Here's the Molex arrangement...
<<Agreements with Molex On May 19 and June 21, 1999, Lumenon entered into several agreements (the "Molex Agreements") with Molex (NASDAQ: MOLX), based in Lisle, Illinois. Molex is a 60-year-old global manufacturer of electronic, electrical and fiber optic interconnection products and systems, switches, value-added assemblies, and application tooling. Molex operates 49 plants in 21 countries and offers approximately 100,000 products through a network of direct salespeople and authorized distributors. The Molex Agreements include a Teaming Agreement, a Stock Purchase Agreement, a Stock Restriction Agreement and a Registration Rights Agreement. Under the Teaming Agreement, Lumenon and Molex agreed to jointly develop 8, 16 and 32-channel DWDM products for use in the DWDM market and other photonics markets. Subject to Lumenon testing and proving its technology and its ability to manufacture and deliver certain devices, Molex is committed to purchase the entire 8, 16 and 32-channel DWDM production of Lumenon at gross cost plus 25% for the first 12 months of production, up to a maximum number of 400 units per month. In the event Lumenon is unable to supply Molex on a timely basis with a commercially reasonable quantity of the devices (which may trigger termination of the Teaming Agreement) or in the event there is a change of control of Lumenon, Molex has the non-exclusive right to manufacture all components of the devices in return for a royalty of 25% of Molex's gross cost. After the first 12-month period, Molex will have the option to purchase all of Lumenon's 8, 16 and 32-channel DWDM production at fair market value for the succeeding three-year period. See - "Risk Factors - Dependence on Strategic Relationships; Customer Concentration" for the risks associated with the Company's dependence on Molex and "Business Strategy," fifth and sixth 15 paragraphs, and "Technology and Products - Manufacturing" in this Item 1. regarding future production and marketing plans for the Company's products. Under the Stock Purchase Agreement, Molex agreed to purchase 3,000,000 shares of the Common Stock of Lumenon (the "Common Stock") at a price of US$0.50 per share in two stages. The first closing was held on June 21, 1999 for 1,500,000 shares of Common Stock and the second closing is scheduled for March 2000 for an additional 1,500,000 shares of Common Stock. The second closing is contingent upon Lumenon's progress in proving its technology and its ability to manufacture and deliver certain DWDM devices. Lumenon also issued to Molex a warrant to purchase 1,666,667 additional shares of Common Stock at a price of US$0.90 per share, which was exercised on November 15, 1999. In addition, Lumenon issued Molex a Services Common Stock Purchase Warrant to receive 5,800,000 additional shares of Common Stock in exchange for certain services to be rendered by Molex to Lumenon under the Teaming Agreement as part of the development of Lumenon's DWDM's technology. The warrant expires in June 2001 and the shares are issuable as Molex performs the services provided for under the terms of the Teaming Agreement. All rights relating to the warrant will be extinguished if Molex elects not to proceed with the second closing under the Stock Purchase Agreement. Under the Stock Restriction Agreement, certain stockholders of Lumenon have agreed not to sell their respective shares of the Company to a competitor of Molex without Molex's prior consent. This agreement includes a right of first refusal and certain preemptive rights in favor of Molex, except that Lumenon can, without Molex's consent, issue up to 6,000,000 units (comprising one common share and a warrant for the purchase of one common share at a price of not less than US$0.90 per share) at a price not less than US$0.50 per unit to raise capital within the 24-month period ending in June 2001. The Stock Restriction Agreement also requires the consent of Molex for certain extraordinary actions relating to the governance of the Company and its operations. Certain rights or restrictions contained in the Stock Restriction Agreement terminate upon completion of a Public Sale or a Public Offering, as defined in the agreement, or if Molex elects not to proceed with the second closing under the Stock Purchase Agreement. The Stock Restriction Agreement will also terminate if the Teaming Agreement is terminated. The net proceeds of the issuance of stock to Molex were added to the Company's working capital and are being used in part to accelerate the commercialization of the Company's DWDM products. In December 1999, Lumenon and Molex began negotiation for the investment by Molex of an additional US$3 million in the Company's Common Stock subject to certain contingencies. The negotiations are expected to be complete in the near future. The proceeds will be used to finance in part Lumenon's planned manufacturing facility. See Item 3. Property. for more detailed disclosure regarding such facility.>> |
