households with two PCs are increasing quickly as computers become a necessary work-at-home and child educational tool. Currently over thirty (30%) percent of households with PCs have more than one computer used by the family.
Computer Integration Trends - There is an increasing trend in movements to further integrate computing technology with everyday appliances, including TV's, telephone and security systems.
Alternative Entertainment Markets - With recent deployments by DBS providers, significant market share is being grabbed from incumbent cable companies. Also online services are becoming a small but important niche for providing entertainment to residential customer segments.
Expanding Foreign Opportunities - A recent World Trade Organization (WTO) pact was signed by 67 countries which pledged to totally open their telecom sectors over the next five to fifteen years. Additionally, many developing markets in Asia/Pacific Rim and also in Central/South America are becoming privatized and deregulated. This will increase foreign telco competition, thus increasing opportunities in overseas telecom markets.
There are several potential target markets for the Video, Voice and Data service packages, as outlined above. mPhase Technologies, Inc. has chosen the following segments as its primary target for initial product launch.
Primary Video Markets
Independent Telephone Exchange Carrier - mPhase XDSL solution will provide additional revenue stream and help set market entry barriers to the telco?s new competitors.
Multi-Dwelling Units Owners (MDUs) - mPhase?s video/data delivery system will provide additional revenue streams.
Interexchange Carriers (IXCs) - IXCs could leverage the mPhase XDSL solution to grow into supercarrier or full service network providers.
Cable Companies - This segment could use the mPhase XDSL solution as an
alternative infrastructure to extend market reach, and avoid expensive plant
upgrades/buildouts in new markets.
Various Verticals - Other industry segments such as health care, education and
financial communities could use video applications to expand their current
business tools and increase productivity.
International Telcos - Several established foreign Telcos are positioning their networks for advanced broadband infrastructures. The mPhase solution can leverage their existing telephone infrastructure to bring enhanced; services to their subscribers.
Developing Foreign Markets - Several developing foreign markets lack the competitive cable infrastructure that exists domestically. Also, several state-owned telcos are positioning for competitive and or privatized markets. As such, advanced infrastructures are being installed, and XDSL technologies can deliver low-cost, high-bandwidth last-mile access.
Secondary Data Markets
Independent Telcos - The smaller telcos will expand their data services in order to grow their market share.
Competitive Local Exchange Carriers - This segment could also expand the data services portfolio, defend against competition with local incumbents, and expand service coverage using unbundled local facilities.
Interexchange Carriers - The mPhase XDSL solution could enable the IXCs to enter local data markets using unbundled local facilities as a lower cost access technology to gain lower cost access to commercial customers.
Internet Service Providers - ISP?s can leverage the mPhase XDSL delivery system to gain customers by providing faster Internet access along with enhanced services.
Data Service Providers in Developing Markets - Developing countries are struggling with providing basic data services. mPhase XDSL solutions could be leveraged to deliver high speed access on low cost copper facilities.
Marketing Plan
In order to achieve success, the Company will put marketing and sales organizations in place. These organizations will be built incrementally as the Company gains customers and commercial market experience. mPhase Technologies, Inc. plans the following phased approach to building the sales and marketing groups.
Phase 1. Add U.S. marketing team, consisting of product managers for the video system and data system. The data system manager can also handle interim activity on the Transmit/Receive filters and POTS splitter strategy.
Phase 2. Evaluate and coordinate entry into foreign markets.
Phase 3. Add sales organizations for U.S. Market.
Phase 4. Add marketing personnel for each new country market.
There are several possible distribution/marketing strategies that the Company will evaluate during its initial phase of planning. Initially, mPhase Technologies, Inc. plans to leverage licensing partners for widespread distribution, thus reducing the requirements for a large direct marketing organization. During the first two years, marketing expenditures will be high relative to its revenue stream, but over time the Company expects to invest only ten (10%) percent of revenues into marketing.
mPhase Technologies, Inc. is planning to enter the XDSL market in a controlled manner in order to establish credibility, gain experience, and cultivate highly successful references without attracting the attention of mega-telecom players. Because of this ?stealth? approach, the Company believes that its long-term success is definitely achievable.
Prototype Strategy
The facilities of Georgia Tech Research Corporation ("GTRC") and Microphase Corporation will be used to design the Company?s products and perform prototype and pre-production fabrication work. To ensure a smooth flow from pre-production to mass volume manufacturing, mPhase intends to use the services of GTRC, which conducts comprehensive programs in manufacturing research and development that draw on the talents of the research and academic faculties throughout Georgia Tech University.
mPhase Technologies, Inc. will make particular use of the Advanced Electronics Assembly Facility in Georgia Tech?s Manufacturing Research Center. This includes a complete prototype manufacturing line for the improvement of surface mount technology (SMT) and direct chip attachment (DCA) assembly processes with over $10.0 million in modern equipment. This facility is used to make advances in manufacturing processes and can perform prototype manufacturing runs of the types needed by mPhase.
Production Strategy
mPhase Technologies, Inc. plans to use contract manufacturing companies to provide manufacturing services and to support responsive customer service. The Company is targeting leading contract manufacturing companies with which it believes long-term relationships can be established and which have strategically located facilities in North America, Mexico and Asia. In doing so, the Company is following a trend already well established among original equipment manufacturers or ?OEMs?.
Reduce Production Costs and Accelerate Production - The competitive environment requires OEMs to reduce production costs continuously. The production scale, infrastructure, purchasing volume and expertise of leading contract manufacturers can enable OEMs to reduce production cycle time and accelerate time to market.
Gain Access to Manufacturing and Design Capabilities - Electronic products manufacturing processes have become highly automated and complex, making it increasingly difficult for OEMs to maintain the design and manufacturing expertise necessary to remain competitive. Contract manufacturers enable OEMs to gain access to advanced manufacturing facilities, packaging technologies and design expertise.
Focus Resources - Contract manufacturers that offer comprehensive services allow OEMs to focus on their core competencies.
Reduce Investment - As electronic products have become more technologically advanced, internal manufacturing has required significantly increased working capital, equipment, labor and infrastructure. Contract manufacturers enable OEMs to manufacture without making the capital investments required for internal production.
Improve Inventory Management and Purchasing Power - OEMs are faced with increasing challenges in planning procuring and managing their inventories efficiently due to frequent design changes, short product life cycles, large investment sin electronic components, component price fluctuations and the need to achieve economies of scale in materials procurement. Contract manufacturers? inventory management expertise and volume procurement can reduce OEM production and inventory costs.
Access Worldwide Manufacturing Capabilities - Contract manufacturers with worldwide capabilities are able to offer OEMs a variety of options on manufacturing locations to better address their objectives regarding costs, shipment location, frequency of interaction with manufacturing specialists and local content requirements of end-market countries.
D. Patents, trademarks, licenses, franchises, concessions, royalty agreements, labor contracts
If practicable, the Company intends to file United States patents and/or copyright applications relating to certain of its proposed products and technologies either with its strategic partners or on its own behalf. Four such promising patent applications have been applied for. Although the Company believes certain of its technology contains patentable claims, there is no assurance that any patents will be obtained. If obtained, there is no assurance that any patents will afford the Company commercially significant protection of its technologies or that the Company will have adequate resources to enforce its patents. Because the Company may license its technology and products in foreign markets, it may elect to seek foreign patent protection. With respect to foreign patents, the patent laws of other countries may differ significantly from those of the United States as to the patentability of the Company's products or technology. Moreover, the degree of protection afforded by foreign patents may be different from that in the United States. Patent applications in the United States are maintained in secrecy until patents issue, and since publication of discoveries in the scientific or patent literature tend to lag behind actual discoveries by several months, the Company cannot be certain that it will be the first creator of inventions covered by any patent applications it makes or the first to file patent applications on such inventions. In addition the Company cannot give any assurances that its products do not infringe on other patents or other proprietary rights of third parties. It is possible that competitors in both the United States and foreign countries, many of which have substantially greater resources and have made substantial investments in competing technologies, may have applied for, or may in the future apply for and obtain, patents which will have an adverse impact on the Company?s ability to make and sell its products. In addition, because being a development stage company, claims against the Company are more likely to be asserted after commencement of production and commercial sales. There can also be no assurance that competitors will not infringe on the Company's patents. Defense and prosecution of patent suits, even if successful, are both costly and time consuming. An adverse outcome in the defense of a patent suit could subject the Company to significant liabilities to third parties, require disputed rights to be licensed from third parties or require the Company to cease its operations.
The Company also relies on unpatented proprietary technology, and there can be no assurance that others may not independently develop the same or similar technology or otherwise obtain access to the Company's unpatented technology. If the Company is unable to maintain the proprietary nature of its mPhase XDSL technology, the Company could be adversely affected.
E. Regulation
Federal and state regulatory agencies, including the Federal Communication Commission ("FCC") and various state public utility and service commissions, regulate most of the Company's potential domestic customers. Changes to FCC regulatory policies affecting the accessibility of services, and other terms on which providers conduct their business, may adversely impact the Company?s potential penetration into certain markets. The Telecommunications Act lifted certain restrictions on telephone providers ability to provide interactive services including video-on-demand. The Telecommunications Act establishes new regulations whereby telephone providers may provide various types of video services including cable television services. Rules to implement these new statutory provisions are now being considered by the FCC. While the statutory and regulatory framework for telephone providers providing video products has become more favorable, it is uncertain at this time how this will affect telephone providers demand for products based upon DSL technology. Furthermore it is unknown what potential litigation might be filed impacting the telephone providers ability to provide certain services. In addition, the Company?s business and results of operations may also be adversely affected by the imposition of certain tariffs, duties and other import restrictions on components which the Company obtains from non-domestic suppliers, or by the Changes in current or future laws or regulations, in the U.S. or elsewhere, could materially adversely affect the Company's business.
A(3) Management's Plan of Operation
The primary subsidiary of Lightpaths, Inc., the Company was incorporated on September 30, 1996. Since its inception it has been in the development stage. As a result, the Company has no operating history upon which an evaluation of the mPhase XDSL products can be formed. Since inception, the Company has a limited engaged primarily in guiding, directing and coordinating the development of its mPhase XDSL technology through Georgia Tech Research Corporation and Microphase Corporation, the recruitment of management and technical personnel, including consultants, and the raising of capital to fund its operations. The Company is in the process of completing the design of its first products. The Company's viability, profitability and growth depend upon successful completion of the development, commercialization and marketing of its XDSL products. There can be no assurance whatsoever that any of the Company's technologies or products will be successfully developed, commercialized or marketed. The risks, expenses and difficulties often encountered in product transition from research and development to prototype to pre-production to production in a highly competitive marketplace based on an innovative technology which is constantly changing must also be considered.
No Revenues; Accumulated Deficit; Forecasted Future Losses
To date, the Company has had no operating revenue and does not anticipate any operating revenue until such time as its pertinent technology and one or more of its Initial Products are completely developed, manufactured in cost competitive commercial quantities and available for commercial delivery. There can be no assurance whatsoever that the mPhase XDSL technology and products, if developed and manufactured, will be able to compete successfully in the marketplace and/or generate any revenue whatsoever. The Company forecasts incurring significant costs in connection with the development of its technologies and proposed Initial DSL Products and there is no assurance that the Company will achieve sufficient revenues to offset anticipated operating costs. Further, the Company forecasts ongoing significant losses into the foreseeable future, including, but not limited to, costs such as general and administrative, marketing and sales advertising, engineering, drafting, manufacturing, assembly, quality control, cost of materials and research and development expenses. Consequently, the Company will continue to have high levels of operating expense with no revenues and will be required to make significant capital expenditures in connection with its ongoing research and development activities. It is anticipated that substantial additional research and development expenses are required in order to continue to develop, market, and sell the mPhase XDSL products. As a result, there can be no assurance whatsoever that the Company will be able to sustain its operations in any future period.
Uncertainty of market Acceptance; Lack of Marketing Experience and Resources
The mPhase XDSL technology and products currently being developed by the Company utilize new concepts and designs in transporting signals over traditional twisted pair telephone wires. The Company's prospects for success will therefore depend on its ability to successfully sell its products to potential customers who may be inhibited from doing business with the Company because of their commitment to their own technologies and products. As a result, demand and market acceptance for mPhase XDSL and proposed products is subject to a high level of risk in relation to its acceptance in the marketplace. The Company currently has limited financial, personnel and other resources to undertake the extensive marketing activities to market the products successfully. Furthermore there is no assurance whatsoever that any of the Company's potential customers will enter into any arrangements with mPhase Technologies, Inc.
Reliance Upon Product and Technology Development
Product development efforts are subject to all the risks inherent in the development of new technology and products (including unanticipated delays, expenses, technical problems or difficulties, as well as the possible insufficiency of funding to complete development. There can be no assurance whatsoever as to when, or whether, such developments will be successfully completed. No assurance can be given that the Initial DSL Products can be developed cost competitively in commercially salable form within the projected project development schedule. If Georgia Tech Research Corporation is unable to complete its development activities for any reason whatsoever with respect to the Company's Initial DSL Products, the Company would have to complete development itself or through third parties. Although the Company believes it has sufficient information to allow the completion of development of these products, there is no assurance that the Company will have sufficient economic or human resources to complete such development in a timely manner, or at all, or that it could enter into economically reasonable arrangements for the completion of such products by third parties. If successful with the development of viable prototypes, the Company must successfully complete a testing program for the products before they can be marketed. Unanticipated technical problems arising out of such testing could significantly and negatively affect the Company's ability to manufacture a cost competitive commercially acceptable version. In addition, the Company's success will depend upon its technologies and proposed products meeting acceptable performance criteria and upon their timely introduction into the marketplace. There can be no assurance the technologies and proposed products will satisfactorily perform or integrate with existing systems for which they are designed, that they will meet applicable price or performance objectives or that unanticipated technical or other problems will not occur which would result in increased costs and/or material delays in their development.
B. Segment Data
As of March 31, 1998, no sales revenue have been generated by the Company. Accordingly, no table showing percentage breakdown of revenue by business segment or product line is included.
Item 2. Description of Property
The Company's corporate headquarters are located at 587 Connecticut Avenue, Norwalk, CT 06856-0960. The Company leases office space as well as administrative services of Microphase Corporation including the use of accounting personnel on a month to month basis for $5,000 per month.
Item 3. Directors, Executive Officers and Significant Employees
(a) Directors and Executive Officers and Significant Employees
The names, ages and positions of the Company's present directors and executive officers are as follows:
Name Age Position
Necdet F. Ergul 74 Chairman of the Board
Ronald A. Durando 41 Director, President and Chief
Executive Officer
Gustave T. Dotoli 62 Director and Chief Operating
Officer
David Rosenberg 47 Director
David Klimek 44 Director and Chief Technology
Management
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(b) Other relationships
Necdet F. Ergul, Director and Chairman of the Board of the Company is also the Chairman of the Board of Microphase Corporation. Ronald A. Durando, president of the Company is also Chief Operating Officer of Microphase Corporation. Gustave T. Dotoli is also Vice President of Corporate Development.
(c) Work Experience
Necdet F. Ergul - Chairman of the Board of Directors. Chairman of the Board, President and Chief Executive Officer of Microphase Corporation which he founded in 1955, and has guided the development of Microphase ever since as its Chief Executive Officer. In addition to his management responsibilities at Microphase, he is active in engineering design and related research and development. Under Mr. Ergul's direction, Microphase Corporation has become an industry leader in the design of passive Radio Frequency and microwave filters, including the design and physical miniaturization of passive multiplexers. Mr. Ergul holds a Masters Degree in Electrical Engineering from the Polytechnic Institute of Brooklyn, New York.
Ronald A. Durando - President and Chief Executive Officer since October of 1996. In addition he has been the Chief Operating Officer of Microphase Corporation since 1994. From 1987 to 1994, he was the President and Chief Executive Officer of Nutley Securities, Inc., a registered broker-dealer. From 1982 to 1987 Mr. Durando worked as a Registered Representative for several Security Brokerage firms: J.W. Weller and Co. (1982 - 1984), Donald and Company Securities, Inc. (1984 - 1985), Graystone Nast (1985 - 111986) and Gladstone Securities (1986 - 1987). From 1973 to 1982, Mr. Durando held various positions and left as head electromechanical design and drafting of Nova Electric Manufacturing Company. He co-founded mPhase in September of 1996.
Gustave T. Dotoli - Chief Operating Officer since October of 1996. In addition, Mr. Dotoli has been the Vice President of Corporate Development of Microphase Corporation since December of 1996. He is formerly the President and Chief Executive Officer of the following corporations: Imperial Electro-Plating, Inc., World Imports USA, Industrial Chemical Supply, Inc., SISCO Beverage, Inc. and Met Pack, Inc. Mr. Dotoli earned a B.S. degree in Industrial Engineering from Fairleigh Dickenson University in 1959.
David Klimek - Chief Technology Officer since June, 1998. Mr. Klimek currently provides engineering development and technical management for the complete line of the Company's products. He has more than 18 years of technical engineering and design expertise. He presently holds 13 individual or co-authored U.S. Patents. Mr. Klimek's research and development have been utilized by Johnson Control, Inc., Master Lock Corporation, Digital Controls and Star Manufacturing. From 1982 to 1990, Mr. Klimek was the R&D Manager of Digital Controls, Inc. Mr. Klimek received his B.S. in EET in 1982 from Milwaukee School of Engineering, Milwaukee, WI. In addition, he graduated from the U.S. Navy Basic Electronics School at Great Lakes Naval Training Center in 1972.
David Rosenberg - Member of the Board of Directors. Mr. Rosenberg was Manager of House of Knitting, a publicly listed company from 1972 to 1977. He has been President of the U.S. Chocolate Corporation since 1977 and has been a private investor since 1969.
(d) Involvement in certain material legal proceedings during the last five years
A. No director, executive officer, significant employee or consultant has been convicted in a criminal proceeding, exclusive of traffic violations.
B. No bankruptcy petitions have been filed by or against any business or property of any director, executive officer, significant employee or consultant of the Company nor has any bankruptcy petition been filed against a partnership or business association where these persons were a general partner or executive officer.
Item 4. Remuneration of Existing Directors, Executive Officers and Consultants
A. Remuneration During Period ended June 30, 1997
(i) Compensation of Officers
Options,
Warrants
Capacities Or Other
In Which Remuneration Aggregate Stock
Name of Individual Was Recorded Remuneration Rights
Executive Officers
Necdet F. Ergul Chairman of the Board -0- 250,000
Ronald A. Durando President and Chief
Executive Officer 75,000 1,000,000 (1)
Gustave Dotoli Chief Operating Officer 60,000 750,000
David Rosenberg Director -0- 100,000
David Klimek Manager of Engineering -0- 500,000
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(ii) Compensation of Directors
There were no arrangements pursuant to which any director of the Company was compensated for the period from June 30, 1997 for any service provided as a director.
(1) Issued with an exercise price of one dollar ($1.00) per share
B. Remuneration Subsequent for the nine months ended March 31, 1998
Options,
Warrants
Capacities Or Other
Name of Individual In Which Remuneration Aggregate Stock
or Identity of Group Was Recorded Remuneration Rights
Executive Officers
Necdet F. Ergul Chairman of the Board -0- 250,000
Ronald A. Durando President and Chief
Executive Officer 113,000 1,000,000
Gustave Dotoli Chief Operating Officer 90,000 750,000
David Rosenberg Director -0- 100,000
David Klimek Manager of Engineering -0- 500,000
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No options on August 15, 1997 have been exercised.
Item 5. Security Ownership of Management and Certain Security holders
A. The following table sets forth information concerning stock ownership of
(i) each director, (ii) each executive officer (iii) the directors and
officers of the Company as a group, (iv) and each person known by the Company
to own beneficially more than 10% of the Common Stock as of June 25, 1998.
Amount
Title Name and Address of Shares Percent
of of Held By of
Class Owner of Shares Owner Class
Common Necdet F. Ergul (1) 1,631,148 12.10
" Ronald A. Durando (1)(2) 1,981,148 14.70
" Gustave Dotoli (1) 725,000 5.38
" David Rosenberg (1) 181,875 1.35
" David Klimek (1) 300,000 2.22
" All Directors and
Officers as a group
(6 persons) Total 4,819,171 35.75%
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(1) c/o mPhase Technologies, Inc.,
(2) Includes 320,000 shares held by Nutley Securities, Inc. which is owned 100% by Mr. Durando.
B. Persons Sharing Ownership of Control Shares
No person other than Necdet F. Ergul and Ronald A. Durando owns or shares the power to vote 10% or more of the Company's securities.
C. Non-voting Securities and Principal Holders Thereof.
The Company has not issued any non-voting securities.
D. Options, Warrants and Rights
There are no options, warrants or rights to purchase securities of the Company or of its subsidiaries. However, see Item G "Interest of Management and Others in Certain Transactions" where certain option agreements which were extinguished as part of the acquisition by the Company of Lightpaths, Inc. are identified.
E. Parents of the Issuer
Under the definition of parent, as including any person or business entity who controls substantially all (more than 80%) of the issuers of common stock, the Company has no parents. No person other than Messrs Necdet F. Ergul and Ronald A. Durando owns or shares the power to vote 10% or more of the Company's securities.
Item 6. Interest of Management and Others in Certain Transactions
The management of the Company are also employees of an affiliated group of companies which have recorded material transactions with the Company. The Company's management is in a position to, and in the future may, influence future operations of the Company for the benefit of other companies that are under their control.
The Company advanced $164,000 to Janifast, Inc. and $250,000 to Microphase Telecommunications, which are companies under common control. Additionally, the Company agreed to reimburse another affiliate Microphase Corporation $383,266 for research and development expenses, as well as $42,500 for other costs including licensing fees and facilities and administrative services discussed in Note 6.
The Company has a convertible option pursuant to the $164,000 advance made to an affiliate, Janifast, Inc., whereby at the Company's discretion this would be convertible to equity at the Company discretion.
On February 15, 1997 the Company entered into a Technology, Patent and Trademark License Agreement with Microphase Telecommunications, Inc., an affiliated company. The agreement permits the Company to utilize the patent and trademark technology of Microphase Telecommunications, Inc. under a licensing arrangement with payments as follows:
(1) a one time non-refundable payment of $37,500 which the Company has recorded as a license agreement in the Balance Sheet.
(2) Minimum annual royalties, based upon sales of the Company at rates of ten (10%) percent on the first $1,000,000 of sales; nine (9%) percent for sales between $1,000,001 and $5,000,000; eight (8%) percent for sales between $5,000,001 and $10,000,000; seven (7%) percent for sales between $10,000,001 and $20,000,000; and six (6%) percent for sales above $20,000,000 per year. Regardless of the Company sales, the company has agreed to pay $50,000, $250,000 and $500,000 as a minimum payment in years one, two and three and additionally, $1,000,000 every year thereafter.
(3) The Company also agreed to make payments of $37,500 per month, starting June 1, 1997 and during the life of the Agreement, which in periods where no royalties are earned, can be applied to the minimum royalty above, for technology development and transfer. The Agreement is for the life of the trademark and patented items, which have been applied for and are expected to be seventeen years. During the period ended June 30, 1997, $37,500 has been charged to expense under this Agreement.
On May 1, 1997 the Company entered into an agreement with Microphase Corporation, an affiliate with common yet unidentical ownership, whereby the Company will use office space as well as the administrative services of the Company including the use of accounting personnel. This Agreement is for $5,000 per month and is on a month to month basis. During the period ended June 30, 1997, $10,000 has been charged to expense under this Agreement.
The predecessor corporation had previously abandoned its Bridgewater, New Jersey facility and has claimed no obligation for rent under a lease which has since expired during the current period. The Company has recorded $54,250 for unpaid rent under this Agreement and the same is included in accounts payable at June 30, 1997. Management believes it will have no obligation under this lease and if it is found otherwise, believes such obligation will be less than the amounts recorded in the financial statements.
During the six months ended December 31, 1995 the predecessor corporation issued 48,000 shares for aggregate consideration of $12,000.
Prior to recapitalization due to the reverse acquisition discussed in A(1) Business Development, Organization and Acquisition Activities, the Company issued 1,500,000 and 27,465 shares of stock in cancellation of $75,000 of loans and $6,866 of accounts payable respectively, bringing the aggregate shares to 11,404,270 prior the recapitalization and the reverse split noted below.
The Company effected a one-for-ten reverse split for the shares above, effective March 31, 1997.
The Company issued 6,600,000 post reverse split shares in connection with the reverse acquisition discussed above.
On June 25, 1998, the Company issued 2,500,000 shares in consideration for all the shares outstanding of Microphase Telecommunications, Inc., a Delaware corporation, which is also an affiliate that holds certain provisional patents and copyrights to the Company's analog technology.
Item 7. Description of Securities
(a) Common or Preferred Stock
(1) Description of Rights and Liabilities of Common Stockholders
(I)Dividend Rights-The holders of outstanding shares of common stock are entitled to receive dividends out of assets legally available therefore at such times and in such amounts as the board of directors of the Company may from time to time determine.
(ii) Voting Rights-Each holder of the Company's common stock are entitled to one vote for each share held of record on all matters submitted to the vote of stockholders, including the election of directors. All voting is noncumulative, which means that the holders of 50% of the shares voting for the election of the directors can elect all the directors. The board of directors may issue shares for consideration of previously authorized but unissued common stock without further stockholder action.
(iii) Liquidation Rights- Upon liquidation, the holders of common stock are entitled to receive pro rata all of the assets of the Company available for distribution to such holders.
(iv) Preemptive Rights-Holders of common stock are not entitled to preemptive rights.
(v) Conversion Rights-No shares of common stock are currently subject to
outstanding options, warrants, or other convertible securities.
(vi) Redemption Rights-No redemption rights exist for shares of common stock
(vii) Sinking Fund Provisions- No sinking fund provisions exist for shares of common stock.
(viii) Further Liability For Calls- No shares of common stock are subject to further call or assessment by the issuer. All stock options outstanding as of March 31, 1998 were converted to common stock on September 14, 1995.
(2) Potential Liabilities of Common Stockholders to State or Local Authorities
No material potential liabilities are anticipated to be imposed on stockholders under state statues.
(b) Debt Securities
The Company is not registering any debt securities, nor are any outstanding.
@ Other Securities To Be Registered
The Company is not registering any securities other than its common stock.
Part II
Item 1 Market Price of and Dividends on the Registrant's Common Equity and Other Stockholder Matters
(a) Market Information
(1)The common stock of the Company is presently traded on the NASDAQ OTC Bulletin Board, under the symbol "XDSL".
The following represents the high and low, bid and ask prices of the Company's common stock the last two fiscal years as provided by the National Quotation Bureau, Inc.. The quotations shown reflect inter-dealer prices, without retail mark-up, mark-down, or commission and may not represent actual transactions. THESE FIGURES HAVE BEEN ADJUSTED TO REFLECT A 1 FOR 10 REVERSE SPLIT ON MARCH 1, 1997 AND A REVERSE SPLIT OF 1 FOR 2 EFFECTIVE ON SEPTEMBER
21, 1995
Bid Prices Ask Prices
High Low High Low
1996
October 1 through December 31 .03125 $ .03125 $ .28125 $ .28125
1997
Jan. 1 through Mar. 31 $ .625 $ .03125 $ .78125 $ .28125
Apr. 1 through June 30 $ 3.75 $ 1.75 $ 5.00 $ 2.125
July 1 through Sept. 30 $ 2.125 $ 1.375 $ 2.3475 $ 1.875
Oct. 1 through Dec. 31 $ 1.40625 $ .625 $ 1.875 $ .8125
1998
Jan. 1 through Mar. 31 $ 1.75 $ .875 $ 2.00 $ 1.46875
April 1 through June 30 $ 2.375 $ 1.125 $ 2.5625 $ 1.28125
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(2)(I) There is currently no common stock which is subject to outstanding options or warrants to purchase, or securities convertible into, the Company's common stock, except for 3,675,000 options to purchase the Company's common stock of $1.00 per share issued to officers and consultants of the Company and 1,615,179 warrants to purchase one share each of the common stock at $.75 per share issued in connection with the Rule 505 offering of the Company's securities described elsewhere.
(ii) There is currently no common stock of the Company which could be sold under Rule 144 under the Securities Act of 1933 as amended or that the registrant has agreed to register for sale by security holders. On August 15, 1997, however as set forth under the caption "Recent Sales of Unregistered Securities" set forth pursuant to item 4 below, the Company issued 100,000 shares which, 90 days after it becomes a reporting issuer, could be sold under Rule 144.
(iii) There is currently no common equity that is being to is proposed to be publicly offered by the registrant, the offering of which could have a material effect on the market price of the issuer's common equity. However, management of the Company does plan to raise approximately $5,000,000 by offering shares.
(b) Shareholders
As of June 25, 1998, the Company had 13,479,711 shares of common stock outstanding, held by individual shareholders and brokerage firms and/or clearing houses, holding the Company's common shares in "street name" for their clients. The Company believes that there are approximately 350 beneficial owners of its common stock.
(c) Dividends
The Company has not paid any dividends, other than a dividend having a value
of $11,404, distributed to shareholders of record on February 16, 1997, and
certain assets and liabilities from the health care business in connection
with the spinoff of TLI Industries, transferred a date which preceded the
acquisition of Lightpaths, Inc., the subsidiary which then held the rights to
the mPhase Technology which is the primary asset of the Company. The Company
does not anticipate paying dividends in the immediate foreseeable future. The
board of directors of the Company will review its dividend policy from time to
time to determine the desirability and feasibility of paying dividends after
giving
consideration to the Company's earnings, financial condition, capital
requirements and such other factors as the board may deem relevant.
Item 2 Legal Proceedings
The Company is not currently involved in any legal proceeding nor does it have
knowledge of any threatened litigation, except for a proposed lawsuit by
Global Music and Media Inc, a Tennessee Corporation, over an alleged breach of
an April 30, 1997 agreement whereby Global alleges it was given the exclusive
right to market mPhase Technology as well as television programming and
related services. The Company has asserted the April 30, 1997 agreement
relied upon by Global was superseded by an October 27, 1997 agreement with
respect to which Global and a related company has defaulted under its
obligations. Accordingly, the Company does not believe there is any merit to
the contentions of Global and intends to vigorously defend its position.
Item 3 Changes in and Disagreements With Accountants
Effective for the fiscal year ended June 30, 1997, the Company changed its accountants from Mauriello, Franklin & LaBrace, CPAs to Schuhalter, Coughlin & Suozzo, LLC. Mauriello, Franklin & Labrace, CPAs declined to stand for re-election in March of 1997. In the Auditor's report for the fiscal year ended June 30, 1996, Mauriello, Franklin & Labrace, CPAs expressed an opinion which was qualified as to the Company's ability to continue as a going concern. There were no disagreements with the former accountant on any matter of accounting principals or practices, financial statement disclosure, or auditing scope or procedure.
Item 4 Recent Sales of Unregistered Securities
(a) In June 1997, the Company issued 594,270 post reverse split shares for aggregate consideration of $897,405, pursuant to Rule 504 of Regulation D of the United States Securities and Exchange Commission.
In July 1997, the Company issued 49,300 post reverse split shares for aggregate consideration of $98,600, pursuant to Rule 504 of Regulation D of the United States Securities and Exchange Commission.
In November 1997, 300,000 post reverse split shares were issued for services rendered to the Company valued at twenty-five ($0.25) cents per share in connection with efforts to obtain markets for the Company's technology 70,000 shares Murray Sternfeld; 25,000 shares Vincent LoCurcio; 75,000 shares Morris Freedman; 50,000 shares David Rosenberg, 30,000 Sigmund Freundlich; 50,000 shares Robert H. Jaffe, Esq., the latter for services rendered as special securities counsel during the first six months of the Company's 1998 fiscal year.
In November 1997, the Company issued 300,000 post reverse split shares to shareholders of Complete Telecommunications, inc. for aggregate consideration of $300,000.
Also in November 1997, the Company issued 250,000 post reverse split shares as part of its investment in Complete Telecommunications, Inc., a Delaware corporation.
In March 1998, the Company issued 649,667 post reverse split shares for aggregate consideration of $487,250, and warrants to purchase 649,667 shares st $.75, pursuant to Rule 505 of Regulation D of the United States Securities and Exchange Commission.
In May 1998, the Company issued 176,666 post reverse split shares for aggregate consideration of $132,500, and warrants to purchase 176,666 shares at $.75, pursuant to Rule 505 of Regulation D of the United States Securities and Exchange Commission.
In June 1998, the Company issued 788,846 post reverse split shares for aggregate consideration of $591,635, and warrants to purchase 788,846 shares at $.75, pursuant to Rule 505 of Regulation D of the United States Securities and Exchange Commission.
In June 1998, the Company issued 130,000 post reverse split shares for $97,500.
On June 25, 1998, the Company issued 2,500,000 shares in consideration for all the shares outstanding of Microphase Telecommunications, Inc., a Connecticut corporation, which is also an affiliate that holds substantially all the patents and copyrights to the Company's technology.
(b) The Company has not publicly offered any unregistered securities. It has no agreement with any person who may be deemed an underwriter. However, it has sold shares of its common stock in private transactions, including the Rule 504 and Rule 505 offerings discussed below.
(d) The issuer has not sold any securities for other than cash, except for
1,000,000 shares of its common stock issued to the following persons:
(1) 600,000 shares of stock issued to Nutley Securities, Inc. a company in
which Ronald A. Durando is President, valued at $0.01 per share in connection
with his services as a "finder fee" at the time of the acquisition of
Lightpaths, Inc. (2) 100,000 shares of common stock, valued at $0.25 per
share, issued to Robert H. Jaffe & Associates, P.A. in consideration of
services to be rendered by that law firm in connection with drafting the
Company's initial registration statement on SEC Form 10-SB, 300,000 shares to
the following person for services rendered during the first six months of
fiscal 1998 as more particularly set forth in item 4(a) above: 70,000 shares
Murray Sternfeld; 25,000 shares Vincent LoCurcio; 75,000 shares Morris
Freedman; 50,000 shares David Rosenberg; 30,000 Sigmund Freundlich and 50,000
shares Robert H. Jaffe & Associates, P.A..
(e) The unregistered shares of common stock sold by the Company pursuant to Rule 504 in June/July 1997 were offered in accordance with provisions of Regulation D of the United States Securities and Exchange Commission and similar exemption provisions in the states where these offerings were made. These offerings were made to accredited investors, who represented in subscription agreements that they had sufficient assets such that they could afford to lose their entire investment without significantly affecting their personal financial condition.
(f) The unregistered shares of common stock sold by the Company pursuant to Rule 505 in 1998 were offered in accordance with provisions of Regulation D of the United States Securities and Exchange Commission and similar exemption provisions in the states where these offerings were made. These offerings were made to accredited investors, who represented in subscription agreements that they had sufficient assets such that they could afford to lose their entire investment without significantly affecting their personal financial condition.
Item 5 Indemnification of Directors and Officers
THE BYLAWS OF THE COMPANY PROVIDE FOR INDEMNIFICATION OF EMPLOYEES AND AGENTS IN CERTAIN CASES. INSOFAR AS INDEMNIFICATION FOR LIABILITIES ARISING UNDER THE SECURITIES ACT OF 1933 MAY BE PERMITTED TO DIRECTORS, OFFICERS OR PERSONS CONTROLLING THE COMPANY PURSUANT TO THE FOREGOING PROVISIONS, THE COMPANY HAS BEEN INFORMED 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.
Part F/S
Financial Statements
The following documents are filed as part of this report:
a) mPhase Technologies, Inc. and subsidiary Page
Report of Schuhalter, Coughlin & Suozzo, LLC F-1
Consolidated Balance Sheet as of June 30, 1997 and
March 31, 1998 (Unaudited) F-2
Consolidated Statement of Operations for the period from
October 2, 1996 through June 30, 1997 and the nine months
ended March 31, 1998 (Unaudited) F-3
Consolidated Statement of Stockholder's Equity for the
period from July 1, 1996 through June 30, 1997 and the
nine months ended March 31, 1998 (Unaudited) F-4
Consolidated Statement of Cash Flows for the period from
October 2, 1996 through June 30, 1997 and the nine months
ended March 31, 1998 (Unaudited) F-5
Notes to Consolidated Financial Statements F-7
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b) Interim Financial Statements are not provided in this section as they are included above
c) Financial Statements of Businesses Acquired or to be Acquired
Tecma Laboratories, Inc.
Report of Mauriello, Franklin & Labrace, CPA's F-21
Balance Sheets as of June 30, 1996 F-22
Statements of Income for the years ended June 30, 1996
and 1995 F-23
Statements of Stockholder's Equity for the years ended
June 30, 1996 and 1995 F-24
Statements of Cash Flows for the years ended June 30,
1996 and 1995 F-25
Notes to the Financial Statements F-26
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To the Board of Directors and Stockholders of mPhase Technologies, Inc.
We have audited the accompanying balance sheet of mPhase Technologies, Inc. as of June 30, 1997 and the related statements of operations, changes in stockholders' equity, and cash flows for the year ended June 30, 1997. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material respects, the financial position of the Company at June 30, 1997 and the results of its operations and its cash flows for the year ended June 30, 1997 in conformity with generally accepted accounting principles.
The Company is in the development stage as of June 30, 1997. Recovery of the Company's assets is dependent upon future events, the outcome of which is indeterminable. In addition, successful completion of the Company's development program and its transition, ultimately, to attaining profitable operations is dependent upon obtaining adequate financing to fulfill its development activities and achieving a level of sales adequate to support the Company's cost structure.
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1, conditions exist which raise substantial doubt about the Company's ability to continue as a going concern unless it is able to generate sufficient cash flows to meet its obligations and sustain its operations. Management's plan in regard to these matters are also described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Schuhalter, Coughlin & Suozzo, LLC
Raritan, New Jersey
September 12, 1997, except for Note 10, as
to which the date is December 5, 1997
mPHASE TECHNOLOGIES, INC.
Formerly Tecma Laboratories, Inc.
(A Development Stage Company)
Consolidated Balance Sheet
June 30, March 31,
1997 1998
(Unaudited)
ASSETS
Cash and equivalents $ 161,787 $ 40,460
Stock subscription receivable 10,800 -
Prepaid expenses 6,705 -
Equipment used in research and development, less
accumulated depreciation of $2,053 & $22,048 64,853 66,494
Marketing equipment, less accumulated depreciation
of $389 & $3,890 13,611 10,110
Licensing rights, at cost, less accumulated
amortization of $10,078 & $28,168 110,527 92,437
Organization costs, less accumulated
amortization of $55 & $154 600 501
Investment in unconsolidated subsidiary - 258,537
Note receivable - unconsolidated subsidiary - 150,000
TOTAL ASSETS 368,883 618,539
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LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Accounts payable 152,692 1,137,996
Accrued expenses 227,197 520,916
Due to affiliate (Microphase Corporation) 11,766 251,917
Deferred Revenue - License fee - 250,980
TOTAL LIABILITIES 391,655 2,161,809
STOCKHOLDERS DEFICIT
Common stock, no par value, 50,000,000 shares
authorized; 8,334,697 shares issued
and outstanding at June 30, 1997 and 9,884,199 shares
issued and outstanding at March 31, 1998 (unaudited) 758,474 1,879,992
Deficit accumulated during development stage,
subsequent to recapitalization effective
October 2, 1996 (781,246) (3,415,289)
Treasury Stock, 13,750 shares at cost - (7,973)
TOTAL STOCKHOLDERS' DEFICIT (22,772) (1,668,270)
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT $ 368,883 $ 618,539
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mPHASE TECHNOLOGIES, INC.
Formerly Tecma Laboratories, Inc.
(A Development Stage Company)
Consolidated Statement of Operations
From October 2,
1996 (Date
of Inception)
to June 30, March 31,
1997 1998
(Unaudited)
REVENUE - LICENSING FEES $ 0 $ 49,020
TOTAL REVENUE 0 49,020
COSTS AND EXPENSES
Research and development (including $109,646
and $23,268 for the period ended June and
March respectively, incurred with affiliate) $ 192,502 1,165,461
Licensing fees 37,500 337,500
General and administrative (including $223,488
and $131,315 for the period ended June and
March respectively, incurred with affiliate) 540,722 837,949
Depreciation and amortization 10,522 21,690
Stock based compensation - 150,000
TOTAL COSTS AND EXPENSES (781,246) (2,512,600)
NET (LOSS) FROM OPERATIONS $(781,246) (2,463,580)
LOSS FROM UNCONSOLIDATED SUBSIDIARY - 170,463
NET (LOSS) $(781,246) $(2,634,043)
BASIC LOSS PER COMMON SHARE $(.100) $ (.297)
COMMON SHARES OUTSTANDING 7,806,457 8,878,432
DILUTED LOSS PER COMMON SHARE $(.068) $( .212)
COMMON SHARES AND EQUIVALENTS OUTSTANDING 11,481,457 12,453,099
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mPHASE TECHNOLOGIES, INC.
Formerly Tecma Laboratories, Inc.
(A Development Stage Company)
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Consolidated Statement of Changes in Stockholders' Deficit From July 1, 1996 to June 30, 1997
Number Common
of Shares Stock (Deficit) Total
Balance, July 1, 1996,
as previously reported, 9,876,800 $389,291 $(671,039) $(281,748)
Conversion of Loans
Payable to Common Stock 1,500,000 75,000 - 75,000
Conversation of Accounts
Payable to Common Stock 27,465 6,866 - 6,866
One-for-Ten Reverse
Common Stock Split (10,263,838) - - -
Assignment of Certain
Assets and Liabilities
of Prior Tecma
Laboratories, Inc. to
TLI Industries, Inc. and
Spin-off of 100% of TLI
Industries Common Stock
to Shareholders, net of
$46,990 Loss from
Discontinued Operations
and Dividend of $11,404 133,332 133,332
Subtotal 1,140,427 471,157 $(537,707) $(66,550)
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mPHASE TECHNOLOGIES, INC.
Formerly Tecma Laboratories, Inc.
(A Development Stage Company)
Consolidated Statement of Changes in Stockholders' Deficit From July 1, 1996 to March 31, 1998
Number Common Treasury
of Shares Stock Stock (Deficit) Total
Subtotal 1,140,427 $471,157 - (537,707) $(66,550)
Issuance of Common Stock
in Consideration for 100%
of the Common Stock of
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Lightpaths, Inc. 6,600,000 66,550 - - 66,550
Elimination of Predecessor
Retained Deficit in Recapitalization - (537,707) - (537,707) - Balance as Restated for Recapitalization, Effective for October 2, 1996 (Date of Inception for Lightpaths, Inc.) 7,740,427 - - - - Issuance of Common Stock, in Private Placement - - - - - Transactions Net of Offering Costs of $138,931 594,270 758,474 - - 758,474 Net (Loss) for the Year - - - (781,246) (781,246) Balance, June 30, 1997 8,334,697 $758,474 - $(781,246) $(22,772) Issuance of Common Stock, Net of Offering Costs of $84,065 (unaudited) 999,502 46,518 - - 871,518 Issuance of Common Stock for Services (unaudited) 300,000 150,000 - - 150,000 |
Issuance of Common Stock in
Connection with investment
in Subsidiary (unaudited) 250,000 125,000 - - 125,000
Repurchase of 13,750 Shares
of Common Stock at Cost
(unaudited) - - (7,973) - (7,973)
Net (Loss) for the nine
months ended March 31, 1998
(unaudited) (2,634,043) (2,634,043)
9,884,199 $1,879,992$(7,973)$(3,415,289) $(1,543,270)
mPHASE TECHNOLOGIES, INC.
Formerly Tecma Laboratories, Inc.
(A Development Stage Company)
Consolidated Statement of Cash Flow
From October 2, For the
1996 (Date Nine Months
of Inception) Ended
to June 30, March 31,
1997 1998
(Unaudited)
Cash Flow Used In Operating Activities:
Net (Loss) $(781,246) $(2,634,043)
Adjustments to reconcile net (loss) to net cash
(used in) operating activities:
Depreciation and Amortization 10,522 21,690
Depreciation of research and development equipment 2,053 19,995
Loss on unconsolidated subsidiary - 170,463
Stock based compensation - 150,000
Changes in assets and liabilities:
(Increase)/Decrease in prepaid expenses (6,705) 6,705
Increase in accounts payable 86,197 985,304
Increase in accrued expenses 227,197 293,719
Increase in due to affiliate 11,766 240,151
Increase in deferred revenue - license fee - 250,980
Increase in receivables from subsidiary - (150,000)
Net cash (used in) operating activities (450,216) (645,036)
Cash Flow Used in Investing Activities:
Investment in organizational costs (54,110) -
Investment in licensing rights (655) -
Investment in fixed assets (80,906) (21,636)
Investment in unconsolidated subsidiary - (304,000)
Net cash (used in) investing activities (135,641) (325,636)
Cash Flow From Financing Activities:
Proceeds from issuance of common stock,
net of offering costs of $138,931 in June and
and $84,065 in March 747,674 857,318
Repurchase of Treasury stock at cost - (7,973)
Net cash provided by financing activities 747,674 866,372
Net Increase (Decrease)in Cash 161,787 (121,327)
Cash, Beginning of Period - 161,787
Cash, End of Period $ 161,787 $ 40,460
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mPhase TECHNOLOGIES, INC
Formerly Tecma Laboratories, Inc.
(A Development Stage Company)
Notes to Consolidated Financial Statements
(Unaudited for the Nine Months Ended March 31, 1998)
NOTE 1 - LOSSES SINCE INCEPTION:
The Company and its predecessor corporation, discussed in Notes 2 and 3 below, have recorded operating losses since inception, totaling $1,499,275 which represents $718,029 operating losses by the predecessor and $781,246 by the Company since the recapitalization.
Management plans to raise additional capital, primarily through the issuance of common stock, until successful operations are obtained and the Company is no longer in the development stage.
In view of these matters, realization of a major portion of the assets in the accompanying balance sheet is dependent upon the Company's ability to meet its financing requirements, and the success of its future operations. Management believes that actions presently being taken to revise the Company's operating and financial requirements provide the opportunity for the Company to continue as a going concern.
NOTE 2 - ORGANIZATION AND NATURE OF BUSINESS:
The Company and its predecessor corporation was organized in the State of New Jersey in December, 1979 under the name Tecma Laboratories, Inc. On April 7, 1997, the Company amended its certificate of incorporation and changed its name to Lightpaths TP Technologies, Inc. On June 2, 1997, the Company amended the certificate of incorporation and changed its name to mPhase Technologies, Inc.
The predecessor corporation was a development stage company primarily engaged in research, development and the exploitation of certain products in the medical and health care field. Since the recapitalization discussed in Note 3, the Company is still in the development stage and primarily engaged in the delivery of cable television services to homes through telephone wire.
NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Principles of Consolidation:
The consolidated financial statements include the accounts of the Company and its subsidiaries, all of which are wholly owned. Significant intercompany accounts and transactions have been eliminated in consolidation. These include Lightpaths, Inc., a Delaware corporation, formed on October 2, 1996. Additionally, the Company formed another wholly owned subsidiary called TLI Industries, Inc. on January 29, 1997, shares of which were spun off to the stockholders of the Company, effective March 31, 1997, after transferring certain assets and liabilities, primarily fixed assets, patents and shareholder loans. The liabilities in excess of basis, and therefore the resultant gain on the disposal of discontinued operations reduced by the loss from this discontinued operation through March 31, 1997, was treated as a decrease of the accumulated deficit prior to the recapitalization.
The consolidated financial statements do not include an affiliate (see Note 5
- Related Party Transactions) which the Company is dependent on (see also Note
3).
mPHASE TECHNOLOGIES, INC.
Formerly Tecma Laboratories, Inc.
(A Development Stage Company)
Notes to Consolidated Financial Statements
(Unaudited for the Nine Months Ended March 31, 1998)
NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued):
Schedule of NonCash Investing and Financing Activities:
From October 2, 1996 For the
(Date of Inception) nine months
To June 30, 1997 Ended
March 31, 1998
(Unaudited)
Accounts payable assumed in
the reverse acquisition of $ 66,550 $ 0
Lightpaths, Inc.
Common stock issued in connection
with investment in subsidiary $ 0 $ 125,000
Common stock issued
for services $ 0 $ 150,000
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Property and Equipment:
Property and equipment are recorded at cost. Depreciation is provided on the straight-line method over the estimated useful lives of five years.
Research and Development:
Research and development costs are charged to operations as incurred.
Income Taxes:
Income taxes have been provided using the liability method in accordance with FASB Statement No. 109, Accounting for Income Taxes.
Dependence:
The Company is dependent on affiliated companies for facilities and technological assistance. (See Note 5 - Related Party Transactions).
Effect of Uncertainty of Affiliate:
The affiliated companies for which the Company's depended on have not been audited. Management has indicated that the affiliated companies have fiscal uncertainties which question their ability to continue as a going concern. No liabilities have been recorded in these financial statements for this uncertainty.
Financial Instruments:
The following methods and assumptions were used by the Company to estimate fair values of financial instruments as discussed herein:
Cash and equivalents:
mPHASE TECHNOLOGIES, INC.
Formerly Tecma Laboratories, Inc.
(A Development Stage Company)
Notes to Consolidated Financial Statements
(Unaudited for the Nine Months Ended March 31, 1998)
The carrying amount approximates fair value because of the short period of maturity.
NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued):
Receivables from and Payables to Affiliates:
The carrying amount approximates fair value because the Company anticipates either repayment or offsets in the current period.
Marketing Expenses:
Marketing expenses are charged to Operations as incurred. Included in General and Administrative expenses is $85,941 of marketing expenses for the period ended June 30, 1997.
Licensing Rights:
Licensing rights are recorded at cost including $51,555 acquired in the acquisition and are amortized over the license period of sixty months.
Equity Method:
The investment in a corporation in which the company has a 41.724% interest is carried at cost, adjusted for the corporation's proportionate share of their undistributed earnings or (loss).
Loss per Common Share
For the period ended June 30, 1997, and all periods subsequent thereto, the Company adopted FASB 128 to compute earnings per share. Basis EPS excludes dilution and is computed by dividing income available to common stockholders by the weighted-average number of common shares outstanding for the period. Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that then shared in the earnings of the entity.
Long-Lived Assets
In March, 1995, the Financial Accounting Standards Board issued SFAS No. 121 "Accounting for the Impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable and long-lived assets and certain identifiable intangibles to be disposed of to be reported at the lower of carrying amount of faire value less cost to sell. SFAS No. 121 also established the procedures for review of recoverability and measurement of impairment, if necessary, of long-lived assets and certain identifiable intangibles to be held and used by an entity. The Company adopted SFAS No. 121 for the year ended June 30, 1997. The carrying value of assets of the Company have not been affected by this statements.
Stock-Based Compensation:
The Company accounts for stock based compensation in accordance with SFAS No.
mPHASE TECHNOLOGIES, INC.
Formerly Tecma Laboratories, Inc.
(A Development Stage Company)
Notes to Consolidated Financial Statements
(Unaudited for the Nine Months Ended March 31, 1998)
123, "Accounting for "Stock-Based Compensation," which permits entities to recognize as expense over the vesting period the fair value of all stock-basedawards on the date of grant. Alternatively, SFAS No. 123 also allows entities to continue to apply the provisions of the Accounting Principles Board (APB) Opinion No. 25 and provide pro forma net income and pro forma earnings per share disclosures for employee stock option grants made in 1995 and future years as if the fair value-based method, as defined in SFAS No. 123, had been applied. The Company has elected to continue to apply the provisions of APB Opinion No. 25 and provide the pro forma disclosure required by SFAS No. 123. As such, compensation expense is generally recorded on the date of grant only if the current market price of the underlying stock exceeded the exercise price.
Other Accounting Pronouncements:
The FASB has issued SFAS No. 130, Reporting Comprehensive Income effective for fiscal years beginning after December 15, 1997, which establishes standards for the reporting of comprehensive income and its components. The Company believes that the effect of the adoption of SFAS No. 130 will not be material to its financial position or results of operations.
NOTE 4 - COMMON STOCK:
Prior to June 30, 1989 the predecessor corporation issued 8,800,200 shares of common stock for aggregate consideration of $222,093, after giving effect for a stock split of 600 for 1 on September 1, 1987.
During 1988 the predecessor corporation entered into an Underwriting Agreement with First Nutley Securities, Inc. for the proposed sale of its securities. The underwriter agreed to sell 600,000 units to the public on a "best efforts, 250,000 unit or more" basis as to the first 250,000 units, and a "best efforts basis" as to the remaining 350,000 Units at a price to the public of $1.00 per unit. Each unit consisted of four shares of common stock, no par value, four Class A redeemable common stock purchase warrants, and four Class B redeemable common stock purchase warrants. Both classes of warrants were exercisable and transferable immediately upon the successful closing of the offering herein. Each Class A warrant and Class B warrant entitled the holder to purchase one share of common stock at a purchase price of $.50 and $1.00 per share for two and three year period respectively, from the effective date of the offering. The terms of the Class A and Class B warrants have been extended to February 13, 1997 and February 13, 1998 respectively. The warrants were subject to redemption by the Company, in whole or in part, and at any time or from time to time, upon thirty (30) days prior written notice, at a per warrant price of $.01 through June 30, 1995 and warrants for a like amount of common shares have been exercised for consideration at $2,125.
On July 20, 1989 the unit public offering was completed, 256,050 Units were issued, and the Company received $206,062 which was net of certain expenses of the sale and offering costs of $49,988, and after giving effect to deferred offering costs it had previously recorded of $53,015, generated net proceed to the company of $153,048. Concurrently, the predecessor corporation issued
mPHASE TECHNOLOGIES, INC.
Formerly Tecma Laboratories, Inc.
(A Development Stage Company)
Notes to Consolidated Financial Statements
(Unaudited for the Nine Months Ended March 31, 1998)
102,440 warrants to the underwriter for $.00025 per warrant and received $25. The warrants entitled the underwriter to purchase 102,440 shares of common stock at $.30 per share for a period of 48 months commencing February 13, 1990. The term for exercise of the warrants has been extended until February 13, 1997. No shares were exercised under this Agreement and these warrants have expired.
During the six months ended December 31, 1995 the predecessor corporation issued 48,000 shares for aggregate consideration of $12,000.
Prior to recapitalization due to the reverse acquisition discussed in Note 3, the Company issued 1,500,000 and 27,465 shares of stock in cancellation of $75,000 of loans and $6,866 of accounts payable respectively, bringing the aggregate shares to 11,404,270.
The Company effected a one-for-ten reverse split for the shares above, effective March 31, 1997.
The Company issued 6,600,000 post reverse split shares in connection with the reverse acquisition discussed in Note 3.
In June of 1997, the Company issued 594,270 post reverse split shares for 897,405, which net of offering costs of $138,931, generated net proceeds of $758,474 to the Company. Included in the net proceeds was a stock subscription of 10,800 which was collected in early July, 1997.
During the period ended March 31, 1998, the Company issued 999,502 post reverse split shares for $930,583, which net of offering costs of $84,065, generated net proceeds of $846,518 to the Company.
During the period ended March 31, 1998, the Company issued 300,000 shares, valued at $150,000, considering the Rule "144" restrictions which they were subject to, and charged the same to stock based compensation in the statement of operation.
In October, 1997, the Company issued $250,000 shares in connection with its investment in an unconsolidated subsidiary valued at $150,000 considering the Rule "144" restrictions which they were subject to.
RESERVED SHARES:
On August 15, 1997, the Board of Directors authorized the grant of options to purchase 3,675,000 shares of the Company's common stock at $1.00 per share, including grants to purchase 3,000,000 shares of the Company's common stock to officers and directors, upon the approval and implementation of a stock option plan. No compensation was charged to expense as the grant price approximates the fair market value of the options considering the Rule "144" restrictions on the shares if exercised during the period. No shares have been exercised under this grant.
mPHASE TECHNOLOGIES, INC.
Formerly Tecma Laboratories, Inc.
(A Development Stage Company)
Notes to Consolidated Financial Statements
(Unaudited for the Nine Months Ended March 31, 1998)
Subsequent to the period ending March 31, 1998, the Company terminated an employee for cause, which under the terms of the Company's stock option plan void a grant of options to purchase 750,000 shares at $1.00 per share. The effect of such was to reduce the options outstanding from 3,675,000 to 2,925,000.
During the period ended March 31, 1998, the Company issued 649,667 warrants to purchase one share of common stock at a price of $.75 per share, exercisable for five years from the date of issuance. These warrants are callable by the Company if the trading price of the common stock traded on the exchange in which the company is listed remains over $5.00 per share for a specified period of time.
NOTE 5 - RELATED PARTY TRANSACTIONS:
The management of the Company are also employees of an affiliated group of companies which have recorded material transactions with the Company. The Company's management is in a position to, and in the future may, influence future operations of the Company for the benefit of other companies that are under their control.
The Company advanced $164,000 and $250,000 to companies under common control. Additionally, the Company agreed to reimburse another affiliate $383,266 for research and development expenses as well as certain marketing expenses and $42,500 for other costs including licensing fees and facilities and administrative services discussed in Note 6. The Company has agreed in principle to have a convertible option to convert its amounts receivable to equity pursuant to the $164,000 advance made to an affiliate.
On August 15, 1997 the Board of Directors of the Company and the Board of Directors of the affiliates agreed to permit the right of offset for the above advances against the liability of the affiliate discussed in Note 6.
On October 27, 1997, the Company, in connection with a licensing agreement discussed in Note 10, became the 41.724% owner in an unconsolidated subsidiary which included the investment of $300,000 and 250,000 shares of common stock valued at $125,000. Additionally, the Company advanced $150,000 in the form of a note receivable bearing interest 12% and due within one year. No interest income was recorded in the statement of operations as the subsidiary has failed to make any payments under the note and the Company is presently negotiating a proposed revised licensing agreement with the co-owners of the subsidiary.
During the period ended March 31, 1998, the subsidiary is not consolidated in the financial statement as management of the Company does not believe it had effective control of the subsidiary.
NOTE 6 - COMMITMENTS AND CONTINGENCIES:
On February 15, 1997 the Company entered into a Technology, Patent and Trademark License Agreement with Microphase Telecommunications, Inc., an affiliated company. The agreement permits the Company to utilize the patent and trademark technology of Microphase Telecommunications, Inc. under a licensing arrangement with payments as follows:
(1) a one time non-refundable payment of $37,500 which the Company has recorded as a license agreement in the Balance Sheet.
(2) Minimum annual royalties, based upon sales of the Company at rates of ten (10%) percent on the first $1,000,000 of sales; nine (9%) percent for sales between $1,000,001 and $5,000,000; eight (8%) percent for sales between $5,000,001 and $10,000,000; seven (7%) percent for sales between $10,000,001 and $20,000,000; and six (6%)percent for sales above $20,000,000 per year. Regardless of the Company sales, the company has agreed to pay $50,000, $250,000 and $500,000 as a minimum payment in years one, two and three and additionally, $1,000,000 every year thereafter.
mPHASE TECHNOLOGIES, INC.
Formerly Tecma Laboratories, Inc.
(A Development Stage Company)
Notes to Consolidated Financial Statements
(Unaudited for the Nine Months Ended March 31, 1998)
(3) The Company also agreed to make payments of $37,500 per month, starting June 1, 1997 and during the life of the Agreement, which in periods where no royalties are earned, can be applied to the minimum royalty above, for technology development and transfer. The Agreement is for the life of the trademark and patented items, which have been applied for and are expected to be seventeen years. During the period ended June 30, 1997, $37,500 has been charged to expense under this Agreement.
On May 1, 1997 the Company entered into an agreement with Microphase Corporation, an affiliate with common yet unidentical ownership, whereby the Company will use office space as well as the administrative services of the Company including the use of accounting personnel. This Agreement is for $5,000 per month and is on a month to month basis. During the period ended June 30, 1997, $10,000 has been charged to expense under this Agreement.
The predecessor corporation had previously abandoned its Bridgewater, New Jersey facility and has claimed no obligation for rent under a lease which has since expired during the current period. The Company has recorded $54,250 for unpaid rent under this Agreement and the same is included in accounts payable at June 30, 1997. Management believes it will have no obligation under this lease and if it is found otherwise, believes such obligation will be less than the amounts recorded in the financial statements.
The Company has entered into various agreements with Georgia Tech Research Corporation, GTRC, a company affiliated with Georgia Tech Research Institute, located in Atlanta, Georgia, pursuant to which the Company receives technical assistance in the developing the commercialization of its digital video and data system. If and when sales commence utilizing this particular technology, the Company will be obligated to record and pay to GTRC a royalty of net sales of 3% to 5%, determined by mutual agreement on a product by product basis.
The utilization by the Company of GTRC for technical assistance with respect to its Research and Development activities during the nine month period ended March 31, 1998 has averaged approximately $250,000 per month and as of March 31, 1998 approximately $850,000 was payable to GTRC and this amount is included in accounts payable.
NOTE 7 - CORPORATE INCOME TAXES:
No provision has been made for corporate income taxes due to cumulative losses incurred. The Company has available unrealized tax benefits of approximately $440,000 in the form of net operating loss carryforwards of approximately $1,185,000 for federal income tax purposes and $989,000 for state income tax purposes to reduce future taxable income.
mPHASE TECHNOLOGIES, INC.
Formerly Tecma Laboratories, Inc.
(A Development Stage Company)
Notes to Consolidated Financial Statements
(Unaudited for the Nine Months Ended March 31, 1998)
The Company has recognized these tax benefits as a deferred tax asset subject to a 100% valuation allowance since it is uncertain whether or not these tax benefits will be realized.
As of June 30, 1997 these losses expire as follows:
Federal State
June 30, 1997 through 2004 $ 0 $989,000
December 31, 1997 through 1999 175,000 0
June 30, 2001 thru 2005 47,000 0
June 30, 2006 76,000 0
June 30, 2007 48,000 0
June 30, 2008 75,000 0
June 30, 2009 73,000 0
June 30, 2010 86,000 0
June 30, 2011 85,600 0
June 30, 2012 519,400 0
TOTAL: $1,185,000 $989,000
|
NOTE 8 - PROPERTY AND EQUIPMENT:
Property and equipment owned by the Company at June 30, 1997 and March 31,
1998 as well as the estimated useful lives used in computing depreciation are
as follows:
June 30, 1997 March 31, 1998
Equipment used in research
and development (5-7 years) $66,906 $88,542
Marketing equipment (3-5 years) 14,000 14,000
|
NOTE 8 - PROPERTY AND EQUIPMENT (Continued):
Subtotal 80,906 102,542 Less accumulated depreciation (2,442) (25,938) Net Total $ 78,464 $ 76,604 |
Depreciation expense for the period ended June 30, 1997 and March 31, 1998 was $389 and $3,501 respectively for marketing equipment and $2,053 and $19,995 respectively for equipment used in research and development.
NOTE 9 - CREDIT RISK AND CONCENTRATIONS OF CREDIT RISK:
In the course of the Company business, it has advanced monies to a supplier and a licensing agent in the technology industries. Furthermore, these are affiliated companies with limited history of operations.
These expose the Company to risk of loss of the amounts advanced should the supplier ultimately be unable to produce what the Company intends upon purchasing as well as risk of loss should the technology to be assigned encounters obsolescence prior to its utilization by the Company. Additionally, the Company may be exposed to off-balance sheet risk arising
mPHASE TECHNOLOGIES, INC.
Formerly Tecma Laboratories, Inc.
(A Development Stage Company)
Notes to Consolidated Financial Statements
(Unaudited for the Nine Months Ended March 31, 1998)
from potential claims should the technology or products create a liability in which the company's counterparties may fail to satisfy their obligations.
The Company measures its exposure on a commitment by commitment basis. This risk can be effected by changes in geographic, industrial or other economic factors. To alleviate the potential for risk concentration, management has monitored the progress of the supplier as well as the status of technological advances and changes with its providers and within the industry itself.
NOTE 10 - FAIR VALUE OF FINANCIAL INSTRUMENTS:
The estimated fair value of the Company's financial instruments are as
follows:
June 30, 1997 March 31, 1998
Carrying Fair Value Carrying Fair Value
Amount Amount
Assets:
Cash and Equivalents $161,787 $161,787 $ 40,460 $ 40,460
Stock Subscription
Receivable $ 10,800 $ 10,800 - -
Liabilities:
Accounts payable $152,692 $152,692 $1,137,996 $1,137,996
Accrued Expenses $227,197 $227,197 $ 520,916 $ 520,916
Due to Affiliate $ 11,766 $ 11,766 $ 251,917 $ 251,917
|
NOTE 11 - SUBSEQUENT EVENTS
On July 31, 1997 the Company and or its designates, agreed to purchase up to a 50% interest in Complete Telecommunications, Inc., together with Global Music and Medica, Inc., a Tennessee corporation, a transaction which was memorialized in an October 27, 1997 license agreement. Complete was intended to be a local cable provider and a marketing vehicle for the Company's technology in certain markets in the United States. The October 27th licensing agreement with Complete, provided Complete certain rights of distribution in the continental United States for mPhase technology for $2,000,000, the terms of which were $300,000 cash and $1,700,000 to be paid upon the receipt by Complete of a proposed financing ranging from $3,000,000 to $5,000,000 pursuant to a memo of understanding between the Company and Global dated April 30, 1997.
NOTE 12 - SUBSEQUENT EVENTS (Unaudited):
In June, 1998, the Company was advised by Global Music & Media, Inc., a Tennessee Corporation, and a major shareholder in the Company's subsidiary, that they may be subject to suit for an alleged breach of contract of an April 30, 1997 agreement. The proposed suit alleges Global was given the exclusive
mPHASE TECHNOLOGIES, INC.
Formerly Tecma Laboratories, Inc.
(A Development Stage Company)
Notes to Consolidated Financial Statements
(Unaudited for the Nine Months Ended March 31, 1998)
right to market mPhase Technology as well as television programming and related services. The company believes the April 30, 1997 agreement was never intended to give exclusive rights to its technology; the April 30, 1997 agreement was superseded by the October 27, 1997 agreement with respect to which Global and a related company has defaulted under its obligations and clearly does not provide for exclusivity. Accordingly, the Company considers the suit meritless and intends to vigorously defend its position.
In May, 1998, the Company issued 176,666 post reverse split shares for aggregate consideration of $132,500 as well as warrants to purchase 176,666 shares at $.75.
In June, 1998, the Company issued 788,846 post reverse split shares for aggregate consideration of $591,635 as well as warrants to purchase 788,846 shares at $.75.
In June, 1998, the Company issued 130,000 post reverse split shares for $97,500.
In June, 1998, the Company issued 2,500,000 post reverse split shares in consideration of all the issued and outstanding shares of Microphase Telecommunications, a Delaware corporation, deemed to be effective for July 1, 1998. The transaction is intended to be an acquisition accounted for as a purchase of Microphase Telecommunications, Inc. pursuant to APB 16. In addition to the shares issued in this agreement, as Microphase Telecommunications will become a wholly owned subsidiary, the Company will no longer be subject to the licensing fee for technology development and transfer discussed in Note 6. The agreement provides for the payment of a 3% royalty on the net sales of mPhase Technologies, Inc. to be paid to an affiliate, Microphase Corporation. Additionally, the agreement provides that the Company shall receive from Microphase Corporation a 3% royalty on the net sales of digital subscriber line components.
As a result of the above, as of June 25, 1998, the Company has total of 13,479,711 shares of common stock issued and outstanding as well as 1,615,179 warrants to purchase 1,615,179 shares of common stock at $.75 per share, exercisable for five years from the date of issuance. These warrants are callable by the Company if the trading price of the common stock traded on the exchange in which the Company is listed remains over $5.00 per share for a specified period of time.
NOTE 13 - INVESTMENT IN UNCONSOLIDATED SUBSIDIARY (Unaudited):
The Company has an interest in a corporation, Complete Telecommunications, Inc. which is involved in marketing the Company's technology. The investment is accounted for using the equity method and represents a 41.724% ownership in the subsidiary. The Company's accumulated deficit in the unconsolidated loss of the corporation included in retained deficit at March 31, 1998 amounted to $170,463.
Condensed financial information for the corporation is as follows:
mPHASE TECHNOLOGIES, INC.
Formerly Tecma Laboratories, Inc.
(A Development Stage Company)
Notes to Consolidated Financial Statements
(Unaudited for the Nine Months Ended March 31, 1998)
March 31, 1998
Assets:
Licensing fee, Net of $49,020
accumulated of an amortization $ 250,980
Pre-organizational costs, net of
$49,798 of accumulated amortization 282,191
TOTAL ASSETS $ 533,171
Liabilities, including $150,000
note payable to mPhase 641,704
Common stock 300,000
Retained Deficit (408,553)
TOTAL LIABILITIES AND SHAREHOLDERS DEFICIT $ 533,171
Summary of Statement of Operations March 31, 1998
Revenues $ -0-
Expenses (408,553)
NET LOSS $(408,553)
|
TECMA LABORATORIES, INC.
FINANCIAL STATEMENTS
YEARS ENDED JUNE 30, 1996 AND 1995
TECMA LABORATORIES, INC.
INDEX TO FINANCIAL STATEMENTS
YEARS ENDED JUNE 30, 1996 AND 1995
PAGE
Independent Auditors' Report 1 Balance Sheets - June 30, 1996 and June 30, 1995 2 Statement of Stockholders' Deficiency - From Inception to June 30, 1996 3 Statements of Operations - Years Ended June 30, 1996 and 1995 and Total From Inception to June 30, 1996 4 Statements of Cash Flows - Years Ended June 30, 1996 and 1995 and Total From Inception to June 30, 1996 5 Notes to Financial Statements 6-11 |
INDEPENDENT AUDITORS' REPORT
March 25, 1997
To the directors and stockholders of
Tecma Laboratories, Inc.:
We have audited the accompanying balance sheets of Tecma Laboratories, Inc. (A Development Stage Company), at June 30, 1996 and 1995, and the related statements of operations, stockholders' deficiency, and cash flows for the two years then ended and for the cumulative period from inception (December 20, 1979) to June 30, 1996. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material respects, the financial position of Tecma Laboratories, Inc. and the results of operations and cash flows for the two years ended June 30, 1996 and for the cumulative period from inception (December 20, 1979) to June 30, 1996 in conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 1 to the
financial statements, the Company has suffered recurring losses and has
utilized substantially all of the cash funds which were derived from the
initial public offering of securities. These factors raise substantial doubt
about the Company's ability to continue as a going concern. Management's
plans in regard to these matters are also described in Note 2. The financial
statements do not include any adjustments that might result from the outcome
of this uncertainty.
TECMA LABORATORIES, INC.
(A Development Stage Company)
BALANCE SHEETS
June 30,
1996 1995
ASSETS
Current assets:
Cash in banks $ 173 $ 39
Prepaid expenses and other current assets - -
Total current assets $ 173 $ 39
Security deposits 4,370 4,370
Patents, at cost, net of accumulated amortization
of $7,642 and $6,432 respectively (Note 1) 12,939 14,149
Property and equipment, at cost, net of accumulated
depreciation of $39,918 and $31,176 respectively
(Notes 1 and 3) 28,752 37,494
Total assets $ 46,234 $ 56,052
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
Current liabilities:
Accounts payable-trade $ 57,898 $ 18,898
Accrued interest--stockholders (Note 4) 48,897 31,536
Accrued legal fees 3,000 3,000
Total current liabilities $ 109,795 $ 53,434
Loans payable-stockholders (Note 4) 218,187 210,767
Total liabilities $ 327,982 $ 264,201
|
Stockholders' deficiency:
Common stock--no par value; Authorized--50,000,000
shares; Issued and outstanding-9,876,800 shares
(1995 - 9,828,800 shares) (Note 2) $ 389,291 $ 377,291
Deficit accumulated during the development stage (671,039) (585,440)
Total stockholders' deficiency $(281,748) $ (208,149)
Total liabilities and stockholders' deficiency $ 46,234 $ 56,052
SEE ACCOMPANYING INDEPENDENT AUDITORS' REPORT
AND NOTES TO FINANCIAL STATEMENTS
TECMA LABORATORIES, INC.
(A Development Stage Company)
STATEMENTS OF OPERATIONS
Total From
Years Ended Inception
June 30, To June 30,
1996 1995 1996
Revenue:
Sales $ -0- $ -0- $ 2,409
Interest income -0- -0- 15,132
Total Revenue -0- -0- 17,541
Costs and expenses:
Write off of investment
in common stock--
foreign corporation -0- -0- 141,208
Selling and administrative
expenses 57,086 60,107 438,207
Depreciation-property and
equipment 8,742 8,743 39,918
Amortization-patents 1,210 1,209 7,642
Interest expense 18,561 15,744 61,605
(85,599) 85,803 688,580
Net loss (Note 5) $ (85,599) $ (85,803) $ (671,039)
Net loss per share (Note 1) $ -0- $ -0-
|
SEE ACCOMPANYING INDEPENDENT AUDITORS' REPORT
AND NOTES TO FINANCIAL STATEMENTS
TECMA LABORATORIES, INC.
(A Development Stage Company)
STATEMENT OF STOCKHOLDERS' DEFICIENCY
TOTAL FROM INCEPTION TO JUNE 30, 1996
Common Stock Accumulated
Shares Amount Deficit Total
Issued prior to June 30, 1982 4,177,200 $ 159,216
Issued July 1, 1982
to June 30, 1989 4,623,000 62,877
Balance, July 1, 1989 8,800,200 222,093 (188,339) 33,754
Proceeds from initial public
offering, net of offering
costs of $103,003 1,024,200 153,048 - 153,048
Sale of 102,440 warrants
at $.00025 each - 25 - 25
Proceeds from exercise
of 4,400 warrants 4,400 2,125 - 2,125
Net loss for year ended June 30, 1990 - - (39,145) (39,145)
Net loss for year ended June 30, 1991 - - (75,739) (75,739)
Net loss for year ended June 30, 1992 - - (47,854) (47,854)
Net loss for year ended June 30, 1993 - - (75,650) (75,650)
Net loss for year ended June 30, 1994 - - (72,910) (72,910)
Net loss for year ended June 30, 1995 - - (85,803) (85,803)
Proceeds from issuance of
common stock 48,000 12,000 - 12,000
Net loss for year ended June 30, 1996 - - (85,599) (85,599)
|
Balance, June 30, 1996 9,876,800 $ 389,291 $ (671,039) $ (281,748)
SEE ACCOMPANYING INDEPENDENT AUDITORS' REPORT
AND NOTES TO FINANCIAL STATEMENTS
TECMA LABORATORIES, INC.
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
Years Ended Total From
June 30, Inception to
1996 1995 June 30, 1996
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(85,599) $ (85,803) $ (671,039)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization 9,952 9,952 47,560
Interest expense 17,361 14,540 48,897
Increase (decrease) in cash arising from
changes in current assets and liabilities:
Security deposits - - (4,370)
Accounts payable 39,000 2,364 57,898
Accrued expenses - - 3,000
Total adjustments 66,313 26,856 152,985
Net cash used in operating activities (19,286) (58,947) (518,054)
CASH FLOWS FROM INVESTING ACTIVITIES:
Patent expenditures - - (20,581)
Property and equipment expenditures - - (68,670)
Net cash used in investing activities - - (89,251)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock 12,000 - 490,143
Proceeds from sale and exercise of
common stock warrants - - 2,150
Net borrowings from shareholders 7,420 56,022 218,187
Public offering expenditures - - (103,002)
Net cash provided by financing activities 19,420 56,022 607,478
NET INCREASE (DECREASE) IN CASH 134 (2,925) 173
Cash balance, beginning of year 39 2,964
Cash balance, end of year $ 173 $ 39
Supplementary cash flow data:
Interest paid $ - $ - $ -
Income taxes paid $ - $ - $ -
|
SEE ACCOMPANYING INDEPENDENT AUDITORS' REPORT
AND NOTES TO FINANCIAL STATEMENTS
TECMA LABORATORIES, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
Note 1--Summary of Significant Accounting Policies
Organization and Nature of Business
The Company was organized under the laws of the State of New Jersey on December 20, 1979 for the primary purpose of research, development, and exploitation of certain products in the medical and health care fields.
The Company is in the development stage and has had no U.S. operations but has invested monies in a 97% owned predecessor foreign subsidiary to develop and produce quinine. The operation was unsuccessful and the investment was written off in June 1984. Since then, the Company has been engaged in the research, development and patenting of medicinal products derived from botanical sources. The Company has patented several products and is in the process of producing and marketing these products.
In July, 1989 the Company successfully completed a unit public offering of its securities (See Note 3).
Basis of Presentation
The Company's financial statements have been presented on a going concern basis which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business.
The Company reported a net loss of approximately $86,000 for the year ended June 30, 1996 and cumulative losses since inception of approximately $671,000. Further the Company has utilized substantially all of its cash funds which were derived from the initial public offering of securities.
The continuation of the Company is dependent upon obtaining additional financing and the commencement of production, marketing, and sales of its patented products. To obtain these objectives, management is pursuing a number of options including borrowing of funds from major shareholders, a secondary offering of securities, and a merger with another corporation (See Note 8).
These conditions raise substantial doubt about the Company's ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
TECMA LABORATORIES, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
Note 1--Summary of Significant Accounting Policies (Continued)
Research and Development
Research and development costs are charged to operations as incurred.
Property and Equipment
Property and equipment are stated at cost and depreciation has been provided on a straight line basis commencing at the time the assets were placed in service (October 1991) based on the following useful lives:
Useful Lives
Lab equipment and fixtures 10 years
Office equipment 5 years
Office furniture 7 years
Leasehold improvements 10 years
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Patent Costs
Patent costs are capitalized as incurred and amortized over the remaining legal life of the patents commencing when the patents are issued by federal authorities. As of June 30, 1996, five patents were issued and amortization provided thereon.
Income Taxes
Taxes are computed on pre-tax financial income which is consistent with income reported for income tax filing purposes.
Loss Per Share
Loss per share is based on the weighted average number of common shares outstanding.
Use of Estimates in the Preparation of Financial Statements
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
TECMA LABORATORIES, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
Note 1--Summary of Significant Accounting Policies (Continued)
Statement of Cash Flows
For purposes of the statement of cash flows, the Company considers all highly liquid instruments purchased with a maturity of three months or less to be cash equivalents.
Note 2--Capitalization Changes
The Company entered into an Underwriting Agreement with First Nutley Securities, Inc. for the proposed sale of its securities. The underwriter agreed to sell 600,000 Units to the public on a "best efforts, 250,000 unit or more" basis as to the first 250,000 Units, and on a "best efforts basis" as to the remaining 350,000 Units at a price to the public of $1.00 per Unit. Each Unit consisted of four shares of common stock, no par value, four Class A redeemable common stock purchase Warrants, and four Class B redeemable common stock purchase Warrants. Both classes of Warrants were exercisable and transferable immediately upon the successful closing of the offering herein. Each Class A Warrant and Class B Warrant entitled the holder to purchase one share of common stock at a purchase price of $.50 and $1.00 per share for two and three year periods respectively, from the effective date of the offering. The terms of the Class A and Class B warrants have expired.
On July 20, 1989 the unit public offering was completed, 256,050 Units were issued, and the Company received $206,062 which is net of certain expenses of the sale and offering costs of $49,988. Concurrently the Company issued 102,440 warrants to the underwriter for $.00025 per warrant and received $25. The warrants entitled the Underwriter to purchase 102,440 shares of common stock at $.30 per share for a period of 48 months commencing February 13, 1990. The term for exercise of the warrants had been extended until February 13, 1997 at which time they expired.
Note 3--Property and Equipment
Property and equipment are comprised as follows:
June 30,
1996 1995
Laboratory equipment
and fixtures $ 9,922 $ 9,922
Office equipment 5,239 5,239
Office furniture 30,480 30,480
Leasehold improvements 23,029 23,029
Total cost 68,670 68,670
Accumulated depreciation 39,918 31,176
Net $ 28,752 $ 37,494
PAGE 8
TECMA LABORATORIES, INC.
(A Development Stage Company)
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NOTES TO FINANCIAL STATEMENTS
Note 4--Related Party Transactions
During the years ended June 30, 1996 and 1995, the Company engaged in the following related party transactions:
1. Was advanced unsecured funds with no stated maturity from two major stockholders of $7,420 and $56,022 to pay for rent and other related operating expenditures of which $218,187 and $210,767 was owing as of June 30, 1996 and 1995 respectively.
2. Was charged 8% interest per annum on such loans totaling $17,361 in 1996 and $14,540 in 1995 of which $48,897 and $31,536 was outstanding at June 30, 1996 and 1995 respectively.
Note 5--Corporate Income Taxes
No provision has been made for corporate income taxes due to cumulative losses incurred. As of June 30, 1996 and 1995, the Company has available unrealized tax benefits of approximately $253,000 and $219,000 respectively in the form of net operating loss carryforwards which can reduce future taxable income.
The Company has recognized these tax benefits as a deferred tax asset subject to a 100% valuation allowance since it is more likely than not that these tax benefits will not be realized.
As of June 30, 1996 these losses expire as follows:
Federal State
December 31, 1996 thru 1999 $175,000 $ -0-
June 30, 1997 thru 2000 -0- 233,000
June 30, 2001 thru 2005 47,000 222,000
June 30, 2006 76,000 -0-
June 30, 2007 48,000 -0-
June 30, 2008 75,000 -0-
June 30, 2009 73,000 -0-
June 30, 2010 86,000 -0-
June 30, 2011 86,000 -0-
$666,000 $455,000
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TECMA LABORATORIES, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
Note 6-Fair Value of Financial Instruments
The fair value of the Company?s long-term debt to stockholders is deemed equal to its reported value based on estimated interest rates available to the Company for debt of similar terms and maturity.
Note 7-Commitments
The Company is committed to a three year operating lease covering its plant and office facility in Bridgewater, New Jersey, commencing from August 12, 1996. The minimum annual rent is $32,775 and is without regard to the Company's proportionate share of real estate taxes, utilities, and maintenance costs which it is obligated to pay. The Company reported lease charges of $48,136 and $47,866 in the years ended June 30, 1996 and 1995 respectively.
Future minimum rental payments for the five years ending June 30, 2001 and thereafter are as follows:
Year Ended June 30,
1997 $ 27,312
1998 32,775
1999 32,775
2000 5,463
2001 -0-
Thereafter -0-
Total $ 98,325
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Note 8--Subsequent Events
Effective January 27, 1997 the Company terminated its facility lease due to constructive eviction. The Company is disputing both unpaid and paid rent and escalation charges from the landlord based on the Company being the last tenant in an unoccupied building which has not been maintained. The Company feels the settlement of such dispute shall not have a material adverse effect on the financial statements.
Effective February 5, 1997 the Company authorized the issuance of 1,500,000 and 27,465 shares of unissued common stock in consideration for the forgiveness of $75,000 of loans payable -stockholders as described in Note 4 and accounts payable of $6,866.
TECMA LABORATORIES, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
Note 8--Subsequent Events (Continued)
On March 24, 1997 a majority of the stockholders of the Company approved the following resolutions:
1) Agreed to the terms of an Exchange and Plan of Reorganization Agreement dated January 15, 1997 with the stockholders of Lightpaths, Inc., a Delaware Corporation, wherein the Company shall acquire 100% of the issued and outstanding common stock of Lightpaths, Inc. in consideration for 6.6 million post reverse split shares of the Company. The Company shall account for the acquisition as a pooling of interests for financial reporting purposes.
Summarized operating data giving effect to the acquisition had it occurred on July 1, 1995 has not been disclosed since there is minimal historical operating data for Lightpaths, Inc.
2) Authorized a 1 for 10 reverse stock split to be effective March 31, 1997 for stockholders of record of the same date and to change the name of the Company to Lightpaths TP Technologies, Inc.
3) Authorized the transfer to a newly formed wholly-owned subsidiary, TLI Industries, Inc. all of its assets and all of its liabilities effective March 31, 1997. Immediately thereafter the Company shall spin off all of the outstanding shares of TLI?s common stock to the stockholders of the Company as a dividend.
Part III
Item 1 Index to Exhibits (Pursuant to Item 601 of Regulation SB)
Exhibit Name and/or Identification of Exhibit
Number
1. Underwriting Agreement
Not applicable
2. Plan of Acquisition, Reorganization, Arrangement, Liquidation, or
Succession.
(a) Exchange of Stock Agreement and Plan of Reorganization, Dated
January 15, 1997
3. Certificate of Incorporation and By-Laws
(a) Certificate of Incorporation of Tecma Laboratory, Inc. filed
December 20, 1979
(b) Certificate of Correction to Certificate of Incorporation of
Tecma Laboratory, Inc. dated June 29, 1987
(c) Certificate of Amendment of Certificate of Incorporation of
Tecma Laboratory, Inc. dated August 28, 1987 (changing name to
Tecma Laboratories, Inc.)
(d) Certificate of Amendment of Certificate of Incorporation of
Tecma Laboratories, Inc. filed April 7, 1997 (changing its name
to Lightpaths TP Technologies, Inc.
(e) Certificate of Amendment of Certificate of Incorporation filed
June 2, 1997 (changing its name to mPhase Technologies, Inc.)
(f) Certificate of Incorporation of Lightpaths, Inc. Filed October
2, 1996 with the Delaware Secretary of State
(g) By-Laws of mPhase Technologies, Inc.
4. Instruments Defining the Rights of Security Holders
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(a) mPhase Long Term Stock Incentive Plan authorized by the Company on
August 15, 1997
(b) A warrant agreement between the Company and Jersey Transfer &
Trust Co., Warrant Agent, relating to the warrants issued
pursuant to Rule 505 offering
5. Opinion on Legality
Not applicable
6. No Exhibit Required
Not applicable
7. Opinion on Liquidation Preference
Not applicable
Exhibit Name and/or Identification of Exhibit
Number
8. Opinion on Tax Matters
Not applicable
9. Voting Trust Agreement and Amendments
Not applicable
10. Material Contracts
(a) Technology agreement Dated February 15, 1997 between
Microphase Telecommunications and mPhase Technologies, Inc.
(b) Loan Agreements and Promissory Notes between Janifast Holdings
, LTD (the Maker) and mPhase Technologies Inc. (the Holder),
Dated April 10,1997, May 5, 1997, June 19, 1997 and August 31,
(c) Joint Venture Agreement dated April 30, 1997 between the
Company and Global Music & Medica, Inc. detailing terms and
conditions under which Complete Telecommunications, Inc. is to
be organized and operated.
(d) License Agreement dated October 27, 1997 between the Company,
Complete Telecommunications, Inc. and Global Music & Media,Inc.
(e) License Agreement dated March 26, 1998, by and between Georgia
Tech Research Corporation and the Company relating to the
commercialization of a certain invention entitled "Digital
Video and Data System."
11. Statement Re Computation of Per Share Earnings
Proforma primary and fully diluted earnings per share
12. No Exhibit Required
Not applicable
13. Annual or Quarterly Reports - Form 10-Q
Not applicable
14. Material Foreign Patents
Not applicable
15. Letter on Unaudited Interim Financial Information
Not applicable
16. Letter from Mauriello, Franklin & LaBrace, CPAs
17. Letter on Director Resignation
Not applicable
18. Letter on Change in Accounting Principles
Not applicable
Exhibit Name and/or Identification of Exhibit
Number
19. Reports Furnished to Security Holders
Not applicable
20. Other Documents or Statements to Security Holders
21. Subsidiaries of Small Business Issuer
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See list of subsidiaries
22. Published Report Regarding Matters Submitted to Vote of Security Holders
Not applicable
23. Consent of Experts and Counsel
Consents of Schuhalter, Coughlin & Suozzo, LLC and Mauriello, Franklin & LoBrace, P.C.
24. Power of Attorney
Not applicable
25. Statement of Eligibility of Trustee
Not applicable
26. Invitations for Competitive Bids
Not applicable
27. Financial Data Schedule
Not applicable
28. Information from Reports Furnished to State Insurance Regulatory Authorities
Not applicable
99. Additional Exhibits
(a) Patent Application (not supplied to protect confidentiality of information - can be supplied to Commission if requested under protective order)
(b) Sample Subscription Agreement for Rule 504 Offering
(c) Sample Subscription Agreement for Rule 505 Offering
SIGNATURES
In accordance with Section 12 of the Securities Act of 1934, the registrant caused this registration statement to be signed on its behalf by the undersigned, hereunto duly authorized.
mPhase Technologies, Inc.
(Registrant)
Date: Executed manually dated August 31, 1998, electronically submitted
October 15, 1998
By: /s/ Ronald Durando
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Ronald Durando, Director and President
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
EXHIBITS TO FORM 10-SB
DATED AS OF AUGUST 31, 1998
FILED BY mPHASE TECHNOLOGIES, INC.
(Formerly Tecma Laboratories, Inc.),
A NEW JERSEY corporation
IRS EMPLOYER IDENTIFICATION NUMBER 22-2287503
EXCHANGE OF STOCK AGREEMENT AND PLAN OF REORGANIZATION
Exchange of Stock Agreement and Plan of Reorganization dated as of January 15, 1997 (the "Agreement"), by and between Tecma Laboratories, Inc. ("Tecma" or "the public company") a New Jersey Corporation, having its principal place for the transaction of business at 7 Finderne Avenue, Bridgewater, New Jersey and Lightpaths, Inc. a Delaware Corporation, ("Lightpaths" or "the Corporation"), having its principal place for the transaction of business at 8 Mountain Avenue, Springfield, New Jersey 07081.
W I T N E S S E T H:
WHEREAS, the shareholders of Lightpaths collectively own 10,000 shares (the "Corporation Shares") which constitutes all of the issued and outstanding shares of the common stock of the Corporation; and
WHEREAS, before giving effect to a reverse stock split on a ten share for one share basis ("the Stock Split"), Tecma shall have a capitalization of 50,000,000 shares of common stock, no par value per share, of which 11,404,265 shares are issued and outstanding; and
WHEREAS, Tecma desires to acquire from the stockholders of Lightpaths all of the Corporation Shares in exchange solely for 6,600,000 shares (after giving effect to the Stock Split) of Tecma common stock (the "New Issue Exchange Shares"); and
WHEREAS, at the closing of the exchange of stock contemplated by this Agreement, Tecma will not have any assets or liabilities, said assets and liabilities having been transferred to a new business entity to be called TLI Industries, Inc. in accordance with authority granted by the board of directors of the public company to be confirmed at a stockholders' meeting of Tecma scheduled to be held on January 17, 1997; and
WHEREAS, it is the intention of Tecma and Lightpaths that the exchange of the Corporation Shares for the New Issue Exchange Shares constitute a "reorganization" as defined in Section 368(a) (1) (B) of the Internal Revenue Code of 1986, as amended.
NOW THEREFORE, in consideration of the foregoing and the mutual covenants contained in this Agreement, IT IS AGREED is follows:
ARTICLE I
EXCHANGE OF SHARES
Section 1.1 Exchange of Stock. Subject to the terms and conditions of this Agreement, at the "Closing" as such term as defined in Section 7.1 hereof, the Corporation Shares shall be exchanged with Tecma for the New Issue Exchange Shares.
Section 1.2 Delivery of Certificates. After the Closing, certificates representing all of the outstanding shares of Corporation Shares duly endorsed to Tecma with signatures guaranteed and with all requisite stock transfer tax stamps affixed, shall be delivered to the public company. The cost of any transfer tax stamps required to be affixed to any stock certificates shall be paid by Lightpaths. Upon delivery by Tecma of the certificates evidencing the New Issue Exchange Shares, all shareholders of Lightpaths, shall be vested with good and valid title to such New Issue Exchange Shares, free and clear of all liens, claims and encumbrances. The New Issue Exchange Shares shall constitute more than eighty (80%) percent of the outstanding common stock of Tecma giving effect to the Stock Split.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF TECMA
Tecma represents and warrants to Lightpaths as follows:
Section 2.1 Organization and Qualification of Tecma. Tecma is a corporation duly incorporated, duly organized, validly existing and in good standing under the laws of the State of New Jersey. It has the corporate power and authority to own or lease and operate all of its properties and assets and to carry on its business as such business in now being conducted and is duly licensed or qualified to do business and is in good standing in the State of New Jersey. The legal representatives of Tecma (the "Representatives") have received copies of the certificate of incorporation and by-laws of Tecma, certified by its Secretary to be complete and correct, as amended.
Section 2.2 Capitalization and Ownership of Tecma. The authorized capital stock of Tecma consists of (i) 50,000,000 shares of common stock, no par value per share, of which 11,404,265 shares are issued and outstanding prior to giving effect to the Stock Split. All outstanding shares of Tecma common stock are validly issued, fully paid for and nonassessable with no personal liability attaching to the ownership thereof and free of preemptive rights. There are no shares of Tecma common stock issued or outstanding except as referred to above, and, except as set forth on Exhibit 2.2 of the disclosure document annexed hereto (the "Disclosure Document"), there are no options, calls, subscriptions, warrants, rights, agreements or commitments of any character obligating the public company, contingently or otherwise, to issue shares of its common stock or to register shares of its common stock under the Securities Act of 1933, as amended (the "1933 Act"), or any other applicable federal or state securities laws.
Section 2.3 No Violations. The execution and delivery of this Agreement by Tecma will not violate any provisions of its certificate of incorporation or by-laws, conflict with any law, rule, statute or regulation to which is subject or violate or result in a default under any agreement to which Tecma is a party or by which it is bound.
Section 2.4 Investments. Tecma has not made any investments and does not own any capital stock of any other corporation or other entity.
Section 2.5 Consents and Approvals. To the best knowledge of Tecma, no permit, consent, approval or authorization of, or declaration, filing or registration with any public body or authority or other person, firm or entity is necessary in connection with the execution and delivery by the public company of this Agreement or the consummation by it of the transactions contemplated hereby.
Section 2.6 Compliance with Law. Tecma holds all licenses, franchises, permits and authorizations necessary for the lawful conduct of its business, and has complied and is in compliance with all applicable statutes, laws, ordinances, rules and regulations of all federal, state, local and foreign governmental bodies, agencies and subdivisions having, asserting or claiming jurisdiction over it or over any part of its operations. In connection with the sale of its securities, the public company has complied with applicable provisions of the 1933 Act, the Securities Exchange Act of 1934 Act, as amended (the "1934 Act"), all rules and regulations of the United States Securities and Exchange Commission ("SEC") and the laws, rules and regulations of each state in which such securities here offered for sale.
Section 2.7 Financial Statements. The Representatives have received copies of the financial statements of Tecma for the fiscal years ended June 30, 1994 and June 30, 1995 including the related balance sheets, statements of operations, statement of changes in shareholders' equity for such years and the notes thereto. The financial statements for the fiscal year ending June 30, 1996 and the six month period ending December 31, 1996 are in the process of being prepared by the public company and will be supplied to Lightpaths at least five days prior to closing. The financial statements of Tecma represent or will represent when presented to Lightpaths (a) the financial position, results of operations and changes in financial position of Tecma, as of the respective dates and for the respective periods indicated, and (b) have been prepared in accordance with generally accepted accounting principles ("GAAP") consistently applied.
Section 2.8 Existing Condition. Except as disclosed in Exhibit 2.8 of the Disclosure Document, since December 31, 1996, Tecma has not:
(a) incurred any liabilities out of the ordinary course of business;
(b) sold, encumbered, assigned or transferred any of its assets;
(c) made or suffered any amendment or termination of any material agreement, contract, commitment, lease under which the public company is lessee, or canceled, modified or waived any significant debts or claims held by it or waived any rights of significant value, whether or not in the ordinary course of business;
(d) suffered any damage, destruction or loss, whether or not covered by insurance;
(e) suffered any material adverse change in its business, operations, assets, properties, prospects or condition (financial or otherwise) other than the transactions required to transfer the assets and liabilities of the public company to a new business entity called TLI Industries, Inc. as more fully reflected in a certain information statement dated as of January 15, 1997 prepared to be submitted to Tecma stockholders, a copy of which is attached as Exhibit "A" to this Agreement;
(f) made commitments or agreements for capital expenditures;
(g) hired any employees or increased the salaries or other compensation of, or made any advance or loan to, any of its employees or consultants or made any increase in, or any addition to, other benefits to which any of its employees may be entitled;
(h) changed any of the accounting principles followed by it or the methods of applying such principles;
(i) entered into any transaction other than in the ordinary course of business consistent with past practice; or
(j) issued any shares of its common stock.
Section 2.9 Title to Properties; Leasehold Interests. Tecma has good and valid title to all properties and assets, real, personal and mixed, free and clear of all mortgages, liens, pledges, security interests, charges, claims, restrictions and other encumbrances and defects of title of any nature whatsoever, except for liens for taxes not yet due and payable.
Section 2.10 Condition of Tangible Assets. All material items of tangible personal property are in good condition and repair, subject to normal wear and tear, and are usable in the regular and ordinary course of business of Tecma.
Section 2.11 Books of Account. The books, records and accounts of Tecma maintained with respect to its business accurately and fairly reflect, in reasonable detail, all the transactions and all the assets and liabilities of the public company. Tecma has not engaged in any transaction, maintained any bank account or used any of its funds except for transactions, bank accounts and funds which have been and are reflected in the normally maintained books and records of the business.
Section 2.12 Litigation. Except as listed and annexed to Exhibit 2.13 of the Disclosure Document, no litigation, including any arbitration, investigation or other proceeding of or before any court, arbitrator or governmental or regulatory official, body or authority is pending or, to the best of its knowledge, is threatened against Tecma. The public company is not a party to or subject to the provisions of any judgment, order, writ, injunction, decree or award of any court, arbitrator or governmental or regulatory official, body or authority which may materially and adversely affect the business or assets of Tecma.
Section 2.13 Contracts and Commitments. Except as listed and annexed to Exhibit 2.13 of the Disclosure Document, Tecma is not a party to any written or oral:
(a) agreement, contract or commitment with any present or former employee or consultant or for the employment of any person, other than contracts terminable at will without future liability to the public company;
(b) agreement contract or commitment for the future purchase of, or payment for, equipment, supplies or products, or for the performance of services by a third party except for any agreement, contract or commitment arising in the ordinary course of business;
(c) agreement, contract or commitment to finance any acquisition of or purchase any asset or to perform any service; or
(d) note, debenture, bond, equipment trust agreement, letter of credit agreement, loan agreement or to their contract or commitment for the borrowing or lending of money or agreement or arrangement for a line of credit or guarantee, pledge or undertaking of the indebtedness of any other person.
Each of the agreements, contracts, commitments, leases, plans and other instruments, documents and undertakings annexed to Exhibit 2.13 is valid and enforceable in accordance with its terms except as the enforceability thereof may be limited by bankruptcy, insolvency or similar laws affecting the rights of creditors generally; Tecma is not in default of the performance, observance or fulfillment of any material obligations, covenant or condition contained therein; and no event has occurred which with or without the giving of notice or lapse of time, or both, would constitute a default thereunder; furthermore, except as may be disclosed on Exhibit 2.13, no such agreement, contract, commitment, lease, plan or other instrument, document or undertaking, in the reasonable opinion of the public company, contains any contractual requirement with which there is a likelihood Tecma will be unable to comply.
Section 2.14 No Broker or Finder. Tecma has not dealt with or retained any finder or broker whose fees or expenses have been paid by the public company or for whose fees or expenses it would be responsible in connection with this Agreement or the transactions contemplated hereby.
Section 2.15 Personnel and Certain Authorized Persons. Exhibit 2.15 of the Disclosure Document contains a true and complete list of all bank accounts of Tecma and the names of all persons who are authorized signatories with respect to such accounts.
Section 2.16 Employee Benefit Plans and Arrangements. Tecma has not sponsored, maintained or supported, or otherwise been a party to, in default under, or had any liability or accrued obligations under, any plan, program, fund or arrangement, either qualified or non-qualified for federal income tax purposes, relating to the employees of the public company, whether for the benefit of a single individual or for more than one individual, and whether or not funded, including, without limitation, any incentive or other benefit arrangement for employees, their dependents and/or their beneficiaries and any "employee pension benefit plan" or "employee welfare benefit plan", as such terms are defined in Section 3 of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"). Tecma has not, at any time, maintained or contributed or been required to maintain or contribute to any "Multi-Employer Plan" as such term is defined in Section 3(37) of ERISA.
Section 2.17 Completeness of Disclosure. No representation or warranty in this Agreement nor any certificate, Exhibit, statements, document or instrument furnished or to be furnished to Lightpaths by Tecma pursuant to this Agreement, or in connection with the negotiation, execution or performance of this Agreement, contains any untrue statement of a material fact or omits to state a material fact required to be stated or necessary to make any statement made, not misleading.
Section 2.18 Tax Matters. Tecma has filed or will file on a timely basis (including all extensions) all tax returns which were required to have been filed, or are hereafter required to be filed up to the Closing Date by it (including, without limitation, all federal, state, county, local and foreign tax returns) and such returns are complete and accurate in all material respects, and the public company has paid or provided for all taxes, interest or penalties which have been incurred or are due and payable pursuant to such returns or pursuant to any assessments received by it in connection with such returns. No foreign, federal, state, local or other taxing authority has provided the public company with any notice of any questions relating to, or claims asserted for, taxes against Tecma for which it may be liable. All taxes which Tecma is required by law to withhold or collect have been duly withheld or collected and, to the extent required, have been paid over to the proper governmental authorities.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF LIGHTPATHS
Lightpaths represents and warrants to Tecma as follows:
Section 3.1 Organization and Qualification of Lightpaths. Lightpaths is a corporation duly incorporated, duly organized, validly existing and in good standing under the laws of Delaware. The Corporation has the corporate power and authority to own or lease and operate all of its properties and assets and to carry on its business as such business is now being conducted and is duly licensed or qualified to do business and is in good standing in all jurisdictions in which the nature of its business or the character or location of the properties and assets owned or leased by it makes such licensing or qualifications necessary and where the failure to qualify would not have a material adverse effect on operations, properties, assets, liabilities, earnings or business.
Section 3.2 Capitalization and Ownership of Lightpaths. The authorized capital stock of Lightpaths consists of 100,000 shares of common stock, $.001 par value per share, of which 10,000 shares are issued and outstanding. All outstanding shares of Lightpaths common stock are validly issued and outstanding, fully paid and nonassessable with no personal liability attaching to the ownership thereof, free of preemptive rights and are owned free and clear of all liens, claims and encumbrances. No securities are issued or outstanding except for the aforementioned 10,000 shares of common stock and, at closing, there will be no options, calls, subscriptions, warrants, rights, agreements or commitments of any character obliging the Corporation on a contingent basis or otherwise, to issue shares of common stock or to register shares of its common stock under the 1933 Act or other applicable federal or state securities laws.
Section 3.3 Authority. Lightpaths has the full power and authority to enter into this Agreement and to carry out its obligations hereunder. Other than approval by its board of directors, no proceedings, on the part of the Corporation are necessary to authorize this Agreement or the transactions contemplated hereby. This Agreement constitutes the legal, valid and bind obligation of Lightpaths enforceable in accordance with its terms.
Section 3.4 Consents and Approvals. No permit, consent, approval or authorization of, or declaration, filing or registration with, any public body or authority or other person, firm or entity is necessary in connection with the execution and delivery by Lightpaths of this Agreement or the consummation by the Corporation of the transactions contemplated hereby.
Section 3.5 Financial Statements. Tecma has received copies of the audited financial statements of Lightpaths prepared for the period ending December 31, 1996 by Schuhalter, Coughlin & Suozzo, LLC of Raritan, New Jersey, certified public accountants for Lightpaths. These financial statements (a) present fairly the financial position, results of operations and changes in financial position of the Corporation, as of the respective dates and for the respective periods indicated, and (b) have been prepared in accordance with GAAP consistently applied.
Section 3.6 Completeness of Disclosure. No representation or warranty in this Agreement nor any certificate, exhibit, statements, document or instrument furnished or to be furnished to Tecma by Lightpaths in connection with the negotiation, execution or performance of this Agreement, contains any untrue statement of a material fact or omits to state a material fact required to be stated or necessary to make any statement made, not misleading.
ARTICLE IV
SURVIVAL OF REPRESENTATIONS AND WARRANTIES
Section 4.1 Survival of Representations and Warranties. The representations and warranties made by the parties to this Agreement or in any certificate, exhibit, document or instrument furnished hereunder shall survive for one year from the closing of the transactions contemplated hereby.
ARTICLE V
AGREEMENTS PENDING CLOSING
Section 5.1 Agreement Pending the Closing. Tecma covenants and agrees that, pending the Closing and except as otherwise agreed to in writing by Lightpaths, it will:
(a) Business in the Ordinary Course. Conduct its business solely in the ordinary course.
(b) Maintenance of Physical Assets. Continue to maintain and service the physical assets used in the conduct of its business in the same manner as has been its consistent past practice.
(c) Employees and Business Relations. Continue to maintain its business relations and relations with its employees in the same manner as has been its consistent past practice.
(d) Compliance with Law. etc. Comply with all laws, ordinances, rules, regulations and orders applicable to it or their operations, assets or properties in respect thereof, the noncompliance with which might materially affect its business or assets.
(e) Cooperation. Cooperate with the other parties to this Agreement and use its best efforts to cause all of the conditions to the obligations on its part to be performed under this Agreement to be satisfied before or immediately after the Closing Date.
(f) Sales of Assets; Negotiations. Except for the transaction deemed to have taken place as of January 1, 1997 whereby the assets and liabilities of Tecma were transferred to a new business entity to be called TLI Industries, Inc., all as more fully set forth in the information statement dated as of January 15, 1997 attached as Exhibit "A" to this Agreement, other than in the ordinary course of business consistent with past practice, the public company will not initiate or participate in any discussions or negotiations or enter into any agreement to sell or encumber any part of its assets.
(g) Press Releases. No party to this Agreement shall give notice to third parties or otherwise make any public statement or release concerning this Agreement or the transactions contemplated hereby except for such written information as shall have been approved in writing by the representatives of Lightpaths as to form and content.
ARTICLE VI
CONDITIONS PRECEDENT TO THE CLOSING
AND ADDITIONAL COVENANTS OF TECMA
Section 6.1 Conditions Precedent to the Obligations of Lightpaths. All obligations of Lightpaths under this Agreement are subject to the fulfillment or satisfaction, and Tecma covenants and agrees to fulfill or satisfy, prior to or at the Closing, each of the following conditions precedent:
(a) Representations and Warranties True as of the Closing Date. The representations and warranties of Tecma contained in this Agreement or in an Exhibit contained in the Disclosure Document, certificate or document delivered by the public company to Lightpaths pursuant to its provisions shall be true on the date of this Agreement without regard to any updates furnished by Tecma after the date of this Agreement and shall be true on the Closing Date with the same effect as though such representations and warranties were made as of such date.
(b) Compliance with this Agreement. Tecma shall have performed and complied with all agreements and conditions required by this Agreement to be performed or complied with by it prior to or at the Closing.
(c) No Threatened or Pending Litigation. On the Closing Date, no suit, action or other proceeding, or injunction or final judgment relating thereto, shall be threatened or be pending before any court or government or regulatory official, body or authority in which it is sought to restrain or prohibit or to obtain damages or other relief in connection with this Agreement or the consummation of the transactions contemplated hereby, and no investigation that might result in any such suit, action or proceeding shall be pending or threatened.
(d) Consents and Approvals. All of the consents required to carry out the transactions contemplated hereunder have been obtained or will be obtained by the closing date including resolutions of the board of directors and stockholders of Tecma approving the entry into this Agreement and the carrying out of transactions contemplated herein.
(e) Material Adverse Changes. There has been no material adverse change in the business, operations, assets or properties of Tecma other than the transactions whereby the existing assets and liabilities of the public company were transferred to a new entity called TLI Industries, Inc. as more fully described in the information statement dated as of January 15, 1997 attached as Exhibit "A" to this Agreement.
(f) Approval of Counsel; Corporate Matters. All actions, proceedings, resolutions, instruments and documents required to carry out this Agreement or incidental hereto and all other related legal matters shall have been approved on the Closing Date by counsel for Lightpaths in the exercise of its reasonable judgment.
(g) Certificates. Tecma shall have delivered to the representatives of Lightpaths, one or more certificates for the New Issue Exchange Shares and the public company shall also have delivered to the representatives of Lightpaths such other documents, instruments, certifications and further assurances as its counsel may reasonably require.
(h) Resignations. Subsequent to the election of three qualified nominees of Lightpaths to be directors of Tecma and their acceptance of the legal duties and obligations related thereto, all officers and predecessor directors of the public company shall have submitted written resignations.
(i) No Liabilities. At closing, Tecma shall have no liabilities or obligations, either accrued, absolute, contingent or otherwise.
For purposes of this Agreement, the terms "liabilities" shall include, without limitation, any direct or indirect indebtedness, guaranty, endorsement, indemnity, claim, loss, damage, deficiency, cost, expense, or obligation, fixed or unfixed, choate or inchoate, liquidated or unliquidated, secured or unsecured or a reserve for any of the foregoing.
(j) Stock Split And Change in Par Value. Tecma shall have authorized and effected a one share for ten share reverse stock split (the "Stock Split") such that each holder of outstanding shares of Tecma common stock, par value $.001 (the "Old Tecma Stock"), shall receive one $.001 par value share of Tecma common stock for every ten shares of Old Tecma Stock that the stockholder owns.
(k) Assignment and Assumption Agreement. Tecma shall have executed and delivered a copy to Lightpaths, an Assignment and Assumption Agreement by and between TLI Industries, Inc. and Tecma pursuant to which, for a period of one year, TLI Industries, Inc. agrees to assume or satisfy any liabilities of the public company that remain or are otherwise asserted after the transfer of its assets to TLI Industries, Inc.
Section 6.2 Conditions Precedent to the Obligations of Tecma. All obligations of Tecma under this Agreement are subject to the fulfillment or satisfaction, prior to or at the Closing, of each of the following conditions precedent:
(a) Representations and Warranties True as of the Closing Date. The representations and warranties of Lightpaths contained in this Agreement or in any list, certificate or document delivered by Lightpaths to Tecma pursuant to the provisions of this Agreement shall be true on the Closing Date with the same effect as though such representations and warranties were made as of such date.
(b) Compliance with this Agreement. Lightpaths shall have performed and complied with all agreements and conditions required by this Agreement to be performed or complied with by them prior to or at the Closing.
(c) No Threatened or Pending Litigation. On the Closing Date, no suit, action or other proceeding, or injunction of final judgment relating thereto, shall be threatened or be pending against Lightpaths before any court or governmental or regulatory official, body or authority in which it is sought to restrain or prohibit or to obtain damages or other relief in connection with this Agreement or the consummation of the transactions contemplated hereby, and no investigation that might result in any such suit, action or proceeding shall be pending or threatened.
(d) Material Adverse Changes. There shall have been no material adverse changes in the business, operations, assets or properties of Lightpaths.
(e) Approval of counsel; Corporate Matters. All actions, proceedings, resolutions, instruments and documents required to carry out this Agreement or incidental hereto and all other related legal matters shall have been approved on the Closing Date by counsel for Tecma in the exercise of its reasonable judgment.
(f) Certificates. Lightpaths shall have delivered to Tecma one or more certificates for the Corporation Shares and shall also have delivered to Tecma such other documents, instruments, certifications and further assurances as its counsel may reasonably require.
ARTICLE VII
CLOSING, FURTHER ASSURANCES
AND CONDITIONS SUBSEQUENT
Section 7.1 Closing. The Closing (the "Closing") of the exchange of the Corporation Stock and the New Issue Exchange Shares shall take place at the offices of Robert H. Jaffe & Associates, P.A. on February 15, 1997 or such other place or date as may be mutually agreed upon in writing by the parties hereto. The date of the Closing is sometimes herein referred to as the "Closing Date".
Section 7.2 Acts to be Performed by the Corporation. Following the Closing Lightpaths shall cause Tecma to:
(a) accept the resignation of its present registered agent in the State of New Jersey and appoint a successor thereto;
(b) change the address of its registered office in the State of New Jersey;
(c) change the address of its principal executive offices and to take all actions necessary to qualify to transact business in the jurisdiction thereof and all other jurisdictions in which the nature of business conducted by Tecma or the character or location of the properties and assets owned or leased by it make such qualification necessary, except where the failure to so qualify would not have a material adverse effect on the public company; and
(d) execute the appropriate certificates and make the appropriate public filings to effectuate each of the foregoing actions.
Section 7.3 Further Assurances. After the Closing, Tecma and Lightpaths agree to execute, acknowledge and deliver to the other such other instruments of conveyance and transfer and will take such other actions and execute and deliver such other documents, certifications and further assurances as the other may reasonably require in order to vest more effectively the Corporation Shares and the New Issue Exchange Shares, as the case may be, in the owners thereof. In addition, each of the parties will cooperate by executing and delivering to the other such additional instruments and documents and take such other actions as may be reasonably requested from time to time by any other party necessary to carry out, evidence and confirm the intended purposes of this Agreement.
ARTICLE VIII
MISCELLANEOUS
Section 8.1 Termination.
(a) Anything herein or elsewhere to the contrary notwithstanding, this Agreement may be terminated by written notice of termination at any time before the Closing Date only as follows:
(i) by mutual consent of Tecma and Lightpaths;
(ii) by Lightpaths at any time if the representations and warranties of Tecma move to be materially incorrect when made;
(iii) by Tecma at any time if the representations and warranties of Lightpaths were materially incorrect when made; or
(iv) by either Tecma or Lightpaths if the transactions contemplated by this Agreement do not close on or before April 15, 1997 unless extended in writing by mutual agreement of the parties.
(b) In the event of the termination and abandonment hereof pursuant to the
provisions of this Section 8.01, this Agreement, except as provided in this
Section 8.01(b) shall become void and have no effect, without any liability on
the part of any of the parties or their directors or officers or stockholders
in respect of this Agreement. Notwithstanding any such termination and
abandonment, the provisions of Section 5.01(j) regarding confidential
information shall remain binding upon the parties hereto.
Section 8.2 Brokers' and Finders' Fees. Each party represents and warrants to the other that all negotiations relative to this Agreement have been carried on by it directly without the intervention of any person except for Ronald A. Durando of Nutley, New Jersey, and Tecma agree to indemnify and hold Lightpaths harmless against any and all claims, losses, liabilities and expenses which may be asserted against or incurred by it as a result of its dealings, arrangements or agreements with any other person.
Section 8.3 Income, Sales, Transfer and Documentary Taxes; etc. Lightpaths shall pay all federal, state and local income taxes, if any, due as a result of the purchase, sale or transfer of the New Issue Exchange Shares and the Corporation Shares in accordance herewith.
Section 8.4 Expenses. Each party shall pay its own expenses incidental to the preparation of this Agreement.
Section 8.5 Contents of Agreement; Parties in Interest; etc. This Agreement, including Exhibit "A" attached hereto and the annexed Disclosure Documents, set forth the entire understanding of the parties with respect to the transactions contemplated by this Agreement. It shall not be amended or modified except by written instrument duly executed by representatives of Tecma and Lightpaths. Any and all previous agreements and understandings between or among the parties regarding the subject matter hereof, whether written or oral, are superseded by this Agreement.
Section 8.6 Assignment and Binding Effect. This Agreement may not be assigned prior to the Closing by either party without the prior written consent of the other.
Section 8.7 Waiver. Any term or provision of this Agreement may be waived at any time by the party entitled to the benefit thereof by a written instrument duly executed by such party.
Section 8.8 Notices. Any notice, request, demand, waiver, consent, approval or other communication which is required or permitted hereunder shall be in writing and shall be deemed given only if delivered personally or sent by telegram or by registered or certified mail, postage prepaid, as follows:
If to Tecma, to:
Tecma, Inc.
7 Finderne Avenue
Bridgewater, New Jersey
Attn: Theodore Trenzeluk, President
With a required copy to:
Joel R. Weiner, Esq.
1952 Washington Valley Road
P.O. Box 591
Martinsville, NJ 08836
and
William J. Reilly, Esq.
19 Raymond Drive
Portsmouth, RI 02871
If to Lightpaths, to:
Ronald A. Durando
Microphase Corporation
587 Connecticut Post Road
Norwalk, Connecticut 06854
With a copy to:
Robert H. Jaffe, Esq.
Robert H. Jaffe & Associates, P.A.
8 Mountain Avenue
Suite 200
Springfield, New Jersey 07081
or to such other address as the addressee may have specified in a notice duly given to the sender as provided herein. Such notice, request, demand, waiver, consent, approval or other communications will be deemed to have been given as of the date so delivered, telephoned or mailed.
Section 8.9 Governing Law. This Agreement shall be governed by and interpreted and enforced in accordance with the laws of the State of New Jersey.
Section 8.10 No Benefit to Others. The representations, warranties, covenants and agreements contained in this Agreement are for the sole benefit of the parties hereto.
Section 8.11 Section Headings. All section headings contained in this Agreement are for convenience of reference only, do not form a part of this Agreement and shall not affect in any way the meaning or interpretation of this Agreement.
Section 8.12 Schedules and Exhibits. All Exhibits referred to herein are intended to be and hereby are specifically made a part of this Agreement.
Section 8.13 Severability. Any provision of this Agreement which is invalid or unenforceable in any jurisdiction shall be ineffective to the extent of such invalidity or unenforceability without invalidating or rendering unenforceable the remaining provisions.
Section 8.14 Counterparts. This Agreement may be executed in any number of counterparts and any party hereto may execute any such counterpart, each of which when executed and delivered shall be deemed to be an original and all of which counterparts taken together shall constitute but one and the same instrument. This Agreement shall become binding when one or more counterparts taken together shall have been executed and delivered by the parties.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement on the date first above written .
ATTEST: TECMA, INC.
___________________________ _____________________________
, Secretary Theodore Trenzeluk, President
ATTEST: LIGHTPATHS, INC.
_______________________________ ______________________________
, Assistant RONALD A. DURANDO, President
Secretary
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CERTIFICATE OF INCORPORATION
OF
THIS IS TO CERTIFY THAT, there is hereby organized a corporation under and by virtue of N.J.S. 14A:1-1 et seq., the "New Jersey Business Corporation Act."
1. The name of the Corporation is: TECMA LABORATORY, INC.
2. The address of the Corporation's initial registered office is:
700 Park Avenue, Plainfield, N.J. 07060
and the name of the registered agent at such address is:
David H. Rothberg
3. The purposes for which this Corporation is organized are:
To engage in any activity within the purposes for which
Corporations may be organized under the ?New Jersey Business
Corporation Act.? N.J.S. 14A 1-1 et seq.
4. The aggregate number of shares which the Corporation shall have authority to issue is: 1000 no par value
5. The first Board of Directors of this Corporation shall consist of 1 Director and the name and address of each person who is to serve as such Director is:
Name Address Zip Code
Theodore Trenzeluk 200 North 5th Ave.,
Manville, New Jersey 08835
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6. The name and address of each incorporator is:
Name Address Zip Code
Theodore Trenzeluk 200 North 5th Ave.,
Manville, New Jersey 08835
|
In Witness Whereof, each individual incorporator, being over twenty-one years of age has signed this Certificate; or if the Incorporator be a corporation has caused this Certificate to be signed by its duly authorized officers this 18th Day of December 1979.
CERTIFICATE OF CORRECTION
TO CERTIFICATE OF
INCORPORATION
OF
TECMA LABORATORY, INC.
Under Section 14A:1-6(5) of Title 14A, Corporations, General, of the New
Jersey Statutes, the undersigned does hereby correct the Certificate of
Incorporation of Tecma Laboratory, Inc., which Certificate contained an
inaccurate record of the Corporation's actions involved therein and as
erroneously executed containing said inaccuracies. Said Certificate of
Incorporation is corrected herein described in paragraph 2 hereof.
1. NAME
The name of the corporation is Tecma Laboratory, Inc. (hereinafter referred to as the "Corporationtm).
2. CORRECTION
The authorized shares of the Corporation is corrected by deleting Paragraph
4 of the Certificate of Incorporation which reads as follows:
4. The aggregate number of shares which
the Corporation shall have authority to issue is 1,000 no par value", and inserting in place thereof:
4. The aggregate number of shares which the Corporation shall have authority to issue is 20,000 no par value.
"Said correction is necessary because, despite the Corporation having advised its then attorney that it desired to have authorized 20,000 shares of common stock, no par value, said attorney, in preparing the Certificate of Incorporation, had inadvertently only listed authorized shares totaling 1,000, which error was not realized until June 18, 1987 when the Corporation received a Certified Copy of the Certificate of Incorporation.
3. EFFECTIVE DATE
Pursuant to 14A:l-6(5) of Title 14A, Corporations, General, of the New Jersey Statutes, said Certificate of Incorporation as corrected shall be deemed to have been effective in its corrected form as of December 20, 1979, the original filing date of said Certificate of Incorporation.
The undersigned, as President of the above Corporation, has signed the Correction to the Certificate of Incorporation this 19th day of June, 1987.
ATTEST: TECMA LABORATORY INC.
By:
Secretary Theodore Trenzluk, President
STATE OF NEW JERSEY
DEPARTMENT OF STATE
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I, the Secretary of State of the State of New Jersey, do hereby Certify that the foregoing is a true copy of
Certificate of Incorporation, Correction and Amendment thereto:
TECMA LABORATORIES, INC. (Formerly TECMA LABORATORY, INC.)
as the same is taken from and compared with the original
filed in this office on the dates set forth on each instrument.
and now remaining on file and of record in my office
In Testimony Whereof. I
have hereunto set my hand
and affixed my Official Seal
at Trenton this 19th
day of July 1989
Secretary of State
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION OF
TECMA LABORATORY, INC.
FILED
AUG 28 1987
JANE BURGIO
Secretary of State
Under Section 14A:9-4(3) of Title 14A, Corporations,
General, of the New Jersey Statutes, the undersigned does hereby amend the Certificate of Incorporation of Tecma Laboratory, Inc. as follows:
1. NAME
The name of the Corporation is Tecma Laboratory, Inc.,
(hereinafter referred to as the "Corporation").
2. AMENDMENTS
The amendments to the Certificate of Incorporation adopted
by the shareholders are as follows:
(a) CHANGE OF NAME
The name of the Corporation is hereby changed to Tecma
Laboratories, Inc., from Tecma Laboratory, Inc., by deleting
Paragraph I of the Certificate of Incorporation which reads as follows:
"1. The name of the Corporation is Tecma Laboratory, Inc." and
inserting in place thereof:
"1. The name of the Corporation is Tecma Laboratories, Inc."
(b) AUTHORIZED SHARES
The authorized shares of the Corporation are hereby changed
to 50,000,000 shares no par value from 20,000 shares no par value, by deleting Paragraph 4 of the Certificate of Incorporation, as corrected, which reads as follows:
"4. The aggregate number of shares which the Corporation shall have authority to issue is 20,000 no par value." and inserting in place thereof:
"4. The aggregate number of shares which the Corporation
shall have authority to issue is 50,000,000 no par value."
(c) REGULATION OF POWERS OF CORPORATION
The following paragraph 7 is hereby added to the Certificate
of Incorporation as follows:
"7. REGULATION OF POWERS OF CORPORATION
(a) The management of the business and the conduct of the
affairs of the Corporation, including the election of the Chairman of the
Board of Directors, if any, the President and the Treasurer, the Secretary
and other principal officers of the Corporation, shall be vested in its Board
of Directors.
(b) A majority of the entire Board of Directors of the
Corporation shall constitute a quorum for the transaction of business except
that the By-Laws may prescribe a lesser proportion, consistent with the
provisions of the New Jersey Business Corporation Act, in the event of a
vacancy or vacancies in the entire Board.
(c) One or more of all the Directors of the Corporation
may be removed for cause by the Shareholders by the affirmative vote of the
majority of the votes cast by the holders of shares entitled to vote for the
election of Directors; and one or more of all the Directors may be removed
without cause by like vote of said shareholders. The Board of Directors shall
have the power to remove the Directors for cause and to suspend Directors
pending a final determination that cause exists for a removal.
(d) In the interim between annual meetings of
shareholders or of special meetings of shareholders called for the election
of Directors, newly created directorships may be filled by the Board of
Directors.
(e) The Corporation is hereby authorized to lend money to,
or guarantee any obligation of, or otherwise assist, any officer or other
employee of the Corporation or of any subsidiary, whether or not such officer
or employee is a director thereof, whenever, in the judgment of the Board
of Directors, such loan, guarantee or assistance may reasonably be expected to
benefit the Corporation.
(f) The Corporation shall have the power, to the full
extent permitted by the New Jersey Business Corporation Act, to indemnify each
corporate agent as the term "corporate agent" is defined by said Act.
(g) Except as otherwise provided by the New Jersey
Business Corporation Act, any action required or permitted to be taken at a
meeting of shareholders by the New Jersey Business Corporation Act, the
Certificate of Incorporation, or the By-Laws of the Corporation may be taken
without a meeting upon the written consent of less than all the shareholders
entitled to vote thereon, if the shareholders who so consent would be entitled
to cast at least the minimum number of votes 'which would be required to take
such action at a meeting at which all shareholders entitled to vote thereon
were present. In the event of such written action, prompt notice of such
action shall be given to all shareholders who would have been entitled to vote
upon the action if such meeting were held, and the written consents of the
shareholders consenting thereto shall be filed within the minutes or
proceedings of the shareholders."
3. DATE OF ADOPTION
The date of the adoption of this Amendment to the
Certificate of Incorporation by the Shareholders was August 1, 1987.
4. NUMBER OF SHARES OUTSTANDING AND ENTITLED TO VOTE
The number of shares of the capital stock of the Corporation entitled to vote
on the adoption of this Amendment to the Certificate of Incorporation was
FOURTEEN THOUSAND SIX HUNDRED SIXTY SEVEN (14,667) shares.
5. NUMBER OF SHARES VOTED
The number of shares of capital stock of the Corporation which voted for the
adoption of said Amendments was THIRTEEN THOUSAND ONE HUNDRED SEVENTY FIVE
(13,175) shares and the number of shares voted against the adoption of said
Amendment was zero (0) shares. Shares not voting were ONE THOUSAND FOUR
HUNDRED NINETY TWO (1,492) shares.
The undersigned as President of the above Corporation has signed this
Amendment of Certificate of Incorporation this 1st day of August 1987.
ATTEST TECMA LABORATORY, INC.
BY:
Joel R. Weiner, Assistant Theodore Trenzeluk, President Secretary
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
Under Section 14A:9-4(3) of Title 14A, Corporations, General, of the New
Jersey Statutes, the undersigned does hereby amend the Certificate of
Incorporation of Tecma Laboratories, Inc. as follows:
1. Name:
The name of the corporation is hereby changed to Lightpaths TP Technologies,
Inc. by deleting paragraph 1 of the Certificate of Incorporation filed with
the Secretary of State on December 18, 1979 stating that:
1. "The name of the Corporation is Tecma Laboratory, Inc." and inserting in
place thereof:
1. The name of the Corporation is "Lightpaths TP Technologies, Inc."
2. Date of Adoption:
The date of the adoption of this Amendment to the Certificate of Incorporation
by the Shareholders was March 24, 1997.
3. Number of Shares Outstanding and Entitled to Vote:
The number of shares of the capital stock of the Corporation entitled to vote
on the adoption of this Amendment to the Certificate of Incorporation was
FIFTY MILLION (50,000,000) shares.
4. Number of Shares Voted:
The number of shares of capital stock of the Corporation which voted for the
adoption of said Amendments was 8,404,800 shares and the number of shares
voted against the adoption of said Amendment was -0- shares. Shares not
voting were 2,999,465 shares.
The undersigned as President of the above Corporation has signed this
Certificate of Amendment of Certificate of Incorporation this 31st day of
March, 1997.
ATTEST: TECMA LABORATORIES, INC.
_________________________ ____________________________
Joel R. Weiner, Assistant Theodore Trenzeluk, President
Secretary
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FILED
CERTIFICATE OF AMENDMENT JUN 2 1997
OF
CERTIFICATE OF INCORPORATION LONNA R. HOOKS
Secretary of State
|
Under Section 14A:9-4(3) of Title 14A, Corporations, General, of the New
Jersey Statutes, the undersigned does hereby amend the Certificate of
Incorporation of Lightpaths TP Technologies, Inc. (formerly Tecma
Laboratories, Inc.) as follows:
1. Name:
The name of the corporation is hereby changed to mPhase
Technologies, Inc. by deleting paragraph 1 of the Certificate of Incorporation
filed with the Secretary of State on December 18, 1979 and amended on April 7,
1997 stating that:
1. The name of the Corporation is Lightpaths TP Technologies, Inc."
and inserting in place thereof:
1. The name of the Corporation is 1' mPhase Technologies, Inc."
2. Date of Adoption:
The date of the adoption of this Amendment to the Certificate of Incorporation
by the Shareholders was May 15, 1997.
3. Number of Shares Outstanding and Entitled to Vote:
The number of shares of the capital stock of the
Corporation entitled to vote on the adoption of this Amendment to the
Certificate of Incorporation was SEVEN MILLION, SEVEN HUNDRED FORTY THOUSAND,
FOUR HUNDRED TWENTY SEVEN (7,740,427) shares.
4. Number of Shares Voted:
The number of shares of capital stock of the Corporation which
voted for the adoption of said Amendments was 7,491,320 shares and the number
of shares voted against the adoption of said Amendment was -0- shares. Shares
not voting were 249,107 shares.
The undersigned as President of the above Corporation has signed this
Certificate of Amendment of Certificate of Incorporation this 15th day of May, 1997. ATTEST: LIGHTPATHS TP TECHNOLOGIES, INC. Gustave T.Dotoli Ronald A. Durando Assistant Secretary President |
CERTIFICATE OF INCORPORATION
OF
LIGHPATHS, INC.
FIRST: The name of the corporation is LightPaths, Inc.
SECOND: The address of its registered office in the State of Delaware is Three Mill Road, Suite 206, Wilmington, Delaware 19806, New Castle County. Its registered agent at such address is The Incorporators Ltd.
THIRD: The purpose of the corporation is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of Delaware.
FOURTH: The corporation shall have the authority to issue One Thousand (1,000) shares of common stock with no par value.
FIFTH: The Board of Directors is expressly authorized to adopt, amend, or repeal the By-Laws of the Corporation.
SIXTH: The stockholders and directors may hold their meetings and keep the books and documents of the corporation outside the State of Delaware, at such places as may be from time to time designated by the By-Laws, except as otherwise required by the Laws of Delaware.
SEVENTH: The corporation is to have perpetual existence.
EIGHTH: The name and mailing address of the incorporator is Robert H. Jaffe, Esq., 8 Mountain Avenue, Springfield, New Jersey 07081.
NINTH: The initial board of the corporation shall be composed of the following person: Ronald A. Durando, 107 Rhoda Avenue, Nutley, New Jersey 07110. The number of directors of the corporation shall be fixed from time to time by its by-laws and may be increased or decreased.
TENTH: No director of the corporation shall have personal liability
to the corporation or its shareholders for monetary damages for breach of
fiduciary duty as a director, provided that this provision shall not eliminate
or limit the liability of a director (a) for any breach of the director?s duty
or loyalty to the corporation or its stockholders, (b) for acts or omissions
not in good faith or which involve intentional misconduct or a knowing
violation of law, (c) under Section 174 of the Delaware Corporation Law, or
(d) for any transaction from which the directory derived an improper personal
benefit.
THE UNDERSIGNED Incorporator for the purpose of forming a corporation pursuant to the laws of the State of Delaware, does make this Certificate, Hereby declaring and certifying that the facts herein stated are true.
Dated: September 30, 1996
By:
Robert H. Jaffe
Incorporator
By-LAWS
of
mPHASE TECHNOLOGIES, INC.
ARTICLE I - OFFICES
The registered office of the corporation shall be 8 Mountain Avenue, Springfield, New Jersey 07081.
The registered agent at said office is Robert H. Jaffe, Esq.
The corporation may also have offices at such other places within or without the State of New Jersey as the board may from time to time determine or the business of the corporation may require.
ARTICLE II - SHAREHOLDERS
1. PLACE OF MEETINGS.
Meeting of shareholders shall be held at the principal office of the corporation or at such place within or without the State of New Jersey as the board shall authorize.
2. ANNUAL MEETING
The annual meeting of the shareholders shall be held on the 20th day of December at 10 A.M. in each year if not a legal holiday, and, if a legal holiday, then on the next business day following at the same hour, when the shareholders shall elect a board and transact such other business as may properly come before the meeting.
3. SPECIAL MEETINGS
Special meetings of the shareholders may be called by the board or by the president and shall be called by the president or the secretary at the request in writing of a majority of the board or at the request in writing by shareholders owning a majority in amount of the shares issued and outstanding. Such request shall state the purpose or purposes of the proposed meeting. Business transacted at a special meeting shall be confined to the purposes stated in the notice.
4. NOTICE OF MEETINGS OF SHAREHOLDERS
Written notice of the time, place and purpose or purposes of every meeting of shareholders shall be given not less than 10 nor more than 60 days before the date of the meeting, either personally or by mail, to each shareholder of record entitled to vote at the meeting.
When a meeting is adjourned to another time or place, it shall not be necessary, unless the by-laws otherwise provide, to give notice of the adjourned meeting if the time and place to which the meeting is adjourned are announced at the meeting at which the adjournment is taken and at the adjourned meeting only such business is transacted as might have been transacted at the original meeting. However, if after the adjournment the board fixes a new record date for the adjourned meeting, a notice of the adjourned meeting shall be given to each shareholder of record on the new record date entitled to notice.
5. WAIVER OF NOTICE OR OF LAPSE OF TIME
(a) Notice of meeting need not be given to any shareholder who signs a waiver of notice, in person or by proxy, whether before or after the meeting, the attendance of any shareholder at a meeting, in person or by proxy, without protesting prior to the conclusion of the meeting the lack of notice of such meeting, shall constitute a waiver of notice by him,
(b) Whenever shareholders are authorized to take any action after the lapse of a prescribed period of time, the action may be taken without such lapse if such requirement is waived in writing, in person or by proxy, before or after the taking of such action, by every shareholder entitled to vote thereon as at the date of the taking of such action.
6. ACTION BY SHAREHOLDERS WITHOUT A MEETING
Any action required or permitted to be taken at a meeting of shareholders by statute, the certificate of incorporation, or by-laws, other than the annual election of directors, may be taken without a meeting upon the written consent of shareholders who would have been entitled to cast the minimum number of votes which would be necessary to authorize such action at a meeting at which all shareholder entitled to vote thereon were present and voting. The written consent of the shareholders consenting thereto shall be filed with the minutes of proceedings of shareholders.
7. QUORUM 0F SHAREHOLDERS.
(a) Unless otherwise provided in the certificate of incorporation, the holders of shares entitled to cast a majority of the votes at a meeting shall constitute a quorum at such meeting. The shareholders present in person or by proxy at a duly organized meeting may continue to do business until adjournment, notwithstanding the withdrawal of enough shareholders to leave less than a quorum. Less than a quorum may adjourn.
(b) Whenever the holders of any class or series of shares are entit1ed to vote separately on a specified item of business, by the affirmative vote of a majority of the remaining directors even though less than a quorum of the board, or by a so1e remaining director. A director so elected by the board shall hold office until the next succeeding annual meeting of shareholders and until his successor shall have been ejected and qualified.
(b) When one or more directors shall resign from the board effective at a future date, a majority of the directors then in office including those who have so resigned, shall have power to fill such vacancy or vacancies, the Vote thereon to take effect when such resignations become effective, and each director so chosen shall hold office as herein provided in the filling of other vacancies.
(c) Any directorship to be filled by reason of an increase in the number of directors shall be filled by election at an annual meeting or at a special meeting of shareho1ders cal1ed for that purpose, unless the certificate of incorporation or a by-law adopted by the shareholders authorizes the board to fill such directorship. A director elected by the board to fill ant such directorship shall hold office until the next succeeding annual meeting of shareholders and until his successor shall have been elected and qualified.
(d) If by reason of death, resignation or other cause the corporation has no directors in office, any shareholder or the executor or administrator of a deceased shareholder may call a special meeting of shareholders for the election of directors and, over his own siqnature, shall give notice of said meeting in accordance with the by-laws.
5. REMOVAL OF DIRECTORS
One or more or all the directors of a corporation may be removed for cause by the shareholders by the affirmative vote of the majority of the votes cast by the holders of shares entitled to vote for the election of directors.
6. QUORUM Of BOARD OF DIRECTORS AND COMMITTEES; ACTION OF DIRECTORS WITHOUT A MEETING
A majority of the entire board, or of any committee thereof, shall constitute a quorum for the transaction of business, unless the certificate of incorporation shall prove that a greater or lesser number shall constitute a quorum, which in no case shal1 be less than the greater of two persons or one-third of the entire board or committee, except that when a board of one director is authorized one director shall constitute a quorum. Any action re-quired or permitted to be taken pursuant to authorization voted at a meeting of the board or any committee thereof, may be taken without a meeting if, prior or subsequent to such action, all members of the board or of such committee, as the case may be, consent thereto in writing and such written consents are filed with the minutes of the proceedings of the board or committee. Such consent shall have the same effect as a unanimous vote of the board or committee for all purposes.
7. PLACE OF BOARD MEETINGS.
Meetings of the board may be held either within or without the State of New Jersey
8. REGULAR ANNUAL MEETING
A regular annual meeting of the board shall be held immediately following the annual meeting of shareholders at the place of such annual meeting of shareholders.
9. NOTICE OF MEETINGS OF THE BOARD; ADJOUNMENT
(a) Regular meetings of the board may be held with or without notice. Special meetings of the board shall be held upon notice to the directors and may be called by the president upon three days? notice to each director either personally or by mail or by wire; special meetings shall be called by the president or by the secretary in a like manner on written request of two directors. Notice of any meetinq need not be given to any director who signs a waiver of notice, whether before or after the meeting. The attendance of any director at a meeting without protesting prior to the conclusion of the meeting the lack of notice of such meeting shall constitute a waiver of notice by him. Neither the business to be transacted at, nor the purpose of, any meeting of the board need be specified in the notice or waiver of notice of such meetinge. Notice of an adjourned meeting need not he given if the time and place are fixed at the meeting adjourning and if the period of adjournment does not exceed ten days in any one adjournment.
(b) A majority of the directors present, whether or not a quorum is present, may adjourn any meeting to another time and place. Notice of the adjournment shall be given all directors who were absent at the time of the adjournment and, unless such time and place are announced at the meeting, to the other directors.
10. EXECUTIVE AND OTHER COMMITTEES
The board, by resolution adopted by a majority of the entire board, may designate from among its members an executive committee and other commmittees, each consistinq of three or more directors. Each such committee shall serve at the pleasure of the board.
11. COMPENSATION
No compensation shall be paid to directors, as such, for their services, but by resolution of the board a fixed sum and expenses for actual attendance, at each regular or special meeting of the board may be authorized. Nothing herein contained shall be construed to preclude any director from serving the corporation in any other capacity and receiving compensation therefore.
ARTICLE IV - OFFICERS
1. OFFICES, ELECTION, TERM, SALARIES, SECURITY
(a) The officers of the corporation shall consist of a president, a secretary, a treasurer, and, if desired, a chairman of the board, one or more vice-presidents, and such other officers as the board may determine. The officers shall be elected or appointed by the board.
(b) Any two or more offices may be held by the same person.
(c) Any officer elected or appointed as herein provided shall hold office until the next regular meeting of the board fo1lowing the annual meeting of shareholders or until a succesor is elected or appointed and has qualified subject to earlier termination by removal or resignation.
(d) All officers of the corporation, as between themselves. and the corporation, shall have such authority and perform such duties in the management of the corporation as may be provided in the by-laws, or as may be determined by resolution of the board not inconsistent with the by-laws.
(e) The salaries of all officers shall be fixed by the board.
(f) In case the board shall so require, any officer or agent of the corporation shall execute to the corporation a bond in such sum and with such surety or sureties as the board may direct, conditioned upon the faithfu1 performance of his duties to the corporation and including responsibility for negligence and for the accounting for all property, funds or securities of the corporation which may come into his hands.
(2) DELEGATION OF DUTIES.
In case of the absence of any officer of the corporation, or for any other reason that may seem sufficient to the board, the directors may, by a majority vote of the board, delegate the powers and duties of such officer, for the time being, to any other officer, or to any director.
(3) REMOVAL AND RESIGNATION OF OFFICERS; FILLING OF VACANCIES.
(a) Any officer elected or appointed by the board may be removed by the board with or without cause. An officer elected by the shareholders may be removed, with or without cause, only by vote of the shareholders but his authority to act as an officer may be suspended by the board for cause.
(b) An officer may resign by written notice to the corporation The resignation shall be effective upon receipt thereor by the corporation or at such subsequent time as shall be specified in the notice of resignation.
(c) Any vacancy occurring among the officers, however caused may be filled by election or appointment by the board for the unexpired term.
4. PRESIDENT
The president shall be the chief executive officer of the corporation; he shall preside at all meetings of the shareholders and of the board: he shall have the management of the business of the corporation and shall see that all orders and resolutions of the board are carried into effect.
5. VICE-PRESIDENTS
During the absence or disabilitv of the president, the vice-president, or if there are more than one, the executive vice-president shall have all the powers and function of the president. Each vice-president shall perform such other duties as the board shall prescribe.
6. SECRETARY
The secretary shall: attend all meetings of the board and of the shareholders; record all votes and minutes of all proceedings in a book to be kept for that purpose; give or cause to be given notice of all meetings of shareholders and of the special meeting of the board; keep in safe custody the seal of the corporation and affix it to any instrument when authorized by the board; when required, prepare a list of shareholders or cause to be prepared and available at each meeting of shareholders entitled to vote thereat, indicating the number or shares of each respective class held by each; keep all the documents and records of the corporation as required by law or otherwise in a proper and safe manner; and perform such other duties as may be prescribed by the board.
7. ASSISTANT - SECRETARIES
During the absence or disability of the secretary, the assistant-secretary, or if there are more than one, the one so designated by the secretary or by the board, shall have all the powers and functions of the secretary.
8. TREASURER
The treasurer shall: have the custody of the corporate funds and securities;
keep full and accurate accounts of receipts and disbursements in the corporate
books, deposit all money and other valuables in the name and to the credit of
the corporation in such depositories as may be designated by the board;
disburse the funds of the corporation as may be ordered or authorized by the
board and preserve proper vouchers for such disbursements; render to the
president and board at the regular meetings of the board, or whenever they
require it, an account of all his transactions as treasurer and of the
financial condition of the corporation; render a full financial report at the
annual meeting of the shareholders if so requested; be furnished by all
corporate officers and aqents at his request, with such reports and statements
as he may require as to all financial transactions of the corporation; and
perform such other duties as are given to him by the by-laws or as from time
to time are assigned to him by the board or the president.
9. ASSISTANT-TREASURER
During the absence or disability of the treasurer, the assistant-treasurer, or if there are more than one, the one so designated by the secretary or by the board, shall have all the powers and functions of the treasurer.
ARTICLE V - CERTIFICATES FOR SHARES AND DIVIDENDS
1. CERTIFICATES REPRESENTING SHARES
The shares of the corporation shall be represented by certificates signed by,or in the name of the corporation by, the chairman or vice-chairman of the board, or the president or a vice-president and by the treasurer or an assistant treasurer, or the secretary or an assistant secretary of the corporation and shall be sealed with the seal of the corporation or a facsimile thereof.
2. LOST OR DESTROYED CERTIFICATES
The board may direct a new certificate or certificates to be issued in place of any certificate or certificate theretofore issued by the corporation, alleged to have been lost or destroyed, upon the makinq of an affidavit of that fact by the person claiming the certificate to be lost or destroyed. When authorizing such issue of a new certificate or certificates, the board may, in its discretion and as a condition precedent to the issuance thereof, require the owner of such lost or destroyed certificate or certificates, or his legal representative, to advertise the same in such manner as it shall require and/or give the corporation a bond in such sum and with such surety or sureties as it may direct as indemnity against any claim that may be made against the corporation with respect to the certificate alleged to have been lost or destroyed.
3. TRANSFER OF SHARES
(a) Upon surrender to the corporation or the transfer agent of the corporation of a certificate for shares duly endorsed or accompanied by proper evidence of succession, assignment or authority to transfer it shall be the duty of the corporation to issue a new certificate to the person entitled thereto, and cancel the old certificate: every such transfer shall be entered on the transfer book of the corporation which shal1 be kept at its principa1 office. No transfer shall be made within ten days next preceding the annual meeting of shareholders.
(b) The corporation shall be entitiled to treat the holder of record of any share as the holder in fact thereof and accordingly, shall not be bound to recognize any equitable or other claim to or interest in such share on the part of any other person whether or not it shall have express or other notice thereof, except as expressly provided by New Jersey statutes.
4. CLOSING TRANSFER B00KS
The board shall have the power to close the share transfer books of the
corporation for a period of not more than ten days during the thirty-day
period immediately preceding (a) any shareholders' meeting, or (b) any date
upon which shareholders shall be called upon to or have a right to take action
without a meeting, or (c) any date fixed for the payment of a dividend or
other form of distribution, and only those shareholders of record at the time
the transfer books are closed, shall be recognized as such for the purpose of
(a) receiving notice of or voting at such meeting, or (b) a1lowing them to
take appropriate action, or (c) entitling them to receive any dividend or
other form or distribution.
5. DIVIDENDS
(a) Subject to the provisions of the certificate of incorporation and to applicable law, the corporation may, from time to time by action of its board, declare and pay dividends or make other distribution on its outstanding shares in cash or in its own shares or in its bonds or other property, including the shares or bonds of other corporations, except when the corporation is insolvent or would thereby be made insolvent.
(b) Dividends may be declared or paid and other distributions may be made out of surplus only, except as otherwise provided by statute.
ARTICLE VI - CORPORATE SEAL
The seal of the corporation shall be circular in form and bear the name of the corporation, the year of its organization and the words ?Corporate Seal, New Jersey.? The seal may be used by causing it to be impressed directly on the instrument or writing to be sealed, or upon adhesive substance affixed thereto. The seal on the certificates for shares or on any corporate obligation for the payment of money may be a facsimile, engraved or printed.
ARTICLE VII - FISCAL YEAR
The fiscal year shall begin the first day of July in each year.
ARTICLE VIII - BY-LAW CHANGES
AMENDMENT, REPEAL, ADOPTION, ELECTION OF DIRECTORS
(a) Except as otherwise provided in the certificate of incorporation the by-laws may be amended, repealed or adopted by vote of the holders of the shares at the time entitled to vote in the election of any directors. By-laws may also be amended, repealed or adopted by the board but any by-law adopted by the board may be amended by the shareholders entitled to vote thereon.
(b) If any by-law regulating an impending election of directors is adopted, amended or repealed by the board, there shall be set forth in the notice of the next meetinq of shareholders for the election of directors the by-law so adopted, amended or repealed, together with a concise statement of the changes made.
ARTICLE IX - INDEMNIFICATION OF DIRECTORS,
OFFICERS, EMPLOYEES AND AGENTS
The Corporation shall indemnify any directors, officers, employees, or agents to the full extent permitted by the New Jersey Business Corporations Act.
mPHASE TECHNOLOGIES, INC.
LONG TERM STOCK INCENTIVE PLAN
ARTICLE I
GENERAL PROVISIONS
Section 1.1 Purposes of the Plan.
The purposes of the mPhase Technologies, Inc. Long Term Stock Incentive Plan are to advance the interests of mPhase Technologies, Inc. by providing equity incentives to selected key employees and consultants of the Company and its subsidiaries who contribute and are expected to contribute materially to the success of the company and/or its subsidiaries, to provide a means of rewarding outstanding performance, and to protect the long-term interests of the Company and its subsidiaries by enabling them to maintain a competitive position in attracting and retaining the key personnel and consultants necessary for growth and profitability.
Section 1.2 Definitions.
For the purposes of this Plan:
(a) "Board of Directors" means the Board of Directors of mPhase Technologies, Inc.
(b) "Committee" means the Board of Directors setting as a Compensation Committee.
(c) "Company" means mPhase Technologies, Inc.
(d) "Fair Market Value" means the average of the bid and asked price of the Company's common stock on the relevant date as quoted by the National Association of Securities Dealers on the OTC Bulletin Board or such other stock exchange such as the NASDAQ Small Cap Market on which the shares are traded. If no sale shall have been made on that date, the Fair Market Value shall be the average price on the next preceding day there is a sale. During such times as the shares are not traded, the Committee shall exercise its best judgment and good faith to determine the Fair Market Value of the Company's common stock on the relevant date and shall consider all factors deemed to be relevant to such determination.
(e) "Plan" means the mPhase Technologies, Inc. Long Term Stock Incentive Plan as set forth herein.
(f) "shares" means shares of the Company's no par value common stock.
(g) "stock option" means a right granted to purchase stock in accordance with Article II of the Plan.
(h) "subsidiaries" means Lightpaths, Inc., a Delaware corporation, and any other direct or indirect subsidiary of the Company.
Section 1.3 Administration.
(a) The Committee shall hold meetings relative to the Plan at such times and places as it may determine. The Committee shall from time to time at its discretion determine which key employees or consultants of the Company and its subsidiaries shall be granted stock options and the amount of common stock covered by such stock options.
(b) Except as hereinafter provided, the Committee shall have full and final authority, binding upon all who have an interest in the Plan, to (i) interpret the Plan, (ii) interpret the stock options granted or awarded under the Plan, and (iii) make all determinations necessary or advisable. No member of the Committee shall incur any liability to any person for anything done or omitted to be done by the member or by any other member of the Committee in connection with the Plan, except for his own willful misconduct or gross negligence.
Section 1.4 Adjustments Upon Changes in Capitalization.
In the event of any change in the number of issued and outstanding shares which results from a stock split, reverse stock split, the payment of a stock dividend or any other change in capital structure of the Company such as a merger, consolidation, reorganization or recapitalization, the Committee shall appropriately adjust (a) the maximum number of shares of common stock which may be issued under stock options pursuant to the Plan, (b) the number of shares subject to each outstanding stock option and the price per share thereof (but not the total price) so that, upon exercise of the stock option, the optionee shall receive the same number of shares he or she would have received had he or she been the holder of all shares subject to his or her outstanding stock option or options immediately before the effective date of such change in the capital structure of the Company. Such adjustments shall not result in the issuance of fractional shares.
The foregoing adjustments shall be made by the Committee. No stock option granted pursuant to this Plan shall be adjusted in a manner that causes an Incentive Stock Option (as defined in Article II) to fail to continue to qualify as an "Incentive Stock Option" within the meaning of Section 422A of the Internal Revenue Code of 1986, as amended (the "Code"). The grant of stock options pursuant to the Plan shall not affect in any way the discretionary right or power of the Company to make adjustments, reclassifications, reorganizations or changes in its capital or business structure or to merge or consolidate or dissolve, liquidate or sell, or transfer all or any part of its business or assets.
Notwithstanding anything herein to the contrary, if the Company shall adopt a plan of dissolution or liquidation of the Company, or if mPhase Technologies, Inc. shall enter into a definitive agreement providing for the reorganization, merger or consolidation of the Company with or into one or more corporations, as a result of which the Company will not be the surviving entity (it being understood that the Company shall not be deemed to be the surviving entity if more than fifty (50%) percent of the Company's voting stock will be held, after such transaction by another entity), or if the Company shall agree to sell substantially all of the assets of the Company to one or more entities, the Company may give a person holding stock options written notice thereof requiring such Optionee either (a) to exercise his or her stock options within thirty days after receipt of such notice, including all installments whether or not they would otherwise be exercisable at that date, or (b) to surrender such stock options or any unexercised portion thereof. Those stock options which the Company requests to be exercised and which shall not have been exercised in accordance with the provisions of the Plan by the end of such thirty day period shall automatically lapse irrevocably and the Optionee shall have no further rights with respect to such stock options.
Section 1.5 Amendment, Suspension or Termination of Plan.
The shareholders of the Company or its Board of Directors may at any time, without the consent of any optionee, alter, amend, revise, suspend, or discontinue the Plan, provided that such action may not (i) adversely affect any stock options theretofore granted under the Plan or, (ii) cause any Incentive Stock Option (as defined in Article II) to fail to qualify as such under Section 422A of the Code.
Section 1.6 Effectiveness.
The Plan shall be effective until August 15, 2007, such date being ten years after the date of adoption of this Plan.
Section 1.7 Withholding Taxes.
(a) The Company or its subsidiaries may withhold from an optionee, as a condition of exercise of a stock option any taxes that it or its subsidiaries are required to withhold in connection with the exercise of a stock option.
(b) At any time when an optionee is required to pay to the Company an amount required to be withheld under applicable income tax laws upon exercise of a stock option, the optionee may satisfy this obligation in whole or in part by electing (the "Election") to have the Company withhold shares having a value equal to the amount required to be withheld or by tendering to the Company shares having a value equal to the amount required to be withheld. The value of the shares to be withheld or tendered shall be based on the Fair Market Value of the Company's common stock on the date that the amount of tax to be withheld shall be determined ("Tax Date").
(c) Each Election must be made prior to the Tax Date. The Committee may disapprove of any Election, may suspend or terminate the right to make such Election, or may provide with respect to any stock option that the right to make Elections shall not apply to such stock option. Any Election once made is irrevocable.
(d) If the optionee is an officer or director of the Company within the meaning of Section 16 of the Securities Exchange Act of 1934, then an Election is subject to the following additional restrictions:
(1) No Election shall be effective for a Tax Date which occurs within six months of the grant of a stock option, except that this limitation shall not apply in the event that an optionee dies or becomes permanently and totally disabled prior to the expiration of such six month period.
(2) The Election must be made either six months prior to the Tax Date or must be made during a period beginning on the third business day following the date of the release for publication the Company's quarterly or annual statements of earnings and ending on the twelfth business day following such date.
ARTICLE II
STOCK OPTION PROGRAM
Section 2.1 Number of Shares Authorized for Stock Options.
The total number of shares of the Company's common stock which may be issued and sold pursuant to stock options granted under the Plan shall not exceed 5,000,000 shares. The limitation established herein shall be subject to adjustment as provided in Section 1.4 hereof. If any stock option granted under this Plan shall expire or be forfeited prior to being exercised in full, the unpurchased shares subject to such stock option shall be available for the granting of further stock options under the Plan.
Section 2.2 Eligibility for Stock Options.
Stock options may be granted only to salaried employees of the Company and its subsidiaries who are officers (including officers who are members of the Board of Directors of the Company or any of its subsidiaries) as well as to other key employees and consultants of the Company and its subsidiaries. The Committee may, from time to time and upon such terms and conditions and for such consideration as it may determine, authorize the granting of stock options to eligible employees and consultants and may fix the number of shares to be covered by each stock option as it deems appropriate. Successive stock options may be granted to the same persons whether or not the stock option or stock options first granted to such persons remain unexercised. Stock options granted may be (i) stock options which are intended to qualify as Incentive Stock Options, (ii) stock options which are not intended to qualify ("Non-Qualified Stock Options"), or (iii) combinations of the foregoing. Each stock option granted shall be identified as to its status, Incentive Stock Option or Non-Qualified Stock Option, and such status shall not thereafter be subject to change. The granting of a stock option to an employee shall not give such employee any right to be granted any future stock option under the Plan, or any right to be retained in the employ of the Company by virtue of his or her participation in the Plan.
Section 2.3 Terms and Conditions.
The grant of a stock option shall be evidenced by a notice to the optionee of such grant signed on behalf of the Committee by the president or duly authorized vice president of the Company. The notice shall describe such stock option, state that such stock option is subject to all the terms and conditions of Article II of the Plan, and set forth the terms and conditions of the stock option. In addition:
(a) In the case of Incentive Stock Options, the option price will not be less than the Fair Market Value of the Stock on the date of the grant. In the case of Non-Qualified Stock Options, the option price shall not be less than the lowest of (i) the Fair Market Value of the Company's common stock on the date of the grant, (ii) the Fair Market Value of the Stock on January 1 of a calendar year within three years of the calendar year in which the grant is made or (iii) the book value per share of the common stock on the date on which such stock option first becomes exercisable. An amendment to an outstanding Incentive Stock Option that constitutes a modification, extension, or renewal of the stock option, pursuant to Section 425(h) of the Code, shall be considered as the grant of a new stock option on the date of such amendment and, therefore, the option price shall be adjusted so that it shall not be less than the Fair Market Value of the Company's common stock on the date of such amendment.
(b) The number of shares in a given stock option will be adjusted pursuant to Section 1.4 so that the total value of the stock option remains the same after any such adjustment.
(c) No stock option by its terms will be exercisable more than five (5) years after the date of grant.
(d) Unless otherwise provided by the Committee, unexercised stock options will expire as follows:
(i) If an employee's employment is terminated for cause, such employee's Stock Options will expire immediately upon termination.
(ii) If an employee's employment is terminated as a result of death, permanent and total disability or retirement (pursuant to a retirement plan of the Company or its subsidiaries or pursuant to a resolution of the Committee that such employee shall be deemed to have retired), such employee's stock options will expire on the sooner of (x) twelve (12) months from the date of death, permanent and total disability or such retirement or (y) the expiration date established in the grant.
(iii) If an employee's employment is terminated for any other reason, such employee's stock options will expire on the sooner of (x) three (3) months from the date of such termination or (y) the expiration date established in the grant.
For purposes of the Plan, an optionee shall be considered permanently and totally disabled if he or she is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impair-ment as determined in accordance with the applicable benefit plans of the Company and its subsidiaries. An optionee shall not be considered to be permanently and totally disabled unless he or she furnishes proof of the existence thereof in such form and manner and at such times as is required under the applicable benefit plan of the Company and its subsidiaries. Unless otherwise provided by the Committee, a stock option shall not be exercisable for more shares than the number of shares which could have been purchased if the stock option were exercised on the date of termination of employment.
(e) An optionee or assignee of a stock option shall have any rights with respect to any shares covered by such stock option until the date of the issuance of a stock certificate for such shares. No adjustment shall be made for dividends (ordinary or extraordinary, whether in cash, securities or other property) or distributions or other rights for which the record date is prior to the date such stock certificate is issued, except as otherwise provided herein for stock dividends.
(f) The stock option shall be exercisable in whole or in part from time to time during the term thereof as may be determined by the Committee; provided, however, that unless otherwise provided by the Committee, (i) no stock option may be exercised prior to the first anniversary of the date of granting of such stock option and (ii) each stock option shall be exercisable in part or in full at any time after such first anniversary.
(g) The employee may exercise stock options by notifying the secretary of the Company that he or she is exercising the stock options and by presenting payment for the shares for which stock options are being exercised. Payment for the shares may be in the form of cash, banker's check, certified check or personal check.
(h) At the time of exercise of any stock option, the Company may require the optionee to execute any documents or take any action which may be then necessary to comply with any and all applicable federal or state laws, regulations or rules regulating the sale and issuance of securities by mPhase Technologies, Inc. and the Company may, if it deems necessary, include provisions in the stock option agreements to assure such compliance. With respect to Non-Qualified stock options, income recognized at the time the stock options are exercised (measured by the excess of the market value of the Company's common stock on the date of exercise over the option price) will be subject to federal and state income tax withholding requirements. The Company may, from time to time, change its requirements with respect to enforcing compliance with the applicable securities laws, such requirements to be determined by the Company in its judgment as necessary to assure compliance with said laws. Such changes may be made with respect to any particular stock option or common stock issued upon exercise thereof.
(i) The Company shall not be obligated to sell or issue any shares upon exercise of any stock option unless:
(a) the shares with respect to which the stock option is being exercised have been registered under all applicable federal and state laws, regulations or rules or are exempt from such registration; and
(b) in the event the common stock has been listed on any recognized stock exchange such as the NASDAQ Small Cap Market, the shares with respect to which the stock option is being exercised have been duly listed on such exchange in accordance with the procedure specified therefor.
Section 2.4 Limits on Incentive Stock Options.
An individual may be granted one or more Incentive Stock Options, provided that the aggregate Fair Market Value (determined at the time that such Incentive Stock Options are granted) of the common stock with respect to which Incentive Stock Options are exercisable for the first time by such individual during any calendar year shall not exceed $1,000,000.
Section 2.5 Governing Law.
The provisions of this Plan and any option agreement issued pursuant to its provisions are to be governed under New Jersey law and the forum for any dispute arising out of its provisions or any option agreement issued thereunder shall be the state courts of New Jersey or the United States District of New Jersey.
MICROPHASE TELECOMMUNICATIONS, INC.
DIGITAL SUBSCRIBER LINE
TECHNOLOGY, PATENT, AND TRADEMARK LICENSE AGREEMENT
This Agreement is made effective this 15th day of February, 1997, between Microphase Telecommunications, Inc., a Delaware Corporation having a place of business at 587 Connecticut Avenue, Norwalk, CT 06854-0960 (referred to as Microphase Telecommunications, Inc.) and LightPaths, Inc., a Delaware Corporation, having a place of business at 587 Connecticut Avenue, Norwalk, CT 06854-0960 (referred to as LightPaths).
WHEREAS, Microphase Telecommunications, Inc. is engaged in the development of hardware and software systems and related services to provide digital interactive subscriber audio and data communications (DSL BUSINESS).
WHEREAS, Microphase Telecommunications, Inc. in the establishment of its DSL BUSINESS, has developed extensive technical information, including, know-how, and trade secrets in connection with the design, manufacture and use of systems which provide digital audio and data communications over conventional copper twisted wire telephone lines on an interactive, bi-directional basis (MICROPHASE TELECOMMUNICATIONS, INC. DSL TECHNOLOGY).
WHEREAS, Microphase Telecommunications, Inc. is in the process of obtaining patents relating to such MICROPHASE TELECOMMUNICATIONS, INC. DSL TECHNOLOGY;
WHEREAS, Microphase Telecommunications, Inc. has adopted the trademark,
mfXDSL to identify products and services provided as part of the DSL BUSINESS;
and
WHEREAS, LightPaths desires to establish and expand the DSL business and in
connection therewith needs to acquire, a license to use Microphase
Telecommunications, Inc. technical information, patent rights and trademarks
in connection with its manufacture and sale of such products in the DSL
BUSINESS.
NOW, THEREFORE, the parties agree as follows:
1. DEFINITIONS For the purposes of this Agreement, the following words and phrases shall have the meanings stated below:
(a) Licensed Trademarks means the Trademark mfXDSL, as described in the registrations or applications for registration listed in Appendix A.
(b) Licensed Patent Rights shall refer to the patents and patent applications listed in Appendix B, any other patent applications derived therefrom, and any patents, reissues, and foreign counterparts issuing as a result of said applications and patents.
(c) Licensed Products and Services means systems, components, software, or
services provided or manufactured by LightPaths in the operation of DSL
BUSINESS which either (I) utilizes MICROPHASE TELECOMMUNICATIONS, INC. DSL
TECHNOLOGY acquired by LightPaths pursuant to this Agreement or (ii) are
described in the Licensed Patent Rights; (iii) are sold by LightPaths in
association with the Licensed Trademarks, or (iv) are subject to Copyright
owned by Microphase Telecommunications, Inc.
(d) Technical Information means trade secrets, know-how and information
disclosed to LightPaths under this Agreement relating in any manner to the
Licensed Products and Services including but not limited to MICROPHASE
TELECOMMUNICATIONS, INC. DSL TECHNOLOGY.
(e) Software and Documentation shall refer to any software, manuals and
information that is subject to copyright owned by Microphase
Telecommunications, Inc. and is included in Licensed Products and Services.
(f) Net Sales Price means: (i) in a normal arm?s length business
transaction, LightPaths invoice price for the Licensed Products or Services
sold, exclusive of freight and delivery charges, sales or other taxes
identified in the invoice as part of the price, less allowances for returns
actually taken by LightPaths customers and trade discounts (except cash
discounts and deductions for any agent?s commissions) identified on the
invoice; or (ii) in the case of Licensed Products used by LightPaths for its
own purposes, the fair market value of such Licensed Products as of their date
of use; or (iii) in the case of Licensed Products and Services sold to a
Related Company (defined below) or in a transaction to at arms length, the
fair market price of such Licensed Products and Services as of the date of
such sale.
(g) Related Company means any company controlling, controlled by (either
directly or indirectly) or under common control with LightPaths.
(h) Territory means the world:
2. GRANT OF LICENSES
(a) Microphase Telecommunications, Inc. hereby grants to LightPaths an exclusive license, within the Territory, including the right to grant sublicenses (i) manufacture, use and sell Licensed Products and provide License Services under the Licensed Patent Rights; (ii) utilize the Technical Information in connection with the manufacture, use and sales of Licensed Products and Services; and (iii) use the Licensed Trademarks on and in the advertising, packaging, marketing, sale of Licensed Products and Services, and as a corporate logo (iv) use Software and Documentation in connection with the manufacture, use and sale of Licensed Products and Services; said license grants being limited to use in the DSL BUSINESS. Nothing in this Agreement shall be construed as granting a license for products or services other than those expressly defined as Licensed Products and Services.
3. DISCLOSURE OF TECHNICAL INFORMATION
(a) Upon the execution of this Agreement and periodically during the term of
this Agreement, Microphase Telecommunications, Inc. shall disclose to
LightPaths such Technical Information pertaining to the Licensed Products and
Services as Microphase Telecommunications, Inc. believes is reasonably
required to allow LightPaths to exercise the rights granted herein. Nothing in
this Agreement shall be construed as requiring Microphase Telecommunications,
Inc., to disclose information which is subject to restriction by a third
party.
(b) Microphase Telecommunications, Inc. will provide LightPaths with
technical assistance reasonably required to permit Light Paths to utilize the
Technical Information (i) by use of correspondence to answer system,
components, software, and service technical questions, where possible, and
(ii) if necessary, by conducting one training session each year during the
term of this Agreement. Said training sessions shall be conducted at
Microphase Telecommunications, Inc., each session to be scheduled on mutually
agreeable dates. All transportation, meals and other costs of LightPaths
personnel during such sessions shall be borne entirely by LightPaths.
4. FEES AND ROYALTIES
(a) LightPaths shall pay to Microphase Telecommunications, Inc. by May 1,
1997, a non-refundable license fee of thirty seven thousand, five hundred
($37,500.00) dollars.
(b) In addition, LightPaths shall pay to Microphase Telecommunications, Inc. during the term of this Agreement, a royalty based on the rates specified in Appendix C which are expressed in percent of the Net Sales Price of Licensed Products and Services manufactured, used, sold or provided by LightPaths.
(c) LightPaths shall also pay to Microphase Telecommunications, Inc. a technology development and transfer fee of $37,500.00 per month, with the first payment commencing on June 1, 1997. This fee will be applied as a partial payment against the minimum annual royalty payments as described further in Paragraph 5 of this Agreement.
5. MINIMUM ANNUAL ROYALTY LightPaths shall maintain sufficient annual sales to provide at least the minimum annual royalty payments to Microphase Telecommunications, Inc. specified below. During the first three calendar years of this Agreement, LightPaths shall have the option to maintain this Agreement in effect by paying to Microphase Telecommunications, Inc., within thirty days after the close of the calendar year, the difference between actual royalties paid and said minimum royalty, less any applicable payments from the technology development fee as specified at Paragraph 4(c). In the event LightPaths fails to pay said difference, Microphase Telecommunications, Inc., shall have the right to terminate the exclusive nature of this Agreement by giving 90 days written notice. Thereafter, the licenses granted under this Agreement shall become non-exclusive and LightPathsO right to sublicense shall cease except to such extent as it is necessary for its customers to utilize the Licensed Product and Services provided by LightPaths in the course of the DSL BUSINESS. If, during the first three years LightPaths does not pay the difference or thereafter in the event that the actual royalties accrued in any one year fall below applicable specified Minimum Annual Royalty.
(i.) First calendar year of this Agreement $ 50,000 (ii.) Second calendar year $250,000 (iii.) Third calendar year $500,000 (iv.) Thereafter, each calendar year $1,000,000 |
6. PAYMENTS
(a) Royalties shall be paid on or before the last day of January, April,
July and October of each year with respect to all sales or uses of the
Licensed Products and Services during the preceding calendar quarter.
(b) All payments payable by LightPaths to Microphase Telecommunications, Inc. shall be paid in United States Dollars to the account of Microphase Telecommunications, Inc. by Bank Transfer. For the purposes of computing royalty payments, the Net Sales Price of all Licensed Products and Services sold hereunder shall be determined by converting any currency in which the Net Sales Price was denominated into United States Dollars at the average spot rate of exchange of Citibank, N.A. New York, New York, USA, in effect on the last day of the calendar quarter for which royalties are computed. The rate of exchange used shall be clearly indicated in the report specifying the royalty payment due.
(c) All royalty payments from LightPaths to Microphase Telecommunications, Inc. shall be made free and clear of, and without deduction for, any taxes, levies, duties, charges, fees, deductions, withholdings or restrictions of any nature imposed by any jurisdiction or by any political subdivision thereof or taxing authority therein, unless LightPaths is compelled by law to make such deduction or withholding. In the event that any such deduction or withholding is required, LightPaths agrees to furnish to Microphase Telecommunications, Inc. official tax receipts or other evidence issued by the tax authorities sufficient to enable Microphase Telecommunications, Inc. to establish payment of the taxes described above in support of its claim for United States tax credits.
7 RECORDS, REPORTS AND INSPECTION
(a) LightPaths shall at all times keep complete and proper records of all Licensed Products and Services manufactured, used or sold by LightPaths. Sales shall be considered as made on the date of the invoice or shipment, whichever shall occur earlier.
(b) During the term of this Agreement, LightPaths shall send to Microphase Telecommunications, Inc., on or before the last day of each January, April, July and October, a full statement in writing, in the English language, identifying separately the total number of units in each product category of Licensed Products and Services manufactured or provided, the total number used, and the total number sold by LightPaths during the preceding calendar quarter, together with the Net Sales Price thereof and a computation of royalties due Microphase Telecommunications, Inc. The statements to be certified as to their accuracy by the Chief Financial Officer of LightPaths or individual having authority therefrom.
(c) Microphase Telecommunications, Inc. shall have the right, upon giving at least fourteen (14) days advance notice, at any time during normal business hours, to audit LightPaths records by having an independent auditor examine and make copies of any portion of the books and records of LightPaths relating to this Agreement. Such records shall be kept available by LightPaths for at least three (3) years after expiration of the calendar year in which they are made. In the event that such examination reveals an underpayment of royalties due Microphase Telecommunications, Inc. from LightPaths of an amount greater than ten percent of the payment made, then LightPaths shall pay to Microphase Telecommunications, Inc. the amount due plus the costs of such audit.
(d) Any claim by LightPaths of overpayment of royalties shall be made within three (3) years of the date of such payment, stating the basis for such claim and providing evidence of such overpayment.
8. DISCLAIMER OF WARRANTY
(a) Microphase Telecommunications, Inc. will not be responsible for, and LightPaths will indemnify and defend Microphase Telecommunications, Inc. harmless against, all claims for loss, liability, damage or expenses (including, without limitation, reasonable attorneys fees, court costs and costs of investigation) arising in connection with the manufacture, use, sale or warranty (express or implied) by LightPaths, by a Related Company or by their customers, of the Licensed Products and Services. In no event will Microphase Telecommunications, Inc. be liable for indirect, special or consequential damages incurred by LightPaths, a Related Company or third parties in connection with this Agreement or the Licensed Products and Services.
(b) Microphase Telecommunications, Inc. makes no representation or warranty with respect to Technical Information including MICROPHASE TELECOMMUNICATIONS, INC. DSL TECHNOLOGY disclosed under this Agreement or of LightPaths ability to use the same, except to state that, unless otherwise specified in this Agreement at the time of disclosure, such Technical Information is the same as that currently used by Microphase Telecommunications, Inc. in its DSL BUSINESS.
9. TRADEMARK USE
(a) LightPaths recognizes Microphase Telecommunications, Inc. prior
proprietary rights in the Licensed Trademark, and agrees that it will acquire
no rights therein by the use of said trademark according to the provisions of
this Agreement. LightPaths further agrees that it will use its best efforts to
maintain the goodwill associated with the Licensed Trademark, and will take no
action which may result in damage to such goodwill or said trademark.
LightPaths shall use the Licensed Trademark in strict accordance with this
Agreement and the standards set by Microphase Telecommunications, Inc.
(b) Wherever the Licensed Trademarks are used by LightPaths, LightPaths shall use the notation Trademark Reg. or , or any other marking required which indicates that the Licensed Trademarks are registered. In addition, appropriate legends, satisfactory to Microphase Telecommunications, Inc. indicating that the Licensed Trademarks are owned by Microphase Telecommunications, Inc. shall be affixed to any product, label, box or other packaging, or any advertising materials which employ any of the Licensed Trademarks. All advertising materials and labels or other materials which bear the Licensed Trademark or refer to Microphase Telecommunications, Inc., shall be subject to, and submitted for, Microphase?s prior examination and approval.
(c) LightPaths agrees that it is the intent of this Agreement that all Licensed Products and Services shall be sold, advertised, distributed and marketed only under the Licensed Trademarks. The Licensed Trademarks shall be affixed by LightPaths to all of the Licensed Products and Services by application directly to the Product, if possible or to the containers thereof where direct application is impractical.
(d) It is the intention of the parties that all use of the Licensed Trademark by LightPaths shall at all times insure to the benefit of Microphase.
10. QUALITY CONTROL, USE AND INSPECTION
(a) LightPaths agrees that the products it sells under the Licensed Trademark shall conform to the standards of quality set by Microphase Telecommunications, Inc.. In order that such standards may be maintained and controlled by Microphase Telecommunications, Inc., and to prevent possible deception of the public, Microphase Telecommunications, Inc. shall have the right to inspect the specific products involved and the facilities of LightPaths which are used in the manufacture and handling of Licensed Products and Services. Within thirty (30) days after notice from Microphase Telecommunications, Inc. that Licensed Products and Services do not conform, LightPaths agrees to make any necessary changes as requested by Microphase Telecommunications, Inc. to make such products conform to said standards.
(b) LightPaths shall use the Technical Information provided by Microphase Telecommunications, Inc. in the manufacture of Licensed Products and the provision of Services to insure compliance with the quality standards and specifications set by Microphase Telecommunications, Inc.
(c) Microphase Telecommunications, Inc. shall also have the right, upon reasonable advance notice, to LightPaths and during normal business hours, to inspect LightPaths manufacturing operations and quality control procedures to ensure the maintenance of quality standards established by Microphase Telecommunications, Inc. pursuant to this Agreement.
11. NON-DISCLOSURE
(a) LightPaths understands that the Technical Information represents valuable property of Microphase Telecommunications, Inc. and are of a highly confidential nature. LightPaths, therefore, shall maintain all Technical Information in confidence and shall not disclose Technical Information to others without the express written consent of Microphase Telecommunications, Inc. LightPaths shall not use the Technical Information except in accordance with the terms of this Agreement. LightPaths shall have no liability for the use or disclosure of Technical Information which at the time of such disclosure is part of the public domain.
(b) LightPaths shall not make copies of the Technical Information disclosed by Microphase Telecommunications, Inc. without prior express, written consent of Microphase Telecommunications, Inc., unless, for internal use only, it is essential for the effective use of the rights granted herein. All such essential copies shall contain the Microphase Telecommunications, Inc. proprietary and confidential notice, shall be individually numbered, and a record kept of the number and location of each copy. The documents which contain the Technical Information are unpublished and all rights thereof are reserved by Microphase Telecommunications, Inc.
(c) LightPaths agrees that it will notify each of its personnel to whom any Technical Information is disclosed of his/her obligations not to disclose such Technical Information commensurate in scope with LightPaths non-disclosure obligations contained in this Agreement.
(d) LightPaths agrees to institute internal procedures for maintaining strict control over documents containing Technical Information provided by Microphase Telecommunications, Inc. and shall take steps to insure that such documents are clearly identified as the property of Microphase Telecommunications, Inc. Said documents shall not be incorporated into documents of LightPaths except by reference.
(e) In the event of termination, and upon expiration, of this Agreement, LightPaths shall immediately return to Microphase Telecommunications, Inc. all Technical Information provided by Microphase Telecommunications, Inc. as well as any copies and derivatives thereof and cease all use thereof.
(f) LightPaths acknowledges that Microphase Telecommunications, Inc. shall suffer irreparable injury in the event LightPaths breaches any of its obligations under this Section. Therefore, LightPaths agrees, that in addition to all other remedies to which Microphse Telecommunications, Inc. may be entitled at law or in equity, Microphase Telecommunications, Inc. shall be entitled to seek any remedy in equity including an injunction permanently restraining LightPaths from breaching or further breaching any of the obligations contained herein. LightPaths agrees that it will not oppose the seeking of such remedy on the basis that there exists an adequate remedy at law for damages.
12. DILIGENCE
LightPaths shall market and solicit sales of the Licensed Products and Services diligently and in a good faith manner to an extent as wide as its facilities permit and shall employ and utilize engineering personnel having reasonable experience and expertise in the design and use of Licensed Products in order to maximize sales of the Licensed Product throughout the Territory.
13. TERM
This Agreement shall remain in full force and effect until the last to expire of the Licensed Patents and for a period of seven (7) years thereafter. This Agreement shall be deemed automatically renewed for additional seven (7) year terms unless Microphase Telecommunications, Inc. notifies LightPaths prior to the expiration of the then current term that the Agreement will not be renewed.
14. TERMINATION
(a) This Agreement shall automatically terminate in the event that
LightPaths (i) is in liquidation, either voluntarily or involuntarily, or is
placed in receivership or otherwise enters into any scheme or composition with
its creditors or makes an assignment for the benefit of creditors or (ii) once
sales commence, ceases to sell the Licensed Products and Services for a period
of six (6) months.
(b) This Agreement may be terminated upon ninety (90) days prior written
notice by Microphase Telecommunications, Inc. to LightPaths.
(i) in the event that LightPaths fails to make any payment due hereunder;
or
(ii) upon the breach or default by LightPaths of one or more terms of any
other license Agreement with Microphase Telecommunications, Inc.
(c) This Agreement may be terminated by either party.
(i) immediately, in the event that the other party defaults under or breaches any of the terms of this Agreement other than payment and such default or breach is not remedied within a period of ninety (90) days after notification thereof; or
(ii) immediately in the event that this Agreement is, in total, held invalid or unenforceable by the determination of a court of competent jurisdiction.
(d) LightPaths may terminate this Agreement at any time upon ninety (90) days prior written notice to Microphase Telecommunications, Inc., provided that the manufacture, use and sale of the Licensed Products and Services has ceased prior to the date of such notice, and provided, further, LightPaths destroys or disposes of all Licensed Products on hand to the satisfaction of Microphase Telecommunications, Inc. as of the date of giving such notice.
(e) The foregoing grant of licenses has been made in recognition of, and
conditioned upon, a careful examination of the personal skills,
reputation and ability of LightPaths current ownership and control.
LightPaths shall notify Microphase Telecommunications, Inc. in writing
of any change in its ownership or control, to the extent practicable
prior to the effective date thereof and, in no event, more than thirty
(30) days thereafter. In the event there is any change in LightPaths
ownership or control to which Microphase Telecommunications, Inc. has
not, in its sole discretion, consented, Microphase Telecommunications,
Inc. shall have the right to terminate this Agreement on thirty (30)
days written notice to LightPaths.
15. RIGHTS AFTER TERMINATION OR EXPIRATION
(a) Upon any termination or expiration of this Agreement, LightPaths shall cease all further use of Technical Information and discontinue manufacture use, or sale of Licensed Products and Services. Also on termination or expiration, LightPaths shall cease all use of the Licensed Trademarks and shall not thereafter, either directly or indirectly, adopt a trademark or trade name which when compared to the Licensed Trademark would be likely to cause confusion, nor shall LightPaths make an reference of any kind which might create the impression that LightPaths continues to be licensed by Microphase Telecommunications, Inc.
(b) Termination or expiration of this Agreement shall not release LightPaths from its obligation to make payment in full of all royalties then owing and, further, shall not relieve the parties from such obligation or liabilities hereunder which expressly extend beyond such termination or expiration.
(c) The provisions of Paragraph 12 hereof shall survive any termination or expiration of this Agreement.
16. LITIGATION
(a) Microphase Telecommunications, Inc. specifically disclaims any financial or other responsibility for litigation of any type to which LightPaths may become a party as a result of its exercising the rights granted therein. Microphase Telecommunications, Inc. does agree, however, without liability for any costs of such litigation, provide such assistance and cooperation as may be reasonably necessary to assist LightPaths in its defense of any litigation which seeks to restrict the exercise of LightPathOs rights under this Agreement.
(b) LightPaths shall promptly notify Microphase Telecommunications, Inc. of any infringement or threatened infringement of the Licensed Trademark which shall be come known to it. Microphase Telecommunications, Inc. shall use its own discretion in deciding whether to act on this information, and its refusal to act thereon shall not affect this Agreement. Microphse Telecommunications, Inc. shall have the sole right to initiate legal action for infringement of said trademark. LightPaths shall provide Microphase Telecommunications, Inc. with such assistance and cooperation as may be reasonably necessary in connection therewith, but without liability for any costs of such legal proceedings.
(c) LightPaths shall promptly advise Microphase Telecommunications, Inc. in writing of any notice or claim of infringement of a third party?s trademark arising out of LightPaths use of the Licensed Trademarks in the Territory; in such event Microphase shall assume control of the defense of any such infringement suit with counsel of its own choice, and at its own expense. LightPaths shall provide Microphase Telecommunications, Inc. with such assistance and cooperation as may be reasonably necessary in connection therewith.
17. WAIVER OF DEFAULT
No waiver by either party of any default of the other party shall be held to be a waiver of any other or subsequent default. The failure of either party at any time to enforce or require performance of any of the provisions of this Agreement, or to exercise any right or option herein provided, shall in no way be construed to be a waiver of that and/or other provisions of this Agreement or to affect the right of such party thereafter to enforce each and every such provision. All waivers shall be in writing, signed by the waiving party.
18. DISCLAIMER OF AGENCY
It is agreed that LightPaths is an independent contractor and not the agent of Microphase Telecommunications, Inc. LightPaths has no right or authority to assume, create or incur any liability or obligation of any kind, express or implied, against, in the name of, or on behalf of Microphase Telecommunications, Inc.
19. NOTICES
All notices required of the parties under this Agreement shall be in writing. Any such notice shall be deemed served if sent registered or certified mail, postage prepaid, addressed to the other party at the address set forth above, or at such other address as may hereafter be designated by either party in writing.
20. ASSIGNMENT
This Agreement shall be binding upon the parties hereto and Microphase Telecommunications, Inc. respective successors and assigns. This Agreement and the rights and obligations hereunder shall not be assignable by LightPaths whether by merger, operation of law or otherwise except with the prior written consent of Microphase Telecommunications, Inc.
21. MISCELLANEOUS
(a) This Agreement shall be governed by and construed in accordance with the substantive laws of the State of Connecticut.
(b) This Agreement constitutes the entire Agreement between the parties and supersedes all prior agreements, negotiations or discussions between the parties with respect to the Licensed Products and Services, and shall not be modified or amended except by an instrument in writing of a date subsequent hereto, duly executed by each of the parties.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the day and year first above written.
By:_________________________________ Microphase Telecommunications,Inc.
Name: Torry Guardino, Chief Contracting Officer
Date:________________________________
By:_________________________________ LightPaths, Inc.
Name: Gustave T. Dotoli, Executive Vice President
Date:________________________________
APPENDIX A
TRADEMARKS
TRADEMARK COUNTRY & GOODS ISSUE DATE REG. NO.
XDSL TBD
(TO BE SUPPLIED)
APPENDIX B
PATENTS
COUNTRY SER. NO. FILING & DATE STATUS
USA TBD
|
(TO BE SUPPLIED)
APPENDIX C
ROYALTY SCHEDULE
Up TO $1,000,000 10% $1,000,001 and $5,000,000 9% $5,000,001 and $10,000,000 8% $10,000,001 and $20,000,000 7% above $20,000,000 6% |
LOAN AGREEMENT
This Loan Agreement is made as of August 31, 1997 by and between Janifast Holdings, Ltd., hereinafter sometimes referred to as ?Janifast? or ?the Company?, as Borrower, with offices located at 587 Connecticut Avenue, Norwalk, CT 06854 and mPhase Technologies Inc as Lender, hereinafter sometimes referred to as ?mPhase ?, with an office and mailing address located at 587 Connecticut Avenue, Norwalk, CT 06854.
WHEREAS, mPhase has agreed to advance the sum of $14,000 as a one year bridge loan represented by a negotiable promissory note payable by Janifast, in accordance with the terms and conditions of this loan agreement and a promissory note, a copy of which is attached as ?Exhibit A? to this Agreement;
WHEREAS, the Board of Directors of Janifast has authorized the officers of the Company to enter into this Loan Agreement, borrow the sum of $14,000 and to pay the consideration for this loan transaction that is detailed in this Loan Agreement;
WHEREAS, Janifast has made preliminary arrangements to merge with a public company whose shares are now trading on the NASDAQ OTC Bulletin Board;
WHEREAS, it is anticipated that, upon completion of the merger with the existing public company, the total issued and outstanding shares of Janifast is anticipated to be approximately 5,300,000.
NOW, THEREFORE, in consideration of the sum of Ten ($10.00) Dollars, lawful money of the United States, receipt of which is hereby acknowledged by mPhase, and the mutual covenants and agreement hereinafter set forth and other valuable consideration, the parties agree as follows:
The representations contained in the "Whereas" clauses are deemed to be incorporated in and made an integral part of this Loan Agreement.
Janifast hereby agrees to borrow the sum of $14,000 from mPhase at an interest rate of twelve (12%) percent per annum with interest to be paid semi-annually for a period of one year in accordance with the terms and conditions of a promissory note attached as Exhibit A to this Agreement, said loan transaction to be effective as of August 31, 1997.
As consideration for the $14,000 loan advance, Janifast hereby agrees to pay all relevant costs and expenses required to close the loan transaction, including legal fees and such other costs as would be normal in such transactions.
As additional consideration for the $14,000 bridge loan, the officers of the Company hereby authorize at the request of mPhase, to convert said loan into shares of Janifast equal to at least zero point nine six two five percent (0.9625%) of the total issued and outstanding shares of the Company subsequent to its merger with a public company, said shares to be Rule 144 restricted shares and the certificates representing said shares to bear and appropriate Rule 144 restrictive legend, and prior to any Rule 504 offering or other public offering.
Janifast further agrees that, without cost to the lender, it will register the first thirty (30%) percent of the shares to which the $14,000 loan may be converted or make arrangements with other Janifast shareholders to exchange thirty (30%) of the shares into which the loan may be converted with free trading shares. The holding period of the remaining seventy (70%) percent of the shares into which the loan may be converted shall be deemed to have started with the date of this Agreement.
All notices due under this Agreement shall be in writing and be addressed to the parties at the addresses set forth at the head of this Agreement. The form of notice that will be deemed effective will be personal delivery, certified mail, return receipt requested and facsimile transmission showing a confirmed receipt by the person to whom the notice is addressed.
This loan Agreement will be governed by the laws of the state of Delaware. The parties further agree that the venue for any legal action taken to enforce this Agreement shall be either the United States District Court for the District of Connecticut, Stamford Division or the Superior Court of Connecticut, Stamford/Norwalk Judicial District.
IN WITNESS WHEREOF, the parties have signed this Agreement as of the day, month and year first set forth above.
WITNESSETH: JANIFAST HOLDINGS, LTD
As Borrower
Robert H. Jaffe Kin Chung Chau Secretary President mPHASE TECHNOLOGIES, INC. As Lender Gustave Dotoli Chief Operating Officer |
PROMISSORY NOTE
$14,000
AUGUST 31, 1997
FOR VALUE RECEIVED, the undersigned, JANIFAST HOLDINGS, LTD., a Delaware Corporation, hereinafter sometimes referred to as "Janifast" or "the Maker", promises to pay to the order of mPhase Technologies Inc, hereinafter sometimes referred to as "mPhase" or "the Holder", at the offices of Janifast Holdings, Ltd., located at 587 Connecticut Avenue, Norwalk, CT 06854, the principal sum of Fourteen Thousand Dollars ($14,000), together with interest on the unpaid principal amount at the rate of twelve percent (12%) per annum, said payments to be made in accordance with the provisions of this promissory note, hereinafter referred to as "the Note", with the final maturity date for any unpaid principal or accrued interest to be August 31, 1998, one year from the date of the execution of this Note by the Maker.
Payment Provisions: Payments of interest only on the Fourteen Thousand Dollars ($14,000) principal amount of this Note shall be required on the twenty-eighth day of February, 1998 and each six-month period thereafter until the maturity date.
Default Provisions: If any of the following events ("Events of Default") shall occur, all amounts of principal unpaid on the Note, as well as unpaid accrued interest, shall be deemed to be immediately due and payable, unless cured within seven (7) days written notice in accordance with the notice provisions made part of this Note. In the event of default, mPhase may, at his option, pursue any of the remedies provided for in this Note or by law and by statute or any guaranty agreement. The reliance of the Holder upon any single remedy would not prevent it from using or invoking any remaining remedies provided by law or statute or any agreement of guaranty relating to this Note. The Events of Default are as follows:
If Janifast shall fail to pay when due any required payment of principal, or interest provided for in this Note for more than fifteen (15) days after the due date of same;
If Janifast fails to diligently preserve its corporate existence or other corporate rights granted to it in the State of Delaware by the failure to timely file state tax returns, annual reports or other required documents; or
If Janifast should be adjudicated by a court of comparative jurisdiction to be bankrupt, insolvent, or placed in receivership, or should proceedings be instituted by or against the maker for bankruptcy, insolvency, receivership, or assignment for the benefit of creditors.
Promissory Note August 31, 1997
Notice of Opportunity to Cure Default: In the event any payment of
principal or interest required by this Note is not timely paid in accordance
with its payment provisions, or Janifast fails to diligently preserve its
corporate existence or corporate rights granted to it by the State of Delaware
and after written notice of one or more of these Events of Default in
accordance with the notice provisions of this Note is given to the Maker and
such Event or Events of Default, as the case may be, is not cured within seven
(7) days of such notice, then an in that event, the entire principal and all
accumulated interest shall become immediately due and payable and mPhase shall
be entitled to pursue all remedies provided by this Note by law, statute, or
any guaranty agreement relating to this note.
General Provisions:
If any Event of Default is not cured after notice to Janifast as provided in this Note and this Note is given to an attorney who files suit to collect on same, the Maker agrees to pay, in addition to any unpaid principal and accrued interest, reasonable attorney?s fees and costs.
This Note is deemed to have been executed in the State of Connecticut and shall be governed, construed and enforced in accordance with the laws of the State of Connecticut. In the event of suit to enforce the Note, mPhase may, at his option, bring suit in either the United States District Court for the District of Connecticut, Stamford Division or the Superior Court of Connecticut, Stamford/Norwalk Judicial District. The Maker hereby consents to such jurisdiction and venue and waives its right to trial by jury.
Janifast may not prepay the principal amount of this Note without first requesting and obtaining written approval of the Holder and/or its authorized representative.
This Note is being issued pursuant to a loan agreement entered into on even date by and between Janifast and mPhase providing in part for the right of the holder to convert a $14,000 principal amount of this loan into shares of common stock equal to zero point nine six two five percent (0.9625%) of the number of shares of the Maker to be issued and outstanding after a proposed merger with a public company whose stock is presently trading on the NASDAQ OTC Bulletin Board.
Promissory Note August 31, 1997
Notice Provisions: Any notices required by this Note shall be served by Certified or Registered mail, postage prepaid, addressed to the addresses listed below:
To the Maker at: Janifast Holdings, Ltd
587 Connecticut Avenue
Norwalk, CT 06854
Attention: Kin Chung Chau
President
To the Holder at: mPhase Technologies Inc
587 Connecticut Avenue
Norwalk, CT 06854
Attention: Gustave T. Dotoli
Chief Operating Officer
|
IN WITNESS WHEREOF, the undersigned persons, being duly authorized to do so pursuant to the certificate of incorporation any bylaws of Janifast Holdings, Ltd., a Delaware Corporation, have executed this Note in the corporate capacities stated below on this thirty-first day of August, 1997.
ATTEST: JANIFAST HOLDINGS, LTD
Robert H. Jaffe, Secretary Kin Chung Chau, President
LOAN AGREEMENT
This Loan Agreement is made as of June 19, 1997 by and between Janifast Holdings, Ltd., hereinafter sometimes referred to as "Janifast" or "the Company", as Borrower, with offices located at 587 Connecticut Avenue, Norwalk, CT 06854 and mPhase Technologies Inc as Lender, hereinafter sometimes referred to as "mPhase", with an office and mailing address located at 587 Connecticut Avenue, Norwalk, CT 06854.
WHEREAS, mPhase has agreed to advance the sum of $64,000 as a one year bridge loan represented by a negotiable promissory note payable by Janifast, in accordance with the terms and conditions of this loan agreement and a promissory note, a copy of which is attached as "Exhibit A" to this Agreement;
WHEREAS, the Board of Directors of Janifast has authorized the officers of the Company to enter into this Loan Agreement, borrow the sum of $64,000 and to pay the consideration for this loan transaction that is detailed in this Loan Agreement;
WHEREAS, Janifast has made preliminary arrangements to merge with a public company whose shares are now trading on the NASDAQ OTC Bulletin Board;
WHEREAS, it is anticipated that, upon completion of the merger with the existing public company, the total issued and outstanding shares of Janifast is anticipated to be approximately 5,300,000.
NOW, THEREFORE, in consideration of the sum of Ten ($10.00) Dollars, lawful money of the United States, receipt of which is hereby acknowledged by mPhase, and the mutual covenants and agreement hereinafter set forth and other valuable consideration, the parties agree as follows:
The representations contained in the "Whereas" clauses are deemed to be incorporated in and made an integral part of this Loan Agreement.
Janifast hereby agrees to borrow the sum of $64,000 from mPhase at an interest rate of twelve (12%) percent per annum with interest to be paid semi-annually for a period of one year in accordance with the terms and conditions of a promissory note attached as Exhibit A to this Agreement, said loan transaction to be effective as of June 19, 1997.
As consideration for the $64,000 loan advance, Janifast hereby agrees to pay all relevant costs and expenses required to close the loan transaction, including legal fees and such other costs as would be normal in such transactions.
As additional consideration for the $64,000 bridge loan, the officers of the Company hereby authorize at the request of mPhase, to convert said loan into shares of Janifast equal to at least four point four percent (4.4%) of the total issued and outstanding shares of the Company subsequent to its merger with a public company, said shares to be Rule 144 restricted shares and the certificates representing said shares to bear and appropriate Rule 144 restrictive legend, and prior to any Rule 504 offering or other public offering.
Janifast further agrees that, without cost to the lender, it will register the first thirty (30%) percent of the shares to which the $64,000 loan may be converted or make arrangements with other Janifast shareholders to exchange thirty (30%) of the shares into which the loan may be converted with free trading shares. The holding period of the remaining seventy (70%) percent of the shares into which the loan may be converted shall be deemed to have started with the date of this Agreement.
All notices due under this Agreement shall be in writing and be addressed to the parties at the addresses set forth at the head of this Agreement. The form of notice that will be deemed effective will be personal delivery, certified mail, return receipt requested and facsimile transmission showing a confirmed receipt by the person to whom the notice is addressed.
This loan Agreement will be governed by the laws of the state of Delaware. The parties further agree that the venue for any legal action taken to enforce this Agreement shall be either the United States District Court for the District of Connecticut, Stamford Division or the Superior Court of Connecticut, Stamford/Norwalk Judicial District.
IN WITNESS WHEREOF, the parties have signed this Agreement as of the day, month and year first set forth above.
WITNESSETH: JANIFAST HOLDINGS, LTD
As Borrower
Robert H. Jaffe Kin Chung Chau Secretary President mPHASE TECHNOLOGIES, INC. As Lender Gustave Dotoli Chief Operating Officer |
PROMISSORY NOTE
$64,000
JUNE 19, 1997
FOR VALUE RECEIVED, the undersigned, JANIFAST HOLDINGS, LTD., a Delaware Corporation, hereinafter sometimes referred to as "Janifast" or "the Maker", promises to pay to the order of mPhase Technologies Inc, hereinafter sometimes referred to as "mPhase" or "the Holder", at the offices of Janifast Holdings, Ltd., located at 587 Connecticut Avenue, Norwalk, CT 06854, the principal sum of Sixty Four Thousand Dollars ($64,000), together with interest on the unpaid principal amount at the rate of twelve percent (12%) per annum, said payments to be made in accordance with the provisions of this promissory note, hereinafter referred to as ?the Note?, with the final maturity date for any unpaid principal or accrued interest to be June 19, 1998, one year from the date of the execution of this Note by the Maker.
Payment Provisions: Payments of interest only on the Sixty-four Thousand Dollars ($64,000) principal amount of this Note shall be required on the nineteenth day of December, 1997 and each six-month period thereafter until the maturity date.
Default Provisions: If any of the following events ("Events of Default") shall occur, all amounts of principal unpaid on the Note, as well as unpaid accrued interest, shall be deemed to be immediately due and payable, unless cured within seven (7) days written notice in accordance with the notice provisions made part of this Note. In the event of default, mPhase may, at his option, pursue any of the remedies provided for in this Note or by law and by statute or any guaranty agreement. The reliance of the Holder upon any single remedy would not prevent it from using or invoking any remaining remedies provided by law or statute or any agreement of guaranty relating to this Note. The Events of Default are as follows:
If Janifast shall fail to pay when due any required payment of principal, or interest provided for in this Note for more than fifteen (15) days after the due date of same;
If Janifast fails to diligently preserve its corporate existence or other corporate rights granted to it in the State of Delaware by the failure to timely file state tax returns, annual reports or other required documents; or
If Janifast should be adjudicated by a court of comparative jurisdiction to be bankrupt, insolvent, or placed in receivership, or should proceedings be instituted by or against the maker for bankruptcy, insolvency, receivership, or assignment for the benefit of creditors.
Promissory Note June 19, 1997
Notice of Opportunity to Cure Default: In the event any payment of
principal or interest required by this Note is not timely paid in accordance
with its payment provisions, or Janifast fails to diligently preserve its
corporate existence or corporate rights granted to it by the State of Delaware
and after written notice of one or more of these Events of Default in
accordance with the notice provisions of this Note is given to the Maker and
such Event or Events of Default, as the case may be, is not cured within seven
(7) days of such notice, then an in that event, the entire principal and all
accumulated interest shall become immediately due and payable and mPhase shall
be entitled to pursue all remedies provided by this Note by law, statute, or
any guaranty agreement relating to this note.
General Provisions:
If any Event of Default is not cured after notice to Janifast as provided in this Note and this Note is given to an attorney who files suit to collect on same, the Maker agrees to pay, in addition to any unpaid principal and accrued interest, reasonable attorney?s fees and costs.
This Note is deemed to have been executed in the State of Connecticut and shall be governed, construed and enforced in accordance with the laws of the State of Connecticut. In the event of suit to enforce the Note, mPhase may, at his option, bring suit in either the United States District Court for the District of Connecticut, Stamford Division or the Superior Court of Connecticut, Stamford/Norwalk Judicial District. The Maker hereby consents to such jurisdiction and venue and waives its right to trial by jury.
Janifast may not prepay the principal amount of this Note without first requesting and obtaining written approval of the Holder and/or its authorized representative.
This Note is being issued pursuant to a loan agreement entered into on even date by and between Janifast and mPhase providing in part for the right of the holder to convert a $64,000 principal amount of this loan into shares of common stock equal to four point four percent (4.4%) of the number of shares of the Maker to be issued and outstanding after a proposed merger with a public company whose stock is presently trading on the NASDAQ OTC Bulletin Board.
Promissory Note June 19, 1997
Notice Provisions: Any notices required by this Note shall be served by Certified or Registered mail, postage prepaid, addressed to the addresses listed below:
To the Maker at: Janifast Holdings, Ltd 587 Connecticut Avenue Norwalk, CT 06854 Attention: Kin Chung Chau President To the Holder at: mPhase Technologies Inc 587 Connecticut Avenue Norwalk, CT 06854 Attention: Gustave T. Dotoli Chief Operating Officer |
IN WITNESS WHEREOF, the undersigned persons, being duly authorized to do so pursuant to the certificate of incorporation any bylaws of Janifast Holdings, Ltd., a Delaware Corporation, have executed this Note in the corporate capacities stated below on this nineteenth day of June, 1997.
ATTEST: JANIFAST HOLDINGS, LTD
Robert H. Jaffe, Secretary Kin Chung Chau, President
LOAN AGREEMENT
This Loan Agreement is made as of May 5, 1997 by and between Janifast Holdings, Ltd., hereinafter sometimes referred to as "Janifast" or "the Company", as Borrower, with offices located at 587 Connecticut Avenue, Norwalk, CT 06854 and mPhase Technologies Inc as Lender, hereinafter sometimes referred to as "mPhase", with an office and mailing address located at 587 Connecticut Avenue, Norwalk, CT 06854.
WHEREAS, mPhase has agreed to advance the sum of $50,000 as a one year bridge loan represented by a negotiable promissory note payable by Janifast, in accordance with the terms and conditions of this loan agreement and a promissory note, a copy of which is attached as "Exhibit A" to this Agreement;
WHEREAS, the Board of Directors of Janifast has authorized the officers of the Company to enter into this Loan Agreement, borrow the sum of $50,000 and to pay the consideration for this loan transaction that is detailed in this Loan Agreement;
WHEREAS, Janifast has made preliminary arrangements to merge with a public company whose shares are now trading on the NASDAQ OTC Bulletin Board;
WHEREAS, it is anticipated that, upon completion of the merger with the existing public company, the total issued and outstanding shares of Janifast is anticipated to be approximately 5,300,000.
NOW, THEREFORE, in consideration of the sum of Ten ($10.00) Dollars, lawful money of the United States, receipt of which is hereby acknowledged by mPhase, and the mutual covenants and agreement hereinafter set forth and other valuable consideration, the parties agree as follows:
The representations contained in the "Whereas" clauses are deemed to be incorporated in and made an integral part of this Loan Agreement.
Janifast hereby agrees to borrow the sum of $50,000 from mPhase at an interest rate of twelve (12%) percent per annum with interest to be paid semi-annually for a period of one year in accordance with the terms and conditions of a promissory note attached as Exhibit A to this Agreement, said loan transaction to be effective as of May 5, 1997.
As consideration for the $50,000 loan advance, Janifast hereby agrees to pay all relevant costs and expenses required to close the loan transaction, including legal fees and such other costs as would be normal in such transactions.
As additional consideration for the $50,000 bridge loan, the officers of the Company hereby authorize at the request of mPhase, to convert said loan into shares of Janifast equal to at least three point four three seven five percent (3.4375%) of the total issued and outstanding shares of the Company subsequent to its merger with a public company, said shares to be Rule 144 restricted shares and the certificates representing said shares to bear and appropriate Rule 144 restrictive legend, and prior to any Rule 504 offering or other public offering.
Janifast further agrees that, without cost to the lender, it will register the first thirty (30%) percent of the shares to which the $50,000 loan may be converted or make arrangements with other Janifast shareholders to exchange thirty (30%) of the shares into which the loan may be converted with free trading shares. The holding period of the remaining seventy (70%) percent of the shares into which the loan may be converted shall be deemed to have started with the date of this Agreement.
All notices due under this Agreement shall be in writing and be addressed to the parties at the addresses set forth at the head of this Agreement. The form of notice that will be deemed effective will be personal delivery, certified mail, return receipt requested and facsimile transmission showing a confirmed receipt by the person to whom the notice is addressed.
This loan Agreement will be governed by the laws of the state of Delaware. The parties further agree that the venue for any legal action taken to enforce this Agreement shall be either the United States District Court for the District of Connecticut, Stamford Division or the Superior Court of Connecticut, Stamford/Norwalk Judicial District.
IN WITNESS WHEREOF, the parties have signed this Agreement as of the day, month and year first set forth above.
WITNESSETH: JANIFAST HOLDINGS, LTD
As Borrower
Robert H. Jaffe Kin Chung Chau Secretary President mPHASE TECHNOLOGIES, INC. As Lender Gustave Dotoli Chief Operating Officer |
PROMISSORY NOTE
$50,000
MAY 5, 1997
FOR VALUE RECEIVED, the undersigned, JANIFAST HOLDINGS, LTD., a Delaware Corporation, hereinafter sometimes referred to as "Janifast" or "the Maker", promises to pay to the order of mPhase Technologies Inc, hereinafter sometimes referred to as ?mPhase? or ?the Holder?, at the offices of Janifast Holdings, Ltd., located at 587 Connecticut Avenue, Norwalk, CT 06854, the principal sum of Fifty Thousand Dollars ($50,000), together with interest on the unpaid principal amount at the rate of twelve percent (12%) per annum, said payments to be made in accordance with the provisions of this promissory note, hereinafter referred to as "the Note", with the final maturity date for any unpaid principal or accrued interest to be May 5, 1998, one year from the date of the execution of this Note by the Maker.
Payment Provisions: Payments of interest only on the Fifty Thousand Dollars ($50,000) principal amount of this Note shall be required on the fifth day of November, 1997 and each six-month period thereafter until the maturity date.
Default Provisions: If any of the following events ("Events of Default") shall occur, all amounts of principal unpaid on the Note, as well as unpaid accrued interest, shall be deemed to be immediately due and payable, unless cured within seven (7) days written notice in accordance with the notice provisions made part of this Note. In the event of default, mPhase may, at his option, pursue any of the remedies provided for in this Note or by law and by statute or any guaranty agreement. The reliance of the Holder upon any single remedy would not prevent it from using or invoking any remaining remedies provided by law or statute or any agreement of guaranty relating to this Note. The Events of Default are as follows:
If Janifast shall fail to pay when due any required payment of principal, or interest provided for in this Note for more than fifteen (15) days after the due date of same;
If Janifast fails to diligently preserve its corporate existence or other corporate rights granted to it in the State of Delaware by the failure to timely file state tax returns, annual reports or other required documents; or
If Janifast should be adjudicated by a court of comparative jurisdiction to be bankrupt, insolvent, or placed in receivership, or should proceedings be instituted by or against the maker for bankruptcy, insolvency, receivership, or assignment for the benefit of creditors.
Promissory Note May 5, 1997
Notice of Opportunity to Cure Default: In the event any payment of
principal or interest required by this Note is not timely paid in accordance
with its payment provisions, or Janifast fails to diligently preserve its
corporate existence or corporate rights granted to it by the State of Delaware
and after written notice of one or more of these Events of Default in
accordance with the notice provisions of this Note is given to the Maker and
such Event or Events of Default, as the case may be, is not cured within seven
(7) days of such notice, then an in that event, the entire principal and all
accumulated interest shall become immediately due and payable and mPhase shall
be entitled to pursue all remedies provided by this Note by law, statute, or
any guaranty agreement relating to this note.
General Provisions:
If any Event of Default is not cured after notice to Janifast as provided in this Note and this Note is given to an attorney who files suit to collect on same, the Maker agrees to pay, in addition to any unpaid principal and accrued interest, reasonable attorney's fees and costs.
This Note is deemed to have been executed in the State of Connecticut and shall be governed, construed and enforced in accordance with the laws of the State of Connecticut. In the event of suit to enforce the Note, mPhase may, at his option, bring suit in either the United States District Court for the District of Connecticut, Stamford Division or the Superior Court of Connecticut, Stamford/Norwalk Judicial District. The Maker hereby consents to such jurisdiction and venue and waives its right to trial by jury.
Janifast may not prepay the principal amount of this Note without first requesting and obtaining written approval of the Holder and/or its authorized representative.
This Note is being issued pursuant to a loan agreement entered into on even date by and between Janifast and mPhase providing in part for the right of the holder to convert a $50,000 principal amount of this loan into shares of common stock equal to three point four three five percent (3.4375%) of the number of shares of the Maker to be issued and outstanding after a proposed merger with a public company whose stock is presently trading on the NASDAQ OTC Bulletin Board.
Promissory Note May 5, 1997
Notice Provisions: Any notices required by this Note shall be served by Certified or Registered mail, postage prepaid, addressed to the addresses listed below:
To the Maker at: Janifast Holdings, Ltd 587 Connecticut Avenue Norwalk, CT 06854 Attention: Kin Chung Chau President To the Holder at: mPhase Technologies Inc 587 Connecticut Avenue Norwalk, CT 06854 Attention: Gustave T. Dotoli Chief Operating Officer |
IN WITNESS WHEREOF, the undersigned persons, being duly authorized to do so pursuant to the certificate of incorporation any bylaws of Janifast Holdings, Ltd., a Delaware Corporation, have executed this Note in the corporate capacities stated below on this fifth day of May, 1997.
ATTEST: JANIFAST HOLDINGS, LTD
Robert H. Jaffe, Secretary Kin Chung Chau, President
LOAN AGREEMENT
This Loan Agreement is made as of April 10, 1997 by and between Janifast Holdings, Ltd., hereinafter sometimes referred to as "Janifast" or "the Company", as Borrower, with offices located at 587 Connecticut Avenue, Norwalk, CT 06854 and mPhase Technologies Inc as Lender, hereinafter sometimes referred to as "mPhase", with an office and mailing address located at 587 Connecticut Avenue, Norwalk, CT 06854.
WHEREAS, mPhase has agreed to advance the sum of $50,000 as a one year bridge loan represented by a negotiable promissory note payable by Janifast, in accordance with the terms and conditions of this loan agreement and a promissory note, a copy of which is attached as "Exhibit A" to this Agreement;
WHEREAS, the Board of Directors of Janifast has authorized the officers of the Company to enter into this Loan Agreement, borrow the sum of $50,000 and to pay the consideration for this loan transaction that is detailed in this Loan Agreement;
WHEREAS, Janifast has made preliminary arrangements to merge with a public company whose shares are now trading on the NASDAQ OTC Bulletin Board;
WHEREAS, it is anticipated that, upon completion of the merger with the existing public company, the total issued and outstanding shares of Janifast is anticipated to be approximately 5,300,000.
NOW, THEREFORE, in consideration of the sum of Ten ($10.00) Dollars, lawful money of the United States, receipt of which is hereby acknowledged by mPhase, and the mutual covenants and agreement hereinafter set forth and other valuable consideration, the parties agree as follows:
The representations contained in the "Whereas" clauses are deemed to be incorporated in and made an integral part of this Loan Agreement.
Janifast hereby agrees to borrow the sum of $50,000 from mPhase at an interest rate of twelve (12%) percent per annum with interest to be paid semi-annually for a period of one year in accordance with the terms and conditions of a promissory note attached as Exhibit A to this Agreement, said loan transaction to be effective as of April 10, 1997.
As consideration for the $50,000 loan advance, Janifast hereby agrees to pay all relevant costs and expenses required to close the loan transaction, including legal fees and such other costs as would be normal in such transactions.
As additional consideration for the $50,000 bridge loan, the officers of the Company hereby authorize at the request of mPhase, to convert said loan into shares of Janifast equal to at least three point four three seven five percent (3.4375%) of the total issued and outstanding shares of the Company subsequent to its merger with a public company, said shares to be Rule 144 restricted shares and the certificates representing said shares to bear and appropriate Rule 144 restrictive legend, and prior to any Rule 504 offering or other public offering.
Janifast further agrees that, without cost to the lender, it will register the first thirty (30%) percent of the shares to which the $50,000 loan may be converted or make arrangements with other Janifast shareholders to exchange thirty (30%) of the shares into which the loan may be converted with free trading shares. The holding period of the remaining seventy (70%) percent of the shares into which the loan may be converted shall be deemed to have started with the date of this Agreement.
All notices due under this Agreement shall be in writing and be addressed to the parties at the addresses set forth at the head of this Agreement. The form of notice that will be deemed effective will be personal delivery, certified mail, return receipt requested and facsimile transmission showing a confirmed receipt by the person to whom the notice is addressed.
This loan Agreement will be governed by the laws of the state of Delaware. The parties further agree that the venue for any legal action taken to enforce this Agreement shall be either the United States District Court for the District of Connecticut, Stamford Division or the Superior Court of Connecticut, Stamford/Norwalk Judicial District.
IN WITNESS WHEREOF, the parties have signed this Agreement as of the day, month and year first set forth above.
WITNESSETH: JANIFAST HOLDINGS, LTD
As Borrower
Robert H. Jaffe Kin Chung Chau Secretary President
mPHASE TECHNOLOGIES, INC.
As Lender
Gustave Dotoli
Chief Operating Officer
PROMISSORY NOTE
$50,000
APRIL 10, 1997
FOR VALUE RECEIVED, the undersigned, JANIFAST HOLDINGS, LTD., a Delaware Corporation, hereinafter sometimes referred to as "Janifast" or "the Maker", promises to pay to the order of mPhase Technologies Inc, hereinafter sometimes referred to as "mPhase" or "the Holder", at the offices of Janifast Holdings, Ltd., located at 587 Connecticut Avenue, Norwalk, CT 06854, the principal sum of Fifty Thousand Dollars ($50,000), together with interest on the unpaid principal amount at the rate of twelve percent (12%) per annum, said payments to be made in accordance with the provisions of this promissory note, hereinafter referred to as ?the Note?, with the final maturity date for any unpaid principal or accrued interest to be April 10, 1998, one year from the date of the execution of this Note by the Maker.
Payment Provisions: Payments of interest only on the Fifty Thousand Dollars ($50,000) principal amount of this Note shall be required on the tenth day of October, 1997 and each six-month period thereafter until the maturity date.
Default Provisions: If any of the following events ("Events of Default") shall occur, all amounts of principal unpaid on the Note, as well as unpaid accrued interest, shall be deemed to be immediately due and payable, unless cured within seven (7) days written notice in accordance with the notice provisions made part of this Note. In the event of default, mPhase may, at his option, pursue any of the remedies provided for in this Note or by law and by statute or any guaranty agreement. The reliance of the Holder upon any single remedy would not prevent it from using or invoking any remaining remedies provided by law or statute or any agreement of guaranty relating to this Note. The Events of Default are as follows:
If Janifast shall fail to pay when due any required payment of principal, or interest provided for in this Note for more than fifteen (15) days after the due date of same;
If Janifast fails to diligently preserve its corporate existence or other corporate rights granted to it in the State of Delaware by the failure to timely file state tax returns, annual reports or other required documents; or
If Janifast should be adjudicated by a court of comparative jurisdiction to be bankrupt, insolvent, or placed in receivership, or should proceedings be instituted by or against the maker for bankruptcy, insolvency, receivership, or assignment for the benefit of creditors.
Promissory Note April 10, 1997
Notice of Opportunity to Cure Default: In the event any payment of
principal or interest required by this Note is not timely paid in accordance
with its payment provisions, or Janifast fails to diligently preserve its
corporate existence or corporate rights granted to it by the State of Delaware
and after written notice of one or more of these Events of Default in
accordance with the notice provisions of this Note is given to the Maker and
such Event or Events of Default, as the case may be, is not cured within seven
(7) days of such notice, then an in that event, the entire principal and all
accumulated interest shall become immediately due and payable and mPhase shall
be entitled to pursue all remedies provided by this Note by law, statute, or
any guaranty agreement relating to this note.
General Provisions:
If any Event of Default is not cured after notice to Janifast as provided in this Note and this Note is given to an attorney who files suit to collect on same, the Maker agrees to pay, in addition to any unpaid principal and accrued interest, reasonable attorney?s fees and costs.
This Note is deemed to have been executed in the State of Connecticut and shall be governed, construed and enforced in accordance with the laws of the State of Connecticut. In the event of suit to enforce the Note, mPhase may, at his option, bring suit in either the United States District Court for the District of Connecticut, Stamford Division or the Superior Court of Connecticut, Stamford/Norwalk Judicial District. The Maker hereby consents to such jurisdiction and venue and waives its right to trial by jury.
Janifast may not prepay the principal amount of this Note without first requesting and obtaining written approval of the Holder and/or its authorized representative.
This Note is being issued pursuant to a loan agreement entered into on even date by and between Janifast and mPhase providing in part for the right of the holder to convert a $50,000 principal amount of this loan into shares of common stock equal to three point four three seven five percent (3.4375%) of the number of shares of the Maker to be issued and outstanding after a proposed merger with a public company whose stock is presently trading on the NASDAQ OTC Bulletin Board.
Promissory Note April 10, 1997
Notice Provisions: Any notices required by this Note shall be served by Certified or Registered mail, postage prepaid, addressed to the addresses listed below:
To the Maker at: Janifast Holdings, Ltd 587 Connecticut Avenue Norwalk, CT 06854 Attention: Kin Chung Chau President To the Holder at: mPhase Technologies Inc 587 Connecticut Avenue Norwalk, CT 06854 Attention: Gustave T. Dotoli Chief Operating Officer |
IN WITNESS WHEREOF, the undersigned persons, being duly authorized to do so pursuant to the certificate of incorporation any bylaws of Janifast Holdings, Ltd., a Delaware Corporation, have executed this Note in the corporate capacities stated below on this tenth day of April, 1997.
ATTEST: JANIFAST HOLDINGS, LTD
Robert H. Jaffe, Secretary Kin Chung Chau, President
AGREEMENT
AGREEMENT made and entered into as of April 30, 1997 by and between mPhase Technologies, Inc., a Delaware corporation with its principal offices at 587 Connecticut Avenue Norwalk, Connecticut 06854-1789 (hereinafter referred to as ?mPhase?)and Global Music & Media, Inc.Tennessee corporation with its principal offices at 1024-C 18th Avenue South, Nashvi1le Tennessee 37212 (hereinafter referred to as "GLOBAL").
WHEREAS, mPhase owns, controls, and/or is in a position to facilitate various proprietary patents, designs, information, copyrights, and other pertinent technology necessary to bring about the delivery of television programming, internet content, health care data transfer, hospitality services, video conferencing, long distance telephone service, remote banking and remote airline reservations, across existing anlog telephone lines, for commercial uses(hereinafter referred to as the "Technology"); and
WHEREAS, GLOBAL has extensive contacts, experience, and knowledge in the television and music fields, as well as the internet, which has allowed it to acquire the rights to distribute programming originated by a number of programming services (hereinafter referred to as the "Programming"); and
WHEREAS, mPhase and GLOBAL have, by Agreement dated April 9, 1997, agreed to jointly form a corporation which shall become the vehicle through which the parties will market the Technology in conjunction with the Programming, in accordance with the terms and conditions hereinafter set forth (hereinafter referred to as the "Venture");
THEREFORE, in consideration of the mutual covenants herein contained, and other good and valuable consideration, receipt and sufficiency of which are acknowledged, the parties hereby agree as follows:
1. TECHNOLOGY
The Technology which is the subject of this Agreement consists of a series of propietary patents, designs, and other pertinent technology with respect to noise filtering and digital compression of date which has been developed and is owned and controlled solely by Michrophase Corporation, and which has been licensed on an exclusive basis to mPhase for unrestricted exploitation throughout the world. The Technology will allow the compression and delivery of television programming, as well as voice, date and other digital services, across existing twister-pair copper, analog telephone lines. The Technology will be utilized by mPhase to develop a digital set-up device and/or computer-resident subscriber presence board which will receive the Programming and other services, as packaged and distributed by the Venture, for use in conjunction with traditional television sets and/or computers (such device hereinafter referred to as the "Network Interface").
Nothing contained in this Agreement shall be construed by the parties or by any third parties to grant to the Venture or the Corporation any rights whatsoever with respect to any military technology or application developed by MicroPhase, mPhase, or any of the corporate affiliates of either, from pursuing the sale or licensing of any military technology or application to any party at any time.
2. PROGRAMMING
The Programming which is the subject of this Agreement shall consist of a package containing a number of satellite- and/or fiber line-delivered television programming services, commonly referred to in the trade as ?cable networks?, as well as independent and network-affiliate broadcast stations, all of which are currently available via alternative means of access and distribution.
3.MARKETING & DISTRIBUTION
The Technology and the Programming, as well as other ancillary services to be developed by the Venture, will be packaged, marketed, and distributed by the Venture under the tradename "COMPLETE TV"(subject to trademark clearance), as more fully described in this Agreement.
4. STARTUP OBLIGATIONS OF mPHASE
mPhase will utilize the Technology to design and manufacture the Network Interface, for retail sale by the Venture to its subscribers, for the exploitation of the Programming and other services as contemplated herein, and will obtain all necessary licenses required for such use of the Technology by the Venture.
mPhase will initially make all necessary arrangements for switching and delivery via fiber optic lines of the Programming from the "Complete TV" headend to telco central offices, as required for ultimate delivery to consumers who subscribe to the Complete TV service. The parties acknowledge that mPhase has the potential to bring to the Venture a corporate customer with a subscriber base which is anticipated to reach 20,000 homes by year-end 1997.
5. STARTUP OBLIGATIONS OF GLOBAL
GLOBAL will arrange and secure a lineup of Programming designed to most effectively market the Complete TV service, and will enter into affiliation agreements with the requisite programming services and broadcasters to acquire the rights to distribute the Programming. GLOBAL will, in consultation with mPhase, further make arrangements for the joint development of user intrface software for use by subscribers in connection with the Network Interface as a means of navigating the "Complete TV" service.
GLOBAL, will, in consultation with mPhase, make arrangements for the reception, decoding, and digitization of the Programming, as well as its delivery via fiber optic lines to the appropriae telco central offices and switching locations.
GLOBAL will, subject to the prior approval of mPhase, identify and develop a marketing and distribution plan and budget for the Complete TV service which takes into account all potential sources of revenue in light of current market conditions.
6. CORPORATE STRUCTURE
mPhase and GLOBAL hereby agree to form a new corporation, tentatively named Complete Telecommunications, Inc., for the sole purpose of pursuing the Venture contemplated in this Agreement (hereinafter referred to as the "Corporation"). The Corporation will be organized under the laws of the State of Delaware with its principal offices initially located at GLOBAL's address. Fifty Percent (50%) of the original capital stock of theCorporation shall be issued to mPhase or its designees or affiliates, and Fifty Percent (50%) of the original capital stock of the Corporation shall be issued to GLOBAL or its designees or affiliates.
The Board of Directors of the Corporation shall have a total of six (6) members, three (3) Directors will be elected by each of mPhase and GLOBAL. The parties acknowledge that mPhase and/or its affiliates have entered into certain agreements with DeKalb Telephone Cooperative, Inc. For the provision of services to the Venture, and it is agreed that the General Manager of that entity will be offered a position as an advisory member of the Corporation?s Board of Directors.
The parties will, as soon as practicable, enter into a Shareholders' Agreement, in form and substance consistent with the purposes of the Venture and containing customary restrictions on the sale, transfer, encumbrance, or other disposition of shares of the Corporation consistent with the nature of the business and the objectives of the parties.
7. OPERATIONAL STRUCTURE
The Chief Executive Officer of the Corporation shall be shall be responsible for the day-to-day operation of the Venture. The Board of Directors of the Corporation shall have full and complete authority to appoint the additional principal officers of the Corporation and to remove any officers of the Corporation in its sole discretion.
The Chief Executive Officer shall develop and present to the Board of Directors for its approval, on or before June 15, 1997, a comprehensive business plan for the Corporation. Except to the extent inconsistent with the terms of this Agreement, said business plan will incorporate the terms of the April 9, 1997 Agreement between the parties and the April 25, 1997, Global Telekom White Paper, each of which is attached hereto and hereby incorporated herein by this reference.
The parties acknowledge that the network controller and the Network Interface devices which are to be sold to the end user by the Corporation are to be purchased by the Corporation from mPhase, that certain expenses incurred by the parties in the course of the start-up and formation of the Venture and the Corporation will be reimbursed by the Corporation after its organization, and that in the future certain fees will be paid to both parties from the revenues of the Corporation as compensation for services and facilities provided to the Corporation on an ongoing basis. The aforementioned business plan which is to be presented to the Board of Directors by the Chief Executive Officer will address all such issues to the extent they can be identified at the time.
8. FINANCING
It is the intention of both GLOBAL and mPhase to work together, utilizing financial resources and introductions to be provided by GLOBAL, to assist the Venture in securing adequate short term and long term financing for the application and deployment of the Technology and the distribution of the Programming.
The parties acknowledge that both of them have certain financial resources which would enable them to secure a certain level of initial debt and/or equity funding for the Venture, under terms acceptable to both parties, within approximately thirty to forty five days following execution of this Agreement, and that a certain level of initial financing will be required in order to allow the Venture to proceed with the deployment and actuation of the Technology and the distribution of the Programming, as described in this Agreement, in a timely manner.
It is understood that the financing efforts on behalf of the Venture pursued by GLOBAL and mPhase will be designed to acquire a short term investment in the amount of $3,000,000 to $5,000,000, and that such efforts will be undertaken immediately and on a best efforts basis. The parties acknowledge that the equity allocations with respect to the Corporation set forth in this Agreement will be applicable only in the event that the short term funding for the Venture is consummated in a timely manner, and is facilitated through associates and/or resources related to GLOBAL. Accordingly, the parties have agreed that in the event that edequate short term financing has not ben secured by GLOBAL, in a manner consistent with the foregoing, within a period of ninety days following the approval of the business plan referenced above, mPhase shall have the right to pursue and consummate other financing alternatives without any obligation to preserve the agreed-upon equity position of GLOBAL. Both parties agree to negotiate in good faith to achieve the funding objectives.
9. OWNERSHIP AND EXPLOITATION
The Corporation will have the sole and exclusive right, for a period of ninety nine (99) years, throughout the world and in all media and markets, to market, distribute, sell, advertise, and promote the Network Interface, as well as television programming and other services offered under the Complete TV tradename, including without limitation all elements and derivative products thereof. Provided, however, nothing contained herein will be interpreted to prohibit mPhase from licensing or selling any or all portions of the Technology to third parties for the manufacture by such parties of devices or systems similar to those utilized in the Network Interface. It is further agreed that all rights in and to the Complete TV tradename and trademark, and in and to all other marks, designs, or logos which may be used to identify or in conjunction with the Complete TV service, shall for all purposes and for all times be the sole and exclusive property of the Corporation.
10. WARRANTIES
Each party to this Agreement hereby warrants and represents to the other that it has the full and unconditional right and authority to enter into, perform, and be bound by all the terms of this Agreement and to grant to the other party all of the rights herein granted to said party, without the necessity of said party obtaining any rights or paying any monies other than as provided herein. Each party to this Agreement further warrants and represents that there is no conract, understanding, or pending or contemplated action (other than as specifically disclosed in writing by mPhase to GLOBAL) which will in any way interfere with or adversely affect any of the rights granted under this Agreement, that all elements and materials furnished by such party in connection with the Agreement will be free and clear of all liens and encumbrances, and, to the best of its knowledge, will not violate the private, civil, or property rights, intellectual property rights, or any other right of any person or entity whatsoever. mPhase and GLOBAL each hereby agree to defend, indemnify, and hold harmless the other from all claims actions, damages, losses, liabilities, and expenses (including, without limitation, attorneys? fees) in any way directly or indirectly arising or resulting from the acts or omissions of the indemnifying party or the breach by the indemnifying party of any of the warranties, representations, terms, or conditions contained in this Agreement.
Each party shall promptly notify the other in writing of any claim or action as to which indemnification might be required hereunder. The party entitled to indemnification with respect to any claim or action hereunder shall have the right, at its own cost and expense, to participate in the defense thereof with councel of its choice.
11. NOTICES
All notices and correspondence to be given pursuant to this Agreement shall be sent to the aprties at the following respective addresses:
If to mPhase: If to GLOBAL:
Ronald A. Durando Stephen A. French
mPhase Technologies, Inc. Global Music & Media, Inc.
587 Connecticut Avenue 1024-C Eighteenth Avenue South
Norwalk, Connecticut 06854-1789 Nashville, Tennessee 37212
12. TERM
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The term of this Agreement shall commence on the execution of this Agreement and shall continue until the expiration of the rights granted pursuant to this Agreement (and thereafter as to all warranties and representations, which shall survive the termination of this Agreement). Either party hereto shall be entitled to terminate this Agreement by giving written notice to the other party upon the occurrence of any of the following events; (a) the other party shall have failed, within thirty (30) days after receiving written notice of the same, to remedy any breach by it of any provision of this Agreement or any warranty or representation made by it hereunder: (b) the other party shall go into bankruptcy, liquidation or receivership, make any arrangement for the benefit of creditors, or a receiver or other custodian of any kind of its business or any part thereof shall be appointed. All the ten-existing rights of the non-breaching party shall survive such termination.
13. CORPORATE AUTHORITY
GLOBAL and mPhase each warrant and represent that it is duly incorporated and in good standing, with the power and authority to execute, deliver, perform, and be bound by all of the terms of this Agreement.
14. RELATIONSHIP OF THE PARTIES
Nothing in this Agreement shall, as between GLOBAL and mPhase, be construed to create (and neither party shall make any representation to the contrary) a partnership, joint venture, or any relationship other than that of independent contractors.
15. MISCELLANEOUS
(a) No failure or delay on the part of either party in exercising any right, power, or remedy hereunder shall operate as a waiver thereof nor preclude any other or further exercise thereof or the exercise of any other right, power, or remedy hereunder, the remedies herein provided for shall be cumulative, and not exclusive of any other remedies provided for at law or in equity.
(b) If either party is ordered by any court or by other legal process to make any payment, which is due hereunder to the other, to some other party, payment by such party in accordance with suchlegal process shall discharge said party?s obligation to the other to the extent thereof.
(c) This Agreement, including any exhibits, schedules, or attachments hereto referred to herein or delivered pursuant hereto, all of which form a part hereof, contain the entire understanding of the parties with respect to the matters set out herein, merging and superseding all prior and contemporaneous agreements and understandings between the parties with respect to such matters. This Agreement may be amended or supplemented only by a written instrument duly executed by both parties or their respective heirs, successors, assigns, or legal representatives.
(d) Any provision of this Agreement which is ruled unnforceable in any jurisdiction shall, as such jurisdiction, be ineffective to such extent, but shall not render invalid or unenforceable the remaining provisions in that jurisdiction or any provisions in any other jurisdiction. This Agreement shall be governed by, construed in accordance with, and enforceable under the laws of the State of Delaware as a contract entered into and to be fully performed therein. The parties hereby agree that the U.S. District Court for the District of Delaware (or, in the absence of jurisdiction or venue in said court, the appropriate state courts sitting in Wilmington, Delaware) shall have exclusive jurisdiction of any and all litigation arising hereunder, and the prevailing party in any such litigation shall be entitled to recover its costs and attorneys? fees incurred in connection therewith.
(e) Neither this Agreement nor any of th rights or obligations of any party hereunder may be assigned or delegated without the prior written consent of the other party hereto.
(f) The captions used in this Agreement are solely for the convenience of the parties, and in all events the language of the body of this Agreement shall control.
(g) This Agreement shall not be deemed effective until executed by both parties hereto.
The parties hereto have caused this Agreement to be executed by their duly authorized respective representatives as of the date first above written.
mPhase Technologies, Inc. Global Music & Media, Inc. By: By: Title: Title: |
Witness: Witness:
GLOBAL MUSIC & MEDIA, INC.
"A MultiFacedted, MultiNational, MultiMedia Group" Scarritt Place South * 1024-C Eighteenth Avenue South * Nashville, TN 37212 Telephone & Voice Mail: (615)327-4235 Facsimile: (615)327-4236
April 9, 1997
Mr. Ronald A. Durando
President
Mphase Technologies, Inc.
587 Connecticut Avenue
Norwalk, CT 06854-1789
Dear Ron:
The purpose of this letter is to evidence the mutual intention of Global Music
& Media, Inc. And Mphase Technologies, Inc., to enter into an arrangement
whereby our jointly-owned subsidiary Global Telecom, Inc. Will provide certain
services with respect to the exploitation of certain technologies owned by
Mphase, as generally described in the April 9, 1997, Memorandum from Stephen
A. French to Hal Willis, Jerry Gardner, and Tom Murphy. The parties
acknowledge the existence of agreements between the DeKalb Telephone
Cooperative and affiliated companies of each party, and acknowledge that the
consent of DeKalb may be required for the consummation of the transactions
contemplated herein.
The parties agree to use their best efforts to execute a formal agreement memorializing their relationship, to the best of their ability in light of current circumstances, on or before April 30, 1997. The contents of this letter and the existence of our relationship will remain confidential, except with respect to representatives or employees of the respective parties and as otherwise agreed by both parties.
If the foregoing meets with your approval, please express your consent by your signature in the space provided below and on the enclosed copy of this letter.
Very truly yours, MPHASE TECHNOLOGIES, INC. GLOBAL MUSIC & MEDIA, INC. By By Ronald A. Durando Hal L. Willis President Chairman, Managing Director Witness Witness |
mPHASE LICENSE AGREEMENT
This Agreement is made effective this 27th day of October, 1997 among mPhase
Technologies, Inc. a Delaware Corporation, having a place of business at 587
Connecticut Avenue, Norwalk, CT 06854-0960 (referred to as ?mPhase?), Complete
Telecommunications, Inc., a Delaware Corporation, having a place of business
at 1024-C 18th Avenue South, Nashville, TN 37212 (referred to as ?CTI?), and
Global Music & Media, Inc. a Tennessee Corporation, having a place of business
at 1024-C 18th Avenue South, Nashville, TN 37212 (referred to as ?Global?);
(mPhase, CTI and Global being collectively referred to as the Parties).
WHEREAS, mPHASE and GLOBAL have entered into a Joint Venture Agreement dated
April 30, 1997 for the purpose of establishing a digital subscriber line
service business to supply packaged TV programming and Internet related
services under the trademark COMPLETE TV over existing twisted-pair copper
analog telephone lines using certain mPhase technology (referred to as the
Venture Business);
WHEREAS, mPhase and Global, in order to implement said Joint Venture
Agreement, have established CTI to operate the Venture Business;
WHEREAS, the Parties desire to enter into an additional Agreement to further
the purposes of the Joint Venture Agreement; and
NOW THEREFORE, the Parties agree as follows:
1. DEFINITIONS
For the purposes of this Agreement, the following words and phrases shall have
the meanings stated below:
(a) "CTI Trademarks" means the Trademark COMPLETE TV, and such other mark or
marks as CTI shall establish to identify the services that it provides in the
operation of the Venture Business.
(b) ?Licensed Products and Services? means systems, components, and
software, which use mPhase Technology (as defined herein) for the transmission
and reception of TV programming and Internet data; and TV programming,
packaged and provided by CTI under the CTI Trademarks, and associated
services, all of which being sold or provided in the operation of the Venture
Business.
(c) "mPhase Technology" refers to the technology owned or controlled by or
licensed to mPhase relating to the design, manufacture and use of systems and
software which provide digital video and data communications over copper
twisted pair telephone networks on an interactive, bi-directional basis, said
systems utilizing a rate adaptive digital subscriber line modem pair to
transmit packaged data to a subscriber placed receiver.
(d) "Related Company" means any company controlling, controlled by (either
directly or indirectly) or under common control with CTI.
(e) "Territory" means the United States and Canada.
(f) "Field of Use" means that segment of the telecommunications industry in
which data, voice and video is transmitted to consumers over wire systems
owned and operated by limited areas, local companies, specifically excluding
regional systems such as the former Bell system companies and other companies
of similar size and distribution area.
2. GRANT OF LICENSES
(a) mPhase hereby grants to CTI an exclusive license, within the Territory,
without the right to grant sublicenses (except as specified below) to utilize
mPhase Technology in connection with the marketing and sale of Licensed
Products and Services, said license grant being limited to use in the Field of
Use. Nothing in this Agreement shall be construed as granting a license for
products or services other than those expressly defined as Licensed Products
and Services. Nothing in this Agreement shall be construed as restricting the
exploitation of mPhase Technology by mPhase for use in the delivery of TV
programming and Internet data related services packaged by others outside of
the Field of Use.
(b) mPhase hereby grants to CTI the limited right to grant sublicenses to
its customers to use software and documentation included in mPhase Technology
as may be necessary for the use of the Licensed Products and Services provided
by CTI in the course of the Field of Use. Such sublicenses shall be granted
only under the terms and conditions of an Agreement approved by mPhase.
(c) Nothing in this Agreement shall be construed as granting a license to
CTI under any patent owned or licensed to mPhase covering mPhase Technology.
mPhase
hereby agrees to refrain from suing CTI based on infringement of the patent
rights of mPhase for activities of CTI licensed herein.
d) Nothing in this Agreement shall be construed as restricting CTI?s rights
to market and sell its packaged TV programming and Internet services,
independent of the rights granted herein, except in the event that CTI desires
to market such products to customers or potential customers of mPhase, then
CTI shall seek the consent of mPhase prior to making contact and shall
cooperate with mPhase in the solicitation of such customers.
3. DISCLOSURE OF mPHASE TECHNOLOGY
(a) Upon the execution of this Agreement and periodically during the term of
this Agreement, mPhase shall disclose to CTI such mPhase Technology pertaining
to the Licensed Products and Services as mPhase believes is reasonably
required to allow CTI to exercise the rights granted herein. Nothing in this
Agreement shall be construed as requiring mPhase to disclose information which
is subject to restriction by a third party.
(b) mPhase Technology disclosed to CTI in writing hereunder shall be
identified by an appropriate legend such as "CONFIDENTIAL" or other similar
legend. CTI agrees that any copies of mPhase Technology made by CTI to the
extent permitted under this Agreement, shall include said legend.
(c) mPhase will provide CTI with technical assistance reasonably required to
permit CTI to utilize the mPhase Technology (i) by use of correspondence to
answer system, components, software, and service technical questions, where
possible, and (ii) if necessary, by conducting one training session each year
during the term of this Agreement. Said training sessions shall be conducted
at mPhase, each session to be scheduled on mutually agreeable dates and not to
exceed two consecutive weekdays in length. CTI may send up to a total of three
employees to each session for the purpose of learning as much of the processes
for marketing the Licensed Products and Services as possible. All
transportation, meals and other costs of CTI?s personnel during such sessions
shall be borne entirely by CTI.
4. FEES
CTI shall pay to mPhase, upon the execution of this Agreement, a non-refundable license fee of $300,000.00 as a down payment on the total license fee of $2,000,000.00, in exchange for 550,000 shares of mPhase Technologies, Inc. common stock with legend.
5. DISCLAIMER OF WARRANTY
(a) mPhase will not be responsible for, and CTI will indemnify and defend
mPhase from and hold mPhase harmless against, all claims for loss, liability,
damage or expenses (including, without limitation, reasonable attorneys? fees,
court costs and costs of investigation) arising as a result of the actions of
CTI in connection with the manufacture marketing, use, sale or warranty
(express or implied) by CTI, by a Related Company or by their customers, of
the Licensed Products and Services. In no event will mPhase be liable for
indirect, special or consequential damages incurred by CTI, a Related Company
or third parties in connection with this Agreement or the Licensed Products
and Services.
(b) mPhase makes no representation or warranty with respect to information
that it discloses to CTI including mPhase Technology disclosed under this
Agreement or of CTI's ability to use the same, except to state that, unless
otherwise specified in this Agreement at the time of disclosure such
information is the current information used in related businesses using mPhase
Technology.
6. IMPROVEMENTS CTI agrees to disclose to mPhase any improvements developed by CTI during the term of this Agreement relating to the manufacture or use of the Licensed Products and Services and to grant to mPhase the nonexclusive, royalty-free, right to use and sublicense said improvements in the manufacture, use and sale of its products and the provision of services.
7. MANUFACTURE AND SUPPLY
a) The Parties acknowledge that mPhase has the exclusive right to
manufacture or supply data delivery systems using the mPhase Technology. CTI
agrees to purchase its requirements for data delivery systems and components
therefore exclusively from mPhase. Contingent on the successful completion of
the design, evaluation, and trial
phases of the development of data delivery systems using the mPhase
Technology, mPhase will supply such systems to CTI at mutually acceptable
terms and conditions.
b) An appropriate manufacturing warranty shall be given by mPhase which
will be consistent with reasonable practices in the telecommunication
industry.
8. NON-DISCLOSURE'
(a) CTI understands the mPhase Technology represents valuable property of
mPhase and are of a highly confidential nature. CTI, therefore, shall maintain
all mPhase Technology in confidence and shall not disclose mPhase Technology
to others without the express written consent of mPhase. CTI shall not use the
mPhase Technology except in accordance with the terms of this Agreement.
(b) CTI shall not make copies of the mPhase Technology disclosed by mPhase without the prior express, written consent of mPhase, unless, for internal use only, it is essential for the effective use of the rights granted herein. All such essential copies shall contain the mPhase proprietary and confidential notice, shall be individually numbered, and a record kept of the number and location of each copy. The documents which contain the mPhase Technology are unpublished and all rights thereto are reserved by mPhase.
(c) CTI agrees that it will notify each of its personnel to whom any mPhase
Technology is disclosed of his/her obligations not to disclose such mPhase
Technology commensurate in scope with CTI?s non-disclosure obligations
contained in this Agreement.
(d) CTI agrees to institute internal procedures for maintaining strict
control over documents containing mPhase Technology provided by mPhase and
shall take steps to insure that such documents are clearly identified as the
property of mPhase. Said documents shall not be incorporated into documents of
CTI except by reference.
(e) In the event of termination, and upon expiration, of this Agreement, CTI
shall immediately return to mPhase, all mPhase Technology provided by mPhase
as well as any copies and derivatives thereof and cease all use thereof.
(f) CTI acknowledges that mPhase shall suffer irreparable injury in the
event CTI breaches any of its obligations under this Section. Therefore, CTI
agrees that, in addition to all other remedies to which mPhase may be entitled
at law or in equity, mPhase shall be entitled to seek any remedy in equity
including an injunction permanently restraining CTI from breaching or further
breaching any of the obligations contained herein. CTI agrees that it will not
oppose the seeking of such remedy on the basis that there exists an adequate
remedy at law for damages.
9. DILIGENCE CTI shall market and solicit sales of the Licensed Products and Services diligently and in a good faith manner to an extent as wide as its facilities permit and shall employ and utilize engineering personnel having reasonable experience and expertise in the design and use of Licensed Products and Services in order to maximize the sales of the Licensed Products and Services throughout the Territory.
10. TERM
This Agreement shall remain in full force and effect for a period of seventeen
(17) years from the effective date indicated in the introduction to this
Agreement. This Agreement shall be deemed automatically renewed for additional
seventeen (17) year terms unless mPhase notifies CTI within sixty (60) days
prior to the expiration of the then current term that the Agreement will not
be renewed.
11. TERMINATION
(a) This Agreement shall automatically terminate in the event that CTI (i) is
in liquidation, either voluntarily or involuntarily, or is placed in
receivership or otherwise enters into any scheme or composition with its
creditors or makes an assignment for the benefit of creditors or (ii) ceases
to sell the Licensed Products and Services for a period of six (6) months.
(b) This Agreement may be terminated immediately by mPhase:
(i) in the event that CTI fails to make any payment due hereunder; or
(ii) upon the breach or default by CTI of one or more terms of the license
Agreement with mPhase.
(c) This Agreement may be terminated by either party:
(i) immediately, in the event that the other party defaults under or
breaches any of the terms of this Agreement other than payment and such
default or breach is not remedied within a period of thirty (30) days after
notification thereof; or
(ii) immediately in the event that this Agreement is, in total, held invalid
or unenforceable by the determination of a court of competent jurisdiction.
(d) CTI may terminate this Agreement at any time upon sixty (60) days prior
written notice to mPhase, provided that the use of all mPhase Technology in
the marketing and sale of Licensed Products and Services has ceased prior to
the date of such notice, and provided, further, that CTI destroys all Licensed
Products on hand which use mPhase Technology as of the date of giving such
notice.
(e) The foregoing grant of licenses has been made in recognition of, and
conditioned upon, a careful examination of the personal skills, reputation and
ability of CTI?s current ownership and control, particularly their ability to
obtain and package TV programming. CTI shall notify mPhase in writing of any
change in its ownership or control, which would materially alter the
participation of individuals constituting the management of CTI existing as of
the Effective Date of this Agreement to the extent practicable prior to the
effective date thereof and, in no event, more than thirty (30) days
thereafter. In the event there is any change in CTI's ownership or control to
which mPhase has not, in its sole discretion, consented, mPhase shall have the
right to terminate this Agreement on thirty (30) days? written notice to CTI.
12. RIGHTS AFTER TERMINATION OR EXPIRATION
(a) Upon any termination or expiration of this Agreement, CTI shall cease
all further use of mPhase Technology and discontinue the marketing and sale of
Licensed Products and Services using said Technology. CTI shall thereafter
make no reference of any kind which might create the impression that CTI
continues to be licensed by mPhase.
(b) Termination or expiration of this Agreement shall not release CTI from
its obligation to make payment in full of all royalties then owing, and
further, shall not relieve the parties from such obligation or liabilities
hereunder which expressly extend beyond such termination or expiration.
(c) The provisions of Paragraph 8 hereof shall survive any termination or
expiration of this Agreement.
13. LITIGATION mPhase specifically disclaims any financial or other responsibility for litigation or any type to which CTI may become a party as a result of its exercising the rights granted herein. mPhase does agree, however, to without liability for any costs of such litigation, provide such assistance and cooperation as may be reasonably necessary to assist CTI in its defense of any litigation which seeks to restrict the exercise of CTI?s rights under this Agreement. In the event that mPhase, in its sole discretion determines that it is in its best interest to participate in such litigation, then it shall have the right to take control of such litigation assuming the responsibility for such expense as the parties shall mutually agree.
14. WAIVER OF DEFAULT
No waiver by either party of any default of the other party shall be held to be a waiver of any other subsequent default. The failure of either party at any time to enforce or require performance of any of the provisions of this Agreement, or to exercise any right or option herein provided, shall in no way be construed to be a waiver of that or any other provision of this Agreement or to affect the right of such party thereafter to enforce each and every such provision. All waivers shall be in writing, signed by the waiving party.
15. DISCLAIMER OF AGENCY It is agreed that CTI is an independent contractor and not the agent of mPhase. CTI has no right or authority to assume, create or incur any liability or obligation of any kind, express or implied, against, in the name of, or on behalf of mPhase.
16. NOTICES All notices required of the parties under this Agreement shall be in writing. Any such notice shall be deemed served if sent registered or certified airmail, postage prepaid, addressed to the other party at the address set forth above, or at such other address as may hereafter be designated by either party in writing.
17. ASSIGNMENT This Agreement shall be binding upon the parties hereto and mPhase?s respective successors and assigns. This Agreement and the rights and obligations hereunder shall not be assignable by CTI whether by merger, operation of law or otherwise except with the prior written consent of mPhase.
18. MISCELLANEOUS
(a) This Agreement shall be governed by and construed in accordance with the
substantive laws of the State of Connecticut.
(b) This Agreement constitutes the entire Agreement between the parties and
supersedes all prior agreements, negotiations, or discussions between the
parties with respect to the Licensed Products and Services, and shall not be
modified or amended except by an instrument in writing of a date subsequent
hereto duly executed by each of the parties.
(c) It is hereby agreed among the Parties that the obligations of mPhase
with respect to the licensing of mPhase Technology under the Joint Venture
Agreement are fully met by the provisions of this License Agreement and that
any inconsistencies or conflicts between the Joint Venture Agreement and this
License Agreement shall be controlled by this License Agreement.
In acceptance of the above provisions, the parties hereto have executed this agreement below.
mPhase Corporation Global Music & Media By: By: Signature:______________________ Signature:______________________ Typed Name & Title: Typed Name & Title: Ronald A. Durando, President and CEO Hal L. Willis, Chairman Date:___________________________ Date:__________________________ Witness:________________________ Witness:_______________________ |
CTI, Inc.
By:
Signature:______________________
Typed Name & Title:
Jerry L. Gardner, President
Date:___________________________
Witness:________________________
LICENSE AGREEMENT
THIS AGREEMENT is made and entered into the day of , 1998 (hereinafter "Effective Date") by and between the GEORGIA TECH RESEARCH CORPORATION, a nonprofit corporation organized and existing under the laws of the State of Georgia and having its principle offices at the Georgia Institute of Technology (hereinafter "GIT"), Centennial Research Building, Atlanta, Georgia 30332-0415, (hereinafter "GTRC") and mPhase Technologies, Inc., a corporation existing under the laws of the State of New Jersey and having its principle offices at 587 Connecticut Avenue, Norwalk, CT 06854-0566 (hereinafter "LICENSEE").
W I T N E S S E T H:
WHEREAS, GTRC owns and wants to provide for the commercialization of a certain invention entitled ADigital Video and Data System@, which is the subject of GTRC Invention Disclosure number 1941 and in respect of which GTRC is seeking patent protection (hereinafter "Invention"); and
WHEREAS, GTRC has available to it certain know-how, technology, trade secrets and methods (hereinafter "Know-how") which relate to the Invention; and
WHEREAS, LICENSEE wishes to utilize the Invention and Know-how related to the Invention (hereinafter "Technology") to achieve the development, manufacture, and sale of Products containing the Technology in the AField of Use@ as defined in Section 1.8 herein.
NOW, THEREFORE, GTRC and LICENSEE in consideration of the foregoing and the mutual promises contained herein and intending to be legally bound hereby agree as follows:
1. DEFINITIONS
As used herein:
1.1 "Net Selling Price" shall mean the gross sales by LICENSEE or any approved sub-licensee of the Products, less only usual trade discounts, sales tax which the seller has to pay or absorb, customs duties and transportation and insurance charges, if not included in the gross price, and any and all Federal, foreign, State or local taxes (except income tax) incurred by the seller on such sales.
1.2 "Patent" shall mean any issued Letters Patent disclosing and claiming the Invention, including a reissued patent, a patent issuing from a continuation application, divisional application or continuation-in-part application, and means any foreign patent similar thereto.
1.3 "Products" shall mean any method through which the Technology is commercialized and utilized by LICENSEE.
1.4 "Sales", "Sell, or "Sold" shall mean any sale, transfer, lease, license, permission to use or other transfer of the right of possession or other conveyance by LICENSEE or any approved sublicensee.
1.5 ASales Made shall mean Sales for which payment has been received by LICENSEE.
1.6 "Proprietary Information" shall mean information and trade secrets owned or controlled by GTRC at any time during the term of this Agreement, which relates to the Inventions covered by the Licensed Patents, including but not limited to, invention records, research records and reports, engineering and technical data, designs, production specifications, processes, methods, procedures, facilities and know-how.
1.7 "Territory" shall mean the world.
1.8 AField of Use@ shall mean:
i. delivery and/or distribution of compressed digital video streams (such as MPEG-2), audio streams, data (such as Internet) or telephony; and
ii. control and/or management of systems delivering and/or distributing digital video streams (such as MPEG-2), audio systems, data (such as Internet) or telephony.
2. GRANT OF LICENSE
2.1 With respect to the Technology to which GTRC has exclusive rights, GTRC hereby grants to LICENSEE an exclusive, nontransferable, royalty-bearing license, with a right of sublicense, to make, have made, sell, and use Products in the Field of Use throughout the Territory. LICENSEE shall not export any Product or enter into any sublicense without fully and completely complying with any and all United States export or munitions control regulations and laws.
2.2 Any provision of this Agreement to the contrary notwithstanding, GTRC reserves an irrevocable, nonexclusive, royalty-free, nontransferable license to make and use the Technology for educational and research and development activities practiced by GTRC and GIT.
3. CONSIDERATION
3.1 In consideration of the granting herein of the License as described in Article 2, LICENSEE shall:
3.1.1 Pay GTRC One Hundred U.S. Dollars ($100.00), the receipt and sufficiency of which is hereby acknowledged;
3.1.2 Pay GTRC the Royalties as set forth below in Article 5; and
3.1.3 Pay GTRC the payments as required in accordance with the Basic
Ordering Research Agreement between GTRC and LICENSEE dated April
14, 1997, and any subsequent amendments to that Agreement.
4. SUBLICENSES
4.1 Subject to this Paragraph, LICENSEE may grant sublicenses to persons or
|
entities specifically approved in writing by GTRC, which approval shall not be unreasonably withheld, provided that each sublicense contains a provision that such sublicense and the rights thereby granted are personal to the sublicensee thereunder and such sublicense cannot be further assigned or sublicensed.
4.2 Any sublicense granted pursuant to this Article shall be in accordance with the terms and conditions of this Agreement and shall at a minimum, contain the same protection for GTRC's Proprietary Information as is set forth herein.
4.3 In respect of any sublicense granted by LICENSEE in accordance with this Article, LICENSEE shall promptly pay to GTRC an amount equal to Thirty percent (30%) of any lump sum or other payment howsoever calculated, made by the sublicensee thereunder in consideration for the grant of such sublicense to it by the LICENSEE.
5. ROYALTIES
5.1 LICENSEE shall pay GTRC royalties at a rate to be agreed on a fair and reasonable basis, but not to exceed Five percent (5%), nor be less than Three percent (3%), of Sales Made by LICENSEE or any sublicensee under this Agreement.
5.2 Should a patent not be allowed in any country of the Territory, or if after allowance should any issued patent be ruled invalid in any countryof the Territory, then the royalty shall be reduced by Fifty percent (50%) of the existing royalty rate for Sales Made in such country as from the date of final rejection of the patent application or the date of final ruling after appeal that the patent is invalid.
5.3 All payments to GTRC under this Agreement shall be made in U.S. dollars at GTRC's address for notice. Such payments shall be paid to GTRC quarterly on a calendar year basis. Payment for Sales Made during each quarter of each calendar year shall be made to GTRC within thirty (30) days after the last day of each quarter.
5.4 LICENSEE shall pay all royalties due hereunder to GTRC and GTRC shall not be required to look to any other entity for payment.
6. ACCOUNTS
6.1 Not later than March 1 of each calendar year LICENSEE shall furnish to GTRC a statement showing Sales Made by LICENSEE during the immediate preceding calendar year, and the royalties payable thereon calculated in the manner required in Article 5.
6.2 LICENSEE shall keep at its usual place of business true and particular accounts of all matters connected with the use of the Technology and the manufacture and sale of all Products and shall keep books of account relating to royalties payable hereunder containing true entries complete in every particular as may be necessary or proper for enabling the amount of such royalties to be conveniently ascertained.
6.3 If requested in writing by GTRC, LICENSEE shall at all reasonable times produce evidence of the matters referred to in Article 6 and shall permit such evidence to be verified by an independent accountant to be selected and paid for by GTRC. LICENSEE shall give such accountant all necessary facilities for verifying such evidence and shall give such information as may be necessary or proper to enable the amount of the royalties to be verified.
7. IMPROVEMENTS
7.1 Should LICENSEE or any consultant or employee of LICENSEE during the term of this Agreement make or discover any improvement in connection with the Technology in the Field of Use, whether patentable or not, which if practiced would constitute an infringement of any Patent of the Technology, LICENSEE shall forthwith disclose or cause the same to be disclosed to GTRC, and such improvement shall be deemed to be a part of the "Technology" and shall be subject to the terms hereof for the purpose of calculating royalties hereunder. The foregoing notwithstanding, LICENSEE shall own all right, title and interest in any such discovery or improvement. However, LICENSEE shall make available to GTRC and GIT any improvements or modifications it makes to the Technology and grants to GTRC and GIT an irrevocable, non-exclusive, royalty-free, non-transferable license to use the improvements throughout the world for educational and research and development purposes only. If so requested by GTRC, LICENSEE shall make available or supply to GTRC such information or data as is necessary or convenient for the proper understanding or use of such discovery or improvement.
7.2 If GTRC makes or discovers any improvement developed within the Georgia Tech Research Institute (GTRI), or jointly by staff of GIT with an employee of LICENSEE, in connection with the Technology, whether patentable or not, which if practiced would constitute an infringement of any Patent on the Technology, GTRC shall, subject to the pre-existing rights of any third party, forthwith disclose or cause the same to be disclosed to LICENSEE and such improvement shall be deemed to be included in the term "Technology" and to be included in this Agreement and be subject to the terms hereof and any application for letters patent or other equivalent protection made in respect thereof shall be treated as if it were included in the term "Patent". The costs of prosecuting such applications for letters patent or equivalent protection and maintaining the letters patent issuing from such applications shall be borne by LICENSEE during the term of this agreement. Any such discovery or improvement shall belong to and be the sole and exclusive property of GTRC.
8. NEW DEVELOPMENTS
8.1 Should GTRC make or discover any new invention which if practiced would not constitute an infringement of the relevant Patent or other equivalent protection in respect of the Technology, but which has a similar application or use as the inventions, then, subject to the pre-existing rights of any third party, GTRC shall offer to LICENSEE the right of first refusal to take up a license to make, sell anduse such new invention within the Territory.
9. CONFIDENTIALITY
9.1 Neither party shall disclose any Proprietary Information received from the other party other than to employees of the party who must have access to such Information in order to carry out the party=s obligations under this Agreement and to potential sublicensees of the Technology, provided such disclosure is in accordance with Paragraph 9.3 hereof. Prior to disclosure of Proprietary Information to employees, such employees shall be under a written obligation of confidentiality at least as restrictive as the provisions contained herein. Proprietary Information shall be maintained in confidence for so long as such Information is maintained in confidence by the owner thereof.
9.2 To protect Proprietary Information, the recipient shall adopt security measures commonly observed in industries that rely on Proprietary Information. These measures shall include, but not be limited to, restricted access to such information, marking such information, and the selective destruction of sensitive materials. Upon termination of this Agreement, the recipient shall return or destroy all documents or materials embodying Proprietary Information.
9.3 Any disclosure of Proprietary Information by the recipient to potential sublicensees of the Technology shall be prohibited, unless such potential sublicensee has signed an agreement which imposes obligations of confidentiality and nonuse at least as restrictive as those imposed on the recipient hereunder.
10. INITIAL DEVELOPMENT AND FULL USE OF TECHNOLOGY
10.1 As soon as reasonably practicable after the Effective Date of this Agreement, but not later than Twenty Four (24) months after the Effective Date hereof, LICENSEE shall take steps to meet the reasonable requirements of the market by offering for sale Products in sufficient quantities to meet a reasonable public demand.
10.2 Should GTRC not receive at least Fifty Thousand U.S. Dollars ($50,000) in royalty payments from LICENSEE within Thirty-six (36) months from the Effective Date of this Agreement and should GTRC not receive at least One Hundred Thousand U.S. Dollars ($100,000) in royalty payments during each twelve (12) month period thereafter, GTRC shall have the option to terminate the license granted hereunder, to allow this Agreement to continue in full force and effect or to convert the license granted hereunder to a nonexclusive license upon written notice to LICENSEE.
11. PROTECTION OF INTELLECTUAL PROPERTY
11.1 GTRC shall file any and all future patent applications, trademark registrations or copyright registrations (hereinafter "Intellectual Property Protection"), domestic and/or foreign, in GTRC's name to protect the Technology and/or improvements to the Technology licensed hereunder. LICENSEE shall be responsible for all costs, fees and expenses incurred in connection with the filing, prosecution and maintenance of all Intellectual Property Protection and the maintenance of any patent, trademark or copyright issuing thereon. GTRC agrees to keep LICENSEE advised, in a timely manner, of any deadlines which would require action on the part of the LICENSEE in the prosecution of such Intellectual Property Protection.
11.2 If, at any time during the term of this Agreement, LICENSEE elects to abandon it's right in any pending Intellectual Property Protection or any patent, trademark or copyright issued thereon, either domestic or foreign, it shall notify GTRC of that decision at least two (2) months prior to any deadline for filing any response or taking any other action necessary to maintain any such Intellectual Property Protection. Thereafter, GTRC shall have the right and option to take over the sole and exclusive responsibility for the prosecution of any such Intellectual Property Protection and/or the maintenance of any such patent, trademark or copyright solely at GTRC's expense and in such an event the rights granted under this Agreement shall become nonexclusive for such country or countries of the Territory.
11.3 If patent, trademark or copyright protection is obtained for the Technology and/or improvements to the Technology, LICENSEE shall cooperate with GTRC in enforcing or policing such protection as provided in Article 12 herein and by taking all appropriate measures including marking trade secrets and other Proprietary Information as required and taking other measures as mutually agreed to by GTRC and LICENSEE.
12. NOTICE OF INFRINGEMENT AND ENFORCEMENT OF RIGHTS
12.1 Immediately upon LICENSEE's learning of any infringement, misappropriation or other unauthorized use of GTRC's Proprietary Information, and/or Patents, copyrights or trademarks pertaining to GTRC's Invention licensed hereunder (hereinafter "Intellectual Property Rights"), LICENSEE shall promptly inform GTRC.
12.2 If LICENSEE and GTRC agree to jointly pursue enforcement of GTRC's Intellectual Property Rights, then the parties hereto shall share equally all costs, fees and/or expenses incurred in connection with enforcement of GTRC's Intellectual Property Rights provided only that GTRC's maximum exposure for such costs, fees and expenses shall be the amount of royalties paid and/or payable to GTRC by LICENSEE hereunder. Any payments accruing from such action to enforce GTRC's Intellectual Property Rights shall be paid to LICENSEE and GTRC in proportion to the parties' respective contributions to all costs, fees and/or expenses incurred in such action.
12.3 In the event that either party shall determine, for any reason, that it does not choose to enforce GTRC's Intellectual Property Rights, then that party shall promptly notify the other party of such decision. The party choosing to enforce GTRC's Intellectual Property Rights may then proceed with such enforcement action solely at its own expense and any and all recoveries shall be awarded solely and exclusively to that party.
13. INDEMNITY
13.1 LICENSEE hereby indemnifies and holds harmless GTRC, GIT, and the Board of Regents of the University System of Georgia, and their employees, officers, board members and agents (hereinafter AIndemnitees@) from and against all claims, suits, liabilities, damages, costs, fees, expenses or losses arising out of or resulting from LICENSEE's performance of this Agreement, including but not limited to any third party claims against Indemnitees for patent, copyright, and/or trademark infringement and/or patent interference, and any damages, losses or liabilities whatsoever with respect to death or injury to any person and damage to any property arising from the possession, use or operation of Products produced or sold by LICENSEE or its sublicensees or their customers in any manner whatsoever.
14. DISCLAIMER, WARRANTY AND LIMITATION OF LIABILITY
14.1 EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT, GTRC DISCLAIMS ANY AND ALL PROMISES, REPRESENTATIONS AND WARRANTIES WITH RESPECT TO THE TECHNOLOGY, INCLUDING ITS CONDITION, CONFORMITY TO ANY REPRESENTATION OR DESCRIPTION, THE EXISTENCE OF ANY LATENT OR PATENT DEFECTS THEREIN AND ITS MERCHANTABILITY OR FITNESS FOR A PARTICULAR USE OR PURPOSE.
14.2 In no event shall GTRC be liable for any use by LICENSEE of the Technology or any loss, claim, damage or liability, of whatsoever kind or nature, which may arise from or in connection with LICENSEE's performance under this Agreement.
15. TRADEMARK
15.1 Except for the purposes of identifying the Technology, no right, title, interest or license to any trademark or service mark, is granted to LICENSEE.
16. PRODUCT LIABILITY
16.1 LICENSEE shall during the term of this Agreement maintain in full force and effect a product liability insurance policy and shall each year provide evidence of such policy.
17. RELATIONSHIP BETWEEN GTRC AND LICENSEE
17.1 GTRC and LICENSEE are and shall remain independent contractors and nothing herein shall create a partnership or joint venture between GTRC and LICENSEE.
18. ADVERTISING, PUBLICITY AND PUBLICATIONS
18.1 Except as otherwise provided herein, LICENSEE shall not use the names of Georgia Tech Research Corporation, the Georgia Tech Research Institute, the Georgia Institute of Technology, Georgia Tech, the Georgia Tech Foundation or any of their respective affiliates or divisions in any advertisement or sales materials without the prior written consent of GTRC.
18.2 In any publication (including advertisements, sales and trade literature and instruction manuals) relating to the Invention used pursuant to this Agreement, LICENSEE shall give due credit to GTRC, as owner and licensor and in the case of professional journals, trade publications and editorials to the relevant staff of GTRI, as Inventors of the Invention.
18.3 GTRC and the Inventors shall have the right to publish papers and other scholarly materials on the Technology in the appropriate literature. Such publication shall in no event disclose proprietary or confidential information of the other party. GTRC and GIT may catalog and place such publications in the GIT library. LICENSEE shall have the right to review materials related to the Technology for Thirty (30) days from receipt by LICENSEE of the material for review, prior to publication.
19. TERM AND TERMINATION
19.1 This Agreement shall commence on the Effective Date of this Agreement and shall continue until the expiration of the last expiring patent covering any of the Technology licensed hereunder. Notwithstanding the foregoing, the obligations of the parties under Articles 5, 6, 9, 14, 15 and 19 shall survive any termination of this Agreement.
19.2 In the event of the breach of a material obligation hereunder by either
party, the nonbreaching party shall inform the alleged breaching party of said
breach in writing. The alleged breaching party shall have sixty (60) days
from the date of said notification during which time to cure the breach. In
the event the alleged breaching party does not cure the breach within sixty
(60) days, the nonbreaching party may terminate the Agreement upon written
notice to the breaching party.
19.3 LICENSEE shall, within ten (10) days of termination of this Agreement for any reason, deliver to GTRC all written documentation in the possession of LICENSEE which contains Proprietary Information pertaining to the Technology.
20. NOTICES
20.1 All notices required or permitted under this Agreement shall be in writing and shall be delivered personally or sent by certified registered mail to LICENSEE or GTRC at the addresses set forth below:
GTRC:
GEORGIA TECH RESEARCH CORPORATION
Centennial Research Building
Georgia Institute of Technology
Atlanta, Georgia 30332-0415
Attn: Director, Technology Licensing
LICENSEE:
mPhase Technologies, Inc.
587 Connecticut Avenue
Norwalk, CT 06854
Attn: Mr. Ronald A. Durando
21. WAIVER
21.1 Waiver by either party of any term or provision of this Agreement shall not constitute a continuing waiver thereof nor of any further or additional rights such party may hold under this Agreement.
22. SEVERABILITY
22.1 If any provision of this Agreement shall be held to be invalid, illegal or unenforceable, the validity, illegality or unenforceability of the remaining provisions shall not in any way be affected or impaired.
23. GOVERNING LAW
23.1 This Agreement shall be construed in accordance with the laws of the State of Georgia, U.S.A.
24. ENTIRE AGREEMENT
24.1 This Agreement is the complete and exclusive statement between the parties relating to the subject matter hereof, and supersedes all prior understandings, communications, or representations, either oral or written, between the parties. This License Agreement may not be modified or altered except by a written instrument duly executed by LICENSEE and GTRC.
25. CUMULATIVE RIGHTS
25.1 Unless expressly stated to the contrary elsewhere in this Agreement, all rights, powers and privileges conferred hereunder upon the parties hereto shall be cumulative and not restrictive of those given by law.
26. SECTION HEADINGS
26.1 Section headings have been inserted herein for convenience of reference only and shall in no way modify or restrict any of the terms or provisions of this Agreement.
27. ASSIGNMENT
27.1 Subject to this Paragraph, the License is personal to LICENSEE. It is expressly understood by the parties that the License may be assigned to the Georgia Institute of Technology or the Board of Regents of the University System of the State of Georgia. Except as otherwise agreed herein, this Agreement may not be assigned by either party without the prior written consent of the other.
28. SUCCESSORS AND ASSIGNS
28.1 This Agreement shall bind and inure to the benefit of the parties hereto and their respective successors and permitted assigns, but nothing contained herein shall be deemed to permit assignment by either party except as otherwise permitted in this Agreement.
29. INTERPRETATION
29.1 In the interpretation of this Agreement, words importing the singular or plural number shall be deemed to import the plural and singular number respectively, words denoting gender shall include all genders and references to persons shall include corporations or other bodies and vice versa.
30. FORCE MAJEURE
30.1 Neither party shall be held in breach of this Agreement because of acts or omissions caused by any act of God or other cause beyond the control of the parties, including, but not limited to, fire, floods, labor disputes, or other unforeseen circumstances.
IN WITNESS WHEREOF, the parties have set their hands and seals and duly executed this Agreement effective as of the date first above written.
Georgia Tech Research Corporation mPhase Technologies, Inc. By: By: Typed Name: Typed Name: Title: Title: |
Date: Date:
By:
Typed Name:
Title:
Date:
Exhibit 11
mPhase Technologies, Inc.
A DEVELOPMENT STAGE ENTERPRISE
COMPUTATION OF PER SHARE EARNINGS
(In thousands except per share amounts)
For the
Period From
October 2, 1996 For the
(Date of nine months
Inception) Ended
Through March 31, 1998
June 30, 1997 (Unaudited)
BASIC EARNINGS PER SHARE:
1) Proforma Average shares outstanding $ 7,806 $ 8,878
Net effect of dilutive stock options
based on the treasury stock method
using current market price - -
Net effect of warrants outstanding,
had they been exercised at the
beginning of the period - -
Total 7,806 8,878
Net (loss) $ ( 781) $ 2,634
Per Share Amounts:
Net (loss) per share $ (.100) $ (.297)
|
Exhibit 11 - (Continued)
mPhase Technologies, Inc.
A DEVELOPMENT STAGE ENTERPRISE
COMPUTATION OF PER SHARE EARNINGS
(In thousands except per share amounts)
For the
Period From
October 2, 1996 For the
(Date of nine months
Inception) Ended
Through March 31, 1998
June 30, 1997 (Unaudited)
DILUTED EARNINGS PER SHARE:
1) Proforma Average shares outstanding $ 7,806 $ 8,878
Net effect of dilutive stock options
based on the treasury stock method
using current market price 3,675 2,925
Net effect of warrants outstanding,
had they been exercised at the
beginning of the period - 650
Total 11,481 12,453
Net (loss) $ .781 $ 2,634
Per Share Amounts:
Net (loss) per share $ (.068) $ (.212)
|
1) Average shares outstanding are based upon the weighted average shares outstanding for the period presented giving retroactive recognition for the number of equivalent shares received by Lightpaths, Inc.
Exhibit 21
Subsidiaries:
1. Microphase Telecommunications, Inc. (a Delaware Corporation) 587 Connecticut Avenue Norwalk, Connecticut 06854-0566 100% owned as of June 25, 1998
2. Lightpaths, Inc. (a Delaware Corporation) 587 Connecticut Avenue Norwalk, Connecticut 06854-0566
3. Complete Telecommunications, Inc. (a Delaware Corporation) 1024-C 18th Avenue South Nashville, Tennessee 37212
CONSENT OF INDEPENDANT PUBLIC ACCOUNTS
MAURIELLO, FRANKLIN & LOBRACE
We hereby consent to the incorporation by reference in this Registration Statement on SEC Form 10-SB of our report dated March 17, 1997, appearing in the Financial Statements of Tecma Laboratories, Inc. for the period from July 1, 1994 through June 30, 1996.
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANT
We hereby consent to the use in this Form 10-SB of our report dated September 12, 1997, except as to Note 11, as to which the date is December 5, 1997, on our audit of the consolidated financial statements of CyberSense Systems Corporation.
Raritan, New Jersey
August 31, 1998
SUBSCRIPTION AGREEMENT
mPhase Technologies. Inc.
(A New Jersey Corporation)
THE 700.000 UNITS OFFERED HEREBY HAVE NOT BEEN REGISTERED WITH THE
SECURITIES AND EXCHANGE COMMISSION UNDER THE SECURITIES ACT OF 1933. AS
AMENDED (THE "ACT"),
IN RELIANCE UPON CERTAIN EXEMPTIONS FROM REGISTRATION
PROVIDED IN THE ACT AND THE RULES AND REGULATIONS
THERETO INCLUDING RULE 505 OF REGULATION D OF THE ACT,
NOR HAVE SUCH SECURITIES BEEN REGISTERED OR QUALIFIED
UNDER ANY STATES SECURITIES LAWS. ACCORDINGLY. IT IS
UNLAWFUL TO CONSUMMATE A SALE OR TRANSFER OF THE
UNITS OF THIS COMPANY UNLESS SUCH UNITS ARE
SUBSEQUENTLY REGISTERED OR QUALIFIED UNDER THE ACT AND
APPLICABLE STATE SECURITIES LAWS OR EXEMPTIONS
THEREFROM ARE WAILABLE.
Date: January 20,1998
This Subscription Agreement is entered into by and between (the "Subscriber") and rnPhase TechnoIogies Inc a New Jersey Corporation ("the Company") as of the date it is accepted below by the Company.
1. Subscription The subscriber hereby agrees to purchase Units of mPhase Technologies Inc. common stock and common stock purchase warrants at a price of $.75 per Unit
2. Acceptance Acceptance by the Company shall be evidenced by its delivery to Subscriber of a full executed Subscription Agreement. Execution of this Agreement by the Subscriber does not require the Company to accept any Subscription and this Agreement shall not be binding unless and until accepted in writing by the Company.
3. Company's Representations The company represents that it has been duly organized under the laws or the State ot New Jersey.
4. Subscriber's Representations The Company is offering and shall issue the Units Subscribed for in this Agreement without registering them pursuant to the Securities Act of 1933 as amended (?the Act?) and in particular Rule 505 of Regulation D of the Act The Company is doing so in reliance upon, among other things, the Subscriber's following representations:
(a)Accuracy of the Information Provided and Subscriber?s Representations
The Subscriber?s representations in this Agreement are complete and accurate to the best of the Subscriber's knowledge, and the Company may rely upon them. The Subscriber will notify the Company immediately if any material change occurs in any of this information before the sale of the Units.
B) Access to Data The Subscriber has reviewed among other documents the Company's Confidential Memorandum dated as of January 20. 1998 issued by counsel in lieu of a disclosure statement and any amendments thereto ("the Statement"). The Subscnber understands that an investment in the Company involves significant risk, including those described in the Memorandum. The Subscriber hereby acknowledges it has requested and has been afforded the opportunity to ask questions and receive answers concerning the terms and conditions of the Offering and to obtain any additional information that the Company possess or can acquire without unreasonable effort or expense that is neccesary to verify the accuracy of the information set forth in the Statement. No oral .representations have been made or oral information furnished to the Subscriber in connection wiih the offcring that were In any way inconsistent with the Statement.
(C) Investment The Subscriber is acquiring the Units for investment only and for the Subscriber's own account not as a nominee or agent. and not with a view to. or for resale in connection with any distribution thereof. The Subscriber understands that. by reason of a specific exemption from the registration provision of the Act, the Units have not been. and (except as provided in Section 5 below) will not be. registered under the Act, and that the availability of such exemption depends upon. among other things, the bona fide nature of the investment intent and the accuracy of the Subscriber's representations as expressed herin.
(d) Restriction on Transfer The Subscriber acknowledges that the Units must be held indefinitely unless subscquently registered under the Act or unless an exemption from such registration is availab1e.
I. Registration Rights The Company is in the process of becoming a full reporting company under Section 12g and other registration provisions of the Securities and Exchange Act of 1934 as amended. It is anticipated mPhase Technologies Inc.. will within 6 months. of January 20. 1998 register the Units offered hereby with the Securities and Exchange Commission. The Company cannot guarantee that its application for registration will be approved by the commission.
(e) Authorization This Agreement. when fully executed and delivered by the Company, will constitute a valid and legally binding obligation of the Subscriber. enforceable in accordance with its terms. The person signing this document and all documents necessary to consummate the purchase of the Units has all requisite authority to sign such documents on behalf of the Subscriber, if it is an entity investor.
(f) No Duplication The Subscriber nas not duplicated or distributed the attached Confidential Memorandum to anyone other than his or her Purchaser Representarive or other personal advisors, and will not do so in the future.
(g) Investment Sophistication The Subscriber has such knowledge and experience in financial and business matters to be capable or evaluating the merits and risks of the proposed investment.
(h) Adequate Financial Means The Subscriber has adequate means of providing
ror his current needs possible personal contingencies and he is able to bear
the economic risks of the investment (i.e. he can afford a complete loss.)
I) Limitcd Trading Market The Subscriber acknowledges that prior to this
Offering there has been a limited trading market for the Company?s Common
Stock and after completion or this Offering there can be no assurance that a
trading market will continue or if it does continue that it will be active or
maintained and thus. the Subscriber may not be able to readily if ever to
liquidate his investment.
5. Indemnification Under This Agreement. The Subscriber shall indemnify and hold harmless the Companv and each of' its affiliates from and against all losses, damages and liabilities (including but not limited to court costs and reasonable attorney?s fees arsing or resulting from. or attributable to any breach of the representations and warranties set forth in or this Subscription Agreement or in any other document furnished by the Subscriber.
6. No Transfer and Subsequent Disposition The Subscriber hereby agrees that he will not sell. transfer or otherwise dispose of the Units unless in the opinion of counsel to the Company, such sale. transter or disposition may be legally made without (I) registration under the Act. and/or (ii) registration and/or qualification under then applicable state and/or federal statutes. or such sale. transfer or disposition shall have been so registered and/or qualified and/or appropriate prospectus shall then in effect.
The Units offered hereby have not been registered under the Act and are being sold in reliance upon the exemption contained in Rule 505 of Regulation D of the Act. A purchaser of the Units will not be able to sell and/or otherwise dispose of their Units unless a registration statement is in effect and/or in exemption from the registration requirements of said act is available.
7 Power of Attorney of Spouse If the Subscriber is a married person and a resident or a community property state. the Subscriber agrees to cause the Subscriber's spouse to execute this Agreement at the space provided for that spouse's signature immediatley following the signature of the Subscriber. and by such signature here to said spouse certifies that said spouse is the spouse of the person who signed this Agrement, that said spouse has read and approves the provisions hereof and hereby consents and agrees to this Agreement and agrees to be bound by and accepts such provisions of this Agreement in lieu or all other interests and spouse may have in the Company, whether such interest be community property or otherwise. Said spouse grants to the Subscriber irrevocable power ot attorney to represent said spouse in all matters connected with the Company to the end that.in all cases the Company may rely on any approval, direction, vote or action taken by the subscriber. and said spouse's attorney-in-fact. Such power of attorney is. and shall be deemed to be. coupled with an interest so that the authority granted hereby may continue during the entire penod of the Company and regardless of the death or incapacity of the spouse granting the same. Said spouse further agrees to execute. Acknowledge and deliver such otner and further instruments and documents as may be required to evidence such power or attorney.
8. Entirety The terms of this Agreement are intended by the parties as a final expression of their agreement with the terms included in this Agreement and may not be contradicted by evidence of any prior or contemporaneous agreement. arrangement, understanding or negotiation (whether oral or written).
9. Waiver No waiver or modification of any of the terms of this Agreement shall be valid unless in writing. No waiver of a breach of. or default under, any provision hereof shall be deemed a waiver of such provision or of any subsequent breach or default of the samne or similar nature or or. any other provision or condition of this Agreement
1 0. Counteerparts This Agreement may be executed in two or more
counterparts. each orf which shall be deemed an original. but all of which
together shall constitute one and the same instrument.
11) NOTICES Execpt as otherwise reguired in this Agreement, any notice
reguired or permitted under this Agreement shall be given in writing and
shall be deemed effectively given upon personal delivery or upon deposit with
the United States Post Office by registered or certified mail postage
prepaid addressed as follows
To the Company.
mPhase Technologies. Inc.
587 Connecticut Avenue
Norwalk. Connecticut 068S4~960
Attention: Ronald A. Durando
Telephone: (203)838-274 I
With a copy to: Robert H. Jaffe. Esq.
3 Mountain Avepue
Springfield. New Jersey 07081
Te1ephone: (973)467~2246
To the Subscriber: At the address set forth beneath the Subscriber?s signature
Any party may changce his. her or its address for notice in accordance with the provisions of this Paragraph.
12. Non-Assignabilirv The ob1igations of the Subscriber hereunder shall not be delegated or assigned to any other party without the prior written consent of Company.
13. Expenses Each party shall pay all of its costs and expenses that it incurs with respect to the negotiation. execution and delivery of this Agreement.
14 Applicable Law This Agreement shall be construed and enforced pursuant to the Iaws of the State of New Jersey.
15. Form of Ownership Please indicate the form of ownership that the Subscriber desires for the Units:
Individual
Joint Tenants with Right of Survivorship
Tenants in Common
Community Property
Trust
Corporarion
Partnership
Other:
16) Survivor All representations. warranties and covenants contained in this Subscription Agreement shall survive the acceptance of the subscription. The Subscriber aknowIedges and agrees that this Subscription Agreement shall survive (i) changes in the transactions. documents and instruments descnbed in the Memorandum that are not material. and (ii) the death or disability of the Subscriber.
17. Gender Numbers etc Terms used herein in any number or gender include other numbers or genders. as the context may require. If the Subscnber is an entity. all references to "him" or "his" shal1 be deemed to include "it" or "its"
MPHASE
TECHNOLOGIES
SIGNATURE PART OF SUBSCRIPTION AGREEMENT
INDIVIDUAL(S) SIGN HERE:
SUBSCRIBER:
(Signature)
(Print Name)
(Address)
SocialSecurity #
Number of Units Subscribed For Purchase:
SPOUSE OF SUBSCRIBER:
(Signature)
ACCEPTED:
mPHASE Technologies Inc.
By
Title
DATE:
SUBSCRIPTION AGREEMENT
LIGHTPATHS TP TECHNOLOGIES, INC.
(Formerly Tecma Laboratories, Inc.)
A New Jersey Corporation
Dated: March 1, 1997
This Subscription Agreement is entered into by and between The "Subscriber") and LightPaths TP Technologies, Inc., formerly known as Tecma Laboratories, Inc., a New Jersey Corporation (hereinafter sometimes referred to as "the Company"), as of the date it is accepted below by the Company.
1.Rule 504 Offering:The shares of LightPaths Common Stock being offered hereby have been offered pursuant to Rule 504 of Regulation D and, accordingly, are exempt from registration under the Securities Act of 1933, as amended. This offering has not been reviewed by the Securities and Exchange Commission or any other state securities commission nor has any such federal or state agency with oversight supervision of securities offerings made any findings or determinations as to the fairness of an investment in these shares.
2.No Restrictive Legend:The issuance of stock certificates to the Subscriber, in accordance with this Subscription Agreement, will be done without restrictive legend. The shares of Common Stock of LightPaths representing the shares subscribed to shall be represented by this Subscription Agreement when signed by both the Company and the Subscriber until such time as the actual issuance of the certificates.
3.Lock-Up Agreement:In connection with the offering, all Subscribers agree that for a period of sixty (60) days from the date of their Subscription, that they will not, without the prior written consent of the Company, offer, sell, grant any option with respect to, pledge gypothecate or otherwise dispose of any shares of Common Stock in a public transaction.
4.Number of Shares:The Subscriber hereby agrees to purchase shares of LightPaths Common Stock at a price of $1.50 per share.
5.Acceptance of Subscription:Acceptance by the Company of this Subscription shall be evidenced by the delivery to the Subscriber of a fully executed Subscription Agreement. If the offer of the Subscriber is accepted, the Company will execute a copy of this Subscription Agreement and return said copy to the Subscriber.
6.Representations of the Company:The Company represents that it has been duly organized under the laws of the State of New Jersey and it has entered into an agreement to acquire all of the issued and outstanding shares of LightPaths, Inc., a Delaware Corporation, a description of which is contained in an information statement provided to the Subscriber.
7.Representations of the Subscriber:The Company is offering and shall issue the shares subscribed for in this Agreement without registering them pursuant to the 1933 Act and Rule 504 of Regulation D. The Company is doing so in reliance upon, among other things, the truthfulness of the following representations made by the Subscriber.
a)Accurace of the Information Provided and Subscriber?s Representations - The Representations in this Agreement are complete and accurate to the best of the Subscriber?s knowledge and the Company may rely upon them. The Subscriber will notify the Company immediately if any material change occurs in any of this information before consummating the purchase of the Shares.
b)Risk Factors - The Subscriber understands that an investment in the Company involves significant risks, including those described in the information statement provided. The Subscriber hereby acknowledges it has requested and has been afforded the opportunity to ask questions and receive answers concerning the terms and conditions of the Offering and to obtain any additional information possessed by the Company or that can be acquired without unreasonable effort or expense. No oral representations have been made or oral information furnished to the Subscriber in connection with the Offering that was in any way relied upon by the Subscriber in executing this Subscription Agreement.
c)Investment Objective - The Subscriber is acquiring the Shares for investment for his own account, not as a nominee or agent, and not with a view to, or for resale in connection with, any distribution thereof.
d)Authorization - This Agreement, when fully executed and delivered by the Company, will constitute a valid and legally binding obligation of the Subscriber, enforceable in accordance with its terms. The person signing this document and all documents necessary to consummate the purchase of the shares has all requisite authority to sign such documents on behalf of the Subscriber, if it is an entity investor.
e)No Duplication - ;The Subscriber has not duplicated or distributed the Statement to anyone other than his or her Purchaser Representative or other personal advisors, and will not do so in the future.
f)Investment Sophistication - The Subscriber has such Knowledge and experience in financial and business matters to be capable of evaluating the merits and risks of the proposed investment.
g)Ability to Absorb Loss - The personal financial situation of the Subscriber is such that he can comply with the minimum applicable suitability requirements applicable to the sophisticated investor. He is aware that the shares of LightPaths Common Stock being purchased constitute a speculative investment involving a high degree of risk. Accordingly, the Subscriber hereby acknowledges that he is able (i) to bear the economic risk of this investment; (ii) ; to hold the shares for an indefinite period of time if required; and (iii) to afford the complete loss of his investment.
h)Limited Trading Market - The Subscriber acknowledges that prior to this Offering, there has been a very limited trading market in the Common Stock of Tecma Laboratories, Inc., the predecessor in name to the Company. After completion of this Offering, there can be no assurance that a trading market will develop or if it does develop, that it will be active or maintained.
i)Applicable to New York Investors Only - The Attorney General of the State of New York does not pass upon or endorse the merits of any private offering. No offering document has been filed with or otherwise approved by the Law of the State of New York. Any representation to the contrary is unlawful.
j)Applicable to Florida Residents Only - The Shares referred to herein will be sold to the Subscriber in a transaction exempt under Section 517.061 of the Florida Securities Act. The shares have not been registered under said act in the State of Florida. In addition, if sales are made to five or more persons in the State of Florida, any sale in the State of Florida is voidable by the purchaser within three (3) days after the first tend or consideration in made by such purchaser to the issuer, an agent of the issuer, or an escrow agent or within three (3) days after the availability of that privilege is communicated to such purchaser, whichever occurs later.
k)Applicable to New Jersey Residents Only- The attorney General of the State
of New Jersey does not pass upon or endorse the merits of ant private
offerings. No offering document has been filed with, or otherwise approved by
the Department of Law and Public Safety of the State of New Jersey. Any
representations to the contrary is unlawful.
8.Indemnification Under This Agreement: The Subscriber shall indemnify and
hold harmless the Company and each of its affiliates from and against all
losses, damages and liabilities (including but not limited to, court costs and
reasonable attorney?s fees) arising or resulting from, or attributable to any
breach of the representations and warranties set forth in Section 7 of this
Subscription Agreement or in any other document furnished by the Subscriber to
any of the foregoing parties or the fact that any representations,
acknowledgments or understanding set forth in Paragraph 7 are untrue or
without adequate factual basis to be considered true and not misleading.
9.Entirety: The terms of this Agreement are intended by the parties as a final expression of their agreement with respect to the terms included in this Agreement and may not be contradicted by evidence of any prior or contemporaneous agreement, arrangement, understanding or negotiation(oral or written). 10.Waiver: No waiver or modification of any terms of this Agreement shall be valid unless in writing. No waiver of a breach of, or default under, any provision hereof shall be deemed a waiver of such provision or of any subsegment breach or default of the same or similar nature or of any other provision or condition of this Agreement. 11.Counterparts: This AGreement may be executed in two or more counterparts, each of which shall be deemed an original, but all which together shall constitute one and the same instrument.
12.Notices: Except as otherwise required in this Agreement, any notice required or permitted under this Agreement shall be given in writing and shall be deemed effectively given upon personal delivery or upon deposit with the United States Post Office, by Registered or Certified Mail, postage prepaid, addressed as follows:
To the Company mPhase Technologies. Inc.
587 Connecticut Avenue
Norwalk. Connecticut 068S4~960
Attention: Ronald A. Durando
Telephone: (203)838-274 I
|
With a copy to: Robert H. Jaffe. Esq.
3 Mountain Avepue
Springfield. New Jersey 07081
Telephone: (973)467~2246
To the Subscriber: At the address set forth beneath the Subscriber?s signature
Any party may change his. her or its address for notice in accordance with the provisions of this Paragraph.
12. Non-Assignability The obligations of the Subscriber hereunder shall not be delegated or assigned to any other party without the prior written consent of Company.
13. Expenses Each party shall pay all of its costs and expenses that it incurs with respect to the negotiation. execution and delivery of this Agreement.
14 Applicable Law This Agreement shall be construed and enforced pursuant to the Iaws of the State of New Jersey.
15. Form of Ownership Please indicate the form of ownership that the Subscriber desires for the Units:
Individual
Joint Tenants with Right of Survivorship
Tenants in Common
Community Property
Trust
Corporation
Partnership
Other:
16) Survivor All representations. warranties and covenants contained in this Subscription Agreement shall survive the acceptance of the subscription. The Subscriber acknowledges and agrees that this Subscription Agreement shall survive (i) changes in the transactions. documents and instruments described in the Memorandum that are not material. and (ii) the death or disability of the Subscriber.
17. Gender Numbers etc Terms used herein in any number or gender include other numbers or genders. as the context may require. If the Subscnber is an entity. all references to 'him" or "this" shall be deemed to include "it"or "its"
SIGNATURE PORTION OF SUBSCRIPTION
TO LIGHTPATHS TP TECHNOLOGIES INC.
ORGANIZATIONS SIGN HERE
Subscriber
(print Name of Organization)
By
(Signature)
(Print name and titles)
(Address)
Fed ID NO.
Number of Shares Subscribed for
Purchase:
ACCEPTED
Lightpaths Tp Technologies Inc.
BY:
TITLE:
DATE:
7
F-