Jx,
Read between the lines:
. Mark McLaughlin, a member of McLaughlin Group LLC, is president and a principal stockholder of McLaughlin International, Inc. McLaughlin International, Inc. serves as a consultant to the Company pursuant to two engagement letters entered into on November 8, 1995 and May 17, 1996 respectively.
The engagement letters provide that McLaughlin International, Inc. will act as a consultant to the Company in connection with certain strategic transactions, relating to the marketing and distribution of the Company's products and technology in Japan and to a select number of companies located principally in the United States, for a period of six months, subject to extension by mutual agreement.
The November 8, 1995 engagement letter was extended for a further six month period. As compensation under the November 8, 1995 engagement letter, which covers Japan, McLaughlin International, Inc. will receive for a period of seven years (in the case of revenues and royalties) or an indefinite period or one time payment (in the case of fees) a percentage of revenue, royalties and fees (with such percentages ranging from 5% to 10% dependent upon what and how much is received) received by the Company as a direct or indirect result of the efforts of McLaughlin International, Inc.
As additional compensation, McLaughlin International, Inc. will receive warrants to acquire 75,000 shares of common stock per each $1 million in fees received by the Company (not to exceed 750,000 warrant shares) plus bonus warrants to acquire 250,000 shares in the event the Company receives $20 million in fees, in each case as a direct or indirect result of the efforts of McLaughlin International, Inc. Such warrants will be exercisable for a five year term at a price equal to the lesser of $10 or 50% of the market price of the Company's stock on the date of issue. Shares of common stock issuable upon exercise of the warrants will carry customary registration rights.
As compensation under the May 17, 1996 engagement letter, McLaughlin International, Inc. will receive for the duration of the relationship (between the Company and the party introduced by the consultant) a percentage of upfront research and development fees/payments; equity private placement proceeds; service provider revenue/fees; and chip sales (with such percentages ranging from 4% to 8%) received by the Company as a direct or indirect result of the efforts of McLaughlin International, Inc.
To be entitled to a percentage compensation under either engagement letter, the revenue, payments, sales or fees must commence or be paid during the engagement period or during the twelve month period immediately following the engagement period. As of September 1997, the Company had no indebtedness to McLaughlin International.
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I would venture to say that Mr. McLaughlin has a lot at stake here and is doing everything possible to make it pay off. He purchased two million shares from the company directly, and we're seeing a long track record of open market buys.
I sure hope he is what those on the street call "smart money".
We'll see. Either way, I believe he just about has the majority interest in the company, or the ability to control it should he wish.
And I imagine that he could probably shop the company around to be acquired should things not progress satisfactorily on the independent marketing side.
Regards,
Ron |
