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U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
(Mark One)
[X] ANNUAL REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended July 31, 1998
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 000-20759
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AMERICAN ARTISTS ENTERTAINMENT CORPORATION
(FORMERLY AMERICAN ARTISTS FILM CORPORATION)
(Name of small business issuer in its charter)
MISSOURI 58-1950450
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
6600 PEACHTREE DUNWOODY ROAD
BUILDING 600, SUITE 250
ATLANTA, GEORGIA 30328
(Address of principal executive offices) (Zip code)
Issuer's telephone number (770) 390-9180
Securities registered under Section 12(b) of the Exchange Act:
NONE
Securities registered under Section 12(g) of the Exchange Act:
CLASS A COMMON STOCK, $.001 PAR VALUE PER SHARE
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days. Yes No X
-- --
Check if there is no disclosure of delinquent filers in response to
Item 405 of Regulation S-B is not contained in this form, and no disclosure will
be contained, to the best of the registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB [ ]
State issuer's revenues for its most recent fiscal year: $2,450,958
State the aggregate market value of the voting stock held by
non-affiliates computed by reference to the price at which the stock was sold,
or the average bid and ask prices of such stock, as of the close of business on
March 2, 1999:
Class A common stock, $.001 par value: $ 520,744
Class B common stock, $.001 par value: There is no established
market for the Class B
common stock
State the number of shares outstanding of each of the issuer's class of
common equity: 3,319,745 shares of Class A common stock, $.001 par value per
share and 3,225,516 shares of Class B common stock, $.001 par value per share
were outstanding as of March 2, 1999.
Documents incorporated by reference: NONE
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AMERICAN ARTISTS ENTERTAINMENT CORPORATION
FORM 10-KSB
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PART I Page
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<S> <C> <C>
Item 1. Description of Business.....................................3
Item 2. Description of Property....................................16
Item 3. Legal Proceedings..........................................16
Item 4. Submission of Matters to a Vote of Security Holders........16
PART II
Item 5. Market for Common Equity and Related
Stockholder Matters......................................16
Item 6. Management's Discussion and Analysis or Plan
of Operation.............................................17
Item 7. Financial Statements.......................................24
Item 8. Changes In and Disagreements With Accountants
on Accounting and Financial Disclosures..................24
PART III
Item 9. Directors, Executive Officers, Promoters and
Control Persons; Compliance with Section 16(a)
of the Exchange Act......................................24
Item 10. Executive Compensation.....................................26
Item 11. Security Ownership of Certain Beneficial
Owners and Management....................................27
Item 12. Certain Relationships and Related
Transactions.............................................28
Item 13. Exhibits and Reports on Form 8-K...........................32
SIGNATURES...................................................................37
INDEX TO FINANCIAL STATEMENTS...............................................F-1
</TABLE>
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PART I
ITEM 1. DESCRIPTION OF BUSINESS
INTRODUCTION
American Artists Entertainment Corporation (the "Company"), known prior
to February 1999 as "American Artists Film Corporation," legally changed its
name on February 5, 1999. The Company, organized in July 1995 as a Missouri
Corporation under the name Setab Alpha, Inc., is the successor by merger of a
Georgia corporation named American Artists Film Corporation that was founded in
July 1991. The Georgia corporation is sometimes referred to herein as "Old
American Artists"; the Missouri corporation prior to the merger is sometimes
referred to herein as "Setab." Unless otherwise indicated by the context, as
used herein, the term "the Company" includes its predecessors and subsidiaries,
and discussion of the business and operations of the Company include those of
Old American Artists; Setab had no business operations prior to the merger with
Old American Artists.
The Company is engaged in the contract production of television
commercials and corporate/industrial videos, the development and production of
television specials and related properties, and the development of
feature-length motion picture screenplays and other media products for possible
future production or license. The Company classifies its operations into two
business segments: (i) film development and production, which includes the
development and production of both cable or television films and specials and
feature films, and (ii) commercial contract production, which includes the
production of both commercials and corporate/industrial videos. Additionally,
during fiscal 1997 and 1998, the Company incurred developmental and
organizational expenses for a new business segment focused on the development
and operation of a network of large screen video display ("LSVD") operations.
See Note 13 of the Notes to Consolidated Financial Statements for financial
information concerning the Company's business segments.
The Company's contract commercial production operations, conducted
through its First Light Entertainment Corporation ("First Light") subsidiary,
suffered a significant decline in revenues during the fourth quarter of fiscal
1998, and as a result incurred an operating loss. In October 1998, the Company
decided to temporarily cease First Light's operations while it evaluated the
form and direction of its future contract commercial production operations. That
study is ongoing and the Company has not yet determined whether it will renew
these operations, and if so whether it will do so under the First Light name,
through American Artists Films, or through another entity. See Item 1.
Description of Business - Business of Company - Contract Commercial Production,
and Item 6. Management's Discussions and Analysis or Plan of Operation.
As a result of the losses of this operation, the lack of film revenues
(due to the release of no new films) and the expenditures incurred in the
Company's development of television and feature film projects and LSVD
operations, the Company incurred a significant net loss in fiscal 1998, and at
July 31, 1998 had significant working capital and stockholders' equity deficits.
Additionally, the Company had negative cash flows from operations in fiscal 1998
and at July 31, 1998 was in default or past due with respect to several loans.
The Company's continued operation will be dependent on its short term ability to
obtain additional capital through debt or equity placements, or project
financing arrangements to alleviate its cash flow and liquidity problems, and
its longer term ability to successfully finance, complete and earn revenues from
one or more of its various film and/or LSVD projects. See Item 6. Management's
Discussion and Analysis or Plan of Operation - Liquidity and Capital Resources.
The Company's executive offices are located at 6600 Peachtree Dunwoody
Road, Building 600, Suite 250 Atlanta, Georgia 30328, and its telephone number
is 770-390-9180.
BACKGROUND
Old American Artists was founded in July 1991. In August 1993 the
Company acquired all of the outstanding capital stock of First Light, a
television commercial producer. In June 1994 the Company subscribed for 49% of
the outstanding capital stock of Diversity Filmworks, Inc. ("Diversity"),
formerly First Light Diversity, Inc., a television commercial producer organized
and 51%-owned by Tyrone C. Johnson.
In May 1996 Setab entered into an agreement ("Merger Agreement") with
Old American Artists for the merger (the "Merger") of Setab and Old American
Artists. The Merger was consummated on October 7, 1996 (the "Merger Date") and
Setab, as the surviving corporation, subsequently changed its name to American
Artists Film
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Corporation. The surviving corporation changed its name to American Artists
Entertainment Corporation in February 1999.
Concurrent with and as a condition of the Merger, on October 7, 1996,
Setab completed a public offering (the "Public Offering") of 700,000 shares of
its Class A common stock, par value $.001 per share (the "Class A common
stock"). The net proceeds of its Public Offering were $15,477, which Setab used
to pay existing liabilities.
By reason of the Merger, the stockholders of Old American Artists
became shareholders of the surviving corporation, the separate existence of Old
American Artists ceased and the business and management of Old American Artists
became the business and management of the Company. Each of the 9,407,837
outstanding shares of Old American Artists common stock became 0.5862 shares of
the capital stock of the Company, with the first 100 shares issued to each Old
American Artists shareholder as Class A common stock, $0.001 par value per share
and the remainder as Class B common stock, $0.001 par value per share (the
"Class B common stock"); outstanding options and warrants to purchase an
aggregate of 3,840,328 shares of common stock of Old American Artists became
options and warrants to purchase an aggregate of 2,251,200 shares of Class B
common stock. The effects of this exchange ratio have been retroactively applied
to the earliest periods presented for all share and per share amounts related to
the Company's outstanding common stock, stock options and warrants.
As a result of the consummation of the Merger, the Old American Artists
shareholders held, immediately following the Merger Date, 88.7% of the
outstanding capital stock of the Company (including all of the outstanding
shares of Class B common stock), and the pre-Merger shareholders of Setab
(including those persons who purchased Class A common stock in the Public
Offering) held the remaining 11.3% of the capital stock of the Company.
Each share of Class B common stock is convertible at any time at the
election of the holder into one share of Class A common stock. The Class A
common stock and the Class B common stock are substantially similar in all
respects and the holders thereof will have equal rights and privileges, except
with respect to the election of directors. In the election of directors, holders
of Class B common stock, voting as a separate class, are entitled to elect a
number of directors equal to the greater of (i) the number (rounded to the
nearest whole number) that bears to the total number of directors of the Company
the same ratio that the number of outstanding shares of Class B common stock
bears to the aggregate number of outstanding shares of Class A and Class B
common stock, or (ii) the smallest number of directors that constitutes a
majority of the board of directors. Holders of Class A common stock voting as a
separate class will be entitled to elect all of the other members of the board
of directors.
BUSINESS OF THE COMPANY
Television - Introduction
The Company's operations related to the television industry consist of
the development and production of specials and feature films for distribution to
both the domestic United States and foreign television markets. These operations
are conducted principally through the American Artists Films division of the
Company.
Television - Industry Overview
The United States domestic television market remains the largest in the
world, consisting of the principal broadcast networks and their affiliates,
independent television stations and cable television networks. The domestic
market for television programming primarily is composed of four submarkets:
broadcast television networks (ABC, CBS, NBC and Fox, and emerging networks UPN
and WBN), pay cable services (HBO/Cinemax, Encore/Starz and Showtime/The Movie
Channel), basic cable services (USA Network, the Arts & Entertainment Network,
Lifetime, The Family Channel, The Disney Channel, and Turner Broadcasting
Network) and syndicators of first-run programming (such as MCA, King World
Productions and Multimedia, Inc.).
The foreign market for television programming includes traditional
television stations and networks as well as cable and satellite delivered
programming.
The number and geographic coverage of television networks and cable and
satellite program delivery systems has expanded both domestically and overseas
in recent years, and the Company believes that it is likely that such expansion
will continue. Such expansion creates increases in the demand for programs
produced by major film
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studios, production divisions or affiliates of the major networks, independent
station owners and independent producers such as the Company.
Television - Production
As a producer, the Company first develops literary properties
internally or acquires them from third parties. These properties are then
presented to various programmers (network, cable and public television)
depending upon the programmer's interest in the subject matter. A development
agreement may be entered into to further develop the programming concept. A
development agreement typically calls for the development of a production budget
and treatment for the programming concept. Once the development materials are
delivered, the programmer may order production of a single pilot episode, a
limited number of episodes in the case of a series, or the entire production in
the case of a television special, movie-for-television or mini-series.
Once the programmer elects to order a production, the Company and
programmer negotiate and enter into a production agreement that includes
provisions for financing and production deliverables. The Company then
undertakes pre-production activities, production personnel (director, actors,
producers and technical personnel) are engaged, filming is scheduled, locations
are arranged and other steps are taken to prepare the project for principal
photography. Principal photography then commences, followed by post-production,
in which the film is edited, synchronized with music and dialogue and, in
certain cases, special effects are added. In the case of a series, if episodes
are ordered and the ratings are sufficiently strong, additional episodes may be
ordered for the entire season or for additional seasons, as applicable.
The Company hires writers, directors, cast and crew members on a
project-by-project basis. The terms of employment and compensation are
negotiated in light of an individual's previous experience, the prevailing
market conditions and, where applicable, collective bargaining agreements. The
Company may also use certain on-staff producers, directors and technical
personnel in its productions. The Company also contracts for locations, sets,
post-production personnel and facilities, on an as-needed basis.
In December 1998, the Company entered into a consulting agreement
("Programming Agreement") with an individual who possesses a number of years of
experience in the television industry. The Programming Agreement calls for the
consultant to assist the Company in the creation, development, packaging and
production of certain television and feature film properties ("Properties"),
including television series. As consideration for his services, the consultant
will receive, in addition to certain "on screen" credits, thirty-three percent
(33%) of all net profits, as defined (generally revenues after the recovery of
all production and distribution costs), generated from Properties introduced to
the Company under this Programming Agreement. The Programming Agreement
generally will relate to properties identified by the consultant and exclude
project ideas identified by the Company.
Television - Projects
The following sets forth information concerning the various television
specials or film projects the Company currently has in various stages of
development or production.
Miracles. In October 1998, the Company entered into an agreement ("HBO
Agreement") with Home Box Office ("HBO"), a division of Time Warner
Entertainment Company, L.P., to develop a one hour special on the subject of
"miracles." The HBO Agreement provided for the payment to the Company of a
development budget of $20,663 to develop a treatment and production budget. The
development materials were delivered to HBO in October 1998, which, under the
HBO Agreement, is permitted three months in which to decide whether to fund the
production of the one hour special.
The HBO Agreement was amended by the parties in February 1999 to
provide for the preparation of additional development materials in relation to
the one hour special. The amendment also called for a $37,376 increase in the
development budget.
In connection with the HBO Agreement, the Company also entered into an
executive producer agreement with the originator and developer of the subject
material for this one hour special. This agreement provides for certain screen
credits, an executive producer fee, to be negotiated at the time of production
funding, and a profit participation in profits, if any, as defined.
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Trafford Project. In August 1998, the Company and an independent
project investor entered into a production agreement ("Trafford Agreement") to
produce a thirty minute video on the ideas and opinions of Ms. Angela Passidomo
Trafford on the subject of "spiritual healing." The Trafford Agreement calls for
the Company to provide the writer, producer, director and all other production
personnel and equipment necessary to produce the thirty minute video in exchange
for a production fee of $25,000. The Trafford Agreement also provides for joint
ownership in the completed project and a 50/50 split of revenues, after first
distributing $30,000 to the independent investor and then distributing $15,000
to the Company. The Company completed production and delivered the thirty minute
video in October 1998.
When Souls Meet. The Company is in the final stages of post-production
on a television special, titled "When Souls Meet," featuring the ideas and
opinions of Robert Johnson and Marion Woodman, experts in the fields of Jungian
psychology, mythology and dream interpretation. This project is being
co-produced with Georgia Public Television ("GPTV"), a division of the Georgia
Public Telecommunications Commission, and in association with the Episcopal
Radio-TV Foundation.
The "When Souls Meet" special is currently scheduled to be broadcast by
GPTV in fiscal 1999, and in addition will be made available to other member
stations of the Public Broadcasting System ("PBS") through the program sharing
arrangements between the PBS stations. The Company and GPTV, the owners of the
special, will be entitled to receive from each airing PBS station (including
GPTV) a fee of a specified percentage of the viewer pledges or donations
obtained as a result of the program's broadcast. The Company and GPTV will share
equally in such fees, after the payment of (i) 5% of such fees to each Mr.
Johnson and Ms. Woodman, and (ii) for the first five years from the date of the
first broadcast, 10% to the Episcopal Media Center ("EMC"). EMC has been granted
the rights to all revenues from certain religious markets. The Company, Mr.
Johnson and Ms. Woodman would share all book related revenues, if any, on a
50/25/25 basis.
Fire From The Sky. In 1997 the Company co-produced with Turner Original
Productions, Inc. ("TOP") a one-hour special titled "Fire From The Sky." This
special was initially broadcast on the TBS Superstation ("TBS") in March 1997
and has been subsequently re-broadcast on TBS and The Cable News Network
("CNN"). Under the production agreement ("Production Agreement") with TOP, dated
October 11, 1996, as amended on November 13, 1996, the Company received
production fees amounting to $368,100 for the production of this special. The
terms of the Production Agreement also call for a limited participation by the
Company in certain international, internet and publishing net profits. Through
fiscal 1998 the Company has not recognized any revenues related to these limited
participations.
Angels. In 1994 the Company produced with Greystone Communications,
Inc. ("Greystone"), two 2-hour prime time specials for the NBC television
network: "Angels: The Mysterious Messengers," hosted by Patty Duke, and "Angels
II: Beyond the Light," hosted by Stephanie Powers. Both programs were initially
licensed to NBC, which aired the first program twice and the second program
once. NBC's rights to further airings expired in November, 1996. In June 1996
the Company entered a three-year license agreement authorizing TOP to broadcast
the two Angels programs on TBS for a total license fee of $100,000. TOP is
permitted to air each of the Angels programs 18 times over the three year
period. The Company and its co-producer bear any obligation for residuals and
must refrain from licensing the programs to any other broadcaster in the United
States during the term of the license. TOP began airing the programs in October
1996.
The Company also entered a 3-year agreement ("Haber Agreement") in July
1994 with Alfred Haber Distribution, Inc. for foreign distribution of the Angels
programs. Under this agreement, the Company and Greystone receive 75% of any
license fees, less expenses, obtained from licensing the Angels programs outside
the United States. License fees have now been received for television, cable and
satellite broadcasts of the programs in more than 55 countries. The Haber
Agreement expired in August 1997 and was extended for an additional eighteen
month period through January 1999. The Company is currently evaluating its
options, which may include an extension or replacement of this agreement.
Under a May 1994 agreement, Calling Card Company, Inc. ("CCC") marketed
home videos of the Angels programs through advertising during the NBC network
broadcast, providing royalties, which were shared by NBC, the Company and
Greystone, of $223,000 through July 31, 1998. In addition, a video edition of
the first Angels program has been separately marketed by Time-Life Video under
an August 1994 agreement which granted Time-Life exclusive home-video rights to
the program in the United States and Canada for a five-year term. The
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agreement provided for $100,000 in non-refundable advance royalties and
guaranteed minimum royalties of $10,000 per year for the duration of the
agreement after recoupment of the advanced royalties. Royalties under the
agreement are shared among NBC, the Company, and Greystone.
The Company also developed a book entitled Angels: The Mysterious
Messengers, edited for the Company by Mr. Hauck and published by Ballantine
Books, Inc. The book has also been published in German, Italian, French and
Spanish editions. Advance royalties for the book amounted to $250,000.
The Company financed development of the initial Angels program
primarily through the private placement of $128,000 of its Revenue Participating
Joint Venture Investment Units with eight accredited investors. The private
placement was completed in February 1994. Investors receive 100% of the
Company's revenues from the first television special and ancillary rights until
their initial investment has been returned, 50% thereafter until an equal
additional amount has been received, and 25% of any further revenues. The
investors also receive 5% of the Company's revenues from the second television
special. Through July 1998 the investors had received an aggregate return of
$1.30 for each dollar of their investment. Additional distributions may be made
later depending on future revenues of the Angels programs.
Windows of Heaven. The Company has completed its principal photography
and prepared a three minute trailer for a project on the subject of re-occurring
global-wide destructions throughout recorded time. This project is being
produced in association with King Arthur Productions, LLC ("KAP"). The
production agreement calls for the distribution of revenues, after the recovery
of all production costs, 46.5% to the Company and the remainder to KAP's
investors and other parties associated with the project. This allocation remains
in effect for revenues received for licensing rights covering the period from
June 1997 to December 2000, with all other revenues allocated evenly between the
Company and KAP.
The Company has initiated discussions with several cable television
networks in relation to the licensing of the rights for the broadcast of this
production, but there can be no assurance that a suitable licensing agreement
can be reached or that the proposed project will be carried out.
The Millennium. Since 1995 the Company has been developing the concept
for a related group of television specials and other media properties pertaining
to the forthcoming end of the second millennium of the modern era. The
development work has included historical and scientific research, development of
themes and preparation of story treatments.
In October 1994 the Company organized Millennium Group, L.L.C. ("MG"),
as a Georgia limited liability company with itself as Manager, for the purpose
of developing an initial one-hour television special on the subject of the
millennium. MG financed certain research and development of the millennium
materials through a private placement of $50,000 of limited liability company
interests with three accredited investors. In July 1998, the Company acquired
100% of the outstanding LLC shares of MG in exchange for 25,000 shares of the
Company's Class A common stock.
The Company has presented this "millennium" concept to several
television and cable networks, and although it has received indications of
interest, it to date has been unable to obtain a firm agreement for the
production and broadcast of any program. The production of a program based on
these materials, packaged as a "millennium" concept, would have to begin within
the first half of calendar 1999 in order to insure that the program could be
broadcast at or near the time of the year 2000 new year. There can be no
assurances that the Company will be able to obtain a production and broadcast
agreement within this time frame; however, a substantial portion of the
materials developed for this project could, in the Company's opinion, also be
utilized in a film special not directly tied to the turn-of-the-century.
Other. The Company currently has over twenty other television
projects/proposals in various stages of development, presentation and
pre-production including both television specials and series. Negotiations are
ongoing with a cross-section of the television industry, including
representation from cable, network and public television. There can be no
assurances that these negotiations will yield production agreements that will be
acceptable to the Company or that any of the projects will result in completed
films or series.
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Feature Films - Introduction
For the feature film market, the Company attempts to develop and
produce feature length films for distribution in both the domestic United States
and foreign markets. These operations are conducted principally through the
American Artists Films division of the Company.
Feature Films - Industry Overview
The business of the feature film industry may be broadly divided into
two major segments: production, involving the development, financing and making
of feature films, and distribution, involving the promotion and exploitation of
completed feature films in a variety of media.
Historically, the largest companies, the so-called "Majors" and
"mini-Majors," have dominated the feature film industry by both producing and
distributing a majority of the feature films which generate significant box
office receipts. Over the past decade, however, "Independents" or smaller film
production and distribution companies, such as the Company, have played an
increasing role in the production and distribution of feature films to fill the
increasing worldwide demand for filmed entertainment product.
The Majors (and mini-Majors) include Universal Pictures, Warner Bros.
Pictures, Metro-Goldwyn-Mayer Inc., Twentieth Century Fox Film Corporation,
Paramount Pictures Corporation, Sony Pictures Entertainment (including Columbia
Pictures, TriStar Pictures and Triumph Releasing) and The Walt Disney Company
(Buena Vista Pictures, Touchstone Pictures and Hollywood Pictures). Generally,
the Majors own their own production studios (including lots, sound stages and
post-production facilities), have nationwide or worldwide distribution
organizations, release pictures with direct production costs generally ranging
from $25 million to $75 million, and provide a continual source of pictures to
film exhibitors. In addition, some of the Majors have divisions which are
promoted as "independent" distributors of motion pictures. These "independent"
divisions of Majors include Miramax Films (a division of The Walt Disney
Company), Sony Classics (a division of Sony Pictures), The Samuel Goldwyn
Company (a division of Metro-Goldwyn-Mayer), October Films (a division of
Universal), New Line (a division of Time Warner) and its Fine Line distribution
label, and Republic Pictures (a division of Viacom).
In addition to the Majors, the Independents engaged primarily in the
distribution of motion pictures produced by companies other than the Majors
include, among others, Trimark Holdings and Live Entertainment. The Independents
typically do not own production studios or employ as large a development or
production staff as the Majors.
Feature Films - Production and Financing
The production of a feature film usually involves four steps:
development, pre-production, production and post-production. The development
stage includes developing a concept internally, or obtaining an original
screenplay or a screenplay based on a pre-existing literary work, or acquiring
and rewriting a screenplay. Creative personnel may be contacted to determine
availability and for planning the timing of the project, or in some cases
actually hired. In pre-production, a budget is prepared, the remaining creative
personnel, including a director, actors and various technical personnel are
identified, shooting schedules and locations are planned and other steps
necessary to prepare for principal photography are completed. Production
commences with principal photography of the project and generally continues for
a period of not more than three months. In post-production, the film is edited
and synchronized with music and dialogue and, in certain cases, special effects
are added. The final edited synchronized product, the negative, is used to
manufacture release prints suitable for public exhibition.
The production of a feature film requires the financing of the direct
and indirect overhead costs of production. Direct production costs include film
studio rental, cinematography, post-production costs and the compensation of
creative and other production personnel. Distribution costs (including costs of
advertising and release prints) are not included in direct production costs.
The Majors generally have sufficient cash flow from their feature films
and related activities, or in some cases, from unrelated businesses (e.g., theme
parks, publishing, electronics, and merchandising) to pay or otherwise provide
for their production costs. Overhead costs are, in substantial part, the
salaries and related costs of the
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production staff and physical facilities which the Majors maintain on a
full-time basis. The Majors often enter into contracts with writers, producers
and other creative personnel for multiple projects or for fixed periods of time.
Independents generally avoid incurring substantial overhead costs by
hiring creative and other production personnel and retaining the other elements
required for pre-production, principal photography and post-production
activities only on a project-by-project basis. Unlike the Majors, Independents
also typically finance their production activities from various sources,
including bank loans, "pre-sales," equity offerings and joint ventures.
Independents generally attempt to complete their financing of a feature film
production prior to commencement of principal photography, at which point
substantial production costs begin to be incurred and to require payment.
"Pre-sales" are often used by Independents to finance all or a portion
of the direct production costs of a motion picture. Pre-sales consist of fees or
advances paid or guaranteed to the producer by third parties in return for the
right to exhibit the completed motion picture in theaters or to distribute it in
home video, television, international or other ancillary markets. Independents
with distribution capabilities may retain the right to distribute the completed
feature film either domestically or in one or more international markets. Other
Independents may separately license theatrical, home video, television,
international and other distribution rights among several licensees. Payment
commitments in a pre-sale are typically subject to delivery and to the approval
of a number of prenegotiated factors, including script, production budget, cast
and director.
Both Majors and Independents often acquire feature films for
distribution through an arrangement known as a "negative pickup" under which the
Major or Independent agrees to acquire from another production company some or
all rights to a film upon its completion. The Independent often finances
production of the feature film pursuant to financing arrangements with banks or
other lenders wherein the lender obtains a security interest in the film and in
the Independent's rights under its distribution arrangement. When the Major or
Independent "picks up" the completed feature film, it may assume some or all of
the production financing indebtedness incurred by the production company in
connection with the film. In addition, the Independent is often paid a
production fee and is granted a participation in the profits from distribution
of the feature film.
Both Majors and Independents often grant third-party participations in
connection with the distribution and production of a feature film.
Participations are contractual rights of actors, directors, screenwriters,
producers, owners of rights and other creative and financial contributors
entitling them to share in revenues or profits (as defined in the respective
agreements) from a particular feature film. Except for the most sought-after
talent, participations are generally payable only after all distribution and
marketing fees and costs, direct production costs (including overhead) and
financing costs are recouped by the producer in full.
Feature Films - Projects
The following sets forth information concerning the various feature
film projects the Company currently has in various stages of development or
production.
False River. In March 1998, the Company organized False River, LLC
("False River") for the purpose of producing a feature film, currently titled
False River. This feature films is a quirky comedy that explores a small town's
inhabitants and their eccentric behavior. The story focuses on the events
following an escape of the story's two main characters from an insane asylum and
their bizarre and sometimes unexpected crossing-of-paths.
In exchange for nominal consideration, the Company obtained 100% of the
ordinary LLC shares of False River. The operating agreement, as amended and
restated, also provides for the issuance of preferred distribution LLC shares,
which are entitled to a preferred distribution from net profits, as defined.
However, the preferred distribution shares may not constitute more than 49% of
the ownership interest in False River. False River has sold interests in the
preferred distribution LLC shares for proceeds amounting to $740,064.
False River's operating agreement provides for various sharings in the
distribution of any operating profits. Initially, the holders of the preferred
distribution shares will be entitled to receive 150% of their initial
investment. After that distribution, False River is next obligated to pay from
any profits an aggregate of $172,000 to certain parties who contributed creative
or organizational efforts for the False River project, including the Company,
which would be entitled to receive $57,000. Thereafter, any profits would be
distributed 49% to the holders of the preferred distribution shares and 51% to
the Company. From that 51%, the Company would be obligated to pay
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<PAGE> 10
20.75% of its interest (or 10.5825% of False Rivers profits) to creative and
technical personnel associated with the project to whom the Company granted such
participations as inducements. Additionally, the Company has agreed to pay
interest, at the rate of 10% per year, on the investment of $311,526 in
preferred distribution shares made by the initial investor in False River, who
is a director of the Company. Such interest will be paid until the investor
receives distributions from False River equal to his investment.
At March 2, 1999, the Company had completed principal photography,
post-production and had prepared a negative and theatrical print of the film. In
February 1999, the Company screened False River as part of the 1998/1999
Independent Film Screening Series sponsored by the Directors Guild of America,
Inc. This screening marked the beginning of a process aimed at exposing the film
to potential distributors. The Company plans to submit False River for entry
into several film festivals as part of its strategy to market this feature film.
The Company has also entered into preliminary discussions with an experienced
producer's representative, for purposes of assisting the Company in its sales
efforts for False River.
As a condition of employing certain union members during the production
of this feature film, False River was required to sign collective bargaining
agreements with the Screen Actors Guild and Directors Guild of America, Inc.
("DGA"). These agreements call for adherence to certain procedures and standards
related to the production of a feature film and the revenues generated from its
exploitation. The Company has guaranteed the full and complete performance by
False River in relation to its agreement with DGA.
The Last Sunrise. The Company entered into an agreement ("THC
Agreement") in May 1998 with THC Entertainment, LLC. ("THC") for the
co-production of a feature film currently titled "The Last Sunrise." The THC
Agreement called for a joint production effort contingent upon the completion of
financing within a six-month period, with an option for an additional six-month
period. The THC Agreement expired prior to the satisfaction of the financing
contingency.
Other. The Company also has a number of other feature film properties
(screenplay or treatment) in various stages of development, and holds an option
to acquire one feature film property. The Company has commenced the
pre-production phase (casting for the lead role) for two of its feature film
properties and anticipates entering the production phase in fiscal 1999 for at
least one of these projects. The Company believes that if the lead roles have
been cast, the financing of these projects can be accelerated. No formal
commitments have been obtained for financing production of any of those
properties and there can be no assurance that any of these properties will be
developed into completed films.
LSVD Operations - Overview
Large screen video displays ("LSVD") are the large screen television
quality displays typically found at major sports arenas and stadiums. These
LSVDs generally have very large displays that provide a clear and identifiable
picture to large audiences, using full motion and full color capabilities. LSVDs
are most identifiable from their uses in large sports arenas and stadiums for
display of "instance replays" and for promotional purposes.
The Company's plans to participate in LSVD operations encompass two
facets of the LSVD industry: (i) the ownership and operation of LSVD units, and
(ii) the production and distribution of LSVD programming.
The first aspect of this plan calls for the Company to construct, own
and operate LSVD units in certain entertainment centers, both domestically and
internationally. These operations will be very similar in nature to the LSVD
unit currently operated by an unaffiliated third party in Times Square, New
York.
The second aspect of the plan calls for the Company to produce and
develop programming for distribution to both its owned and operated LSVD units
and to third party LSVD operators. The Company plans to produce and distribution
programming that includes a mixture of news, weather, sports, music, film,
fashion, arts, entertainment and other current events. These programming
components may be created and produced by the Company or obtained under
licensing agreements entered into with third party programming providers.
In August 1997, the Company, together with certain members of the board
of directors and an officer of one of the Company's subsidiaries, organized
Video Communications Network, LLC ("VCN") to serve as the entity
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<PAGE> 11
through which the Company will pursue its LSVD operations. VCN will engage in
LSVD operations both directly and indirectly through investments in other
entities.
The Company acquired 83.3% of the initial ownership of VCN in exchange
for nominal consideration. In January 1998, the Company sold a portion of its
interest in VCN, representing 444 LLC shares, to certain members of the board of
directors and a shareholder for nominal consideration.
In January 1998, VCN commenced a private placement offering, under
Regulation D of the Securities Act of 1933, of an aggregate of 1,110 LLC shares
in $100,000 units comprised of 222 LLC shares together with warrants to purchase
50,000 shares of the Company's Class A common stock at an exercise price of
$3.00 per share, exercisable through January 2001. This private placement was
closed in April 1998, at which time the Company's ownership of VCN decreased to
74%, as a result of VCN's receipt of $300,000 for the sale of three private
placement units.
VCN has incurred expenses of $507,746 and has not generated any
revenues as of July 31, 1998. These expenses have been funded by advances from
the Company and from the proceeds of VCN's private placement offering.
LSVD Operations - Ownership and Operation of LSVD Units
The Company's concept for the ownership and operation of LSVD units
anticipates the establishment of a brand identification "Diversity Entertainment
Television" or "DETV" to represent a contemporary brand of entertainment
containing a mix of sports, music, news, film, fashion and animated content
delivered in a seamless audio and video presentation. The Company, through VCN,
is pursuing the installation, ownership and operation of a LSVD unit at
Underground Atlanta in Atlanta, Georgia as its initial LSVD operation. VCN is
also investigating the feasibility of LSVD units in Miami, San Francisco,
Chicago, Baltimore and Dallas.
VCN's proposed installation and operation of a LSVD unit in Atlanta,
Georgia is being pursued through its ownership of an interest in Diversity
Entertainment Television/Atlanta, LLC ("DETV/Atlanta"). DETV/Atlanta was
organized in August 1997 by VCN and an unaffiliated consultant.
VCN acquired 6,762 of DETV/Atlanta's LLC shares, representing 98% of
the initial ownership, in exchange for nominal consideration. VCN agreed to
distribute to an officer of VCN, in consideration of his services to VCN, all of
the net cash or other assets received by VCN at any time in respect of 1,690.5
of its DETV/Atlanta LLC shares, representing 24.5% of DETV/Atlanta's outstanding
shares.
During fiscal 1997 and 1998 DETV/Atlanta's activities involved seeking
necessary regulatory approvals, negotiating programming and advertising
agreements, and pursuing financing for the installation of the LSVD unit.
In May 1997, the City Council for the City of Atlanta voted to amend
its existing sign ordinance to allow for the installation of large screen video
displays in certain areas designated for public entertainment (a "Public
Entertainment District" or "PED"). The amendment also provided that a PED could
only be designated by resolution of the City Council. Subsequent to the adoption
of this amendment to the sign ordinance, the City Council also adopted a
resolution designating Underground Atlanta as a PED.
In January 1998, DETV/Atlanta entered into a third party licensing
agreement with Georgia Public Television ("GPTV") that would allow GPTV to
provide certain programming to DETV/Atlanta for broadcast on the proposed LSVD
unit at Underground Atlanta. In exchange for this programming, DETV/Atlanta
agreed to provide promotional exposure for GPTV through a promotional
identification tag on all GPTV programming. This licensing agreement had a term
of one year and was effective upon execution of the agreement. The agreement has
now expired, but the Company will pursue, and believes it can obtain, a new
agreement, having similar terms, at such time as it has obtained the financing
necessary for and begun the construction of the proposed LSVD unit at
Underground Atlanta. There can be no assurances that the Company will be able
to execute a new agreement having similar terms.
In February 1998, DETV/Atlanta entered into an agreement with the Cable
News Network, Inc. ("CNN") that granted CNN the exclusive right to provide
national and international news programming for broadcast on the proposed LSVD
unit at Underground Atlanta. In exchange for this programming, DETV/Atlanta
agreed to provide
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<PAGE> 12
an inventory of time ("Promo Time") for CNN to use for promotional purposes.
The agreement provides that the Promo Time may be used by CNN, its parent,
subsidiary or any division thereof. This agreement commenced in February 1998
and had a one year term. The agreement has now expired, but the Company will
pursue, and believes it can obtain, a new agreement, having similar terms, at
such time as it has obtained the financing necessary for and begun the
construction of the proposed LSVD unit at Underground Atlanta. There can be no
assurrances that the Company will be able to execute a new agreement having
similar terms.
In April 1998, DETV/Atlanta entered into an agreement with Georgia
Television Company, d/b/a WSB-TV ("WSB-TV"), the local ABC affiliate in Atlanta,
Georgia. The agreement grants WSB-TV the right to provide live and taped local
news programming for broadcast on the proposed LSVD unit at Underground Atlanta.
In exchange for this programming, DETV/Atlanta agreed to provide an inventory of
time for WSB-TV to use for promotional purposes. This agreement is for a term of
one year and commences upon the first day of operations at the Underground
Atlanta LSVD unit.
In September 1998, DETV/Atlanta entered in a sales agreement ("Sales
Agreement"), with a supplier of contract service to various multi-national
corporation, that calls for the sale of $2,000,000 of advertising time on
DETV/Atlanta's proposed LSVD screen at Underground Atlanta. The Sales Agreement
is for a two year term and is contingent upon the completion of startup
financing by DETV/Atlanta. Under the terms of the Sales Agreement, the supplier
is to purchase a minimum of $1,000,000 of airtime per year over the two year
term of this Sales Agreement.
To succeed in installing and then operating the proposed LSVD unit in
Atlanta, Georgia, DETV/Atlanta must obtain financing for the cost of installing
the unit (approximately $2.6 million) and agreements for sufficient sources of
programming and paid advertising. DETV/Atlanta continues to negotiate with
program providers and potential advertiser, and to pursue debt, equity or joint
venture/strategic alliance financing for the installation of the Atlanta LSVD
unit. There can be no assurance that DETV/Atlanta will succeed in these efforts.
LSVD Operations - Distribution of LSVD Programming
As a LSVD program producer and distributor, VCN will obtain LSVD
suitable programming from various sources, format such programming for LSVD use,
and transmit the programming to LSVD units owned and operated both by VCN (or
its subsidiaries) or third parties. In general, VCN will seek to obtain and
distribute the following types of programming:
- Targeted Special Interests - customized programming available for
venue specific events at multi-purpose sporting and entertainment
center venues,
- General Interests - featured segments to suit the audience
demographics (e.g. daily news, weather, sports, etc.),
- Special Events - event programming tied to cultural affairs programs,
civic promotions/parades, sporting events/pep rallies, concerts,
corporate sponsorships and other special events.
VCN will obtain the majority of its programming through licensing
agreements with local and national programming providers. These would include
international, national and local news networks, network affiliates, and cable
broadcasters. VCN is currently negotiating with various programming sources.
Additionally, VCN would have access to the programming licensed to its "DETV"
subsidiaries, such as the programming licensed to DETV/ Atlanta under its
agreements with GPTV, CNN and WSB-TV.
In July 1998, VCN entered into a letter of agreement ("Crawford
Agreement") that establishes a strategic alliance with Crawford Communications,
Inc. ("Crawford"). The Crawford Agreement calls for Crawford to originate the
signal transmission for VCN's proposed network of LSVD operations. This letter
of agreement is subject to definitive negotiations and execution of a formal
written agreement.
To succeed in its proposed LSVD programming distribution operation, VCN
must obtain a sufficient quantity and variety of programming to make its
services attractive to LSVD operators, obtain financing for and acquire the
necessary equipment, and ultimately secure a sufficient number of LSVD operator
customers. There can be no assurances that VCN will be successful in
establishing and generating profits from its proposed LSVD programming
production and distribution operations.
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<PAGE> 13
Contract Production
Television Commercials
The Company produces television commercials on a contract basis for
advertisers and advertising agencies, typically under short-term agreements for
the production of the commercials, whose scripts or story outlines are provided
by the client. Under these contracts, the Company generally arranges all
production aspects of the commercials, including casting, location selection and
contractual arrangements with the director and other production personnel. The
Company uses the services of a number of independent directors. These directors
are paid on a fixed fee basis determined by mutual agreement during the
commercial production budgeting process, although other compensation
arrangements may be used from time to time, including director participation in
the gross profits of commercials.
The Company generally produces its commercials on a "firm bid" basis as
opposed to a "cost plus fixed fee" basis. If a commercial is produced on a "firm
bid" basis, the production company is responsible for any costs in excess of the
budget, unless approved by the client. If the commercial is filmed under "cost
plus fixed fee" arrangement, the Company receives a predetermined fee for its
work and approved production costs are charged to the client as incurred.
Despite the differences in the structure of the two forms of bids, the risk of
costs overage to the Company is not substantially greater for "firm bid"
contracts because the Company is also responsible for unapproved costs overages
that exceed the budget for a "cost plus fixed fee" bid. Production company
personnel, in tandem with the advertising agency responsible for the commercial,
must carefully monitor costs throughout the filming process, whether a "firm
bid" or "cost plus fixed fee" arrangement is operating. The agreed upon bid
might be altered because the agency, client and director agree upon a new
creative option or because of unexpected occurrences such as inclement weather
or unavailability of location.
In general, the Company requires an advance payment, due on the first
day of pre-production, of 50% of the budget. The remainder of the fee is
generally paid in one or more installments within 30 to 120 days after the
completion of production. In April 1998, First Light entered into a $1,000,000
line of credit agreement with a financial institution to alleviate any working
capital shortfalls incurred as a result of these billing practices.
In marketing their services the Company emphasizes the talents of the
directors with whom it works, its skill in cost control and timely production,
the quality of the production and the advantages of Atlanta as a production
center. Diversity especially emphasizes use of directors and other production
staff from diverse cultural and ethnic backgrounds.
In fiscal 1998 the Company produced twelve commercials for net revenues
of $2,451,000, compared to twenty-two commercials and net revenues of $3,470,000
in fiscal 1997. In October 1998, the Company elected to reassess its television
commercial operations and is currently unable to accurately predict the effect
of this reassessment on future revenues and bidding opportunities.
For fiscal 1998, two of the Company's customers accounted for fees
equal to 54.3% and 12.5% of consolidated revenues. The Company obtains its
revenues from discrete project assignments obtained from various clients.
Accordingly, while the fees from one or more clients may, in any year, be
significant as the result of the size of a project undertaken for that client,
the Company is not dependent on any one client for a material amount of its
continuing revenues.
Through the end of fiscal 1998 the Company conducted its contract
commercial production operations through its First Light subsidiary. First Light
suffered a significant decline in revenues during the fourth quarter of fiscal
1998, and as a result incurred an operating loss. In October 1998, the Company
decided to temporarily cease First Light's operations while it evaluated the
form and direction of its future contract commercial production operations. That
study is ongoing, and the Company has not yet determined whether it will renew
these operations, and if so whether it will do so under the First Light name,
through American Artists Films, or through another entity. Although the Company
may use the First Light name, the temporary cessation of its operations and
uncertain future made uncertain the future recovery of the remainder of the
goodwill which was recorded in connection with the Company's fiscal 1994
acquisition of First Light.
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<PAGE> 14
As a result of the Company's decision to temporarily cease First
Light's operations, Ms. Vivian Jones, the president of First Light and a
director and co-president of the Company, tendered her resignation.
Corporate/Industrial Videos
In February 1998, the Company organized a division, "First Draft
Films," for purposes of creating and producing corporate/industrial videos. The
Company also hired an individual with a number of years of experience in this
field to oversee its operations and to serve as its president. First Draft Films
will seek to obtain contracts to produce corporate/industrial training,
marketing and other films. Generally, First Draft Films contracts and method of
operations would be similar to those for television commercials.
COMPETITION
All of the industries in which the Company operates are extremely
competitive and include major corporations with substantially greater resources
than the Company.
Film Development and Production
The success of the Company's television and feature film operations is
heavily dependent upon public taste, which is unpredictable and subject to
change. In addition, filmed entertainment operating results fluctuate due to the
timing and performance of theatrical and home video releases. Release dates are
determined by several factors, including timing of vacation and holiday periods
and competition.
Although the demand for low-cost quality media products has expanded
dramatically with the growth of cable, video and foreign markets, the production
of television specials and feature films remains dominated by major studios and
distributors. In addition, some major distributors such as Walt Disney, Turner
Broadcasting and Fox Broadcasting have acquired or developed their own
production companies. In this environment, the Company competes on the basis of
the artistic creativity of its projects and its commitment to low-cost quality
production.
LSVD Operations
This segment of the LSVD industry is in its infancy and has not drawn a
great deal of domestic attention outside of the LSVD operation in Times Square,
New York. Similar to other new and highly profitable media and communication
industries, the Company expects a number of new entrants into the marketplace.
These new entrants may come from a number of other industries, including
multimedia, outdoor advertising, consumer electronics, telecommunications,
entertainment and cable/network television. Companies in these industries may
have considerable human and financial resources, and may seek to capture a
certain market share. The Company plans to compete based upon its experience
gained during the development of this concept.
Contract Production
The contract production industry is subject to extreme price
competition and is highly fragmented. The Company competes in this industry with
numerous national and regional companies, no one of which has a major market
share. The Company competes primarily on the basis of the skills of its
executive producers, directors and production staff, and the advantages of
Atlanta as a production center.
INTELLECTUAL PROPERTY
The Company's success and ability to compete will be dependent in part
upon its ability to obtain and maintain protection for its current and future
literary properties, to defend its intellectual property rights and to operate
without infringing on the proprietary rights of others, See "Item 3 Legal
Proceedings." While the Company relies on a combination of copyrights and
trademarks to establish and protect its intellectual property rights, management
of the Company believes that factors such as the technical and creative skills
of its personnel are more essential to its success and ability to compete. There
can be no assurance that any intellectual property rights of the Company will
provide competitive advantages or will not be challenged, invalidated or
circumvented by competitors. There can be no assurance that disputes will not
arise concerning the ownership of intellectual property. Furthermore, there can
be no assurance that intellectual properties will not become known or be
independently
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<PAGE> 15
developed by competitors or that the Company will be able to maintain the
confidentiality of information relating to its literary properties.
GOVERNMENT REGULATIONS
In a decision released September 6, 1995, the Federal Communications
Commission ("FCC") repealed its financial interest and syndication rules,
effective as of September 21, 1995. Those FCC rules, which were adopted in 1970
to limit television network control over television programming and thereby
foster the development of diverse programming sources, had restricted the
ability of the three established, major U.S. television networks (ABC, CBS and
NBC) to own and syndicate television programming. The impact of the repeal of
the FCC's financial interest and syndication rules on the Company's operations
cannot be predicted at the present time, although it is expected that there will
be increased in-house production of television programming for the network's own
use. It is possible that this change will have a negative impact on the
Company's business.
On February 1, 1996, Congress passed the Telecommunications Act of 1996
(the "1996 Act"), and it was signed into law on February 8, 1996. The 1996 Act
is the first comprehensive re-write of the Communications Act of 1934, as
amended (the "1934 Act") and dramatically changes the ground rules for
competition and regulation in virtually all sectors of the telecommunications
industry, from local and long-distance telephone services to broadcasting, cable
television, and equipment manufacturing. The 1996 Act eliminates many entry
barriers to the telecommunications business, relaxes concentration and merger
rules, and delegates authority for implementing such Act to the FCC.
The impact on the Company of the changes to the 1934 Act brought about
by the 1996 Act and by accompanying changes in FCC rules cannot be predicted at
the present time, although it is expected that there will be an increase in the
demand for video programming products as a result of the likelihood that these
regulatory changes will facilitate the advent of additional exhibition sources
for such programming. However, it is possible that recent alliances of certain
program producers and television station group owners, coupled with the recent
FCC rule revision allowing a single television station licensee to own
television stations reaching up to 35% of the nation's television households,
may place additional competitive pressures on program suppliers who are not
aligned with any television station group owners.
The Company may also be subject, in certain international markets, to
local content and quota requirements which effectively prohibit or limit access
to particular markets.
The Classification and Rating Administration of the Motion Picture
Association of America, an industry trade association, assigns ratings for
age-group suitability for motion pictures. The Company submits its feature films
for such ratings. Management's current policy is to produce motion pictures that
qualify for a rating no more restrictive than "R."
EMPLOYEES
As of March 2, 1999, the Company has nine full-time employees. In its
production activities, the Company relies primarily upon independent third
parties for production facilities and personnel. A portion of the salaries
payable to the Company's employees are paid, from time to time, directly from
the production budgets of the projects on which the individuals are working. The
Company hires additional personnel for projects on a contract basis as needed.
Such individuals are generally paid directly from the budget of the projects on
which they are working.
The Company is a signatory to The Writers Guild of America and is
subject to its industry-wide collective bargaining agreement. False River, LLC
is a signatory to the Screen Actors Guild and Directors Guild of America, Inc.
The Company is not a party to any other collective bargaining agreement.
However, it is possible that some of the Company's business activities may be
affected by the existence of collective bargaining agreements since many of the
performing artists and technical personnel, such as cameramen and film editors,
that it employs from time to time on specific projects are members of unions.
The extent to which collective bargaining agreements may affect the Company is
difficult to estimate and strikes related to collective bargaining or other
collective actions by union members could, in the future, delay or disrupt
activities.
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ITEM 2. DESCRIPTION OF PROPERTY
The Company leases as its headquarters a facility of approximately
4,500 square feet located at 6600 Peachtree Dunwoody Road, Building 600, Suite
250 in Atlanta, Georgia. Rent under the lease, which expires in January 2001, is
$5,500 per month. The Company does not own sound stages and related production
facilities (generally referred to as a "studio") and, accordingly, does not have
the fixed payroll, general, administrative and other expenses resulting from
ownership and operation of a studio. Studio facilities are generally available
for rental as needed.
DETV/Atlanta entered into a lease agreement in January 1998 for the
premises for the proposed LSVD screen in Atlanta, Georgia. This lease agreement
defined, among other things, the premises, rent provisions and operating
guidelines for the proposed LSVD operation. This lease agreement was contingent
upon the completion of financing within a specific period of time. The financing
contingency expired without resolution in July 1998. Based upon discussions with
various parties associated with the lease, management believes that despite the
expiration of the contingency period, DETV/Atlanta will be able to obtain the
lease of this proposed location, if and when it otherwise is ready to commence
operation.
ITEM 3. LEGAL PROCEEDINGS
In June 1997, the Company settled all known issues related to an
arbitration proceeding commenced in May 1995 by its co-producer of the Angels
television specials. As a condition of the settlement, the Company agreed to pay
its co-producer $140,000 over a period of fourteen months commencing in June
1997. The Company completed its final installment of the $140,000 payment
obligation, as directed by this agreement, in July 1998.
There has been substantial litigation in the entertainment industry
with respect to literary properties. The Company has no formal procedure for
monitoring the possible infringement of its literary properties by others or for
confirming that its literary properties do not infringe the rights of others,
but the Company does address specific issues as they are brought to its
attention from time to time. In 1992 the Company received approximately $350,000
in settlement of its claim that a certain motion picture then in production
infringed upon a literary property of the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not Applicable
PART II
ITEM 5. MARKETS FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Class A common stock was approved by the National Association of
Security Dealers (NASD) for an unpriced quotation on the Over-the-Counter
("OTC") Bulletin Board under the symbol "AAFC" on November 15, 1996. The Class A
common stock began trading on the OTC Bulletin Board in December 1997.
The following table sets forth the high and low bid prices, if
applicable, for the Class A common stock during each quarter of fiscal 1998 and
1997 as reported on the OTC Bulletin Board. The prices reported reflect
inter-dealer prices, may not represent actual transactions and do not include
retail mark-ups, mark-downs or commissions.
<TABLE>
<CAPTION>
Fiscal 1998 Fiscal 1997
-------------- -------------
High Low High Low
<S> <C> <C> <C> <C>
1st Quarter (1) (1) (1) (1)
2nd Quarter $5.88 $5.56 (1) (1)
3rd Quarter 6.00 5.94 (1) (1)
4th Quarter 5.50 1.63 (1) (1)
</TABLE>
(1) The Class A common began trading in December 1997.
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<PAGE> 17
As of March 2, 1999 there were 3,319,745 shares of Class A common stock
outstanding and 323 record holders of such shares. The Company also has
outstanding shares of Class B common stock. There is no public market for the
Class B common stock, however, shares of the Class B common stock are
convertible, at the option of the holder, into shares of the Class A common
stock on a one-for-one basis. As of March 2, 1999, there were 3,225,516 shares
of Class B common stock outstanding and 112 record holders of such shares.
The Company has not declared or paid any cash dividends on its common
stock since its formation, and the board of directors currently intends to
retain all of its earnings, if any, for its business. The declaration and
payment of cash dividends will be at the discretion of the board of directors.
The Company commenced a private placement of its Class A common stock
in October 1998. As of March 2, 1999, the Company had sold 240,000 shares of
Class A common stock at $.50 per share in 4.8 units of 50,000 shares each. The
purchaser also received in each unit, without additional consideration, a
warrant to purchase up to 25,000 shares of Class A common stock at $1.30 per
share, exercisable through December 2001. Purchasers of fractional units
received a prorated warrant.
In August 1997, a member of the board of director purchased 36,364
shares of Class A common stock for an aggregate price of $100,000. In connection
with this purchase, the Company also issued a common stock purchase warrant
allowing for the purchase of 37,000 shares of Class A common stock at $2.80 per
share, exercisable through June 30, 2000.
The Class A common stock was sold by the Company, and on behalf of the
Company by directors and executive officers of the Company without commission or
additional compensation. All sales were for cash. The sales were made in
reliance upon the exemption from registration contained in Regulation D of the
Securities Act of 1933. All of the purchasers were "accredited investors" within
the meaning of Regulation D.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
GENERAL
As discussed elsewhere herein, on October 7, 1996, Old American Artists
and Setab merged in a transaction in which each of the 9,407,837 shares of Old
American Artists common stock became .5862 shares of common stock of the
Company, and the Company succeeded to the business of Old American Artists.
Old American Artists is considered the predecessor to the Company, and
prior to and at the completion of the Merger, the Company, then Setab, had no
material assets, liabilities or operations. Additionally, for accounting
purposes, the Merger is being accounted for as a recapitalization of Old
American Artists, with the operating results of Old American Artists prior to
the Merger becoming the operating results of the Company for that period.
Accordingly, the following discussion of financial condition and
results of operations focuses on the financial condition and results of
operations of Old American Artists.
The Company is engaged in two lines of business; (i) the development
and production of television, cable and feature films, and (ii) the contract
production of films, generally television commercials and corporate industrial
videos. A third line of business, LSVD operations, is in the planning and
development stage.
Revenues from the license or sale of films produced by the Company are
generally recognized when the film is exhibited or is available for distribution
in the applicable market. In general, the majority of the revenue to be derived
from a film will be earned during the two to three years following its initial
release. Accordingly, film revenues will fluctuate dependent on the timing of
the Company's production and release of films.
Additionally, in some instances the level of revenues generated by a
film in the periods immediately following its release may not be directly
related to the film's success. As described below, the Company might sell
certain distribution rights, in advance of production, for fixed amounts as a
means of financing production costs. In those instances, the film's success
might not affect revenues initially, but could generate revenues later as the
result of distribution in secondary markets or the sale of ancillary products.
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<PAGE> 18
The Company capitalizes the costs incurred to develop, produce and
print films, as well as advertising and other costs that benefit future periods.
Capitalized film costs are amortized, using the individual film forecast method,
under which capitalized costs are amortized based on total projected gross
revenues.
Several factors can affect the relationship that amortized film costs
bear to film revenues. The Company has in the past exchanged, and may in the
future exchange, interest in the revenues from certain or all distribution for
contributions towards the costs of production. Capitalized costs, and the
related amortization, are reduced by such contributions, while revenues are
reduced for outside interests. Accordingly, the terms of the arrangements, which
can vary from film to film, in addition to the total costs of the film, will
affect the relationship of film costs to film revenues.
The Company's contract production services are performed under
short-term (typically less than two months) agreements generally using fixed fee
agreements. Revenues and costs will therefore vary based on the number of
production assignments obtained and completed in any particular period, and the
profitability of the individual assignments. The number of production
assignments obtained in any particular period will be influenced by both the
overall level of contract production activity in the markets in which the
Company operates, and its success in competitive biddings, and can therefore
fluctuate significantly. Overall contract production activities are influenced
by, among other things, the general economic trends that effect the advertising
plans and expenditures of commercial and not-for-profit industries and
enterprises in the Company's geographic markets. Such general economic trends
and conditions can neither be controlled, nor predicted by the Company. The
Company's success in competitive biddings will depend on the potential
customer's assessment, relative to other bidders, of the production, talent and
capabilities offered by the Company and the quoted fee.
The Company's contract commercial production operations, which were
conducted principally through First Light, suffered a significant decline in
revenues during the fourth quarter of fiscal 1998, and as a result incurred an
operating loss. In October 1998, the Company decided to temporarily cease First
Light's operations while it evaluated the form and direction of its future
contract commercial production operations. That study is ongoing, and the
Company has not yet determined whether it will renew these operations, an if so
whether it will do so under the First Light name, through American Artists
Films, or through another entity. Although the Company may use the First Light
name, the temporary cessation of its operations and uncertain future made
uncertain the future recovery of the remainder of the goodwill, which was
recorded in connection with the Company's fiscal 1994 acquisition of First
Light. Accordingly, the goodwill of $78,286 remaining at July 31, 1998 was
charged to operations in fiscal 1998.
Although the Company has temporarily ceased the operations of First
Light, it continues to consolidate its accounts. First Light has a line of
credit, secured by its accounts receivable and guaranteed by the Company, which
the Company repaid in the first quarter of fiscal 1999 with the collection of
those accounts receivable amounts previously outstanding at July 31, 1998. The
Company is presently deferring the payment of First Light's other liabilities,
which consists principally of its accounts payable ($86,883 at July 31, 1998 and
$113,777 as of March 2, 1999). With the exception of accounts receivable, which
the Company has collected, and certain property and equipment, which the Company
can continue to use in its other operations, First Light has no significant
assets.
As a result of the Company's decision to temporarily cease First
Light's operations, Ms. Vivian Jones, the president of First Light and a
director and co-president of the Company, tendered her resignation.
RISK FACTORS
Certain statements in the following discussion of financial condition
and the results of operations, or elsewhere in this report, represent
"forward-looking" statements as defined in the Private Securities Litigation
Reform Act of 1995. Such statements involve matters that are subject to certain
risks and uncertainties, as a result of which actual future results or events
may differ materially depending on a variety of factors.
The future results of the Company's production of television specials
and feature films will be subject to a substantial degree of risk. Each project
is an individual artistic work, and its commercial success is primarily
determined by the reactions of distributors and the general public, each of
which is unpredictable. Historically, many feature films do not generate a net
profit or a return on investment, and there is a substantial degree of risk that
the production and exploitation of a film by the Company would not allow a
recovery of the costs incurred by the Company in its production. Additionally,
as discussed elsewhere herein, the Company will be required to raise
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<PAGE> 19
significant capital to pursue the production of the films it is presently
developing, either through the sale of revenue interests in the films, the
pre-production sale of distribution rights, or the sale of equity or debt
securities by the Company. There can be no assurance that the Company will be
able to raise the necessary funds to pursue the production of these films, which
creates an additional uncertainty.
The LSVD industry is in its infancy and subject to a number of
uncertainties, all of which are normally inheritant in a new and developing
industry. The Company, as an entrant into this industry, will face a number of
these uncertainties including, the need to obtain regulatory approvals, to
obtain access to sufficient programming, and to secure sufficient funding. There
can be no assurances that the Company will have either the financial and human
resources required to adequately compete and remain in this industry.
The Company commenced a private placement of its Class A common stock
in October 1998, with an individual unit comprised of 50,000 shares of Class A
common stock and a warrant to purchase 25,000 shares of Class A common stock at
$1.30 through December 2001. Each unit was priced at $25,000 or $.05 per share.
The term for this private placement expired on March 1, 1999, however, the
Company has elected to extend the term date by amendment. As of March 2, 1999,
the Company had sold 4.8 units for proceeds of $120,000 and may sell additional
units. The sale of additional private placement units may result in substantial
dilution to existing shareholders and the per share price ($.50) may differ
substantially from the existing market price for such shares.
In the contract production of commercials and corporate/industrial
videos, the Company competes in an industry that is highly fragmented and the
result of the operations can vary depending on the number of production
assignments obtained. The number of production assignments the Company obtains
is affected by various factors, including those discussed above and elsewhere
herein. The Company is not currently able to accurately predict the impact upon
its operations of the reassessment of its contract commercial operations.
RESULTS OF OPERATIONS
YEAR ENDED JULY 31, 1998 COMPARED TO YEAR ENDED JULY 31, 1997
Revenues for the year ended July 31, 1998 ("fiscal 1998") decreased as
compared to revenues for the year ended July 31, 1997 ("fiscal 1997") as a
result of a decrease in both commercial production and film revenues. Revenues
for fiscal 1998 were $2,450,958 which represented a $1,439,634 or 37.0% decrease
from revenues of $3,890,592 for fiscal 1997.
Commercial production revenues for fiscal 1998 decreased by $1,018,697
or 29.4% to $2,450,958 from $3,469,655 for fiscal 1997, due to a decrease in the
number of awarded commercial productions. In fiscal 1998, the number of
commercials productions decreased to twelve from twenty-two in fiscal 1997. As
previously discussed, the decline in contract commercial production revenues
occurred in the fourth quarter of fiscal 1998 and led to the Company's decision
to temporarily cease these operations.
The level of the Company's commercial production revenues in each
period will depend on the size and number of projects it is awarded, which can
fluctuate dependent on changes in levels of commercial advertising expenditures
by advertisers, the number and commercial appeal of the commercial producers and
directors with which the Company is working in any one period, and the success
the Company and those producers and directors have in competing for projects.
Accordingly, the level of commercial revenues or growth therein in any one
interim period may not be indicative of trends that will continue throughout the
fiscal year. The number of directors utilized by the Company varies over time.
One individual, who directed commercials representing 61.8% of the Company's
revenues in fiscal 1997, ended her relationship with the Company in December
1997. The adverse effect of the loss of the Company's relationship with this
director was, during the second and third quarters of fiscal 1998, partially
offset by increases in commercial projects obtained with other directors with
which the Company has worked with throughout fiscal 1997 and 1998.
Commercial production costs, as a percentage of related revenues, were
73.9% for the year ended July 31, 1998 as compared to 76.6% for the year ended
July 31, 1997. This decrease in commercial production costs, relative to
revenues, was primarily the result of an increase in the average size of awarded
commercial production contracts and resulting increased levels of gross profit
during the first quarter of fiscal 1998. Gross profits for commercial production
were $638,659 and $813,591 for fiscal 1998 and 1997, respectively.
There were no film revenues for the year ended July 31, 1998 as
compared to film revenues of $420,937 for the year ended July 31, 1997. The
decrease in film revenues relates primarily to a delay in a scheduled broadcast
date for one of the Company's television film projects, currently titled When
Souls Meet. This project was initially scheduled for broadcast in March 1998 but
has been rescheduled for broadcast in June 1999. Film cost amortization
decreased from $362,214 for the year ended July 31, 1997 to $78,943 for the year
ended July 31, 1998. Film cost amortization for the year ended July 31, 1998
resulted from the write-down of certain film properties to their estimated net
realizable value.
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Selling, general and administrative ("SG&A") expenses increased
$460,963 to $1,808,376 for the year ended July 31, 1998 from $1,347,413 for the
year ended July 31, 1997. This increase was primarily the result of the addition
of several new staff positions in the commercial production segment and the
large screen video display and corporate/industrial video operations, the
amortization of the remaining goodwill of $78,286 related to the acquisition of
First Light, an increase in legal fees and travel and related expenses of
$66,751 caused by the Company's various efforts throughout fiscal 1998 to raise
capital, promotional costs of $24,994 related to the introduction of VCN and
DETV/Atlanta to prospective clients and the $122,618 write-off of advertising
credits.
Consulting expenses increased by $650,000 for fiscal 1998 as result of
the two significant consulting contracts entered into during the year ended July
31, 1998. See Note 10 of the Notes to the Consolidated Financial Statements.
Interest expense increased to $57,647 for fiscal 1998 from $15,746 for
the year ended July 31, 1997. This increase was the result of an increase in
outstanding debt during the year ended July 31, 1998.
As a result of the foregoing factors the Company incurred a net loss of
$1,956,307 for the year ended July 31, 1998 as compared to a net loss of
$580,845 for the year ended July 31, 1997.
The Company has provided a 100% valuation allowance against deferred
tax assets associated with its net operating loss carryforwards as management
has concluded that it is not "more likely than not" that the benefit of deferred
tax assets will be realized.
LIQUIDITY AND CAPITAL RESOURCES
The Company's strategic goal has been to finance its operating (i.e.
selling, general and administrative) expenses from the gross profits generated
by its television film, contract production operations and proposed LSVD
operations while utilizing equity financing, pre-production license revenues,
and co-producer contributions to finance the production of feature films. Using
this strategy, the Company seeks to reduce or eliminate the burden of
significant operating losses and negative cash flows, while retaining the
potential for significant profits and positive cash flows from successful
feature films. The success of such a strategy is, however, dependent on the
Company's ability to control operating expenses, to obtain sufficient, and
sufficiently profitable, commercial production contracts and television film
projects, and to fully develop its LSVD operations.
Operating cash flows were a negative $1,547,380 and $763,426 for the
years ended July 31, 1998 and 1997, primarily as a result of shortfalls in the
coverage of SG&A and other expenses by television film and commercial production
profits. The operating cash flow shortfalls were financed with funds obtained
from debt financing, equity financing and the issuance of minority interests by
certain consolidated subsidiaries.
Operating cash flows were affected by certain significant increases and
decreases in assets and liabilities during the year ended July 31, 1998. Film
costs increased by $819,949 primarily as a result of production activities on
the Company's first feature film project, currently titled "False River." This
feature film project was in the first stages of post-production at July 31,
1998. Accounts receivable decreased by $408,839 as a result of the collection of
a large accounts receivable previously outstanding at July 31, 1997 and a
decrease in contract commercial production revenues in the fourth quarter of
fiscal 1998.
Cash provided by financing activities amounted to $1,553,890 for the
year ended July 31, 1998. During fiscal 1998, the Company raised $100,000 from
the private placement of its Class A common stock with a member of the board of
directors and raised $1,071,550 (partially offset by $515,752 in repayments) in
borrowings under notes payable, including $683,000 advanced from related parties
and $388,550 advanced from shareholders or obtained from bank borrowings which
were guaranteed by board members. Additionally, $545,610 used to fund the
activities of VCN and False River, was obtained from the issuance by those
entities of minority interests.
The Company's consolidated financial statements have been prepared on
the basis of the continuation of the Company as a going concern, which
contemplates the realization of assets and the settlement of liabilities in the
normal course of business. The consolidated financial statements do not reflect
any adjustments which might be necessary if the Company were to be unable to
continue as a going concern.
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<PAGE> 21
Since its inception, the Company has experienced a history of operating
losses and constrained cash flows, and has been unable to fully implement its
business plan due to insufficient capital resources. In fiscal 1998 the Company
incurred a net loss of $1,956,307, and negative operating cash flows of
$1,547,380, due to the losses suffered by its contract commercial production
operations, and a lack of film revenues (due to the release of no new films) and
the expenses incurred in pursuing its film and LSVD projects. At July 31, 1998
the Company had a deficit in stockholders' equity of $649,631 and a significant
working capital deficit. The Company was unable to meet certain debt service
requirements both during fiscal 1998 and subsequent to July 31, 1998. A
significant portion of notes payable and notes payable to related parties, which
amount to $1,026,926, is due on demand or matures in fiscal 1999, and the
Company is in arrears on and has been unable to renew its $225,000 bank line of
credit. Since July, 31, 1998 the Company has obtained $294,764 through
additional loans, principally from officers or directors, which for the most
part have been used to fund operations. As a result, at March 2, 1999 the
Company's total indebtedness under notes payable and notes payable to related
parties, net of debt repayments, has increased to $1,307,221, of which a
substantial portion matures in fiscal 1999 or is due on demand.
These conditions raise substantial doubt concerning the Company's
ability to continue as a going concern. To continue in operations and pursue its
business plan, the Company must over the short-term raise additional capital and
reduce expenditures so as to be able to fund its operations and the payment of
those items of indebtedness that cannot be restructured or deferred, and over
the longer term must raise the capital necessary to complete a portion of its
film and LSVD projects and generate profits and positive cash flows therefrom.
Management has developed a plan to address these requirements. The
elements of the short-term plan include the following:
RAISE ADDITIONAL CAPITAL
- Private placement offering. In October 1998, the Company commenced a
$500,000 private placement offering of units comprised of the Company's
Class A common stock and common stock purchase warrants. The Company
has raised $120,000 from the sale of 4.8 units through March 2, 1999.
- Pursue other sources of capital. Subsequent to year end, the Company
engaged several firms to assist it in its capital raising efforts. To
date these firms have introduced the Company to a number of potential
capital sources, and on the basis of initial meetings the Company is
cautiously optimistic that these efforts will provide the Company with
new equity financing opportunities.
- Borrowings from directors and stockholders. Subsequent to July 31,
1998 the Company obtained loans from certain members of the board of
directors and certain stockholders. The Company will attempt to
continue to make use, if available, of these borrowings on a short-term
basis while it pursues other capital.
REDUCE OPERATING EXPENSES AND NET LOSSES
- Temporary cessation of contract commercial production operations. As
previously discussed, in October 1998 the Company temporarily ceased
its commercial contract production operations, which had suffered a
decline in revenues and a net loss in the last quarter of fiscal 1998.
The Company is evaluating the form and direction of its future contract
commercial production operations. While such operations are suspended,
the Company estimates that it will realize cost savings of
approximately $30,000 per month.
- Voluntary salary reductions. In March 1998 the Company requested that
all employees voluntarily reduce their salary levels. All employees
participated in this voluntary reduction, which remains in effect.
- Reduce staffing levels. The Company has reduced its staffing levels
subsequent to July 31, 1998, principally through attrition, and has the
ability to temporarily eliminate certain other positions, without
suffering short-term revenue losses, if cash flow conditions require.
Management will therefore continue to monitor and if necessary adjust
staffing levels for certain projects to match cash flow availability.
- Maximize short-term cash inflows from film projects. As previously
discussed, the Company's False River film was screened as part of a
special screening series in February 1999. Such screening marked the
beginning of a process aimed at exposing the film to potential
distributors. The Company also plans to
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<PAGE> 22
submit False River for entry into several film festivals as part of its
strategy to market this feature film project. The Company will, in
negotiating with distributors, seek a license and/or sales agreement
that maximizes the immediate or near-term cash payment it receives and
offers the Company commitments for additional projects, in return for
accepting a lesser than normal, or no, participation in the revenues or
residual payments from the distribution of the film. A larger initial
cash payment would allow the Company to both fund its operating
expenses and finance the completion of certain other film projects,
which then in turn could generate cash flows over the longer term.
The elements of management's longer term plan include:
- Revised approach to LSVD financing. Through fiscal 1998 the Company
has been attempting to obtain traditional debt or equity financing for
its proposed LSVD operations. Recently the Company modified its
approach, and is now also seeking joint venture/strategic alliance
partners among larger companies in related businesses. The Company
believes that this approach may be more likely to attract the financing
necessary to commence the proposed LSVD operation in Atlanta, which in
turn would provide cash flows for operations and the pursuit of other
LSVD and film projects.
- Series programming relationship. The Company has increased its
efforts to pursue relationships with cable television networks for the
production of a series of programs, as a means of providing the Company
with a more predictable backlog of projects and potential revenues. The
Company is currently in negotiations for several specific series with
one large cable network, and additionally has engaged as a consultant
an individual from the cable network industry whose experience and
relationships in that industry could, management believes,
substantially improve the Company's ability to implement this strategy.
There can be no assurance that any or all of the elements of the
Company's short-term or longer term plans can or will be successfully
implemented. Additionally, even if such initiatives are successful, they may not
be sufficient to alleviate the Company's short term cash flow and liquidity
problems, or in the long term generate revenues sufficient to sustain profitable
operations. Should the Company fail to alleviate its short-term cash flow and
liquidity problems, or over the longer term achieve profitable operations, the
Company will have to either reduce the scope of its activities or cease its
operations.
RECENT ACCOUNTING PRONOUNCEMENTS
In June 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 130, Reporting Comprehensive Income ("SFAS
130"), which establishes standards for reporting and display of comprehensive
income, its components and accumulated balances. Comprehensive income is defined
to include all changes in equity, except those resulting from investments by
owners and distributions to owners. Among other disclosures, SFAS 130 requires
that all items that are required to be recognized under current accounting
standards as components of comprehensive income be reported in a financial
statement that is displayed with the same prominence as other financial
statements.
SFAS 130 is effective for financial statements for periods beginning
after December 15, 1997 and requires comparative information for earlier years
to be restated. The Company will adopt SFAS 130 in fiscal 1999 and anticipates
that the implementation of this standard will not affect the Company's financial
position or results of operations.
In June 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 131, Disclosures about Segments of an
Enterprise and Related Information ("SFAS 131"), which supersedes Statement of
Financial Accounting Standards No. 14, Financial Reporting for Segments of a
Business Enterprise. SFAS 131 establishes standards for the manner in which
public companies report information about operating segments in annual financial
statements and requires reporting of selected information about operating
segments in interim financial statements issued to the public. It also
establishes standards for disclosures regarding products and services,
geographic areas and major customers. SFAS 131 defines operating segments as
components of a company about which separate financial information is available
that is evaluated regularly by the chief operating decision maker in deciding
how to allocate resources and in assessing performance.
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<PAGE> 23
SFAS 131 is effective for financial statements for periods beginning
after December 15, 1997 and requires comparative information for earlier years
to be restated. The Company will adopt SFAS 131 in fiscal 1999. The Company has
not yet determined whether its reportable segments, under SFAS 131, will differ
from those it currently reports under SFAS 14. However, the adoption of this
disclosure standard will not affect the Company's financial position or results
of operations.
In February 1998, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 132, "Employers Disclosures
about Pension and Other Postretirement Benefits" ("SFAS 132"). SFAS 132 revises
employers' disclosures about pension and other postretirement benefit plans but
does not change existing measurement or recognition requirements related to such
plans. SFAS 132 also requires additional information on changes in the benefit
obligations and fair values of plan assets. The Company does not currently offer
postretirement benefits and anticipates that the adoption of SFAS 132 will not
have an effect on the Company's financial position or results of operations.
In June 1998, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments," ("SFAS 133"). SFAS 133 establishes accounting and reporting
standards for derivative instruments and hedging activities. SFAS 133 requires
that an entity recognize all derivatives as either assets or liabilities and
measure those instruments at fair market value. Under certain circumstances, a
portion of the derivative's gain or loss is initially reported as a component of
other comprehensive income and subsequently reclassified into income when the
transaction effects earnings. For a derivative not designated as a hedging
instrument, the gain or loss is recognized in income in the period of change.
The Company does not currently use derivative instruments either in hedging
activities or for investment purposes. Accordingly, the Company anticipates that
the adoption of SFAS 133 will not have an effect on the Company's financial
position or results of operations.
YEAR 2000
The year 2000 issue relates to computer programs and systems that
recognize dates using two digit year data rather than four digit year data. As a
result, such programs and systems may fail or provide incorrect information for
dates after December 31, 1999. If the year 2000 issue were to cause disruption
to the Company's internal information technology systems or to the information
technology systems of entities with whom the Company has commercial
relationships, material adverse effects to the Company's operations could
result.
The Company's internal computer programs and systems consist of
programs and systems relating to virtually all segments of the Company's
business, including customer database management, marketing, production
budgeting and accounting, financial reporting, investor relations, proposal
generation, cash management and other key information systems. These programs
and systems are primarily comprised of:
- Personal computers. These systems are used for all of the Company's
computer programs and systems.
- Telecommunications systems. These systems enable the Company to
manage all its telecommunication services, including incoming/outgoing
telephone calls and all connections to the internet.
- Voicemail systems. These systems are used for receiving and storing
messages to employees.
- Ancillary services systems. These include such systems as heating,
ventilation and air conditioning control systems and security systems.
- Third party software programs. These programs are used throughout the
Company in a number of business applications, including word
processing, spreadsheets, budgeting, financial reporting, proposal
generation, telecommunications management and internet access.
The Company has not yet completed its reviews of these programs and
systems, but does not expect that any remediation relating to such programs and
systems that might be necessary following such reviews will cause the Company to
incur material costs or present implementation challenges that cannot be
addressed prior to the end of calendar 1999. The Company expects to complete its
reviews of these programs and systems during fiscal 1999.
The computer programs and operating systems used by entities with whom
the Company has commercial relationships also pose potential problems relating
to the year 2000 issue, which may affect the Company's operations in a variety
of ways. These risks are more difficult to assess than those posed by internal
programs and systems and the Company has not yet completed the process of
formulating a plan for assessing them.
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<PAGE> 24
The Company expects to complete the formulation of its plan for
assessing the programs and systems of the entities with whom it has commercial
relationships and the identification of the related risks and uncertainties by
the end of fiscal 1999. Once such assessment and identification has been
completed, the Company intends to resolve any material risks and uncertainties
that are identified by: 1) communicating further with the relevant vendors and
service providers, 2) working internally to identify alternative sourcing, and
3) formulating contingency plans to deal with such material risks and
uncertainties. The Company expects the resolution of such material risks and
uncertainties to be an ongoing process until all year 2000 problems are
satisfactorily resolved.
ITEM 7. FINANCIAL STATEMENTS
See index to financial statements on page F-1.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not Applicable
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
The executive officers and directors of the Company are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Glen C. Warren (1) 67 Director, Chairman of the Board
Steven D. Brown (1) (2) 52 Director, Chief Executive Officer
Rex Hauck (2) 47 Director, President
Robert A. Martinez 36 Vice President - Finance, Chief Financial Officer and
Treasurer
J. Eric Van Atta 34 Vice President, Secretary
John Boyd 62 Director
Malcolm C. Davenport, V 47 Director
Dan W. Holloway 76 Director
Norman J. Hoskin 64 Director
Ben Noble 46 Director
</TABLE>
- ------------------------------
(1) Member of the Executive Committee of the board of directors
(2) Member of the Stock Option Committee of the board of directors
GLEN C. WARREN, has served as Chairman of the Board of River Oaks
Hospital in Jackson, Mississippi, since 1988, President of Mississippi
Diagnostic Imaging Center, Ltd., since 1986 and as a clinical professor of
neurological surgery at the University of Mississippi School of Medicine since
1972. Dr. Warren became a director of the Company in July 1994. Dr. Warren
accepted the post of Chairman of the Board in August 1998.
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<PAGE> 25
STEVEN D. BROWN - Mr. Brown founded the Company in July 1991 with Mr.
Hauck and has served as Chairman of the Board from July 1997 to August 1998, as
Co-Chairman of the Board from July 1994 through July 1997 and as Chief Executive
Officer since the Company's inception.
REX HAUCK - Mr. Hauck founded the Company in July 1991 with Mr. Brown.
He served as Executive Vice President from the inception of the Company until
July 1994, when he was elected Co-Chairman of the Board, which position he held
from July 1994 until July 1997. Mr. Hauck also served as Co-President from July
1994 to October 1998 and has served President since October 1998.
ROBERT A. MARTINEZ - Mr. Martinez joined the Company as Vice
President-Finance in December 1995 after nine years with the accounting firm of
BDO Seidman, LLP. Mr. Martinez became Treasurer in April 1996 and also assumed
the responsibilities of Chief Financial Officer in January 1997.
J. ERIC VAN ATTA - Mr. Van Atta has served as Vice President and
Secretary of the Company since its inception in July 1991.
JOHN BOYD, a private investor, was a physician on the staff of
Southwest Regional Medical Clinic from 1969 to January 1996 and President of
Boyd Medical Center in McComb, Mississippi, from 1965 to December 1995. Dr. Boyd
became a director of the Company in July 1991.
MALCOLM C. DAVENPORT, V, has practiced law in West Point, Georgia,
since October 1993, originally as a sole practitioner and since 1996 as a
partner in the firm of Coulter & Davenport. Mr. Davenport previously practiced
law in Dalton, Georgia, as a sole practitioner from 1984 to 1991 and as a
partner in Ponder & Davenport, P.C., from 1991 to 1993. He is currently a
director of ITC DeltaCom, Inc. a communications holding company, and a director
and secretary of Spintek Gaming Technologies, Inc., a gaming technology
manufacturer and licensor. Mr. Davenport became a director of the Company in
July 1994.
DAN W. HOLLOWAY, is a physician in private practice in Las Vegas,
Nevada and has been affiliated, as a resident physician, with Desert Springs
Hospital since 1982. Dr. Holloway has also served as Chairman of the Department
of Family Practice at Desert Springs Hospital since 1993. Dr. Holloway became a
director of the Company in September 1996.
NORMAN J. HOSKIN, has been Chairman of the Board of Atlantic
International Capital, Inc. since July 1994. He was previously Chairman of
Atlantic Capital Group, Ltd., a venture capital advisory service, from 1986. Mr.
Hoskin is a director of Aquacare Systems, Inc., a producer of water purification
equipment, Consolidated Technologies Corp., a diversified manufacturing company,
COTG Technologies Group, Inc., a technology company, Trans Global Services,
Inc., a telephone and internet communications company and Sequential Information
Systems, Inc., a high-tech aircraft equipment company. Mr. Hoskin became a
director of the Company in September 1996. Mr. Hoskin has also served as
chairman and director of Tapistron International, Inc., a textile equipment
company.
BEN E. NOBLE, is a private investor and has been president and chairman
of The Noble Group, Inc., a management, investment and consulting firm, since
1989. Mr. Noble became a director of the Company in March 1997.
Each of the Company's directors is elected at the annual meeting of
stockholders and serves until the next annual meeting or until his successor has
been elected and qualified. Holders of Class A common stock and Class B common
stock, respectively, can elect a number of members of the board of directors
proportionate to the percentage which shares of the respective classes
constitute of the total outstanding shares of both classes, except that holders
of Class B shares in any event elect at least a majority of the directors.
Vacancies in the board of directors are filled by a majority vote of the
remaining members of the board of directors who were elected by the same class
of shareholders. Currently, there are no standing compensation arrangements for
non-executive board of director members. Executive officers of the Company are
elected by and serve at the discretion of the board of directors.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's officers, directors, and persons who own more than 10% of the
registered class of the Company's equity securities to file reports of
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<PAGE> 26
ownership with the Securities and Exchange Commission. Officers, directors and
greater than 10% stockholders are required by the regulations of the Securities
and Exchange Commission to furnish the Company with copies of all Section 16(a)
forms they file.
Based solely on a review of the Forms 3 and 4 furnished to the Company,
the Company believes that all filing requirements applicable to its officers,
directors and greater than 10% beneficial owners were complied with.
Form 5 is not required to be filed if there are not previously
unreported transactions or holdings to report. Nevertheless, the Company is
required to disclose the name of directors, executive officers and 10%
shareholders who did not file a Form 5, unless the Company has obtained a
written statement that no filing is due. The Company has been advised by those
required to file Form 5 that no filings were due.
ITEM 10. EXECUTIVE COMPENSATION
EXECUTIVE COMPENSATION
The following table furnishes compensation information for the year
ended July 31, 1998, for the chief executive officer; no other executive
officers earned more than $100,000 during the year ended July 31, 1998. During
fiscal 1998, the Company's chief executive officer did not receive, and as of
July 31, 1998 did not hold any stock options or SARs which have been granted in
connection with his service to the Company in any capacity.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
--------------------------------
NAME AND FISCAL OTHER ANNUAL
PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION
------------------ ---- ------ ----- ------------
<S> <C> <C> <C> <C>
Steven D. Brown 1998 $ 89,210 -0- -0-
Chief Executive Officer 1997 99,360 -0- -0-
1996 104,040 -0- -0-
</TABLE>
STOCK OPTION PLAN
In May 1996 the Company adopted its 1996 Stock Option Plan (the "Stock
Option Plan"). The purpose of the Stock Option Plan is to encourage growth in
shareholder value by providing financial incentives to selected members of its
board of directors, employees, consultants and advisors who are in positions to
make significant contributions toward that success. The aggregate number of
shares reserved for issuance under the Stock Option Plan is 2,500,000 shares.
Options granted under the Stock Option Plan can be either (i) options intended
to qualify as "incentive stock options" under Section 422 of the Internal
Revenue Code of 1986, as amended (the "Code"), or (ii) non-qualified stock
options. The Stock Option Plan permits the grant of stock appreciation rights in
connection with the grant of stock options. The Stock Option Plan is
administered by a stock option committee of the board of directors, consisting
of Messrs. Brown and Hauck. The stock option committee has the authority to
determine exercise prices applicable to the options, the eligible directors,
employees, consultants and advisers to whom options may be granted, the number
of shares and class of common stock subject to each option, and the extent to
which options may be exercisable. The stock option committee is empowered to
interpret the Stock Option Plan and to prescribe, amend and rescind the rules
and regulations pertaining to the Stock Option Plan. No option is transferable
by the optionee other than by will or the laws of descent and distribution, and
each option is exercisable during the lifetime of the optionee only by such
optionee.
No incentive stock option granted under the Stock Option Plan may be
granted at a price less than the fair market value of the underlying common
stock on the date of grant (or less than 110% of fair market value in the case
of holders of 10% or more of the total combined voting power of all classes of
stock). Non-qualified stock options may be granted at the exercise price
established by the stock option committee, which may not be less than the fair
market value of the common stock on the date of grant.
Each option granted under the Stock Option Plan is exercisable for a
period not to exceed ten years from the date of grant (or five years in the case
of a holder of more than 10% of the total combined power of all classes of
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<PAGE> 27
stock) and shall lapse upon expiration of such period, or earlier upon
termination of the recipient's employment with the Company or as determined by
the stock option committee.
In June 1998, the Company amended its Stock Option Plan, primarily to
allow for the issuance of an additional 2,500,000 stock options and/or stock
appreciation rights, as provided for by the Stock Option Plan. In June 1998, the
Company also filed a Form S-8 registration statement to register the potential
issuance of the 2,500,000 additional shares underlying the Stock Option Plan, as
amended, in addition to 315,051 shares underlying employee stock options
previously granted under the Stock Option Plan.
In December 1998, the Company re-priced the exercise price of certain
stock options that had been previously granted under its employee stock option
plan. The Company re-priced these options as follows: 1) 52,345 stock options
granted between November 21, 1995 and December 8, 1997 with exercise prices
ranging from $1.45 to $3.75 were re-priced to an exercise price of $1.00, and 2)
272,844 stock options granted between November 21, 1995 and December 8, 1997
with exercise prices ranging from $1.45 to $3.75 were re-priced to an exercise
price of $.50.
Neither the Chief Executive Officer nor President of the Company had
any stock options affected by this re-pricing and with the exception of Robert
A. Martinez and J. Eric Van Atta, no executive officer held stock options that
were affected by the re-pricing. Mr. Martinez and Mr. Van Atta held,
respectively, 70,000 and 136,689 stock options, having exercise prices ranging
from $1.45 to $3.75, which were re-priced to exercise prices of $.50.
In February 1999, the Company entered into two consulting agreements
("Consulting Agreements") with two entities for the performance of certain
strategic financial planning services and consulting in the areas of filmed
entertainment and LSVD operations. The Consulting Agreements call for these
entities to provide these services over a period of six month in exchange for
1,200,000 shares of the Company's Class A common stock, in the aggregate. The
Company has agreed to file a Form S-8 to register the issuance of these shares.
As a result of these transactions, the consultants' beneficial
ownership in the Company's common stock will be as follows:
<TABLE>
<CAPTION>
Entity Class A Class B Class A and Class B
- ------ ------- -------- -------------------
<S> <C> <C> <C>
Fontenelle, LLC 17.7% -- 10.3%
FT Enterprises, Inc. 8.9% -- 5.2%
</TABLE>
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table shows beneficial ownership of capital stock of the
Company at March 2, 1999, for the directors and officers of the Company, and for
each beneficial owner of 5% or more of either class of the Company's common
stock
<TABLE>
<CAPTION>
SHARES OF CLASS A SHARES OF CLASS B
----------------- -----------------
COMMON STOCK COMMON STOCK
------------ ------------
NAME NUMBER % OF CLASS NUMBER % OF CLASS
- ---- ------------------------ ------------------------
<S> <C> <C> <C> <C>
Steven D. Brown (1)(6) 600,100 18.08% 606,127 18.79%
Rex Hauck (1)(2)(6) 660,300 19.89% 601,029 18.63%
Robert A. Martinez (1)(3) 9,276 * 35,448 1.09%
J. Eric Van Atta (1)(4) 10,567 * 183,257 5.43%
John W. Boyd (1)(5) 455,096 13.25% 46,210 1.41%
Glen Warren (1)(6)(7) 138,564 4.05% 475,486 14.07%
Malcolm C. Davenport, V (1)(8) 41,866 1.25% 152,133 4.69%
Ben E. Noble (1)(9) 113,332 3.34% 0 *
Norman Hoskin (1) 0 * 0 *
Dan Holloway (10) 2,667 * 35,172 1.08%
Vivian W. Jones (6)(11)
4319 Lehaven Circle Tucker, GA 30084 250,600 7.55% 179,050 5.55%
- -----------------------------------------
All Officers and Directors as a Group (10
persons total) 2,031,768 55.66% 2,134,862 58.23%
========= ===== ========= ======
</TABLE>
* Any percentages under one percent (1%) are not shown.
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<PAGE> 28
(1) The address for the officers and directors is the corporate
office of the Company located at 6600 Peachtree Dunwoody Road, Building 600,
Suite 250, Atlanta, Georgia 30328.
(2) Includes 11,524 shares of Class B common stock and 200 shares
of Class A common stock owned by Mr. Hauck's minor children, as to which Mr.
Hauck disclaims beneficial ownership.
(3) Includes 8,276 shares of Class A common stock subject to
purchase under currently exercisable options and 35,448 shares of Class B common
stock subject to purchase under currently exercisable options.
(4) Includes 10,000 shares of Class A common stock subject to
purchase under currently exercisable options and 150,254 shares of Class B
common stock subject to purchase under currently exercisable option.
(5) Includes 43,965 shares of Class B common stock subject to
purchase under currently exercisable options and 115,000 shares of Class A
common stock subject to purchase under currently exercisable warrants. Also
includes 2,245 shares of Class B common stock and 100 shares of Class A common
stock owned by Mr. Boyd's spouse, as to which Mr. Boyd disclaims beneficial
ownership.
(6) Under an agreement (the "Voting Agreement") dated April 1996
Messrs. Brown, Hauck and Warren and Ms. Jones agreed to vote all their shares of
common stock of the Company ("Committed Shares") as a block in accordance with
the majority vote (by shares) among themselves. The Voting Agreement will remain
in effect until April 2001, unless sooner terminated by a written agreement
executed by shareholders holding of record a majority of the Committed Shares
then subject to the Agreement.
(7) Includes 154,851 shares of Class B common stock subject to
purchase under currently exercisable warrants and options and 102,000 shares of
Class A common stock subject to purchase under currently exercisable warrants.
Also includes 12,315 shares of Class B common and 100 shares of Class A common
stock owned by Dr. Warren's wife, as to which Dr. Warren disclaims beneficial
ownership.
(8) Includes (i) 87,830 shares of Class B common stock, (ii)
20,100 shares of Class A common stock and (iii) 6,666 shares of Class A common
stock subject to purchase under currently exercisable options, all of which are
held by Mr. Davenport as trustee of a family trust. Also includes 21,127 shares
of Class B common stock subject to purchase under currently exercisable options
and 15,000 shares of Class A common stock subject to purchase under currently
exercisable warrants.
(9) Includes 73,332 shares of Class A common stock subject to
purchase under currently exercisable warrants.
(10) Includes 35,172 shares of Class B common stock subject to
purchase under currently exercisable options.
(11) Includes 14,555 shares of Class B common stock and 100 shares
of Class A common stock owned by Ms. Jones' minor son as to which Ms. Jones
disclaims beneficial ownership, and 72,875 shares of Class B common stock and
400 shares of Class A common stock transferred by Ms. Jones to other relatives,
which shares continue to be subject to the voting agreement between Messrs.
Brown, Hauck, Warren and Ms. Jones. See Note (6).
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Pursuant to an agreement dated August 31, 1993, and restructured
November 3, 1995, the Company acquired all of the outstanding stock of Current
Corporation (later renamed First Light Entertainment Corporation) from Ms.
Vivian Jones in exchange for 439,650 shares of Class B common stock and an
option to purchase up to 879,300 additional shares of Class B common stock on or
before September 1, 2003, at a price of $0.85 per share. Ms. Jones' options
became exercisable in three annual increments of 293,100 shares each, the last
of which vested September 1, 1996. Ms. Jones' option expired, without exercise,
in January 1999. Current Corporation, organized by Ms. Jones in August 1993, had
acquired certain assets of Jayan House, Ltd., a commercial production business
with which she had been employed, in exchange for its 4.37%, $100,000 principal
amount note, payable in 20 equal
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<PAGE> 29
quarterly installments of principal and interest commencing November 1993. First
Light Entertainment Corporation had not made the last two full quarterly
installments under this note agreement as of March 1999.
From December 1993 through July 1997, Dr. Glen Warren purchased 86,205
shares of Class B common stock at an aggregate price of $125,000 ($1.45 per
share). In connection with certain of these purchases, Dr. Warren also received
warrants for the purchase of 25,862 shares of Class B common stock at a price,
to be determined by the related agreement, between $2.56 and $3.41.
These warrants expired without exercise in June 1998.
In July 1993, Dr. Glen Warren and Dr. John Boyd personally secured a
$100,000 revolving bank line of credit for the benefit of the Company. In
September 1994, the revolving line of credit was replaced by a note which the
Company repaid in monthly installments. This note was paid in full in fiscal
1997.
In June 1994, the Company purchased a 49% interest in Diversity
Filmworks, Inc., a newly incorporated corporation, consisting of 490 shares of
common stock, for a purchase price of $245. The owner of the other 51% is Tyrone
C. Johnson. In September 1996, the Company and Mr. Johnson entered into a
stockholder agreement pursuant to which the size of Diversity's board of
directors was set at five, of which three will be individuals designated by the
Company.
From December 1993 to July 1997, the Company made seven loans totaling
$71,176 to Steven D. Brown, each of which was represented by an unsecured
promissory note due December 1998, with accumulated interest of 7% per annum. In
December 1998, the Company extended the due date of these notes to December
1999.
From December 1993 to July 1997, the Company made five loans totaling
$54,767 to Rex Hauck, each of which was represented by an unsecured promissory
note due December 1998, with accumulated interest of 7% per annum. In December
1998, the Company extended the due date of these notes to December 1999.
From December 1993 to July 1997, the Company made four loans totaling
$87,600 to Vivian Jones, each of which was represented by an unsecured
promissory note due December 1998, with accumulated interest of 7% per annum.
Ms. Jones repaid $23,000 against these notes in October 1996. In December 1998,
the Company extended the due date of these notes to December 1999.
In April 1996 Messrs. Brown and Hauck, Dr. Warren and Ms. Jones entered
an agreement under which they agreed to vote all their shares of Class A and
Class B common stock as a block in accordance with the majority vote (by shares)
among themselves. By reason of their corporate offices, share ownership or
voting agreements they may be deemed "controlling persons" of the Company.
In May 1996, the Company agreed to issue to Dr. Glen Warren options,
exercisable through June 2000, for the purchase of 28,208 shares of Class B
common stock, at $1.71 per share, contingent upon Dr. Warren arranging for the
Company a three month $75,000 line of credit. The line of credit was arranged in
July 1996. In November 1996, the Company converted this line of credit into a
six month unsecured note due May 1997 with a per annum interest rate of 8.75%.
The due date of the note has been subsequently extended at each successive due
date for an additional six month period. The note is currently due in November
1998. Dr. Warren is the co-signer on the note.
The Company's original agreement dated May 16, 1995, as amended, with
Atlantic International Capital, Ltd., ("AIC"), of which Norman Hoskin is an
officer and stockholder, was terminated by mutual consent on September 27, 1996.
The Company then entered a new agreement retaining AIC, effective October 1,
1996, (i) to advise and offer counsel concerning communications and relations
with investors and with market makers in the common stock of the Company, and
(ii) to provide other business advice and counsel. This agreement was
terminated, by mutual consent of both parties, on October 31, 1996.
In October 1996, Dr. Glen Warren and Malcolm C. Davenport, V each
loaned $25,000 to the Company for use as working capital and to fund operating
losses. The loans are due upon demand by the respective holders, but no later
than August 1997, and bear interest at the prime rate plus 1%. As consideration,
the Company issued each of the lenders an option to purchase up to 9,403 of
Class B common stock at $1.71 per share at any time through June 2000. The
Company re-paid $25,000 of these loans in June 1997; the remaining loan's fixed
due date was extended to August 1, 1998 and was settled in February 1998.
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<PAGE> 30
In a private placement completed in May 1997, two directors of the
Company subscribed as follows for units consisting of 10,000 shares of Class A
common stock and a warrant, exercisable through June 2000, to purchase 3,333
shares of Class A common stock at a price of $3.00 per share: Mr. Noble, four
units for $100,000; and Mr. Davenport, two units for $50,000 (including one unit
as trustee of the Malcolm C. Davenport Trust).
In April 1997, Dr. Glen Warren made a short-term advance, without
interest, of $30,000 to the Company for a period of eight days.
In June 1997, Dr. Glen Warren loaned the Company $30,000. This demand
loan, as amended, bore interest at the prime rate plus 1% and was due on demand,
but no later than August 1, 1998. The Company settled this loan in August 1997.
In July 1997 certain directors of the Company guaranteed revolving
lines of credit, or extended personal revolving lines of credit to the Company
in the following principal amounts; Messrs. Boyd, Davenport and Dr. Warren,
$75,000 each; Mr. Noble, $100,000. The lines of credit bear interest on loan
balances outstanding at the prime rate plus 1% and are due July 1998. As
consideration, in October 1997 the Company issued each member of the group
warrants for the purchase of 5,000 shares of Class A common stock at $4.58 per
share, exercisable through June 2000, in respect of each $25,000 of revolving
line of credit guaranteed or provided. The maturity date for the line of credit
with Mr. Noble was extended, by amendment, to April 1999.
The revolving lines of credit related to Messrs. Boyd, Davenport and
Dr. Warren, amounting to $225,000 in the aggregate, were not extended by the
bank beyond July 1998. However, the guarantees have remained in place for these
lines of credit. The Company is currently discussing its various options with
the individual guarantors and the bank.
In August 1997, Dr. Glen Warren purchased 36,364 shares of Class A
common stock for a an aggregate price of $100,000. In connection with this
purchase Dr. Warren also received a warrant to purchase 37,000 shares of Class A
common stock at $2.80 per share, exercisable through June 2000.
In August 1997, Messrs.. Boyd, Davenport, Noble and Dr. Warren,
participated in the organization of Video Communications Network, LLC ("VCN"), a
83.3% owned subsidiary of the Company that is in the planning and development
stage. In exchange for nominal consideration, this group received 666 Ordinary
LLC shares of VCN, representing 6.7% of the outstanding Ordinary and Deferred
LLC shares.
In October 1997, Ben E. Noble received warrants to purchase 40,000
shares of Class A common stock at a purchase price of $4.58 per share,
exercisable through June 2000, in consideration of his having agreed to join the
board of directors.
In January 1998, the Company sold a portion of its interest in VCN,
representing 444 LLC shares, to Messrs. Boyd, Noble, Dr. Warren and a
shareholders for nominal consideration.
In January 1998, Ben E. Noble extended a loan to the Company in the
amount of $75,000. This loan is unsecured, bear interest at the prime rate plus
1% and is due on demand.
In February 1998, Dr. Glen Warren subscribed for one unit of a VCN
private placement offering. Each unit in the private placement was priced at
$100,000 and consisted of 222 LLC shares and a warrant to purchase 50,000 shares
of the Company's Class A common stock, exercisable at $3.00 per share through
January 2001.
In February 1998, John Boyd extended a loan to the Company in the
amount of $75,000. This loan is unsecured, bear interest at the prime rate plus
1% and is due on demand.
In April 1998, the Company entered into an agreement to pay Ben E.
Noble ten percent (10%) interest on his investments into False River, LLC. The
Company agreed to pay such interest in consideration of Mr. Noble being the
initial and largest investor in False River, LLC and agreed to pay such interest
until such time that his investments were repaid from the proceed of the sale of
any and all distribution rights associated with the feature film currently
titled False River.
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<PAGE> 31
During the period of April 1998 to February 1999, certain members of
the board of directors purchased preferred distribution LLC share interests in
False River, LLC. The amount of funds received from the sale of these interests
were as follows: Ben E. Noble $311,526; Dr. Glen Warren $147,000; Norman Hoskin
$7,738; John Boyd $50,000 and Steven Brown $53,800.
During the period of May 1998 to July 1998, Dr. Warren loaned the
Company $370,500, in the aggregate. These notes are unsecured, bear interest at
the prime rate plus 1% and are due on demand but no later than September 1999.
In July 1998, Atlantic International Entertainment, Inc., a corporation
whose chairman, Norman Hoskin, is a member of the board of directors, purchased
preferred distribution LLC share interests in False River, LLC. These interests
had a purchase price of $100,000.
In July 1998, Dr. Glen Warren extended a non-interest bearing loan
amounting to $37,500 to the Company, which was repaid in July 1998.
In August 1998, Robert Martinez extended a loan to the Company
amounting to $26,264. This note is secured, bears interest at the prime rate
plus 1% and is due on demand but no later than September 1999. The Company has
pledged as security its interest in the ordinary LLC shares of False River, LLC
to the extent that any principal and accrued interest remain unpaid at maturity
under this note agreement.
During the period of August 1998 to October 1998, Dr. Glen Warren
loaned the Company $68,000, in the aggregate. These notes are unsecured, bear
interest at the prime rate and are due on demand, but no later than September
1999.
During the period of December 1998 to January 1999, Dr. Warren extended
loans to the Company amounting to $137,000. These loans are unsecured, bear
interest at the prime rate plus 1% and are due on demand.
In February 1999, the Company issued to John Boyd a warrant to purchase
100,000 shares of the Company's Class A common stock as additional consideration
for his commitment to invest $50,000 in False River, LLC. The warrant is
exercisable at $.20 per share, through January 2004. False River, LLC received
$25,000 in January 1999 and $25,000 in February 1999 relative to this
commitment.
In February 1999, Steve Brown extended a loan to the Company amounting
to $11,000. This note is secured, bears interest at the prime rate plus 1% and
is due on demand but no later than September 1999. The Company has pledged as
security its interest in the ordinary LLC shares of False River, LLC to the
extent that any principal and accrued interest remain unpaid at maturity under
this note agreement.
In February 1999, Norman Hoskin extended a loan to the Company
amounting to $10,000. This loan is unsecured, bears interest at the prime rate
plus 1% and is due on demand, but no later than September 1999.
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<PAGE> 32
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
(A) EXHIBIT LIST
EXHIBIT NUMBER DESCRIPTION
2.1* Agreement and Plan of Merger dated as of May 1, 1996 with
American Artists Film Corporation
3.1* Articles of Incorporation of the Registrant
3.2* Amended and Restated Bylaws of the Registrant
3.3* Amendment to Articles of Incorporation of the Registrant
adopted May 1, 1996
3.4* Articles of Incorporation of American Artists
3.5* Bylaws of American Artists
3.6 Third Amended and Restated Bylaws of American Artists Film
Corporation, dated July 24, 1998
3.7 Amendment of Articles of Incorporation of American Artists
Film Corporation dated January 26, 1999
10.1* Form of Indemnification Agreement
10.2* Consulting Agreement with Douglas J. Bates
10.3* Consulting Agreement with Alan G. Johnson
10.4* Promissory Note with Douglas J. Bates
10.5* Promissory Note with Alan G. Johnson
10.6* Common Stock Investment Agreement, dated February 24, 1992,
and the Agreement dated February 24, 1992, between American
Artists and Icon International, Inc., as extended by letter
dated August 21, 1995
10.7* Asset Purchase Agreement, dated August 1, 1993, between
Current Corporation and First Light Entertainment Corporation
10.8* Lease Agreement, dated August 5, 1993, between Kee Joint
Venture and Current Corporation, as renewed June 15, 1995
between Kee Joint Venture and First Light Entertainment
Corporation
10.9* Share Purchase Agreement, dated August 31, 1993, and
Amendment Agreement, dated November 3, 1995, between American
Artists and Vivian Walker Jones, with respect to shares of
First Light Entertainment Corporation
10.10* Agreement, dated April ___, 1994, between NBC Entertainment
and Greystone Communications, Inc., as supplemented by letter
agreement dated April 7, 1994, regarding Angels I
10.11* License Agreement, dated April 13, 1994, between Calling
Card Company, Inc. and American Artists, as supplemented by
letter agreement dated July 28, 1994
10.12* Letter Agreement, dated May 13, 1994, between Calling Card
Company, Inc. and American Artists
10.13* Joint Venture Agreement, dated May 20, 1994, between
Greystone Communications, Inc. and American Artists
10.14* Subscription Agreement, dated June 29, 1994, between American
Artists and First Light Diversity, Inc.
10.15* Agreement, dated July 26, 1994, between NBC Entertainment and
Greystone Communications, Inc., as supplemented by agreement
dated July 26, 1994, regarding Angels II
10.16* Distribution Agreement, dated July 26, 1994, as revised
October 10, 1994, between Alfred Haber Distribution, Inc. and
American Artists
10.17* Agreement, dated August 3, 1994, between American Artists
and Ballantine Books
10.18* License Agreement, dated as of August 8, 1994, between Time-
Life Video and American Artists
10.19* Promissory Note, dated September 13, 1994, made by John W.
Boyd and Glen C. Warren, to be paid to the order of Deposit
Guaranty National Bank
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<PAGE> 33
10.20* Financial Consulting Agreement, dated May 6, 1995, between
Atlantic International Capital, Ltd. and American Artists,
as amended by letter agreement dated May 1, 1996
10.21* American Artists 1995 Stock Option Plan, approved December 1,
1995
10.22* Voting Agreement, dated april 29, 1996, among Rex Hauck,
Steve Brown, Dr. Glen Warren, and Vivian Jones
10.23* License Agreement, dated as of April 30, 1996, between
American Artists and Turner Original Productions, Inc.,
regarding Angels I and Angels II
10.24* Development Agreement, dated June 14, 1996, between American
Artists and Turner Original Productions, Inc.
10.25* Articles of Incorporation of Millennium Group, L.L.C.
10.26* Operating Agreement of Millennium Group, L.L.C.
10.27* Articles of Organization of Death and Taxes Film Company,
L.L.C.
10.28* Form of Operating Agreement of Death and Taxes Film Company,
L.L.C.
10.29* Articles of Incorporation of First Light Entertainment
Corporation
10.30* Bylaws of First Light Entertainment Corporation
10.31* Articles of Incorporation of Diversity Film Works, Inc.
10.32* Bylaws of Diversity Film Works, Inc.
10.33* Unsecured Promissory Note dated July 17, 1996 issued to
Deposit Guaranty National Bank
10.34* Agreement with Liberty Transfer Co.
10.35** Voting Agreement between American Artists Film Corporation
and Tyrone C. Johnson
10.36* Lease Agreement, dated August 15, 1996, between
Kee Joint Venture and First Light Entertainment Corporation
10.37* Promissory Note, dated November 21, 1996, made by American
Artists Film Corporation and co-signed by Glen C. Warren, to
be paid to the order of Deposit Guaranty National Bank
10.38* Financial Consulting Agreement, dated May 16, 1995, between
Atlantic International Capital, Ltd. and American Artists, as
amended by letter agreements dated May 1, 1996 and September
27, 1996
10.39* Overhead Allocation Agreement between American Artists Film
Corporation and Diversity Filmworks, Inc. , dated July 31,
1996
10.40* Production Agreement, dated October 11, 1996, between
American Artists and Turner Original Productions, Inc.
10.41* Common Stock Investment Agreement, dated February 24, 1992,
and the Agreement dated February 24, 1992, between American
Artists and Icon International, Inc., as extended by letter
agreements dated August 21, 1995 and December 10, 1996
10.42* Amendment to Distribution Agreement, dated July 26, 1994, as
revised October 10, 1994, between Alfred Haber Distribution,
Inc. and American Artists (Amendment of Exhibit 10.16)
10.43* Termination Letter to Liberty Transfer Company
10.44* Amendment to Production Agreement, dated October 11, 1996,
between American Artists and Turner Original Productions,
Inc. (Amendment to Exhibit 10.40)
10.45* Common Stock Investment Agreement, dated February 24, 1992,
and the Agreement dated February 24, 1992, between American
Artists and Icon International, Inc., as extended by letter
agreements dated August 21, 1995 and December 10, 1996 and
October 20, 1997
10.46* Agreement with Continental Stock Transfer & Trust Company
dated November 6, 1996.
10.47* Promissory Note, dated May 20, 1997, made by Glen C. Warren,
to be paid to the order of Deposit Guaranty National Bank
10.48* Settlement Agreement and Release, dated May 29, 1997, by and
between Greystone Communications, Inc. and American Artists
Film Corporation
10.49* Letter of Agreement by and between Desmond Towey & Associates
and American Artists Film Corporation dated June 18, 1997
10.50* Promissory Note, dated July 17, 1997, made by Glen C. Warren,
John W. Boyd, and Malcolm C. Davenport, to be paid to the
order of First Bank of Childersburg
10.51* Production Agreement between King Arthur Productions, LLC and
American Artists Film Corporation
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<PAGE> 34
10.52* Subscription Agreement and Stock Purchase Agreement both
dated September 3, 1997 for Glen C. Warren
10.53* Agreement between Marion Woodman and American Artists Film
Corporation dated September 17, 1997
10.54* Agreement between The Episcopal Media Center and American
Artists Film Corporation dated September 18, 1997
10.55* Agreement between Robert Johnson and American Artists Film
Corporation dated September 25, 1997
10.56* Agreement between Georgia Public Television and American
Artists Film Corporation
10.57* Unsecured Promissory Note, dated as of October 2, 1996,
issued to Malcolm C. Davenport
10.58* Unsecured Promissory Note, dated as of October 3, 1996 issued
to Glen C. Warren
10.59* Unsecured Promissory Note, dated as of October 10, 1996,
issued to Martin Howard
10.60* Unsecured Promissory Note, dated as of June 3, 1997, issued
to Glen C. Warren
10.61* Letter of Agreement, dated July 17, 1997, by and between
American Artists Film Corporation and Ben Noble for an
unsecured revolving line of credit
10.62* Amendment to Promissory Note, dated as of July 31, 1997,
issued to Glen C. Warren (Amendment of Exhibit 10.58)
10.63* Amendment to Promissory Note, dated as of July 31, 1997,
issued to Glen C. Warren (Amendment of Exhibit 10.60)
10.64* Termination Letter, dated October 31, 1996, to Atlantic
International Capital, Ltd.
10.65 Lease Amendment-Renewal, dated December 5, 1997, between Kee
Joint Venture, First Light Films/American Artists Film
Corporation and I.J. Kapplin Co.
10.66 Third Party Licensing Agreement, dated February 9, 1998,
between Diversity Entertainment Television/Atlanta, LLC, and
Georgia Public Television Company
10.67 Lease Agreement, dated January 12, 1998, between Underground
Festival, Inc., and Diversity Entertainment
Television/Atlanta, LLC
10.68 Amendment Agreement, dated January 15, 1998, between Video
Communications Network, LLC and its Members
10.69 Unsecured Promissory Note, dated January 21, 1998, issued to
Ben E. Noble
10.70 Agreement, dated February 12, 1998, between Cable New Network
("CNN") and Diversity Entertainment Television/Atlanta, LLC
10.71 Unsecured Promissory Note, dated February 28, 1998, issued to
John W. Boyd
10.72 Unsecured Promissory Note, dated March 16, 1998, issued to
Joseph Litner
10.73 Third Party Licensing Agreement, dated April 1, 1998, between
Diversity Entertainment Television/Atlanta, LLC, and Georgia
Television Company d/b/a WSB-TV
10.74 Production Agreement, dated April 6, 1998, between Crossing
Point, Inc., and American Artists Film Corporation.
10.75 Amended and Restated Operating Agreement of False River, LLC,
dated April 1998
10.76 False River Interest Agreement, dated April 30, 1998, between
Ben Noble and American Artists Film Corporation
10.77 Financial Advisory and Consulting Agreement, dated May 1,
1998, between National Securities Corporation and American
Artists Film Corporation
10.78 Unsecured Promissory Note, dated May 4, 1998, issued to Glen
C. Warren
10.79 Unsecured Promissory Note, dated May 14, 1998, issued to Glen
C. Warren
10.80 Unsecured Promissory Note, dated May 14, 1998, issued to Glen
C. Warren
10.81 "Last Sunrise" Production Agreement, dated May 21, 1998,
between THC Entertainment, Inc., and American Artists Film
Corporation
10.82 Amendment Agreement, dated May 29, 1998, to the Amended and
Restated Operating Agreement .of False River, LLC, between
False River, LLC and its Members
10.83 Amendment #1 to the Loan and Security Agreement dated April
2, 1998, between Emergent Financial Corporation and First
Light Entertainment Corporation
10.84 Unsecured Promissory Note, dated June 17, 1998, issued to
Glen C. Warren
10.85 Media Relations and Consulting Agreement, dated June 23,
1998, between Stockstowatch.com, American Artists Film
Corporation and Third Parties
10.86 Unsecured Promissory Note, dated June 26, 1998, issued to
Glen C. Warren
-34-
<PAGE> 35
10.87 Amendment #1 dated June 30, 1998, to the Media Relations and
Consulting Agreement, dated June 23, 1998, between
Stockstowatch.com, Inc., American Artists Film Corporation
and Third Parties
10.88 Operating Agreement of Diversity Entertainment
Television/Atlanta, dated June 30, 1998
10.89 Unsecured Promissory Note, dated July 2, 1998, issued to
Glen C. Warren
10.90 Letter of Agreement, dated July 16, 1998, between Crawford
Communications, Inc., and Video Communications Network, LLC.
10.91 Extension Letter of Agreement, dated July 17, 1997, between
American Artists Film Corporation and Ben E. Noble
10.92 Settlement Agreement and Release, dated July 24, 1998,
between American Artists Film Corporation, Millennium Group,
LLC and Investors.
10.93 Unsecured Promissory Note, dated December 1, 1998, issued to
Glen C. Warren
10.94 "Miracles" Co-Production Agreement, dated July 29, 1998,
between Jeanette Ebaugh and American Artists Film Corporation
10.95 Unsecured Promissory Note, dated July 31, 1998, issued to
Glen C. Warren
10.96 Unsecured Promissory Note, dated August 6, 1998, issued to
Glen C. Warren
10.97 Production Agreement, dated August 10, 1998, between Doris
Reynolds and American Artists Film Corporation
10.98 Unsecured Promissory Note, dated August 14, 1998, issued to
Glen C. Warren
10.99 Operating Agreement of Video Communications Network, LLC,
dated August 20, 1997
10.100 Secured Promissory Note, dated August 26, 1998, issued to
Robert A. Martinez
10.101 Unsecured Promissory Note, dated August 31, 1998, issued to
Glen C. Warren
10.102 Secured Promissory Note, dated September 14, 1998, issued to
Sandra Smallwood
10.103 Sales Agreement, dated September 24, 1998, between Diversity
Entertainment Television/Atlanta, LLC, and International Food
Specialties
10.104 "Miracles" Development Agreement, dated October 5, 1998,
between Home Box Office ("HBO") and American Artists Film
Corporation.
10.105 Unsecured Promissory Note, dated October 6, 1998, issued to
Glen C. Warren
10.106 Investor Relations Services Agreement, dated November 23,
1998, between Makenna Delaney & Sullivan and American Artists
Film Corporation
10.107 Consulting Agreement, dated December 7, 1998, between
American Artists Film Corporation and Ron Qurashi
10.108 Sublease Agreement, dated December 23, 1998, between CSX
Intermodal, Inc, American Artists Film Corporation and
Steven D. Brown
10.109 Extension Letter for Promissory Notes dated December 31,
1998, by and between American Artists Film Corporation and
Steven D. Brown
10.110 Extension Letter for Promissory Notes dated December 31,
1998, by and between American Artists Film Corporation and
Rex Hauck
10.111 Extension Letter for Promissory Notes dated December 31,
1998, by and between American Artists Film Corporation and
Tyrone Johnson
10.112 Extension Letter for Promissory Notes dated December 31,
1998, by and between American Artists Film Corporation and
Vivian W. Jones
10.113 Extension Letter for Promissory Notes dated December 31,
1998, by and between American Artists Film Corporation and
J. Eric Van Atta
10.114 Extension Letter for Promissory Notes dated December 31,
1998, by and between First Light Entertainment Corporation
and Vivian W. Jones
10.115 Extension Letter for Promissory Notes dated December 31,
1998, by and between First Light Entertainment Corporation
and Steven D. Brown
10.116 Unsecured Promissory Note, dated January 15, 1999, issued to
Glen C. Warren
10.117 Secured Promissory Note, dated January 15, 1999, issued to
Sandra Smallwood
10.118 Amendment Letter Agreement dated as of February 1, 1999,
between American Artists Film Corporation and Home Box Office
("HBO") in connection with the "Miracles" Development
Agreement dated as of October 5, 1998 between American
Artists Film Corporation and HBO
10.119 Unsecured Promissory Note, dated February 1, 1999, issued to
Norman J. Hoskin
10.120 Secured Promissory Note, dated February 16, 1999, issued
to Steven D. Brown
10.121 Consulting Agreement, dated February 19, 1999, between
American Artists Film Corporation and Fontenelle, LLC
-35-
<PAGE> 36
10.122 Consulting Agreement, dated February 19, 1999, between
American Artists Film Corporation and F T Enterprises, Inc.
10.123* Loan and Security Agreement Between First Light Entertainment
Corporation and Emergent Financial Corp.
23.1 Consent of BDO Seidman, LLP
27.1 American Artists Entertainment Corporation Financial Data
Schedule (for SEC use only).
- ------------------------------------------------------------
* Certain of the exhibits to this Report, indicated by an asterisk, are
incorporated by reference to other documents on file with the Securities
and Exchange Commission with which they were physically filed, to be part
of hereof as of their respective dates. Documents to which reference is
made are as follows:
(1) Registration Statement on Form SB-2 (File No. 33-97196C) of Setab Alpha,
Inc., filed on September 16, 1996.
(2) Registration Statement on Form S-4 (File No. 333-4159) of Setab Alpha,
Inc., filed September 16, 1996.
(3) Annual Report on Form 10-KSB (File No. 000-20759) of American Artists Film
Corporation for the year ended July 31, 1996.
(4) Annual Report on Form 10-KSB (File No. 000-20759) of American Artists Film
Corporation for the year ended July 31, 1997.
(5) Quarterly Report on Form 10-QSB (File No. 000-20759) of American Artists
Film Corporation for the quarter ended April 30, 1998
(B) REPORTS ON FORM 8-K.
The following report was filed on Form 8-K by the Company during the
quarter ended July 31, 1998:
(a) Form 8-K filed on June 24, 1998
-36-
<PAGE> 37
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
Date: March 11, 1999
AMERICAN ARTISTS ENTERTAINMENT CORPORATION
By: /s/ Steven D. Brown
--------------------------------------
Steven D. Brown
Chief Executive Officer and Director
In accordance with the Exchange Act, this report has been signed below
by the following persons on behalf of the registrant and in the capacities and
on the dates indicated.
<TABLE>
<S> <C> <C>
/s/ Dr. Glen C. Warren Director and Chairman March 11, 1999
- -----------------------------
Dr. Glen C. Warren
/s/ Rex Hauck Director and President March 11, 1999
- ------------------------------
Rex Hauck
/s/ Robert A. Martinez Vice President/Finance, Chief March 11, 1999
- ------------------------------ Financial Officer and Treasurer
Robert A. Martinez
/s/ John W. Boyd Director March 11, 1999
- -----------------------------
John W. Boyd
/s/ Malcolm C. Davenport, V Director March 11, 1999
- -----------------------------
Malcolm C. Davenport, V
/s/ Dan W. Holloway Director March 11, 1999
- -----------------------------
Dan W. Holloway
/s/ Norman J. Hoskin Director March 11, 1999
- -----------------------------
Norman J. Hoskin
/s/ Ben E. Noble Director March 11, 1999
- -----------------------------
Ben E. Noble
</TABLE>
-37-
<PAGE> 38
AMERICAN ARTISTS ENTERTAINMENT CORPORATION
AND SUBSIDIARIES
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS F-2
CONSOLIDATED BALANCE SHEET S F-3
CONSOLIDATED STATEMENTS OF OPERATIONS F-5
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (CAPITAL DEFICIT) F-6
CONSOLIDATED STATEMENTS OF CASHFLOWS F-7
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS F-8
</TABLE>
F-1
<PAGE> 39
Report of Independent Certified Public Accountants
Board of Directors and Stockholders
American Artists Entertainment Corporation
We have audited the accompanying consolidated balance sheets of American
Artists Entertainment Corporation (formerly American Artists Film Corporation)
and Subsidiaries as of July 31, 1998 and 1997, and the related consolidated
statements of operations, stockholders' equity (capital deficit), and cash
flows for each of the years then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of American Artists
Entertainment Corporation (formerly American Artists Film Corporation) and
Subsidiaries at July 31, 1998 and 1997, and the results of their operations and
their cash flows for each of the years then ended in conformity with generally
accepted accounting principles.
The accompanying consolidated financial statements have been prepared assuming
the Company will continue as a going concern. As discussed in Note 2 to the
financial statements, the Company incurred a significant net loss in fiscal 1998
and has a capital deficiency at July 31, 1998. These matters raise substantial
doubt about the ability of the Company to continue as a going concern.
Management's plans in regard to these matters are also discussed in Note 2. The
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.
BDO SEIDMAN, LLP
Atlanta, Georgia
March 2, 1999
F-2
<PAGE> 40
AMERICAN ARTIST ENTERTAINMENT CORPORATION
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
July 31,
----------------------------
1998 1997
---------- ----------
<S> <C> <C>
ASSETS
CASH $ 35,568 $ 31,379
ACCOUNTS RECEIVABLE 99,998 508,837
FILM COSTS, NET OF ACCUMULATED AMORTIZATION (NOTE 1) 1,230,231 493,912
PROPERTY AND EQUIPMENT, NET (NOTES 1 AND 4) 28,221 41,193
GOODWILL, NET OF ACCUMULATED AMORTIZATION (NOTE 1) -- 117,429
ADVANCES TO OFFICERS (NOTE 1) 253,012 220,719
---------- ----------
$1,647,030 $1,413,469
========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
F-3
<PAGE> 41
AMERICAN ARTIST ENTERTAINMENT CORPORATION
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (CONTINUED)
<TABLE>
<CAPTION>
July 31,
-------------------------------
1998 1997
----------- -----------
<S> <C> <C>
LIABILITIES
LINE OF CREDIT (NOTE 6) $ 52,549 $ --
ACCOUNTS PAYABLE 392,421 342,860
ACCRUED EXPENSES 72,026 180,790
ACCRUED PROFESSIONAL FEES 161,816 193,510
COMMON STOCK ISSUABLE (NOTE 1) 45,313 --
NOTES PAYABLE (NOTE 7) 406,426 316,128
NOTES PAYABLE/RELATED PARTIES (NOTE 8) 620,500 155,000
----------- -----------
TOTAL LIABILITIES 1,751,051 1,188,288
----------- -----------
MINORITY INTERESTS (NOTES 3, 4 AND 5) 545,610 50,000
CONTINGENCIES
STOCKHOLDERS' EQUITY (CAPITAL DEFICIT) (NOTE 9)
PREFERRED STOCK - SHARES AUTHORIZED 10,000,000; NONE ISSUED -- --
COMMON STOCK, $.001 PAR:
CLASS A - SHARES AUTHORIZED 20,000,000; ISSUED AND
OUTSTANDING 3,157,789 AND 876,620 3,158 877
CLASS B - SHARES AUTHORIZED 20,000,000; ISSUED AND
OUTSTANDING 3,282,472 AND 5,502,277 3,282 5,502
ADDITIONAL PAID-IN CAPITAL 3,916,933 2,908,117
UNAMORTIZED ADVERTISING CREDITS -- (122,618)
ACCUMULATED DEFICIT (4,573,004) (2,616,697)
----------- -----------
TOTAL STOCKHOLDERS' EQUITY (CAPITAL DEFICIT) (649,631) 175,181
----------- -----------
$ 1,647,030 $ 1,413,469
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements
F-4
<PAGE> 42
AMERICAN ARTIST ENTERTAINMENT CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Year Ended July 31,
-------------------------------
1998 1997
----------- -----------
<S> <C> <C>
REVENUES (NOTE 1)
Commercial production $ 2,450,958 $ 3,469,655
Film revenues (Note 1) -- 420,937
----------- -----------
2,450,958 3,890,592
----------- -----------
COSTS AND EXPENSES
Cost of commercial production 1,812,299 2,656,064
Film cost amortization 78,943 362,214
Consulting expenses (Note 10) 650,000 --
Selling, general and administrative 1,808,376 1,347,413
----------- -----------
4,349,618 4,365,691
----------- -----------
LOSS FROM OPERATIONS (1,898,660) (475,099)
Interest expense 57,647 15,746
Other expense -- 90,000
----------- -----------
NET LOSS $(1,956,307) $ (580,845)
=========== ===========
NET LOSS PER SHARE - BASIC AND DILUTED $ (.30) $ (.09)
=========== ===========
WEIGHTED AVERAGE COMMON SHARES (NOTE 1) 6,414,314 6,172,977
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements
F-5
<PAGE> 43
AMERICAN ARTIST ENTERTAINMENT CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (CAPITAL DEFICIT)
<TABLE>
<CAPTION>
Total
Stock-
Un- holders'
Additional amortized Equity
Class A Class B Paid-In advertising Accumulated (Capital
Common Stock Common Stock Common Stock Capital credits Deficit Deficit)
Shares Amount Shares Amount Shares Amount
--------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance - July
31, 1996 - $ - - $ - 9,407,837 $ 470,392 $2,125,117 $(122,618) $(2,035,852) $ 437,039
Merger with
Setab Alpha,
Inc. accounted
for as a
recapitalization
(Note 1):
Recapitalization
of outstanding
common stock 12,600 13 5,502,277 5,502 (9,407,837) (470,392) 464,877 - - -
Acquisition of
net assets of
Setab Alpha,
Inc. 700,020 700 - - - - (700) - - -
Offering costs - - - - - (105,000) - - (105,000)
Issuances of
common stock
(Note 9(b)) 164,000 164 - - - - 409,836 - - 410,000
Award of stock
options (Note
9(a)) - - - - - - 13,987 - - 13,987
Net loss - - - - - - - - (580,845) (580,845)
---------------------------------------------------------------------------------------------------------
Balance - July
31, 1997 876,620 $ 877 5,502,277 $5,502 - - $2,908,117 $(122,618) $(2,616,697) $175,181
Consulting
agreement (Note
10(a)) 25,000 25 - - - - 149,975 - - 150,000
Write-down of
advertising
credits (Note 1) - - - - - - - 122,618 - 122,618
Contribution of
stock warrants
to VCN (Note 4) - - - - - - 299,933 - - 299,933
Private
placement (Note
9(b)) 36,364 36 - - - - 99,964 - - 100,000
Consulting
agreement (Note
10(b)) - - - - - - 446,450 - - 446,450
Award of stock
options (Note
9(a)) - - - - - - 12,494 - - 12,494
Common stock
conversions 2,219,805 2,220 (2,219,805) (2,220) - - - - - -
Net loss - - - - - - - - (1,956,307) (1,956,307)
---------------------------------------------------------------------------------------------------------
Balance - July
31, 1998 3,157,789 $3,158 3,282,472 $3,282 - - $3,916,933 $ - $(4,573,004) $(649,631)
=========================================================================================================
</TABLE>
See accompany notes to consolidated financial statements.
F-6
<PAGE> 44
AMERICAN ARTIST ENTERTAINMENT CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year Ended July 31,
-------------------------------
1998 1997
----------- ---------
<S> <C> <C>
OPERATING ACTIVITIES
Net loss $(1,956,307) $(580,845)
Adjustments to reconcile net loss to cash used in operating
activities:
Film costs amortization 78,943 362,214
Depreciation and amortization 255,339 59,425
Consulting expense 596,450 --
Award of stock options 12,494 13,987
Changes in assets and liabilities:
Accounts receivable 408,839 (401,380)
Film costs additions (819,949) (380,249)
Other assets (32,293) (3,360)
Accounts payable 49,561 173,079
Accrued expenses (140,457) 5,570
Deferred revenue -- (11,867)
----------- ---------
Cash used in operating activities (1,547,380) (763,426)
INVESTING ACTIVITIES
Capital expenditures (2,321) (9,347)
----------- ---------
FINANCING ACTIVITIES
Borrowings under line of credit, net 52,549 --
Repayment of notes payable (515,752) (140,848)
Borrowings under notes payable 1,071,550 535,000
Issuances of common stock 100,000 410,000
Issuances of stock warrants 299,933 --
Minority interests 545,610 --
----------- ---------
Cash provided by financing activities 1,553,890 804,152
NET INCREASE IN CASH 4,189 31,379
----------- ---------
CASH, beginning of year 31,379 --
----------- ---------
CASH, end of year $ 35,568 $ 31,379
=========== =========
</TABLE>
See accompanying notes to consolidated financial statements
F-7
<PAGE> 45
AMERICAN ARTIST ENTERTAINMENT CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF BUSINESS
American Artists Entertainment Corporation (the "Company" or "American
Artists"), which prior to February 1999 was known as American Artists Film
Corporation, legally changed its name on February 5, 1999. The Company, directly
and through its subsidiaries, engages in the development, production and
exploitation of made-for-television and feature length motion pictures, and in
the commercial contract production of film products, principally television
commercials and corporate/industrial videos. The Company classifies its
operations in two business segments: (i) film development and production, which
includes the development and production of both cable or television films and
specials and feature films, and (ii) contract production, which includes the
production of both commercials and corporate/industrial videos. The Company's
film development and production operations involve the granting of credit to
film exhibitors and distributors. The Company's contract production operations
involve the granting of credit to clients and advertising agencies that
represent clients in various industries.
During fiscal 1997 and 1998, the Company incurred developmental and
organizational expenses for a new business segment focused on the development
and operation of a network of large screen video display ("LSVD") units. This
segment is in the planning and development stage and has not generated any
revenues.
The Company obtains its revenues from discrete project assignments
obtained from various clients. Accordingly, while the fees from one or more
clients may, in any one year, be significant as the result of the size of a
project undertaken for that client, the Company is not dependent on any one
client for a material amount of its continuing revenues.
During fiscal 1998, two of the Company's customers accounted for fees
equal to 54.3% and 12.5% of consolidated revenues. During fiscal 1997, three of
the Company's customers accounted for fees equal to 21.2%, 19.7% and 12.2% of
consolidated revenues.
BASIS OF PRESENTATION
The consolidated financial statements include the accounts of American
Artists, First Light Entertainment Corporation ("First Light"), a wholly-owned
subsidiary, Diversity Filmworks, Inc. ("Diversity"), a 49% owned subsidiary,
Millennium Group, LLC ("Millennium"), a wholly-owned subsidiary, False River,
LLC ("False River"), a 51% owned subsidiary and Video Communications Network,
LLC ("VCN"), a majority-owned subsidiary. The Company also consolidates the
accounts of Diversity Entertainment Television/Atlanta, LLC ("DETV/Atlanta"),
which it controls through VCN's majority ownership in DETV/Atlanta. American
Artists and its subsidiaries are collectively referred to as "AAEC Group."
AAEC Group conducts its television, feature film and television
commercial operations under the name of American Artists Films, a division of
American Artists and conducts its corporate/industrial video operations under
the name of First Draft Films, a division of American Artists.
Through the end of fiscal 1998 the Company conducted its contract
commercial production operations through its First Light subsidiary. First Light
suffered a significant decline in revenues during the fourth quarter of fiscal
1998, and as a result incurred an operating loss. In October 1998, the Company
decided to temporarily cease First Light's operations while it evaluated the
form and direction of its future contract commercial production operations. That
study is ongoing and the Company has not yet determined whether it will renew
these operations, and if so whether it will do so under the First Light name,
through American Artists Films, or through another entity. Although the Company
may use the First Light name, the temporary cessation of its operations and
uncertain future made uncertain the future recovery of the remainder of the
goodwill which was recorded in connection with the Company's fiscal 1994
acquisition of First Light. Accordingly, the goodwill of $78,286 remaining at
July 31, 1998 was charged to operations in fiscal 1998.
F-8
<PAGE> 46
AMERICAN ARTIST ENTERTAINMENT CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Although the Company has temporarily ceased the operations of First
Light, it continues to consolidate its accounts. First Light has a line of
credit, secured by its accounts receivable and guaranteed by the Company, which
the Company repaid in the first quarter of fiscal 1999 with the collection of
First Light's accounts receivable. The Company is presently deferring the
payment of First Light's other liabilities, which consist primarily of its
accounts payable ($86,883 at July 31, 1998 and $113,777 as of March 2, 1999).
With the exception of accounts receivable, which the Company collected
subsequent to July 31, 1998, and certain property and equipment, which the
Company can continue to use in its operations, First Light has no significant
assets.
As a result of the Company's decision to temporarily cease First
Light's operations, Ms. Vivian Jones, the president of First Light and a
director and co-president of the Company, tendered her resignation.
Diversity was formed by American Artists and a qualified minority owner
to engage in contract production as a qualified minority contractor. The Company
and the other stockholder of Diversity have an agreement as to the size and
composition of Diversity's board of directors. As a result, the Company
consolidates the accounts of Diversity in its consolidated financial statements.
Millennium, a limited liability company, was formed to produce and
distribute a sixty minute video. As of July 31, 1998, Millennium's activities
have been limited to pre-production story development. In July 1998, the Company
acquired 100% of the outstanding LLC shares of Millennium in exchange for 25,000
shares of the Company's Class A common stock. These shares were valued at
$45,313 based upon the closing share price of the Company's Class A common stock
on the date of the agreement. These shares were issued subsequent to July 31,
1998 and the liability related to the contractual obligation to issue these
shares is presented as a component of liabilities in the consolidated balance
sheet at July 31, 1998.
Prior to this acquisition, the Company exercised control through its
capacity as manager, which position allowed it to direct the operations of
Millennium, its purchase and sale of assets, issuance of debt or equity
securities, and execution of contracts and agreements, without the approval of
the other LLC shareholders. The minority interest at July 31, 1997 relates to
Millennium.
False River was organized in fiscal 1998 to develop and produce a
feature film, currently titled False River (See Note 3). VCN, and its subsidiary
DETV/Atlanta, were organized in fiscal 1998 in connection with the Company's
plans to develop and operate large screen video display units (See Notes 4 and
5).
In accordance with Statement of Financial Accounting Standards No. 53
"Financial Reporting by Producers and Distributors of Motion Picture Films"
("SFAS No. 53"), AAEC Group presents an unclassified balance sheet.
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. Certain
amounts in the consolidated balance sheet have been reclassified for comparative
purposes.
FILM COSTS AND REVENUES
Cost incurred to develop stories, acquire story rights, produce and
print films, and advertising or other distribution costs which benefit future
markets, are capitalized as film costs when incurred. All other advertising and
distribution costs are expensed as incurred.
AAEC Group finances certain of its projects by granting revenue
participations to outside investors in exchange for investments in the
production of the film. Capitalized film costs are reduced by the financing
provided under these arrangements.
F-9
<PAGE> 47
AMERICAN ARTIST ENTERTAINMENT CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Capitalized film costs are amortized using the individual film forecast
method under which capitalized costs are amortized based on the relationship
between the gross revenue realized and the estimate of the total gross revenues
to be earned by the film over its life. Revenue estimates are reviewed
periodically and, when appropriate, are revised. Where unamortized film costs
exceed a revised estimate of total future gross revenues, film costs are written
down to net realizable value. In fiscal 1998, the Company directly wrote-off
$78,943 from projects in development that were determined to be unlikely to be
pursued.
The components of capitalized film costs were as follows:
<TABLE>
<CAPTION>
July 31,
--------------------------------------
1998 1997
--------------------------------------
<S> <C> <C>
Released $ 1,185,560 $ 1,185,560
Accumulated amortization (1,174,643) (1,174,643)
--------------------------------------
10,917 10,917
In production 745,632 34,181
In development 473,682 448,814
--------------------------------------
$ 1,230,231 $ 493,912
======================================
</TABLE>
The above amounts do not include any value for four developed scripts
contributed to AAEC Group in 1991 by its founding stockholders in exchange for
common stock. In accordance with generally accepted accounting principles, the
scripts were recorded at zero, which, because no amounts had been expended for
the development of the scripts, represented the cost basis of the contributing
stockholders, and the stated value of the common shares issued, $238,000, was
charged against additional paid-in capital.
In general, the majority of the revenue to be derived from a film will
be earned during the two to three years following its release. On the basis of
American Artists' current production projections, which could change in the
future based on the availability of production funding, film demand and other
factors, 40% of the unamortized film costs will be amortized over the two year
period that will end July 31, 2000 and 60% will amortized over the four year
period that will end July 31, 2002.
Film revenues are recognized, in accordance with SFAS No. 53, generally
when the film has been accepted by the licensee, where applicable, collection of
license fees is reasonably assured, and the film is exhibited or is available
for distribution in the applicable market. Films are generally first exhibited
in television markets, and then are distributed on videotape. Revenues from the
foreign exhibition or sale of films are denominated in U.S. dollars. Minimum
guaranteed amounts from video license agreements, and from book royalties, are
recognized when the applicable license period begins and the film or book is
available to the distributor; amounts in excess of the minimum guarantee are
recognized when earned. Revenues are reduced for amounts payable on account of
revenue participations, which are accrued on the same basis as film costs are
amortized.
The components of film revenues were as follows:
<TABLE>
<CAPTION>
Year Ended July 31,
--------------------------------------
1998 1997
--------------------------------------
<S> <C> <C>
Television $ - $ 406,991
Foreign video - 13,946
--------------------------------------
$ - $ 420,937
======================================
</TABLE>
F-10
<PAGE> 48
AMERICAN ARTIST ENTERTAINMENT CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
CONTRACT PRODUCTION
AAEC Group produces film products, primarily television commercials and
corporate/industrial videos, for customers under fixed fee arrangements, which
typically are less than two months in duration. Revenues and cost attributed to
these contracts are recognized over the life of the contract using the
percentage-of-completion method of accounting. Under that method, revenue and
related costs are recognized based on the percentage of the contract completed,
which is estimated on the basis of the relationship of the costs incurred to
total estimated costs, except that provision is made currently for the full
amount of any anticipated losses on contracts in progress.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Depreciation is provided
using the straight-line method over the estimated life of the related asset. The
components of property and equipment are as follows:
<TABLE>
<CAPTION>
Useful July 31,
-------------------------------
Lives 1998 1997
---------------------------------------------
<S> <C> <C> <C>
Office furniture and fixtures 5 - 7 years $ 91,683 $ 89,362
Leasehold improvements - 35,000 35,000
Production equipment 5 - 7 years 7,498 7,498
---------------------------------
134,181 131,860
Less accumulated depreciation and
amortization (105,960) (90,667)
---------------------------------
$ 28,221 $ 41,193
=================================
</TABLE>
ADVANCES TO OFFICERS
AAEC Group has, on certain occasions, made cash advances to certain
officers which generally bear interest at 7% per annum. Management anticipates
that these advances will be repaid through their offset against future
compensation. (See Note 15(i)).
UNAMORTIZED ADVERTISING CREDITS
In fiscal 1992, American Artists issued shares of its common stock in
exchange for advertising credits that entitled American Artists to purchase
advertising credit having an aggregate "standard cost" value of $500,000. The
credits were recorded on the basis of $0.85 per share, based on per share prices
of shares of common stock issued for cash during the same period. The
unamortized advertising credits were presented as a reduction of stockholders'
equity reflecting the acquisition of the credits for common stock.
At July 31, 1998, the Company determined that it would be unable to
fully utilize these credits prior to their expiration in December 1998. As a
result, the Company recorded a $122,618 charge to operations to fully amortize
these advertising credits at July 31, 1998.
INCOME TAXES
AAEC Group files a consolidated income tax return and provides for
income taxes under Statement of Financial Accounting Standards No. 109
"Accounting for Income Taxes." Under that standard, deferred income taxes are
provided on the difference between the financial reporting and tax bases of
assets and liabilities. A valuation allowance is provided to the extent that
management estimates that it is more likely than not that the benefit of
deferred tax assets will be realized.
F-11
<PAGE> 49
AMERICAN ARTIST ENTERTAINMENT CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
EARNINGS PER SHARE
The Company adopted the requirements of Statement of Financial
Accounting Standards No. 128, "Earnings Per Share," effective January 31, 1998,
and restated the earnings per share amounts for prior periods. The restatement
did not have any effect on previously presented earnings per share amounts.
Basic and diluted earnings per share are computed on the basis of net
income or loss divided by the weighted average number of common shares (Class A
and Class B) outstanding during the relevant period. Diluted earnings per share
excludes the effects of stock options and warrants (and is therefore the same as
basic earnings per share) as their effects would be anti-dilutive due to the net
losses. There were 3,634,618 and 2,791,972 anti-dilutive common stock options
and common stock warrants outstanding at July 31, 1998 and 1997, respectively.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents are generally comprised of demand deposits
and time deposits or highly liquid debt instruments with original maturities of
three months or less. The Company's cash balances do not involve any significant
concentrations of credit risk.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company believes that the estimated fair values of its financial
instruments, which are notes payable, approximates the carrying values of such
financial instruments in all material respects. The carrying value of notes
payable approximates fair value since these notes substantially bear interest at
floating rates based upon the lenders "prime" rate.
MERGER WITH SETAB ALPHA, INC.
In October 1996 the Company completed a merger (the "Merger") with
Setab Alpha, Inc. ("Setab") whereby Setab acquired 100 percent of the
outstanding common stock of American Artists Film Corporation ("Old American
Artists") in exchange for the issuance of 12,600 shares of the Setab's Class A
common stock and 5,502,277 shares of Setab's Class B common. Upon completion of
the Merger, Setab as the surviving corporation, changed its name to American
Artists Film Corporation. In February 1999, the surviving corporation changed
its name to American Artists Entertainment Corporation.
The Merger resulted in the issuance of a controlling interest in Setab
to the stockholders of Old American Artists. Because of this, and because Setab
did not have any material operations, the Merger was accounted for as a
recapitalization of Old American Artists in which (i) Old American Artists is
deemed to have (a) created a second class of common stock, such that its
authorized capital consisted of Class A and Class B common stock, each with a
par value of $.001, and (b) exchanged for the outstanding shares of its common
stock, an aggregate of 12,600 shares of Class A common stock and 5,502,277
shares of Class B common stock, and (ii) issued 700,020 shares of Class A common
stock (representing the number of shares outstanding after the completion of
Setab's public offering) in exchange for the net assets of Setab, recorded at
their historical costs.
The Merger effectively resulted in a reverse split of the Company's
common stock on a basis of .5862 to 1. The effects of this reverse split has
been retroactively applied to the earliest periods presented for all share and
per share amounts related to the Company's outstanding common stock, stock
options and warrants.
RECENT ACCOUNTING PRONOUNCEMENTS
In June 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 130, Reporting Comprehensive Income ("SFAS
130"), which establishes standards for reporting and
F-12
<PAGE> 50
AMERICAN ARTIST ENTERTAINMENT CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
display of comprehensive income, its components and accumulated balances.
Comprehensive income is defined to include all changes in equity, except those
resulting from investments by owners and distributions to owners. Among other
disclosures, SFAS 130 requires that all items that are required to be recognized
under current accounting standards as components of comprehensive income be
reported in a financial statement that is displayed with the same prominence as
other financial statements.
SFAS 130 is effective for financial statements for periods beginning
after December 15, 1997 and requires comparative information for earlier years
to be restated. The Company will adopt SFAS 130 in fiscal 1999 and anticipates
that the implementation of this standard will not affect the Company's financial
position or results of operations.
In June 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 131, Disclosures about Segments of an
Enterprise and Related Information ("SFAS 131"), which supersedes Statement of
Financial Accounting Standards No. 14, Financial Reporting for Segments of a
Business Enterprise. SFAS 131 establishes standards for the manner in which
public companies report information about operating segments in annual financial
statements and requires reporting of selected information about operating
segments in interim financial statements issued to the public. It also
establishes standards for disclosures regarding products and services,
geographic areas and major customers. SFAS 131 defines operating segments as
components of a company about which separate financial information is available
that is evaluated regularly by the chief operating decision maker in deciding
how to allocate resources and in assessing performance.
SFAS 131 is effective for financial statements for periods beginning
after December 15, 1997 and requires comparative information for earlier years
to be restated. The Company will adopt SFAS 131 in fiscal 1999. The Company has
not yet determined whether its reportable segments, under SFAS 131, will differ
from those it currently reports under SFAS 14. However, the adoption of this
disclosure standard will not affect the Company's financial position or results
of operations.
In February 1998, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 132, "Employers Disclosures
about Pension and Other Postretirement Benefits" ("SFAS 132"). SFAS 132 revises
employers' disclosures about pension and other postretirement benefit plans but
does not change existing measurement or recognition requirements related to such
plans. SFAS 132 also requires additional information on changes in the benefit
obligations and fair values of plan assets. The Company does not currently offer
postretirement benefits and anticipates that the adoption of SFAS 132 will not
have an effect on the Company's financial position or results of operations.
In June 1998, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments," ("SFAS 133"). SFAS 133 establishes accounting and reporting
standards for derivative instruments and hedging activities. SFAS 133 requires
that an entity recognize all derivatives as either assets or liabilities and
measure those instruments at fair market value. Under certain circumstances, a
portion of the derivative's gain or loss is initially reported as a component of
other comprehensive income and subsequently reclassified into income when the
transaction effects earnings. For a derivative not designated as a hedging
instrument, the gain or loss is recognized in income in the period of change.
The Company does not currently use derivative instruments either in hedging
activities or for investment purposes. Accordingly, the Company anticipates that
the adoption of SFAS 133 will not have an effect on the Company's financial
position or results of operations.
NOTE 2 - ABILITY TO CONTINUE AS A GOING CONCERN
The Company's consolidated financial statements have been prepared on
the basis of the continuation of the Company as a going concern, which
contemplates the realization of assets and the settlement of liabilities in the
normal course of business. The consolidated financial statements do not reflect
any adjustments which might be necessary if the Company were to be unable to
continue as a going concern.
F-13
<PAGE> 51
AMERICAN ARTIST ENTERTAINMENT CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Since its inception, the Company has experienced a history of operating
losses and constrained cash flows, and has been unable to fully implement its
business plan due to insufficient capital resources. In fiscal 1998 the Company
incurred a net loss of $1,956,307, and negative operating cash flows of
$1,547,380, due to the losses suffered by its contract commercial production
operation, and a lack of film revenues (due to the release of no new films) and
the expenses incurred in pursuing its film and LSVD projects. At July 31, 1998
the Company had a deficit in stockholders' equity of $649,631 and a significant
working capital deficit. The Company was unable to meet certain debt service
requirements both during fiscal 1998 and subsequent to July 31, 1998. A
significant portion of notes payable and notes payable to related parties, which
amount to $1,026,926, is due on demand or matures in fiscal 1999, and the
Company is in arrears on and has been unable to renew its $225,000 bank line of
credit. Since July, 31, 1998 the Company has obtained $294,764 through
additional loans, principally from officers or directors, which for the most
part have been used to fund operations. As a result, at March 2, 1999 the
Company's total indebtedness under notes payable and notes payable to related
parties, net of debt repayments, has increased to $1,307,221, of which a
substantial portion is due on demand or matures in fiscal 1999.
These conditions raise substantial doubt concerning the Company's
ability to continue as a going concern. To continue in operations and pursue its
business plan, the Company must over the short-term raise additional capital and
reduce expenditures so as to be able to fund its operations and the payment of
those items of indebtedness that cannot be restructured or deferred, and over
the longer term must raise the capital necessary to complete a portion of its
film and LSVD projects and generate profits and positive cash flows therefrom.
Management has developed a plan to address these requirements. The
elements of the short-term plan include the following:
RAISE ADDITIONAL CAPITAL
- Private placement offering. In October 1998, the Company commenced a
$500,000 private placement offering of units comprised of the Company's
Class A common stock and a common stock purchase warrants. The Company
has raised $120,000 from the sale of 4.8 units through March 2, 1999.
- Pursue other sources of capital. Subsequent to year end, the Company
engaged several firms to assist it in its capital raising efforts. To
date these firms have introduced the Company to a number of potential
capital sources, and on the basis of initial meetings the Company is
cautiously optimistic that these efforts will provide the Company with
new equity financing opportunities.
- Borrowings from directors and stockholders. Subsequent to July 31,
1998 the Company obtained loans from certain members of the board of
directors and certain stockholders. The Company will attempt to
continue to make use, if available, of these borrowings on a short-term
basis while it pursues other capital.
REDUCE OPERATING EXPENSES AND NET LOSSES
- Temporary cessation of contract commercial production operations. As
previously discussed, in October 1998 the Company temporarily ceased
its contract commercial production operations, which had suffered a
decline in revenues and a net loss in the last quarter of fiscal 1998.
The Company is evaluating the form and direction of its future contract
commercial production operations. While such operations are suspended,
the Company estimates that it will realize cost savings of
approximately $30,000 per month.
- Voluntary salary reductions. In March 1998 the Company requested that
all employees voluntarily reduce their salary levels. All employees
participated in this voluntary reduction, which remains in effect.
- Reduce staffing levels. The Company has reduced its staffing levels
subsequent to July 31, 1998, principally through attrition, and has the
ability to temporarily eliminate certain other positions, without
F-14
<PAGE> 52
AMERICAN ARTIST ENTERTAINMENT CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
suffering short-term revenue losses, if cash flow conditions require.
Management will therefore continue to monitor and if necessary adjust
staffing levels for certain projects to match cash flow availability.
- Maximize short-term cash inflows from film projects. As previously
discussed, the Company's False River film was screened as part of a
special screening series in February 1999. Such screening marked the
beginning of a process aimed at exposing the film to potential
distributors. The Company also plans to submit False River for entry
into several film festivals as part of its strategy to market this
feature film project. The Company will, in negotiating with
distributors, seek a license and/or sales agreement that maximizes the
immediate or near-term cash payment it receives and offers the Company
commitments for additional projects, in return for accepting a lesser
than normal, or no, participation in the revenues or residual payments
from the distribution of the film. A larger initial cash payment would
allow the Company to both fund its operating expenses and finance the
completion of certain other film projects, which then in turn could
generate cash flows over the longer term.
The elements of management's longer term plan include:
- Revised approach to LSVD financing. Through fiscal 1998 the Company
has been attempting to obtain traditional debt or equity financing for
its proposed LSVD operations. Recently the Company modified its
approach, and is now also seeking joint venture/strategic alliance
partners among larger companies in related businesses. The Company
believes that this approach may be more likely to attract the financing
necessary to commence the proposed LSVD operation in Atlanta, which in
turn would provide cash flows for operations and the pursuit of other
LSVD and film projects.
- Series programming relationship. The Company has increased its
efforts to pursue relationships with cable television networks for the
production of a series of programs, as a means of providing the Company
with a more predictable backlog of projects and potential revenues. The
Company is currently in negotiations for several specific series with
one large cable network, and additionally has engaged as a consultant
(See Note 15(g)) an individual from the cable network industry whose
experience and relationships in that industry could, management
believes, substantially improve the Company's ability to implement this
strategy.
There can be no assurance that any or all of the elements of the
Company's short-term or longer term plans can or will be successfully
implemented. Additionally, even if such initiatives are successful, they may not
be sufficient to alleviate the Company's short term cash flow and liquidity
problems, or in the long term generate revenues sufficient to sustain profitable
operations. Should the Company fail to alleviate its short-term cash flow and
liquidity problems, or over the longer term achieve profitable operations, the
Company will have to either reduce the scope of its activities or cease its
operations.
NOTE 3 - FALSE RIVER, LLC
In March 1998, the Company organized False River, LLC ("False River")
for the purpose of producing a feature film, currently titled False River. In
exchange for nominal consideration, the Company obtained 100% of the ordinary
LLC shares of False River. The operating agreement, as amended and restated,
also provides for the issuance of preferred distribution LLC shares, which are
entitled to a preferred distribution from net profits, as defined. However, the
preferred distribution shares may not constitute more than 49% of the ownership
interest in False River.
As of July 31, 1998, False River had sold interests in the preferred
distribution shares for proceeds amounting to $545,200. An officer, certain
members of the board of directors, and a corporation whose chairman is a
director of the Company purchased $505,200 of these preferred distribution share
interests.
F-15
<PAGE> 53
AMERICAN ARTIST ENTERTAINMENT CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
False River's operating agreement provides for various sharings in the
distribution of any operating profits. Initially, the holders of the preferred
distribution shares will be entitled to receive 150% of their initial
investment. After that distribution, False River is next obligated to pay from
any profits an aggregate of $172,000 to certain parties who contributed creative
or organizational efforts for the False River project, including the Company,
which would be entitled to receive $57,000. Thereafter, any profits would be
distributed 49% to the holders of the preferred distribution shares and 51% to
the Company. From that 51%, the Company would be obligated to pay 20.75% of its
interest (or 10.5825% of False River profits) to creative and technical
personnel associated with the project to whom the Company granted such
participations as inducements. Additionally, the Company has agreed to pay
interest, at the rate of 10% per year, on the investment of $311,526 in
preferred distribution shares made by the initial investor in False River, who
is a director of the Company. Such interest will be paid until the investor
receives distributions from False River equal to that initial investment.
As a condition of employing certain union members during the production
of this feature film, False River was required to sign collective bargaining
agreements with the Screen Actors Guild and Directors Guild of America, Inc.
("DGA"). These agreements call for adherence to certain procedures and standards
related to the production of a feature film and the revenues generated from its
exploitation. The Company has guaranteed the full and complete performance by
False River in relation to its agreement with DGA.
The Company consolidates the accounts of False River and reflects a
minority interest in the remaining 49% interest in its consolidated financial
statements.
NOTE 4 - VIDEO COMMUNICATIONS NETWORK, LLC
In August 1997, the Company, certain members of the board of directors
and an officer of one of the Company's subsidiaries organized Video
Communications Network, LLC ("VCN"). The Company acquired 83.3% of the initial
ownership of VCN in exchange for nominal consideration. In January 1998, the
Company sold a portion of its interest in VCN, representing 444 LLC shares, to
certain members of the board of directors and a shareholder for nominal
consideration.
VCN was organized for purposes of developing, managing and providing
programming for a network of large screen video display ("LSVD") operations in
domestic and international locations. VCN plans to develop LSVD operations that
deliver a mixture of programming, advertising and special events similar to the
present LSVD operation conducted by an unaffiliated company at Times Square in
the City of New York.
In January 1998, VCN commenced a private placement offering, under
Regulation D of the Securities Act of 1933, of an aggregate of 1,110 LLC shares
in $100,000 units comprised of 222 LLC shares together with warrants to purchase
50,000 shares of the Company's Class A common stock at an exercise price of
$3.00 per share, exercisable through January 2001. The warrants were contributed
by the Company to VCN to facilitate its private placement and were recorded as
an investment in VCN, at their fair value. This private placement was closed in
April 1998 at which time the Company's ownership of VCN decreased to 74% as a
result of VCN's receipt of $300,000 for the sale of three private placement
units. A purchaser of one of the private placement units was a member of the
board of directors.
VCN has incurred expenses of $507,746 as of July 31, 1998. These
expenses have been funded by advances from the Company and proceeds of VCN's
private placement offering.
NOTE 5 - DIVERSITY ENTERTAINMENT TELEVISION/ATLANTA, LLC
In August 1997, VCN and an unaffiliated consultant organized Diversity
Entertainment Television/Atlanta, LLC ("DETV/Atlanta"). DETV/Atlanta was
organized for the purpose of installing and operating a LSVD operation in
Atlanta, Georgia.
F-16
<PAGE> 54
AMERICAN ARTIST ENTERTAINMENT CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
VCN acquired 6,762 of DETV/Atlanta's LLC shares, representing 98% of
the initial ownership, in exchange for nominal consideration. VCN agreed to
distribute to an officer of VCN, in consideration of his services to VCN, all of
the net cash or other assets received by VCN at any time in respect of 1,690.5
of its DETV/Atlanta LLC shares, representing 24.5% of DETV/Atlanta's outstanding
shares. VCN accounts for these LLC shares as a minority interest in its
consolidated financial statements.
DETV/Atlanta had not incurred a significant level of expenses nor
generated any revenues as of July 31, 1998.
NOTE 6 - LINE OF CREDIT
First Light Entertainment Corporation, a wholly-owned subsidiary,
entered into a line of credit agreement with a financial institution in April
1998. This asset-based credit facility provides for borrowings not to exceed
$1,000,000 and bears interest at the prime rate (8.5% at July 31, 1998) plus
2.5%, subject to a minimum monthly service fee of $500. All advances are made
based upon availability under a borrowing base calculation which allows for
borrowings up to 85% of accounts receivable. There was no unused availability
under the borrowing base calculation at July 31, 1998. This line of credit,
which was repaid in the first quarter of fiscal 1999, has a one year term and is
guaranteed by the Company.
NOTE 7 - NOTES PAYABLE
Notes payable consisted of the following:
<TABLE>
<CAPTION>
July 31,
---------------------------------
1998 1997
---------------------------------
<S> <C> <C>
Line of credit with a bank, guaranteed by
certain members of the board of directors,
interest at the prime rate (8.5% at July 31,
1998) plus 1% and due quarterly, principal
due July 1998 $225,000 $225,000
Unsecured note payable to shareholder,
interest at the prime rate (8.5% at July 31,
1998) plus 1%, due on demand 75,000 -
Unsecured note payable to shareholder,
interest at the prime rate (8.5% at July 31,
1998) plus 1%, due December 1998 53,550 -
Unsecured installment note payable to bank,
interest at 8.75%, $3,000 due monthly in
principal and interest, principal due
November 1998 41,750 64,055
Secured installment note, collateralized by
equipment and tradename of First Light, due
with interest at 4.37% in quarterly
installment of $5,593 through August 1998 11,126 27,073
-------------------------------
$ 406,426 $ 316,128
===============================
</TABLE>
The line of credit, which is unsecured, provides for maximum borrowings
not to exceed $225,000. Borrowings outstanding under this line of credit
amounted to $225,000 at July 31, 1998. In consideration for establishing the
line of credit, the Company issued, in October 1997, to certain members of the
board of directors common stock purchase warrants allowing for the purchase, in
the aggregate, of 45,000 shares of Class A common stock, priced at $4.58 per
share, through June 30, 2000.
F-17
<PAGE> 55
AMERICAN ARTIST ENTERTAINMENT CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The Company was unable to renew this line of credit with the bank at
July 31, 1998. The Company, its guarantors and the bank are currently exploring
various alternative means to renew or replace this line of credit. The Company
made the quarterly interest payment due on this line of credit in October 1998.
As of March 1999, the Company had not made the quarterly interest payment due
January 1999 on this line of credit.
In November 1997, the Company received an extension of the maturity
date for its $41,750 unsecured installment note payable to bank. This
installment note's maturity date was extended to November 1998 with all other
terms remaining unchanged. As of March 1999, the Company had not received an
extension of the November 1998 maturity date on this unsecured installment note.
At July 31, 1998, the Company was in arrears for the quarterly payment
due May 1, 1998 on the $11,126 secured installment note. As of March 1999, the
Company was in arrears for the final two full quarterly installments, due May 1
and August 1, on this secured installment note.
As of March 1999, the Company was in arrears in the amount of $9,000 in
relation to the unsecured installment note payable to bank.
Aggregate maturities of notes payable amount to $406,426 for the year
ending July 31, 1999.
NOTE 8 - NOTES PAYABLE/RELATED PARTIES
Notes payable to related parties consisted of the following:
<TABLE>
<CAPTION>
July 31,
-------------------------------
1998 1997
-------------------------------
<S> <C> <C>
Unsecured notes due to certain member of the
board of directors, due on demand but no
later than September 1999, interest at the
prime rate (8.5% at July 31, 1998) plus 1% $ 370,500 $ -
Unsecured notes due to certain members of
the board of directors, due on demand,
interest at the prime rate (8.5% at July 31,
1998) plus 1% 150,000 -
Line of credit with member of the board of
directors, interest at the prime rate (8.5%
at July 31, 1998) plus 1%, due monthly,
principal due April 1999 100,000 100,000
Unsecured notes due certain member of board
of directors, due on demand, but no later
than August 1998, interest at the prime rate
plus 1% - 55,000
-------------------------------
$ 620,500 $ 155,000
===============================
</TABLE>
The line of credit, which is unsecured, provides for maximum borrowings
not to exceed $100,000. Borrowings outstanding under this line of credit
amounted to $100,000 at July 31, 1998. In consideration for establishing the
line of credit, the Company issued, in October 1997, this member of the board of
directors common stock purchase warrants allowing for the purchase of 20,000
shares of Class A common stock, priced at $4.58 per share, through June 30,
2000. The maturity date for this line of credit was extended, by amendment, to
April 1999.
F-18
<PAGE> 56
AMERICAN ARTIST ENTERTAINMENT CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In April 1997, a board of directors member made a non-interest bearing
advance amounting to $30,000 to the Company, which was repaid in April 1997.
This board of director member also made a loan of $30,000, bearing interest at
the prime rate plus 1%, to the Company in June 1997. This note was settled by
the Company in August 1997.
In July 1998, a board of directors member made a non-interest bearing
advance amounting to $37,500 to the Company, which was repaid in July 1998.
In September 1996, three shareholders, two of whom are members of the
board of directors, loaned the Company $75,000. These notes were due on demand,
but no later than August 1997, and bore interest at the prime rate plus 1%. The
Company re-paid these loans in February 1997, June 1997 and February 1998. In
consideration of the original loans, the Company issued each shareholders an
option to purchase 9,403 shares of Class B common stock at a price of $1.71,
exercisable through June 30, 2000.
Aggregate maturities of notes payable/related parties amount to
$620,500 for the year ending July 31, 1999.
NOTE 9 - STOCKHOLDERS' EQUITY
(A) STOCK OPTIONS
The Company has a stock option plan ("Stock Option Plan") which allows
for the issuance of stock options as either incentive stock options,
non-qualified stock options, or stock appreciation rights. The Stock Option Plan
initially provided for the grant of up to 2.5 million stock options, but was
amended in June 1998 to provide for the grant of up to an additional 2.5 million
options (aggregate grants of 5.0 million options).
Stock options may be granted to officers, directors, employees and
consultants and may be either "incentive stock options" (as defined in the
Internal Revenue Code) or non-qualified stock options. Stock options are
generally granted at an exercise price equal to the grant date fair value of
American Artists' common stock, and vest at varying rates over periods ranging
from one to ten years, with certain grants contingent upon continued service
with the Company.
The following summarizes stock option activity:
<TABLE>
<CAPTION>
Weighted average
Number of options exercise price
-----------------------------------------
<S> <C> <C>
Outstanding, July 31, 1996 1,933,369 $1.22
Granted 503,673 3.88
Exercised - -
Forfeited or expired (17,587) 1.54
----------------------------------------
Outstanding, July 31, 1997 2,419,455 1.77
Granted 1,048,500 2.08
Exercised - -
Forfeited or expired (180,000) 2.55
----------------------------------------
Outstanding, July 31, 1998 3,287,955 $1.81
========================================
Options exercisable at:
July 31, 1997 1,677,504 $1.16
========================================
July 31, 1998 3,022,904 $1.70
========================================
</TABLE>
F-19
<PAGE> 57
AMERICAN ARTIST ENTERTAINMENT CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Options exercisable at July 31, 1998 were as follows:
<TABLE>
<CAPTION>
Weighted average
Number of options Option price exercise price
---------------------------------------------------------
<S> <C> <C>
70,344 $ 0.085 $0.085
879,300 0.85 0.85
746,818 1.45 to 1.71 1.51
1,000,000 2.00 2.00
83,683 2.25 to 2.56 2.53
87,518 3.00 to 4.00 3.62
105,241 4.58 4.58
50,000 $ 4.75 4.75
-------------------
3,022,904 $ 1.70
===================
</TABLE>
Options outstanding at July 31, 1998 were as follows:
<TABLE>
<CAPTION>
Weighted Average
Remaining
Contractual Life Weighted average
Number of options in Years Option price exercise price
----------------------------------------------------------------------------
<S> <C> <C> <C>
82,068 4.31 $ 0.085 $0.085
879,300 5.09 0.85 0.85
797,818 2.2 1.45 to 1.71 1.51
1,000,000 0.42 2.00 2
111,235 2.82 2.25 to 2.56 2.54
212,293 8.12 3.00 to 4.00 8.12
105,241 2 4.58 4.58
100,000 1.84 $ 4.75 4.75
-------------------
3,287,955 2.87 $ 1.81
===================
</TABLE>
The Company adopted the provisions of Statement of Financial Accounting
Standards No. 123, "Accounting for Stock-Based Compensation" ("SFAS 123")
effective August 1, 1996. As permitted by SFAS 123, the Company continues to
measure compensation expense for stock options issued to employees using the
intrinsic-value only provisions of Accounting Principles Board Opinion No. 25.
Expense for stock options granted to non- employees is measured at fair value
using methods consistent with the requirements of SFAS 123. The Company
recognized stock option compensation costs of $12,494 and $13,987 for the years
ended July 31, 1998 and 1997, respectively.
If the Company had elected to recognize compensation costs based on the
fair value at the grant date of all options, including employee awards, issued
under the plan described above, consistent with the method prescribed by SFAS
123, net loss and net loss per share would have been changed to the pro forma
amounts indicated below:
F-20
<PAGE> 58
AMERICAN ARTIST ENTERTAINMENT CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Year Ended July 31,
--------------------------------------
1998 1997
--------------------------------------
<S> <C> <C>
Net loss
As reported $(1,956,307) $(580,845)
Pro forma (2,731,887) (733,689)
Net loss per share (basic and diluted)
As reported (.30) (.09)
Pro forma $ (.43) $ (.12)
</TABLE>
The weighted average grant date fair value of options, calculated using
the Black-Scholes option pricing model, was as follows:
<TABLE>
<CAPTION>
Year Ended July 31,
1998 1997
----------------------------------
<S> <C> <C>
Options granted at market price $630,000 $272,434
Options granted at above market price $ 24,480 $ 1,200
</TABLE>
The significant weighted average assumptions used to estimate the fair
value of stock options for the year ended July 31, 1998 were: a risk-free
interest rate of 6.5%, an expected option life of six months, no dividend yield
and a violatility factor of 110%. The significant weighted average assumptions
used to estimate the fair value of stock options for the year ended July 31,
1997 were: a risk-free interest rate of 6.5%, an expected option life of four
years and no dividend yield. A trading market for the Company's common stock had
not developed as of July 31, 1997, therefore, the minimum value method was used
in estimating fair value.
(B) COMMON STOCK PURCHASE WARRANTS
During fiscal 1997, American Artists completed a private placement of
16.4 units priced at $25,000 per unit ($2.50 per share), with each unit
comprised of 10,000 shares of its Class A common stock and 3,333 Class A common
stock purchase warrants. American Artists issued 54,663 Class A common stock
purchase warrants under this private placement in fiscal 1997.
In August 1997, a member of the board of director purchased 36,364
shares of common stock for an aggregate price of $100,000. In connection with
this purchase, the Company also issued a common stock purchase warrant allowing
for the purchase of 37,000 shares of Class A common stock at $2.80 per share,
exercisable through June 30, 2000.
In October 1997, the Company issued a member of the board of directors
a common stock purchase warrant for the purchase of 40,000 shares of Class A
common stock at $4.58 per share, exercisable through June 30, 2000, in
consideration for his election to join the board of directors in March 1997.
As disclosed in Note 4, in January 1998 the Company contributed 150,000
warrants, exercisable at a price of $3.00 per share through January 2001, to VCN
which VCN reissued to outside investors, in a private placement, to raise
minority interest capital for its operations.
F-21
<PAGE> 59
AMERICAN ARTIST ENTERTAINMENT CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Outstanding warrants were as follows:
<TABLE>
<CAPTION>
Shares
-------------------
<S> <C>
Outstanding, July 31, 1996 317,854
Issued 54,663
Exercised -
Forfeited -
-------------------
Outstanding, July 31, 1997 372,517
Issued 292,000
Exercised -
Forfeited (317,854)
-------------------
Outstanding, July 31, 1998 346,663
===================
</TABLE>
Warrants outstanding at July 31, 1998 were as follows:
<TABLE>
<CAPTION>
Warrants Exercisable
Exercise Price Outstanding Through
--------------------------------------------------------------
<S> <C> <C>
$2.80 37,000 June 2000
$3.00 54,663 June 2000
$3.00 150,000 June 2001
$4.58 105,000 June 2000
--------------------
346,663
====================
</TABLE>
NOTE 10 - CONSULTING AGREEMENTS
The Company entered into two significant consulting agreements during
the year ended July 31, 1998 as follows:
(a) The Company entered into a Financial Advisory and Consulting
Agreement in May 1998 whereby a consulting group agreed to perform certain
financial advisory services. In exchange for these services, the Company agreed
to issue 25,000 shares of the Company's Class A common stock as a means of
compensation. These shares were valued at $150,000, based upon the closing share
price for the Company's Class A common stock on the date of the agreement.
(b) The Company entered into a Media Relations and Consulting Agreement
in June 1998 whereby a consulting group ("Consulting Group") agreed to perform a
number of services including the development and maintenance of a worldwide
website and the preparation of an independent analysis of the Company to be
featured on the Consulting Group's investor service website. In exchange for
these services, two unaffiliated shareholders of the Company agreed to
compensate the Consulting Group with 223,225 shares of the Company's Class A
common stock. The Company recorded this transaction as an expense, offset by a
contribution of capital by these shareholders, of $446,450, based upon the
closing share price for the Company's Class A common stock on the date of the
agreement. The Company also executed a note payable amounting to $53,550 as
additional compensation to the Consulting Group. This consulting agreement was
terminated by the Company in November 1998.
F-22
<PAGE> 60
AMERICAN ARTIST ENTERTAINMENT CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 11 - INCOME TAXES
Deferred tax assets result from the following temporary differences
between book and tax bases of assets:
<TABLE>
<CAPTION>
July 31,
---------------------------------------
1998 1997
---------------------------------------
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforwards $ 1,356,000 $ 800,000
Investment in Diversity Filmworks, Inc. 159,000 164,000
Investment in Video Communications Network, LLC 193,000 -
Valuation allowance (1,708,000) (964,000)
---------------------------------------
$ - $ -
=======================================
</TABLE>
The book and tax bases differences for Diversity Filmworks, Inc. and
Video Communications Network, LLC result from the fact that the Company
consolidates such entities for financial reporting purposes, but does not own
the level (80%) required to consolidate them for income tax reporting purposes.
The effective tax rate differed from the U.S. statutory federal income
tax rate as a result of the following:
<TABLE>
<CAPTION>
Year Ended July 31,
--------------------------------------
1998 1997
--------------------------------------
<S> <C> <C>
U.S. statutory federal income tax rate (34)% (34)%
Valuation allowance 34% 34%
--------------------------------------
Effective tax rate - -
======================================
</TABLE>
AAEC Group has net operating loss carryforwards for federal tax
purposes amounting to approximately $3,569,000 at July 31, 1998. These net
operating loss carryforwards expire principally in fiscal years 2008 through
2013. As a result of such net operating loss carryforwards and the related 100%
valuation allowance, AAEC Group has not provided a provision for income taxes
for the years ended July 31, 1998 and 1997.
NOTE 12 - SETTLEMENT OF ARBITRATION
The Company was involved in an arbitration with one of its co-producers
concerning the accounting for costs and revenues received by each company
relating to two co-produced network television specials.
The Company executed an agreement (the "Agreement") in June 1997 in
settlement of all known issues related to this arbitration. Under the Agreement,
the Company agreed to pay the co-producers $140,000, over a period of fourteen
months commencing in June 1997. The Company completed its payment obligations,
as called for by this agreement, in July 1998.
The Agreement also calls for the Company and its co-producer to pay
certain residuals related to the two co-produced network television specials.
The amount of these residuals is not presently determinable, however, they are
not considered to be material to the Company's financial position, results of
operations or cash flows.
F-23
<PAGE> 61
AMERICAN ARTIST ENTERTAINMENT CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 13 - SEGMENT INFORMATION
Financial information by business segment is as follows:
<TABLE>
<CAPTION>
Development and Contract
1998 Film Production Production Consolidated
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Revenues $ - $2,450,958 $ 2,450,958
Loss (income) from operations (1,827,412) (71,248) (1,898,660)
Identifiable assets 1,264,136 94,314 1,358,450
Capital expenditures 2,321 - 2,321
Depreciation and amortization $ 203,961 $ 130,321 $ 334,282
1997
- ------------------------------------------------
Revenues $ 420,937 $3,469,655 $ 3,890,592
Loss (income) from operations 621,138 (146,039) 475,099
Identifiable assets 561,091 600,280 1,161,371
Capital expenditures - 9,347 9,347
Depreciation and amortization $ 364,878 $ 56,761 $ 421,639
</TABLE>
NOTE 14 - SUPPLEMENTAL CASH FLOW INFORMATION
<TABLE>
<CAPTION>
1998 1997
--------------------------------------
<S> <C> <C>
Cash paid for interest $44,934 $ 8,221
Cash paid for income taxes - -
--------------------------------------
$ - $ 8,221
======================================
</TABLE>
Non-cash investing and financing transactions were as follows:
(a) The Company completed the Merger, as described in Note 1, which
included a reverse split of the Company's common stock, a non-cash transaction.
(b) The Company adjusted certain of its film costs in the amount of
$4,687 related to negative goodwill recognized as a result of the acquisition of
the minority interest in Millennium Group, LLC during the year ended July 31,
1998.
(c) In fiscal 1998, the Company contributed 150,000 Class A common
stock purchase warrants to VCN (see Note 4).
F-24
<PAGE> 62
AMERICAN ARTIST ENTERTAINMENT CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 15 - SUBSEQUENT EVENTS
(a) In October 1998, the Company commenced a private placement of units
comprised of the Company's Class A common stock and common stock warrants.
Subsequent to July 31, 1998, the Company issued, at a price of $25,000 per unit
($.50 per share), 4.8 units with each unit comprised of 50,000 shares of Class A
common stock and 25,000 Class A common stock purchase warrants. The warrants are
exercisable at $1.30 per share through December 2001.
(b) During the period from August 1998 to October 1998, a member of the
board of directors extended loans to the Company amounting to $68,000 in the
aggregate. These amounts are unsecured, bear interest at the prime rate plus 1%
and are due on demand but no later than September 1, 1999.
(c) In August 1998, an officer extended a loan to the Company in the
amount of $26,264. This note is secured, bears interest at the prime rate plus
1% and is due on demand but no later than September 1, 1999. The Company has
pledged as security its interest in the ordinary LLC shares of False River, LLC
to the extent that any principal and accrued interest remain unpaid at maturity
under this note agreement.
(d) During the period from August 1998 to February 1999, False River
sold additional interests in its preferred distribution LLC shares for proceeds
amounting to $194,864. An officer and certain members of the board of directors
purchased $164,864 of these preferred distribution LLC share interests.
(e) During the period from September 1998 to January 1999, a
shareholder extended loans to the Company amounting to $42,500. These notes are
secured, bear interest at the prime rate plus 1% and are due on demand but no
later than September 1, 1999. The Company has pledged as security its interest
in the ordinary LLC shares of False River, LLC to the extent that any principal
and accrued interest remain unpaid at maturity under these note agreements.
(f) In November 1998, the Company entered into an investor relation
services agreement with an investor relations firm, that calls for, among other
things, certain investor relations and capital formation services. The
consideration for this agreement included the issuance of 50,000 shares of the
Company's Class A common stock.
(g) In December 1998, the Company entered into a consulting agreement
("Programming Agreement") with an individual who possesses a number of years of
experience in the television programming industry. The Programming Agreement
calls for the consultant to assist the Company in the creation, development,
packaging and production of certain television and feature film properties
("Properties"), including television series. As consideration for his services,
the consultant will receive, in addition to certain "on screen" credits,
thirty-three percent (33%) of all net profits, as defined (generally revenues
after the recovery of all production and distribution costs), generated from
Properties introduced to the Company under this Programming Agreement. The
Programming Agreement generally will relate to properties identified by the
consultant and exclude project ideas identified by the Company.
(h) In December 1998, the Company re-priced the exercise price of
certain stock options that had been previously granted under its employee stock
option plan. The Company re-priced these options as follows: 1) 52,345 stock
options granted between November 21, 1995 and December 8, 1997 with exercise
prices ranging from $1.45 to $3.75 were re-priced to an exercise price of $1.00,
and 2) 272,844 stock options granted between November 21, 1995 and December 8,
1997 with exercise prices ranging from $1.45 to $3.75 were re-priced to an
exercise price of $.50. Neither the Chief Executive Officer nor President of the
Company had any stock options affected by this re-pricing.
(i) In December 1998, the Company extended the due dates of all of its
notes issued in connection with certain advances to officers. The due dates were
extended from December 1998 to December 1999.
F-25
<PAGE> 63
AMERICAN ARTIST ENTERTAINMENT CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(j) During the period from December 1998 to January 1999, a member of
the board of directors extended loans to the Company amounting to $137,000.
These loans are unsecured, bear interest at the prime rate plus 1% and are due
on demand.
(k) In February 1999, the Company issued a member of the board of
directors a warrant to purchase 100,000 shares of the Company's Class A common
stock as additional consideration for his commitment to invest $50,000 in False
River, LLC. The warrant is exercisable at $.20 per share, through January 2004.
(l) In February 1999, an officer extended a loan to the Company in the
amount of $11,000. This note is secured, bears interest at the prime rate plus
1% and is due on demand but no later than September 1, 1999. The Company has
pledged as security its interest in the ordinary LLC shares of False River, LLC
to the extent that any principal and accrued interest remain unpaid at maturity
under this note agreement.
(m) In February 1999, a member of the board of directors extended a
loan to the Company in the amount of $10,000. This loan is unsecured, bears
interest at the prime rate plus 1% and is due on demand, but no later than
September 1, 1999.
(n) In February 1999, the Company entered into two consulting
agreements ("Consulting Agreements") with two entities for the performance of
certain strategic financial planning services and consulting in the areas of
filmed entertainment and LSVD operations. The Consulting Agreements call for
these entities to provide these services over a period of six month in exchange
for 1,200,000 shares of the Company's Class A common stock, in the aggregate.
The Company has agreed to file a Form S-8 to register the issuance of these
shares.
(o) In February 1999, the Company legally effected a change in name
from "American Artists Film Corporation" to "American Artists Entertainment
Corporation." This name change had been previously approved by the shareholders
of the Company in January 1998.
F-26
<PAGE> 1
EXHIBIT 3.6
THIRD
AMENDED AND RESTATED BYLAWS
OF
AMERICAN ARTISTS FILM CORPORATION
* * * * *
ARTICLE I
OFFICES
Section 1. The registered office of the Corporation shall be in the
County of St. Louis, State of Missouri.
Section 2. The Corporation may also have offices at such other places,
both within and without the State of Missouri, as the Board of Directors may
from time to time determine or the business of the Corporation may require.
ARTICLE II
MEETINGS OF SHAREHOLDERS
Section 1. All meetings of the shareholders for the election of
directors shall be held at such place, either within or without the State of
Missouri, as may be designated from time to time by the Board of Directors and
stated in the notice of the meeting. Meetings of shareholders for any other
purpose may be held at such time and place, within or without the State of
Missouri, as shall be stated in the notice of the meeting or in a duly executed
waiver of notice thereof.
Section 2. Annual meetings of shareholders, commencing with the year
1996, shall be held on the second Tuesday of May if not a legal holiday, and if
a legal holiday, then on the next business day following, at 10:00 a.m., or at
such other date and time as shall be designated from
<PAGE> 2
time to time by the Board of Directors and stated in the notice of the meeting,
at which the shareholders shall elect one or more directors and transact such
other business as may properly be brought before the meeting.
At an annual meeting of the shareholders, only such business shall be
conducted as shall have been properly brought before the meeting. To be properly
brought before an annual meeting, business must be: (a) specified in the notice
of meeting (or any supplement thereto) given by or at the direction of the Board
of Directors, (b) otherwise brought before the meeting by or at the direction of
the Board of Directors, or (c) otherwise properly brought before the meeting by
a shareholder. For business to be properly brought before an annual meeting by a
shareholder, the shareholder must have given timely notice thereof in writing to
the secretary of the Corporation. To be timely, a shareholder's notice must be
received at the principal executive offices of the Corporation not less than 120
days nor more than 150 days prior to the date of the notice to shareholders of
the previous year's annual meeting. A shareholder's notice to the secretary
shall set forth as to each matter the shareholder proposes to bring before the
annual meeting: (a) a brief description of the proposal or business desired to
be brought before the annual meeting and the reasons for presenting the proposal
or conducting such business at the annual meeting, (b) the name and address, as
they appear on the Corporation's books, of the shareholder proposing such
business, (c) the class and number of shares of the Corporation which are
beneficially owned by the shareholder, and (d) any material interest of the
shareholder in such proposal or business. Notwithstanding anything in these
By-Laws to the contrary, no business shall be conducted at any annual meeting
except in accordance with the procedures set forth in this Section 2. The
chairman of the annual meeting shall, if the facts warrant, determine and
declare to the meeting that business was not properly brought before the meeting
in
2
<PAGE> 3
accordance with the provisions of this Section 2, and if the chairman should so
determine and declare to the meeting, any such business not properly brought
before the meeting shall not be transacted.
Section 3. Written notice of the annual meeting stating the place,
date and hour of the meeting shall be given to each shareholder entitled to vote
at such meeting not less than ten (10) nor more than seventy (70) days before
the date of the meeting.
Section 4. The officer who has charge of the stock ledger of the
Corporation shall prepare and make, at least ten (10) days before every meeting
of shareholders, a complete list of the shareholders entitled to vote at the
meeting, arranged in alphabetical order, and showing the address of each
shareholder and the number of shares registered in the name of each shareholder.
Such list shall be open to the examination of any shareholder, for any purpose
germane to the meeting, during ordinary business hours, for a period of at least
ten (10) days prior to the meeting, either at a place within the city where the
meeting is to be held, which place shall be specified in the notice of the
meeting, or, if not so specified, at the place where the meeting is to be held.
The list shall also be produced and kept at the time and place of the meeting
during the whole time thereof, and may be inspected by any shareholder who is
present.
Section 5. Special meetings of the shareholders entitled to vote, for
any purpose or purposes, may be called only by the chief executive officer or
the Board of Directors.
Section 6. Written notice of a special meeting of the shareholders
entitled to vote, stating the place, date and hour of the meeting and the
purpose or purposes for which the meeting is called, shall be given not less
than ten (10) nor more than seventy (70) days before the date of the meeting to
each shareholder entitled to vote at the meeting.
Section 7. Business transacted at a special meeting of the
shareholders entitled to vote
3
<PAGE> 4
shall be limited to the purposes stated in the notice.
Section 8. The holders of a majority of the issued and outstanding
stock which is entitled to vote, whether present in person or represented by
proxy, shall constitute a quorum at all meetings of the shareholders for the
transaction of business. If, however, such a quorum shall not be present or
represented at a meeting, the shareholders entitled to vote thereat, present in
person or represented by proxy, shall have the power to adjourn the meeting from
time to time, without notice other than announcement at the meeting, until a
quorum shall be present or represented. At such adjourned meeting at which a
quorum shall be present or represented, any business may be transacted which
might have been transacted at the meeting in accordance with the original notice
thereof. If the adjournment is for more than ninety (90) days, or if after the
adjournment a new record date is fixed for the adjourned meeting, a notice of
the adjourned meeting shall be given to each shareholder of record entitled to
vote at the meeting in accordance with Section 3 and/or Section 6 of this
Article II.
Section 9. When a quorum is present at any meeting, the affirmative
vote of a majority of the votes cast shall decide any question brought before
the meeting, unless the question is one upon which, by the express provision of
statute, the Articles of Incorporation of the Corporation or these By-Laws, a
different vote is required in which case such express provision shall govern and
control the decision of such question.
Section 10. When determining the presence of a quorum at any meeting,
all shares held by (a) any shareholder, or represented by a holder of a proxy
therefor, who is present but voluntarily decides not to vote, or (b) a broker or
nominee who lacks authority to vote such shares, shall be deemed present.
However, such shares shall not be deemed cast on any matter unless properly
voted and, therefore, shall have no effect on the outcome of the matter in
4
<PAGE> 5
question.
Section 11. Unless otherwise provided in the Articles of Incorporation
of the Corporation, each shareholder shall at every meeting of the shareholders
be entitled to cast one vote in person or by proxy for each share of the capital
stock having voting power held by such shareholder. No proxy shall be voted on
after eleven (11) months from its date, unless the proxy provides for a longer
period.
Section 12. Any action required or permitted to be taken at any annual
or special meeting of shareholders of the Corporation, may be taken without a
meeting, without prior notice and without a vote, if a consent in writing,
setting forth the action so taken, is signed by all of the shareholders entitled
to vote at the meeting with respect to the subject matter thereof, and is
delivered to the Corporation to its registered office in the state of
Incorporation, its principal place of business, or to an officer or agent of the
Corporation having custody of the book in which proceedings of meetings of
shareholders are recorded.
Section 13. (a) Directors shall be elected by a plurality of the votes
cast by holders of the shares entitled to vote in the election at a meeting at
which a quorum is present. Shareholders do not have the right to cumulate their
votes for directors.
(b) Until a distinction between the rights of holders of Class A and
Class B Common Stock shall have terminated as provided in the Articles of
Incorporation of the Corporation, the holders of any outstanding shares of Class
B Common Stock voting as a separate class shall be entitled to elect a number of
directors equal to the greater of:
(i) the number (rounded to the nearest whole number) that
bears to the total number of directors of the Corporation
the same ratio that the number of outstanding shares of
Class B Common Stock bears to the aggregate number
5
<PAGE> 6
of outstanding shares of Class A and Class B Common Stock;
or
(ii) the smallest number of directors that constitutes a
majority of the Board of Directors.
Holders of any outstanding shares of Class A Common Stock voting as a separate
class shall be entitled to elect all of the other members of the Board of
Directors, if any. Notwithstanding the foregoing, if no shares of Class A Common
Stock are outstanding, all directors shall be elected by the holders of
outstanding shares of Class B Common Stock.
ARTICLE III
DIRECTORS
Section 1. (a) The number of directors constituting the entire Board
shall be not less than three (3) nor more than fifteen (15) as fixed from time
to time by vote of a majority of the entire Board, provided, however, that the
number of directors shall not be reduced so as to shorten the term of any
director then in office, and provided further, that the number of directors
constituting the entire Board shall be three (3) until otherwise fixed by a
majority of the entire Board.
(b) Notwithstanding any other provisions of the Articles of
Incorporation of the Corporation or these By-Laws:
(1) The holders of Class A Common Stock as a separate class shall
be entitled by majority vote to remove, with or without cause, any
director elected by the holders of Class A Common Stock (or by
directors elected by them) and the holders of Class B Common Stock as a
separate class shall be entitled by majority vote to remove, with or
without cause, any director elected by the holders of Class B Common
Stock (or by directors elected by them).
(2) Any vacancy in the office of a director elected by the holders
of Class A Common
6
<PAGE> 7
Stock may be filled by majority vote of such holders voting as a
separate class and any vacancy in the office of a director elected by
the holders of Class B Common Stock may be filled by majority vote of
such holders voting as a separate class or, in the absence of a
shareholder vote, in either case by majority vote of the remaining
directors elected by holders of the same class. Any vacancy created by
increasing the number of directors may be filled by majority vote of
the holders of Class A Common Stock voting as a separate class or of
the holders of Class B Common Stock voting as a separate class or, in
the absence of a shareholder vote, in either case by majority vote of
the directors of such class, whichever is necessary in order to insure
that holders of Class B Common Stock (or directors elected by them)
shall have elected the same number of directors as they would be
entitled to elect at such time in an election of directors pursuant to
Article II, Section 13, and that holders of Class A Common Stock (or
directors elected by them) shall have elected the other members of the
Board of Directors. Any director elected by the members of the Board of
Directors to fill a vacancy shall serve until the next annual meeting
of shareholders and until his or her successor has been elected and
qualified.
Section 2. The business of the Corporation shall be managed by or
under the direction of its Board of Directors, which may exercise all such
powers of the Corporation and do all such lawful acts and things as are not by
statute or by the Articles of Incorporation of the Corporation or by these
By-Laws directed or required to be exercised or done by the shareholders.
MEETINGS OF THE BOARD OF DIRECTORS
Section 3. The Board of Directors of the Corporation may hold
meetings, both regular and special, either within or without the State of
Missouri.
Section 4. The annual meeting of the Board of Directors shall be held
immediately
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following the annual meeting of shareholders at the place at which the meeting
of the shareholders is held, and no notice of such meeting shall be necessary to
the newly elected directors in order legally to constitute the meeting, provided
a quorum of the Board of Directors is present.
Section 5. Regular meetings of the Board of Directors may be held
without notice at such time and at such place as shall from time to time be
determined by the Board of Directors.
Section 6. Special meetings of the Board of Directors may be called
by the chief executive officer or president on two (2) days' notice to each
director, either personally or by mail or by facsimile; special meetings shall
be called by the chief executive officer or secretary in like manner and on like
notice on the written request of a majority of directors.
Section 7. At all meetings of the Board of Directors, a majority of
directors shall constitute a quorum for the transaction of business and the vote
of a majority of the directors present at any meeting at which there is a quorum
shall be the act of the Board of Directors, except as may be otherwise
specifically provided by statute. If a quorum shall not be present at any
meeting of the Board of Directors, the directors present thereat may adjourn the
meeting from time to time, without notice other than announcement at the
meeting, until a quorum is present.
Section 8. Any action required or permitted to be taken at any meeting
of the Board of Directors or of any committee thereof may be taken without a
meeting, without prior notice and without a vote, if all members of the Board of
Directors or committee, as the case may be, consent thereto in writing, and the
writing or writings are filed with the minutes of proceedings of the Board of
Directors or committee.
Section 9. Members of the Board of Directors, or any committee
designated by the
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Board of Directors, may participate in a meeting of the Board of Directors, or
any committee, by means of conference telephone or similar communications
equipment by means of which all persons participating in the meeting can hear
each other, and such participation in a meeting shall constitute presence in
person at the meeting.
COMMITTEES OF DIRECTORS
Section 10. The Board of Directors may, by resolution passed by a
majority of the whole Board of Directors, designate one or more committees, each
committee to consist of two or more of the directors of the Corporation. The
Board of Directors may designate one or more directors as alternate members of
any committee, who may replace any absent or disqualified member at any meeting
of the committee.
In the absence or disqualification of a member of a committee, the
member or members thereof present at any meeting and not disqualified from
voting, whether or not he, she or they constitute a quorum, may unanimously
appoint another member of the Board of Directors to act at the meeting in the
place of any such absent or disqualified member.
Any such committee, to the extent provided in resolutions of the Board
of Directors, shall have and may exercise all the powers and authority of the
Board of Directors in the management of the business and affairs of the
Corporation, and may authorize the seal of the Corporation to be affixed to all
papers which may require it; but no such committee shall have the power or
authority to amend the Articles of Incorporation of the Corporation (except that
a committee may, to the extent authorized in the resolution or resolutions
providing for the issuance of shares of stock adopted by the Board of Directors,
as provided in Section 180(1) of the General Corporation Law of Missouri, fix
any of the preferences or rights of such shares relating to dividends,
redemption, dissolution, any distribution of assets of the Corporation, or the
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conversion into, or the exchange of such shares for, shares of any other class
or classes or any other series of the same or any other class or classes of
stock of the Corporation), to adopt an agreement of merger or consolidation, to
recommend to the shareholders the sale, lease or exchange of all or
substantially all of the Corporation's property and assets, to recommend to the
shareholders a dissolution of the Corporation or a revocation of a dissolution,
or to amend the By-Laws of the Corporation; and, unless the resolution of the
Board of Directors or the Articles of Incorporation of the Corporation expressly
so provides, no such committee shall have the power or authority to declare a
dividend or to authorize the issuance of stock or to adopt a certificate of
ownership and merger. Such committee or committees shall have such name or names
as may be determined from time to time by resolution adopted by the Board of
Directors.
Section 11. Each committee shall keep regular minutes of its meetings
and report the same to the Board of Directors.
COMPENSATION OF DIRECTORS
Section 12. The Board of Directors shall have the authority to fix the
compensation of directors. The directors may be paid their expenses, if any, of
attendance at each meeting of the Board of Directors or committee thereof and
may be paid, either in cash or in securities of the Corporation, a fixed sum for
attendance at each meeting of the Board of Directors or committee thereof or a
stated salary as director or committee member. No such payment shall preclude
any director from serving the Corporation in any other capacity and receiving
compensation therefor.
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ARTICLE IV
NOTICES
Section 1. Whenever notice is required or permitted to be given to any
director or shareholder, it shall not be construed to require personal notice,
but such notice may be given in writing, by mail, addressed to such director or
shareholder, at his or her address as it appears on the records of the
Corporation, with first class postage thereon prepaid, and such notice shall be
deemed to be given three (3) business days after the same shall be deposited in
the United States mail. Notice to directors may also be given personally, by
facsimile or by next business day courier delivery and shall be deemed to be
given when personally given or so sent (provided, however, that notice by
facsimile shall be effective only if receipt is acknowledged by addressee).
Section 2. Whenever any notice is required to be given, a waiver
thereof in writing, signed by the person or persons entitled to said notice,
whether before or after the time stated therein, shall be deemed equivalent
thereto.
ARTICLE V
OFFICERS
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Section 1. The officers of the Corporation shall be chosen by the
Board of Directors at its first meeting after each annual meeting of
shareholders and shall be a chairman (or one or more co-chairmen) of the Board
of Directors, president (or one or more co-presidents), one or more
vice-presidents (who may have further descriptive designations thereof, such as
executive vice-president, senior vice-president, vice-president, finance, etc.),
a secretary and a treasurer. The Board of Directors may also choose additional
vice-presidents, and one or more assistant secretaries and assistant treasurers.
Any number of offices may be held by the same person, unless the Articles of
Incorporation or these By-Laws otherwise provide.
Section 2. The Board of Directors may appoint such other officers and
agents as it shall deem necessary, who shall hold their offices for such terms
and shall exercise such powers and perform such duties as shall be determined
from time to time by the Board of Directors.
Section 3. The salaries of all executive officers of the Corporation
shall be fixed by the Board of Directors.
Section 4. The officers of the Corporation shall hold office until
their successors are chosen and qualified. Any officer elected or appointed by
the Board of Directors may be removed at any time by the Board of Directors with
or without cause. Any vacancy occurring in any office of the Corporation may be
filled by the Board of Directors.
CHAIRMAN OF THE BOARD OF DIRECTORS
Section 5. The Chairman of the Board of Directors shall preside at all
meetings of the stockholders and of the Board of Directors and shall have such
other duties as may be conferred upon him by the Board of Directors. Except
where the signature of some other officer or agent of the Corporation is
expressly required, the Chairman shall possess the same power as the Chief
Executive Officer to execute all deeds, notes, bonds, mortgages, certificates,
contracts and other
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instruments of the corporation which may be authorized by the Board of
Directors.
THE CHIEF EXECUTIVE OFFICER
Section 5A. The Chief Executive Officer of the Corporation shall have
general supervision over the policies, affairs and finances of the Corporation.
He shall keep the Board of Directors fully informed and shall freely consult
with the Board of Directors concerning the business of the Corporation and shall
perform such other duties as are incident to such office and are properly
required of the Chief Executive Officer by the Board of Directors. The Chief
Executive Officer shall preside at all meetings of the shareholders and the
Board of Directors. Except where by law the signature of the president is
required and except as otherwise provided by the Board of Directors, the Chief
Executive Officer may sign all certificates, contracts, documents and other
instruments on behalf of the Corporation. Unless otherwise provided by
resolution of the Board of Directors, the Chief Executive Officer also shall be
entitled to vote all stock and other interests having voting rights which are
owned by the Corporation; in the absence of a contrary resolution adopted by the
Board of Directors, the Chief Executive Officer shall vote such stock and other
interests in a manner which the Chief Executive Officer deems appropriate.
THE PRESIDENT AND VICE PRESIDENTS
Section 6. The president or each co-president and each vice president
shall perform such duties and have such powers as the Board of Directors may
from time to time prescribe.
THE SECRETARY AND ASSISTANT SECRETARY
Section 7. The secretary shall attend all meetings of the Board of
Directors and all meetings of the shareholders and record all the proceedings of
such meetings in a book to be kept for that purpose and shall perform like
duties for the standing committees when required. The
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secretary shall give, or cause to be given, notice of all meetings of the
shareholders and special meetings of the Board of Directors, and shall perform
such other duties as may be prescribed by the Board of Directors or chief
executive. The secretary shall have custody of the corporate seal of the
Corporation and shall have authority to affix the same to any instrument
requiring it and, when so affixed, it may be attested by the secretary's
signature. The Board of Directors may give general authority to any other
officer to affix the seal of the Corporation and to attest the affixing by the
secretary's signature.
Section 8. The assistant secretary, if any, or if there be more than
one, the assistant secretaries in the order determined by the Board of Directors
(or if there be no such determination, then in the order of their election)
shall, in the absence of the secretary or in the event of the secretary's
inability or refusal to act, perform the duties and exercise the powers of the
secretary and shall perform such other duties as may be prescribed by the Board
of Directors or Chief Executive Officer.
THE TREASURER AND ASSISTANT TREASURERS
Section 9. The treasurer shall be the chief financial officer of the
Corporation and shall have the custody of the corporate funds and securities and
shall keep or cause to be kept full and accurate accounts of receipts and
disbursements in books belonging to the Corporation and shall deposit all moneys
and other valuable effects in the name and to the credit of the Corporation in
such depositories as may be designated by the Board of Directors.
Section 10. The treasurer shall disburse the funds of the Corporation
as may be ordered by the Board of Directors, taking proper vouchers for such
disbursements, and upon request shall render to the Chief Executive Officer and
the Board of Directors an account of all transactions as treasurer and of the
financial condition of the Corporation.
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Section 11. If required by the Board of Directors, the treasurer shall
give the Corporation and maintain in effect a bond in such sum and with such
surety or sureties as shall be satisfactory to the Board of Directors for the
faithful performance of the duties of the office of treasurer and for the
restoration to the Corporation, in case of the death of the treasurer,
resignation, retirement or removal from office, of all books, papers, vouchers,
money and other property of whatever kind in the possession or under the control
of the treasurer belonging to the Corporation.
Section 12. The assistant treasurer, if any, or if there shall be more
than one, the assistant treasurers in the order determined by the Board of
Directors (or if there be no such determination, then in the order of their
election) shall, in the absence of the treasurer or in the event of the
inability or refusal to act of the treasurer, perform the duties and exercise
the powers of the treasurer and shall perform such other duties and have such
other powers as the Board of Directors and Chief Executive Officer may from time
to time prescribe.
ARTICLE VI
CERTIFICATES FOR SHARES
Section 1. The shares of the Corporation shall be represented by one
or more certificates. Certificates shall be signed, in the name of the
Corporation, by the Chief Executive Officer, the president, a co-president or a
vice-president and the secretary or an assistant secretary or the treasurer or
an assistant treasurer of the Corporation.
If the Corporation is authorized to issue more than one class of stock
or more than one series of any class, the powers, designations, preferences and
relative, participating, optional or other special rights of each class of stock
or series thereof and the qualifications, limitations or restrictions of such
preferences and/or rights shall be set forth in full or summarized or referenced
on the face or back of the certificate which the Corporation shall issue to
represent
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such class or series of stock, provided that, if summarized or referenced, there
shall also be set forth on the face or back of the certificate which the
Corporation shall issue to represent such class or series of stock, a statement
that the Corporation will furnish without charge to each shareholder thereof who
so requests a copy of the powers, designations, preferences and relative,
participating, optional or other special rights of the class of stock or series
and the qualifications, limitations or restrictions of such preferences and/or
rights.
Section 2. Any of or all the signatures on a certificate may be
facsimile. If any officer, transfer agent or registrar who has signed or whose
facsimile signature has been placed upon a certificate shall have ceased to be
such officer, transfer agent or registrar before such certificate is issued, it
may be issued by the Corporation with the same effect as if he or she were such
officer, transfer agent or registrar at the date of issue.
LOST CERTIFICATES
Section 3. The Board of Directors may direct a new certificate or
certificates to be issued in place of any certificate or certificates
theretofore issued by the Corporation alleged to have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the person claiming
the certificate of stock to be lost, stolen or destroyed. When authorizing such
issue of a new certificate or certificates, the Board of Directors may, in its
discretion and as a condition precedent to the issuance thereof, require the
owner of such lost, stolen or destroyed certificate or certificates, or his or
her legal representative, to advertise the same in such manner as it shall
require and/or to give the Corporation a bond in such sum 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, stolen or destroyed.
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TRANSFER OF STOCK
Section 4. (a) Except as otherwise provided by the Articles of
Incorporation of the Corporation or these By-Laws, 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, assignation or
authority to transfer, it shall be the duty of the Corporation to issue a new
certificate to the person entitled thereto, cancel the old certificate and
record the transaction upon its books, subject, however to restrictions imposed
either by applicable federal or state securities laws or by agreements by or
among the shareholders.
(b) Any transfer of record of shares of Class B Common Stock other than
to a Qualified Transferee (as herein defined) shall be conclusively deemed to
constitute an election by the holder of record thereof to convert the said
shares of Class B Common Stock into an equal number of shares of Class A Common
Stock. As used herein, Qualified Transferee means any one or more of (i) the
transferor's spouse, issue, parents or siblings, or a trust for the benefit of
the transferor or any such persons, (ii) in the event of the transferor's death
or legal disability, the transferor's executor, administrator or personal
representative, (iii) any transferee receiving the shares as a gift, legacy or
inheritance, or as a distribution from a corporation, partnership, trust or
other entity in respect of the transferee's ownership interest therein, or (iv)
any other person approved in their sole discretion by the Board of Directors or
its designee upon written application submitted to the Secretary of the
corporation at least five (5) business days prior to the date of the transfer.
Any shares of Class B Common Stock transferred beneficially but not of record
may upon application by any record holder of Class B Common Stock be denied the
right to vote and receive payment of dividends until the shares have been
transferred of record.
FIXING RECORD DATE
Section 5. In order that the Corporation may determine the
shareholders entitled to notice
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of or to vote at any meeting of shareholders, or to express consent to corporate
action in writing without a meeting, or entitled to receive payment of any
dividend or other distribution or allotment of any rights, or entitled to
exercise any rights in respect of any change, conversion or exchange of stock or
for the purpose of any other lawful action, the Board of Directors may fix, in
advance, a record date, which shall not be more than seventy (70) nor less than
ten (10) days before the date of such meeting, nor more than seventy (70) days
prior to any other action. A determination of shareholders of record entitled to
notice of or to vote at a meeting of shareholders shall apply to any adjournment
of the meeting; provided, however, that the Board of Directors may fix a new
record date for the adjourned meeting.
REGISTERED SHAREHOLDERS
Section 6. The Corporation shall be entitled to recognize the
exclusive right of a person registered on its books as the owner of shares to
receive dividends, to vote as such owner, and to hold liable for calls and
assessments, and shall not be bound to recognize any equitable or other claim to
or interest in such shares on the part of any other person, whether or not the
Corporation shall have express or other notice thereof.
ARTICLE VII
GENERAL PROVISIONS
DIVIDENDS
Section 1. (a) Dividends upon the capital stock of the Corporation
may be declared by the Board of Directors at any regular or special meeting,
pursuant to law. Dividends may be paid in cash, in property, or in shares of the
capital stock of the Corporation.
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(b) Upon any stock dividend or other distribution in the form of Common
Stock of the Corporation, only Class A Common Stock may be distributed in
respect of Class A Common Stock and only Class B Common Stock may be distributed
in respect of Class B Common Stock. Whenever any such distribution is made, the
same number of shares shall be distributed in respect of each outstanding share
of Class A and Class B Common Stock. The Corporation shall not combine or
subdivide shares of either of such classes without at the same time making a
proportionate combination or subdivision of shares of the other class.
Section 2. Before payment of any dividend, there may be set aside out
of any funds of the Corporation available for dividends such sum or sums as the
directors from time to time, in their absolute discretion, think proper as a
reserve to meet contingencies, or for equalizing dividends, or for repairing or
maintaining any property of the Corporation, or for such other purpose as the
directors shall think conducive to the interest of the Corporation, and the
directors may modify or abolish any such reserve in the manner in which it was
created.
CHECKS
Section 3. All checks or demands for money and notes of the
Corporation shall be signed by such officer or officers or such other person or
persons as the Board of Directors may from time to time designate.
FISCAL YEAR
Section 4. The fiscal year of the Corporation shall be fixed by
resolution of the Board of Directors.
SEAL
Section 5. The corporate seal shall have inscribed thereon the name of
the Corporation and the words "Corporate Seal, Missouri". The seal may be used
by causing it or a facsimile
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thereof to be impressed or affixed or reproduced or otherwise.
ARTICLE VIII
INDEMNIFICATION WITH RESPECT TO
THIRD PARTY ACTIONS
Section 1. The Corporation shall indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of this Corporation) by
reason of the fact that (i) such person is or was a director, officer, employee
or agent of this Corporation, or (ii) is or was serving at the request of this
Corporation as a director, officer, employee, partner, trustee or agent of
another Corporation, partnership, joint venture, trust or other enterprise, or
(iii) is or was at the request of the Corporation a guarantor of any debts of
the Corporation, against expenses (including attorneys' fees), judgments, fines,
taxes and amounts paid in settlement actually and reasonably incurred by such
person in connection with such action, suit or proceeding if such person acted
in good faith and in a manner such person reasonably believed to be in or not
opposed to the best interests of this Corporation, and, with respect to any
criminal action or proceeding, had no reasonable cause to believe such conduct
was unlawful. The termination of any action, suit or proceeding by judgment,
order, settlement, conviction, or upon a plea of nolo contendere or its
equivalent, shall not, of itself, create a presumption that the person did not
act in good faith and in a manner which such person reasonably believed to be in
or not opposed to the best interests of this Corporation, and, with respect to
any criminal action or proceeding, had reasonable cause to believe that such
person's conduct was unlawful.
INDEMNIFICATION WITH RESPECT TO ACTIONS BY
OR IN THE RIGHT OF THE CORPORATION
Section 2. This Corporation shall indemnify any person who was or is a
party or is
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threatened to be made a party to any threatened, pending or completed action or
suit by or in the right of this Corporation to procure a judgment in its favor
by reason of the fact that such person is or was a director, officer, employee
or agent of this Corporation, or is or was serving at the request of this
Corporation as a director, officer, employee, partner, trustee or agent of
another Corporation, partnership, joint venture, trust or other enterprise,
against expenses (including attorneys' fees) and amounts paid in settlement
actually and reasonably incurred by such person in connection with the defense
or settlement of such action or suit, if such person acted in good faith and in
a manner such person reasonably believed to be in or not opposed to the best
interests of this Corporation and except that no indemnification shall be made
in respect of any claim, issue or matter as to which such person shall have been
adjudged to be liable for negligence or misconduct in the performance of such
person's duty to this Corporation unless and only to the extent that the court
in which such action or suit was brought shall determine upon application that,
despite the adjudication of liability but in view of all the circumstances of
the case, such person is fairly and reasonably entitled to indemnity for such
expenses which the court shall deem proper. Any indemnification under this
Section 2 (unless ordered by a court) shall be made by this Corporation only as
authorized in the specific case upon a determination that indemnification of the
director, officer, employee, partner, trustee or agent is proper in the
circumstances because he has met the applicable standard of conduct set forth in
this Section 2. Such determination shall be made (1) by the Board of Directors
by a majority vote of a quorum consisting of directors who were not parties to
such action, suit or proceeding, or (2) if such a quorum is not obtainable, or,
even if obtainable a quorum of disinterested directors so directs, by
independent legal counsel in a written opinion, or (3) by the shareholders.
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INDEMNIFICATION - HOW AUTHORIZED
Section 3. To the extent that a director, officer, employee or agent
of this Corporation has been successful on the merits or otherwise in defense of
any action, suit, or proceeding referred to in Subsections 1 or 2 of this
Section, or in defense of any claim, issue or matter therein, the director,
officer, employee or agent shall be indemnified against expenses, including
attorneys' fees actually and reasonably incurred by such director, officer,
employee or agent in connection with the action, suit or proceeding.
PAYMENT OF EXPENSES IN ADVANCE OF
DISPOSITION OF ACTION
Section 4. Expenses incurred in defending any actual or threatened
civil or criminal action, suit or proceeding may be paid by this Corporation in
advance of the final disposition of such action, suit or proceeding as
authorized by the Board of Directors in the specific case upon receipt of an
undertaking by or on behalf of the director, officer, employee, partner, trustee
or agent to repay such amount unless it shall ultimately be determined that the
director, officer, employee, partner, trustee or agent is entitled to be
indemnified by this Corporation as authorized in this Article VIII.
INDEMNIFICATION PROVIDED IN THIS ARTICLE
NON-EXCLUSIVE
Section 5. The indemnification provided by this Article VIII shall not
be deemed exclusive of any other rights to which those seeking indemnification
may be entitled under any bylaw, agreement, vote of stockholders or
disinterested directors or otherwise, both as to action in such person's
official capacity while holding such office and as to action in another capacity
while holding such office, and shall continue as to a person who has ceased to
be a director, officer, employee, partner, trustee or agent and shall inure to
the benefit of the heirs, executors and administrators of such a person.
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DEFINITION OF "Corporation"
Section 6. For the purposes of this Article VIII, references to this
"Corporation" include all constituent Corporations absorbed in a consolidation
or merger as well as the resulting or surviving Corporation, so that any person
who is or was a director, officer, employee, partner, trustee or agent of such a
constituent Corporation or is or was serving at the request of such constituent
Corporation as a director, officer, employee, partner, trustee or agent of
another Corporation, partnership, joint venture, trust or other enterprise shall
stand in the same position under the provisions of this Article VIII with
respect to the resulting or surviving Corporation in the same capacity.
INSURANCE
Section 7. The Corporation may purchase and maintain insurance on
behalf of any person who is or was a director, officer, employee or agent of the
Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another Corporation, partnership, joint
venture, trust or other enterprise, against any liability asserted against such
person and incurred by such person in any such capacity, or arising out of such
person's status as such, whether or not the Corporation would have the power to
indemnify such person against such liability under the provisions of this
section.
CERTAIN DEFINITIONS
Section 8. For purposes of this Article VIII, references to "other
enterprises" shall include employee benefit plans; references to "fines" shall
include any excise taxes assessed on a person with respect to an employee
benefit plan; and references to "serving at the request of the Corporation"
shall include any service as a director, officer, employee or
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agent of the Corporation which imposes duties on, or involves services by, such
director, officer, employee or agent with respect to an employee benefit plan,
its participants or beneficiaries; and a person who acted in good faith and in a
manner such person reasonably believed to be in the interest of the participants
and beneficiaries of an employee benefit plan shall be deemed to have acted in a
manner "not opposed to the best interests of the Corporation" as referred to in
this Article VIII.
EXTENT OF INDEMNIFICATION
Section 9. The Corporation shall, to the fullest extent permitted by
Section 351.355 of the General Corporation Law of the State of Missouri, as the
same may be amended and supplemented from time to time, indemnify any and all
persons whom it shall have the power to indemnify under said section from and
against any and all of the expenses, liabilities or other matters referred to in
or covered by said Section.
SAVING CLAUSE
Section 10. In the event any provision of this Article VIII is held
invalid by any court of competent jurisdiction, such holding shall not
invalidate any other provision of this Article VIII and the other provisions of
this Article VIII shall be construed as if such invalid provision had not been
contained in this Article VIII.
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ARTICLE IX
AMENDMENTS
Section 1. These By-Laws may be altered, amended or repealed or new
By-Laws may be adopted by the shareholders or by the Board of Directors (when
such power is conferred upon the Board of Directors by the Articles of
Incorporation), at any regular meeting of the shareholders or of the Board of
Directors or at any special meeting of the shareholders or of the Board of
Directors if notice of such alteration, amendment, repeal or adoption of new
By-Laws be contained in the notice of such special meeting. If the power to
adopt, amend or repeal By-Laws is conferred upon the Board of Directors by the
Articles of Incorporation it shall not divest or limit the power of the
shareholders to adopt, amend or repeal By-Laws.
AS APPROVED BY THE BOARD OF DIRECTORS OF AMERICAN ARTISTS FILM CORPORATION on
July 24, 1998.
AMERICAN ARTISTS FILM CORPORATION
By: J. Eric Van Alta
---------------------------
Secretary
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EXHIBIT 3.7
AMENDMENT OF ARTICLES OF INCORPORATION
Honorable Rebecca McDowell Cook,
Secretary of State
Corporation Division
P.O. Box 778
Jefferson City, MO 65102
Pursuant to the provision of The General and Business Corporation Law of
Missouri, the undersigned Corporation certifies the following:
1. The present name of the Corporation is AMERICAN ARTISTS FILM CORPORATION
The name under which it was organized was Setab Alpha, Inc.
2. An amendment to the Corporation's Articles of Incorporation was adopted by
written consent of the directors on January 16, 1998, and by the stockholders at
a meeting held on January 16, 1998.
3. Article I of the Corporation's Articles of Incorporation is amended to read
as follows:
ARTICLE I
The name of the Corporation is AMERICAN ARTISTS ENTERTAINMENT CORPORATION.
4. Of the 912,984 shares of $0.001 par value Class A common stock and the
5,502,277 shares of $0.001 par value Class B common stock outstanding (6,415,261
shares of Class A common stock and Class B common stock in the aggregate)
5,054,932 were entitled to vote on such amendment with both Class A common stock
and Class B common stock voting together as a single class.
5. The number of shares voted for, against or abstained from voting on the
amendment was as follows:
<TABLE>
<S> <C>
Number Voted For: 5,040,077
Number Voted Against: 300
Number of Abstentions 14,555
</TABLE>
6. The amendment did not change the number or par value of authorized shares
having a par value.
The amendment did not change the number of authorized shares without par
value.
-1-
<PAGE> 2
7. The amendment does not provide for an exchange or cancellation of issued
shares, or a reduction of the number of authorized shares of any class. The
amendment provides for a reclassification of shares as follows: revokes
preferential or preemptive right to acquire additional shares of stock and
eliminates cumulative voting.
IN WITNESS WHEREOF, the undersigned, Rex Hauck, President, has executed
this instrument and J. Eric Van Atta, Secretary, has affixed its corporate seal
hereto and attested said seal on the 26th day of January, 1999.
AMERICAN ARTISTS FILM CORPORATION
By: /s/ Rex Hauck
--------------------------------
Rex Hauck, President
Attest:
/s/ J. Eric Van Atta
- --------------------------------
J. Eric Van Atta, Secretary
STATE OF GEORGIA )
) SS.
COUNTY OF FULTON )
I, Kimberly A. Taylor, a Notary Public, do hereby certify that on this
4th day of February, 1999, personally appeared before me Rex Hauck, who, being
by me duly sworn, declared that he is the President of AMERICAN ARTISTS FILM
CORPORATION and that he signed the foregoing document as President of the said
Corporation, and that the statements therein contained are true.
/s/ Kimberly A. Taylor
------------------------------------
Notary Public
My Commission Expires:
-2-
<PAGE> 1
Exhibit 10.65
KEE JOINT VENTURE /
FIST LIGHT FILMS/AMERICAN ARTIST FILMS/
I.J. KAPPLIN CO.
LEASE AMENDMENT-RENEWAL
This agreement, entered into this 5th day of December, 1997 by and between Kee
Joint Venture known as Landlord, and First Light Films/American Artist Films
hereinafter known as Tenant and I.J. Kapplin co. hereafter called "Agent".
WITNESSETH:
WHEREAS, Landlord and Tenant entered into a lease dated August 15, 1996 covering
premises commonly known as 1245 Fowler Street Atlanta, GA, and
WHEREAS, Landlord and Tenant desire to amend said lease in certain respects,
NOW THEREFORE, in consideration of the sum of TEN DOLLARS, each paid to the
other, the receipt and sufficiency of which is hereby acknowledged, Landlord and
Tenant hereby agree that said lease is hereby amended as follows:
1. The monthly rental shall increase to $3400.00 commencing January 1, 1998.
2. The term of said lease is extended to December 31, 1998.
3. The tenant name is changed from First Light Films to American Artists Film
Corporation.
All other terms, conditions and covenants of said lease shall remain unchanged.
IN WITNESS whereof the parties hereto have hereunto set their hands and seals
this 5th day of January, 1998.
FAX SIGNATURES ARE ACCEPTABLE AND BINDING TO ALL PARTIES.
LANDLORD TENANT
Kee Joint Venture American Artists Film Corporation
By: /s/ By: /s/ J. Eric Van Atta, Vice President
-------------------------- --------------------------------------
By:
--------------------------------------
I.J. Kapplin Co.
/s/ Lynn Carden
- --------------------------------------
Lynn Carden
<PAGE> 1
EXHIBIT 10.66
[DIVERSITY ENTERTAINMENT LOGO]
Diversity Entertainment Television/Atlanta L.L.C.
Third Party Licensing Agreement
AGREEMENT
This agreement is made as of this 6th day of January 1998, by and
between Diversity Entertainment Television/Atlanta L.L.C. (DETV/ATL), a State of
Georgia Limited Liability Company whose principal place of business is in
Atlanta, Georgia and Georgia Public Television (hereinafter referred to as
GPTV), according to the terms and conditions set forth below.
I. CONTENT/PROGRAM PROVIDER
GPTV shall provide content/programming to DETV/ATL for broadcast on its
Large Screen Video Display (LSVD) at Underground Atlanta as discussed
and conceptually agreed to previously.
II. DUTIES OF PARTIES
A. GPTV shall be responsible for the following services and
obligations with respect to providing content/programming to
DETV/ATL.
1. Preparing and delivering to DETV/ATL pre-produced
content/programming set forth in exhibit A, attached
hereto and made a part hereof, including, but not
limited to, cue sheets of all music intended for use
with content/programming.
2. Securing the services of and compensating the
technical and creative talent for the production and
delivery of said content/programming.
3. Obtaining and hereby granting to DETV/ATL at no
additional cost to DETV/ATL, the music
synchronization rights and master recording rights
with respect to the content/programming and the
payment of all residuals, royalty fees, contributions
and other benefits required under applicable guild,
or other agreement arising in connection with the
production or exhibition of all clearances, releases,
and licenses necessary for the use of all musical
material supplied with GPTV content/programming.
B. DETV/ATL shall broadcast content/programming provided by GPTV
during the Term of this agreement provided, however, that
DETV/ATL shall not be obligated to broadcast any
content/programming which is not of "broadcast quality," as
<PAGE> 2
determined by DETV/ATL in its sole discretion pursuant to its
normal standard of broadcast quality.
1. DETV/ATL shall make every reasonable effort to
broadcast all content/programming sourced from GPTV.
2. DETV/ATL shall have the right to sell and retain all
advertising revenues generated from commercials
scheduled by DETV/ATL and exhibited by it with
content/programming provided by GPTV and aired on the
DETV/ATL screen.
III. BROADCAST RIGHTS; ANCILLARY RIGHTS
A. GPTV hereby grants to DETV/ATL the non-exclusive right,
license and privilege to exhibit, distribute, and perform
those audio visual broadcasts of content/programming for one
(1) year (the "Term") on DETV/ATL, including lyrics, and
musical compositions contained within the content/programming
provided for promotional exhibition.
B. During the Term, GPTV will provide to DETV/ATL video segments.
These segments will range in length from three (3) minutes to
thirty (30) minutes. These segments are intended to be shown
with no further modifications or editing and are to be shown
properly utilizing the video's sound track. Each segment will
be edited by GPTV so as to provide the GPTV logo throughout
each segment. When appropriate, GPTV will provide raw video to
DETV/ATL to be edited for future segments. All segments
utilizing GPTV raw video must be approved by GPTV prior to
airing on DETV/ATL.
IV. COMPENSATION
A. GPTV has offered and agreed to provide content/programming to
DETV/ATL free of charge.
B. In exchange for providing pre-produced and/or stock footage as
content/programming for a one (1) year license period,
DETV/ATL shall tag GPTV content/programming with CGI generated
static GPTV ID on the DETV/ATL screen.
C. It is understood that such on-screen promotional value shall
constitute full payment for all services and
content/programming which DETV/ATL shall render hereunder and
no additional payment shall be required for such services and
content/programming.
V. EFFECTIVE DATE
This Agreement shall be effective upon full execution of this
Agreement.
<PAGE> 3
VI. INDEMNIFICATION
A. GPTV party shall indemnify, defend and hold harmless DETV/ATL,
its affiliates and subsidiaries (and their respective
directors, officers, employees, agents, successors, and
assigns) from and against any and all third party actions,
suits, proceedings, judgments, demands or claims, liabilities,
loss or expenses whatsoever (including reasonable attorneys'
fees) incurred in connection with or arising from such party's
negligence or willful misconduct, or the breach of an
agreement, representation or warranty of such party made
hereunder.
B. All agreements between GPTV and third parties, or DETV/ATL and
third parties, shall be the sole responsibility of the
contracting party and the other shall have no liability for
the same.
C. The indemnification described in this Section shall survive
the termination or expiration of this Agreement.
VII. DELIVERY
A. If/when applicable, GPTV agrees to deliver live
content/programming to DETV/ATL via fiber optic, microwave or
satellite signal feed at DETV/ATL expense. DETV/ATL will
provide the electronic interface to process fed signal via
fiber optic, microwave or satellite transmission.
B. GPTV agrees to deliver the following to DETV/ATL with respect
to pre produced content/programming ( i ) one BETA SP
videotape master or umatic SP video master, whichever is
available, ( NTSC ) with one-minute color bars and tone: with
SMPTE drop frame time code; starting at 01:00:00; one
protection dub; ( ii ) music cues, commercial cues, and formal
sheets, if any directed to: Edward J. Anderson, II, V.P. of
Operations.
VIII. RIGHTS OF PARTIES For purposes of this Section VIII, all references to
DETV/ATL shall also include its parent and affiliate companies.
A. The content/programming and all elements thereof, shall be the
sole and exclusive property of GPTV and may only be used or
exploited by DETV/ATL in the manner set forth herein. Any
rights not specifically granted herein to DETV/ATL are
expressly reserved by GPTV.
B. Nothing herein shall be deemed to prohibit DETV/ATL from
developing, producing, distributing or exhibiting programs
similar in format or subject matter to the content/programming
provided by GPTV; however DETV/ATL agrees that it shall not
exhibit any such program that may be deemed a conflict of
interest to GPTV.
<PAGE> 4
C. GPTV hereby grants to DETV/ATL the right to publicize and
advertise the content/programming in any/all media, including,
but not limited to, the right to disseminate, reproduce, print
and publish the names biographies, voices and likeness of the
principal participants appearing in the content/programming in
connection with such publicity and advertising. GPTV shall
ensure that appropriate releases are obtained from all
participants appearing in the content/programming. GPTV shall
provide to DETV/ATL without additional cost, pertinent
promotional material available to GPTV regarding the
content/programming, and DETV/ATL shall have the right to
distribute such material for promotion of the Program.
IX. PAYMENT FOR INCLUDED MATTER
GPTV represents and warrants that its employees or affiliates
shall not pay, accept payment on service or valuable
consideration from, or knowingly permit any of its agents or
subcontractors to accept or pay, any money service or other
valuable consideration for the inclusion of matter plug,
reference, or product identification in the broadcast of the
content/programming without first disclosing such information
to DETV/ATL and obtaining the prior approval of DETV/ATL's
Legal Counsel.
X. REPRESENTATIONS AND WARRANTIES
A. Each party represents and warrants to the other:
1. that it has full legal right, power and authority to
enter into and perform its obligations hereunder; and
2. that it has not entered into, nor will it enter into,
any contract or other agreement which would conflict
with, prohibit or interfere with the full performance
of its obligations hereunder or with the full
enjoyment by the other party of the rights granted
herein.
3. that it shall use its best efforts to ensure that
content/programming is completed and ready for airing
at the scheduled dates and times.
B. GPTV further represents and warrants to DETV/ATL that:
( i ) it shall be solely responsible for obtaining all
releases from the talent, guests or other artists
participating in the content/programming prior to the
airing of said programming on DETV/ATL. The failure
by GPTV to obtain such releases shall constitute a
material breach of this Agreement.
<PAGE> 5
( ii ) that it has or will obtain, at its own cost and
expense, the sole and exclusive distribution and
exhibition rights in and to the content/programming
and the character, concepts and ideas contained
therein, and that it has the full legal right, power
and authority to enter into and perform this
Agreement and to grant to DETV/ATL all the rights
granted herein including, without limitation, the
rights to exhibit and otherwise exploit the
content/programming as herein provided.
( iii ) that the performing rights for the music contained in
the content/programming are (i) controlled by a
performing rights society having jurisdiction, (ii)
in the public domain, or (iii) controlled by GPTV to
the extent necessary so that no additional clearance
of or payment with respect to such rights is required
for use of the content/programming provided
hereunder.
( iv ) that it shall have obtained and hereby grants to
DETV/ATL, at no additional cost to DETV/ATL, the
music synchronization rights and master recording
rights with respect to the content/programming as
provided herein.
( v ) that the content/programming is original and does not
infringe the copyright or any other proprietary right
of any person, firm or other entity and neither the
content/programming, nor the production or any use
hereunder of the content/programming of any visual or
aural element thereof, will infringe on any trademark
or tradename of, violate any right of privacy or
right of publicity of, or constitute a libel or
slander against, any person, firm or other entity.
(vi) that DETV/ATL will not be obligated to make payments
or to pay any other consideration to GPTV or to any
third party, except as expressly specified in this
Agreement in connection with the exercise of the
rights granted to DETV/ATL herein.
C. The representations and warranties of this Section X shall
survive the expiration or earlier termination of this
Agreement.
XI. TERMINATION
Either party shall have the right to terminate the Agreement without
further obligation to the other upon the occurrence of a material breach, which
continues for a period of thirty (30) days or longer, by the other party to
materially perform its obligations including the inability,
<PAGE> 6
failure, refusal or neglect of the other party hereunder. However, no
termination of this Agreement shall act to waive or otherwise limit either
party's rights under this Agreement.
XII. GOVERNING LAW
This Agreement shall be construed in accordance with and governed by
the laws of the State of Georgia.
XV. ASSIGNMENT
Neither party may assign its rights or obligations under this Agreement
without the prior written consent of the other party (unless such assignment is
to an affiliate or successor in interest).
XVI. ENTIRE AGREEMENT
This Agreement contains the entire understanding of the agreement
between the parties with respect to the subject matter hereof and shall
supersede all prior agreements, understandings, communications and proposals,
whether oral or written. This Agreement may not be modified or amended except in
a writing executed by DETV/ATL and GPTV which refers to this Agreement.
XVII. BINDING NATURE
This Agreement will not be binding on DETV/ATL unless and until the
Agreement has been signed by all parties and a fully executed Agreement has been
returned to DETV/ATL.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date indicated below.
By: /s/ Tyrone C. Johnson By: /s/ Frank D. Sugg, Jr.
-------------------------- ---------------------------
For DETV/ATL For GPTV
Date: 1-9-98 Date: 1-7-98
------------------------- --------------------------
<PAGE> 7
Exhibit A
DETV/ATL and GPTV Proposed Content Provider Summary
A. GPTV will provide content/programming at no cost to DETV/ATL to air on
the DETV/ATL screen at Underground Atlanta.
B. DETV/ATL will provide promotional exposure at no additional cost to
GPTV via CGI generated static ID tag during airing of GPTV
content/programming.
C. DETV/ATL Special Program Segment Opportunities These segment
opportunities, including but no limited to Georgia Legacy, Georgia
Outdoors, and Vanishing Georgia are segments that DETV/ATL would like
to incorporate into its daily programming schedule. As discussed, it is
these types of programming segments that DETV/ATL will merchandise to
DETV/ATL anchor sponsors for open and/or close "brought to you by"
graphics to any anchor sponsor so that GPTV has final approval on any
DETV/ATL merchandised sponsorship of a GPTV program segment.
<PAGE> 1
Exhibit 10.67
JMB 301 7/92
CENTER: UNDERGROUND ATLANTA
TENANT: DIVERSITY ENTERTAINMENT TELEVISION/ATLANTA, LLC
SPACE: 88 UPPER ALABAMA STREET
DATE:
SHOPPING CENTER LEASE
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
Article 1 Basic Provisions .............................................. 1
Article 2 Premises, Term and Commencement Date .......................... 2
Article 3 Minimum Rent and Percentage Rent .............................. 2
Article 4 Payment of Rent, Rent Taxes and Prorations .................... 3
Article 5 Taxes ......................................................... 4
Article 6 Condition of Premises; Tenant's Work .......................... 4
Article 7 Trade Fixtures, Alterations and Liens ......................... 5
Article 8 Use Requirements .............................................. 5
Article 9 Use of Screen ................................................. 7
Article 10 Utilities ..................................................... 7
Article 11 Maintenance and Repair of Premises ............................ 7
Article 12 Roof Common Areas ............................................. 8
Article 13 Insurance, Subrogation, and Waiver of Claims .................. 9
Article 14 Casualty Damage ............................................... 9
Article 15 Condemnation .................................................. 10
Article 16 Return of Possession........................................... 10
Article 17 Holding Over .................................................. 10
Article 18 Subordination, Attornment and Mortgagee Protection ............ 11
Article 19 Estoppel Certificate .......................................... 11
Article 20 Assignment and Subletting ..................................... 11
Article 21 Rights Reserved by Landlord ................................... 12
Article 22 Landlord's Remedies ........................................... 13
Article 23 Landlord's Right to Cure ...................................... 15
Article 24 Indemnification ............................................... 15
Article 25 Safety and Security Devices, Services and Programs ............ 16
Article 26 Hazardous Materials ........................................... 16
Article 27 Captions and Severability ..................................... 17
Article 28 Definitions ................................................... 17
Article 29 Rules ......................................................... 19
Article 30 No Waiver ..................................................... 19
Article 31 Attorneys' Fees, Counterclaims, Venue and Jury Trial .......... 19
Article 32 Personal Property Taxes ....................................... 20
Article 33 Conveyance by Landlord and Liability .......................... 20
Article 34 Notices ....................................................... 20
Article 35 Real Estate Brokers ........................................... 20
Article 36 Security Deposit and Landlord's Lien .......................... 21
Article 37 Miscellaneous ................................................. 21
Article 38 Offer ......................................................... 22
Article 39 Americans With Disabilities Act ............................... 22
Article 40 Entire Agreement .............................................. > 23
Exhibit A: The Premises
Exhibit B: Landlord's and Tenant's Work
Exhibit C: Emergency notification instructions
Exhibit D: TCCC Agreement
</TABLE>
<PAGE> 2
SHOPPING CENTER LEASE
THIS LEASE made as of the 12 day of JANUARY, 1998, between UNDERGROUND
FESTIVAL, INC. ("Landlord"), a(n) Georgia corporation, having a place of
business at 900 North Michigan Avenue, Chicago, Illinois 60611-1957 and
DIVERSITY ENTERTAINMENT TELEVISION/ATLANTA, LLC ("Tenant") a Georgia limited
liability company whose principal place of business is located at Olympia
Building, 8 Decatur Street, Loft Studio A, Atlanta, Georgia, 30303.
ARTICLE 1
BASIC PROVISIONS
A. TENANT'S TRADE NAME: DETV
B. CENTER: UNDERGROUND ATLANTA
ADDRESS: Olympia Building, 8 Decatur Street, Loft Studio A
Atlanta, Georgia, 30303
C. PREMISES: Approximately 564 square feet of the roof (and the air space
extending fifty-five (55) feet above the roof line) of the building known as 88
UPPER ALABAMA STREET (the ("Building"), the approximate location of which is
shown cross-hatched on Exhibit A hereto
D. COMMENCEMENT DATE: Sixty (60) days after the date Landlord delivers
possession of the Premises to Tenant;
E. EXPIRATION DATE: the last day of the sixtieth (60th) full calendar
month following the Commencement Date;
F. EXTENSION AND TERMINATION OPTIONS: Provided there has been no default
during the Lease Term beyond the expiration of any applicable cure period and
Tenant is not then in default beyond any applicable cure period, has
continuously operated in good faith throughout the term of this Lease for
Tenant's Permitted Use and is in good financial condition in Landlord's
reasonable judgement as evidenced by Tenant's financial statement reviewed (in
accordance with FASB standards) by Tenant's chief financial officer (who shall
be a certified public accountant) which shall be less than one (1) year old and
shall accompany the following notice, Tenant shall have the option to extend the
term hereof for one (1) additional period of five (5) years (the "Option
Period"). Said option shall be exercised, if at all, by written notice to
Landlord at least one hundred eighty (180) days prior to the expiration of the
then current term. All terms and conditions contained herein shall apply during
the option period with exception of the annual Minimum Rent which shall be
adjusted annually by the percentage increase in the CPI as set forth in Section
1.G. below. Landlord's acceptance of the foregoing financial statements without
objection for more than thirty (30) days after receipt shall be deemed an
acceptance of such financial statements.
If Tenant shall fail to exercise the option herein provided in
accordance with the terms hereof, said option shall terminate and be null and
void. Tenant's exercise of said option shall not operate to cure any default by
Tenant of any of the terms or provisions of this Lease, nor to extinguish or
impair any rights or remedies of Landlord arising by virtue of such default. If
the Lease or Tenant's right to possession of the Premises shall terminate in any
manner whatsoever before Tenant shall exercise the option herein provided, or
before the commencement of the Extension Period, or if Tenant shall have
assigned the Lease or subleased all or any portion of the Premises before Tenant
shall have exercised the option herein provided, then immediately upon such
termination, sublease or assignment, the option herein granted to extend the
term shall simultaneously terminate and become null and void. Time is of the
essence of this provision.
G. MINIMUM RENT:
<TABLE>
<CAPTION>
PERIOD MONTHLY AMOUNT ANNUAL AMOUNT
------ -------------- -------------
<S> <C> <C>
Commencement Date through
First (1st) Lease Year $4,166.67 $50,000.00
---------------------- --------- ---------
</TABLE>
-1-
<PAGE> 3
<TABLE>
<S> <C>
Second (2nd) Lease Year through
Expiration of the Term Annual CPI adjustment as set forth below.
----------------------
</TABLE>
The Minimum Rent for each of the last four (4) Lease Years of the
Term hereof (and each Lease Year during the Option Period, if any) shall be
determined by adding to Minimum Rent for the immediately preceding Lease Year a
sum equal to the product obtained when the Minimum Rent for the immediately
preceding Lease Year is multiplied by a fraction, the numerator of which is the
difference between (a) the CPI in effect as of the last day of the immediately
preceding Lease Year and (b) the CPI in effect as of the first day of the
immediately preceding Lease Year and the denominator of which is the CPI on the
first day of the immediately preceding Lease Year. In no event shall the Minimum
Rent during any Lease Year of the Term be less than that of any preceding Lease
Year.
Provided Tenant is not then in default beyond any applicable cure
periods and has timely cured all prior defaults, if any, Tenant shall be
conditionally excused of its obligation for the payment of the initial Fifty
Thousand and 00/100 Dollars ($50,000.00) of Minimum Rent due and payable
hereunder for the twelve (12) month period from the Commencement Date ("Excused
Rent"), and Tenant's first payment of Minimum Rent will be due on 1 January
1999. However, Tenant shall pay Percentage Rent, Taxes, and other charges due
pursuant to the terms hereof as of the Commencement Date.
In the event Tenant subsequently defaults in any of its monetary
obligations under the Lease and (if applicable) fails to timely cure such
default, the Excused Rent shall immediately become due and payable to Landlord.
H. PERCENTAGE RENT: Five percent (5%) of Tenant's Gross Revenue.
I. SECURITY DEPOSIT: $ N/A
J. GUARANTOR:
Q. RENT PAYMENT ADDRESS: Tenant shall forward all Rent, insurance
certificates and Gross Revenue reports to Landlord at the following
address, or such other address or addresses as to which Landlord shall
provide advance notice:
<TABLE>
<S> <C>
for sales reports/insurance certificates/
For Rent payments: /correspondence:
------------------------------------------------------------------------------------------
Underground Atlanta Managers, LLC, Underground Atlanta Management Office
------------------------------------------------------------------------------------------
Agent for Underground Festival, Inc. 50 Upper Alabama Street
------------------------------------------------------------------------------------------
P.O. Box 905247 Atlanta, Georgia 30303
------------------------------------------------------------------------------------------
Charlotte, NC 28290-5247
------------------------------------------------------------------------------------------
</TABLE>
R. RENT SHALL BE PAYABLE TO: UNDERGROUND ATLANTA MANAGERS, LLC, a/f
UNDERGROUND FESTIVAL, INC. or such other entity as Landlord shall
designate from time to time in writing.
The foregoing provisions shall be interpreted and applied in accordance
with the other provisions of this Lease set forth below. The terms in this
Article, and the terms defined in Article 28, shall have the meanings specified
therefor, herein or therein, when used as capitalized terms in other provisions
of this Lease.
ARTICLE 2
PREMISES, TERM AND COMMENCEMENT DATE
Landlord hereby leases to Tenant and Tenant hereby leases from Landlord
the Premises for a term ("Term") commencing on the Commencement Date and ending
on the Expiration Date set forth in Article 1, unless sooner terminated as
provided herein, subject to the provisions herein contained. The Commencement
Date set forth in Article 1 shall be advanced to such earlier date as Tenant
opens the Premises for business. If the Commencement Date
-2-
<PAGE> 4
is advanced, the Rent and other obligations of Tenant, and the Term and initial
Lease Year hereunder, shall all commence on the Commencement Date as advanced.
However, the Expiration Date set forth in Article 1 shall not be changed.
Landlord and Tenant shall confirm in writing any adjustment to the Commencement
Date hereunder upon written request by either party. In the event of any dispute
concerning such adjustment, Tenant shall pay Rent commencing on the Commencement
Date set forth in Article 1, subject to adjustment between the parties after
such dispute is resolved. The obligations of Tenant under this Lease are subject
to and conditioned upon Tenant obtaining all "Permits" (as hereinafter defined)
on or before the ninetieth (90th) day following the date of full execution of
this Lease (the "Contingency Date"). "Permits" shall mean any and all licenses,
permits and authorizations from the appropriate governmental authorities
necessary for the installation and use of the Screen and the improvements to the
Building contemplated in connection therewith. In the event the foregoing
condition to Tenant's obligations has not been satisfied or waived by Tenant
prior to the Contingency Date, this Lease shall be deemed null and void and this
Lease shall be of no further force or effect.
ARTICLE 3
MINIMUM RENT AND PERCENTAGE RENT
A. MINIMUM RENT. Tenant shall pay Landlord the monthly Minimum
Rent set forth in Article 1 in advance on or before the first day of each
calendar month during the Term, except that Minimum Rent for the first full and
any initial partial calendar month shall be paid when Tenant executes this
Lease.
B. PERCENTAGE RENT. Tenant shall pay Landlord Percentage Rent
each Lease Year equal to the amount set forth in Article 1. Percentage Rent for
each Lease Year shall be paid in arrears on a quarterly basis. Such payments
shall be made on or before the fifteenth (15th) day of the calendar month next
succeeding such quarter with respect to Gross Revenue earned during each
preceding quarter. The term "Lease Year" shall have the meaning specified
therefor in Article 28. Tenant shall provide monthly statements to Landlord upon
Landlord's request therefor.
C. GROSS REVENUE RECORDS. Tenant shall ensure that the business
of Tenant in, at or from the Premises is operated such that the following books
and records (collectively, "Tenant's Records") are prepared, preserved and
maintained in accordance with both generally accepted accounting principles and
sound business practices, and adequately and accurately evidence Tenant's Gross
Revenue using the accrual method of accounting: (i) settlement report sheets (or
other similar form of reporting) of all transactions involving the use of the
Screen or the Premises (whether paid, bartered, traded, "comped" or exchanges or
any other form of consideration), (ii) bank statements, (iii)general ledger or
summary record of all receipts and disbursements from operations in, at or from
the Premises, (iv) state and local sales and use tax returns, and (v) purchase
orders or other written documents or agreements confirming the purchase of
promotional or advertising services involving the Screen or the Premises; and
(vi) such other records that would normally be kept pursuant to generally
accepted accounting principles, or as the Landlord may reasonably require in
order to determine Gross Revenue hereunder. A separate bank account shall be
maintained for all revenue from the Screen and the Premises and no funds from
any other source shall be deposited in such account. Tenant shall retain
Tenant's Records at the home office of Tenant for at least two (2) years from
the end of the Lease Year to which they are applicable or, if any audit is
required or a controversy should arise between the parties regarding Percentage
Rent, until such audit or controversy is terminated, even though such retention
period may be after the expiration of the Term or earlier termination of this
Lease.
D. GROSS REVENUE STATEMENTS. Tenant shall provide Landlord with a
monthly statement of Gross Revenue within fifteen (15) days after the end of
each quarter, signed by an authorized representative, which shall show Gross
Revenue for such quarter, the value of time for Landlord Content, the Net Value
(as defined below) of all trade-out or bartered sales, as well as year-to-date
amounts for the current Lease Year. The Percentage Rent due for such quarter
shall accompany such statement. In addition to such regular quarterly
statements, Tenant shall provide an annual statement within sixty (60) days
after the end of each Lease Year, which shall show the total amount
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of Gross Revenue for such Lease Year, and shall be certified to be true,
complete and correct by Tenant's chief financial officer who shall be a
certified public accountant . If such annual statement shows that Tenant
underpaid Percentage Rent for such Lease Year, Tenant shall include the
additional amount with such statement, and if such statement shows that Tenant
overpaid Percentage Rent, Landlord shall provide a credit or refund. The
Percentage Rent due for the Net Value shall be paid in three equal installments
the first of which shall accompany Tenant's quarterly statement and the balance
on or before the fifteenth (15th) day of the next succeeding two (2) months.
E. AUDITS. Landlord may from time to time (but not more
frequently than once during any twelve (12) month period), upon at least
twenty-one (21) days' notice to Tenant, cause a complete audit or examination to
be made of Tenant's Records for all or any part of the three (3) Lease Years
immediately preceding such notice which have not been previously audited by
Landlord. During such audit, Landlord or its authorized representatives shall
have full and free access to Tenant's Records and the right to require that
Tenant, its agents and employees furnish such information or explanation with
respect to such items as may be necessary for a proper examination and audit
thereof. If such audit or examination discloses that any of Tenant's statements
of Gross Revenue understate Gross Revenue made during any Lease Year by three
percent (3%) or more, or if Tenant shall have failed to furnish Landlord any
quarterly Gross Revenue statements during any Lease Year (after notice and
opportunity to cure) or shall have failed to prepare and maintain Tenant's
Records as required herein, Tenant shall pay Landlord the cost of such audit or
examination, including travel and related expenses, and any deficiency in
Percentage Rent, with interest at the Default Rate. If such audit or examination
shall disclose an understatement of more than ten percent (10%), Landlord shall
also have the right to cancel this Lease by written notice given to Tenant
within six (6) months after such audit. Landlord's acceptance of Percentage Rent
shall be without prejudice to the Landlord's examination, audit and other rights
hereunder.
F. GROSS REVENUE DEFINED. "Gross Revenue" shall mean the entire
amount of all income and receipts whatsoever of all business conducted at, on,
from, or relating to the Screen or the Premises, including, without limitation
(i) bookings from other parties for advertising or promotional space or services
at or with respect to the Screen, the Building or the Premises, (ii) after the
first full calendar year of the Term, an amount equal to the value of the time
for Landlord Content (including, without limitation, Landlord Events, but any
sums received from the sponsor by Tenant for advertising time shall be included
under (i) above) aired on the Screen) valued at normal hourly rates then
charged; (iii) after the first full calendar year of the Term, an amount equal
to the value of all consideration received from parties other than Landlord,
other than money promised or received, including, without limitation, trade-outs
and bartering; and (iv) all other gross income or receipts from any business or
operation at, on, from or relating to the use of the Premises or the Screen. No
deduction shall be allowed for any uncollected or uncollectible amounts or
reserves therefor, nor for cost of products or services sold, or other costs,
charges or expenses of purchasing, financing, selling, transportation, overhead
or taxes except as expressly provided herein. Tenant will utilize the accrual
method of accounting to recognize and compute all components of Gross Revenue.
Credit and installment sales shall be included in the month in which the
services are provided, or in which any portion of the payment is received,
whichever first occurs, regardless of when or whether full payment is received.
Gross Revenue excludes insurance proceeds and any sales, use or gross receipts
tax imposed by any governmental unit or authority directly on sales and
collected from customers, provided that the amount thereof is added to the
selling price or absorbed therein and is paid by Tenant to such governmental
authority.
Gross Revenue shall be adjusted by deducting or excluding the following:
(a) Items 1 and 2 below (collectively referred to herein as the "Net
Value")
1. After the first full calendar year of the Term, an
amount equal to the value of the time for Landlord Content
(including, without limitation, Landlord Events, but any sums
received from the sponsor by Tenant for advertising time shall
be included under (i) above) aired on the Screen).
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2. After the first full calendar year of the Term, the
value of all consideration other than money promised or
received to parties other than Landlord, including, without
limitation, trade-outs and bartering valued at normal hourly
rates then charged but only up to the total value of (1) above
for such year.
(b) Items 1 through 3 below up to three percent (3%) of the total Gross
Revenue and item 4 below up to twenty-two and one-half percent (22.5%)
of total Gross Revenue.
1. Interest, service or sales carrying charges or other
charges, however denominated, paid by customers for the
extension of credit on sales, provided such is in excess of
the purchase price, and further provided said amount shall not
exceed one percent (1%) of Tenant's Gross Revenue for the
applicable Lease Year.
2. To the extent previously reported as Gross Revenue,
those amounts written off by Tenant (not exceed one-half of
one percent (0.5%) of Tenant's Gross Revenue for the
applicable Year) due to dishonored checks and/or bad debts,
provided such shall be included to the extent later recovered.
3. Refunds or allowances made on merchandise, goods,
advertising, promotional space or services claimed to be
defective or unsatisfactory, provided they shall have
previously been included in Gross Revenue.
4. Sales and marketing commissions.
ARTICLE 4
PAYMENT OF RENT, RENT TAXES AND PRORATIONS
A. RENT AND RENT TAXES. Minimum Rent, Percentage Rent and Taxes
and any other amounts which Tenant is or becomes obligated to pay Landlord under
this Lease are sometimes herein referred to collectively as "Rent", and all
remedies applicable to the non-payment of Rent shall be applicable thereto. Rent
shall be paid without any prior demand or notice therefor, and shall in all
events be paid without any deduction, recoupment, set-off or counterclaim, and
without relief from any valuation or appraisement laws. Tenant shall pay any
rent tax, sales tax, service tax, transfer tax, value added tax, or any other
applicable tax on the Rent, utilities or services herein or otherwise respecting
this Lease or any other document entered into in connection herewith. Landlord
may apply payments received from Tenant to any obligations of Tenant then
accrued, without regard to such obligations as may be designated by Tenant.
B. PRORATIONS. If the Term commences on a day other than the
first day of a calendar month or ends on a day other than the last day of a
calendar month, the Minimum Rent and any other amounts payable on a monthly
basis shall be prorated on a per diem basis for such partial calendar months. If
the Minimum Rent is scheduled to increase under Article 1 other than on the
first day of a calendar month, the amount for such month shall be prorated on a
per diem basis to reflect the number of days of such month at the then current
and increased rates, respectively.
ARTICLE 5
TAXES
A. TAXES. Tenant shall pay Landlord an amount equal to the
excess, if any, of the Taxes for any Lease Year over the Taxes for the calendar
year 1997 (the "Base Year") which are directly attributable to the presence of
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the Screen on the Building or the business conducted on the Premises involving
the Screen. Taxes shall be paid to Landlord within thirty (30) days of Landlord
delivery of a Statement detailing the amount owed by Tenant and which includes a
true, correct and complete copy of the applicable tax bill.
B. FINALITY OF STATEMENTS. Unless Tenant takes exception to any
Statement by written notice to Landlord within thirty (30) days after Landlord
provides such Statement and a copy of the tax bill to Tenant, such Statement
shall be considered final and binding on Tenant. Tenant acknowledges that
Landlord's ability to budget and incur expenses depends on the finality of such
Statement, and accordingly agrees that time is of the essence of this Paragraph.
If Tenant takes exception to any matter contained in any Statement as provided
herein, Landlord and Tenant shall submit the matter to binding arbitration in
accordance with the rules of the American Arbitration Association in Atlanta,
Georgia, whose ruling as to the proper amount shall be final and binding as
between Landlord and Tenant. Tenant shall promptly pay the cost of any such
proceeding unless the ruling from such proceeding determines that Tenant was
over-billed by more than 2%. Pending resolution of any such exceptions, Tenant
shall pay Tenant's Taxes in the amount determined by Landlord, subject to
adjustment between the parties after any such exceptions are resolved.
C. GENERAL MATTERS. So long as Tenant's obligations hereunder are
not materially adversely affected thereby, Landlord reserves the right to
reasonably change, from time to time, the manner or timing of the foregoing
payments and Landlord reserves the right to change to a full accrual system of
accounting. No delay by Landlord in providing the Statement (or separate
statements) shall be deemed a default by Landlord or a waiver of Landlord's
right to require payment of Tenant's obligations for actual or estimated Taxes.
ARTICLE 6
CONDITION OF PREMISES; TENANT'S WORK
Except as expressly otherwise set forth in this Lease, Tenant agrees to
accept the Premises, Center, the Building (including the roof) and any Systems
and Equipment serving the Premises "as is," without any agreements,
representations, understandings or obligations on the part of Landlord to
perform any alterations, repairs or improvements. Tenant shall on or before the
Commencement Date: (i) perform work to the Premises and certain portions of the
Building, install a structure (the "Structure") which will support a full
motion, LSVD screen (the "Screen"), install the Screen, and install equipment
necessary to operate the Screen (the "Ancillary Equipment"), all in accordance
with the other provisions of this Lease, including, without limitation, Article
7, and the Rules ("Tenant's Initial Work"), and (ii) begin operating the Screen
in compliance with all provisions of this Lease, including, without limitation,
Article 8. During any period that Tenant shall be permitted or required to enter
the Premises prior to the Commencement Date (to plan or perform Tenant's Initial
Work), Tenant shall comply with all terms and provisions of this Lease, except
those provisions requiring the payment of Rent (other than such charges as
Landlord may impose under Article 7). Within thirty (30) days of the completion
of Tenant's Initial Work, Tenant will provide Landlord with copies of paid
invoices for the cost of purchasing and installing the Structure, the Screen,
and the Ancillary Equipment, not to include any work performed on the roof or
structure of the Building ("Tenant's Verified Costs").
The Landlord hereby grants to Tenant a revocable, non-exclusive license
(subject to the provisions of Article 12 hereof) over the Roof Common Areas, as
hereinafter defined, for the purpose of (i) ingress and egress during the
performance of Tenant's Work; ingress and egress during the term for the use and
operation of the Premises and performance of Tenant's maintenance and repair
obligations under the Lease; and (ii) for the installation maintenance and use
of utility lines to serve the Premises. Landlord shall permit Tenant twenty-four
hour a day, seven day a week access to the Roof Common Areas for the purposes
permitted hereunder. Landlord reserves the right to enter the Premises, without
notice, at any time for the purpose of inspecting same, or of making repairs,
additions, or alterations to the Building, and to exhibit the Roof Common Areas
or the Premises for any reason not inconsistent with Tenant's rights hereunder.
In connection with exercising such rights, Tenant shall, upon request, and if
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reasonably necessary, temporarily disconnect or move the Ancillary Equipment. If
Tenant does not disconnect or move the Ancillary Equipment after Landlord's
request or in the event of an emergency, Landlord may disconnect the Ancillary
Equipment without liability to Tenant. The exercise by Landlord of any of its
rights under this Paragraph shall not be deemed an eviction or disturbance of
Tenant's use of the Roof Common Areas or the Premises, provided and on the
condition that Landlord exercises such rights in such a manner as to reasonably
endeavor to minimize the disruption of Tenant's business.
ARTICLE 7
TRADE FIXTURES, ALTERATIONS AND LIENS
A. APPROVAL. Tenant shall not attach any fixtures, equipment or
other items to the Premises, the Building, the Center or make any additions,
changes, alterations or improvements to the Premises, the Building, the Systems
and Equipment serving the Building, or the Center including without limitation
Tenant's Initial Work described in Article 6 and Exhibit B hereto (all such work
referred to collectively herein as the "Work"), without the prior written
consent of Landlord. Landlord reserves the right to withhold consent in
Landlord's sole discretion for Tenant's Initial Work or any Work including,
without limitation, that affecting the structure, safety or security of the
Center, the Building, or Premises, the Systems and Equipment, or the appearance
of the Premises or the Building. Landlord hereby consents to Tenant's Initial
Work. Plans and specifications shall be submitted to Landlord for approval in
accordance with the following terms:
(a) All prints and drawing information, and other materials to
be furnished by Tenant as required hereinafter, shall be
delivered to Landlord in care of Urban Retail Properties, Co.,
900 N. Michigan Avenue, Suite 1300, Chicago, IL 60611,
Attention: Tenant Coordinator, or such different address as
Landlord may designate to Tenant form time to time. Tenant's
preliminary drawings and specifications are herein referred to
as the "Preliminary Drawings" and Tenant's final drawings and
specifications are herein referred to as the Working
Drawings". The Preliminary Drawings and Working Drawings are
sometimes referred to herein as the "Drawings".
(b) Tenant shall, at is sole expense, utilize the services of
the architectural firm of Cooper, Carry and Associates, Inc.
to prepare all Drawings. All Drawings shall be submitted to
Landlord for approval in the form of one (1) set of
reproducible sepia prints and one (1) set of blueline prints.,
Tenant shall, with the Drawings, furnish sample boards
indicating materials, color selections and finished to be
used. Tenant shall also submit to Landlord such further
information on tenant's planned electrical and mechanical
usage at the Premises as requested by Landlord (herein
referred to as "Mechanical/Electrical Design Submittal
Forms"). Tenant shall accurately indicate on the Plans any
existing equipment or conditions that Tenant proposes to
reuse.
(c) Tenant shall submit the Preliminary Drawings promptly, and
in no event later than four (4) weeks after the date hereof.
The Preliminary Drawings shall show a general rendering of the
work Tenant intends to perform. With the Preliminary Drawings
Tenant shall submit a color rendering of Tenant's proposed
work with specifications of materials to be used. Landlord
shall use reasonable efforts to send notification to Tenant
that it approves or disapproves the Preliminary Drawings
within thirty (30) days after receipt thereof. If Landlord
disapproves, Tenant shall within ten (10) days after receipt
of Landlord's disapproval, send Landlord revised Preliminary
Drawings addressing Landlord's comments. This procedure shall
be repeated until LANDLORD has approved the Preliminary
Drawings. Landlord may give approval "as noted" in which event
the changes noted by Landlord shall be deemed incorporated in
the Preliminary Drawings; provided, if Tenant notifies
Landlord within five (5) days thereafter that is does not
accept said changes, then the Preliminary Drawings shall be
deemed disapproved on account of the changes Landlord had
requested.
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(d) Within fourteen (14) days after Landlord approves the
Preliminary Drawings, but in no event later than eight(8)
weeks prior to the Commencement Date, Tenant shall submit the
Working Drawings. The Working Drawing shall include detailed
final drawings for architectural, electrical, mechanical,
sprinkler and plumbing and all other work to be performed by
Tenant and shall be prepared consistent with the approved
Preliminary Drawings. Landlord shall use reasonable efforts to
sent notification to Tenant that it approves or disapproves of
the Working Drawings within thirty (30) days after receipt
thereof. If Landlord disapproves, Landlord shall specify the
reasons for the disapproval. If Landlord disapproves, Tenant
shall have twenty-one (21) days after receipt of Landlord's
disapproval to send Landlord revised Working Drawings.
Landlord may give approval "as noted" in which event the
changes noted by Landlord shall be deemed incorporated in to
the Working Drawings; provided, if Tenant notifies Landlord
within five (5) days thereafter that is does not accept said
changes, then the Preliminary Drawings shall be deemed
disapproved on account of the changes Landlord had requested.
(e) The approval by Landlord or Landlord's agent of any
Drawings or of Tenant's Work shall not constitute an
implication, representation or certification by Landlord or
Landlord's agent that either the said Drawing of Tenant's Work
is accurate, sufficient, efficient or in compliance with
insurance and indemnity requirement, or any Laws, including
but not limited to the code and the Americans with
Disabilities Act, the responsibility for which belongs solely
to Tenant.
(f) In the instances where multiple standards and requirements
apply with respect to Tenant's Work, the strictest of such
standards and/or requirements shall control unless prohibited
by applicable Law.
(g) Upon completion of Tenant's Work and before Tenant begins
its operations at the Premises, Tenant shall submit to
Landlord written proof from Landlord's insurance underwriter
that the fully installed fire suppression system was approved
by said underwriter, and that Tenant shall submit to Landlord
and Landlord's insurance underwriter copies of all material
and test certificates.
B. CONDITIONS. Landlord reserves the right to impose requirements
as a condition of such consent or otherwise in connection with the Work,
including without limitation, requirements that Tenant: (i) submit for
Landlord's prior written approval detailed plans and specifications prepared by
licensed and competent architects and engineers, (ii) submit for Landlord's
prior written approval the names, addresses and background information
concerning all contractors, subcontractors and suppliers, (iii) obtain and post
permits, bonds, and additional insurance, (iv) submit contractor, subcontractor
and supplier lien waivers, and (v) comply with such other requirements as
Landlord may impose concerning the manner and times in which such Work shall be
done and other aspects of the Work. Landlord may require that all Work be
reviewed and inspected by Landlord's for compliance with previously approved
plans and specifications. Landlord's consent or supervision, shall not be deemed
a warranty as to the adequacy of the design, workmanship or quality of
materials, or compliance of the Work with any Laws. Landlord's approval shall be
deemed to have given if Landlord does not notify Tenant in writing specifying
Landlord's objections in reasonable detail within seven (7) business days of
Landlord's receipt of a request for approval from Tenant.
C. PERFORMANCE OF WORK. All Work shall be performed: (i) in a
thoroughly first class, professional and workmanlike manner, (ii) only with
materials that are new, high quality, and free of material defects, (iii)
strictly in accordance with plans and specifications approved by Landlord in
advance in writing, (iv) so as not to adversely affect the Systems and Equipment
or the structure of the Center, (v) diligently to completion and so as to
reasonably minimize possible interference with other tenants and the operation
of the Center, (vi) so as not to void or invalidate any warranty Landlord may
have on the Building's roof, and (vii) in compliance with all Laws and other
provisions of this Lease, including without limitation, Exhibit B and the Rules
attached hereto as Rider One. If Tenant fails to perform the Work as required
herein or the materials supplied fail to comply herewith or with the
specifications approved by Landlord, and Tenant fails to cure such failure
within 48 hours (or, if such cure reasonably takes longer than 48 hours to
complete, then if Tenant fails to commence to cure such failure within such 48
hour period or thereafter fails to diligently pursue such cure to completion)
after notice by Landlord (except that notice shall not be
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required in emergencies), Landlord shall have the right to stop the Work until
such failure is cured (which shall not be in limitation of Landlord's other
remedies and shall not serve to abate the Rent or Tenant's other obligations
under this Lease).
D. LIENS. Tenant shall keep the Center, the Building, Premises
and this Lease free from any mechanic's, materialman's or similar liens or
encumbrances, and any claims therefor, in connection with any Work. Tenant shall
give Landlord notice at least two (2) business days prior to the commencement of
any Work (or such additional time as may be necessary under applicable Laws), to
afford Landlord the opportunity of posting and recording appropriate notices of
non-responsibility. Tenant shall remove any such claim, lien or encumbrance by
bond or otherwise within twenty (20) days after notice by Landlord. If Tenant
fails to do so, Landlord may pay the amount or take such other action as
Landlord deems necessary to remove such claim, lien or encumbrance, without
being responsible for investigating the validity thereof. The amount so paid and
costs incurred by Landlord shall be deemed additional Rent under this Lease
payable upon demand, without limitation as to other remedies available to
Landlord. Nothing contained in this Lease shall authorize Tenant to do any act
which shall subject Landlord's title to the Center, the Building, or Premises to
any such notices, liens or encumbrances whether claimed by operation of statute
or other Law or express or implied contract. Any claim to a lien or encumbrance
upon the Center, the Building, or Premises arising in connection with any Work
shall be null and void, or at Landlord's option shall attach only against
Tenant's interest in the Premises and shall in all respects be subordinate to
Landlord's title to the Center, the Building, and Premises.
E. LANDLORD'S FEES AND COSTS. Tenant shall pay Landlord a
reasonable fee to cover Landlord's out-of-pocket costs, including the cost of
any outside engineer, architect or consultant, in reviewing Tenant's plans and
specifications and performing any review and inspection of the Work, and such
fees as Landlord may reasonably impose for utilities, trash removal, temporary
barricades and other matters in connection with the Work, or such fees therefor
(if any) set forth in Exhibit B hereto.
ARTICLE 8
USE REQUIREMENTS
A. USE. Tenant shall use the Premises for the purpose of
installing, maintaining, repairing and using a full motion, large screen video
display (LSVD) screen (the "Screen") to advertise promotions, products,
services, exhibits, events, and attractions and for no other purpose whatsoever,
subject to and in compliance with all other provisions of this Lease, including
without limitation the Rules attached as Rider One hereto. No portion of the
Premises other than the Screen will be used for advertising or promotion
purposes (except to house the Ancillary Equipment, and except for the "Sony",
and "DETV" logos on the Screen). No audio (other than low frequency FM band
radio transmissions) will be broadcast or played from the Screen or any
Ancillary Equipment except with Landlord's prior written approval , which
approval Landlord may unreasonably withhold. Tenant shall comply with all Laws
relating to the Premises and Tenant's use thereof, including, without
limitation, health, safety and building codes, and any permit or license
requirements. Landlord makes no representation that the Premises are suitable
for Tenant's purposes.
Tenant shall (i) conduct its business and operate the Screen at all
times in a first-class, professional and businesslike manner consistent with
reputable business standards and practices, and such that a high reputation of
the Center is developed and enhanced; (ii) shall operate its business and the
Screen continuously, actively and diligently in a good faith manner designed to
maximize Gross Revenue; (iii) diligently solicit advertisers and conduct all
advertising arrangements for the Screen; and (iv) comply with all applicable
federal, state, county, municipal statutes, ordinances and regulations,
including without limitation, any licensing, bonding, and permit requirements.
No advertisement, promotional material, or other material displayed on
the Screen ("Content") is to include any advertising or promotion for tobacco
products, illegal drugs, or any products which may not legally be sold within
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the City of Atlanta, Fulton County, or the State of Georgia. The following will
not be displayed on the Screen: (i) Content not acceptable for airing by a
majority of the major television or radio broadcasters in the Atlanta, Georgia
media market; (ii) Content containing or depicting any matter which could be
reasonably considered obscene, immoral or offensive to the majority or a
substantial minority of the citizens of Atlanta, Georgia, or shoppers or
occupants of the Center; (iii) Content which the Landlord determines in its sole
discretion, presents an unreasonable risk of (a) physical injury or property
damage to the Center, its tenants, or its invitees; or (b) harm to the business
or reputation of the Center or its tenants; or (iv) advertisements or
promotional material for any shopping centers (such as, for example, Lenox
Square Mall) or shopping areas (such as, for example, CNN Center, or Peachtree
Center) other than Underground Atlanta. In any dispute involving these
provisions, between Tenant and Landlord's managing agents at the Center,
Landlord, by and through its President (or Vice President in their absence)
shall make the initial decision or determination (subject, however, to the right
of Tenant to bring legal action challenging such determination, wherein the
court shall make its own determination of whether such Content is permitted
pursuant to the standards set forth in this Article 8) and Tenant will
immediately take all necessary action to prevent any disapproved Content from
being displayed on the Screen (other than Landlord provided Content) unless and
until a court determines that such Content is permitted to be displayed pursuant
to the standards set forth in this Article 8. If, as a result of any Content
displayed on the Screen (other than Landlord Content), the Landlord incurs
actual increased costs (due to disruptive or destructive behavior of persons
viewing the Screen) relating to security, maintenance or repair, the Tenant will
promptly reimburse Landlord for such expenses. All continuous programming feeds
longer than thirty (30) minutes in length must receive Landlord's written
consent prior to it being displayed on the Screen, which consent may be withheld
or conditioned in Landlord's sole discretion (but such decision will not be
unreasonably delayed) and may be conditioned on Tenant's agreement to pay
additional costs anticipated as a result of such airing. Tenant shall give
Landlord notice of any such special event programming at least forty-eight (48)
hours in advance of display on the Screen. Landlord shall respond to Tenant
within forty-eight (48) hours (but in no event sooner than the next business
day) after Tenant's notice. If Landlord fails to respond within such forty-eight
(48) hour period, Landlord shall be deemed to have approved such special event
programming. Notwithstanding the foregoing, Landlord and Tenant agree that
circumstances may arise from time to time when the waiver of the advance consent
provisions is mutually beneficial to Landlord and Tenant in order to facilitate
airing programming in excess of thirty (30) minutes, and in such event, Landlord
and Tenant agree to act in good faith and with reasonable promptness to
accommodate the airing of such programming. In the event Tenant defaults on any
of its obligations under any portion of this Section of the Lease, Landlord, at
its option, may, upon facsimile and telephonic notice to Tenant (as set forth in
the emergency notification instructions set forth in Exhibit C attached hereto
and incorporated herein by this reference), immediately exercise its right of
self-help and cut-off Tenant's access to utilities in order to prevent further
airing of disapproved Content until Landlord receives reasonable assurance from
Tenant that no disapproved Content will be aired.
By no later than 12:00 noon each Friday during the Term, Tenant will
provide Landlord with a schedule of all programming for the Screen then
committed for the upcoming (Monday-Sunday) week and will provide timely updates
to reflect any changes. Tenant will, on a monthly basis, provide Landlord with a
list of all sponsors or advertisers who have agreed to use the Screen on a long
term basis. Tenant shall also keep and maintain at the address shown at the
beginning of this Lease a video tape of all Content displayed on the Screen for
a period of not less than four (4) business days after display and Tenant shall
make any tape(s) of Content maintained by Tenant available to Landlord during
regular business hours upon four (4) hours notice.
Tenant shall not use the Premises, the Structure, the Screen or the
Ancillary Equipment so as to interfere in any way (except as is consistent with
the intended use of low frequency FM band radio transmissions) with the ability
of other occupants of the Building or the Center to receive radio, television,
telephone, microwave, short-wave, long-wave or other signals of any sort, nor so
as to interfere with the use by Landlord or such occupants of electric,
electronic or other facilities, equipment, appliances, personal property and
fixtures, nor so as to interfere in any way with the use of antennae, satellite
dished or other electronic or electric equipment or facilities currently or
hereafter located on the Roof Common Areas or any other floor or area of the
Building or the Center. Tenant shall not use the Premises in any way so as to
increase Landlord's insurance payments except as is consistent with the
installation of the Screen and Ancillary Equipment (in accordance with approved
plans ans specifications) and the use thereof contemplated in this Lease, and at
Landlord's option, shall pay such increases. The location of the Ancillary
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Equipment shall be subject to Landlord's advance written approval, which
approval shall not be unreasonably withheld, conditioned or delayed. Tenant will
be permitted to air Content originated from a camera (or cameras) mounted on the
light tower located on the fountain plaza.
B. TCCC AGREEMENT. Tenant acknowledges that it is aware of the
Agreement dated 16 February 1989 (the "TCCC Agreement")by and between, among
others, Landlord and The Coca Cola Company ("TCCC") is a true and correct copy
of which is attached to this Lease as Exhibit "D" contains limitations on the
advertising of beverages at the Center. Tenant covenants and agrees that it will
conduct its business and use the Premises and the Screen in accordance with the
TCCC Agreement as fully as if Tenant were a signatory to the TCCC Agreement.
C. REQUIRED HOURS. Tenant agrees to continuously operate and
conduct its business during the Required Hours. "Required Hours" herein shall
mean 10:00 a.m. - 9:00 p.m. Monday to Sunday or such other hours as a majority
of tenants in the Center are open and operating. Tenant may operate in the
Premises during additional hours beyond the Required Hours, without Landlord's
prior approval for the Acceptable Hours if Tenant so desires. The "Acceptable
Hours" shall mean 7:00 a.m. - 12:00 midnight Monday to Sunday. If Tenant desires
to operate beyond the Acceptable Hours (including but not limited to hours the
center is closed during any holiday), Tenant shall first obtain Landlord's
written approval (which approval may be unreasonably withheld or conditioned,
but such decisions shall not be unreasonably delayed). Likewise, if Tenant
desires to operate the Screen for less than the Required Hours, Tenant shall
first obtain Landlord's written approval (which approval may not be unreasonably
withheld, conditioned or delayed), and upon any such approval, Required Hours
shall be modified in accordance therewith. Without limiting the generality of
the foregoing, Landlord reserves the right to close the Center on holidays or
certain hours of holidays. The Center will be closed Easter, Thanksgiving and
Christmas and Landlord will give Tenant thirty (30) days written notice of any
other irregular closing hours and days for the Center.
The parties agree that Tenant's obligations to continuously operate for
the Required Hours go to the essence of the parties' agreement hereunder, and
that any failure to perform such obligations will result in damages to Landlord
that are extremely difficult and impractical to determine and for which
Landlord's remedies at law will not be adequate. Accordingly, as a fair and
reasonable estimate and liquidation of Landlord's damages and not a penalty, if
Tenant fails to perform its obligations under this Article to continuously
operate for the Required Hours during any portion of any day of the Term other
than as a result of Unavoidable Delays, Tenant shall pay Landlord as Additional
Rent an amount equal to 50% of the Minimum Rent then in effect prorated on a per
diem basis. Acceptance by Landlord of such liquidated damages shall not be
deemed permission for Tenant to continue such violation, and shall not preclude
Landlord from seeking any other remedy (other than damages) for such violation
including, without limitation, specific performance or termination of this Lease
or Tenant's right to possession as described in Article 22.
ARTICLE 9
CENTER USE OF SCREEN
At no cost or expense to Landlord, the Tenant will provide the Landlord
with advertising time on the Screen for Center promotions, Center tenants (as
provided for in this Lease), Center exhibits, Center events, and special Center
attractions in a total amount of one (1) minute per hour per day for each day of
the Term (based on the applicable operating hours of the Screen for such days).
The advertising time provided to Landlord in the previous sentence will be
cumulative to the extent unused, for a period of seven (7) days and such unused,
cumulative advertising time may be used by Landlord only during "Available Time"
as set forth below. The advertising time provided to Landlord will be at a time
designated by Tenant (which decision shall be made in good faith) on a weekly
basis subject, however, to the rights of paying customers of the Screen which or
who have purchased time for such week (but in no event shall there be available
to Landlord an aggregate of less than one minute for each hour of operation of
the Screen), and provided that, except with respect to Landlord Events as set
forth below and except in connection with the "Available Time", Tenant shall not
be required to provide Landlord more than one (1) minute during any single hour
of operation of the Screen. In addition to the foregoing time, Tenant will
provide Landlord
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with time on the Screen equal to the lesser of (x) one (1) minute per hour
during each hour of operation of the Screen, and (y) the Available Time, if any,
during such hour. The time on the Screen provided pursuant to the immediately
preceding sentence shall be non-cumulative. "Available Time" as used in this
Article shall mean, with respect to any hour of operation of the Screen,
twenty-three (23) minutes reduced by the number of minutes of such hour which
have been sold to third parties by Tenant. Content for the Landlord's
advertising time will be provided by the Landlord and shall be subject to all
the restrictions applicable to all other Content. Landlord may arrange for
sponsorship of Landlord Events (which sponsorship may include an incidental
presence on the Screen) and Landlord will direct any such sponsor to the Tenant
for the possible purchase of advertising time on the Screen, but otherwise,
Landlord will not sell, exchange, barter, assign, sublease or otherwise transfer
all or any portion of, or any interest in, the Screen time provided to Landlord
pursuant to this Article 9. No portion of such time in excess of thirty (30)
seconds in any one (1) minute shall be used for the advertisement or promotion
(whether individually or in combination with other tenants) of any individual
tenant in Underground Atlanta. In addition, the Tenant will provide the Landlord
with blocks of no less than one (1) and no more than three (3) hours of time
("Landlord Events") for live display on the Screen including audio broadcast.
During (and for the one (1) hour period immediately before and after) Landlord
Events, Tenant will not display any Content on the Screen in conflict with the
event in question and its advertisers not approved in advance by Landlord. Other
than the Christmas Tree Lighting and the New Year's Eve "Peach Drop" (which will
be considered Permanent Landlord Events), Landlord will be permitted to
designate no more than five (5) Landlord Events per year [no more than two (2)
per calendar quarter] with each Landlord Event designated no less than sixty
(60) days in advance. Landlord and Tenant will each use their best efforts to
coordinate scheduling and production of the Landlord Events in accordance with
the event proposal developed by the Landlord.
ARTICLE 10
UTILITIES
A. UTILITIES PROVIDED BY TENANT. Tenant shall: (i) make
application in Tenant's own name for all utilities not provided by Landlord;
(ii) comply with all utility company regulations for such utilities, including
requirements for the installation of meters; (iii) install all utility lines and
equipment (including control panels accessible by Landlord) within the Roof
Common Areas as approved by Landlord; and (iv) obtain such utilities directly
from, and pay for the same when due directly to, the applicable utility company.
The term "utilities" for purposes hereof shall include but not be limited to
electricity, gas, water, sewer, steam, fire protection, telephone and other
communication and alarm services, HVAC, and all taxes or other charges thereon.
Tenant shall maintain, repair and replace all such items, operate all equipment
and lines required to supply such utilities, and keep the same in good working
order and condition, as further provided in Article 11. Tenant shall not install
any equipment or fixtures, or use the same, so as to exceed the safe and lawful
capacity of any utility equipment or lines serving the same. The installation,
alteration, replacement or connection of any utility equipment and lines shall
be subject to the requirements for alterations of the Premises set forth in
Article 7. Tenant shall ensure that all Ancillary Equipment and utility
equipment required by this Article 10 is installed and operated at all times in
a manner to prevent roof leaks, damage, or noise due to vibrations or improper
installation, maintenance or operation.
B. INTERRUPTIONS. Landlord does not warrant that any utilities
will be free from shortages, failures, variations, or interruptions caused by
repairs, maintenance, replacements, improvements, alterations, changes of
service, strikes, lockouts, labor controversies, accidents, inability to obtain
services, fuel, steam, water or supplies, governmental requirements or requests,
or other causes beyond Landlord's reasonable control. None of the same shall be
deemed an eviction or disturbance of Tenant's use and possession of the Premises
or any part thereof, or render Landlord liable to Tenant for abatement of Rent,
or relieve Tenant from performance of Tenant's obligations under this Lease.
Landlord in no event shall be liable for damages by reason of such shortage,
failure, variation, or interruption, including without limitation, loss of
profits, business interruption or other incidental or consequential damages.
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ARTICLE 11
MAINTENANCE AND REPAIR OF PREMISES
A. TENANT MAINTENANCE AND REPAIRS. Tenant shall keep the
Premises, the Structure, the Screen, and the Ancillary Equipment in good working
order, repair and condition (which condition shall also be clean, sanitary,
sightly and free of pests and rodents, and which repairs shall include necessary
replacements and capital expenditures and compliance with all Laws now or
hereafter adopted), except to the extent provided to the contrary in Article 14
respecting casualty damage. Tenant's obligations hereunder shall include all of
the Tenant's Work including any improvements to Landlord's property but not be
limited to fire extinguishers and fire protection systems, and equipment and
lines for water, HVAC, electrical, gas, steam, sprinkler and mechanical
facilities, and other systems and equipment which serve the Premises exclusively
whether located within or outside the Premises, and all alterations and
improvements to the Building or the Center whether installed by Landlord or
Tenant. Tenant shall also at Landlord's option perform or reimburse Landlord for
any repairs, maintenance and replacements to areas of the Building (including
the roof) or the Center outside the Premises caused as a result of moving any
property to or from the Premises, Tenant's use of the Premises of the Roof
Common Areas, or otherwise caused by Tenant, or any of its employees, agents,
invitees or contractors. Any repairs or other work by Tenant hereunder shall be
deemed "Work" under Article 7, and shall be subject to all of the requirements
thereunder, including Landlord's prior written approval. Tenant shall provide
Landlord with evidence that any Work required hereunder has been performed from
time to time within five (5) days after Landlord's request therefor.
B. HVAC MAINTENANCE. If the Premises are served exclusively by
any HVAC units or other systems or equipment, Tenant shall enter annual, written
maintenance contracts with competent, licensed contractors reasonably approved
by Landlord. Such contracts shall include, and Tenant shall require that such
contractors provide: (i) inspection, cleaning and testing at least monthly for
HVAC units and semi-annually for other systems and equipment (or more frequently
if required by applicable Law or if reasonably required by Landlord), (ii) any
servicing, maintenance, repairs and replacements of filters, belts or other
items determined to be necessary or appropriate as a result of such inspections
and tests, or by the manufacturers' warranty, service manual or technical
bulletins, or otherwise required to ensure proper and efficient operation,
including emergency work, (iii) all other work as shall be reasonably required
by Tenant, Landlord or Landlord's insurance carriers, (iv) a detailed record of
all services performed, and (v) an annual service report at the end of each
calendar year (upon written request from Landlord, Tenant shall provide Landlord
with a copy of such annual reports). Not later than thirty (30) days prior to
the Commencement Date and annually thereafter, Tenant shall provide Landlord
with access to a copy of all maintenance contracts required hereunder, and
written evidence reasonably satisfactory to Landlord that the annual fees
therefor have been paid. Such maintenance contracts represent part of Tenant's
obligations under this Article, and shall not be deemed to limit Tenant's
general obligations to keep any HVAC equipment and other systems and equipment
hereunder in good working order, repair and condition as further described in
Paragraph A, above.
C. LANDLORD MAINTENANCE AND REPAIRS. Except for any work
performed on the Roof or the Building that is a part of Tenant's Work, Landlord
shall keep the Roof Common Areas and the structural portions of the Buildings in
good working order and repair, provided that Tenant shall give Landlord
reasonable prior notice of the necessity for such repairs, and further provided
that any damage thereto shall not have been caused by Tenant's Work or any
willful misconduct or negligent act or omission of, or violation of this Lease
by, Tenant or any of its employees, agents, invitees or contractors, in which
event Landlord may perform or require that Tenant perform such repairs as
provided above (without limiting Landlord's other remedies therefor).
ARTICLE 12
ROOF COMMON AREAS
A. USE OF ROOF COMMON AREAS. Tenant's license to use portions of
the Roof Common Areas as set forth in Article 6 is subject to the following
conditions:
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(1) The Roof Common Areas shall be used by Tenant and Tenant's
employees and contractors on a non-exclusive basis in common with employees,
agents, and contractors of Landlord and other tenants and parties to whom the
right to use the Roof Common Areas has been or is hereafter granted. Tenant
shall be permitted to place its HVAC units in the Roof Common Areas in
accordance with Plans and Specifications approved by Landlord.
(2) Except as expressly permitted, Tenant shall not directly or
indirectly conduct business in the Roof Common Areas or make any use of the Roof
Common Areas which interferes in any way with the use of the Roof Common Areas
by other parties.
(3) Tenant's right to use the Roof Common Areas shall terminate
upon the expiration or earlier termination of this Lease, or upon the
termination of Tenant's right to possession of the Premises.
B. ROOF COMMON AREA MAINTENANCE AND CONTROL. Landlord shall
administer, operate, clean, maintain and repair the Roof Common Areas, and
Tenant shall pay to Landlord all of Landlord costs incurred as a result of the
act or omission of Tenant, its agents, contractors, or employees in using the
Roof Common Area. Landlord shall have exclusive control and management of the
Roof Common Area. However, in the exercise of its rights with respect to the
Roof Common Areas, Landlord shall at all times during the Term, allow Tenant an
ingress and egress path from the Premises to an exit stair and access to
Tenant's HVAC units.
C. INTERRUPTION OF SERVICES OR USE. Landlord does not warrant
that any services to, or any use of, the Roof Common Areas will be free from
shortages, failures, variations, or interruptions caused by repairs,
maintenance, replacements, improvements, alterations, changes of service,
strikes, labor controversies, accidents, inability to obtain services, fuel,
steam, water or other utilities or supplies, governmental requirements or
requests, or other causes beyond Landlord's reasonable control. None of the same
shall be deemed an eviction or disturbance of Tenant's use and possession of the
Premises or any part thereof, or render Landlord liable to Tenant for abatement
of Rent, or relieve Tenant from performance of Tenant's obligations under this
Lease. Landlord in no event shall be liable for damages by reason of such
shortages, failures, variations or interruptions, including without limitation
loss of profits, business interruption or other incidental or consequential
damages. Notwithstanding the foregoing, Landlord acknowledges that certain of
Tenant's equipment to be installed in the Premises or otherwise used in
connection with the Screen is or may be susceptible to damage in the event
electricity is disrupted or cut off, and therefore (except as a result of
Unavoidable Delay or as otherwise permitted under this Lease) Landlord shall
give Tenant written notice at least three (3) days in advance of any planned
disruption or cut off in the provision of electricity to the Premises.
D. DEFINITION OF COMMON AREAS. The term "Roof Common Areas"
herein means those areas of the roof of the Building cross-hatched on Exhibit
"A".
ARTICLE 13
INSURANCE, SUBROGATION, AND WAIVER OF CLAIMS
A. REQUIRED INSURANCE. Tenant shall maintain during the Term: (i)
commercial general liability insurance, with a contractual liability endorsement
covering Tenant's indemnity obligations under this Lease, and with limits of not
less than $3,000,000 combined single limit for personal injury, bodily injury or
death, or property damage or destruction (including loss of use thereof) per
occurrence, (ii) workers' compensation insurance as required by statute, and
employer's liability insurance in the amount of at least $500,000 per
occurrence, and (iii) all-risk" property damage insurance covering Tenant's
inventory, personal property, business records, furniture, floor coverings,
fixtures and equipment, and all Work installed by Tenant for damage or other
loss caused by fire or other casualty or cause including, but not limited to,
vandalism and malicious mischief, theft, explosion, business income and extra
expense, and water damage of any type, including sprinkler leakage, bursting and
stoppage of pipes. All insurance required hereunder shall be provided by
responsible insurers rated at least A and 10 in the then current edition of
Best's Insurance Guide and shall be licensed in the State of Georgia. Tenant's
property damage insurance shall include full replacement cost coverage and the
amount shall satisfy any coinsurance requirements under the
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applicable policy. Tenant's insurance shall be primary, and any insurance
maintained by Landlord or any other additional insureds hereunder shall be
excess and non-contributory. Landlord shall have the right, not more than once
every five (5) years, to reasonably increase the amount or expand the scope of
insurance to be maintained by Tenant hereunder from time to time.
B. CERTIFICATES, SUBROGATION AND OTHER MATTERS. Tenant shall
provide Landlord with ACCORD-27 (or equivalent) certificate(s) evidencing the
coverage required hereunder (and, with respect to liability coverage showing
Landlord and Landlord's managing agent for the Center and others designated by
Landlord as additional insureds, and with respect to leasehold improvements
showing Landlord as an additional named insured). Tenant shall provide such
certificates prior to the Commencement Date or Tenant's possession of the
Premises or construction of improvements therein (whichever first occurs).
Tenant shall provide renewal certificates to Landlord at least thirty (30) days
prior to expiration of such policies. Such certificates shall state that the
coverage may not be changed or canceled without at least thirty (30) days' prior
written notice to Landlord. The parties mutually hereby waive all rights and
claims against each other for all losses covered by their respective insurance
policies, and waive all rights of subrogation of their respective insurers. The
parties agree that their respective insurance policies are now, or shall be,
endorsed so that such waivers of subrogation shall not affect their respective
rights to recover thereunder.
C. WAIVER OF CLAIMS. Except for claims arising from Landlord's
intentional or grossly negligent acts that are not covered by Tenant's insurance
hereunder, Tenant waives all claims against Landlord for injury or death to
persons, damage to property or to any other interest of Tenant sustained by
Tenant or any party claiming through Tenant resulting from: (i) any occurrence
in or upon the Premises, (ii) leaking of roofs, bursting, stoppage or leaking of
water, gas, sewer or steam pipes or equipment, including sprinklers, (iii) wind,
rain, snow, ice, flooding, freezing, fire, explosion, earthquake, excessive heat
or cold, fire or other casualty, (iv) the Center, Premises, Systems or Equipment
being defective, out of repair, or failing, and (v) vandalism, malicious
mischief, theft or other acts or omissions of any other parties including
without limitation, other tenants, contractors and invitees at the Center. To
the extent that Tenant is required to or does carry insurance hereunder, Tenant
agrees that Tenant's property loss risks shall be borne by such insurance, and
Tenant agrees to look solely to and seek recovery only from its insurance
carriers in the event of such losses; for purposes hereof, any deductible amount
shall be treated as though it were recoverable under such policies.
D. LANDLORD'S INSURANCE. Landlord shall maintain during the Term
insurance on Landlord's buildings in the Center against fire and such other
risks as may be included in extended coverage insurance form time to time
available in an amount not less than eighty percent (80%) of the full insurance
replacement value of Landlord's buildings in the Center.
ARTICLE 14
CASUALTY DAMAGE
A. RESTORATION BY LANDLORD. If the Building shall be damaged by
fire or other casualty, Landlord shall use available insurance proceeds to
repair the Building, except that Landlord's obligation to repair or replace any
of Tenant's furniture, furnishings, fixtures or equipment, or any alterations or
improvements in excess of any Landlord's Work under Exhibit B hereto shall be
subject to any governmental requirements or requirements of any Lender and such
Lender's right to control, apply or withhold such insurance proceeds. Landlord
shall not be liable for any inconvenience or annoyance to Tenant, or injury to
Tenant's business resulting in any way from such damage or the repair thereof.
B. RESTORATION BY TENANT. If Landlord repairs the Building as
provided herein, Tenant shall repair and replace Tenant's Work, all items
required to be insured by Tenant hereunder, and all other items required to
restore the Premises to the condition required under Article 11 of this Lease.
Tenant shall commence such work within ten (10) days following substantial
completion by Landlord of any repairs required by Landlord hereunder and shall
proceed diligently therewith to completion. Tenant's work hereunder shall
constitute "Work" under Article 7 and shall be subject to all of the provisions
thereof.
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C. ABATEMENT OF RENT. Landlord shall allow Tenant an abatement of
Minimum Rent from the date of the casualty through the date that Landlord
substantially completes Landlord's repair obligations hereunder (or the date
that Landlord would have substantially completed such repairs, but for delays by
Tenant, its agents, employees, invitees, Transferees and contractors), provided
such abatement shall apply only to the extent the Premises are untenantable for
the purposes permitted under this Lease and not used by Tenant as a result
thereof.
D. TERMINATION OF LEASE. Notwithstanding the foregoing to the
contrary, Landlord may elect to terminate this Lease, if the Building is
materially damaged by Tenant or any other occupant of the Building, or any of
their agents, employees, invitees or contractors, or if the Center is damaged by
fire or other casualty or cause such that: (a) more than 25% of the Building is
affected by the damage and Landlord elects not to repair the damage, (b) the
damage occurs less than one year prior to the end of the Term, (c) any Lender
requires that the insurance proceeds or any portion thereof be applied to the
Mortgage debt (or terminates the ground lease, as the case may be), or the
damage is not fully covered by Landlord's insurance policies, or (d) in
Landlord's reasonable opinion, the cost of the repairs, alterations, restoration
or improvement work would exceed 25% of the replacement value of the Building or
of the portion thereof owned or ground leased by Landlord (whether or not the
Premises are affected) and Landlord elects not to repair the damage. In any such
case, Landlord may terminate this Lease by notice to Tenant within 120 days
after the date of damage (such termination notice to include a termination date
providing at least thirty (30) days for Tenant to vacate the Premises). Tenant
agrees that Landlord's obligation to restore, and the abatement of Rent provided
herein, shall be Tenant's sole recourse in the event of such damage, and waives
any other rights Tenant may have under any applicable Law to terminate this
Lease by reason of damage to the Premises or Center.
ARTICLE 15
CONDEMNATION
If any portion of the Building shall be taken by power of eminent
domain or condemned by a competent authority or by conveyance in lieu thereof
for public or quasi-public use ("Condemnation"), including any temporary taking
for a period of one year or longer, this Lease shall terminate on the date
possession for such use is so taken. The parties further agree that if this
Lease is terminated, all Rent shall be apportioned as of the date of such
termination or the date of such taking, whichever shall first occur. Landlord
shall be entitled to receive the entire award or payment in connection with such
Condemnation and Tenant hereby assigns to Landlord any interest therein for the
value of Tenant's unexpired leasehold estate or any other claim and waives any
right to participate therein, except that Tenant shall have the right to file
any separate claim available to Tenant for moving expenses and any taking of the
Screen, the Ancillary Equipment and Tenant's personal property, provided such
award is separately payable to Tenant and does not diminish the award available
to Landlord or any Lender.
ARTICLE 16
RETURN OF POSSESSION
At the expiration or earlier termination of this Lease or Tenant's
right of possession, Tenant shall surrender possession of the Premises in good
repair, and otherwise in the condition required under Article 11, and shall
ensure that all personal property (and all property above the roof line) has
been removed therefrom (subject to Article 36) and that any damage caused
thereby (including, without limitation, any damage to the roof or roof system)
has been repaired. All fixtures and improvements on the roof installed by Tenant
(including but not limited to the Screen and the Ancillary Equipment) shall be
and remain the property of Tenant. Tenant shall permit Landlord the opportunity
to purchase such fixtures and improvements (exclusive of the Screen and the
Ancillary Equipment) at the end of the term (or upon the earlier termination of
this Lease or Tenant's right to possession) at a price to be mutually agreed
upon by Landlord and Tenant. In the event Landlord and Tenant do not agree on a
price, Tenant shall remove the same at the end of the term (or upon the earlier
termination of this Lease or Tenant's right to possession). All improvements to
the structure of the Building or the roof, whether installed by Tenant or
Landlord, shall be
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<PAGE> 18
Landlord's property and shall remain, all without compensation, allowance or
credit to Tenant. If Tenant shall fail to perform any repairs or restoration, or
fail to remove any items from the Premises as required hereunder, Landlord may
do so, and Tenant shall pay Landlord the cost thereof upon demand. All property
removed from the Premises by Landlord hereunder may be handled, discarded or
stored by Landlord at Tenant's expense, and Landlord shall in no event be
responsible for the value, preservation or safekeeping thereof. All such
property shall at Landlord's option be conclusively deemed to have been conveyed
by Tenant to Landlord as if by bill of sale without payment by Landlord. If
Landlord arranges for storage of any such property, Landlord shall have a lien
against such property for costs incurred in removing and storing the same.
ARTICLE 17
HOLDING OVER
Tenant shall pay Landlord 150% of the amount of Rent then applicable
prorated on a per diem basis for each day Tenant shall retain possession of the
Premises or any part thereof after expiration or earlier termination of this
Lease, together with all damages sustained by Landlord on account thereof. The
foregoing provisions shall not serve as permission for Tenant to hold-over, nor
serve to extend the Term (although Tenant shall remain a tenant at sufferance,
bound to comply with all provisions of this Lease until Tenant vacates the
Premises). Landlord shall have the right, at any time after expiration or
earlier termination of this Lease or Tenant's right to possession, to reenter
and possess the Premises and remove all property and persons therefrom, and
Landlord shall have such other remedies for holdover as may be available to
Landlord under other provisions of this Lease or applicable Laws.
ARTICLE 18
SUBORDINATION, ATTORNMENT AND MORTGAGEE PROTECTION
This Lease is subject and subordinate to all Mortgages now or hereafter
placed upon the Center, and all other encumbrances and matters of public record
applicable to the Center, including without limitation, any reciprocal easement
or operating agreements, covenants, conditions and restrictions (and Tenant
shall not act or permit the Premises to be operated in violation thereof);
provided Tenant shall not be required to subordinate to a Mortgage that is
entered into after the date of this Lease unless Tenant is furnished with a
non-disturbance agreement from the Lease on Lender's standard form or in a form
which is otherwise acceptable to the Lender, provided furnishing such
non-disturbance agreement shall not be a condition to Tenant's subordination to
the Mortgagee if Tenant is in default. Landlord shall use reasonable efforts to
facilitate negotiations between Tenant and the City of Atlanta concerning a
non-disturbance agreement in Tenant's favor in accordance with Section 10.06 of
the Commercial Facilities Sublease as such is more fully defined in Rider Two.
If any foreclosure or power of sale proceedings are initiated by any Lender or a
deed in lieu is granted (or if any ground lease is terminated), Tenant agrees,
upon written request of any such Lender or any purchaser at such sale, to attorn
and pay Rent to such party and to execute and deliver any commercially
reasonable instruments necessary or appropriate to evidence or effectuate such
attornment. In the event of attornment, no Lender shall be: (i) liable for any
act or omission of Landlord, or subject to any offsets or defenses which Tenant
might have against Landlord (prior to such Lender becoming Landlord under such
attornment), (ii) liable for any security deposit or bound by any prepaid Rent
not actually received by such Lender, or (iii) bound by any future modification
of this Lease not consented to by such Lender. Any Lender may elect to make this
Lease prior to the lien of its Mortgage, and if the Lender under any prior
Mortgage shall require, this Lease shall be prior to any subordinate Mortgage;
such elections shall be effective upon written notice to Tenant. Tenant agrees
to give any Lender by certified mail, return receipt requested, a copy of any
notice of default served by Tenant upon Landlord, provided that prior to such
notice Tenant has been notified in writing (by way of service on Tenant of a
copy of an assignment of leases, or otherwise) of the name and address of such
Lender. Tenant further agrees that if Landlord shall have failed to cure such
default within the time permitted Landlord for cure under this Lease, any such
Lender whose address has been so provided to Tenant shall have an additional
period of thirty (30) days in which to cure (or
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such additional time as may be required due to causes beyond such Lender's
control, including time to obtain possession of the Center by power of sale or
judicial action). The provisions of this Article shall be self-operative;
however, Tenant shall execute such commercially reasonable documentation as
Landlord or any Lender may request from time to time in order to confirm the
matters set forth in this Article in recordable form. To the extent not
expressly prohibited by Law, Tenant waives the provisions of any Law now or
hereafter adopted which may give or purport to give Tenant any right or election
to terminate or otherwise adversely affect this Lease or Tenant's obligations
hereunder if such foreclosure or power of sale proceedings are initiated,
prosecuted or completed.
ARTICLE 19
ESTOPPEL CERTIFICATE
Tenant shall from time to time, within fifteen (15) days after written
request from Landlord, execute, acknowledge and deliver a statement: (i)
certifying that this Lease is unmodified and in full force and effect or, if
modified, stating the nature of such modification and certifying that this Lease
as so modified, is in full force and effect (or if this Lease is claimed not to
be in force and effect, specifying the ground therefor) and the dates to which
the Minimum Rent, Percentage Rent and other charges hereunder have been paid,
and the amount of any Security Deposit, (ii) acknowledging that there are not,
to Tenant's knowledge, any uncured defaults on the part of Landlord hereunder,
or specifying such defaults if any are claimed, and (iii) certifying such other
matters as Landlord may reasonably request, or as may be reasonably requested by
Landlord's current or prospective Lenders, insurance carriers, auditors, and
prospective purchasers. Any such statement may be relied upon by any such
parties. If Tenant shall fail to execute and return such statement within the
time required herein, Tenant shall be deemed to have agreed with the matters set
forth therein.
ARTICLE 20
ASSIGNMENT AND SUBLETTING
A. TRANSFERS. Tenant acknowledges that Landlord has entered this
Lease in order to obtain the unique attraction of Tenant's expertise, the unique
attraction associated with Tenant's business and the unique combination of
Tenant's apparent operating expertise and financial integrity, except as may be
provided in Article 36, Tenant shall not, without the prior written consent of
Landlord, which consent may be withheld in Landlord's sole discretion: (i)
assign, mortgage, pledge, hypothecate, encumber, permit any lien to attach to,
or otherwise transfer, this Lease or any interest hereunder, by operation of law
or otherwise, (ii) sublet the Screen or the Premises or any part thereof, or
extend, renew or modify any sublease, or (iii) permit the use of the Premises by
any parties other than Tenant and its employees, whether as licensee,
concessionaire, franchisee or otherwise (all of the foregoing are hereinafter
referred to collectively as "Transfers" and any party to whom any Transfer is
made or sought to be made is hereinafter referred to as a "Transferee"). Any
Transfer made without complying with this Article shall, at Landlord's option,
be null, void and of no effect (which shall not be in limitation of Landlord's
other remedies). Whether or not Landlord grants consent, Tenant shall pay
$750.00 towards Landlord's review and processing expenses, as well as any
reasonable legal fees incurred by Landlord in connection therewith.
B. RECAPTURE. Notwithstanding anything to the contrary contained
in this Article, Landlord shall have the option, by giving notice to Tenant
within thirty (30) days after receipt of Tenant's notice of any proposed
Transfer, to recapture the Premises. Such recapture notice shall cancel and
terminate this Lease as of the date stated in Tenant's notice as the effective
date of the proposed Transfer, unless Tenant revokes Tenant's notice of proposed
Transfer by notice to Landlord within ten (10) days after Landlord's notice of
recapture.
C. INCREASE IN MINIMUM RENT. If Landlord consents to a Transfer,
the monthly Minimum Rent shall be increased on the effective date of the
Transfer to the greater of: (i) an amount equal to the average total monthly
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Minimum Rent and Percentage Rent payable by Tenant during the thirty-six (36)
months prior thereto (or such shorter period as may have occurred since the
Commencement Date)
D. CERTAIN TRANSFERS. For purposes of this Lease, the term
"Transfer" shall also include the following, whether accomplished directly or
indirectly: (a) if Tenant is a partnership, the withdrawal or change, voluntary,
involuntary or by operation of law, of a majority of the partners, or a transfer
of a majority of partnership interests, in the aggregate on a cumulative basis,
or the dissolution of the partnership, (b) if Tenant is a closely held
corporation (i.e., whose stock is not publicly held and not traded through an
exchange or over the counter), the: (i) dissolution, merger, consolidation or
other reorganization of Tenant, (ii) sale or other transfer of more than a
cumulative aggregate of 50% of the voting shares of Tenant (other than to
immediate family members by reason of gift or death) or (iii) sale, mortgage,
hypothecation or pledge of more than a cumulative aggregate of 50% of Tenant's
net assets; (c) if Tenant is a limited liability company, the withdrawal or
change, voluntary, involuntary or by operation of law, of a majority of the
members, or a transfer of a majority or controlling portion of economic or
voting interest, in the aggregate or a cumulative basis, or the dissolution of
the limited liability company other than in connection with the formation of a
corporation controlled by the persons or entities then controlling such limited
liability company and the transfer of this Lease to, or the merger of such
limited liability company into, such corporation. Notwithstanding the foregoing
to the contrary, the term "Transfer" shall specifically exclude, and no transfer
of a majority or controlling portion of economic or controlling interest or of
voting shares of Tenant shall occur or be deemed to have occurred on account of,
the offering of voting stock to the public pursuant to a registered securities
offering, the transfer of voting stock on a national securities exchange or
through the NASDAQ national market system, or the transfer of voting stock to
Tenant's employees pursuant to a bona fide employee stock ownership plan.
ARTICLE 21
RIGHTS RESERVED BY LANDLORD
Except to the extent expressly limited herein, Landlord reserves full
rights to control the Center (which rights may be exercised without subjecting
Landlord to claims for constructive eviction, abatement of Rent, damages or
other claims of any kind), including more particularly, but without limitation,
the following rights:
A. ACCESS TO PREMISES. Landlord and its authorized
representatives may: (i) inspect the Premises, (ii) exhibit the Premises to
current and prospective tenants, purchasers, lenders, insurers, governmental
authorities, and brokers, (iii) enter or permit entry to the Premises in
emergencies or for any other reasonable purpose, or for the purpose of
exercising any other rights or remedies expressly granted or reserved to
Landlord under this Lease or applicable Law, or to make any repairs,
maintenance, improvements or alterations, or other work in or about the Center,
and (iv) in connection therewith, erect scaffolding and temporary barricades and
take into, upon or through the Premises, materials required to perform the same,
and if reasonably required, move Tenant's leasehold improvements, fixtures,
property and equipment. However, in connection with entering the Premises to
exercise any of the foregoing rights, Landlord shall take reasonable steps to
minimize any interference with Tenant's business, and following completion of
the work, return Tenant's leasehold improvements, fixtures, property and
equipment to the original locations and condition to the fullest extent
reasonably possible.
B. RESERVED AREAS. Landlord reserves all rights to use (or grant
other parties the right to use) and Tenant shall have no right, title or
interest in: (i) the roof of the Center other than the Premises and the Roof
Common Areas, (ii) exterior non-storefront portions of the Premises (including,
without limitation, demising walls and outer walls of the area of the Center in
which the Premises are located), (iii) air rights above the Premises and rights
to the Building and improvements below the level of the Premises, and (iv) areas
within the Premises necessary for utilities, services, safety and operation of
the Center that will not materially interfere with Tenant's use of the Premises,
including the Systems and Equipment, and fire stairways. If the Premises does
not contain a suspended ceiling, the Premises shall extend vertically to the
height where, in Landlord's reasonable opinion, a suspended ceiling would
otherwise exist, and Landlord reserves the right to install a suspended ceiling
and use the area thereabove. In
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the exercise of its rights under this Section, Landlord shall use reasonable
efforts not to deny on a permanent basis reasonable visibility of the Screen
from the Common Areas of the Center.
C. ACCESS TO CENTER. Landlord may prevent or restrict access to
the Center or designated portions thereof by such security procedures as
Landlord may from time to time impose on days and hours when the Center is, or
portions thereof are, closed for business to the public. Landlord reserves the
right to control, prevent access by and remove, any person whose presence in the
judgment of Landlord shall be prejudicial to the safety, character, reputation
and interests of the Center, or who in the judgment of Landlord, is intoxicated
or under the influence of liquor or drugs.
D. EMERGENCY CLOSINGS. Landlord shall have the right (but not the
obligation) to limit or prevent access to all or any portion of the Center, shut
down elevator and escalator service, activate emergency controls or procedures,
or otherwise take such action or preventive measures deemed necessary by
Landlord for the safety of tenants or other occupants of the Center or the
protection of the Center or other property located thereon or therein, in case
of fire or other casualty, riot or other civil disorder, strike or labor unrest,
public excitement or other dangerous condition, or threat thereof.
E. OTHER TENANTS. Landlord reserves the right to lease any
portion of the Building (including the Roof Common Areas) or the Center to such
other tenants as Landlord, in Landlord's sole discretion, deems appropriate,
whether or not engaged in the same or similar business for which Tenant is
permitted to use the Premises under this Lease. In the exercise of its rights
under this Section, Landlord shall use reasonable efforts not to deny on a
permanent basis reasonable visibility of the Screen from the Common Areas of the
Center. Tenant acknowledges that Landlord has made no representations as to the
presence of any specific tenant or number or types of tenants at the Center as
of or after the Commencement Date, hours or days that such other tenants shall
or may be open for business, or gross sales which may be achieved by Tenant or
any other tenants at the Center. A vacation or abandonment of its premises or
cessation of business in the Center by any other tenant or occupant shall not
release or excuse Tenant from Tenant's obligations under any provision of this
Lease.
F. CHANGES TO THE CENTER. Landlord reserves the right to: (i)
change the name of the Center and the address or designation of the Premises or
the building in which the Premises are located, (ii) install, maintain, alter
and remove signs on or about the exterior and interior of the Center, (iii) add
land, easements or other interests to or eliminate the same from the Center, and
grant easements and other interests and rights in the Center to other parties,
(iv) add, alter, expand, reduce, eliminate, relocate or change the shape, size,
location, character, design, appearance, use, number or height of any permanent
or temporary buildings, structures, improvements, surface parking, subterranean
and multiple level parking decks, kiosks, planters, pools, waterfalls, parking
areas, driveways, landscaped areas and other Common Areas, change the striping
of parking areas and direction and flow of traffic, and convert Common Areas to
leasable areas and leasable areas to Common Areas, (v) enclose any mall or other
area, or remove any such enclosure, or add one or more additional levels or
stories to the Center or any portion thereof, whether or not the Premises are
contained therein, and add structural support columns that may be required
within the Premises or Common Areas, (vi) relocate any HVAC equipment serving
the Premises installed on the roof or other area outside the Premises if
Landlord constructs an additional story or level or otherwise alters the Center,
and (vii) in connection with the foregoing matters, or with any other
inspections, repairs, maintenance, improvements or alterations in or about the
Center, or as a result of any casualty, incident, strike, condemnation, act of
God, Law or governmental requirement or request, or any other cause, erect
scaffolding, barricades, and other structures reasonably required in, or
otherwise close, Common Areas or portions thereof, including but not limited to
public entry ways and areas, restrooms, stairways, escalators, elevators and
corridors. In the exercise of its rights under this Section, Landlord shall use
reasonable efforts not to deny on a permanent basis reasonable visibility of the
Screen from the Common Areas of the Center. However, in connection with
exercising such rights, Landlord shall: take reasonable steps to minimize or
avoid any denial of access to the Premises except when necessary on a temporary
basis. In the event the City of Atlanta constructs a building on any adjacent
property that obstructs the view of the Screen from the fountain plaza of the
Center, Tenant shall have the right to terminate this Lease upon ninety (90)
days prior written notice to Landlord and this Lease shall terminate on the
expiration of such ninety (90) day period. If
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Tenant so terminates this Lease, Tenant shall remove the Screen and the
Ancillary Equipment on or before such ninetieth (90th) day.
G. TERMINATION OR RELOCATION. Landlord reserves the right to
terminate this Lease or relocate Tenant if Landlord determines that such
termination or relocation is required in order to demolish the Building for use
of the site for the development of an aquarium or other major attraction
requiring demolition of the Building; provided Landlord shall give Tenant at
least one hundred eighty (180) days' prior notice. If Tenant relocates pursuant
to this Section, Landlord and Tenant shall immediately execute a written
instrument extending the Lease Term for an additional five (5) years. Landlord
shall be responsible for Tenant's reasonable moving and construction costs in
connection with any relocation. If the new Premises is unsuitable for Tenant's
use hereunder or if Tenant elects to terminate this Lease in lieu of relocating,
Tenant shall have the right to terminate this Lease upon at least one hundred
eighty (180) days's prior written notice to Landlord. In the event of
termination by either party pursuant to this Section, Landlord shall pay Tenant,
within thirty (30) days after Tenant's after the effective date of such
termination, the unamortized value of the Verified Costs (as defined in Article
36) amortized on a straight-line basis, monthly over a five (5) year period
beginning on the Commencement Date.
ARTICLE 22
LANDLORD'S REMEDIES
A. DEFAULT. The occurrence of any one or more of the following
events shall constitute a "Default" by Tenant and shall give rise to Landlord's
remedies set forth in Paragraph (B), below: (i) failure to make when due any
payment of Rent, unless such failure is cured within five (5) days after notice,
(ii) failure to observe or perform any term or condition of the third
grammatical paragraph of Article 8 with respect to the display of Content on the
Screen, unless such failure is cured following the notice expressly provided for
in such Article, (iii) failure to observe or perform any term or condition of
this Lease other than the payment of Rent, unless such failure is cured within
any period of time following notice expressly provided in other Articles hereof,
or otherwise within a reasonable time, but in no event more than thirty (30)
days following notice (or such additional time as may be required due to
Unavoidable Delays as described in Article 28)(iv) (a) making by Tenant or any
guarantor of this Lease ("Guarantor") of any general assignment for the benefit
of creditors, (b) filing by or against Tenant or any Guarantor of a petition to
have Tenant or such Guarantor adjudged a bankrupt or a petition for
reorganization or arrangement under any Law relating to bankruptcy or insolvency
(unless, in the case of a petition filed against Tenant or such Guarantor, the
same is dismissed within sixty (60) days), (c) appointment of a trustee or
receiver to take possession of substantially all of Tenant's assets located in
the Premises or of Tenant's interest in this Lease, where possession is not
restored to Tenant within thirty (30) days, (d) attachment, execution or other
judicial seizure of substantially all of Tenant's assets located on the Premises
or of Tenant's interest in this Lease, (e) Tenant's or any Guarantor's convening
of a meeting of its creditors or any class thereof for the purpose of effecting
a moratorium upon or composition of its debt, (f) Tenant's or any Guarantor's
insolvency or admission of an inability to pay its debts as they mature, or (v)
a violation by Tenant or any affiliate of Tenant under any other lease or
agreement with Landlord relating to the Center which is not cured within the
time permitted for cure thereunder. Failure by Tenant to comply with the same
term or condition of this Lease on two occasions during any twelve month period
shall cause any failure to comply with such term or condition during the
succeeding twelve month period, at Landlord's option, to constitute an incurable
Default. The notice and cure periods provided herein are in lieu of, and not in
addition to, any notice and cure periods provided by Law; provided, Landlord may
at any time and from time to time elect to comply with such notice and cure
periods as may be provided by Law in lieu of the notice and cure periods
provided herein.
B. REMEDIES. If a Default occurs, Landlord shall have the rights
and remedies hereinafter set forth to the extent permitted by Law, which shall
be distinct, separate and cumulative with and in addition to any other right or
remedy allowed under any Law or other provisions of this Lease:
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(1) Without terminating the Lease or Tenant's right of possession,
Landlord may, upon facsimile and telephonic notice to Tenant (as set forth in
the emergency notification instructions set forth on Exhibit "C" hereto),
cut-off Tenant's access to utility service for so long as Tenant remains in
Default;
(2) Landlord may terminate Tenant's right of possession, cut off
Tenant's access to utility service, reenter and repossess the Premises by
detainer suit, summary proceedings or other lawful means, with or without
terminating this Lease (and if applicable Law permits, and Landlord shall not
have expressly terminated this Lease in writing, any such action shall be deemed
a termination of Tenant's right to possession only). In such event, Landlord may
recover from Tenant: (i) any unpaid Rent as of the termination date, (ii) the
amount by which: (a) any unpaid Rent which would have accrued after the
termination date during the balance of the Term exceeds (b) the reasonable
rental value of the Premises under a lease substantially similar to this Lease
for the balance of the Term, taking into account among other things, the
condition of the Premises, market conditions and the period of time the Premises
may reasonably remain vacant before Landlord is able to re-lease the same to a
suitable replacement tenant, and Costs of Reletting (as defined in Paragraph I
below) that Landlord may incur in order to enter such replacement lease, and
(iii) any other amounts necessary to compensate Landlord for all damages
proximately caused by Tenant's failure to perform its obligations under this
Lease. For purposes of computing the amount of Rent herein that would have
accrued after the termination date, Tenant's obligation for Percentage Rent
shall be projected based on Tenant's average annual Gross Revenue for the 36
months (or lesser period, if 36 months of the Term have not expired) preceding
Tenant's Default, and Tenant's obligations for Taxes shall be projected, based
upon the average rate of increase, if any, in such items from the Commencement
Date through the termination date. The amounts computed in accordance with the
foregoing subclauses (a) and (b) shall both be discounted in accordance with
accepted financial practice at the rate of eight percent (8%) per annum to the
then present value.
(3) Landlord may terminate Tenant's right of possession, reenter
and repossess the Premises by detainer suit, summary proceedings or other lawful
means, with or without terminating this Lease (and if applicable Law permits,
and Landlord shall not have expressly terminated this Lease in writing, any such
action shall be deemed a termination of Tenant's right of possession only). In
such event, Landlord may recover from Tenant: (i) any unpaid Rent as of the date
possession is terminated, (ii) any unpaid Rent which accrues during the Term
from the date possession is terminated through the time of judgment (or which
may have accrued from the time of any earlier judgment obtained by Landlord),
less any consideration received from replacement tenants as further described
and applied pursuant to Paragraph l, below, and (iii) any other amounts
necessary to compensate Landlord for all damages proximately caused by Tenant's
failure to perform its obligations under this Lease, including without
limitation, all Costs of Reletting (as defined in Paragraph I below). Tenant
shall pay any such amounts to Landlord as the same accrue or after the same have
accrued from time to time upon demand. At any time after terminating Tenant's
right to possession as provided herein, Landlord may terminate this Lease as
provided in clause (1) above by written notice to Tenant, and Landlord may
pursue such other remedies as may be available to Landlord under this Lease or
applicable Law.
C. MITIGATION OF DAMAGES. If Landlord terminates this Lease or
Tenant's right to possession, Landlord shall have no obligation to mitigate
Landlord's damages except to the extent required by applicable Law. If Landlord
has not terminated this Lease or Tenant's right to possession, Landlord shall
have no obligation to mitigate under any circumstances and may permit the
Premises to remain vacant or abandoned.
D. RELETTING. If this Lease or Tenant's right to possession is
terminated, or Tenant vacates or abandons the Premises, Landlord may: (i) enter
and secure the Premises, change the locks, install barricades, remove any
improvements, fixtures or other property of Tenant therein, perform any
decorating, remodeling, repairs, alterations, improvements or additions and take
such other actions as Landlord shall determine in Landlord's sole discretion to
prevent damage or deterioration to the Premises or prepare the same for
reletting, and (ii) relet all or any portion of the Premises (separately or as
part of a larger space), for any rent, use or period of time (which may extend
beyond the Term hereof), and upon any other terms as Landlord shall determine in
Landlord's sole discretion, directly or as Tenant's agent (if permitted or
required by applicable Law). The consideration received from such reletting
shall be applied pursuant to the terms of Paragraph I hereof, and if such
consideration, as so applied, is not sufficient to cover
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all Rent and damages to which Landlord may be entitled hereunder, Tenant shall
pay any deficiency to Landlord as the same accrues or after the same has accrued
from time to time upon demand, subject to the other provisions hereof.
E. SPECIFIC PERFORMANCE, COLLECTION OF RENT AND ACCELERATION.
Landlord shall at all times have the right without prior demand or notice except
as required by applicable Law to: (i) seek any declaratory, injunctive or other
equitable relief, and specifically enforce this Lease or restrain or enjoin a
violation of any provision hereof, and Tenant hereby waives any right to require
that Landlord post a bond in connection therewith, and (ii) sue for and collect
any unpaid Rent which has accrued. Notwithstanding anything to the contrary
contained in this Lease, to the extent not expressly prohibited by applicable
Law, in the event of any Default by Tenant, Landlord may terminate this Lease or
Tenant's right to possession and accelerate and declare that all Rent reserved
for the remainder of the Term shall be immediately due and payable (in which
event, Tenant's obligations for Percentage Rent and Taxes herein that would have
accrued thereafter shall be projected in the manner described in Section B(1),
above); provided the Rent so accelerated shall be discounted in accordance with
accepted financial practice at the rate of eight percent (8%) per annum to the
then present value, and Landlord shall, after receiving payment of the same from
Tenant, be obligated to turn over to Tenant any actual net reletting proceeds
(net of all Costs of Reletting) thereafter received during the remainder of the
Term, up to the amount so received from Tenant pursuant to this provision.
F. LATE CHARGES AND INTEREST. Tenant shall pay, as additional
Rent, a service charge of Fifty and 00/100 Dollars ($50.00) for bookkeeping and
administrative expenses, if any portion of Rent is not received when due. If
Landlord rightfully issues a Notice of Default to Tenant, Tenant shall pay
Landlord an additional service charge in the amount of One Hundred Dollars
($100.00). In addition, any Rent not paid when due shall accrue interest from
the due date at the Default Rate until payment is received by Landlord. Such
service charges and interest payments shall not be deemed consent by Landlord to
late payments, nor a waiver of Landlord's right to insist upon timely payments
at any time, nor a waiver of any remedies to which Landlord is entitled as a
result of the late payment of Rent.
G. LANDLORD'S CURE OF TENANT DEFAULTS. If Tenant fails to perform
any obligation under this Lease for thirty (30) days after notice thereof by
Landlord (except that no notice shall be required in emergencies), Landlord
shall have the right (but not the duty), to perform such obligation on behalf
and for the account of Tenant. In such event, Tenant shall reimburse Landlord
upon demand, as additional Rent, for all expenses incurred by Landlord in
performing such obligation together with an amount equal to fifteen percent
(15%) thereof for Landlord's overhead, and interest thereon at the Default Rate
from the date reimbursement of such expenses was requested in writing.
Landlord's performance of Tenant's obligations hereunder shall not be deemed a
waiver or release of Tenant therefrom.
H. BAD RENT CHECKS. If during the Term, as it may be extended,
Landlord receives two (2) or more checks from Tenant which are returned by
Tenant's bank for insufficient funds, Landlord may require that all checks
thereafter be bank certified or cashier's checks (without limiting Landlord's
other remedies). All bank service charges resulting from any bad checks shall be
borne by Tenant.
I. OTHER MATTERS. No re-entry or repossession, repairs, changes,
alterations and additions, reletting, acceptance of keys from Tenant, or any
other action or omission by Landlord shall be construed as an election by
Landlord to terminate this Lease or Tenant's right to possession, or accept a
surrender of the Premises, nor shall the same operate to release the Tenant in
whole or in part from any of the Tenant's obligations hereunder, unless express
written notice of such intention is sent by Landlord or its agent to Tenant.
Landlord may bring suits for amounts owed by Tenant hereunder or any portions
thereof, as the same accrue or after the same have accrued, and no suit or
recovery of any portion due hereunder shall be deemed a waiver of Landlord's
right to collect all amounts to which Landlord is entitled hereunder, nor shall
the same serve as any defense to any subsequent suit brought for any amount not
theretofore reduced to judgment. Landlord may pursue one or more remedies
provided for in this Lease against Tenant and need not make an election of
remedies until findings of fact are made by a court of competent jurisdiction.
All rent and other consideration paid by any replacement tenants shall be
applied, at Landlord's option: first, to the Costs of Reletting, second, to the
payment of all costs of enforcing this Lease against Tenant or any Guarantor,
third, to the payment of all interest and service charges accruing hereunder,
fourth, to the payment of Rent theretofore
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accrued, and the residue, if any, shall be held by Landlord and applied to the
payment of other obligations of Tenant to Landlord as the same become due (with
any remaining residue to be retained by Landlord). "Costs of Reletting" shall
include without limitation, all reasonable costs and expenses incurred by
Landlord for any repairs, maintenance, changes, alterations and improvements to
the Premises (whether to prevent damage or to prepare the Premises for
reletting), brokerage commissions, advertising costs, attorneys' fees, any
economic incentives given to enter leases with replacement tenants, and costs of
collecting rent from replacement tenants. Landlord shall be under no obligation
to observe or perform any provision of this Lease on its part to be observed or
performed which accrues after the date of any Default by Tenant. The times set
forth herein for the curing of violations by Tenant are of the essence of this
Lease. Tenant hereby irrevocably waives any right otherwise available under any
Law to redeem or reinstate this Lease or Tenant's right to possession after this
Lease or Tenant's right to possession is terminated based on a Default by
Tenant.
ARTICLE 23
LANDLORD'S RIGHT TO CURE
If Landlord shall fail to perform any obligation under this Lease
required to be performed by Landlord, Landlord shall not be deemed to be in
default hereunder nor subject to claims for damages of any kind, unless such
failure shall have continued for a period of thirty (30) days after written
notice thereof by Tenant or such additional time as may be required due to
Unavoidable Delays. If Landlord shall fail to cure within the time permitted for
cure herein, Landlord shall be subject to such claims for damages and remedies
as may be available to Tenant (subject to the other provisions of this Lease);
provided, Tenant shall have no right of self-help to perform repairs or any
other obligation of Landlord, and shall have no right to withhold, set off, or
abate Rent.
ARTICLE 24
INDEMNIFICATION
A. GENERAL. Other than as provided for below with respect to the
TCCC Agreement, and other than as provided below with respect to Landlord
provided Content and Landlord Events, except to the extent arising from the
intentional or grossly negligent acts of Landlord or Landlord's agents or
employees, Tenant shall defend, indemnify and hold harmless Landlord from and
against any and all claims, demands, liabilities, damages, judgments, orders,
decrees, actions, proceedings, fines, penalties, costs and expenses, including
without limitation, court costs and attorneys' fees arising from or relating to
any violation of Law, loss of life, diminution in value of the Center, damage or
injury to persons, property or business occurring in, about or from the
Premises, or directly or indirectly caused by or in connection with any
violation of this Lease or use of the Premises or Center by, or any other act or
omission of, Tenant, any other occupant of the Premises, or any of their
respective agents, employees, invitees or contractors. Without limiting the
generality of the foregoing, Tenant specifically acknowledges that the indemnity
undertaking herein shall apply to claims in connection with or arising out of
any "Work" as described in Article 7, the use or consumption of any utilities in
the Premises under Article 10, any repairs or other work by or for Tenant under
Article 11 and the transportation, use, storage, maintenance, generation,
manufacturing, handling, disposal, release or discharge of any "Hazardous
Material" as described in Article 26 (whether or not such matters shall have
been theretofore approved by Landlord), except to the extent that any of the
same arises from the intentional or grossly negligent acts of Landlord or
Landlord's agents or employees.
B. TCCC AGREEMENT. Landlord hereby agrees to and does hereby
indemnify and hold free and harmless Tenant from and against any and all
liabilities, losses, costs, damages or expenses of any kind or nature whatsoever
(collectively, the "Losses and Expenses") suffered or incurred by Tenant
resulting from a complaint, claim or legal action (or the threat of any of the
foregoing) arising directly out of an allegation that the TCCC Agreement
constitutes a violation of any local, state or federal law. Landlord shall
assume full responsibility and expense of investigation, litigation, negotiation
and settlement of any such complaint, claim or legal action, provided that the
Tenant gives Landlord reasonable notice in writing of such complaint, claim or
legal action and permits Landlord (or
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TCCC), through legal counsel appointed by or through Landlord to defend same.
Tenant shall have the right to participate at its own expense. Landlord (or
TCCC) shall pay all judgments, damages, profits, interest, attorneys' fees and
costs levied against or incurred by Tenant in connection with any such
complaint, claim or legal action. Landlord or TCCC shall be given reasonable
assistance, if requested, at Landlord's or TCCC's expense, in the defense of
such complaint, claim or legal action. Landlord shall provide prompt notice in
writing to the Tenant of any such complaint, claim or legal action of which
Landlord becomes aware other than through notification by the Tenant. Landlord
or TCCC shall promptly advise Tenant in writing of any proposed settlement or
adjustment of any claim sufficiently in advance to give Tenant a reasonable
opportunity to raise any questions or objections it may have as to such proposed
settlement or adjustment.
C. LANDLORD PROVIDED CONTENT AND LANDLORD EVENTS. Except in the
event of the negligence of Tenant, its agents, employees or contractors,
Landlord hereby agrees to and does indemnify and hold free and harmless Tenant
from and against any and all claims, demands, liabilities, damages, judgments,
orders, decrees, actions, proceedings, fines, penalties, costs and expenses,
including without limitation court costs and attorneys' fees, arising from or
relating to or in any manner connected with any Landlord provided Content
including, without limitation, the broadcast of Landlord Events.
ARTICLE 25
SAFETY AND SECURITY DEVICES, SERVICES AND PROGRAMS
Landlord shall have no obligation to provide any safety or security
devices, services or programs for Tenant, the Building, the Premises or the
Center and shall have no liability for failure to provide the same or for
inadequacy of any measures provided. However, Landlord may institute or continue
such safety or security devices, services and programs with respect to the
Building or the Premises as Landlord in its sole discretion deems necessary. The
costs and expenses of instituting and maintaining such devices shall be borne by
Tenant as a separate, additional charge to Tenant based on reasonable factors as
Landlord shall determine. The parties acknowledge that safety and security
devices, services and programs provided by Landlord, if any, while intended to
deter crime and enhance safety, may not in given instances prevent theft or
other injurious acts or ensure safety of parties or property. The risk that any
safety or security device, service or program may not be effective, or may
malfunction, or be circumvented, is assumed by Tenant with respect to Tenant's
property and interests, and Tenant shall obtain insurance coverage to the extent
Tenant desires protection against such acts and other losses, beyond that
described in Article 13. Tenant agrees to cooperate in any safety or security
program developed by Landlord or required by Law.
ARTICLE 26
HAZARDOUS MATERIALS
A. Tenant shall not transport, use, store, maintain, generate,
manufacture, handle, dispose, release or discharge any "Hazardous Material" (as
defined below) upon or about the Center, or permit Tenant's employees, agents,
contractors, invitees and other occupants of the Premises to engage in such
activities upon or about the Center. However, the foregoing provisions shall not
prohibit the transportation to and from, and use, storage, maintenance and
handling within, the Premises of substances customarily used in the business or
activity expressly permitted to be undertaken in the Premises under Article 1,
provided: (a) such substances shall be used and maintained only in such
quantities as are reasonably necessary for such permitted use of the Premises
and the ordinary course of Tenant's business therein, strictly in accordance
with applicable Law, highest prevailing standards, and the manufacturers'
instructions therefor, (b) such substances shall not be disposed of, released or
discharged in the Center, and shall be transported to and from the Premises in
compliance with all applicable Laws, and as Landlord shall reasonably require,
(c) if any applicable Law or Landlord's trash removal contractor requires that
any such substances be disposed of separately from ordinary trash, Tenant shall
make arrangements at Tenant's expense for such disposal directly with
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a qualified and licensed disposal company at a lawful disposal site (subject to
scheduling and approval by Landlord), (d) any remaining such substances shall be
completely, properly and lawfully removed from the Center upon expiration or
earlier termination of this Lease, and (e) for purposes of removal and disposal
of any such substances, Tenant shall be named as the owner and generator, obtain
a waste generator identification number, and execute all permit applications,
manifests, waste characterization documents and any other required forms.
B. Tenant shall promptly notify Landlord of: (i) any enforcement,
cleanup or other regulatory action taken or threatened by any governmental or
regulatory authority with respect to the presence of any Hazardous Material on
the Premises or the migration thereof from or to other property, (ii) any
demands or claims made or threatened by any party relating to any loss or injury
resulting from any Hazardous Material on the Premises, (iii) any release,
discharge or nonroutine, improper or unlawful disposal or transportation of any
Hazardous Material on or from the Premises or in violation of this Article, and
(iv) any matters where Tenant is required by Law to give a notice to any
governmental or regulatory authority respecting any Hazardous Material on the
Premises. Landlord shall have the right (but not the obligation) to join and
participate, as a party, in any legal proceedings or actions affecting the
Premises initiated in connection with any environmental, health or safety Law.
At such times as Landlord may reasonably request, Tenant shall provide Landlord
with a written list, certified to be true and complete, identifying any
Hazardous Material then used, stored, or maintained upon the Premises, the use
and approximate quantity of each such material, a copy of any material safety
data sheet ("MSDS") issued by the manufacturer therefor, and such other
information as Landlord may reasonably require or as may be required by Law. The
term "Hazardous Material" for purposes hereof shall mean any chemical,
substance, material or waste or component thereof which is now or hereafter
listed, defined or regulated as a hazardous or toxic chemical, substance,
material or waste or component thereof by any federal, state or local governing
or regulatory body having jurisdiction, or which would trigger any employee or
community "right-to-know" requirements adopted by any such body, or for which
any such body has adopted any requirements for the preparation or distribution
of an MSDS.
C. If any Hazardous Material is released, discharged or disposed
of by Tenant or any other occupant of the Premises, or their employees, agents
or contractors or as to claims made by Tenant's clients or advertisers on the
Screen, on or about the Center in violation of the foregoing provisions, Tenant
shall immediately, properly and in compliance with applicable Laws clean up and
remove the Hazardous Material from the Center and any other affected property
and clean or replace any affected personal property (whether or not owned by
Landlord), at Tenant's expense (without limiting Landlord's other remedies
therefor). Such clean up and removal work shall be subject to Landlord's prior
written approval (except in emergencies), and shall include, without limitation,
any testing, investigation, and the preparation and implementation of any
remedial action plan required by any court or governmental body having
jurisdiction or reasonably required by Landlord. If Landlord or any Lender or
governmental body arranges for any tests or studies showing that this Article
has been violated, Tenant shall pay for the costs of such tests. If any
Hazardous Material is released, discharged or disposed of on or about the Center
and such release, discharge or disposal is not caused by Tenant or other
occupants of the Premises, or their employees, agents or contractors, such
release, discharge or disposal shall be deemed casualty damage under Article 14
to the extent that the Premises is affected thereby; in such case, Landlord and
Tenant shall have the obligations and rights respecting such casualty damage
provided under such Article but Landlord and Tenant each expressly retain and
reserve their respective rights and remedies with the respect to the party
responsible for such release, discharge or disposal.
ARTICLE 27
CAPTIONS AND SEVERABILITY
The captions of the Articles and Paragraphs of this Lease are for
convenience of reference only and shall not be considered or referred to in
resolving questions of interpretation. If any term or provision of this Lease or
portion thereof shall be found invalid, void, illegal, or unenforceable
generally or with respect to any particular party, by a
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court of competent jurisdiction, it shall not affect, impair or invalidate any
other terms or provisions or the remaining portion thereof, or its
enforceability with respect to any other party.
ARTICLE 28
DEFINITIONS
A. "Center" shall mean the building or structure in which the
Premises are located and any other buildings or structures owned or ground
leased by Landlord from time to time and operated in conjunction therewith and
known as Underground Atlanta, whether or not shown on Exhibit A hereto, together
with the Common Areas, and all parcels or tracts of land owned or ground leased
by Landlord from time to time on which all or any portion of the foregoing items
are located and any fixtures, Systems and Equipment, furniture and other
personal property owned or leased by Landlord located thereon or therein and
used in connection therewith. "Center" shall also include, at Landlord's
election from time to time, Majors and other buildings, structures and parcels
or tracts of land owned by other parties which adjoin the other areas of the
Center or the Common Areas.
B. "Common Areas" shall have the meaning specified therefor in
Article 12.
C. "CPI" shall mean the Consumer Price Index for All Urban
Consumers, All Items (Base year 1982-1984 = 100) published by the United States
Department of Labor, Bureau of Labor Statistics, All City Average. If the Bureau
of Labor Statistics substantially revises the manner in which the CPI is
determined, an adjustment shall be made in the revised index which would produce
results equivalent, as nearly as possible, to those which would be obtained
hereunder if the CPI were not so revised. If the CPI becomes unavailable to the
public because publication is discontinued, or otherwise, Landlord shall
substitute therefor a comparable index based upon changes in the cost of living
or purchasing power of the consumer dollar published by a governmental agency,
major bank, other financial institution, university or recognized financial
publisher.
D. "Default Rate" shall mean eighteen percent (18%) per annum, or
the highest rate permitted by applicable Law, whichever shall be less.
E. "Gross Revenue" shall have the meaning specified therefor in
Article 3.
F. "HVAC" shall mean heating, ventilating and air-conditioning.
G. "Landlord" and "Tenant" shall be applicable to one or more
parties as the case may be, and the singular shall include the plural, and the
neuter shall include the masculine and feminine; and if there be more than one,
the obligations thereof shall be joint and several. For purposes of any
provisions indemnifying or limiting the ability of Landlord, the term "Landlord"
shall include Landlord's present and future partners, beneficiaries, trustees,
officers, directors, employees, shareholders, principals, Lenders, agents,
affiliates, successors and assigns. For purposes of any provisions indemnifying
Tenant, the term "Tenant" shall include Tenant's present and future partners,
beneficiaries, trustees, officers, directors, employees, shareholders,
investors, consultants, owners, managers, principals, lenders, agents,
affiliates, successors and assigns.
H. "Law" or "Laws" shall mean all federal, state, county and
local governmental and municipal laws, statutes, ordinances, rules, regulations,
codes, decrees, orders and other such requirements, applicable equitable
remedies and decisions by courts in cases where such decisions are binding
precedents in the state in which the Center is located, and decisions of federal
courts applying the Laws of such state, at the time in question.
I. "Lease Year" shall mean each calendar year or portion thereof
during the Term, and any initial or final partial years are sometimes referred
to herein as "Partial Lease Years"; provided, Landlord reserves the right to
change the "Lease Year" to each consecutive twelve month period commencing on
the Commencement Date or such other date as Landlord shall designate by notice
to Tenant.
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J. "Lender" shall mean the holder of any Mortgage at the time in
question, and where such Mortgage is a ground lease, such term shall refer to
the ground lessor.
K. "Mortgage" shall mean all mortgages, deeds of trust, ground
leases and other such encumbrances now or hereafter placed upon the Center or
any part thereof, and all renewals, modifications, consolidations, replacements
or extensions thereof, and all indebtedness now or hereafter secured thereby and
all interest thereon.
L. "Rent" shall have the meaning specified therefor in Article 4.
M. "Systems and Equipment" shall mean any plant, machinery,
transformers, ducts, cables, wires, and other equipment, facilities, and systems
designed to supply light, heat, ventilation, air conditioning and humidity or
any other services or utilities, or comprising or serving as any component or
portion of any electrical, gas, steam, plumbing, water, sewer, sprinkler,
communications, alarm, security, or fire/life/safety systems or equipment, or
any other mechanical, electrical, electronic, computer or other systems or
equipment for the Center, except to the extent that any of the same serves any
tenant exclusively or is subject to shared tenant use as described in Article
11.
N. "Taxes" shall mean all federal, state, county, or local
governmental, special district, improvement district, municipal or other
political subdivision taxes, fees, levies, assessments, charges or other
impositions of every kind and nature, whether foreseen or unforeseen, general,
special, ordinary or extraordinary (unless required to be paid by Tenant under
Article 4), respecting the Center, including without limitation, real estate and
other ad valorem taxes, general and special assessments, interest on any special
assessments paid in installments, transit taxes, water and sewer rents, taxes
based upon the receipt of rent including, without limitation, gross receipts
taxes applicable to the receipt of rent, personal property taxes imposed upon
the fixtures, machinery, equipment, apparatus, Systems and Equipment,
appurtenances, furniture and other personal property used in connection with the
Center which Landlord shall pay during any calendar year, any portion of which
occurs during the Term (without regard to any different fiscal year used by such
government or municipal authority except as provided in Article 5).
Notwithstanding the foregoing, Taxes shall not include excess profits taxes,
franchise taxes, gift taxes, capital stock taxes, inheritance and succession
taxes, estate taxes, federal and state income taxes, and other taxes to the
extent applicable to Landlord's general or net income (as opposed to rents,
receipts or income attributable to operations at the Center). If the method of
taxation of real estate prevailing to the time of execution hereof shall be, or
has been altered, so as to cause the whole or any part of the taxes now,
hereafter or theretofore levied, assessed or imposed on real estate to be
levied, assessed or imposed on Landlord, wholly or partially, as a capital levy
or otherwise, or on or measured by the rents received therefrom, then such new
or altered taxes attributable to the Center shall be included within the term
"Taxes", except that the same shall not include any enhancement of said tax
attributable to other income of Landlord. Tenant shall pay increased Taxes
whether Taxes are increased as a result of increases in the assessment or
valuation of the Center (whether based on a sale, change in ownership or
refinancing of the Center or otherwise), increases in tax rates, reduction or
elimination of any rollbacks or other deductions available under current law,
scheduled reductions of any tax abatement, elimination, invalidity or withdrawal
of any tax abatement, or for any other cause whatsoever. In addition, Landlord
may include in Taxes any actual, out-of-pocket expenses reasonably incurred by
Landlord in attempting to protest, reduce or minimize Taxes (including without
limitation, fees for attorneys, consultants, appraisers and other experts) in
the calendar year such expenses are paid.
O. "Unavoidable Delays" shall mean delays due to strikes,
lockouts, labor troubles, inability to procure labor or materials or reasonable
substitutes therefor, failure of power, governmental requirements, restrictions
or Laws, fire or other casualty damage, war or civil disorder, or other causes
beyond the reasonable control of the party delayed; provided, Unavoidable Delays
hereunder shall not include delays resulting from changes in economic or market
conditions, or financial or internal problems of the parties or problems that
can be satisfied by the payment of money. Notwithstanding any provision of this
Lease to the contrary, if as a result of Unavoidable Delay, Tenant is delayed in
performing any of its obligations under this Lease, other than Tenant's
obligations to pay Rent and all other charges and sums payable by Tenant
hereunder, Tenant's performance shall be excused for a period equal to such
delay and Tenant shall not during such period be considered to be in default
under this Lease with respect to the
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obligation, performance of which has thus been delayed. As a condition to
Tenant's right to claim an Unavoidable Delay, Tenant shall notify Landlord
within ten (10) business days after the delay occurs.
ARTICLE 29
RULES
Tenant shall comply with all of the rules which are set forth in Rider
One attached to this Lease, as the same may be amended or supplemented hereunder
(the "Rules"). Landlord shall have the right by notice to Tenant or by posting
at the Center to reasonably amend such Rules and supplement the same with other
reasonable Rules relating to the Center or the promotion of safety, care,
cleanliness or good order therein. Landlord agrees to uniformly enforce the
Rules. Nothing herein shall be construed to give Tenant or any other party any
claim against Landlord arising out of the violation of such Rules by any other
tenant, occupant or visitor of the Center, or out of the enforcement,
modification or waiver of the Rules by Landlord in any particular instance.
ARTICLE 30
NO WAIVER
No provision of this Lease will be deemed waived by either party unless
expressly waived in writing signed by the waiving party. No waiver shall be
implied by delay or any other act or omission of either party. No waiver by
either party of any provision of this Lease shall be deemed a waiver of such
provision with respect to any subsequent matter relating to such provision, and
Landlord's consent respecting any action by Tenant shall not constitute a waiver
of the requirement for obtaining Landlord's consent respecting any subsequent
action. Acceptance of Rent by Landlord shall not constitute a waiver of any
breach by Tenant of any term or provision of this Lease. No acceptance of a
lesser amount than the Rent herein stipulated shall be deemed a waiver of
Landlord's right to receive the full amount due, nor shall any endorsement or
statement on any check or payment or any letter accompanying such check or
payment be deemed an accord and satisfaction, and Landlord may accept such check
or payment without prejudice to Landlord's right to recover the full amount due.
The acceptance of Rent or of the performance of any other term or provision from
any party other than Tenant, including any Transferee, shall not constitute a
waiver of Landlord's right to approve any Transfer.
ARTICLE 31
ATTORNEYS' FEES, COUNTERCLAIMS, VENUE AND JURY TRIAL
If Landlord or any of its officers, directors, trustees, beneficiaries,
partners, agents, affiliates or employees shall be made a party to any
litigation commenced by or against Tenant and are not found to be at fault,
Tenant shall pay all costs, expenses and reasonable attorneys' fees incurred by
Landlord or any such party in connection with such litigation. Tenant shall also
pay all costs, expenses and reasonable attorneys' fees that may be incurred by
Landlord in successfully enforcing this Lease. IN THE INTEREST OF OBTAINING A
SPEEDIER AND LESS COSTLY HEARING OF ANY DISPUTE, EACH OF LANDLORD AND TENANT
HEREBY EXPRESSLY WAIVES TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM
BROUGHT BY EITHER PARTY AGAINST THE OTHER AND ANY RIGHTS TO A TRIAL BY JURY
UNDER ANY STATUTE, RULE OF LAW OR PUBLIC POLICY IN CONNECTION WITH ANY MATTER
WHATSOEVER ARISING OUT OF OR IN ANY WAY RELATING TO THIS LEASE, THE PREMISES OR
THE CENTER. Although such jury waiver is intended to be self-operative and
irrevocable, Landlord and Tenant each further agree, if requested, to confirm
such waivers in writing at the time of commencement of any such action,
proceeding or
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counterclaim. If Landlord commences any detainer suit, summary proceedings or
other action seeking possession of the Premises, Tenant agrees not to interpose
by consolidation of actions, removal to chancery or otherwise, any counterclaim,
claim for set-off, recoupment or deduction of Rent, or other claim seeking
affirmative relief of any kind (except a mandatory or compulsory counterclaim
which Tenant would forfeit if not so interposed). The parties agree to waive any
defenses relating to jurisdiction or venue in any action or proceeding brought
by either party against the other for any matter arising out of or in any way
relating to this Lease, the Premises or the Center, shall be filed and heard in
the Courts of the State of Georgia located in Fulton County, Georgia.
ARTICLE 32
PERSONAL PROPERTY TAXES
Tenant shall pay before delinquent all taxes, assessments, license
fees, charges or other governmental impositions assessed against or levied or
imposed upon Tenant's business operations, Tenant's leasehold interest, or based
on Tenant's use or occupancy of the Premises, the Equipment, the Structure, or
the Screen, or Tenant's fixtures, furnishings, equipment, leasehold
improvements, inventory, merchandise, and personal property located in the
Premises (whether or not title shall have vested in Landlord pursuant to any
provision hereof). Whenever possible, Tenant shall cause all such items to be
assessed and billed separately from the property of Landlord and other parties.
If any such items shall be assessed and billed with the property of Landlord or
another party, Landlord shall include the same or an appropriate portion thereof
in a bill to all applicable tenants which bill shall reasonably allocate the
same or an appropriate share thereof between Tenant and such other party (and
Tenant shall promptly pay the amount so allocated to Tenant).
ARTICLE 33
CONVEYANCE BY LANDLORD AND LIABILITY
In case Landlord or any successor owner of the Center shall convey or
otherwise dispose of any portion thereof in which the Premises are located to
another party (and nothing herein shall be construed to restrict or prevent such
conveyance or disposition), such other party shall thereupon be and become
landlord hereunder and shall be deemed to have fully assumed and be liable for
all obligations of this Lease to be performed by Landlord, including the return
of any Security Deposit. Tenant shall attorn to such other party, and Landlord
or such successor owner shall, from and after the date of conveyance, be free of
all liabilities and obligations hereunder. The liability of Landlord to Tenant
for any default by Landlord under this Lease or arising in connection herewith
or with Landlord's operation, management, leasing, repair, renovation,
alteration, or any other matter relating to the Center or the Premises, shall be
limited to the interest of Landlord in the Center (and rental and insurance
proceeds). Tenant agrees to look solely to Landlord's interest in the Center
(and rental and insurance proceeds) for the recovery of any judgment against
Landlord, and Landlord shall not be personally liable for any such judgment or
deficiency after execution thereon. Under no circumstances shall any present or
future general or limited partner of Landlord (if Landlord is a partnership), or
trustee or beneficiary (if Landlord or any partner of Landlord is a trust) have
any liability for the performance of Landlord's obligations under this Lease.
ARTICLE 34
NOTICES
Except as expressly provided to the contrary in this Lease, every
notice, demand or other communication given by either party to the other with
respect hereto or to the Premises or Center, shall be in writing and shall not
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be effective for any purpose unless the same shall be served personally or by
national air courier service, or United States registered or certified mail,
return receipt requested, postage prepaid, addressed, if to Tenant, at the
address first set forth in the Lease, and if to Landlord, at the address at
which the last payment of Rent was required to be made and to JMB Properties
Company at 900 North Michigan Avenue, Chicago, Illinois, 60611, Attn: Director
of Lease Administration, or such other address or addresses as Tenant or
Landlord may from time to time designate by notice given as above provided.
Every notice or other communication hereunder shall be deemed to have been given
as of the second business day following the date of such mailing or dispatch by
national air courier service (or as of any earlier date evidenced by a receipt
from such national air carrier service or the United States Postal Service) or
immediately if personally delivered. Notices not sent in accordance with the
foregoing shall be of no force or effect until received by the foregoing parties
at such addresses required herein. All communications to Landlord regarding
Articles 8 and 9 will be directed to the Center's General Manager or Senior
Marketing Director. The Emergency Notification Instructions attached hereto as
Exhibit C shall be amended from time to time by the parties by written notice
given as provided herein.
ARTICLE 35
REAL ESTATE BROKERS
Tenant shall defend, indemnify and hold Landlord harmless from all
damages, judgments, liabilities and expenses (including attorneys' fees) arising
from any claims or demands of any broker, agent or finder with whom Tenant has
dealt for any commission or fee alleged to be due in connection with its
participation in the procurement of Tenant or the negotiation with Tenant of
this Lease, other than a broker with whom Landlord has signed a written
agreement relating to this Lease. Landlord shall defend, indemnify and hold
Tenant harmless from all damages, judgments, liabilities and expenses (including
attorneys' fees) arising from any claims or demands of any broker, agent or
finder employed or engaged by Landlord for any commission or fee alleged to be
due in connection with its participation in the procurement of Tenant or the
negotiation of this Lease.
ARTICLE 36
TENANT'S PERSONAL PROPERTY AND TENANT LENDERS
The Screen and the Ancillary Equipment shall be and remain Tenant's
property. As provided for in this Lease, Tenant shall have the right and
obligation to remove the Screen and Ancillary Equipment and repair all damage to
the Building caused by such removal. Landlord will, for itself and any successor
to Landlord's interest in the Premises and Building, in consideration of the
loans and advances to Tenant by any one or more lenders (individually, a "Tenant
Lender", any two or more lenders collectively "Tenant Lenders"), to or on behalf
of the Tenant, hereby covenants and agrees with Tenant, Tenant Lenders, their
respective successors and assigns (all of whom shall be intended third party
beneficiaries of these provisions), that subject to compliance by the applicable
Tenant Lender with the provision of this Paragraph (provided , however, that the
failure of a Tenant Lender to comply with such provisions shall not affect the
rights of any other Tenant Lender under this Paragraph): (a) any lien, security
interest, or rights (including the right of distraint for any unpaid rent) which
Landlord, any successors to the Landlord's interest in the Premises or the
Building, now has or hereafter may acquire in the Screen or Ancillary Equipment
will be subordinate and inferior to the security interest of Tenant's Lenders,
their successors and assigns; and (b) in the enforcement of the rights of Tenant
Lenders, the Screen and Ancillary Equipment may be removed from the Premises and
Building in accordance with the following provisions of this Paragraph; and (c)
the subordination of any lien, security interest, or rights (including the right
of distraint for any unpaid rent) which Landlord, any successors to the
Landlord's interest in the Premises or the Building, now has or hereafter may
acquire in the Screen or Ancillary Equipment shall be effective as to a Tenant
Lender only upon Landlord's receipt of a written acknowledgment and acceptance
of the provisions of this Article from such Tenant Lender .
In the event Tenant defaults under its obligations to any Tenant
Lender, and such Tenant Lender has the right to remove the Screen or the
Ancillary Equipment (or both) as a result of such default and such Tenant Lender
desires
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to remove the Screen, the Ancillary Equipment or any portion thereof, then prior
to entering onto the Premises to remove the Screen, the Ancillary Equipment or
any portion thereof, such Tenant Lender must provide Landlord with a Notice to
Remove. A Notice to Remove must include written notice of Tenant Lender's
intention to remove the Screen and Ancillary Equipment (or both) and
satisfactory evidence of its authority to remove the Screen and Ancillary
Equipment (or both). Tenant Lender must remove the Screen and Ancillary
Equipment (or both, whichever is applicable) within thirty (30) days after the
date of the Notice to Remove; provided, however, that in the event such Tenant
Lender is enjoined or stayed or otherwise prohibited by legal process from
taking steps to remove the Screen, the Ancillary Equipment or such portion
thereof, and such Tenant Lender proceeds with reasonable diligence to obtain the
lifting of such injunction, stay or other prohibition, such thirty (30 ) day
time period shall be extended on a day for day basis for each day of such
injunction, stay or prohibition. If a Tenant Lender delivers to Landlord a copy
of any notice of default sent to the Tenant under an agreement between Tenant
Lender and Tenant then, solely for the purposes of this Article, Landlord may
rely on such notice and assume that all defaults specified in such notice have
in fact taken place. The Landlord will have not liability to Tenant or any other
party for any action taken or admitted to be taken by Landlord, in good faith,
in reliance on such notice. Prior to such removal by Tenant Lender, such Tenant
Lender shall contact the Landlord to arrange a mutually convenient time for a
representative of the Landlord to accompany such Tenant Lender's representative
in order to remove the Screen or Ancillary Equipment (or both, whichever is
applicable). Such Tenant Lender shall reimburse Landlord for any physical damage
to the Building, the Premises or the Shopping Center caused by such removal.
Landlord agrees that except with respect to claims arising out of the
enforcement against Tenant Lender of Tenant Lender's obligations under this
Article 36, Landlord will make no claim whatsoever on the Screen or the
Ancillary Equipment (or both), at, prior to or subsequent to such removal by
such Tenant Lender or its successors or assigns. Such Tenant Lender shall be
responsible for payment of rent due Landlord accruing from the date of the
Notice to Remove through and including the date of such removal if Tenant has
not paid same even if Tenant Lender does not elect to cure Tenant's Default or
enter into a new lease with Landlord, as provided for below.
In the event Tenant commits a Default under this Lease, Landlord shall
give each Tenant Lender written notice of such and, in the event a Tenant Lender
cures such default (even though Tenant's opportunity to cure has expired) within
fourteen (14) days of such notice, Landlord will not be entitled to proceed
further with its remedies of termination or dispossession and for all purposes
under this Lease, such Default shall be deemed to have been cured prior to the
expiration of the applicable cure period. In the event Tenant's Lenders fail to
cure the Tenant's Default as herein provided and no Tenant Lender provides
Landlord with a Notice to Remove within twenty-one (21) days of Landlord's
notice to Tenant Lenders of Tenant's Default and the Screen or the Ancillary
Equipment (or both), as the case may be, are not removed by Tenant, such failure
shall be deemed (a) a release and wavier of each Tenant Lenders' lien, security
interest, or rights in the Screen or Ancillary Equipment to the rights of
Landlord; and (b) an abandonment by Tenant of the Screen and Ancillary
Equipment, to the extent not removed by Tenant, such that the Landlord's lien,
security interest, and rights shall no longer be subordinate, and the Screen and
Ancillary Equipment will be deemed conveyed by Tenant to Landlord as if by Bill
of Sale, and the Landlord will be entitled to take whatever further action it
deems appropriate with respect to the Screen and Ancillary Equipment including,
without limitation, the removal of the Screen and Ancillary Equipment from the
Premises or Building (with or without legal process) and Landlord will not be
liable or responsible in any way (including, without limitation, the payment of
money or the protection of any parties' interest or rights) to Tenant or any
Tenant Lender for whatever further action Landlord takes.
In the event the Lease shall be terminated by the Landlord prior to the
natural expiation of the Term and if Tenant's Lenders cure a Default as provided
for above, then the Tenant Lender shall have the right, subject to satisfaction
of the requirements of Article 20, to enter into a new lease with the Landlord
on the same terms and conditions as contained in this Lease.
ARTICLE 37
MISCELLANEOUS
A. Each of the terms and provisions of this Lease shall be
binding upon and inure to the benefit of the parties hereto, their respective
heirs, executors, administrators, guardians, custodians, successors and assigns,
subject
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to the provisions of Article 20 respecting Transfers. However, if Tenant is an
individual and dies or becomes incapacitated, Landlord reserves the right to
terminate this Lease upon thirty (30) days' advance notice to Tenant or Tenant's
legal representative.
B. Neither this Lease nor any memorandum of lease or short form
lease shall be recorded by Tenant.
C. This Lease shall be construed in accordance with the Laws of
the State of Georgia.
D. All obligations (including indemnity obligations) or rights of
either party arising during or attributable to the period prior to expiration or
earlier termination of this Lease shall survive such expiration or earlier
termination, except as provided to the contrary in Article 33.
E. Landlord agrees that if Tenant timely pays the Rent and
performs the terms and provisions hereunder, Tenant shall hold and enjoy the
Premises during the Term, free of lawful claims by any party acting by or
through Landlord, subject to all other terms and provisions of this Lease.
F. The parties agree that they intend hereby to create only the
relationship of landlord and tenant. No provision hereof, or act of either party
hereunder, shall be construed as creating the relationship of principal and
agent, or as creating a partnership, joint venture or other enterprise, or
render either party liable for any of the debts or obligations of the other
party, except under any indemnity provisions of this Lease.
G. Tenant acknowledges that any site or lease plan of the Center
attached as an Exhibit hereto shall not be deemed a representation, warranty or
agreement by Landlord respecting the Center or any other matter shown thereon
other than the approximate location of the Premises, and that Majors and other
parties unrelated to Landlord may own or control portions of the Center shown on
such Exhibit.
H. If applicable Laws require that this Lease be in the form of a
deed, this Lease shall be deemed a deed of lease for all purposes, and Landlord
shall be deemed to have granted and demised the Premises to Tenant for the Term
hereof, subject to the other terms and provisions contained herein.
I. This Lease, and any Riders and Exhibits hereto, have been
mutually negotiated by Landlord and Tenant, and any ambiguities shall not be
interpreted in favor of either party. Any printed provisions that have been
deleted shall not be used to interpret the remaining provisions.
J. For purposes of this Lease the term "business day" shall mean
any day other than Saturday, Sunday, or any other day on which banks are
required or authorized to close in Atlanta, Georgia.
ARTICLE 38
OFFER
The submission and negotiation of this Lease shall not be deemed an
offer to enter the same by Landlord, but the solicitation of such an offer by
Tenant and Landlord shall not consider such offer by Tenant unless audited
financial statements for Tenant's most recent fiscal year are delivered along
with this Lease. Tenant agrees that its execution of this Lease constitutes a
firm offer to enter the same which may not be withdrawn for a period of two (2)
weeks after delivery to Landlord. During such period and in reliance on the
foregoing, Landlord may, at Landlord's option, deposit any Security Deposit and
Rent, proceed with any alterations or improvements, and permit Tenant to enter
the Premises and make alterations or improvements. If Landlord shall fail to
execute and mail or deliver this Lease to Tenant within such period, Tenant may
revoke its offer to enter this Lease by sending notice thereof to Landlord
before Landlord mails or delivers an executed copy of this Lease to Tenant. In
such case, Landlord shall return any Security Deposit and Rent to Tenant, and
Tenant shall promptly remove any alterations, improvements, fixtures or personal
property made or placed in or upon the Premises by Tenant or its contractors,
agents or employees and restore the same to good condition as required under
Article 16. If Tenant shall seek to
-33-
<PAGE> 35
revoke its offer to enter this Lease in violation of the foregoing provisions,
Landlord shall have the options of forfeiting and retaining any Security Deposit
and Rent theretofore paid, as liquidated damages without executing and
delivering this Lease to Tenant, or executing and delivering this Lease to
Tenant and enforcing the same as a valid and binding lease agreement.
The parties acknowledge and agree that this Lease shall be subject to
and contingent upon the closing (i.e. Tenant's receipt of funds) of Tenant's
financing (which may be a combination of debt and equity) in an amount of not
less than $1.5 million as demonstrated by evidence reasonably acceptable to
Landlord of the closing. In such event, Landlord shall deliver the Premises to
Tenant following Landlord's review and approval of such evidence. If Landlord
fails to approve such evidence on or before the ninetieth (90th) day after the
date hereof, Landlord shall notify Tenant in writing of the reason for such
disapproval, and if Tenant fails to supply Landlord with such further evidence
of such financing reasonably acceptable to Landlord within five (5) days
thereafter, this Lease shall be deemed null and void and of no further force or
effect.
ARTICLE 39
AMERICANS WITH DISABILITIES ACT
The parties acknowledge that the Americans with Disabilities Act of
1990 (42 U.S.C. '12101 et seq.) and regulations and guidelines promulgated
thereunder, as all of the same may be amended and supplemented from time to time
(collectively referred to herein as the "ADA") establish requirements for
business operations, accessibility and barrier removal, and that such
requirements may or may not apply to the Premises and Center depending on, among
other things: (1) whether Tenant's business is deemed a "public accommodation"
or "commercial facility", (2) whether such requirements are "readily
achievable", and (3) whether a given alteration affects a "primary function
area" or triggers "path of travel" requirements. The parties hereby agree that:
(a) Landlord shall be responsible for ADA Title III compliance in the Common
Areas, except as provided below, (b) Tenant shall be responsible for ADA Title
III compliance in the Premises, including any leasehold improvements or other
work to be performed in the Premises under or in connection with this Lease, and
(c) Landlord may perform, or require that Tenant perform, and Tenant shall be
responsible for the cost of, ADA Title III "path of travel" requirements
triggered by alterations in the Premises. Tenant shall be solely responsible for
requirements under Title I of the ADA relating to Tenant's employees.
ARTICLE 40
ENTIRE AGREEMENT
This Lease, together with Riders One through Three, and Exhibits A
through D (WHICH COLLECTIVELY ARE HEREBY INCORPORATED WHERE REFERRED TO HEREIN
AND MADE A PART HEREOF AS THOUGH FULLY SET FORTH), contains all the terms and
provisions between Landlord and Tenant relating to the matters set forth herein
and no prior or contemporaneous agreement or understanding pertaining to the
same shall be of any force or effect. To the extent that anything in the Lease
conflicts with Exhibit B, the Lease shall control. Without limiting the
generality of the foregoing, Tenant hereby acknowledges and agrees that
Landlord's leasing and field personnel are only authorized to show the Premises
and negotiate terms and conditions for leases subject to Landlord's final
approval, and are not authorized to make any agreements, representations,
understandings or obligations binding upon Landlord, respecting the present or
future condition of the Premises or Center, suitability of the same for Tenant's
business, or any other matter, and no such agreements, representations,
understandings or obligations not expressly contained herein shall be of any
force or effect. TENANT HAS RELIED ON TENANT'S INSPECTIONS AND DUE DILIGENCE IN
ENTERING THIS LEASE AND NOT ON ANY REPRESENTATIONS OR WARRANTIES MADE BY
LANDLORD CONCERNING THE CONDITION OR SUITABILITY OF THE PREMISES OR CENTER FOR
ANY PARTICULAR PURPOSE. Neither this Lease, nor any Riders or Exhibits referred
to above may be modified, except in writing signed by both parties.
-34-
<PAGE> 36
IN TESTIMONY WHEREOF, the parties have caused this Lease to be signed
under seal by their respective representatives designated below, or if either
party is a corporation, it has caused these presents to be signed by its
president or other officer designated below, attested by its secretary, and its
corporate seal to be affixed, and if the Center is in Washington, D.C., does
hereby appoint such president or other officer its true and lawful
attorney-in-fact to acknowledge and deliver these presents as its act and deed
as of the day and year first above written.
Witness our hands and seals:
TENANT:
DIVERSITY ENTERTAINMENT TELEVISION/
ATLANTA, LLC, a Georgia limited
liability company
/s/ By: /s/ Tyrone C. Johnson
- --------------------------------- ---------------------------------
Witness
Title: President
------------------------------
Sworn to and subscribed before me
this 12th day of January, 1998. Attest: /s/ Vivian W. Jones
-----------------------------
(Vivian W. Jones)
Title: Director
------------------------------
/s/
- ---------------------------------
Notary Public
My commission expires: February 22, 1999
[NOTARY SEAL]
LANDLORD:
UNDERGROUND FESTIVAL, INC., a
Georgia corporation
By: Underground Atlanta Managers
LLC, Agent
By: /s/
---------------------------------
Manager
-35-
<PAGE> 37
RIDER ONE
RULES
(1) COMMON AREAS. Tenant shall not use the interior Common Areas,
including areas adjacent to the Premises, for any purpose other than ingress and
egress, and any such use thereof shall be subject to the other provisions of
this Lease, including these Rules. Without limiting the generality of the
foregoing, Tenant shall not use the interior Common Areas to canvass, solicit
business or information from, or distribute any article or material to, other
tenants, occupants or invitees of the Center. Tenant shall not allow anything to
remain in any passageway, sidewalk, court, corridor, stairway, entrance, exit,
elevator, shipping area, or other area outside the Premises. Janitorial closets,
utility closets, telephone closets, broom closets, electrical closets, storage
closets, and other such closets, rooms and areas shall be used only for the
purposes and in the manner designated by Landlord, and may not be used by
Tenant, or its contractors, agents, employees, or other parties without
Landlord's prior written consent.
(2) DELIVERIES. Furniture, inventory and all other deliveries may
be brought into the Center only at times and in the manner designated by
Landlord, in compliance with all Laws, and always at Tenant's sole risk.
Landlord may inspect items brought into the Center or Premises with respect to
weight or dangerous nature or compliance with this Lease or applicable Laws.
Tenant's use of any freight elevators, loading and service areas at the Center
shall be subject to scheduling by Landlord. Tenant shall not take or permit to
be taken in or out of other entrances or elevators of the Center, any item
normally taken, or which Landlord otherwise requires to be taken, in or out
through service doors or on freight elevators. Tenant shall move all inventory,
supplies, furniture, equipment and other items as soon as received directly to
the Premises. Any hand-carts used at the Center shall have rubber wheels and
side guards and no other material handling equipment may be brought upon the
Center except as Landlord shall approve in writing in advance.
(3) TRASH. All garbage, refuse, trash and other waste shall be
kept in the kind of container, placed in the areas, and prepared for collection
in the manner and at the times and places specified by Landlord, subject to
Article 26 respecting Hazardous Materials. If Landlord designates a service to
pick up such items, Tenant shall use the same at Tenant's cost.
(4) FIRE PROTECTION. If Landlord installs or has heretofore
installed a supervised fire sprinkler and/or alarm system for the protection of
the Center, Tenant shall pay Tenant's Proportionate Share of the cost thereof
(or such other share as Landlord may fairly and reasonably determine) to
Landlord on or before the first day for each calendar month in advance, or
Landlord may include such charges in Center Expenses.
(5) PEST CONTROL. [INTENTIONALLY DELETED]
(6) SIGNS AND DISPLAY WINDOWS. [INTENTIONALLY DELETED]
(7) DISPLAY OF MERCHANDISE. Tenant shall not place or maintain any
permanent or temporary fixture or item or display any merchandise.
(8) PLUMBING EQUIPMENT. The toilet rooms, urinals, wash bowls,
drains and sewers and other plumbing fixtures, equipment and lines shall not be
misused or used for any purpose other than that for which they were constructed
and no foreign substance of any kind whatsoever shall be thrown therein, and
Tenant shall properly install, maintain, clean, repair and replace adequate
grease traps.
(9) ROOF; AWNINGS AND PROJECTIONS. Except as expressly set forth
in this Lease, Tenant shall not install any aerial, antennae, satellite dish or
any other device on the roof, exterior walls or Common Areas of the Center.
Tenant may install and have access to rooftop HVAC equipment only to the extent
approved or required by Landlord from time to time in connection with Tenant's
obligations under Articles 10 and 11 of this Lease. Except as expressly set
forth in this Lease, no awning or other projection shall be attached by or for
Tenant to the exterior walls of the Premises or the building of which it is a
part.
PAGE 1-1
<PAGE> 38
(10) OVERLOADING FLOORS. Tenant shall not overload any floor or
part thereof in the Premises or Center including any public corridors or
elevators therein, and Landlord may direct and control the location of safes,
vaults and all other heavy articles and require supplementary supports of such
material and dimensions as Landlord may deem necessary to properly distribute
the weight at Tenant's expense (including expenses for structural review and
engineering).
(11) LOCKS AND KEYS. Upon termination of the Lease or Tenant's
right to possession, Tenant shall: (i) return to Landlord all keys, parking
stickers or key cards, and in the event of loss of any such items shall pay
Landlord therefor, and (ii) advise Landlord as to the combination of any vaults
or locks that Landlord permits to remain in the Premises.
(12) UNATTENDED PREMISES. [INTENTIONALLY DELETED]
(13) ENERGY CONSERVATION. Tenant shall not waste electricity,
water, heat or air conditioning, or other utilities or services, and agrees to
cooperate fully with Landlord and comply with any Laws to assure the most
effective and energy efficient operation of the Center.
(14) FOOD, BEVERAGES, GAME AND VENDING MACHINES. [INTENTIONALLY
DELETED]
(15) GOING-OUT-OF-BUSINESS SALES AND AUCTIONS. Tenant shall not
use, or permit any other party to use, the Premises for any distress, fire,
bankruptcy, closeout, "lost our lease" or going-out-of-business sale or auction.
Tenant shall not display any signs advertising the foregoing anywhere in or
about the Premises. This prohibition shall also apply to Tenant's creditors.
(16) LABOR RELATIONS. Tenant shall conduct its labor relations and
relations with employees so as to avoid strikes, picketing, and boycotts of, on
or about the Premises or Center. If any employees strike, or if picket lines or
boycotts or other visible activities objectionable to Landlord are established,
conducted or carried out against Tenant, its employees, agents, contractors, or
subcontractors in or about the Premises or Center, Tenant shall immediately
close the Premises and remove or cause to be removed all such employees, agents,
contractors, and subcontractors until the dispute has been settled.
(17) LANDLORD'S TRADENAME AND TRADEMARKS. No symbol, design, name,
mark or insignia adopted by Landlord for the Center or picture or likeness of
the Center shall be used by Tenant without the prior written consent of
Landlord, except as provided in Article 9 of this Lease.
(18) PROHIBITED ACTIVITIES. Tenant shall not: (i) use, sell or
distribute any leaflets, handbills, bumper stickers, other stickers or decals,
balloons or other such articles in the Premises (or other areas of the Center),
(ii) operate any loudspeaker, television set, phonograph, radio, CD player or
other musical or sound producing instrument or device so as to be heard outside
the Premises unless consented to by Landlord, (iii) other than the Screen and
the Ancillary Equipment (including but not limited to low frequency FM band
radio transmissions) operate any electrical or other device which interferes
with or impairs radio, television, microwave, or other broadcasting or reception
from or in the Center or elsewhere, (iv) bring or permit any bicycle or other
vehicle, or dog (except in the company of a blind party) or other animal, fish
or bird in the Center, (v) make or permit objectionable noise, vibration or odor
to emanate from the Premises or any equipment serving the same, (vi) do or
permit anything in or about the Premises that is unlawful, immoral, obscene,
pornographic, or which tends to create or maintain a nuisance or do any act
tending to injure the reputation of the Center, (viii) use or permit upon the
Premises anything that violates the certificates of occupancy issued for the
Premises or the Center, or causes a cancellation of Landlord's insurance
policies or increases Landlord's insurance premiums (and Tenant shall comply
with all requirements of Landlord's insurance carriers, the American Insurance
Association, and any board of fire underwriters), (ix) use the Premises for any
purpose, or permit upon the Premises anything, that may be dangerous to parties
or property (including but not limited to flammable oils, fluids, paints,
chemicals, firearms or any explosive articles or materials), nor (x) do or
permit anything to be done upon the Premises in any way tending to disturb,
bother or annoy any other tenant at the Center or the occupants of neighboring
property.
PAGE 1-2
<PAGE> 39
(19) PARKING. [INTENTIONALLY DELETED]
(20) RESPONSIBILITY FOR COMPLIANCE. Tenant shall be responsible for
ensuring compliance with these Rules, as they may be amended, by Tenant's
employees and as applicable, by Tenant's agents, invitees, contractors,
subcontractors, and suppliers.
PAGE 1-3
<PAGE> 40
RIDER TWO
UNDERGROUND ATLANTA
RIDER TO LEASE dated JANUARY 12, 1998 between Underground Festival, Inc.
("Landlord") and DIVERSITY ENTERTAINMENT TELEVISION/ATLANTA, LLC, a Georgia
limited liability company ("Tenant") for Premises at Underground Atlanta,
Atlanta, Fulton County, Georgia
In the event of a conflict between the provisions of the printed form and any of
the terms of this Rider, this Rider shall be deemed to control.
1. The following is added to Article 2:
Underlying Leases. The Premises are subject to the following:
(i) that certain Lease between the Downtown Development
Authority of the City of Atlanta, Georgia (the "DDA") and the
City of Atlanta, Georgia (the "City"), dated 1 August 1986
(the "Superior Lease"); and (ii) that certain Sublease among
DDA, the City and Landlord, dated 7 September 1988 (the
"Sublease").
2. [INTENTIONALLY DELETED]
3. The following is added to Article 34:
Notices. Notwithstanding anything herein to the contrary, all
notices to Landlord shall be sent to the Center Address set
forth in Paragraph 1.B. of this Lease with a copy to Landlord
c/o Urban Retail Properties Company, 900 North Michigan
Avenue, Chicago, Illinois,60611, Attn: Director of Lease
Administration.
4. The following is added to Rider One, Rules:
Tenant or its employees shall not park in any Common Areas,
including loading docks or service corridors. Tenant
acknowledges that all parking available to Tenant, its
employees and customers will be located off the Center site
and will not be controlled by Landlord.
5. [INTENTIONALLY DELETED]
6. The application of any Security Deposit to Tenant's past due
obligations by Landlord shall be a recoupment by Landlord.
7. This Lease grants Tenant only a usufruct and no estate in land.
Tenant's usufruct shall not be subject to levy and sale.
JMB 353(3/91)
Georgia Rider
8. Notwithstanding anything in the Lease to the contrary, if Landlord
requires an attorney to judicially enforce any of the provisions of
this Lease (other than those requirements regarding the payment of
money), Landlord shall be entitled to all reasonable actual expenses
including attorney's fees and costs incurred by it. If Landlord
requires an attorney to collect any monies due hereunder, Landlord
shall be entitled to all reasonable expenses and costs incurred by it,
including attorney's fees in the amount of fifteen percent (15%) of the
principal and interest then due and owing.
Page 2-1
<PAGE> 41
RIDER THREE
UNDERGROUND ATLANTA
RIDER TO LEASE dated JANUARY 12, 1998 between Underground Festival, Inc.
("Landlord") and DIVERSITY ENTERTAINMENT TELEVISION/ATLANTA, LLC, a Georgia
limited liability company ("Tenant") for Premises at Underground Atlanta,
Atlanta, Fulton County, Georgia
In the event of a conflict between the provisions of the printed form and any of
the terms of this Rider, this Rider shall be deemed to control.
Tenant acknowledges that the identity of Landlord may change as the
Center is sold or the ownership thereof is restructured from time to
time. In connection therewith, Tenant acknowledges that Landlord either
currently is, or may in the future be, a real estate investment trust
("REIT") under the United Sates Internal Revenue Code of 1986 (the
"Code") Sections 856 et seq., as modified, supplemented or replaced
from time to time.
During any period of time when Landlord is a REIT the parties
agree that:
1. Landlord shall not furnish or render any services to
tenants except services customarily furnished or
rendered in connection with the rental of real
property within the meaning of Section 856 (d)(1)(B)
and the regulations thereunder as modified,
supplemented or replaced from time to time, which
services shall be provided through an independent
contractor within the meaning of Section 856(d)(3) of
the Code from whom the Landlord does not derive or
receive any income unless income from the provision
of such services would be excluded from unrelated
business taxable income under Section 51(b)(3) of the
Code if received by an organization described in
Section 511(a)(2) of the Code.
(a) In particular, but without limiting the
foregoing, Landlord shall not provide
construction, alteration, or improvement
services (collectively ("Work") to Tenant,
except that in connection with any Work
respecting the Premises to be performed at
any time by Tenant or its contractors,
Landlord shall have the right to approve the
plans, specifications and contractors, and
to supervise, coordinate, schedule, monitor,
inspect, required engineering reports,
building permits, additional insurance,
bonds, lien waivers and union labor, and
impose other conditions respecting such Work
contemplated under this Lease, or any
Exhibit or related documents, or reasonable
required to ensure the maintenance of
quality standards or otherwise protect
Landlord's's interest in the property. Under
no circumstances shall Landlord's own
employees perform physical construction work
for Tenant, including, but not limited to,
carpentry, plumbing, electrical, painting,
and other such physical work.
(b) In particular, but without limiting the
foregoing, Urban Retail Properties, Inc.
("URP") or another independent contractor
shall administer any Promotion Fund, Media
Fund, or Merchant's Association under this
Lease. In such case, Landlord may direct
Tenant to make payments therefor directly to
URP or the other independent contractor, or
Landlord's may turn over to URP or the other
independent contractor any such payments
received from Tenant on behalf of URP or the
other independent contractor (but any
failure by Tenant to make any such payments
required under this Lease shall give rise to
all remedies available to Landlord for the
non-payment of Rent).
Page 3-1
<PAGE> 42
2. Whenever this Lease permits Landlord to impose a fee
or charge (including, but not limited to, charges
pertaining to any Work by Tenant under Article 7 or
Exhibit B, charges for after hours use of the
Premises under Article 8, or charges for utilities
provided by Landlord under Article 10), Landlord
shall reduce such fees or charges to the extent
necessary to maintain Landlord's REIT status, as
determined in Landlord's sole discretion, including,
without limitation, reductions in utility charges to
the extent necessary under Sections 856 through 860
of the Code.
JMB 370 (7/92)
REIT RIDER
Page 3-2
<PAGE> 43
[FLOORPLAN]
EXHIBIT A
<PAGE> 44
EXHIBIT B
DESCRIPTION OF LANDLORD'S WORK AND TENANT'S WORK
UNDERGROUND ATLANTA
ATLANTA, GEORGIA
MARCH 29, 1988
<PAGE> 45
EXHIBIT B
UNDERGROUND ATLANTA
ATLANTA, GEORGIA
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Title Page
- ----- ----
<S> <C> <C>
PREFACE ........................................................................ 1
A. WORK TO BE PERFORMED BY LANDLORD IN LANDLORD'S BUILDING................. 2
B. WORK TO BE PERFORMED BY LANDLORD IN PREMISES AT LANDLORD'S EXPENSE...... 2
1. Demising Partitions............................................... 2
2. Floor Structure................................................... 3
3. Egress Door....................................................... 3
4. Heating, Ventilating and Air Conditioning (HVAC).................. 3
5. Water Service..................................................... 3
6. Sewer Service..................................................... 3
7. Fire Protection System............................................ 4
8. Kitchen Exhaust................................................... 4
9. Telephone Service................................................. 4
10. Electrical Service................................................ 4
11. Natural Gas....................................................... 4
C. WORK TO BE PERFORMED BY TENANT IN PREMISES.............................. 5
1. Construction Permits.............................................. 5
2. Utilities by Tenant............................................... 5
3. Floor Slab Penetrations........................................... 5
4. Floor Slab Waterproofing.......................................... 5
5. Demising Partitions............................................... 6
6. Egress Door Hardware.............................................. 6
7. Non-Combustible Construction...................................... 6
8. Ceilings.......................................................... 6
9. Damage to Landlord's Work......................................... 6
10. Tenant Improvement Supports....................................... 6
11. Tenant Mezzanines................................................. 6
12. Grease Traps...................................................... 6
13. Kitchen Exhaust Hoods............................................. 7
14. Tenant Mechanical System.......................................... 7
15. Tenant Electrical System.......................................... 7
16. Fire Protection................................................... 8
17. Discipline........................................................ 8
18. Character of Employees............................................ 8
19. Clean-Up.......................................................... 8
20. Tenant Deliveries................................................. 9
21. Violations........................................................ 9
D. WORK BY LANDLORD IN PREMISES AT TENANT'S EXPENSE........................ 9
E. PROCEDURE............................................................... 11
</TABLE>
March 29, 1988
<PAGE> 46
EXHIBIT B
UNDERGROUND ATLANTA
ATLANTA, GEORGIA
PREFACE:
This Schedule B is intended to describe the obligations of Landlord and
Tenant in the design and construction of the Premises.
Landlord's work will be limited to the work described in Sections A and
B. Landlord's work in Section A will be accomplished by Landlord at Tenant's
expense.
The work of Tenant described in Section C is intended to provide a
Premises finished in accordance with Tenant's drawings as approved in writing by
Landlord. Tenant shall use a Registered Architect for the design of the Premises
and a licensed General Contractor for construction of the Premises.
Landlord and Tenant have a common interest in opening the Premises on
the Opening Date. To this end, Landlord will coordinate its work with Tenant's
work insofar as the schedule for such Opening Date and prudent construction
practices will allow and Landlord will assign one or more tenant coordinators to
function as liaison between tenants and Landlord. Tenant agrees to abide by
Landlord's construction rules and regulations which may be issued from time to
time and Tenant will cause Tenant's contractors to abide by the same rules and
regulations.
All work by Tenant's architect, engineer(s) and contractor(s) shall be
in accordance with this Schedule B and Schedules C and C-I as attached to and
referenced in the Lease.
All Tenant construction shall be in accordance with the requirements of
all applicable codes, ordinances, rules and regulations and all authorities
having jurisdiction over the work, including the applicable requirements of the
handicapped Code and Landlord's insurance carrier.*
Tenant shall give Landlord copies of all inspection reports,
certificates, and other documents as required by authorities having jurisdiction
over the project or as required by Landlord.
TENANT'S ARCHITECT SHALL VERIFY ACTUAL FIELD CONDITIONS PRIOR TO
BEGINNING DESIGN.
Underground Atlanta
March 29, 1988
Page 1 of 13
* and all work required to comply with the Americans with Disabilities
Act
<PAGE> 47
A. WORK TO BE PERFORMED BY LANDLORD IN LANDLORD'S BUILDING
NONE
B. WORK TO BE PERFORMED BY LANDLORD IN PREMISES AT LANDLORD'S EXPENSE:
NONE
Underground Atlanta
March 29, 1988
Page 2 of 13
<PAGE> 48
NONE
Underground Atlanta
March 29, 1988
Page 3 of 13
<PAGE> 49
NONE - DELETED
Underground Atlanta
March 29, 1988
Page 4 of 13
<PAGE> 50
C. WORK TO BE PERFORMED BY TENANT IN PREMISES:
1. Construction Permits
Tenant shall be responsible for obtaining all necessary
permits, including a Certificate of Occupancy, for the
Premises, and shall be responsible for payment of all
associated fees, including connection fees, if any, to
utilities.
2. Utilities by Tenant
Tenant shall arrange for and procure at Tenant's expense:
a. Telephone service, Electrical service, and Gas
service, if any, between the utility service
locations and the Premises.
b. Connection to Landlord-installed utilities.
c. Tenant shall provide a main shut-off valve in
addition to the valve provided by Landlord within the
Premises when connecting to Landlord-installed water
service.
d. Deleted
3. Floor Slab Penetrations
All openings through structurally-supported floors must be
core-bored, sleeved, grouted, sealed and made waterproof.
4. Deleted
Underground Atlanta
March 29, l988
Page 5 of 13
<PAGE> 51
5. Deleted
6. Egress Door Hardware
Tenant shall furnish and install all required hardware other
than that supplied by Landlord.
7. Non-Combustible Construction
All Tenant construction must be non-combustible including any
materials used above the ceiling or concealed in walls.
8. Deleted
9. Damage to Landlord's Work
Tenant shall bear all costs of restoring Landlord's work or
the property or work of other tenants which is damaged by
Tenant, its contractors, subcontractors, suppliers or their
employees, agents or licensees.
10. Tenant Improvement Supports
All Tenant improvements, other than ceilings and light
fixtures, shall be floor-mounted unless written approval is
obtained from Landlord to support Improvements otherwise.
11. Tenant Mezzanines
Mezzanines are prohibited, unless specifically approved by
Landlord in writing.
12. Deleted
Underground Atlanta
March 29, 1988
Page 6 of 13
* Tenant shall design and construct and enclosure within the Premises in
accordance with the Plans and Specification approved by Landlord and
all applicable laws, rules, ordinances and regulations. Tenant shall
also perform all work necessary to provide additional support to
Landlord's the roof to support the enclosure and the structure.
Tenant shall design and construct an exit stair from the interior of
Landlord's building to the roof. Such exit stair shall be installed in
accordance with Plans and Specification approved by Landlord.
<PAGE> 52
13. Deleted
14. Tenant Mechanical System
a. Tenant shall provide and install a complete HVAC
system.*
b. No openings for fans, vents, louvers, grilles, or
other devices shall be installed in any demising
partition, exterior wall, floor, or roof without
Landlord's prior written approval.
c. Air balance of HVAC systems and exhaust and make-up
air systems is required and shall be the
responsibility of Tenant. Tenant shall furnish
Landlord with two (2) copies of a certified air
balance report. Landlord's specifications of HVAC
conditions within the Premises are predicated on the
correct balance, to Landlord's satisfaction, of any
Tenant-installed mechanical systems.**
e. Use of walk-in coolers, refrigerators or freezer
boxes, requires specific approval of Landlord. Where
approved, equipment shall be provided with insulated
floor systems as recommended by the equipment
manufacturer. Landlord must approve the loads imposed
on the structure. All refrigeration equipment must be
air cooled.
f. Condensate lines for refrigeration and/or air
conditioning must terminate within the Premises.
15. Tenant Electrical System
Tenant shall furnish and install all electrical facilities***
including but not necessarily limited to the following:
a. Feeder wire from the electrical connection to the
Premises.
Underground Atlanta
March 29, 1988
Page 7 of 13
* as approved in writing by Landlord
** and a completed Tenant HVAC Data Sheet
*** , as approved in writing by Landlord
<PAGE> 53
b. Distribution and/or branch circuit panels.
c. Dry-type transformers for electrical power other than
480 volt, 3 phase/60hz/4 wire. All transformers shall
be floor-mounted on vibration isolators and contained
completely within the Premises.
d. Deleted
e. All Tenant wiring shall be copper, including the main
feeder.
f. Deleted
16. Fire Protection
Tenant shall furnish and install all required fire protection
equipment in the Premises.
17. Discipline
Tenant shall enforce strict discipline and good order among
the employees of Tenant's contractors.
18. Character of Employees
Tenant shall not employ any unfit person or anyone not skilled
in the work he or she is performing, or any workman who is
incompatible with the balance of the work force, or who may
cause, or seek to cause, labor disputes or work stoppages.
19. Clean-Up
Tenant shall maintain the Premises in a clean and orderly
condition at all times. Tenant shall deposit all unused
construction material daily in dumpsters provided by Landlord.
Flammable waste must be confined to covered metal containers
and removed daily by Tenant.
All construction material, equipment, fixtures, merchandise,
or other Tenant materials must be contained within the
Premises. Malls, courts, arcades, public corridors, service
corridors and the exterior of the project shall be kept clean
at all times. Any construction material, equipment, tools,
fixtures, merchandise, or
Underground Atlanta
March 29, 1988
Page 8 of 13
<PAGE> 54
other Tenant material not contained in the Premises may be
disposed of by Landlord at Tenant's expense as described in
Section D herein. Items so disposed of will be deemed to be of
no monetary value and no compensation will be made for items
so disposed.
20. Tenant Deliveries
Tenant shall be responsible for scheduling (including
coordination with Landlord of all deliveries to the Premises
including, without limitation, receipt, checking, inspection
and payment for all labor (including, but not limited to
overtime, demurrage and waiting time) and equipment required
to receive materials and move them to the Premises. See
Section D herein.
21. Violations
In the event Tenant is notified of any violations of codes, or
ordinances, or regulations, either by the jurisdictional
authorities or by Landlord, Tenant shall stop such violation
immediately and shall correct such violations within seven (7)
calendar days from such date of notification. In the event
Tenant fails to correct such violations within seven (7)
calendar days, Landlord may, at Landlord's sole option,
correct such violations and Tenant will reimburse Landlord for
the correction of such violations at Landlord's actual cost
plus fifteen percent (15%) cost of administration.
D. WORK BY LANDLORD IN PREMISES AT TENANT'S EXPENSE:
DELETED IN ITS ENTIRETY
Underground Atlanta
March 29, 1988
Page 9 of 13
<PAGE> 55
Deleted
Underground Atlanta
March 29, 1988
Page 10 of 13
<PAGE> 56
E. PROCEDURES:
Paragraphs 1-5 DELETED
Underground Atlanta
March 29, 1988
Page 11 of 13
<PAGE> 57
6. Within ten (10) calendar days after the issuance of
notification that the Premises are available for Tenant to
start construction, Tenant will start construction after first
having obtained final approval of submissions by Landlord and
all necessary permits from the jurisdictional authorities and
having further deposited with Landlord certificates of
insurance as described below. Tenant shall require any
contractor performing work in the Premises to take out and
keep in force, at no expense to Landlord, the following
insurance coverage, showing Landlord as an additional insured.
a. comprehensive general liability insurance, including
contractor's liability coverage, contractual
liability coverage, completed operations coverage,
broad form property damage endorsement and
contractor's protective liability coverage, to afford
protection, with limits for each occurrence, of not
less than Three Million Dollars ($3,000,000.00) with
respect to personal Injury or death, and One Million
Dollars ($1,000,000.00) with respect to property
damage;
b. comprehensive automobile liability insurance with
limits for which occurrence of not less than One
Million Dollars ($1,000,000) with respect to personal
injury or death and Five Hundred Thousand Dollars
($500,000) with respect to property damage; and
c. Worker's Compensation or similar insurance in form
and amounts required by law.
7. Tenant shall commence and complete all work within the
Premises as expeditiously as possible.
8. Landlord's work is limited to that specified in this Schedule
B. Tenant is required to make all improvements to the Premises
in accordance with Tenant's approved plans, except those which
Landlord is specifically required to make hereunder.
9. No work performed by Tenant pursuant to this Lease, whether in
the nature of erection, construction, alteration or repair,
shall be deemed to be for the immediate use and benefit of
Landlord so that no mechanic's or other lien shall be allowed
against the estate of Landlord by reason of any consent given
by Landlord to Tenant to
Underground Atlanta
March 29, 1988
Page 12 of 13
<PAGE> 58
improve the Premises. Tenant shall place such contractual
provisions as Landlord may request in all contracts and
subcontracts for Tenant's improvements assuring Landlord that
no mechanics' liens will be asserted against Landlord's
interest in the Premises or the property of which the Premises
are a part. Tenant shall pay promptly all persons furnishing
labor or materials with respect to any work performed by
Tenant or its contractors on or about the Premises. If any
mechanics' or other liens shall at any time be filed against
the Premises or the property of which the Premises are a part
by reason of work, services or materials performed or
furnished, or alleged to have been performed or furnished, to
Tenant or to anyone holding the Premises through or under
Tenant, Tenant shall forthwith cause the same to be discharged
of record or bonded to the satisfaction of Landlord. If Tenant
shall fail to cause such lien forthwith to be so discharged or
bonded after being notified of the filing thereof, then, in
addition to any other right or remedy of Landlord, Landlord
may bond or discharge the same by paying the amount claimed to
be due, and the amount so paid by Landlord, Including
reasonable attorneys' fees incurred by Landlord either in
defending against such lien or in procuring the bonding or
discharge of such lien, together with interest thereon at the
Default Rate, shall be due-and payable by Tenant to Landlord
as Additional Rental.
10. If for any reason Tenant shall fail to pay any amounts due
herein, then, in addition to any other remedies available to
Landlord pursuant to the Lease, upon the commencement of the
Term, such amounts, together with interest thereon at the
Default Rate, shall be due and payable by Tenant to Landlord
as Additional Rental.
11. "Landlord's approval" as used herein shall mean acceptable to
Landlord in accordance with Schedules B, C and C-1 and does
not mean, nor can it be construed to mean, acceptability
relative to any codes, ordinances or other requirements placed
upon Tenant by any source other than Landlord.
Underground Atlanta
March 29, 1988
Page 13 of 13
<PAGE> 59
<TABLE>
<S> <C>
General Criteria 2
DELETE
HVAC Schedule 8
Piping Diagram 9
DELETE
Electrical Design Criteria 13
Electrical Schedules 17
Special Area Criteria:
DELETE
DELETE
Retail Shops 26
</TABLE>
<PAGE> 60
GENERAL CRITERIA
1. The Tenant's engineer shall refer to Schedule 8, "Description of
Landlord and Tenant Work"; Schedule C "Design Criteria for Tenant
Improvements", and this schedule for submission requirements. All
Tenant improvements are subject to Landlord's approval and must conform
to both the GENERAL CRITERIA and the applicable SPECIAL AREA CRITERIA.
2. All plans, specifications and calculations shall be prepared under the
supervision of a Registered Professional Engineer holding a current
valid registration in the State of Georgia, in the applicable field of
engineering.
3. All work shall be done in accordance with the requirements of the
Landlord's insurance carrier, NFPA Standards, and all applicable codes
and regulations. Additionally, food service facilities must adhere to
the pertinent Department of Health regulations, Sanitary Codes, and all
other applicable codes.
Certain code required items are mentioned in these criteria for
emphasis only. All applicable code requirements not mentioned also
apply to the work.
4. The design and appearance of all light fixtures and exposed ductwork
and piping which are visible from the public areas or Tenant sales area
are critical to the overall visual effect, and are subject to detailed
review and approval by the Landlord.
5. All piping and ductwork is to be installed as high as reasonably
possible. All holes through structural members must be approved in
writing by Landlord prior to the start of any work.
6. All openings through structurally-supported slabs must be corebored,
sleeved, grouted, sealed and made water roof. Sleeves, except for water
closets, must extend at least two inches (2") above the finished floor.
Waterproofing must be inspected and approved by the Landlord before any
flooring material Is installed. Tenant Is responsible to take whatever
measures are necessary including but not limited to those measures
prescribed by Landlord in the exercise of its reasonable judgement to
assure that coreboring will not damage Landlord's structure, conduits,
etc or the work of other Tenant's below. The costs of such tests or
repair of any damage will be borne by the Tenant.
7. Noise and Vibration Control: All equipment installed by Tenant shall be
provided with vibration isolators, sound traps, duct lining, acoustic
housings, acoustical louvers and other noise and vibration control
apparatus required to limit sound intrusion into adjacent spaces
accordingly:
a. Intrusive noise levels in adjacent spaces shall not exceed
NC-25 when measured in these spaces.
2
<PAGE> 61
b. Tenant equipment noise emitted to the exterior shall not
exceed 55 d8A in any occupied exterior space.
c. Tenant shall provide vibration isolation of ductwork, piping
and equipment in accordance with practices described in
Chapter 32 of the 1984 ASHRAE System Handbook so that the
numerical difference between fat and C-Scale measurements made
in adjacent spaces does not exceed 5 decibels.
Test for Noise and Vibration Control. At any time within the first six
months of occupancy or within the first six months after installation
of any new equipment which produces noise and vi oration, the Landlord
may request a Lest by an acoustical consultant of his choice to verify
compliance with tie above minimum acoustical requirements. Should
Tenant be in compliance, tee Owner will pay the costs of the testing.
Should Tenant not be in compliance, Tenant will pay costs of the
initial testing, shall make whatever changes are required to bring the
installation into compliance end shall pay the costs of all subsequent
testing oy an acoustical consultant approved by the Owner to verify
compliance.
8. The Tenant design team is required to visit the site and verify field
conditions which may affect the design.
3
<PAGE> 62
HVAC DESIGN CRITERIA - DELETE
4
<PAGE> 63
HVAC DESIGN CRITERIA - DELETE
5
<PAGE> 64
HVAC DESIGN CRITERIA - DELETE
6
<PAGE> 65
HVAC DESIGN CRITERIA - DELETE
7
<PAGE> 66
TENANT HVAC DATA
TENANT HVAC DATA
(TO BE FILLED IN By TENANT'S ENGINEER)
Tenant:__________________________ Space No. _______ GLA _________
_________________________________________________________________
LOAD ITEM
_________________________________________________________________
Lighting _______________ KW
Equipment _______________ KW
Peak Cooling Load:
Sensible _______________ Btu/Hr.
Latent _______________ Btu/Hr.
Peak Heating Load _______________ Btu/Hr.
Calculated Air Quantity _______________ CFM
Calculated Static Pressure _______________ IN. WAT.
Calculated Ventilation Air _______________ CFM
Air Conditioning Unit Selection (Provide the following data for
each type selected.)
Quantity _______________
Manufacturer _______________
Model No. _______________
EER _______________
Sound Rating (DB) _______________
Condenser Water Flowrate ____________ GPM
Total Exhaust Quantity _______________ CFM
Static Pressure
_______________ IN. WAT.
Automatic Flow Control
Valve Selection _______________ GPM
PREPARED BY: _____________________ SIGNATURE ____________________
STATE OF GEORGIA PROFESSIONAL ENGINEER LICENSE NO._______________
FIRM _________________________________ DATE _____________________
TEL. NO. _____________________________
SEAL
8
<PAGE> 67
TYPICAL ACU PIPING DIAGRAM
[MECHANICAL DRAWING]
9
<PAGE> 68
PLUMBING
PLUMBING DESIGN CRITERIA
DELETED IN ITS ENTIRETY
10
<PAGE> 69
PLUMBING
PLUMBING DESIGN CRITERIA
DELETED IN ITS ENTIRETY
11
<PAGE> 70
PLUMBING
PLUMBING DESIGN CRITERIA
DELETED IN ITS ENTIRETY
12
<PAGE> 71
ELECTRICAL
ELECTRICAL DESIGN CRITERIA
1. The maximum demand of the Tenant's electrical system shall not exceed
the maximum allowable demand given under the Special Criteria for the
applicable area without prior approval by the Landlord. The Tenant will
be subject to substantial additional charges for exceeding the
allowable demand. Tenant electrical work shall be based on the design
conditions which follow.
2. Materials, products and equipment, including components thereof, shall
be new and be identified by Underwriter's Laboratories, Inc. as
suitable for the purpose, and shall meet the requirements of the
National Electrical Code and of local authorities having jurisdiction.
Materials, products and equipment, including components thereof, shall
be sized in conformity with the requirements of the National Electrical
Code and shall meet the requirements of other recognized standards,
such as ASTM, IEEE, IPCEA, NFPA and NEMA, where the requirements of
such standards are more stringent than those cited above.
3. Electrical service provided for the Tenant will be 277/480 volts, three
phase, four wire, or in the case of open-air Market Tenants' 120 volt
receptacles, as defined under the Special Criteria for the applicable
area. Tenant will provide his own transformer for other voltage he may
require. Transformer installations shall conform to NEC and local code
requirements with respect to location, mounting, grounding and
overcurrent protection.
4. For all Tenants, with the exception of open-air Market Tenants, the
Landlord will provide a 277/480 volt service consisting of a fusible
switch or current breaker and a meter socket located in the meter room.
From the service point, the Landlord will provide an empty conduit
sized to accommodate the maximum allowable Tenant load to a point
within the Tenant's space. The Tenant shall provide feeder conductors,
a disconnect switch for his service in his space and shall provide all
wiring and electrical equipment in his space.
5. All conductors shall be soft-drawn annealed copper. Minimum size shall
be #12 for power wiring and #14 for control wiring. Wire shall be 600
volt insulated, NEC type THW, or THHN/THWN. All wire shall be run in
rigid conduit or EMT. The use of type AC cable will be permitted in dry
retail Tenants.
6. Where the Tenant provides distribution and lighting panelboards within
his space they shall be of the three phase four wire distributed
phasing type. Tenant's circuiting shall be arranged to present, as
nearly as possible, an evenly balanced load on all phases. Panelboards
shall be circuit breaker type. All circuit breakers shall have
interrupting capacity at least 10% greater than the available fault
current at the breaker location. Available fault current will be stated
on the Tenant's panelboard schedule.
13
<PAGE> 72
ELECTRICAL
7. All electrical work shall be installed* Deleted
8. Grounding shall consist of copper conductors in conduit with bolted or
brazed connection to cold water line for 120/208 volt neutral.
Grounding and bonding shall comply with NEC Article 250. All metallic
raceways shall be grounded.
9. Contractors for control of show window lighting and signs shall be
Automatic Switch Company Bulletin 920 series, enclosed, electrically
operated and mechanically held, or equivalent. Time switches for
control of show window lighting and signs shall be Sangamo Electric
Company Type L-12 or equivalent.
10. Manual motor starters with overload protection may be used for
fractional horsepower motors. Single phase starters shall be Square D
or equivalent. Three-phase starters shall be provided with overload
relay in each phase. Magnetic motor starters shall be used for integral
horsepower motors. Combination starters, when used shall contain
fusible switches. Reduced voltage starters shall be used for all motors
100 HP and larger. All magnetic motor starters shall have a control
transformer, HOA switch and red pilot light.
11. Lighting fixtures shall be as follows: Incandescent fixtures shall be
as required by the Tenant and shall be selected so as not to produce,
in the Landlord's opinion, objectionable glare. HID (metal halide,
mercury vapor or high pressure sodium) lamps will not be allowed.
Tenant's engineer shall refer to Schedule C, Special Criteria, for
specific light fixture and signage lighting requirements. Fluorescent
fixtures, where permitted, shall be either rapid start or slimline
lamps with high power factor ballast individually fused. All ballasts
for 4 foot fluorescent lamps shall be the high efficiency type. Preheat
and/or trigger start fixtures shall be used only in special
applications requiring lamps less than four feet in length.
12. Motors shall be designed to latest NEMA Standards. Motors rated 3/4 HP
and larger shall be 460 volt, three phase. Motors rated less than 3/4
HP shall be 115 volt, single phase.
14
* in accordance with the Lease and per approved Plans and Specifications.
<PAGE> 73
ELECTRICAL
13. Water heaters in Tenant spaces rated less than 5,000 watts may be 120
volts single phase, or 208 volts single phase or 277 volts single
phase. Those rated 5,000 watts to 7,000 watts inclusive shall be 277
volts single phase or 480 volts single phase. Those larger than 7,000
watts shall be 430 volts three phase.
14. Quick recovery type not water heaters will not be permitted.
15. The Tenant's estimated maximum demand load shall be based on the
summation of:
a. 100% of the air conditioning and ventilation load (the greater
load of cooling or heating);
b. The percentage of the connected load for kitchen equipment,
including refrigerators, freezers, etc.; in accordance with
Article 220-20 of the NEC;
c. 100% of the connected load for electric water heaters;
d. 100% of connection lighting load (based on lamp wattage for
incandescent lamps and watts input to the ballast for
fluorescent lamps);
e. 65% of the connected load of all appliances not mentioned
above;
f. Base equipment connected load on nameplate volt-amperes;
9. Receptacles as per NEC.
16. Load data indicated in Item 15 shall be listed on the "TENANT
ELECTRICAL DATA" form - a copy of which is included in this schedule on
page 17.
17. Tenant shall perform all electrical work in accordance with the
National Electrical Code and all applicable local codes and in
accordance with good engineering practice. All calculations shall
conform to the appropriate articles in the National Electrical Code.
Calculations shall include all branch circuits and feeder (service)
tabulation.
18. Deleted
15
<PAGE> 74
ELECTRICAL
19. Deleted
16
<PAGE> 75
TENANT SERVICE REQUIREMENT ELECTRICAL
TO BE SUPPLIED AND CONSISTS OF PAGES # 17, 18 & 19
17
<PAGE> 76
3. RETAIL SHOPS
HVAC
Retail Tenants provide their own complete water cooled air conditioning
systems. Landlord provides condenser cooling water at 88 degrees F at
outside design temperature at 94 degrees F DB and 74 degrees F WB
(coincidental) to be returned at no higher than 99 degrees F. Each
Tenant will be supplied condenser water with a pressure differential of
at least 13 psig at the point of connection at the Tenant premises and
at a maximum flow of 0.015 gpm/sq. ft.
PLUMBING
Water connection - 3/4"
Sewer connection - 4"
Vent connection - 3"
ELECTRICAL
Power shall be supplied at 277/480 volts, 3 phase, 4 wire - maximum 15
watts per square foot of GLA. A significant charge will be made if this
is exceeded.
<PAGE> 77
EXHIBIT C
DETV Routing for Emergency Notification
(Prioritized Order)
1. Edward Anderson
V.P. Operations
(0) 404-524-8600
(H) 770-451-4279
(email) [email protected]
2. Tyrone Johnson
President
(0) 404-524-8600
(H) 770-587-1077
(email) [email protected]
3. Robert Martinez
CFO
(0) 404-878-7373 x 125
(H) 404-814-9788
4. Elyce Strong
Associate Producer
(0) 404-524-8800
(H) 770-435-0573
(email) [email protected]
5. Eric Van Atta
Vice-President
(0) 404-876-7373 x 115
(H) 404-836-7931
DETV Studio/Office Address
- --------------------------
The Olympia Building
Loft Studio A
Eight Decatur Street
Atlanta, GA 30303-2907
404-524-8600
VCN/American Artists Entertainment Corporation Address
- ------------------------------------------------------
1245 Fowler Street
Atlanta, GA 30318
404-876-7373
<PAGE> 78
UNDERGROUND ATLANTA ROUTING FOR EMERGENCY NOTIFICATION
UNDERGROUND ATLANTA
SECURITY
404-523-3407
GEOFFREY GRIFFITH
Shopping Center Manager
(H) 770-973-7862
(0) 404-614-3211
(0) 404-295-6699
MARLA ELLIS
Senior Marketing Manager
(H) 404-255-8108
(0) 404-523-2311
WILLIAM J. BERG
Legal Counsel
(H) 770--396-1072
(0) 404-237-4100
EXHIBIT C
<PAGE> 79
AGREEMENT
THIS AGREEMENT (the "Agreement") is made and entered into this 16th day
of February, 1989, by and among Underground Festival, Inc., a Georgia
corporation (hereinafter referred to as "UFI"), Underground Festival Development
Company, a Georgia corporation (hereinafter referred to as "UFDC"),
Rouse-Atlanta, Inc. , a Maryland corporation (hereinafter referred to as
"Rouse"), The Rouse Company of Georgia, a Maryland corporation (hereinafter
referred to as "TRC Georgia"), The Rouse Company, a Maryland corporation
(hereinafter referred to as "TRC"), Kinley Enterprises, Inc., a Georgia
corporation (hereinafter referred to as "Kinley") , H. J. Russell & Company, a
Georgia corporation (hereinafter referred to as "Russell") Underground Atlanta
Joint Venture, a general partnership composed of Rouse, Kinley and Russell
(hereinafter referred to as "UAJV"), and The Coca-Cola Company, a Delaware
corporation (hereinafter referred to as "TCCC").
W I T N E S S E T H:
WHEREAS, UFDC has undertaken certain obligations as master developer of
a real estate development project on Atlanta, Georgia known as "Underground
Atlanta"
WHEREAS, UFDC, UFI, the City of Atlanta, Georgia, the Downtown
Development Authority of the City of Atlanta. Georgia, and UAJV have entered
in-to a certain Development Agreement, dated October 7, 1986, with respect to
the development of said project, and UFI and UAJV have entered into a certain
Management Agreement, dated September 8, 1988, with respect to the management
and operation of said project;
WHEREAS, Rouse is a wholly-owned subsidiary of TRC Georgia, and TRC
Georgia is a wholly-owned subsidiary of TRC;
WHEREAS, TCCC desires to assist in the success of Underground Atlanta
by building at its own expense "The World of Coca-Cola" a one-of-a-kind
attraction dedicated to the century-old relationship between TCCC and its
consumers which comprises a 45,000-square-foot, four story facility to be built
adjacent to Underground Atlanta, on a site subleased by UFI from the City of
Atlanta at the corner of Central Avenue and ilartin Luther King, Jr. Drive"'
(said site hereinafter referred to as the "TCCC Premises")
WHEREAS, UFI desires that TCCC enter into a Sublease ("TCCC Sublease")
for the lease of the TCCC Premises;
EXHIBIT D
<PAGE> 80
WHEREAS, in consideration for TCCC's lese of the TCCC Premises and the
construction and maintenance of the World of Coca-Cola facility on the TCCC
Premises, UFI ahs agreed to use its best efforts to include within the leas
agreements ("Tenant Agreements") by and between UFI, as landlord, and
prospective tenants of Underground Atlanta ("Project Tenants") the provision
more particularly described in Section 1.00 of this Agreement (the "TCCC
Provision"); and
WHEREAS, in connection with the TCCC Provision, TCCC has agreed to
indemnify the other parties to this Agreement as more fully set forth in this
Agreement.
NOW, THEREFORE, for and in consideration of the sum of TEN AND NO/l00
DOLLARS ($10.00) and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto do hereby agree
as follows:
Section 1.00. UFI hereby agrees to use its "best efforts," as
hereinafter defined, to require all Project Tenants (as defined in the
Commercial Facilities Sublease) to accept the following TCCC Provision in any
applicable Tenant Agreement:
Sale of Beverages. Tenant hereby covenants and agrees that:
(a) as long as Tenant offers for sale at the Premises any
carbonated soft drink or carbonated non-alcoholic beverage
whatsoever in the sugar containing "cola" category other than
the beverage Coca-Cola classic, Tenant shall also in good
faith promote and make available for sale at the premises
during the Term the beverage Coca-Cola classic or any
successor product thereof;
(b) as long as Tenant offers for sale at the Premises any diet
carbonated soft drink or diet carbonated non-alcoholic
beverage whatsoever other than the beverage diet Coca-Cola,
Tenant shall also in good faith promote and make available for
sale during the Term the beverage diet Coca-Cola or any
successor product thereof; and
(c) as long as Tenant offers for sale at the Premises any
carbonated soft drink or carbonated non-alcoholic beverage
whatsoever in the lemon and/or lime category other than the
beverage Sprite, Tenant shall also in good faith promote and
make available for sale during the Term the beverage Sprite or
any successor product thereof.
Nothing in this Agreement is intended or shall be construed to prohibit
Tenant from selling at the Premises any
2
EXHIBIT D
<PAGE> 81
carbonated soft drink or carbonated non-alcoholic beverage or from
selling or not selling any such carbonated soft drinks or carbonated
non-alcoholic beverages at any particular price or range of prices.
Tenant hereby further acknowledges and agrees that the foregoing
provision constitutes a reasonable condition upon Tenant's use and
operation of the Premises benefiting Landlord, Tenant and The Coca-Cola
Company.
Advertisement of Beverages. During the Term, including any
renewal or extension thereof, Tenant shall not display within
Underground Atlanta any advertising for any soft drinks that compete
with the soft-drink products of The Coca-Cola Company except on a menu
board and/or the point of dispensing of such competitive products.
Tenant hereby covenants and agrees that Tenant shall not distribute or
serve soft drinks that compete with the soft-drink products of The
Coca-Cola Company in any cup or other container bearing the logo of or
advertising for such competitive soft drink or the manufacturer of such
competitive soft drink.
For purposes of this Section 1.00, UFI's best efforts shall include
providing each Project Tenant who has signed a Tenant Agreement prior to the
date hereof with an amendment form to the project Tenant Agreement incorporating
the TCCC Provision, providing each prospective Project Tenant with the TCCC
Provisions to be included as a material part of the applicable Tenant Agreement,
using good faith efforts to persuade each Project Tenant or prospective Project
Tenant to accept the TCCC Provision, and thereafter using reasonable good faith
efforts to enforce the terms of the TCCC Provision. Additionally, UFI shall
notify TCCC or a representative designated by TCCC if a Project Tenant or
prospective project Tenant refuses to accept the TCCC Provision and shall allow
TCCC or such representative to meet with such Project Tenant or prospective
Project Tenant to attempt to resolve the issue in good faith and in a manner
that does not aversely affect the relationship between the Project Tenant and
UFI or its agents. Further, any Tenant Agreement entered into after the date of
this Agreement that does not include the TCCC Provision shall be reviewed and
approved by the Board of Directors of UFI prior to its extension. In no event,
however, shall the foregoing best efforts obligation require UFI to provide
monetary or other concessions to any Project Tenant in an attempt to cause such
project Tenant to agree to the TCCC Provision.
3
EXHIBIT D
<PAGE> 82
Section 2.00 The parties to this Agreement further agree to grant to
TCCC the exclusive privilege of advertising soft-drink products within the
common areas of Underground Atlanta during the term of the TCCC Sublease,
subject to the rights of the Project Tenants described in the provision relating
to Advertisement of Beverages in Section 1.00 hereof, and further subject to
UFI's control of the common areas as landlord.
Section 3.00(a) TCCC hereby agrees to and does hereby indemnify and
hold free and harmless UFI, UFDC, UAJV, Rouse, Kinley, Russell, TRC
Georgia, TRC and each of their respective directors, officers, agents
employees, attorneys, successors and assigns (each such person being
hereinafter referred to as "Indemnitee" for purposes of this
Agreement), from and against any and all liabilities, losses, costs,
damages or expenses of any kind or nature whatsoever (collectively the
"Losses and Expenses") suffered or incurred by any Indemnitee resulting
from a complaint, claim or legal action (or the threat of any of the
foregoing) arising directly out of an allegation that the TCCC
Provision, or any variation thereof which pertains to TCCC, constitutes
a violation of any local, state or federal law.
(b) TCCC shall assume full responsibility and expense of
investigation, litigation, negotiation and settlement of any such
complaint, claim or legal action, provided that the Indemnitee gives
TCCC reasonable notice in writing of such complaint, claim or legal
action and permits TCCC, through legal counsel appointed by TCCC and
reasonably acceptable to such Indemnitee, to defend same. Indemnity
have the right to participate at its own expense. TCCC shall pay all
judgments, damages, profits, interest, attorneys' fees and costs levied
against or incurred by Indemnitee in connection with any such
complaint, claim or legal action. TCCC shall be given reasonable
assistance, if requested, at TCCC's expense, in the defense of such
complaint, claim or legal action. TOSS shall provide prompt notice in
writing to the Indemnitee of any such complaint, claim or legal action
of which TOSS becomes aware other than through notification by the
Indemnitee.
(c) TCCC shall promptly advise Indemnitee in writing of any
proposed settlement or adjustment of any claim sufficiently in advance
to give Indemnitee a reasonable opportunity to raise any questions or
objections it may have as to such proposed settlement or adjustment,
and TCCC or its insurer shall not make any settlement or adjustment
which shall be prejudicial to the interests of Indemnitee
4
<PAGE> 83
without the prior written consent of the Indemnitee, which consent
shall not be unreasonably withheld.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date and year first hereinabove written.
Sworn to and subscribed THE COCA COLA COMPANY.,
before me this 13th day a Delaware corporation
of March, 1989:
/s/ Ann House By: /s/ Carlton Curtis
- ------------------------------------- --------------------------------
Notary Public
Name: Carlton Curtis
--------------------------
My Commission Expires
Title: VP, Corporate Comm.
[SEAL] -------------------------
- -------------------------------------
Sworn to and subscribed UNDERGROUND FESTIVAL, INC.,
before me this 3rd day a Georgia corporation
of March, 1989:
/s/ Susie Gober By: /s/ Joseph G. Martin, Jr.
- ------------------------------------- --------------------------------
Notary Public Joseph G. Martin, Jr.
President
My Commission Expires
[SEAL]
- -------------------------------------
Sworn to and subscribed UNDERGROUND FESTIVAL,
before me this 3rd day DEVELOPMENT COMPANY, a Georgia
of March, 1989: corporation
/s/ Susie Gober By: /s/ Joseph G. Martin, Jr.
- ------------------------------------- -------------------------------
Notary Public Joseph G. Martin, Jr.
President
My Commission Expires
[SEAL]
- -------------------------------------
5
EXHIBIT D
<PAGE> 84
Sworn to and subscribed ROUSE - ATLANTA, INC.,
Before me this 17th day a Maryland corporation
Of February, 1989:
Elizabeth A. Horne By: /s/ Robert M. Cameron
- -------------------------- --------------------------------
Notary Public Name Robert M. Cameron
---------------------------
My Commission Expires Title Vice President
---------------------------
7-1-90
- --------------------------
Sworn to and subscribed THE ROUSE COMPANY OF GEORGIA, INC.,
Before me this 17th day a Maryland corporation
Of February, 1989:
Elizabeth A. Horne By: /s/ Robert M. Cameron
- -------------------------- --------------------------------
Notary Public Name Robert M. Cameron
---------------------------
My Commission Expires Title Vice President
---------------------------
7-1-90
- --------------------------
Sworn to and subscribed THE ROUSE COMPANY,
Before me this 17th day a Maryland corporation
Of February, 1989:
Elizabeth A. Horne By: /s/ Robert M. Cameron
- -------------------------- --------------------------------
Notary Public Name Robert M. Cameron
---------------------------
My Commission Expires Title Vice President
---------------------------
7-1-90
- --------------------------
Sworn to and subscribed KINLEY ENTERPRISES, INC.,
Before me this 21st day a Georgia corporation
Of February, 1989:
Gladys Wesley By: /s/ Mack Wilbourn
- -------------------------- --------------------------------
Notary Public Name Mack Wilbourn
---------------------------
My Commission Expires Title President
---------------------------
[SEAL]
- --------------------------
6
EXHIBIT D
<PAGE> 85
Sworn to and subscribed H.J. RUSSELL & COMPANY,
before me this 2nd day a Georgia corporation
of March, 1989:
/s/ Linda F. Jones By: /s/ Egbert Perry
- ------------------------------------ --------------------------------
Notary Public Name Egbert Perry
---------------------------
[SEAL] Title President
- ------------------------------------ ---------------------------
Sworn to and subscribed UNDERGROUND ATLANTA JOINT
before me this 17th day VENTURE, a general partnership
of February, 1989: a Delaware corporation
/s/ Elisabeth A. Horne
- ------------------------------------ By: ROUSE - ATLANTA, INC.,
Notary Public managing partner
My Commission Expires By: /s/ Robert M. Cameron
--------------------------------
Name Robert M. Cameron
7-1-90 ---------------------------
- ------------------------------------ Title Vice President
---------------------------
7
EXHIBIT D
<PAGE> 1
Exhibit 10.68
AMENDMENT AGREEMENT
This Amendment Agreement is made and entered into as of this 15th day
January 1998 by and among VIDEO COMMUNICATIONS NETWORK, LLC (the "Company"), a
Georgia limited liability company, and the undersigned members ("Members") of
the Company.
RECITALS:
A. The Members entered into an Operating Agreement dated August 20, 1997,
for the purpose of, among other things, organizing the Company as a Georgia
limited liability company and providing for the Members' respective
contributions to the capital of the Company and resulting ownership of shares
("Limited Liability Company Shares" or "LLC Shares").
B. The Members have decided to amend and revise the allocation of LLC
shares ownership among themselves effective as of the date of the Original
Agreement, without changing the aggregate number of Ordinary LLC Shares and
Deferred LLC Shares.
AGREEMENTS:
In consideration of the Recitals, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties agree as follows:
1. Amendment. The Original Agreement is hereby amended by deleting
Exhibit A thereof in its entirety and substituting in lieu thereof the new form
of Exhibit A that is attached as Exhibit A to this Amendment Agreement.
2. Company Consent; Capital Accounts. The Company consents to the revised
allocation of ownership of its LLC Shares in the substituted form of Exhibit A.
The Members will immediately adjust their respective capital contributions to
the Company to conform to the revised allocation of Ordinary LLC Shares
stipulated in the substituted form of Exhibit A.
3. No Other Change. Except as provided in Paragraph 1 above, the Original
Agreement shall remain in full force and effect in accordance with its terms.
<PAGE> 2
IN WITNESS WHEREOF, the parties have caused this Amendment Agreement to be
duly executed and affixed their seals.
AMERICAN ARTISTS FILM CORPORATION
(CORPORATE SEAL)
By: /s/ Steven D. Brown
--------------------------------
Authorized Officer
/s/ Tyrone C. Johnson (SEAL)
--------------------------------------
Tyrone C. Johnson
/s/ Glen C. Warren (SEAL)
--------------------------------------
Glen C. Warren
/s/ Malcolm C. Davenport (SEAL)
--------------------------------------
Malcolm C. Davenport, V
/s/ Ben E. Noble (SEAL)
--------------------------------------
Ben E. Noble
/s/ John W. Boyd, M.D. (SEAL)
--------------------------------------
John W. Boyd
VIDEO COMMUNICATIONS NETWORK, LLC
(COMPANY SEAL)
By: /s/ Tyrone C. Johnson
-----------------------------------
Authorized Officer
2
<PAGE> 3
EXHIBIT A
to Operating Agreement, as amended, of
VIDEO COMMUNICATIONS NETWORK, LLC.
a limited liability company
organized under the laws of Georgia
<TABLE>
<CAPTION>
Name, address and federal Ordinary Deferred Capital
tax identification number LLC Shares LLC Shares Contribution
of initial Members Received Received by Member
------------------ -------- -------- ---------
<S> <C> <C> <C> <C>
1. American Artists Film 7,890 0 $789.00
Corporation
1245 Fowler St., NW
Atlanta, GA 30318
Tax I.D. No.: 43-1717111
2. Tyrone C. Johnson 0 1,000 50.00
1245 Fowler St., NW
Atlanta, GA 30318
Soc. Sec. No.: ###-##-####
3. Glen C. Warren 444 0 44.40
10 Lakeland Circle
Jackson, MS 39211
Soc. Sec. No.: ###-##-####
4. Malcolm C. Davenport, V 222 0 22.20
1120 N. 18th Street
Lanett, AL 36863
Soc. Sec. No.: ###-##-####
5. Ben E. Noble 222 0 22.20
3261 Lenox Rd., N.E.
Atlanta, GA 30324
Soc. Sec. No.: ###-##-####
6. John W. Boyd 222 0 22.20
411 Cherokee Drive
McComb, MS 39648
Soc. Sec. No.: ###-##-####
----- ----- -------
Total 9,000 1,000 $950.00
===== ===== =======
</TABLE>
3
<PAGE> 1
Exhibit 10.69
$75,000.00 January 21, 1998
PROMISSORY NOTE
FOR VALUE RECEIVED, American Artists Film Corporation, a Missouri
corporation (herein called "Obligor"), hereby promises to pay to the order of
Ben E. Noble, a resident of Atlanta, Georgia (herein called "Holder"), in legal
tender of the United States, without grace, at his office located at P.O. Box
18769, Atlanta, Georgia 31126-0769, or at such other place as the Holder may
hereafter designate, the sum of Seventy-Five Thousand Dollars ($75,000.00)
together with simple interest on the unpaid balance of such principal amount
outstanding from time to time hereunder at an annual interest rate equal to
prime plus one percent (1%) per annum. All principal and any accrued but unpaid
interest will be due and payable on demand.
It is hereby expressly agreed that should any default be made in the
payment of principal or interest when due, the principal indebtedness evidenced
hereby and all interest accrued thereon shall, upon written demand, become due
and payable and may be collected forthwith. Notwithstanding any other provision
hereof to the contrary, Obligor shall not be deemed to be in default of payment
of principal or interest hereunder if such payment (the "Late Payment") is
received by Holder within ten (10) days following the date on which Obligor
receives written notice of said default.
Payment not made within ten (10) days of the due date shall bear interest
at the rate of prime plus one percent (1%) per annum from the original due date
until paid.
Time is of the essence of this Note, and in the event that this Note is
collected by law or through an attorney-at-law, the Obligor agrees to pay all
reasonable costs of collection.
This note is unsecured.
The Obligor shall be entitled, at any time, and from time to time, without
the consent of the Holder and without making any penalty or premium therefor, to
prepay all or any portion or portions of the outstanding principal amount
thereof.
This Note shall be governed as to the validity, interpretation,
construction, enforcement, effect, and in all respects by the laws and decisions
of the State of Georgia.
No delay or omission on the part of the Holder in exercising any rights
hereunder shall operate as a waiver of such right or any other rights under this
Note. A waiver on any occasion shall not be construed as a bar to or waiver of
any right or remedy on any future occasion.
IN WITNESS WHEREOF, the undersigned has caused these presents to be duly
executed under the seal on the date and year first above written.
"OBLIGOR"
By: /s/ Steven D. Brown
-------------------------------------
American Artists Film Corporation
1245 Fowler St., N.W.
Atlanta, Georgia 30318
"HOLDER"
/s/ Ben E. Noble
- ------------------------------------
Ben E. Noble
<PAGE> 1
Exhibit 10.70
[CNN LOGO AND LETTERHEAD]
AGREEMENT
This agreement when fully executed, shall constitute the understanding and
agreement between Cable News Network, Inc. ("CNN") and Diversity Entertainment
Television/Atlanta L.L.C. ("DETV/ATL") concerning the broadcast of CNN
programming on DETV/ATL's large screen video display located at Underground
Atlanta in Atlanta, Georgia (the "Display"). In exchange for good and valuable
consideration, the sufficiency and receipt of which are hereby acknowledged CNN
and DETV/ATL agree as follows:
1. THE PROGRAMMING. CNN will permit DETV/ATL to broadcast CNN Headline News news
segments (the "Programming") on the Display in accordance with the Headline News
Programming Schedule, attached hereto as Exhibit "A". Nothing in this Agreement
shall require CNN to produce programming specifically for DETV/ATL to fulfill
its obligations to provide the Programming hereunder.
2. DETERMINATION OF PROGRAMMING CONTENT: COPYRIGHT. CNN shall have absolute and
complete discretion, editorial and otherwise, with respect to the content and
production of the Programming, all segments included therein and the arrangement
of the segments. CNN shall have absolute discretion to determine the frequency
with which the Programming shall be updated or otherwise revised, consistent
with the parties' mutual objective for the Programming to remain generally
current. DETV/ATL agrees and acknowledges that the sole right of copyright in,
and all rights of copyright with respect to the Programming shall belong to CNN
and DETV/ATL shall not acquire or obtain any copyright or other proprietary or
ownership interests therein or thereto by virtue of the exercise by DETV/ATL of
the rights granted to it in this Agreement.
3. RESERVATION OF RIGHTS. DETV/ATL acknowledges that no rights are granted to
DETV/ATL with respect to the Programming except those rights expressly granted
in this Agreement All rights, licenses and interests in, to and with respect to
the Programming, the elements and parts thereof and the media of exhibition not
specifically granted to DETV/ATL are hereby reserved to CNN. DETV/ATL shall not
edit the Programming, remove any portions, or insert any materials in, the
Programming whatsoever.
4. FORCE MAJEURE. The transmission of the Programming is also subject to events
of force majeure (including, without limitation, fire flood, casualty, lockout,
strike, labor condition, unavoidable accident, national calamity, mechanical or
other breakdown of electrical or sound equipment, failure or delay on the part
of supplier, delay in or lack of transportation, export embargo, riot war, civil
commotion, act of God, the act of any legally constituted authority) or any
other interruption beyond CNN's reasonable control. In the event that any of the
Programming transmission is delayed as a result of the foregoing, CNN shall use
commercially reasonable efforts to transmit the Programming as soon as
practicable, but shall not be held liable to DETV/ATL for any failure to so
transmit the Programming, if CNN has made said commercially reasonable efforts.
5. THE DISPLAY. DETV/ATL shall, at its own cost and expense, pick-up the
satellite feed and cause to be broadcast on the Display the Programming and any
such "special reports" Programming created by CNN to which the parties may, from
time to time, agree. The Programming shall be broadcast on the Display
throughout each day along with the Promo Time (see below) and DETV/ATL shall
update the Programming each day in accordance with the Headline News Programming
Schedule provided in Exhibit "A". CNN shall have the right to prior approval of
all Display advertisers which advertise immediately before, during or
immediately following the Programming, such approval not to be unreasonably
withheld or delayed and to be given or denied
<PAGE> 2
within 24 business hours (business hours running 8:30am to 5:30pm ET Monday to
Friday, excluding statutory holidays) of receipt by CNN of a request for
approval from DETV/ATL. CNN shall approve all graphics, print and other
advertisements which may be used by DETV/ATL to advertise the broadcast of CNN
Programming on the Display. DETV/ATL warrants that all such programming shall be
consistent with DETV/ATL's then current standards and practices and shall not be
obscene, or defamatory, or derogatory to or critical of CNN or any officer,
director, agent, employee, affiliate, parent or subsidiary of CNN or of any
program or publication produced or distributed by CNN or any of the foregoing
entities. DETV/ATL shall direct all requests for approval under this Paragraph 5
to the attention of Jacquie Scheider or Danny Sullivan at CNN. A breach by
DETV/ATL of this paragraph 5 is a material breach of the contract.
6. CNN ADVERTISING. In exchange for the Programming, DETV/ATL shall broadcast on
the Display fifteen and/or thirty second (:15, :30) commercial or identification
segments for CNN, produced and supplied by CNN, so that a total of sixty seconds
of CNN commercials or identification segments are broadcast on the Display each
hour of its operation ("Promo Time"). Without limiting the foregoing, CNN may
also display the CNN logo and program identification throughout each segment of
CNN Programming. The Promo Time may be used by CNN, its parent, subsidiaries and
companies wholly owned by its parent or any division thereof. CNN may not resell
or assign the Promo Time to any other third party, however it may utilize the
Promo Time where spots involve a third party and include CNN, its parent,
subsidiary or any company wholly owned by its parent or any division thereof.
Where a spot involves a third party as above contemplated, DETV/ATL shall have
the right to approve that promotional spot prior to its broadcast on the
Display, such approval not to be unreasonably withheld or delayed and to be
given or denied within 24 business hours (business hours running 8:30am to
5:30pm ET Monday to Friday, excluding statutory holidays) of receipt of a
request for approval from CNN. CNN shall direct all requests for approval under
this Paragraph 6 to the attention of Tyrone Johnson at DEWY/ATL.
7. EXCLUSIVITY. DETV/ATL hereby grants to CNN the exclusive right to provide
national and international news programming for broadcast on the Display during
the term of this Agreement.
8. PRE-EMPTION. DETV/ATL may pre-empt the broadcast of Programming and Promo
Time on the Display, upon the occurrence of any force majeure, as previously
defined, or for scheduled maintenance of the Display, or where prior written
permission is obtained from CNN.
9. RIGHT OF FIRST REFUSAL. DETV/ATL hereby grants CNN a right of first refusal
with respect to the opportunity to provide Programming if DETV/ATL or one of its
affiliate or subsidiary companies establishes video displays in locations other
than that of Underground Atlanta. DETV/ATL shall give CNN written notice of its
intent to operate any such additional display, shall extend to CNN terms and
conditions similar to those set forth in this Agreement and CNN shall have sixty
(60) days from the date of receipt of such notice from DETV/ATL to accept such
opportunity in writing.
10. TERM. This Agreement shall commence on February 9, 1998 and run through and
including February 8, 1999 (the "Term"). Notwithstanding the foregoing, either
party may terminate this Agreement for any reason by giving ninety days prior
written notice thereof to the other, or immediately upon written notice to the
other party in the event the other materially breaches its obligations hereunder
and such breach is not cured within ten business days to the reasonable
satisfaction of the party giving notice.
2
<PAGE> 3
11. INDEMNITY. DETV/ATL shall indemnify, defend and hold CNN and its affiliates,
subsidiaries and parent, and their respective officers, directors, agents and
employees, harmless from and against any and all loss, cost, claims, damages,
liabilities, demands or expenses arising from or incident to DETV/ATL's
operation of the Display, except for any claim by a third party relating to the
content of the Programming. CNN shall indemnify, defend and hold harmless
DETV/ATL and its affiliates, subsidiaries and its parents and their respective
officers, directors, agents and employees, harmless from and against any and all
loss, cost, claims, damages, liabilities, demands or expenses arising from or
incident to the content and production of the Programming except for claims
arising as a result of any editing, modification or other unauthorized use of
the Programming by any of such indemnities, or the use of the Programming by any
of such indemnities other than in accordance with the rights expressly granted
to DETV/ATL in this Agreement. Each party may enter into subcontract
arrangements to perform their respective duties hereunder; provided, however,
that the subcontracting party shall remain responsible for its performance
herein and any such subcontract arrangement shall not relieve the subcontracting
party of any of its duties or obligations under this Agreement
12. NOTICES. Notices to DETV/ATL shall be made via first class mail, hand
delivery, express mail or facsimile to the address shown above. Notices to CNN
shall be made via first class mail, hand delivery, express mail or facsimile to
the Attention of Jacquie Scheider, Cable News Network, Inc., One CNN Center, Box
105366, Atlanta, GA 30348, with copies of all notices to Turner Broadcasting
System, Inc., Attention: Legal Department/CNN Advertising at the foregoing CNN
address.
13. HEADINGS. The headings contained in this Agreement are inserted solely for
convenience purposes and shall not affect the meaning or construction of this
Agreement.
14. MISCELLANEOUS. The terms and conditions of this Agreement constitute the
entire agreement between the parties with respect to the subject matter hereof
and supersede all prior agreements or understandings, whether written or oral,
between them concerning same.
A waiver of any breach of this Agreement or of any of the terms or conditions by
either party hereto shall not be deemed a waiver of rights of said party to
demand strict compliance with the terms hereof. No waiver by a party of any of
the terms or conditions of this Agreement in any instance shall be deemed or
construed to be a waiver of such term or condition in the future, or of any
subsequent breach of said provision or of any other provision in this Agreement.
All rights and remedies contained in this Agreement shall be cumulative and
shall not limit any other right or remedy to which a party may be entitled.
These terms and conditions will enure to the benefit of, and be binding upon,
the parties and their respective successors. Nothing contained herein shall
create any association, partnership, or agency or joint venture between the
parties. Neither party hereto shall represent itself as the associate, partner,
agent or joint venturer of the other in any way whatsoever. This Agreement may
not be assigned by DETV/ATL without the prior written consent of CNN.
This Agreement shall be interpreted according to the laws and decisions of the
State of Georgia, applicable to agreements made and to be performed therein. The
parties agree that the federal courts in the State of Georgia shall have
personal jurisdiction over the parties with respect to, and that venue shall be
proper in such courts with respect to, and that such courts shall be the
exclusive forum for the resolution of any matter or controversy arising from or
with respect to this Agreement.
Any of these terms and conditions which are prohibited or unenforceable in any
jurisdiction will, as to that jurisdiction, be limited in effect to the extent
of such prohibition or unenforceability without invalidating the remaining terms
and conditions or affecting their validity or enforceability in any other
jurisdiction.
3
<PAGE> 4
RECOMMENDATION FOR HEADLINE NEWS PROGRAMMING SCHEDULE
<TABLE>
<CAPTION>
Headline News Total
Programming Minutes Minutes Minutes
Time Minutes/Hour Mon - Fri Saturday Sunday
<S> <C> <C> <C> <C>
7am -- --
7:30am 15 75
8am -- --
8:30am 15 75
9am -- --
9:30am -- --
10am 30 150
10:30am -- --
11am -- --
11:30am -- --
12noon -- -- --
12:30pm 15 75 15 15
1pm -- -- --
1:30pm -- -- --
2pm 30 150 30 30
2:30pm -- -- --
3pm -- -- --
3:30pm -- -- --
4pm 30 150 30 30
4:30pm -- -- --
5pm -- -- --
5:30pm 15 75 15 15
6pm -- -- --
6:30pm 15 75 15 15
7pm -- -- --
7:30pm -- -- --
8pm 30 150 30 30
8:30pm -- -- --
9pm -- -- --
9:30pm -- -- --
10pm 30 150 30 30
10:30pm -- -- --
11pm -- -- --
11:30pm -- -- --
225 1,125 165 165
</TABLE>
WEEKLY PROGRAMMING MINUTES = 1,680
WEEKLY PROMOTIONAL ADVERTISING MINUTES = *109
*Not represented in above chart.
Equals one 60 second unit per hour per day.
<PAGE> 5
If this letter confirms your understanding of the agreement between us, please
indicate this by signing where indicated.
Sincerely,
CABLE NEWS NETWORK, INC.
By: /s/ Jacqueline Scheider
-------------------------------------
Its: Director, Domestic Marketing
------------------------------------
Date:02-09-98
-----------------------------------
CONFIRMED AND AGREED TO:
DIVERSITY ENTERTAINMENT TELEVISION/ATLANTA L.L.C.
By: Tyrone C. Johnson
-----------------------------------
Its: President & General Manager
----------------------------------
Date: 02/12/98
---------------------------------
4
<PAGE> 1
Exhibit 10.71
$75,000.00 February 28, 1998
PROMISSORY NOTE
FOR VALUE RECEIVED, American Artists Film Corporation, a Missouri
corporation (herein called "Obligor"), hereby promises to pay to the order of
John W. Boyd, a resident of McComb, Mississippi (herein called "Holder"), in
legal tender of the United States, without grace, at his office located at 411
Cherokee Drive, McComb, Mississippi, 39648, or at such other place as the Holder
may hereafter designate, the sum of Seventy-Five Thousand Dollars ($75,000.00)
together with simple interest on the unpaid balance of such principal amount
outstanding from time to time hereunder at an annual interest rate equal to
prime plus one percent (1%) per annum. All principal and any accrued but unpaid
interest will be due and payable on demand.
It is hereby expressly agreed that should any default be made in the
payment of principal or interest when due, the principal indebtedness evidenced
hereby and all interest accrued thereon shall, upon written demand, become due
and payable and may be collected forthwith. Notwithstanding any other provision
hereof to the contrary, Obligor shall not be deemed to be in default of payment
of principal or interest hereunder if such payment (the "Late Payment") is
received by Holder within ten (10) days following the date on which Obligor
receives written notice of said default.
Payment not made within ten (10) days of the due date shall bear interest
at the rate of prime plus one percent (1%) per annum from the original due date
until paid.
Time is of the essence of this Note, and in the event that this Note is
collected by law or through an attorney-at-law, the Obligor agrees to pay all
reasonable costs of collection.
This note is unsecured.
The Obligor shall be entitled, at any time, and from time to time, without
the consent of the Holder and without making any penalty or premium therefor, to
prepay all or any portion or portions of the outstanding principal amount
thereof.
This Note shall be governed as to the validity, interpretation,
construction, enforcement, effect, and in all respects by the laws and decisions
of the State of Georgia.
No delay or omission on the part of the Holder in exercising any rights
hereunder shall operate as a waiver of such right or any other rights under this
Note. A waiver on any occasion shall not be construed as a bar to or waiver of
any right or remedy on any future occasion.
IN WITNESS WHEREOF, the undersigned has caused these presents to be duly
executed under the seal on the date and year first above written.
"OBLIGOR"
By: /s/ Steven D. Brown, CEO
-------------------------------------
American Artists Film Corporation
1245 Fowler St., N.W.
Atlanta, Georgia 30318
"HOLDER"
/s/ John W. Boyd
- ------------------------------------
John W. Boyd
<PAGE> 1
Exhibit 10.72
$75,000.00 March 16, 1998
PROMISSORY NOTE
FOR VALUE RECEIVED, American Artists Film Corporation, a Missouri
corporation (herein called "Obligor"), hereby promises to pay to the order of
Joseph S. Litner, a resident of Metairie, Louisiana, (herein called "Holder"),
in legal tender of the United States, without grace, at his office located at
617 Carnation Avenue, Metairie, Louisiana, 70001, or at such other place as the
Holder may hereafter designate, the sum of Seventy-Five Thousand Dollars
($75,000.00) together with simple interest on the unpaid balance of such
principal amount outstanding from time to time hereunder at an annual interest
rate equal to prime plus one percent (1%) per annum. All principal and any
accrued but unpaid interest will be due and payable on demand.
It is hereby expressly agreed that should any default be made in the
payment of principal or interest when due, the principal indebtedness evidenced
hereby and all interest accrued thereon shall, upon written demand, become due
and payable and may be collected forthwith. Notwithstanding any other provision
hereof to the contrary, Obligor shall not be deemed to be in default of payment
of principal or interest hereunder if such payment (the "Late Payment") is
received by Holder within ten (10) days following the date on which Obligor
receives written notice of said default.
Payment not made within ten (10) days of the due date shall bear interest
at the rate of prime plus one percent (1%) per annum from the original due date
until paid.
Time is of the essence of this Note, and in the event that this Note is
collected by law or through an attorney-at-law, the Obligor agrees to pay all
reasonable costs of collection.
This note is unsecured.
The Obligor shall be entitled, at any time, and from time to time, without
the consent of the Holder and without making any penalty or premium therefor, to
prepay all or any portion or portions of the outstanding principal amount
thereof.
This Note shall be governed as to the validity, interpretation,
construction, enforcement, effect, and in all respects by the laws and decisions
of the State of Georgia.
No delay or omission on the part of the Holder in exercising any rights
hereunder shall operate as a waiver of such right or any other rights under this
Note. A waiver on any occasion shall not be construed as a bar to or waiver of
any right or remedy on any future occasion.
IN WITNESS WHEREOF, the undersigned has caused these presents to be duly
executed under the seal on the date and year first above written.
"OBLIGOR"
By: /s/ STEVEN D. BROWN
-------------------------------------
American Artists Film Corporation
1245 Fowler St., N.W.
Atlanta, Georgia 30318
"HOLDER"
/s/ JOSEPH S. LITNER
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Joseph S. Litner
<PAGE> 1
Exhibit 10.73
Diversity Entertainment Television/Atlanta L.L.C.
Third Patty Licensing Agreement
AGREEMENT
This agreement is made as of this first day of April, 1998, by and
between Diversity Entertainment Television/Atlanta L.L.C. (DETV/ATL), a State of
Georgia Limited Liability Company whose principal place of business is in
Atlanta, Georgia and Georgia Television Company d/b/a WSB-TV ("WSB-TV"), a
Delaware corporation whose place of business is in Atlanta, Georgia, according
to the terms and conditions set forth below.
I. CONTENT/PROGRAM PROVIDER
WSB-TV shall provide both live and taped local news programming to
DETV/ATL for broadcast on its Large Screen Video Display (LSVD) at
Underground Atlanta as set forth in Exhibit A.
II. DUTIES OF PARTIES
A. WSB-TV shall be responsible for the following services and
obligations with respect to providing content/programming on
DETV/ATL.
1. Preparing and delivering to DETV/ATL pre-produced, taped
content/programming set forth in Exhibit A ("Taped
Programming"), attached hereto and made a part hereof,
including, but not limited to, cue sheets of all music
intended for use with content/programming.
2. Preparing and delivering to DETV/ATL live
content/programming set forth in Exhibit A ("Live
Programming"), attached hereto and made a part hereof
3. Securing the services of and compensating the technical and
creative talent for the production and delivery of the Live
Programming and the Taped Programming to a mutually agreed
upon delivery point.
4. Obtaining and hereby granting to DETV/ATL, at no additional
cost to DETV/ATL, a license for the music synchronization
rights and master recording rights with respect to the Taped
Programming.
5. WSB-TV agrees to use commercially reasonable efforts to
obtain any necessary third party rights, releases,
clearances, and licenses that -DETV/ATL may need to use the
Taped Programming and the Live Programming pursuant to this
Agreement (the "Third Party Rights"). At the time DETV/ATL
requests Live or Taped Programming from WSB-
<PAGE> 2
TV, WSB-TV will inform DETV/ATL of what rights and
clearances, including Third Party Rights, WSB-TV has in such
programming and what Third Party Rights it did not obtain.
It then shall be the sole responsibility of DETV/ATL, prior
to its use of the programming, to obtain any necessary Third
Party Rights that WSB-TV did not obtain.
6. During the Term and as soon as possible after the LSVD at
Underground Atlanta is frilly operational, WSB-TV shall make
a good faith effort to place a permanent camera at the
Underground that will provide WSB-TV with live shots of the
LSVD. WSB-TV agrees to incorporate one live shot per day
from the permanent camera into one of the following parts of
a WSB-TV's Action News program: the open, the close, a
tease/bump, or a weather background. The timing, placement,
and duration of the daily live shot from the permanent
camera shall be at WSB-TV's sole discretion. In addition,
WSB-TV shall make continuous footage of the LSVD from the
permanent camera available on the WSB-TV Web site on the
Internet. In the event that a camera cannot be installed at
the Underground during the Term, the parties will negotiate
in good faith to establish an alternative method for
DETV/ATL to obtain the promotion value of having the live
shots from the permanent camera displayed on WSB-TV and on
WSB-TV's Web site.
7. WSB-TV agrees to promote the LSVD and WSB-TV's relationship
to the LSVD on WSB-TV according to the following schedule:
(a) one (1) ten-second mention of the LSVD each day during
the block of WSB-TV newscasts that air from Sam to 7am; (b)
one (1) ten-second mention of the LSVD each day during the
noon WSB-TV newscast; (c) one (1) ten-second mention of the
LSVD each day during the block of WSB-TV newscasts that air
from 5pm to 7pm; and (d) one (I) mention of the LSVD each
day in a station identification spot, which may air anytime
between 6am and midnight.
B. DETV/ATL shall broadcast 7 days per week, 52 weeks per year
programming provided by WSB-TV during the Term of this Agreement
in accordance with the schedule provided in Exhibit B, provided,
however, that DETV/ATL shall not be obligated to broadcast any
Live Programming or Taped Programming which is not of "broadcast
quality," as determined by DETV/ATL in accordance with normal
industry standards of broadcast quality.
1. DETV/ATL shall make every reasonable effort to broadcast all
Live Programming and Taped Programming provided by WSB-TV
under this Agreement.
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2. DETV/ATL shall have the right to sell commercials to be
broadcast by it on the LSVD with the Taped Programming and
Live Programming provided by WSB-TV. DETV/ATL shall retain
all advertising revenues generated from these commercials.
DETV/ATL shall not broadcast on the LSVD any of the original
commercials that may be included in the Live Programming
provided by WSB-TV under this Agreement. DETV/ATL represents
and warrants that all commercials broadcast on the LSVD with
the Taped Programming and the Live Programming will not
include: (i) advertisements for tobacco products, illegal
drugs, or any product that may not be legally sold within
the City of Atlanta, Fulton County or the State of Georgia,
(ii) advertisements that contain content that has been
prohibited by Article 8 of DETV/ATL's lease with the owners
of Underground Atlanta, a copy of which is attached as
Exhibit C and made a part hereof, or (iii) advertisements
for local television stations other than WSB-TV, ABC
national and affiliate networks, and CNN News. Upon fifteen
(15) days prior written notice to DETV/ATL, WSB-TV shall
have the right to amend this list of prohibited
advertisements to be consistent with its own advertising
standards.
3. Upon WSB-TV's prior, written approval, DETV/ATL may
merchandise the Live or Taped Programming for "brought to
you by" sponsorships. DETV/ATL will notify WSB-TV prior to
committing to any such sponsor and will give WSB-TV final
approval over any sponsorship of a WSB-TV program segment.
In addition, DETV/ATL will provide WSB-TV with prior
approval over the content of any "brought to you by"
sponsorship message that will air with the Live or Taped
Programming. WSB-TV agrees to respond to DETV/ATL's requests
for approval within twenty-four (24) hours during the
business week.
4. DETV/ATL agrees that, during the term of this Agreement,
WSB-TV shall be the exclusive provider of local news
programming and information and programs of local interest
for DETV/ATL's LSVD. DETV/ATL will not use any program
material from any other local television affiliate or
network, except CNN News. In addition, the previous sentence
notwithstanding, DETV/ATL may obtain programs of local
interest directly from Georgia Public Television ("GPTV") or
may create original programs of local interest for use on
the LSVD. In the event that DETV/ATL desires to obtain local
news programming or programs of local interest from a party
other than GPTV, WSB-TV, or CNN News, such as, programming
from ABC-TV or any of ABC's related
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<PAGE> 4
production entities (i.e. ESPN and Disney), DETV/ATL will
first obtain prior written approval from WSB-TV.
5. Other than WSB-TV, ABC-TV, CNN News (including CNN News'
parent, subsidiaries or companies wholly owned by CNN News'
parent or subsidiaries), and ABC-related production
properties (i.e. ESPN and Disney), DETV/ATL will not accept
any local television station advertising for placement on
DETV/ATL's LSVD at Underground Atlanta.
6. In the event that, pursuant to Section ll.A.5 above, WSB-TV
informs DETV/ATL that it has only obtained some, but not
all, of the necessary Third Party Rights for the use of the
Live Programming and Taped Programming, DETV/ATL shall be
ultimately and solely responsible for obtaining, prior to
its use of the Live Programming or Taped Programming, any
necessary Third Party Rights that WSB-TV did not obtain.
7. DETV/ATL shall be responsible for the payment of all
residuals, royalty fees, contributions and other benefits
required under applicable guild, or other agreements arising
in connection with the exhibition of the Taped Programming
or the Live Programming on the LSVD. WSB-TV shall be
responsible for the payment of all residuals, royalty fees,
contributions and other benefits required under applicable
guild, or other agreements arising in connection with the
exhibition of the Taped Programming or the Live Programming
on WSB-TV or on other mediums other than DETV/ATL's LSVD. At
the time DETV/ATL requests Live or Taped Programming, WSB-TV
will inform DETV/ATL whether, to the best of WSB-TV's
knowledge, DETV/ATL's use of such programming will trigger
an obligation to pay residuals, royalty fees, or other
benefits required under applicable guild or other
agreements.
III. BROADCAST RIGHTS: ANCILLARY RIGHTS
A. WSB-TV hereby grants to DETV/ATL the non-exclusive right, license
and privilege to exhibit, distribute, and perform those audio
visual broadcasts of the Live Programming and Taped Programming
pursuant to this Agreement on DETV/ATL's LSVD for one (1) year
commencing on the first day that the LSVD at Underground Atlanta
is frilly operational and terminating exactly one year (365 days)
thereafter (the "Term").
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<PAGE> 5
B. DETV/ATL agrees not to edit, dub, and revise the Taped or Live
Programming, or replace or superimpose matter over the music or
sound effects track in the Taped or Live Programming. The
previous sentence notwithstanding, WSB-TV grants DETV/ATL the
right to determine how much of the Live Programming actually will
be displayed on the LSVD. However, DETV/ATL will use its best
efforts to begin and end its carriage of any of the Live
Programming at a commercial break. WSB-TV will provide DETV/ATL
with taped, standard entrance and exit footage that DETV/ATL
agrees to exhibit on the LSVD directly before and after it
exhibits the Live Programming on the LSVD.
C. Upon the prior, written approval of WSB-TV, DETV/ATL shall have
the right to use portions of the WSB-TV Live Programming or Taped
Programming or footage therefrom, in connection with the
promotion and advertising of the programming. In addition, upon
the prior, written approval of WSB-TV, DETV/ATL shall have the
right to create opening and closing materials for the programming
hereunder and, upon the prior, written approval of WSB-TV,
DETV/ATL shall have the right to utilize the images derived from
excerpts of the programming, reconfigure them for inclusion in
opening and closing materials, and on-air promotional materials.
DETV/ATL agrees not to display on the LSVD any material
containing WSB-TV video or materials, including without
limitation the Live or Taped Programming, or mentioning or using
WSB-TV productions, personnel or trademarks, without the express,
prior written approval of WSB-TV. Any use of the Live Programming
or Taped Programming or other WSB-TV material, personnel or
trademarks in promotions, advertising, openings, or closings, or
other LSVD content without the express, written approval of WSBTV
shall be a breach of the agreement and shall void any and all
representations and indemnifications regarding such programming
or material.
IV. COMPENSATION
A. As compensation for providing the Live Programming and the Taped
Programming during the Term, DETV/ATL shall grant WSB-TV the
exclusive local promotional rights and the commercial advertising
time set forth in Exhibits A and B.
B. It is understood that such compensation shall constitute frill
payment for all services and content/programming which DETV/ATL
shall obtain from WSB-TV hereunder and no additional payment
shall be required for such services and content/programming.
V. EFFECTIVE DATE
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This Agreement shall be effective upon frill execution of this
Agreement.
VI. INDEMNIFICATION
A. WSB-TV shall indemnify, defend and hold harmless DETV/ATL, its
affiliates and subsidiaries (and their respective directors,
officers, employees, agents, successors, and assigns) from and
against any and all third party actions, suits, proceedings,
judgments, demands or claims, liabilities, loss or expenses
whatsoever (including reasonable attorneys' fees) incurred in
connection with or arising from WSB-TV's breach of this
Agreement, or representation or warranty of WSB-TV made
hereunder.
B. DETV/ATL shall indemnify, defend and hold harmless WSB-TV, its
affiliates and subsidiaries (and their respective directors,
officers, employees, agents, successors, and assigns) from and
against any and all third party actions, suits, proceedings,
judgments, demands, pr claims, liabilities, loss or expenses
whatsoever (including reasonable attorneys' fees) incurred in
connection with or arising from DETV/ATL's breach of this
Agreement, or representation or warranty of DETV/ATL made
hereunder.
C. All agreements between WSB-TV and third parties, or DETV/ATL and
third parties, shall be the sole responsibility of the
contracting party and the other shall have no liability for the
same.
D. The indemnification described in this Section shall survive the
termination or expiration of this Agreement.
VII. DELIVERY
A. WSB-TV agrees to deliver the Live Programming to a mutually
agreed upon delivery point, within the WSB-TV studio, via fiber
optic, microwave or satellite signal feed. All transmissions of
the Live Programming from the delivery point to the LSVD shall be
at DETV/ATL sole expense. The previous sentence notwithstanding,
the parties may agree to have DETV/ATL intercept the signal of
the Live Programming at a location outside the WSB-TV studio,
provided that DETV/ATL pays for the costs of intercepting the
signal. DETV/ATL will provide the electronic interface to process
the signal feed via fiber optic, microwave or satellite
transmission, at DETV/ATL's sole expense.
B. WSB-TV agrees to deliver the following, at WSB-TV's sole expense,
to a mutually agreed upon delivery point with respect to the
Taped Programming (i) one BETA SP videotape master or umatic SP
video master, whichever is
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available, (NTSC) with one-minute color bars and tone: with
SNIPTE drop frame time code; starting at 01:00:00; one protection
dub; (ii) music cues, commercial cues, and formal sheets, if any
directed to: Edward J. Anderson, II, V.P. of Operations.
VIII. RIGHTS OF PARTIES.
A. The Live Programming and the Taped Programming and all elements
thereof, shall be the sole and exclusive property of WSB-TV and
may only be used or exploited by DETV/ATL in the manner set forth
herein. Any rights not specifically granted herein to DETV/ATL
are expressly reserved by WSB-TV.
B. Nothing herein shall be deemed to prohibit DETV/ATL from
developing, producing, distributing or exhibiting programs
similar in format or subject matter to the content/programming
provided by WSB-TV; however, DETV/ATL agrees that it shall not
exhibit any such program that may be deemed to infringe upon any
of WSB-TV's rights in the Taped Programming or the Live
Programming.
C. WSB-TV hereby grants to DETV/ATL the right to publicize and
advertise the Live Programming and the Taped Programming in
any/all media, including, but not limited to, the right to
disseminate, reproduce, print and publish the names biographies,
voices and likeness of the principal participants appearing in
the programming in connection with such publicity and
advertising; provided that DETV/ATL obtains WSB-TV's prior
written approval over any such publicity or advertising and
obtain permission from any necessary third parties. WSB-TV, in
its sole discretion, may provide to DETV/ATL, without additional
cost, pertinent promotional material available to WSB-TV
regarding the programming, and DETV/ATL shall have the right to
distribute such material for promotion of the programming.
IX. PAYMENT FOR INCLUDED MATTER
WSB-TV represents and warrants that its employees or
affiliates shall not pay, accept payment on service or valuable
consideration from, or knowingly permit any of its agents or
subcontractors to accept or pay, any money service or other valuable
consideration for the inclusion of matter plug, reference, or product
identification in the broadcast of the content/programming without
first disclosing such information to DETV/ATL and obtaining the prior
approval of DETV/ATL's Legal Counsel.
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<PAGE> 8
x. REPRESENTATIONS AND WARRANTIES
A. Each party represents and warrants to the other:
1. that it has frill legal right, power and authority to enter
into and perform its obligations hereunder; and
2. that it has not entered into, nor will it enter into, any
contract or other agreement which would conflict with,
prohibit or interfere with the frill performance of its
obligations hereunder or with the frill enjoyment by the
other party of the rights granted herein.
3. that it shall use its commercially reasonable efforts to
ensure that Live Programming and Taped Programming is
completed and ready for airing at mutually agreed upon dates
and times.
B. WSB-TV further represents and warrants to DETV/ATL:
1. that it shall use commercially reasonable efforts to obtain
all Third Party Rights from the talent, guests or other
artists participating in the Live Programming or Taped
Programming or will inform DETV/ATL that it did not obtained
such rights prior to the airing of said programming on
DETV/ATL.
2. that, subject to Sections II.A.5, II.B.5, and II.B.6
regarding obtaining required Third Party Rights, WSB-TV has
or will obtain, at its own cost and expense, distribution
and exhibition rights in and to the Live and Taped
Programming and the character, concepts and ideas contained
therein, and that it has the frill legal right, power and
authority to enter into and perform this Agreement and to
grant to DETV/ATL all the rights granted herein including,
without limitation, the rights to broadcast and otherwise
exploit the Live and Taped Programming.
3. that the performing rights for the music contained in the
Taped Programming and the Live Programming are (i)
controlled by a performing rights society having
jurisdiction, (ii) in the public domain, or (iii) controlled
by WSB-TV to the extent necessary so that no additional
clearance of or payment with respect to such performance
rights is required for use of the content/programming
provided hereunder. The parties agree that, if necessary,
DETV/ATL shall obtain any necessary music performance
licenses for the performance of the Live Programming
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and Taped Programming from any performing rights societies
having jurisdiction.
4. that it shall have obtained and hereby grants to DETV/ATL,
at no additional cost to DETV/ATL, the music synchronization
rights and master recording rights with respect to the Taped
Programming.
5. that it will inform DETV/ATL, at the time that DETV/ATL
requests the Live and Taped Programming, what rights,
including Third Party Rights, WSB-TV has in such programming
and what Third Party Rights it did not obtain.
6. that, subject to Sections II.A.5, II.B.5, and II.B.6
regarding obtaining required Third Party Rights, the Live
and Taped Programming is original and does not infringe the
copyright or any other proprietary right of any person, firm
or other entity and neither the Live Programming, the Taped
Programming, nor the production or any use hereunder of the
Live or Taped Programming or any visual or aural element
thereof, will infringe on any trademark or trade name of,
violate any right of privacy or right of publicity of, or
constitute a libel or slander against, any person, firm or
other entity;
7. that DETV/ATL will not be obligated to make payments or to
pay any other consideration to WSB-TV, except as expressly
specified in this Agreement in connection with the exercise
of the rights granted to DETV/ATL.
C. DETV/ATL further represents and warrants to WSB-TV:
1. that it will provide WSB-TV with Promotional Use release
forms authorizing rights clearances from the talent, guests
and other artists participating in Live and Taped
Programming airing on DETV/ATL.
2. that it will be ultimately responsible for obtaining all
necessary Third Party Rights for its use of the Live and
Taped Programming on the LSVD that WSB-TV was unable to or
did not obtain.
3. that it will inform WSB-TV of any and all legal precedent,
laws, or regulations relating to the LSVD or the clearance
of programming for use on the LSVD that DETV/ATL becomes
aware of and that may be relevant to the performance and
obligations of the parties under this Agreement.
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<PAGE> 10
D. The representations and warranties of this Section X shall
survive the expiration or earlier termination of this Agreement.
XI. RIGHT OF FIRST REFUSAL
A. DETV/ATL agrees to offer first, in writing, to WSB-TV, an
agreement to renew or extend this Agreement for an additional one
(1) year period. If WSB-TV does not accept DETV/ATL's agreement
within thirty (30) days of receipt of the offer, DETV/ATL may
offer an identical agreement for the right to be the exclusive
provider of local news programming and programs of local interest
for the LSVD in Underground Atlanta to other local television
stations. In the event that DETV negotiates an agreement with
another party that is not identical to the agreement it offered
WSB-TV, DETV shall provide WSB-TV with written notice of such
proposed agreement with such other party and will give WSB-TV
thirty (30) days to accept or reject that proposed agreement. If
WSB-TV accepts the agreement, WSB-TV and DETV/ATL shall enter
into the agreement. If WSB-TV rejects the agreement, DETV/ATL is
free to enter into that proposed agreement with another party.
B. If DETV/ATL plans to operate another LSVD at a location other
than Underground Atlanta in the Atlanta television market,
DETV/ATL agrees to offer first, in writing, to WSB-TV an
agreement to be the exclusive provider of local news programming
and programs of local interest for that other LSVD. If WSBTV does
not accept DETV/ATL's agreement within thirty (30) days of
receipt of the offer, DETV/ATL may offer an identical agreement
for the right to be the exclusive provider of local news
programming and programs of local interest for that other LSVD to
other local television stations. In the event that DETV
negotiates an agreement with another party that is not identical
to the agreement it offered WSB-TV, DETV shall provide WSB-TV
with written notice of such proposed agreement with such other
party and will give WSB-TV thirty (30) days to accept or reject
that proposed agreement. If WSB-TV accepts the agreement, WSB-TV
and DETV/ATL shall enter into the agreement. If WSB-TV rejects
the agreement, DETV/ATL is free to enter into that proposed
agreement with another party.
XIII. TERMINATION
Either party shall have the right to terminate the Agreement without
further obligation to the other upon the occurrence of a material breach of this
Agreement by the other party, which continues for a period of thirty (30) days
or longer. In addition, WSB-TV shall have the right to -terminate this Agreement
without further obligation, for any reason or for no reason upon ninety
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(90) days prior written notice to DETV/ATL. However, no termination of this
Agreement shall act to waive or otherwise limit either party's rights under this
Agreement.
XIII. GOVERNING LAW
This Agreement shall be construed in accordance with and governed by
the laws of the State of Georgia.
XIV. ASSIGNMENT
Neither party may assign its rights or obligations under this
Agreement without the prior written consent of the other party (unless such
assignment is to an affiliate or successor in interest).
XV. FORCE MAJEURE
Neither party shall be responsible for delays or failure of
performance resulting from acts beyond the reasonable control of such party.
Such acts shall include, but not be limited to, acts of God, strikes, walkouts,
riots, acts of war, epidemics, failure of suppliers to perform, governmental
regulations, power failure(s), earthquakes, or other disasters.
XVI. COMMUNICATIONS REGARDING THIRD PARTY RIGHTS
The parties agree that all communications from WSB-TV to DETV/ATL
regarding the Third Party Rights referred to in this Agreement must be in
writing and signed by either WSBTV's Vice President and General Manager or
WSB-TV's Director of Local Programming. Any other communications regarding the
Third Party Rights referred to in this Agreement shall not be valid or binding
on WSB-TV under this Agreement.
XVII. ENTIRE AGREEMENT
This Agreement contains the entire understanding of the agreement
between the parties with respect to the subject matter hereof and shall
supersede all prior agreements, understandings, communications and proposals,
whether oral or written. This Agreement may not be modified or amended except in
a writing executed by DETV/ATL and WSB-TV which refers to this Agreement. Any
modifications or amendments to this Agreement must be signed on behalf of WSB-TV
by WSB-TV's Vice President and General Manager.
XVIII. BINDING NATURE
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This Agreement will not be binding on either party unless and until
the Agreement has been signed by both parties and a frilly executed copies of
the Agreement have been delivered to both parties.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date indicated below.
By: /s/ Tyrone C. Johnson By: /s/ Gregory J. Stone
-------------------------- -----------------------------
For DETV/ATL For WSB-TV
Date: 04/01/98 Date: 04/01/98
------------------------ ---------------------------
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<PAGE> 14
EXHIBIT A
A. Live Programming: WSB-TV will produce and provide live, local news
programming to DETV/ATL to air on the DETV/ATL screen at Underground
Atlanta every day, subject to the possible preemption of such live,
local news programming by other programming that has not been licensed
to DETV/ATL for use on the LSVD. WSB-TV shall make a good faith effort
to promptly notify DETV/ATL of any such preemption. WSB-TV, in
consultation with DETV/ATL, shall determine what portion of the
programming hours outlined on Exhibit B shall be live, local news
programming.
B. Taped Programming: WSB-TV will produce and provide taped, local news
programming to DETV/ATL to air on the DETV/ATL screen at Underground
Atlanta. WSB-TV, in consultation with DETV/ATL, shall determine what
portion of the programming hours outlined on Exhibit B shall be taped,
local news programming.
C. If needed, WSB-TV will provide consultation to DETV/ATL, at no cost to
WSB-TV, for technical and logistical issues, such as audio and program
delivery.
D. DETV/ATL Special Programming Opportunities
If agreed to by the parties and subject to third party rights, WSB-TV
may provide DETV/ATL with such special programming as the Salute 2
America Parade, the Egleston Children's Parade, Monica Kaufman
Closeups, and People 2 People. At this time, DETY/ATL reserves the
right to work with WSB-TV on clearing these programs for broadcast on
an opportunity specific basis.
E. DETV/ATL Special Program Segment Opportunities
If agreed to by the parties and subject to third party rights, WSB-TV
shall provide DETV/ATL with program segment opportunities, including,
but not limited to, Consumer Reports and Health Reports, that DETV/ATL
may incorporate into its daily programming schedule.
F. DETV/ATL shall provide WSB-TV with at least sixteen (16) thirty (30)
second promotional advertising spots per day, twelve (12) of which
shall appear on the LSVD between 8:00 a.m. and 6:00 p.m.
<PAGE> 15
EXHIBIT B
PROPOSED WSB-TV LOCAL NEWS PROGRAMMING ON DETV/ATL
<TABLE>
<CAPTION>
Hour WSB-TV
Programming Total Minutes Minutes Minutes
Minutes/Hour Mon - Fri Saturday Sunday
<S> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------
7am 12 60
- ------------------------------------------------------------------------------------------------------
8am 4 20
- ------------------------------------------------------------------------------------------------------
9am 4 20
- ------------------------------------------------------------------------------------------------------
10am 4 20
- ------------------------------------------------------------------------------------------------------
11am 4 20
- ------------------------------------------------------------------------------------------------------
12noon 12 60 12 12
- ------------------------------------------------------------------------------------------------------
1pm 4 20 4 4
- ------------------------------------------------------------------------------------------------------
2pm 4 20 4 4
- ------------------------------------------------------------------------------------------------------
3pm 4 20 4 4
- ------------------------------------------------------------------------------------------------------
4pm 4 20 4 4
- ------------------------------------------------------------------------------------------------------
5pm 30 150 4 4
- ------------------------------------------------------------------------------------------------------
6pm 4 20 30 30
- ------------------------------------------------------------------------------------------------------
7pm 4 20 4 4
- ------------------------------------------------------------------------------------------------------
8pm -- -- -- --
- ------------------------------------------------------------------------------------------------------
9pm -- -- -- --
- ------------------------------------------------------------------------------------------------------
10pm -- -- -- --
- ------------------------------------------------------------------------------------------------------
11pm -- --
- ------------------------------------------------------------------------------------------------------
470 66 66
- ------------------------------------------------------------------------------------------------------
</TABLE>
WEEKLY WSB-TV PROGRAMMING MINUTES = 602
WSB-TV WEEKLY PROMOTIONAL ADVERTISING MINUTES = 55*
*Not represented in above chart
<PAGE> 16
EXHIBIT C
[Attach a Copy of Article 8 of the Lease between DETV/ATL and Underground
Atlanta]
<PAGE> 1
Exhibit 10.74
AAFC LETTERHEAD
AGREEMENT
THIS AGREEMENT is made and entered into this 6th day of April, 1998 by and
between the American Artists Entertainment Corporation (AAEC), a corporation
doing business in the state of Georgia and Crossing Point, Inc. (CPI), a
corporation doing business in Asheville, North Carolina.
RECITALS
1 - AAEC is a development and production company in the business of producing
feature length motion pictures and video and television programs for worldwide
distribution in all media.
2 - CPI has in it's possession certain exclusive research and information
regarding the probability of extra terrestrial life and various concerted
efforts to cover up any interaction or knowledge of such life existing.
3 - AAEC and CPI wish to enter into an agreement to produce a series of
programs featuring the ideas and opinions of CPP to be distributed in all media
in all markets worldwide.
AGREED
1 - CPI, for good and valuable consideration, the receipt of which is hereby
acknowledged, agrees to an exclusive six month option to AAEC to solicit
funding for a series of television documentaries. Such option to commence on
the date of the execution of the option. Such option can be extended for an
additional six months at the concurrence of both parties.
2 - AAEC agrees to provide its resources and connections to develop a strategy
and the appropriate support materials to solicit from television broadcasters
funding and air date guarantees for the programs.
3. AAEC and CPI agree to cooperate to mutually facilitate the development of
such strategy and support materials to most effectively effect a sale of the
programs.
4. Both AAEC and CPI must agree to whatever offers or final licensing
arrangements are made to any broadcast entity.
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5. In the event of a sale or licensing of the programs, both parties agree to
the following:
AAEC agrees to provide all production services, including but not limited to
Producers, director, writer, sound recording, editors and other such personnel
as required to produce a broadcast quality program. Such personnel and services
to be paid from the production budget of the programs.
CPI agrees to provide existing documents and material, researchers, experts who
will appear on camera and the services of Steven Greer. Such goods and services
to be paid from the production budget of the programs.
The specific fees for all services will be negotiated in good faith and
directly related to the total production dollars available for any program.
6 - AAEC and CPI agree to negotiate in good faith the appropriate corporate and
individual credits.
7 - AAEC and CPI will jointly decide as to the production; release, distribute,
exploit and market the Program in all markets and to assign these rights
to others.
8 - For their contributions, AAEC shall own 25% of any profits derived from the
broadcast or exploitation of these programs from any sales or licensing
arrangements or any derivative or indirect or spin off products resulting from
these programs in all media worldwide.
9 - For their contributions, CPI shall own 75% of any profits derived from the
broadcast or exploitation of these programs from any sales or licensing
arrangements or any derivative or indirect or spin off products resulting from
these programs in all media worldwide
10 - AAEC and CPI will jointly own the programs in perpetuity.
11 - Both parties assert that they have the right to enter into this agreement
and that there are no known liens prohibiting against either party.
If the above commemorates your understanding please signify so by signing
below.
/s/ Rex Hawk
- --------------------------------------------
American Artists Entertainment Corporation
/s/ Steven Greer, President, CPI
- --------------------------------------------
Crossing Point, Inc.
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EXHIBIT 10.75
THE SECURITIES HEREUNDER HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933 OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE RESOLD UNLESS REGISTERED
UNDER THE SECURITIES ACT OF 1933 AND APPLICABLE STATE SECURITIES LAWS OR
PURSUANT TO EXEMPTION FROM REGISTRATION
AMENDED AND RESTATED
OPERATING AGREEMENT
OF
FALSE RIVER, LLC.
a limited liability company
organized under the Georgia Limited Liability Company Act
THIS AMENDED AND RESTATED OPERATING AGREEMENT is made and entered into
as of the ____day of April 1998 by and among the undersigned parties to amend,
restate and supersede in its entirety the original Operating Agreement of False
River, LLC, dated March 17, 1998, by and among American Artists Film
Corporation, Steven D. Brown and J. Eric Van Atta. Unless otherwise indicated by
the context, as used herein the term "Members" refers to those of the
undersigned parties at this date who are identified as initial Members in
Exhibit A hereto and to other persons who hereafter became parties hereto in
accordance with the terms hereof.
R E C I T A L S:
1. FALSE RIVER, LLC (the "Company"), was formed as a Georgia
limited liability company on March 17, 1998, by execution and delivery of
Articles of Organization to the Secretary of State of Georgia in accordance with
the provisions of the Georgia Limited Liability Company Act, as amended (the
"Act").
2. The business purpose of the Company is to produce and exploit
a feature motion picture tentatively entitled FALSE RIVER (the "Film").
3. The Members desire to organize the Company with themselves as
its members and to set out the terms of their agreement with respect to the
Company, its operations, and their own respective rights and interests therein.
AGREEMENT:
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In consideration of the Recitals, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties agree as follows:
ARTICLE I
OFFICES; SEAL
1.1 Registered Office, Agent. The Company shall at all times
maintain a registered office in the State of Georgia and a registered agent at
that address but may have other offices located within or without the State of
Georgia.
1.2 Principal Office. The Company shall maintain its principal
office within the State of Georgia unless otherwise determined by the Board of
Managers.
1.3 Seal. The seal of the Company shall be in such form as the
Board of Managers may from time to time determine. If it is inconvenient to use
such a seal at any time, the signature of the Company followed by the word
"Seal" enclosed in parentheses or scroll shall be deemed the seal of the
Company.
ARTICLE II
LLC SHARES AND INTERESTS
2.1 LLC Shares. The ownership of the Company shall be divided
initially into 100,000 equal shares ("Limited Liability Company Shares" or "LLC
Shares"); provided, however, that the said number of LLC Shares may be increased
or reduced by the Board of Managers from time to time as hereinafter provided.
2.2 Initial Members. The names, addresses and federal tax
identification numbers of the initial Members are set out in Exhibit A hereto.
Each of the initial Members shall make an initial capital contribution to the
Company in cash or in kind in the amount specified in Exhibit A and receive in
consideration thereof the number and type of LLC Shares specified therein. The
capital contributions of the initial Members shall be made from time to time
upon call by the Company, but in any event not later than July 31, 1998. Exhibit
A is incorporated herein by reference and made a part of this Agreement.
2.3 Additional LLC Shares. (a) The Company by action of the Board
of Managers may from time to time increase the number of LLC Shares of the
Company by selling additional LLC Shares for fair value in cash or in kind to
one or more persons who are already Members or to other persons who are not
already Members; provided, however, that the Company may not sell LLC Shares to
any person unless the person at such time (i) agrees in writing to become a
party to, and to be bound as a Member by the terms and conditions of, this
Agreement, and (ii) pays in full the agreed consideration for the LLC Shares.
Upon receipt by the Company of the agreed original capital contribution of a
Member in respect of an LLC Share, the LLC Share and
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the resulting Interest of the Member shall be fully paid and non-assessable. No
Member shall have any preemptive rights with respect to the purchase of any such
additional LLC Shares.
(b) In connection with the sale of additional LLC Shares the Board
of Managers may, if it deems such action to be necessary and appropriate, at the
time of the sale thereof designate certain LLC Shares as Preferred Distribution
LLC Shares. Preferred Distribution LLC Shares shall be entitled to Preferred
Distributions in accordance with Section 8.1 of this Agreement.
2.4 Reduction of Shares. Except as prohibited by the Act, the
Company by action of the Board of Managers may from time to time agree to
repurchase the LLC Shares of a Member for fair value.
2.5 Options. The Company may also by action of the Board of
Managers grant options to such Members or non-Members as it may deem appropriate
for purchase of LLC Shares upon such terms and conditions and at such option
purchase price (not less than fair value of the LLC Shares on the date of grant)
as the Board of Managers may deem appropriate; provided, however, that upon
exercise of any such option the exercising person must satisfy the requirements
of clauses (i) and (ii) in Section 2.3(a) above.
2.6 Interests of Members. The limited liability company interest
(the "Interest") of each Member at any time shall be the percentage that the
number of LLC Shares owned by such Member constitutes of the aggregate number of
LLC Shares at such time.
2.7 LLC Share Certificates; Register. The Company shall issue
certificates to the Members evidencing their respective ownership of LLC Shares.
The certificates shall be signed by the President and Secretary and the seal of
the Company shall be affixed thereto. The name, address and federal tax
identification number of the Member owning the LLC Shares, the number of LLC
Shares, and the date acquired shall be entered in a register maintained by the
Secretary. LLC Share certificates exchanged or returned shall be canceled and
retained by the Secretary.
2.8 Voting. The holders of the shares of LLC Shares shall be
entitled to one vote for each LLC Share owned of record.
ARTICLE III
MEMBERS MEETINGS
3.1 Annual Meeting. A meeting of Members shall be held annually.
The annual meeting shall be held at such time and place and on such date as the
Board of Managers shall determine from time to time and as shall be specified in
the notice of the meeting.
3.2 Special Meetings. Special meetings of the Members may be
called at any time by the Board of Managers, the President or Members owning at
least 50% of the LLC Shares.
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Special meetings shall be held at such time and place and on such date as shall
be specified in the notice of the meeting.
3.3 Place. Annual or special meetings of Members may be held
within or without the State of Georgia.
3.4 Notice. Notice of annual or special Members meetings stating
the place, day and hour of the meeting shall be given in writing not less than
10 nor more than 60 days before the date of the meeting, either mailed to the
last known address of or personally given to each Member. Notice of any special
meeting of Members shall state the purpose or purposes for which the meeting is
called. Notice of any meeting at which amendments to the Operating Agreement,
merger of the Company, or the disposition of all or substantially all of the
assets of the Company are to be considered shall state such purpose. Notice of a
meeting may be waived by an instrument in writing executed before or after the
meeting. The waiver need not specify the purpose of the meeting or the business
transacted. Attendance at a meeting in person or by proxy shall constitute a
waiver of notice thereof unless the Member shall provide written notice to the
Company prior to the taking of any action by the Members at the meeting that the
Member's attendance is not to be deemed a waiver of the requirement that notice
be given or of the adequacy of any notice that may have been given to the
Members.
3.5 Quorum; Vote Required. At all meetings of Members the Members
holding a majority of the outstanding LLC Shares, whether present in person or
by proxy, shall constitute a quorum for the transaction of business. Action by
the Members on all matters shall require the affirmative vote of Members holding
a majority of the LLC Shares represented at a meeting at which a quorum is
present, except that the affirmative vote of Members holding 80% of all of the
LLC Shares outstanding shall be required (i) to approve the Company's engaging
in any business not reasonably related to the business purpose of the Company,
or (ii) to approve the Company's guaranty or collateralization of the debt of
any person other than a wholly-owned subsidiary of the Company. A lesser number
may adjourn a meeting from day to day, and shall announce the time and place to
which the meeting is adjourned.
3.6 Action in Lieu of Meeting. Any action that may be taken at a
meeting of the Members may be taken without a meeting if a consent in writing
setting forth the action so taken shall be signed by Members holding a majority
of the outstanding LLC Shares or such greater number as would be required if the
action were taken at a meeting of the Members.
ARTICLE IV
BOARD OF MANAGERS
4.1 Management. Subject to the terms of this Agreement, or any
other lawful agreement among the Members, the full and entire management of the
affairs and business of the Company shall be vested in the Board of Managers,
which shall have and may exercise all of the powers that may be exercised or
performed by the Company.
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4.2 Number of Managers. The Members shall fix by resolution the
precise number of members of the Board of Managers. Managers shall be elected by
and serve at the pleasure of the Members. Membership on the Board of Managers is
not limited to Members. A majority of the Managers shall constitute a quorum for
the transaction of business. The Board of Managers shall act by the affirmative
vote of a majority of the Managers.
4.3 Meetings. The Managers shall meet annually, without notice,
following the annual meeting of the Members. Special meetings of the Managers
may be called at any time by the President or by a majority of the Managers, on
two days' written notice to each Manager, which notice shall specify the date,
time, and place of the meeting. Notice of a meeting may be waived by an
instrument in writing executed before or after the meeting. Managers may attend
and participate in meetings either in person or by means of communications
equipment by which all persons participating in the meeting can hear each other.
Attendance at a meeting shall constitute a waiver of notice thereof.
4.4 Action in Lieu of Meeting. Any action that may be taken at a
meeting of the Managers may be taken without a meeting if a consent in writing,
setting forth the action so taken, shall be signed by all of the Managers.
ARTICLE V
OFFICERS
5.1 General Provisions. The officers of the Company shall consist
of a President and a Secretary who shall be elected by the Board of Managers,
and such other officers, including a General Manager, as may be elected by the
Board of Managers or appointed as provided in this Agreement. Each officer shall
be elected or appointed to serve at the pleasure of the Board of Managers. Any
two or more offices may be held by the same person.
5.2 President. The President shall be the chief executive officer
of the Company and shall have general and active management of the operations of
the Company, subject to the directions and authority of the Board of Managers.
The President shall be responsible for the administration of the Company,
including general supervision of the policies of the Company and management of
its financial affairs, and shall execute bonds, mortgages or other contracts in
the name and on behalf of the Company within the general powers of the office
and otherwise in accordance with the direction and authority of the Board of
Managers.
5.3 Secretary. The Secretary shall keep minutes of all meetings of
the Members and Managers and have charge of the minute books and seal of the
Company and shall perform such other duties and have such other powers as may
from time to time be delegated to him or her by the President or the Board of
Managers.
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5.4 Assistant Officers. Assistants to the Secretary may be
appointed by the President or by the Board of Managers and shall have such
duties as shall be delegated to them by the President or the Board of Managers.
5.5 Vice Presidents. The Company may have one or more Vice
Presidents, elected by the Board of Managers, who shall perform such duties as
may be delegated by the President or the Board of Managers.
ARTICLE VI
CAPITAL ACCOUNTS
6.1 Capital Accounts. "Capital Account" means an account that
shall be maintained in respect of each Member and which, as of any given date,
shall be equal to the sum of the following:
(i) The aggregate amount of cash that has been
contributed to the capital of the Company as of such date by or on
behalf of such Member in payment for its LLC Shares or otherwise; plus
(ii) The value of any property other than cash that has
been contributed to the capital of the Company as of such date by such
Member in payment for its LLC Shares or otherwise, and the amount of
liabilities assumed by any such Member under Regulation Section 1.752
or which are secured by any Company property distributed to such
Member; plus
(iii) The aggregate amount of the Company's Net Profit that
has been allocated to such Member as of such date pursuant to the
provisions of Article VII or any items of income or gain which are
specifically allocated to such Member or other positive adjustments
required by the Regulations and which have not been previously taken
into account in calculating Capital Accounts; minus
(iv) The aggregate amount of the Company's Net Loss that
has been allocated to such Member as of such date pursuant to Article
VII and the amount of any item of expense deduction or loss which is
specially allocated to such Member; minus
(v) The aggregate amount of cash and the value of all
other property (as of the date of distribution) that has been
distributed to or on behalf of such Member and the amount of any
liabilities of such Member assumed by the Company under Regulations
Section 1.752 or which are secured by any property contributed by such
Member to the Company and other negative adjustments required by the
Regulations; and
(vi) In the case of a Member who has acquired all or any
part of his or her LLC Shares by succession or assignment from another
Member, plus or minus (as the
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case may be) an aliquot portion of the Capital Account balance or
Capital Account Deficit of such predecessor in interest at the date of
such acquisition.
6.2 The provisions of this Article and the other provisions of
this Agreement relating to the maintenance of Capital Accounts are intended to
comply with Regulations Section 1.704-1(b), and shall be interpreted and applied
in a manner consistent with such regulations.
ARTICLE VII
TAX ALLOCATIONS AND DISTRIBUTIONS
7.1 Tax Allocations of Net Profit and Net Losses.
(a) Except as otherwise provided the Company's Net Losses
for each fiscal year for federal and state income tax purposes shall be
allocated to the Members pro rata in proportion to their respective
Capital Accounts. Except as otherwise provided herein, the Company's
Net Profits for each fiscal year for federal and state income tax
purposes shall be allocated to the Members as follows:
(i) First, to the Members (or their successors
in interest) who have previously been allocated Net Losses,
pro rata in proportion to the Net Losses previously allocated
to each of them, respectively, until the cumulative amount of
Net Profits so allocated equals the cumulative amount of all
previously allocated Net Losses;
(ii) Thereafter, to the Members holding Preferred
Distribution LLC Shares (pro rata in proportion to the capital
contribution originally paid to the Company in respect of
their respective Preferred Distribution LLC Shares), until
each such Member shall have been allocated Net Profits equal
to 150% of the capital contribution originally paid to the
Company in respect of such Member's Preferred Distribution LLC
Shares; and
(iii) Thereafter as follows:
(A) 49% to Members holding Preferred
Distribution LLC Shares, pro rata in proportion to
their respective holdings of such Shares; and
(B) 51% to Members holding other LLC
Shares, pro rata in proportion to their respective
holdings of such other Shares.
(b) Net Losses allocated pursuant to subsection (a)
hereof shall not exceed the maximum amount of Net Losses that can be so
allocated without causing any Member to have an Adjusted Capital
Account Deficit at the end of any fiscal year. In the event some but
not all of the Members would have Adjusted Capital Account Deficits as
a consequence of an allocation of Net Losses pursuant to subsection (a)
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hereof, the limitation set forth in this subsection (b) shall be
applied on a Member-by-Member basis so as to allocate the maximum
permissible Net Losses to each Member under Section
1.704-1(b)(2)(ii)(d) of the Regulations.
(c) To the extent a Member is allocated Net Losses which
otherwise would have been allocated to another Member, or a result of
the application of subsection (b) hereof, then the Member that was
allocated additional Net Losses pursuant to subsection (b) hereof shall
be allocated as quickly as possible additional Net Profit in an amount
equal to such Net Losses.
7.2 Distribution of Assets. If the Company at any time distributes
any of its assets in kind to any Member, the Capital Account of each Member
shall be adjusted to account for that Member's allocable share of the Net
Profits or Net Losses that would have been realized by the Company had it sold
its assets that were distributed at their respective fair market values
immediately prior to their distribution.
7.3 Qualified Income Offset. In the event any Member unexpectedly
receives any adjustments, allocations, or distributions described in Regulations
Section 1.704-1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5), or
1.704-1(b)(2)(ii)(d)(6), items of Company income and gain shall be specially
allocated to each such Member in an amount and manner sufficient to eliminate,
to the extent required by the Regulations, the Adjusted Capital Account Deficit
of such Member as quickly as possible, provided that an allocation pursuant to
this Section shall be made only if and only to the extent that such Member would
have an Adjusted Capital Account Deficit after all other allocations provided
for in this Article have been tentatively made as if this Section were not in
this Agreement.
7.4 Gross Income Allocation. In the event any Member has a deficit
Capital Account balance at the end of any fiscal year, each such Member shall be
specially allocated items of Company income and gain in the amount of such
excess as quickly as possible, provided that an allocation pursuant to this
Section shall be made if and only to the extent that such Member would have a
deficit Capital Account balance in excess of such sum after all other
allocations provided for in this Article have been tentatively made as if the
immediately preceding Section and this Section were not in this Agreement.
7.5 Section 704(c) Allocation.
(a) Notwithstanding any other provision of this Agreement
to the contrary, any gain or loss and any depreciation or other cost
recovery deductions recognized by the Company for income tax purposes
in any fiscal year with respect to all or any part of the Company's
property that is required or permitted to be allocated among the
Members in accordance with Section 704(c) of the Code and any
Regulations promulgated thereunder so as to take into account the
variation, if any, between the adjusted tax basis of such property at
the time of its contribution and the fair market value of such property
at the time of its contribution, shall be allocated to the Members for
income tax purposes in the manner so required or permitted.
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(b) Any elections or other decisions relating to such
allocations shall be made by the Board of Managers in any manner that
reasonably reflects the purpose and intention of this Agreement.
Allocations pursuant to this Section are solely for purposes of
federal, state and local taxes and shall not affect, or in any way be
taken into account in computing, any Member's Capital Account or share
of net profit, net loss, other items, or distributions pursuant to any
provision of this Agreement.
7.6 Section 754 Election. In connection with any permitted
transfer of an LLC Share in the Company, the Board of Managers shall cause the
Company, at the written request of the transferor, the transferee or any of the
Members, on behalf of the Company and at the time and in the manner provided in
Regulations Section 1.754-1(b), to make an election to adjust the basis of the
Company's property in the manner provided in Sections 734(b) and 743(b) of the
Code, and such transferee shall pay all costs incurred by the Company in
connection therewith, including, without limitation, attorneys' and accountants'
fees that are reasonable in the aggregate.
7.7 Adjusted Capital Account Deficit. As used herein, the term
"Adjusted Capital Account Deficit" means, with respect to any Member, the
Member's Adjusted Capital Account Deficit shall be the deficit balance, if any,
in the Member's Capital Account as of the end of the relevant fiscal year or at
any time, after giving effect to the following adjustments:
(i) Credit to the Member's Capital Account any amount
which the Member is obligated to restore pursuant to any provision of
this Agreement or is deemed obligated to restore pursuant to the
penultimate sentence of Regulations Sections 1.704-2(g)(1) and
1.704-2(i)(5); and
(ii) Debit to the Member's Capital Account the items
described in Sections 1.704-1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5),
and 1.704-1(b)(2)(ii)(d)(6) of the Regulations.
The foregoing definition of Adjusted Capital Account Deficit is intended to
comply with the provisions of Section 1.704-1(b)(2)(ii)(d) of the Regulations
and shall be interpreted consistently therewith.
7.8 Gross Asset Value. As used herein, the term "Gross Asset
Value" means, with respect to any asset, the asset's adjusted tax basis for
federal income tax purposes, except as follows:
(i) The initial Gross Asset Value of any asset
contributed by a Member to the Company shall be the gross fair market
value of the asset as determined by the contributing Member and the
Company;
(ii) The Gross Asset Values of all Company assets shall be
adjusted to equal their respective gross fair market values, as
determined by the Board of Managers, as of the following times: (A) the
acquisition of an additional LLC Share in the Company by any new or
existing Member in exchange for more than a de minimis capital
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contribution; (B) the distribution by the Company to a Member of more
than a de minimis amount of Company property as consideration for such
Member's LLC Shares in the Company; and (C) the liquidation of the
Company within the meaning of Regulations Section 1.704-1(b)(2)(ii)(g);
provided, however, that adjustments pursuant to clauses (A) and (B)
above shall be made only if the Board of Managers reasonably determines
that such adjustments are necessary or appropriate to reflect the
relative economic interests of the Members in the Company;
(iii) The Gross Asset Value of any Company asset
distributed to any Member shall be the gross fair market value of the
asset on the date of distribution;
(iv) The Gross Asset Values of Company assets shall be
increased (or decreased) to reflect any adjustments to the adjusted
basis of such assets pursuant to Code Section 734(b) or Code Section
743(b), but only to the extent that such adjustments are taken into
account in determining Capital Accounts pursuant to Regulations Section
1.704-1(b)(2)(iv)(m) hereof; provided, however, that Gross Asset Values
shall not be adjusted pursuant to this paragraph to the extent the
Board of Managers determines that an adjustment pursuant to paragraph
(ii) above is necessary or appropriate in connection with a transaction
that would otherwise result in an adjustment pursuant to this
paragraph; and
(v) If the Gross Asset Value of an asset has been
determined or adjusted pursuant to paragraphs (i), (ii) or (iii) above,
the Gross Asset Value shall hereafter be adjusted by the depreciation
taken into account with respect to the asset for purposes of computing
Net Profits and Net Losses.
7.9 Net Profits and Net Losses. As used herein, the terms "Net
Profits" and Net Losses" mean for each fiscal year or other period an amount
equal to the Company's taxable income or loss for such fiscal year or period,
determined in accordance with Code Section 703(a) (for this purpose, all items
of income, gain, loss, or deduction required to be stated separately pursuant to
Code Section 703(a)(1) shall be included in taxable income or loss), with the
following adjustments:
(i) Any income of the Company that is exempt from federal
income tax and not otherwise taken into account in computing Net
Profits or Net Losses pursuant to this Section shall be added to such
taxable income or loss;
(ii) Any expenditures of the Company described in Code
Section 705(a)(2)(B) or treated as Code Section 705(a)(2)(b)
expenditures pursuant to Regulations Section 1.704-1(b)(2)(iv)(i), and
not otherwise taken into account in computing Net Profits or Net Losses
pursuant to this Section shall be subtracted from such taxable income
or loss;
(iii) In the event the Gross Asset Value of any Company
asset is adjusted pursuant to paragraphs (ii) or (iii) above, the
amount of such adjustment shall be taken
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into account as gain or loss from the disposition of such asset for
purposes of computing Net Profits or Net Losses;
(iv) Gain or loss resulting from any disposition of
Company property with respect to which gain or loss is recognized for
federal income tax purposes shall be computed by reference to the Gross
Asset Value of the property disposed of, notwithstanding that the
adjusted tax basis of such property differs from its Gross Asset Value;
(v) Notwithstanding any other provision of this Section,
any items which are specially allocated pursuant to Sections 7.3, 7.4
or 7.5 hereof shall not be taken into account in computing Net Profits
and Net Losses; and
(vi) The amounts of the items of Company income, gain,
loss or deduction to be specially allocated pursuant to Sections 7.3,
7.4 or 7.5 hereof shall be determined by applying rules analogous to
those set forth in paragraphs (i) through (iv) above.
7.10 Special Allocations. (a) Notwithstanding anything to the
contrary in this Article:
(i) All Nonrecourse Deductions for each Fiscal Year shall
be allocated to the Members in accordance with their relative
Interests.
(ii) All Member Nonrecourse Deductions for each Fiscal
Year shall be allocated to the Members who bear the economic risk of
loss with respect to the Member Nonrecourse Debt giving rise to such
deductions, in accordance with Regulation ss.1.704-2(i)(1).
(iii) If there is a net decrease in Minimum Gain during a
Fiscal Year, then before any other allocation is made for such Fiscal
Year , the Members shall be allocated items of income and gain for such
Fiscal Year (and, if necessary, subsequent Fiscal Years) in the amount
and in the proportions necessary to satisfy the requirements of a
"minimum gain chargeback" under Regulation ss.1.704-2(f).
(iv) If there is a net decrease in Member Minimum Gain
during a Fiscal Year, then before any other allocation is made for such
Fiscal year, the Members shall be allocated items of income and gain
for such Fiscal Year (and, if necessary, subsequent Fiscal Years) in
the amount and in the proportions necessary to satisfy the requirements
of a "partner nonrecourse debt minimum gain chargeback" under
Regulation ss.1.704-2(i)(4).
(v) The allocations set forth in subsections (i) through
(iv) above (the "Regulatory Allocations") are intended to comply with
certain requirements of Treasury Regulation ss.ss. 1.704-1(b) and
1.704-2. Notwithstanding any other provision of this Section (other
than the Regulatory Allocations), the Regulatory
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Allocations shall be taken into account in allocating other items of
income, gain, loss and deduction among the Members so that, to the
extent possible, the net amount of such allocation of other items and
the Regulatory Allocations to each Member shall be equal to the net
amount that would have been allocated to each such Member if the
Regulatory Allocations had not occurred. (b) As used in subsection (a)
above, the following terms have the following meanings:
(i) Member Minimum Gain means an amount determined by
computing, with respect to each Member Nonrecourse Debt, the Minimum
Gain that would result if such Member Nonrecourse Debt were treated as
a nonrecourse liability, determined in accordance with Regulation ss.
1.704-2(i)(3).
(ii) Member Nonrecourse Debt means nonrecourse Company
debt for which one or more Members bears an economic risk of loss,
determined in accordance with Regulation ss. 1.704-2(b)(4).
(iii) Member Nonrecourse Deductions means, for each Fiscal
Year, the Company deductions which are attributable to Member
Nonrecourse Debt and are characterized as "partner nonrecourse
deductions" under Regulation ss. 1.704-2(i)(2).
(iv) Minimum Gain means an amount determined by computing,
with respect to each nonrecourse liability of the Company, the amount
of gain (of whatever character), if any, that would be realized by the
Company if it disposed of (in a taxable transaction) the Company
property subject to such liability for no consideration other than full
satisfaction of such liability, and by then aggregating the amounts so
computed. Such amount shall be determined in a manner consistent with
Regulation ss.1.704-2(d).
ARTICLE VIII
CASH DISTRIBUTIONS
8.1 Cash Flow. Subject to the provisions of Section 8.5, the Company
will distribute all of its Net Cash Flow, as hereinafter defined, as follows:
(i) First, to Members holding Preferred Distribution LLC Shares
until such Members shall have received distributions equal to 150% of the
initial capital contribution made in respect of such Preferred Distribution LLC
shares;
(ii) Second, thereafter to holders of Participations, as
hereinafter defined, until such holders shall have received distributions equal
to the aggregate stated amount of such Participations, the distributions to said
holders to be made pro rata in proportion to their respective Participations;
and
(iii) Third, thereafter as follows:
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<PAGE> 13
(A) 49% to Members holding Preferred Distribution LLC Shares,
pro rata in proportion to their respective holdings of
such Shares; and
(B) 51% to Members holding other LLC Shares, pro rata in
proportion to their respective holdings of such other
Shares.
8.2 Certain Definitions. As used herein, the following terms have
the following meanings:
(i) "Net Cash Flow" means all revenues of the Company
from exploitation of the Film or any other source, net after providing
for payment of all expenses and for satisfaction of all loans incurred
to produce and exploit the Film, other than Participations.
(ii) "Participations" means any so-called "points" or
other deferred compensation that the Company may agree to pay to
production personnel or participants in connection with production of
the Film; provided, however, that Participations shall be subject to
prior written approval by Members holding a majority of any Preferred
Distribution LLC Shares, which approval shall not be unreasonably
withheld.
8.3 Time of Distribution. Distribution to Members shall be made
quarterly and at such other intervals as the Board of Managers in its sole
discretion deems advisable.
8.4 Limitations on Distributions. No distribution shall be made to
Members if prohibited by Section 14-11-407 of the Act.
8.5 Board of Managers Determination. Notwithstanding any other
provision hereof, the distribution of Cash Flow shall be subject to
determination of the Board of Managers, in the exercise of its discretion, that
the financial condition and financing agreements and commitments of the Company
permit such distribution by the Company. In making such determination, the Board
of Managers may provide for retention of a reasonable cash reserve (taking into
account the anticipated future availability of other assets or revenue of the
Company) in an amount that it deems necessary for completing production and
exploitation of the Film and satisfying the obligations of the Company.
ARTICLE IX
PROTECTIONS AND POWERS
9.1 The Members do not intend to be liable for any debt,
obligation or liability of the Company or for any act or omission of its
Managers or agents, however arising.
9.3 The Company shall indemnify the Members, members of the Board
of Managers and officers of the Company to the maximum extent authorized by the
Act.
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<PAGE> 14
9.3 No Member, acting solely in his or her capacity as a Member,
is an agent of the Company.
ARTICLE X
DISSOCIATION OF A MEMBER
10.1 Dissociation. Except as otherwise provided in this article, a
Member shall cease to be a Member as of the date of the occurrence of any of the
events under Section 14-11-601(a) of the Act.
10.2 No Dissociation. Notwithstanding the Act and Section 10.1
above, a Member shall not cease to be a Member upon the occurrence of any of the
events under Sections 14-11-601(a)(1), 14-11-601(a)(5), 14-11-601(a)(6),
14-11-601(a)(7) or 14-11-601(c) of the Act.
10.3 Death or Dissolution, etc. In the event of the death or
dissolution of a Member, or the occurrence of any of the events of Sections
14-11-601(a)(5), (6) or (7), the Member's successor-in-interest shall, except as
may be otherwise provided by law, be deemed to be an assignee of the Member's
LLC Shares and Interest but not a Member.
10.4 No Withdrawal. No Members may by voluntary act withdraw from
the Company.
10.5 Transfer; Repurchase. A Member shall cease to be a Member of
the Company upon transfer in compliance with this Agreement of all of his or her
LLC Shares or upon repurchase thereof by the Company.
ARTICLE XI
DISSOLUTION AND WINDING UP
11.1 Dissolution. The Company shall be dissolved upon the
occurrence of any of the following events ("Dissolution Event"):
(i) The expiration of the period fixed for the duration
of the Company as set out in the Articles of Organization of the
Company, namely, December 31, 2025;
(ii) The Members agree by majority vote of the LLC Shares
to dissolve the Company; or
(iii) The Board of Managers determines that dissolution of
the Company is appropriate and so notifies the Members.
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<PAGE> 15
11.2 Effect of Dissolution. Upon dissolution, the Company shall
cease to carry on its business, except as permitted by Section 14-11-605 of the
Act. Upon dissolution the Company shall file a statement of commencement of
winding up pursuant to Section 14-11-606 of the Act and publish the notice
permitted by Section 14-11-608 of the Act.
11.3 Winding Up, Liquidation and Distribution of Assets.
(a) Upon dissolution, an accounting shall be made by the
Company's independent accountants of the accounts of the Company and of
the Company's assets, liabilities and operations, from the date of the
last previous accounting until the date of dissolution. The Board of
Managers shall immediately proceed to wind up the affairs of the
Company.
(b) If the Company is dissolved and its affairs are to be
wound up, the Board of Managers shall, subject to the availability of
assets of the Company for such purposes:
(i) Sell or otherwise liquidate all of the
Company's assets as promptly as practicable (except to the
extent the Board of Managers may determine to distribute any
assets to the Members in kind);
(ii) Allocate any profit or loss resulting from
such sales to the Members in accordance with Article VII;
(iii) Discharge all liabilities of the Company,
other than liabilities to Members, and establish such reserves
as may be reasonably necessary to provide for contingent
liabilities of the Company;
(iv) Discharge liabilities of the Company to
Members; and
(v) Make distributions to the Members in
accordance with Section 8.2 of this Agreement. Any such
distributions to the Members in respect of their Interests
shall be made in accordance with the time requirements set
forth in Section 1.704-1(b)(2)(ii)(b)(2) of the Regulations.
(c) Notwithstanding anything to the contrary in this
Agreement, upon a liquidation within the meaning of Section
1.704-1(b)(2)(ii)(g) of the Regulations, if any Member has an Adjusted
Capital Account Deficit (after giving effect to all contributions,
distributions, allocations and other Capital Account adjustments for
all taxable years, including the year during which such liquidation
occurs), such Member shall have no obligation to make any Capital
Contribution, and the negative balance of such Member's Capital Account
shall not be considered a debt owed by such Member to the Company or to
any other person for any purpose whatsoever.
(d) Upon completion of the winding up, liquidation and
distribution of the assets, the Company shall be deemed terminated.
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<PAGE> 16
(e) The Board of Managers shall comply with any
applicable requirements of applicable law pertaining to the winding up
of the affairs of the Company and the final distribution of its assets.
11.4 Certificate of Termination. When all debts, liabilities and
obligations have been paid and discharged or adequate provisions have been made
therefor and all of the remaining property and assets have been distributed to
the Members, a Certificate of Termination shall be executed and filed with the
Secretary of State of Georgia in accordance with Section 14-11-610 of the Act.
ARTICLE XII
DISPOSITION OF LLC SHARES
12.1 Disposition. No Member shall have the right to assign,
transfer, sell, or convey its LLC Shares in the Company or any of its rights and
obligations as a Member, without the written consent of the Board of Managers.
12.2 Securities Law Compliance. No Member shall sell, pledge or
otherwise dispose of or transfer any LLC Share unless registered under the
Securities Act of 1933, as amended, and applicable state securities laws, or an
opinion is given by counsel satisfactory to the Company that such registration
is not required.
12.3 Dispositions not in Compliance with this Article Void. Any
attempted assignment, transfer, sale or conveyance of an Interest not in
compliance with this Article is null and void.
ARTICLE XIII
TAX MATTERS REPRESENTATIVE
13.1 The initial Tax Matter Representative, as defined in Section
6231 of the Code, shall be Steven D. Brown. A successor Tax Matter
Representative may be selected by majority vote of the Members from time to time
in their discretion.
ARTICLE XIV
AMENDMENT
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<PAGE> 17
14.1 Amendment. This Agreement may be amended or modified from time
to time only by vote of Members holding a majority of the LLC Shares, except
that in no event shall any amendment hereto, without the unanimous consent of
the Members:
(i) Create any individual liability of any Members to any
other Members or to third parties, without express written consent of
any Member to be obligated thereby, or
(ii) Create any obligation of any Members to the Company,
including (but not by way of limitation) any obligation to pay any
assessment or make any capital contribution to the Company, without
express written consent of any Member to be obligated thereby; or
(iii) Alter or amend the voting rights of the LLC Shares or
their relative participation in the net profits and net losses of the
Company; or
(iv) Extend the date specified in the Articles of
Organization of the Company for dissolution of the Company.
ARTICLE XV
MISCELLANEOUS PROVISIONS
15.1 Entire Agreement. This Agreement represents the entire
Agreement among all the Members.
15.2 No Partnership Intended for Non-tax Purposes. The Company is
formed under the Act, and the Members expressly do not intend hereby to form a
partnership under either the State Uniform Partnership Act nor the State Uniform
Limited Partnership Act. The Members do not intend to be partners one to another
or partners as to any third party.
15.3 Application of Georgia Law. This Agreement, the application
and interpretation hereof shall be governed exclusively by its terms and the
laws of the State of Georgia and specifically the Act.
15.4 Execution of Additional Instruments. Each Member hereby agrees
to execute such other and further statements of interest and holdings,
designations, powers of attorney and other instruments necessary to comply with
any laws, rules or regulations.
15.5 Construction. When required by the context, whenever the
singular form is used in this Agreement, the same shall include the plural and
vice versa, and the masculine gender shall include the feminine and neuter
genders and vice versa.
15.6 Headings. The headings in this Agreement are inserted for
convenience only and are in no way intended to describe, interpret, define, or
limit the scope, extent or intent of this Agreement or any provision hereof.
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<PAGE> 18
15.7 Waivers. The failure of any party to seek redress for
violation of or to insist upon the strict performance of any covenant or
condition of this Agreement shall not prevent a subsequent act, which would have
originally constituted a violation, from having the effect of an original
violation.
15.8 Rights and Remedies Cumulative. The rights and remedies
provided by this Agreement are cumulative and the use of any one right or remedy
by any party shall not preclude or waive the right to use any or all other
remedies. Such rights and remedies are given in addition to any other rights the
parties may have by law, statute, ordinance or otherwise.
15.9 Counterparts. This Agreement may be executed in counterparts,
each of which shall be deemed an original but all of which shall constitute one
and the same instrument.
15.10 Certification of Non-Foreign Status. In order to comply with
Section 1445 of the Code and the applicable Treasury Regulations thereunder, in
the event of the disposition by the Company of a United States real property
interest as defined in the Code and Treasury Regulations, each Member shall
provide to the Company, an affidavit stating, under penalties of perjury, (i)
the Member's address, (ii) United States taxpayer identification number, and
(iii) that the Member is not a foreign person as that term is defined in the
Code and Treasury Regulations.
15.11 Withholding.
(a) The Company shall withhold and pay over to the
Internal Revenue Service or other applicable taxing authority, all
taxes or withholdings, and all interest, penalties, additions to tax,
and similar liabilities in connection therewith or attributable thereto
(hereinafter "Withheld Taxes") to the extent that the Board of Managers
determines that such withholding and/or payment is required by the Code
or any other law, rule, or regulation, including, without limitation,
Sections 1441, 1442, 1445, or 1446 of the Code and Section 48-7-129 of
the Official Code of Georgia. The Board of Managers shall determine in
good faith to which Member such Withheld Taxes are attributable. All
amounts withheld pursuant to this paragraph with respect to any
allocation, payment or distribution to any Member shall be treated as
amounts distributed to such Member pursuant to Article VII hereof for
all purposes of this Agreement.
(b) If an amount payable to the Company is reduced
because the Member paying that amount withholds and/or pays over to the
Internal Revenue Service or other applicable taxing authority any
amount as a result of the status of a Member, the Board of Managers
shall make such adjustments to amounts distributed and allocated among
Members as it determines to be fair and equitable. (For example, if a
portion of interest income earned by the Company is withheld by the
payor and paid over to the Internal Revenue Service because a
particular Member is a non-U.S. Person, the Manger might include such
withheld and paid over amount in computing amounts
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<PAGE> 19
available for distribution to the Members pursuant to Article VII and
rate such withheld and paid over amount as if that amount were
distributed to the Member in satisfaction of whose tax liability such
amount was withheld and paid over.)
15.12 Banking. All funds of the Company shall be deposited in its
name in an account or accounts of a financial institution as shall be designated
from time to time by the Board of Managers. All funds of the Company shall be
used solely for the business and affairs of the Company. All withdrawals from
the Company bank accounts shall be made only upon checks or other instructions
signed by the Board of Managers or by such other persons as the Board of
Managers may designate from time to time.
15.13 Attorney-in-fact. The Members hereby severally designate and
appoint the President of the Company, as the same may be from time to time, as
their agent and attorney-in-fact for the purpose of executing on their behalf
and in their stead one or more amendments to this Agreement from time to time
for the purpose of adding new Members to this Agreement in accordance with the
terms hereof, specifying their respective ownership of LLC Shares, and
identifying the consideration to be received by the Company in payment for such
LLC Shares or the Member from whom the LLC Shares are being transferred.
15.14 Authorization to Transact Business in Other States. The Board
of Managers is authorized, empowered and directed to undertake any and all
actions that may be necessary or appropriate to enable the Company to transact
business in those states in which the Company is required to qualify to transact
business.
15.15 Determination of Matters Not Provided for in This Agreement.
The Board of Managers shall decide any questions arising with respect to the
Company and this Agreement which are not specifically or expressly provided for
in this Agreement.
15.16 Further Assurances. The Members each agree to cooperate, and
to execute and deliver in a timely fashion any and all additional documents
necessary to effectuate the purposes of the Company and this Agreement.
15.17 Time. TIME IS OF THE ESSENCE OF THIS AGREEMENT, AND TO ANY
PAYMENTS, ALLOCATIONS AND DISTRIBUTIONS SPECIFIED UNDER THIS AGREEMENT.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed and affixed their seals.
AMERICAN ARTISTS FILM CORPORATION
Attest:
/s/ J. Eric Van Atta By: /s/ Steven D. Brown
- ---------------------------------- ----------------------------------
Secretary Authorized Officer
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/s/ Steven D. Brown
----------------------------------
Steven D. Brown
/s/ J. Eric Van Atta
----------------------------------
J. Eric Van Atta
/s/ Glen C. Warren
----------------------------------
Glen C. Warren
/s/ Ben E. Noble
----------------------------------
Ben E. Noble
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<PAGE> 21
EXHIBIT A
to Amended and Restated Operating Agreement of
FALSE RIVER, LLC.
a limited liability company
organized under the laws of Georgia
<TABLE>
<CAPTION>
Preferred
Ordinary Distribution Capital
Name, address and federal tax LLC Shares LLC Shares Contribution
identification number of initial Members Received Received by Member
---------------------------------------- -------- -------- ---------
<S> <C> <C> <C> <C>
1. American Artists Film Corporation 51,000 19,600 $201,000
1245 Fowler Street, N. W.
Atlanta, GA 30318
Tax I.D. No.: 43-1717111
2. Glen C. Warren 0 9,800 $100,000
10 Lakeland Circle
Jackson, MS 39216-5093
Soc. Sec. No.: ###-##-####
3. Ben E. Noble 0 19,600 $200,000
P.O. Box 18769
Atlanta, GA 31126-0769
Soc. Sec. No.: ###-##-####
4.
------ ------ --------
Totals 51,000 49,000 $501,000
====== ====== ========
</TABLE>
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<PAGE> 1
EXHIBIT 10.76
April 30, 1998
Mr. Ben Noble
3261 Lenox Road, N.E.
Atlanta, Georgia 30324
RE: Interest Agreement - False River, LLC
Dear Mr. Noble:
This letter will confirm our agreement to pay you ten percent (10%)
interest on all of your False River, LLC investments until such time that those
investments are re-paid out of proceeds from the sale of any and all
distribution rights associated with the feature film currently titled False
River. This agreement is entered into in consideration of your commitment to be
the initial and largest investor in False River, LLC.
Very Truly Yours,
/s/ Steven D. Brown
- ---------------------------------
Steven D. Brown
Chairman and CEO
American Artists Film Corporation
<PAGE> 1
EXHIBIT 10.77
FINANCIAL ADVISORY AND CONSULTING AGREEMENT
This agreement ("Agreement") is made and entered into this 1st day of
May, 1998, between American Artists Film Corporation, a Missouri corporation
(the "Company"), and National Securities Corporation (the "Consultant").
In consideration of and for the mutual promises and convenants
contained herein, and for other good and valuable consideration, the receipt of
which is hereby acknowledged, the parties hereto agree as follows:
1. Purpose. The Company hereby retains the Consultant on a
non-exclusive basis during the term specified to render consulting advice to the
Company as the Company reasonably request relating to financial and similar
matters, upon the terms and conditions as set forth herein.
2. Term and Compensation. This Agreement shall be effective for a
period of three months commencing on the date first written above (the
"Engagement Period"); provided, however, that this Agreement may be terminated
by either party upon 10 days prior written notice. The Company shall pay the
Consultant a non-refundable fee upon the execution of this Agreement consisting
of 25,000 shares of restricted common stock of the Company (the "Restricted
Stock").
3. Duties of Consultant. During the term of this Agreement, the
Consultant will provide the Company with such regular and customary
non-exclusive consulting advice as is reasonably requested by the Company,
provided that the Consultant shall not be required to undertake duties not
reasonable within the scope of the consulting advisory services contemplated by
this Agreement. In performance of these duties, the Consultant shall provide the
Company with the benefits of its best judgment and efforts. It is understood and
acknowledged by the parties that the value of the Consultant's advice is not
measurable in any quantitative manner, and that the Consultant shall not be
obligated to spend any specific amount of time doing so. The Consultant's duties
may at the direction of the Company include, but not necessarily be limited to
on a non-exclusive basis:
A. Providing sponsorship and exposure in connection with the
dissemination of corporate information regarding the Company to the investment
community at large.
B. Assisting in the Company's financial public relations, including
discussions between the Company and the financial community.
C. Advice regarding the financial structure of the Company and its
divisions or subsidiaries or any programs and projects, as such issues relate to
the public market for the Company's equity securities.
D. Rendering advice with respect to any acquisition program of the
Company, as such program relates to the public market for the Company's equity
securities.
<PAGE> 2
E. Rendering advice regarding the public market for the Company's
securities and the timing and structure of any future public offering of the
Company's equity securities.
It is expressly understood that no actual or express authority on
behalf of the Company is granted by the Company hereunder to Consultant.
4. Relationships with others. The Company acknowledges that the
Consultant or its affiliates is in the business of providing financial service
and consulting advice (of all types contemplated by this Agreement) to others.
Nothing herein contained shall be construed to limit or restrict the Consultant
in conducting such business with respect to others, or in rendering such advise
to others. In connection with the rendering of services hereunder, Consultant
has been or will be furnished with confidential information concerning the
Company including, but not limited to, financial statements and information,
cost and expense data, production data, trade secrets, marketing and customer
data, and such other information not generally obtained from public or published
information or trade sources. Such information shall be deemed "Confidential
Material" and, except as specifically provided herein, shall not be disclosed by
Consultant or its employees or agents without prior written consent of the
Company. In the event Consultant is required by applicable law or legal process
to disclose any of the Confidential Material, it is agreed that Consultant will
deliver to the Company immediate notice of such requirement prior to disclosure
of same to permit the Company to seek an appropriate protective order and/or
waive compliance of this provision. If, in the absence of a protective order or
receipt of written waiver, Consultant is nonetheless, in the reasonable written
opinion of Consultant's counsel, compelled to disclose any Confidential
Material, Consultant may do so without liability hereunder provided that notice
of such prospective disclosure is delivered to the Company at least five (5)
days prior to actual disclosure, Following the termination of this Agreement,
Consultant shall deliver to the Company all Confidential Material.
5. Consultant's Liability. In the absence of gross negligence or
willful misconduct on the part of the Consultant or the Consultant's breach of
this Agreement, the Consultant shall not be liable to the Company or to any
officer, director, employee, stockholder or creditor of the Company, for any act
or omission in the course of or in connection with the rendering or providing of
advice hereunder. Except in those cases where the gross negligence or willful
misconduct of the Consultant or the breach by the Consultant of this Agreement
is alleged and proven, the Company agrees to defend, indemnify, and hold the
Consultant harmless from and against any and all reasonable costs, expenses and
liability (including reasonable attorney's fees paid in the defense of the
Consultant) which may in any way result from services rendered by the Consultant
pursuant to or in any connection with this Agreement.
6. Expenses. The Company, upon receipt of appropriate supporting
documentation, shall reimburse the Consultant for any and all reasonable and
actual out-of-pocket expenses incurred in connection with services provided to
the Company, subject in each case to prior written approval of the Company.
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<PAGE> 3
7. Other Assistance by Consultant
If the Consultant materially assists the Company with respect to (i)
the sale or distribution of securities and/or (ii) acquisition of or merger with
another business, then the Company agrees to compensate the Consultant in a
manner which is reasonably consistent with the industry standards for the
particular type and size of transaction and based upon Consultant's level of
involvement. If the parties are unable to agree upon a compensation arrangement
for such services within 30 days of the identification of such a transaction,
then the parties hereto agree to submit such dispute to a mutually acceptable
mediation service for resolution.
8. Limitation Upon the Use of Advice and Services
(a) No person or entity, other than the Company or any of its
subsidiaries or directors or officers of each of the foregoing, shall be
entitled to make use of or rely upon the advice of the Consultant to be given
hereunder, and the Company shall not transmit such advice to, or courage or
facilitate the use or reliance upon such advice by other without the prior
consent of the Consultant.
(b) It is clearly understood that the Consultant, for services rendered
under this Agreement, makes no commitment whatsoever as to recommend or advise
its clients to purchase the securities of the Company. Research reports or
corporate finance reports that may be prepared by the Consultant will, when and
if prepared, be done solely on the merits or judgment of analysts of the
Consultant or any senior finance personnel of the Consultant.
(c) Use of the Consultant's name in annual reports or any other report
of the Company or releases by the Company must have the prior approval of the
Consultant unless the Company is required by law to include Consultant's name in
such annual reports, other report or release of the Company, in which even
Consultant will be furnished with copies of such annual reports or other reports
or releases using Consultant's name in advance of publication by the Company.
9. Severability. Every provision of this Agreement is intended to be
severable. If any term or provision hereof is deemed unlawful or invalid for any
reason whatsoever, such unlawfulness or invalidity shall not affect the validity
of this Agreement.
10. Miscellaneous.
(a) Any notice or other communication between parties hereto shall be
sufficiently given if sent by certified or registered mail, postage prepaid, or
faxed and confirmed if to the Company, addressed to it at American Artists Film
Corporation, Attention: Steven D. Brown, 1245 Fowler Street NW, Atlanta, GA
30318 or if to the Consultant, addressed to it at National Securities
Corporation, 875 N. Michigan Avenue, Suite 1560, Chicago, Illinois 60611. Such
notice or other communication shall be deemed to be given on the date of
receipt.
(b) If the Consultant shall cease to do business, the provisions hereof
relating to duties of the Consultant and compensation by the Company as it
applies to the Consultant shall thereupon cease to be in effect, except for the
(1) Restricted Stock paid by the Company to Consultant hereunder as of the date
hereof, and (2) Any compensation due Consultant in accordance with paragraph 7
above.
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<PAGE> 4
(c) This Agreement embodies the entire agreement and understanding
between the Company and the Consultant and supersedes any and all negotiations,
prior discussions and preliminary and prior agreements and understandings
related to the central subject matter hereof.
(d) This Agreement has been duly authorized, executed and delivered by
and on behalf of the Company and the Consultant.
(e) This Agreement shall be construed and interpreted in accordance
with the laws of the State of Washington, without giving effect to conflicts of
laws.
(f) There is no relationship or partnership, agency, employment,
franchise or joint venture between the parties. Neither party has the authority
to bind the other or incur any obligation on its behalf.
(g) This Agreement and the rights hereunder may not be assigned by
either party (except by operation of law or merger) and shall be binding upon
and inure to the benefit of the parties and their respective successors, assigns
and legal representatives.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date hereof.
AMERICAN ARTISTS FILM CORPORATION
By: /s/ Steven D. Brown
----------------------------
Name: Steven D. Brown
Title CEO
NATIONAL SECURITIES CORPORATION
By: /s/ Steven A. Rothstein
----------------------------
Name: Steven A. Rothstein
Title Chairman
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<PAGE> 1
Exhibit 10.78
$63,300.00 May 4, 1998
PROMISSORY NOTE
FOR VALUE RECEIVED, American Artists Film Corporation, a Missouri
corporation (herein called "Obligor"), hereby promises to pay to the order of
Glen C. Warren, a resident of Jackson, Mississippi (herein called "Holder"), in
legal tender of the United States, without grace, at his office located at 10
Lakeland Circle, Jackson, Mississippi, or at such other place as the Holder may
hereafter designate, the sum of Sixty-Three Thousand Three Hundred Dollars
($63,300.00) together with simple interest on the unpaid balance of such
principal amount outstanding from time to time hereunder at an annual interest
rate equal to prime plus one percent (1%) per annum. All principal and any
accrued but unpaid interest will be due and payable on demand but no later than
September 1, 1999.
It is hereby expressly agreed that should any default be made in the
payment of principal or interest when due, the principal indebtedness evidenced
hereby and all interest accrued thereon shall, upon written demand, become due
and payable and may be collected forthwith. Notwithstanding any other provision
hereof to the contrary, Obligor shall not be deemed to be in default of payment
of principal or interest hereunder if such payment (the "Late Payment") is
received by Holder within ten (10) days following the date on which Obligor
receives written notice of said default.
Payment not made within ten (10) days of the due date shall bear interest
at the rate of prime plus one percent (1%) per annum from the original due date
until paid.
Time is of the essence of this Note, and in the event that this Note is
collected by law or through an attorney-at-law, the Obligor agrees to pay all
reasonable costs of collection.
This note is unsecured.
The Obligor shall be entitled, at any time, and from time to time, without
the consent of the Holder and without making any penalty or premium therefor, to
prepay all or any portion or portions of the outstanding principal amount
thereof.
This Note shall be governed as to the validity, interpretation,
construction, enforcement, effect, and in all respects by the laws and decisions
of the State of Georgia.
No delay or omission on the part of the Holder in exercising any rights
hereunder shall operate as a waiver of such right or any other rights under this
Note. A waiver on any occasion shall not be construed as a bar to or waiver of
any right or remedy on any future occasion.
IN WITNESS WHEREOF, the undersigned has caused these presents to be duly
executed under the seal on the date and year first above written.
"OBLIGOR"
By: /s/ STEVEN D. BROWN
--------------------------------------
American Artists Film Corporation
1245 Fowler St., N.W.
Atlanta, Georgia 30318
"HOLDER"
/s/ GLEN C. WARREN
- ------------------------------------
Glen C. Warren
<PAGE> 1
Exhibit 10.79
$85,150.00 May 14, 1998
PROMISSORY NOTE
FOR VALUE RECEIVED, American Artists Film Corporation, a Missouri
corporation (herein called "Obligor"), hereby promises to pay to the order of
Glen C. Warren, a resident of Jackson, Mississippi (herein called "Holder"), in
legal tender of the United States, without grace, at his office located at 10
Lakeland Circle, Jackson, Mississippi, or at such other place as the Holder may
hereafter designate, the sum of Eighty-Five Thousand One Hundred and Fifty
Dollars ($85,150.00) together with simple interest on the unpaid balance of such
principal amount outstanding from time to time hereunder at an annual interest
rate equal to prime plus one percent (1%) per annum. All principal and any
accrued but unpaid interest will be due and payable on demand but no later than
September 1, 1999.
It is hereby expressly agreed that should any default be made in the
payment of principal or interest when due, the principal indebtedness evidenced
hereby and all interest accrued thereon shall, upon written demand, become due
and payable and may be collected forthwith. Notwithstanding any other provision
hereof to the contrary, Obligor shall not be deemed to be in default of payment
of principal or interest hereunder if such payment (the "Late Payment") is
received by Holder within ten (10) days following the date on which Obligor
receives written notice of said default.
Payment not made within ten (10) days of the due date shall bear interest
at the rate of prime plus one percent (1%) per annum from the original due date
until paid.
Time is of the essence of this Note, and in the event that this Note is
collected by law or through an attorney-at-law, the Obligor agrees to pay all
reasonable costs of collection.
This note is unsecured.
The Obligor shall be entitled, at any time, and from time to time, without
the consent of the Holder and without making any penalty or premium therefor, to
prepay all or any portion or portions of the outstanding principal amount
thereof.
This Note shall be governed as to the validity, interpretation,
construction, enforcement, effect, and in all respects by the laws and decisions
of the State of Georgia.
No delay or omission on the part of the Holder in exercising any rights
hereunder shall operate as a waiver of such right or any other rights under this
Note. A waiver on any occasion shall not be construed as a bar to or waiver of
any right or remedy on any future occasion.
IN WITNESS WHEREOF, the undersigned has caused these presents to be duly
executed under the seal on the date and year first above written.
"OBLIGOR"
By: /s/ STEVEN D. BROWN
-------------------------------------
American Artists Film Corporation
1245 Fowler St., N.W.
Atlanta, Georgia 30318
"HOLDER"
/s/ GLEN C. WARREN
- ------------------------------------
Glen C. Warren
<PAGE> 1
Exhibit 10.80
$51,550.00 May 14, 1998
PROMISSORY NOTE
FOR VALUE RECEIVED, American Artists Film Corporation, a Missouri
corporation (herein called "Obligor"), hereby promises to pay to the order of
Glen C. Warren, a resident of Jackson, Mississippi (herein called "Holder"), in
legal tender of the United States, without grace, at his office located at 10
Lakeland Circle, Jackson, Mississippi, or at such other place as the Holder may
hereafter designate, the sum of Fifty-One Thousand Five Hundred and Fifty
Dollars ($51,550.00) together with simple interest on the unpaid balance of such
principal amount outstanding from time to time hereunder at an annual interest
rate equal to prime plus one percent (1%) per annum. All principal and any
accrued but unpaid interest will be due and payable on demand but no later than
September 1, 1999.
It is hereby expressly agreed that should any default be made in the
payment of principal or interest when due, the principal indebtedness evidenced
hereby and all interest accrued thereon shall, upon written demand, become due
and payable and may be collected forthwith. Notwithstanding any other provision
hereof to the contrary, Obligor shall not be deemed to be in default of payment
of principal or interest hereunder if such payment (the "Late Payment") is
received by Holder within ten (10) days following the date on which Obligor
receives written notice of said default.
Payment not made within ten (10) days of the due date shall bear interest
at the rate of prime plus one percent (1%) per annum from the original due date
until paid.
Time is of the essence of this Note, and in the event that this Note is
collected by law or through an attorney-at-law, the Obligor agrees to pay all
reasonable costs of collection.
This note is unsecured.
The Obligor shall be entitled, at any time, and from time to time, without
the consent of the Holder and without making any penalty or premium therefor, to
prepay all or any portion or portions of the outstanding principal amount
thereof.
This Note shall be governed as to the validity, interpretation,
construction, enforcement, effect, and in all respects by the laws and decisions
of the State of Georgia.
No delay or omission on the part of the Holder in exercising any rights
hereunder shall operate as a waiver of such right or any other rights under this
Note. A waiver on any occasion shall not be construed as a bar to or waiver of
any right or remedy on any future occasion.
IN WITNESS WHEREOF, the undersigned has caused these presents to be duly
executed under the seal on the date and year first above written.
"OBLIGOR"
By: /s/ STEVEN D. BROWN
-------------------------------------
American Artists Film Corporation
1245 Fowler St., N.W.
Atlanta, Georgia 30318
"HOLDER"
/s/ GLEN C. WARREN
- ------------------------------------
Glen C. Warren
<PAGE> 1
Exhibit 10.81
AGREEMENT
THIS AGREEMENT is made and entered into this 21 day of May, 1998 by and
between the American Artists Entertainment Corporation (AAEC), a corporation
doing business in the state of Georgia and THC Entertainment, LLC (THC), a
corporation doing business in Nashville, Tennessee.
RECITALS
1 - AAEC is a development and production company in the business of producing
feature length motion pictures and video and television programs for worldwide
distribution in all media.
2 - THC, LLC is an entertainment music production and project/personnel
management company in the business of composing, producing and managing motion
picture, movie, television and promotional projects/programs/campaigns.
3 - AAEC and THC wish to enter into an agreement to produce a feature
film based on the screenplay owned by AAEC titled LAST SUNRISE, hereafter known
as the property, to be distributed in all media in all markets worldwide.
AGREED
1 - THC and AAEC mutually agree to a six month period, with an additional six
month option to jointly produce the property, said option commencing on the
execution of this document.
2 - AAEC agrees to provide its resources and connections to develop a strategy
and the appropriate support materials to seek financing for the production.
3. THC agrees to mutually facilitate the development of such strategy and
support materials.
4. Both parties agree and acknowledge that they will introduce the property to
actors, musicians, recording artists, and entertainment industry executives who
may cause the property to be produced.
5. In the event that funding is arranged, both parties agree to the following:
a. AAEC agrees to provide the property and all production services, including
but not limited to producers, director, writer, sound recording, editors and
other such personnel as required to produce a theatrical or broadcast quality
program. Such personnel and services to be paid from the production budget of
the programs.
<PAGE> 2
b. THC agrees to provide the music composers, score, title track and, budget
permitting, music for a soundtrack CD to compliment the production of the
feature film, and to serve as co-producer of the feature film. Such goods and
services to be paid from the production budget of the programs.
6. The specific fees for all services will be negotiated in good faith and
directly related to the total production dollars available.
7 - AAEC and THC agree to negotiate in good faith the appropriate corporate and
individual credits.
8 - For their contributions, AAEC and THC shall each own equal shares of any
profits derived from the broadcast or exploitation of these programs from any
sales or licensing arrangements or any derivative or indirect or spin off
products resulting from these programs in all media worldwide.
9. - Both parties assert that they have the right to enter into this agreement
and that there are no known liens against either party.
If the above commemorates your understanding please signify so by signing below.
/s/ Rex Hauch
- --------------------------------------------------------
American Artists Entertainment Corporation
/s/ Don Casselman
- ---------------------------------------------------------
THC Entertainment, LLC
<PAGE> 1
EXHIBIT 10.82
AMENDMENT AGREEMENT
TO THE AMENDED AND RESTATED
OPERATING AGREEMENT OF
FALSE RIVER, LLC
This Amendment Agreement is made and entered into as of this 29th day
May 1998 by and among FALSE RIVER, LLC (the "Company"), a Georgia limited
liability company, and the undersigned members ("Members") of the Company.
RECITALS:
A. The Members entered into an Amended and Restated Operating Agreement
dated April 1998, (the "Original Agreement") for the purpose of, among other
things, organizing the Company as a Georgia limited liability company and
providing for the Members' respective contributions to the capital of the
Company and resulting ownership of shares ("Limited Liability Company Shares" or
"LLC Shares") with such LLC Shares consisting of Ordinary LLC Shares and
Preferred Distribution LLC Shares.
B. The Members have decided to amend and revise the allocation of LLC
shares ownership among themselves effective as of the date of the Original
Agreement, without changing the aggregate number of Ordinary LLC Shares
outstanding which is 51,000. The Preferred Distribution LLC Shares will be
allocated in accordance with Paragraph 1. below.
AGREEMENTS:
In consideration of the Recitals, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties agree as follows:
1. Amendment. (a) The Original Agreement is hereby amended by deleting
Exhibit A thereof in its entirety and substituting in lieu thereof the new form
of Exhibit A that is attached as Exhibit A to this Amendment Agreement and;
(b) If any current Member or subsequent Member is to receive
Preferred Distribution LLC Shares as described in the Original Agreement, then
such Members shall receive a total number of Preferred Distribution LLC Shares
that shall be equal to the percentage relationship of each Member's capital
contribution to the aggregate amount of total capital contributions made by all
Members holding Preferred Distribution Shares. The number of such Preferred
Distribution LLC Shares for each Member will be determined once the offering of
Preferred Distribution LLC Shares is complete but in no event shall the
aggregate number of said Preferred Distribution LLC Shares exceed 49,000, unless
the Board of Mangers determines otherwise. All allocations of Net Profits, Net
Losses, Net Cashflow, distributions and any other adjustments and allocations
shall also be proportionately adjusted in accordance herewith.
i
<PAGE> 2
2. Company Consent; Capital Accounts. The Company consents to the
revised allocation of ownership of its LLC Shares in the substituted form of
Exhibit A. Once the offering of Preferred Distribution LLC Shares is complete,
the Company will immediately adjust the Members' respective allocation of
Preferred Distribution LLC Shares to conform with the Members' respective
capital contributions to the Company as so described in Paragraph 1 above.
3. No Other Change. Except as provided in Paragraph 1 above, the
Original Agreement shall remain in full force and effect in accordance with its
terms.
4. Definitions Unless otherwise defined herein, all terms used herein
shall have the meaning as defined in the Original Agreement.
IN WITNESS WHEREOF, the parties have caused this Amendment Agreement to
be duly executed and affixed their seals.
AMERICAN ARTISTS FILM CORPORATION
(CORPORATE SEAL)
By: /s/ J. Eric Van Atta
-------------------------------------
Authorized Officer
/s/ Steve Brown
-------------------------------------
Steve Brown
/s/ Glen C. Warren
-------------------------------(SEAL)
Glen C. Warren
/s/ Ben Noble
-------------------------------(SEAL)
Ben E. Noble
FALSE RIVER, LLC
(COMPANY SEAL)
By: /s/ Steve Brown
-------------------------------------
Steve Brown, Board of Managers
By: /s/ Ben Noble
-------------------------------------
Ben E. Noble, Board of Managers
By: /s/ Glen C. Warren
-------------------------------------
Glen C. Warren, Board of Managers
ii
<PAGE> 3
ACCEPTED AND ACKNOWLEDGED:
ATLANTIC INTERNATIONAL ENTERTAINMENT, INC.
By: /s/ Norman Hoskin
------------------------------------
Authorized Officer
By: /s/ Ceil Brown
------------------------------------
Ceil Brown
By: /s/ Norman Hoskin
------------------------------------
Norman Hoskin
By: /s/ Paul E. Michael
------------------------------------
Paul E. Michael
iii
<PAGE> 4
EXHIBIT A
AMENDMENT AGREEMENT
TO THE AMENDED AND RESTATED
OPERATING AGREEMENT OF
FALSE RIVER, LLC
AS OF DECEMBER 2, 1998
<TABLE>
<CAPTION>
Preferred
Ordinary Distribution Capital
Name, address and federal tax identification LLC Shares LLC Shares Contribution
number of initial Members Received Received by Member
------------------------- -------- -------- ---------
<S> <C> <C> <C> <C>
1 American Artists Film Corporation 51,000 0 $ 1,000
1245 Fowler Street, N. W.
Atlanta, GA 30318
Tax I.D. No.: 43-1717111
2 Glen C. Warren 0 TBD* $147,000
10 Lakeland Circle
Jackson, MS 39216-5093
Soc. Sec. No.: ###-##-####
3 Ben E. Noble 0 TBD* $293,400
P.O. Box 18769
Atlanta, GA 31126-0769
Soc. Sec. No.: ###-##-####
4 Atlantic International Entertainment 0 TBD* $100,000
200 E. Palmetto Park Road, Suite 200
Boca Raton, FL 33432
Tax I.D. No.:
5 Steven D. Brown 0 TBD* $ 53,800
9965 Lake Forest Way
Roswell, GA 30076
Soc. Sec. No.: ###-##-####
6 Ceil Brown 0 TBD* $ 60,000
7910 N.W. 87th Avenue
Tamarac, FL 33321
Soc. Sec. No.:
7 Norman Hoskin 0 TBD* $ 7,738
200 E. Palmetto Park Road, Suite 200
Boca Raton, FL 33432
Soc. Sec. No.:
8 Paul E. Michael 0 TBD* $ 10,000
199 Courtney Ann Drive.
Henderson, NV 89014
Soc. Sec. No.: ###-##-####
Totals 51,000 TBD* $671,938
------------------------------------ ====== ========
*TBD - TO BE DETERMINED
</TABLE>
iv
<PAGE> 1
Exhibit 10.83
AMENDMENT #1
TO
THE LOAN AND SECURITY AGREEMENT AND RELATED FINANCING DOCUMENTS DATED
April 2, 1998 BETWEEN EMERGENT FINANCIAL CORP. (HEREIN REFERRED TO AS "SECURED
PARTY") AND FIRST LIGHT ENTERTAINMENT CORPORATION (HEREIN REFERRED TO AS
"DEBTOR")
DATE EFFECTIVE
June 16, 1998
For and in consideration of the premises, mutual agreements, warranties and
representations herein made, and other good and valuable consideration, the
receipt, adequacy and sufficiency of which is hererby acknowledged, the Debtor
and Secured Party agree that the Loan and Security Agreement, dated as of April
2, 1998, between Debtor and Secured Party, is hereby amended and modified in the
following particulars:
1. Capitalized terms used herein and not otherwise defined herein shall
have the meanings given to such terms in the Loan Agreement.
2. Exhibit "A" of the Loan Agreement is hereby deleted in its entirety and
inserted in lieu thereof is the new Exhibit "A," which is attached
hereto and incorporated herein by reference.
3. Except as expressly amended hereinabove, each condition, provision,
covenant and term contained in the Loan Agreement and the documents
related hereto shall remain in full force and effect, and the Debtor
hereby ratifies, confirms, adopts and approved the Loan Agreement and
the documents related thereto as they exist and agrees that it shall
continue to be bound by all of the conditions, provisions, terms and
covenants contained in said Loan Agreement and documents related
thereto and nothing contained therein shall be deemed to have been
modified, abrogated, superseded or otherwise affected except as
specifically set forth herein.
4. This Amendment represents a modification only and is not, and should
not be construed as, a novation.
DEBTOR ACKNOWLEDGES THAT IT HAS READ THIS AMENDMENT TO THE LOAN AND SECURITY
AGREEMENT ALONG WITH THE AMENDED AND RESTATED SCHEDULE #1, ATTACHED HERETO AS
EXHIBIT "A," AND IS AWARE OF ALL OF THE TERMS THEREOF, THAT THEY MERELY
CONSTITUTE AN OFFER BY DEBTOR TO SECURED PARTY UNTIL AND UNLESS ACCEPTED BY
SECURED PARTY IN WRITING AT ITS PRINCIPAL PLACE OF BUSINESS.
IN WITNESS WHEREOF, the undersigned has executed this Amendment under hand and
seal this 16th day of June 1998.
Debtor:
Attest: FIRST LIGHT ENTERTAINMENT CORPORATION
/s/ J. Eric Van Atta /s/ Robert Martinez
- --------------------------- -------------------------------------
J. Eric Van Atta, Secretary By: Robert Martinez
Title: Chief Financial Officer
[corporate seal]
<PAGE> 2
The undersigned Guarantors of all Indebtedness at any time owing by First light
Entertainment Corporation to Emergent Financial Corp. hereby acknowledge and
consent to the foregoing and affirm that nothing contained herein shall modify
in any respect such guaranty.
AMERICAN ARTISTS FILM CORPORATION,
Witness: a Missouri corporation
/s/ Robert A. Martinez By: /s/ Steven D. Brown
- ------------------------ ---------------------------------
Steven D. Brown, Chairman/CEO
Accepted and agreed to this 16th day of June, 1998
Witness: Emergent Financial Corp.
- ------------------------ -------------------------------------
Harold Combs, Senior Vice President
(CORPORATE SEAL)
<PAGE> 3
SCHEDULE
This amended and Restated Schedule is a part of a Loan and Security
Agreement, dated April 2, 1998, between FIRST LIGHT ENTERTAINMENT CORPORATION
and EMERGENT FINANCIAL CORP., a South Carolina Corporation, ("EFC") and succeeds
the original Schedule dated April 2, 1998. The amended schedule items covered
under this Amended and Restated Schedule pertain to Schedule Item #26.
1. Borrowing Capacity (SS 1.1(c))
Borrowing Capacity at any time shall be the net amount
determined by taking the lesser of the following amounts:
(A) $1,000,000.00
or
(B) the amount equal to the sum of:
(i) 85.00% of the Receivable Borrowing Base;
and
(ii) the lessor of - 0 - or the amount of the
--------
Inventory Borrowing Base;
and subtracting from the lessor of (A) or (B) above, the sum of (a)
banker's acceptances, plus (b) letters of guaranty, plus (c) standby
letters of credit.
2. Inventory Borrowing Base Percentages (SS 1.1(r))
The following percentages of dollar value (calculated at the
lower of actual cost or market value) are applicable to the following
categories of Eligible Inventory:
( N/A ) finished goods, to the extent of ___%;
( N/A ) raw materials, to the extent of ___ %;
( N/A ) work in process to the extent of ___%.
3. Cash Discount (SS 1.1(g) & 10.3)
Maximum Cash Discount of 2.00%, net 10 days
4. Receivable--Age (SS 1.1(o)(i))
90 DAYS AFTER ( X ) INVOICE DATE
--
( ) due date (not to exceed ___ days
after invoice date) shown on the
Invoice evidencing the applicable
Receivable.
5. Receivable Disqualification Percentage (SS 1.1(o) (vi))
25.00 % OR MORE
6. Permissible Foreign Account Debtors (SS 1.1(o)(vii))
NONE
7. Inventory Accounting (SS 1.1(r))
( X ) FIRST-IN, FIRST-OUT (FIFO)
( ) Last-in, first-out (LIFO)
( ) Other as specified below
<PAGE> 4
8. Payment Account (SS 1.1(t))
There is ( X ) a Payment Account
is not ( )
Name and address of depository bank: NATIONSBANK, N.A.
9. State of Incorporation (SS 4.2(b), 5.1)
Debtor: GEORGIA
Consolidated Subsidiary N/A
10. Location(s) of Inventory and Equipment (SS 5.4(c), 5.7, 5.8(a) & 11.1)
INVENTORY LOCATIONS: - 1245 FOWLER STREET, N.W. ATLANTA, GEORGIA 30318
EQUIPMENT LOCATIONS (INCLUDING NAMES AND ADDRESSES OF OWNERS OR REAL
PROPERTY AND MORTGAGES):
1245 FOWLER STREET, N.W. ATLANTA, GEORGIA
11. Permitted Encumbrances (SS 5.5(a), 5.5(c) & 11.3)
NONE
12. Business Records Location (SS 5.7(a), 5.7(c) & 11.1)
1245 FOWLER STREET, N.W. ATLANTA, GEORGIA 30318
13. Trademarks and Patents (SS 5.17)
Debtor:
Consolidated Subsidiary:
14. Margin Stock: (SS 5.22)
NONE
15. Labor Contracts (SS 5.24)
Debtor: NONE
Consolidated Subsidiary:
16. Authorized Shares (SS 5.27)
No. of authorized common shares: 1,000,000
Par Value of common shares: $1.00 per share
No. of issued and outstanding shares: 100,000
17. Required Documents (SS 6.1, 6.4, 6.7, 9.2(b)
<TABLE>
<CAPTION>
Check if Required Frequency Due
----------------- -------------
<S> <C> <C>
Borrowing Base Certificate ( X ) Daily
Receivable Schedule (Aging) ( X ) Monthly, for the end of
the month, due by the
10th of the following
month.
Inventory Reports
(a) Value Reports ( ) Upon Request
(b) Periodic Summary Reports ( ) Upon Request
(c) Dispute Report ( ) Upon Request
</TABLE>
<PAGE> 5
<TABLE>
<S> <C> <C>
Credits & Extension Reports ( X ) Same as Receivable Aging
Copies of billing documents relating to the Receivables ( X ) Upon Request
List of names and addresses of Account Debtors ( X ) At closing & upon request
Reconciliation report, in form satisfactory to ( X ) Monthly, for the end of
Secured Party, showing all Receivables, collections, the month, due by the
payments, Credits, & Extensions since the proceeding report 10th of the following
month.
Payable aging report, showing the amounts due and ( X ) Monthly, for the end of
owing on all of Debtor's payable according to Debtor's the month, due by the
records as of the close of such periods as shall be 10th of the following
specified by Secured Party. Month.
Payroll tax returns ( X ) Quarterly
Payroll tax calculations and deposit information ( X ) Monthly
Invoice and Credit registers ( X ) Daily or with each
Advance Request
</TABLE>
18. Interest Rate (SS 8.2)
TWO AND ONE-HALF PERCENT (2.50%) PLUS THE GREATER OF (I) THE PRIME RATE
OR (II) SEVEN AND ONE-HALF PERCENT (7.50%).
19. Fees and Due Dates (SS 8.3)
<TABLE>
<CAPTION>
Type Amount Due Date(s)
---- ------ -----------
<S> <C> <C>
Monthly Service Fee .50% of the average daily Due and payable on the first day of each
balance of the loan outstanding, month for the preceding month.
subject to a monthly minimum
fee of $500.00
Facility Fee .25% ($2,500.00) of the total At closing and each facility anniversary
credit facility date of the Loan and Security Agreement,
in the event of renewal.
Overline Fee .50% per daily occurrence of Due and payable on the first day of each
the excess of indebtedness over month for the preceding month.
the borrowing capacity defined
in Schedule Item 1(A).
Overcollateral Fee .50% per daily occurrence of Due and payable on the first day of each
the excess of indebtedness over month for the preceding month.
the borrowing capacity defined
in Schedule Item 1(A).
</TABLE>
<PAGE> 6
<TABLE>
<S> <C> <C>
Audit Fee $400.00 per day, plus out of Due upon occurrence.
pocket expenses, limited to
$750.00 per quarter as long as
the credit line is not in default.
</TABLE>
20. Uncollected Funds Adjustment (SS 8.6)
( ) ________________ calendar days; or
( X ) THREE (3) BUSINESS DAYS; OR
( ) for each Item, the number of days estimated
by Secured party as necessary for collection
of funds from the particular institution on
which such Item is drawn.
21. Additional Covenants (SS 10 & 11)
None
22. Annual Financial Statements -- Timing (SS 10.1(a))
23. Annual Financial Statements -- Form (SS 10.1(a))
The following prepared by independent certified public
accountants satisfactory to Secured Party
( ) a compilation
( ) a review or
( X ) AUDITED (AS A COMPONENT OF THE AUDITED
FINANCIAL STATEMENTS OF THE PARENT COMPANY).
24. Interim Financial Statements (SS 10.1(b)
INTERNALLY GENERATED INTERIM FINANCIAL STATEMENTS WITHIN 30 DAYS OF
EACH MONTH END.
25. Terms of Sale (SS 10.3)
Due dates of no more than 30 calendar days from date of Invoice, except
in regard to transactions specified below under "Datings."
Datings: NONE
26. Net Working Capital; Consolidated Tangible Net Worth (SS 10.13)
Minimum net working capital NOT APPLICABLE
Minimum consolidated tangible net worth: NOT APPLICABLE
The New Working Capital and Tangible Net Worth covenants have been
amended to be not applicable.
27. Permitted Borrowing (SS 11.2)
Debtor: NONE, OTHER THAN THAT OF EMERGENT FINANCIAL CORP
FACILITATED THROUGH THIS TRANSACTION AND THOSE IN
EXISTENCE AT THE TIME OF CLOSING OF THIS TRANSACTION,
AS DISCLOSED IN VARIOUS SCHEDULES AND EXHIBITS
RELATED TO THE LOAN DOCUMENTS OF THIS FACILITY.
Consolidated Subsidiary: N/A
28. Permitted Investments and Advances (SS 11.9(d))
Debtor: NONE, OTHER THAN INTERCOMPANY TRANSFERS
THAT ARE WITHIN THE NORMAL COURSE OF
BUSINESS.
Consolidated Subsidiary: N/A
<PAGE> 7
29. Permitted Guaranties (SS 5.18, 11.10)
Debtor: NONE
Consolidated Subsidiary: N/A
30. Maximum Annual Lease Rentals (SS 11.11)
Debtor: THOSE IN EXISTENCE AT THE TIME OF THIS TRANSACTION
PLUS ANY NEW LEASE RENTALS IN CONJUNCTION WITH THE
ANNUAL CAPITAL EXPENDITURE ALLOWANCE OF $100,000.00
DESCRIBED IN SCHEDULE ITEM #31.
Consolidated Subsidiary: N/A
31. Permitted Capital Expenditures (SS 11.12)
Debtor: $100,000 ANNUALLY.
Consolidated Subsidiary: N/A
32. Maximum Aggregate Compensation (SS 11.13(a))
Debtor: $ N/A
Consolidated Subsidiary: $
33. Maximum Annual Compensation for Certain Individuals (SS 11.13(b))
Name Amount
Debtor: N/A
Consolidated Subsidiary: N/A
34. State (SS 1.1(ff))
GEORGIA
35. Initial Term and Renewal Term (SS 14.13)
Initial Term: ONE (1) YEAR TERM
Renewal Term: ANNUALLY
36. Percentage of Stock Ownership of Consolidated Subsidiaries (SS 5.25, SS
10.24))
Consolidated Subsidiary Debtor's Percentage of ownership
N/A
37. Prepayment Premium (SS 14.13)
ONE PERCENT (1.00%) OF THE BORROWING CAPACITY DEFINED IN SCHEDULE ITEM
1(A).
38. Other Provisions (SS 14.9)
None
39. Bank or Financial Institution (SS 1.1(w))
NationsBank, N.A.
<PAGE> 8
The undersigned have executed this Schedule on the 16TH DAY OF JUNE, 1998.
<TABLE>
<S> <C> <C> <C>
Secured Party: EMERGENT FINANCIAL CORP., Debtor: FIRST LIGHT ENTERTAINMENT CORPORATION,
A SOUTH CAROLINA CORPORATION A GEORGIA CORPORATION
By: /s/ Harold Combs By: /s/ Robert A. Martinez
------------------------------------ ----------------------
HAROLD COMBS, SENIOR VICE PRESIDENT Attest: /s/ J. Eric Van Atta
--------------------
(Corporate Seal) (Corporate Seal)
</TABLE>
<PAGE> 1
Exhibit 10.84
$50,000.00 June 17, 1998
PROMISSORY NOTE
FOR VALUE RECEIVED, American Artists Film Corporation, a Missouri
corporation (herein called "Obligor"), hereby promises to pay to the order of
Glen C. Warren, a resident of Jackson, Mississippi (herein called "Holder"), in
legal tender of the United States, without grace, at his office located at 10
Lakeland Circle, Jackson, Mississippi, or at such other place as the Holder may
hereafter designate, the sum of Fifty Thousand Dollars ($50,000.00) together
with simple interest on the unpaid balance of such principal amount outstanding
from time to time hereunder at an annual interest rate equal to prime plus one
percent (1%) per annum. All principal and any accrued but unpaid interest will
be due and payable on demand but no later than September 1, 1999.
It is hereby expressly agreed that should any default be made in the
payment of principal or interest when due, the principal indebtedness evidenced
hereby and all interest accrued thereon shall, upon written demand, become due
and payable and may be collected forthwith. Notwithstanding any other provision
hereof to the contrary, Obligor shall not be deemed to be in default of payment
of principal or interest hereunder if such payment (the "Late Payment") is
received by Holder within ten (10) days following the date on which Obligor
receives written notice of said default.
Payment not made within ten (10) days of the due date shall bear interest
at the rate of prime plus one percent (1%) per annum from the original due date
until paid.
Time is of the essence of this Note, and in the event that this Note is
collected by law or through an attorney-at-law, the Obligor agrees to pay all
reasonable costs of collection.
This note is unsecured.
The Obligor shall be entitled, at any time, and from time to time, without
the consent of the Holder and without making any penalty or premium therefor, to
prepay all or any portion or portions of the outstanding principal amount
thereof.
This Note shall be governed as to the validity, interpretation,
construction, enforcement, effect, and in all respects by the laws and decisions
of the State of Georgia.
No delay or omission on the part of the Holder in exercising any rights
hereunder shall operate as a waiver of such right or any other rights under this
Note. A waiver on any occasion shall not be construed as a bar to or waiver of
any right or remedy on any future occasion.
IN WITNESS WHEREOF, the undersigned has caused these presents to be duly
executed under the seal on the date and year first above written.
"OBLIGOR"
By: /s/ STEVEN D. BROWN
-------------------------------------
American Artists Film Corporation
1245 Fowler St., N.W.
Atlanta, Georgia 30318
"HOLDER"
/s/ GLEN C. WARREN
- ------------------------------------
Glen C. Warren
<PAGE> 1
Exhibit 10.85
MEDIA RELATIONS AND CONSULTING AGREEMENT
This agreement ("Agreement") is made and entered into this 23rd day of June,
1998 between American Artists Film Corporation, a Missouri corporation (the
"Company"), Stockstowatch.com, Inc., a Florida Corporation ("Consultant"),
Australian Advisors Corp., a _______________ corporation and Icon
International, Inc., a Connecticut corporation (collectively "Third Parties").
In consideration of and for the mutual promises and covenants contained herein,
and for the good and valuable consideration, the receipt of which is hereby
acknowledged, the parties hereto agree as follows:
1. PURPOSE.
The Company hereby retains the Consultant on a non-exclusive basis during the
term specified to render media relations and consulting advice to the Company,
as the Company may reasonably request, upon the terms and conditions as set
forth herein.
2. TERM AND COMPENSATION.
This Agreement shall be effective for a period of six months commencing upon
the date first written above (the "Engagement Period"); provided, however, that
this Agreement may be terminated by either the Company or Consultant upon ten
days (10) written notice. The Third Parties shall pay the Consultant a
non-refundable fee upon execution of this Agreement consisting of 223,225
shares of registered Class A common stock of the Company. The Third Parties
shall pay these shares as follows: Australian Advisors Corp. - 150,000 shares
and Icon International, Inc. - 73,225 shares.
The term of this agreement may be extended upon mutual written consent of all
parties for an additional six-month period ("Extended Engagement Period"),
commencing on the date of expiration of the initial Engagement Period. The
Company and/or Third Parties shall, upon mutual written consent of the parties,
pay the Consultant a non-refundable fee consisting of shares of registered
Class A common stock. The number of shares shall be determined by the parties
prior to the end of the Engagement Period.
3. DUTIES OF THE CONSULTANT.
During the term of this Agreement, the Consultant will provide the Company with
such regular and customary non-exclusive media relations and consulting
services as is reasonably requested by the Company, provided that the
Consultant shall not be required to undertake duties not reasonably within the
scope of the media relations and consulting services contemplated by this
Agreement. In performance of these duties, the Consultant shall provide the
Company with the benefits of its best judgment and efforts. It is understood
and acknowledged by the parties that the value of the Consultant's services is
not measurable in any quantitative manner, and that the Consultant shall not be
obligated to spend any specific amount of time doing so. The Consultant's
duties may, at the direction of the Company include, but not necessarily be
limited to on a non-exclusive basis, the following:
A. Develop World Wide Web site ("Web Site") for the Company, its
divisions and its subsidiaries, including First Light Entertainment
Corporation, Diversity Filmworks, Inc., First Draft Films, American
Artists Films, Video Communications Network, LLC, and Diversity
Entertainment Television/Atlanta, LLC.
B. Maintain and update Web Site, with information supplied by the
Company, for the term of this Agreement. Such information shall be
limited to information that is considered "public information" by the
Company, in its sole discretion. Upon expiration of the term of this
1
<PAGE> 2
Agreement, the Company shall assume sole ownership of the Web Site and
domain name and responsibility for its maintenance.
C. Prepare independent analysis of the Company based upon available
"public information" and meetings with the Company's senior
management.
D. Feature independent analysis ("Company Profile") on the
Consultant's investor service web site located at Stockstowatch.com on
the World Wide Web. Such Company Profile shall be featured at
Stockstowatch.com for the month of July 1998 and shall provide a link
to the Company homepage on the World Wide Web.
E. Provide updates to initial Company Profile, on a monthly basis,
based upon new "public information", additional meetings with the
Company's senior management and additional independent analysis by the
Consultant.
F. Provide exposure in connection with the dissemination of
corporation information regarding the Company to the investment
community at large.
G. Provide other business consulting services including, introductions
to capital resources, market makers and broker/dealer firms.
4. COMPANY PROFILE.
The Company Profile shall include both factual information based upon available
"public information" and subjective information based upon independent analysis
performed by the Consultant.
A. Factual information shall be provided by the Company and shall be
subject to prior approval by a member of senior management. Factual
information may include information regarding the Company, including
corporate structure, management's experience, business segments,
historical market prices and other "public information".
B. Subjective information shall be provided by the Consultant and will
be based upon an independent analysis performed by the Consultant. All
such subjective information included in the Company Profile shall be
clearly marked as such, along with an indication that such subjective
information has not been reviewed by the Company and that the Company
takes no responsibility for its content.
5. CONSULTANT'S LIABILITY.
In the absence of gross negligence or willful misconduct on the part of the
Consultant or the Consultant's breach of this Agreement, the Consultant shall
not be liable to the Company or to any officer, director, employee, stockholder
or creditor of the Company, for any act or omission in the course of or in
connection with the rendering or providing of services hereunder. Except in
those cases where the gross negligence or willful misconduct of the Consultant
or the breach by the Consultant of this Agreement is alleged and proven, the
Company agrees to defend, indemnify, and hold the Consultant harmless from and
against any and all reasonable costs, expenses and liability (including
reasonable attorney's fees paid in the defense of the Consultant) which may in
any way result from services rendered by the Consultant pursuant to or in any
connection with this Agreement. This indemnification expressly excludes any and
all damages as a result of any actions or statements, on behalf of the Company,
made by the Consultant without the prior approval or authorization of the
Company.
2
<PAGE> 3
6. COMPANY'S LIABILITY.
The Consultant agrees to defend, indemnify, and hold the Company harmless from
and against any and all reasonable costs, expenses and liability (including
reasonable attorney's fees paid in defense of the Company) which may in any way
result pursuant to its gross negligence or willful misconduct or in any
connection with any actions or statements, on behalf of the Company, without
the prior approval or authorization of the Company or which are otherwise in
violation of applicable law.
7. THIRD PARTY INDEMNIFICATION.
The Company agrees to defend, indemnify, and hold the Third Parties harmless
from and against any and all reasonable costs, expenses and liability
(including reasonable attorney's fees paid in defense of the Third Parties)
which may in any way result pursuant to or in any connection with this
Agreement, except for such Third Parties' gross negligence or willful
misconduct.
8. EXPENSES.
The Company, upon receipt of appropriate supporting documentation, shall
reimburse the Consultant for any and all reasonable and actual out-of-pocket
expenses incurred in connection with the services provided to the Company,
subject in each case to prior written approval of the Company. The Consultant
will be solely responsible for its expenses related to its initial due
diligence meetings with the Company.
9. REPRESENTATIONS
Consultant makes the following representations to the parties to this
Agreement:
(a) The Consultant shall not make any statements about the Company, in
any capacity, without the prior approval of the Company, unless such
statement is clearly marked as an opinion of the Consultant, which the
Company has not reviewed and for which the Company bears no
responsibility.
(b) Consultant shall clearly and adequately disclose the nature and
amount of compensation received under this Agreement (including the
existence of this Agreement) on its Web Site and on all other
disclosures to the public.
(c) Consultant shall clearly and adequately disclose on its Web site
and on all other disclosures to the public that it "may from time to
time have a long or short position in or be a purchaser or seller of
the securities of the Company."
(d) Consultant shall not offer or make payment of any consideration to
brokers, dealers, or others for purposes of inducing the purchase or
recommendation for the purchase of the Company's securities.
(e) Consultant is not currently the subject of an investigation or
inquiry by the Securities and Exchange Commission, the NASD, or any
state securities commission.
(f) Consultant's activities and operations fully comply with all
applicable state and federal securities laws and regulations.
(g) Consultant is either properly registered as, or exempt from
registration, as a broker-dealer or an investment advisor.
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<PAGE> 4
(h) Consultant understands that, as a result of its services, it may
come to possess material non-public information about the Company, and
that it has implemented internal control procedures designed to
reasonably insure that it, and none of its employees, agents,
consultants or affiliates, trade in the securities of client companies
while in possession of material non-public information.
The Company makes the following representations to the parties to this
Agreement:
(a) The Company is not currently the subject of an investigation or
inquiry by the Securities and Exchange Commission, the NASD, or any
state securities commission.
(b) The Company is in good standing in its state of incorporation,
Missouri.
(c) The Company is a "reporting company" under the Securities Act of
1934 and has timely filed all of its required reports.
(d) The Company and its senior management are not aware of any
materially adverse events not previously disclosed in the Company's
annual and quarterly reports with the Securities and Exchange
Commission.
10. SEVERABILITY.
Every provision of this Agreement is intended to be severable. If any term or
provision hereof is deemed unlawful or invalid for any reason whatsoever, such
unlawfulness or invalidity shall not affect the validity of this Agreement.
11. MISCELLANEOUS.
(a) Any notice or other communication between parties hereto
shall be sufficiently given if sent by certified or
registered mail, postage prepaid, or faxed and confirmed at
the following locations:
COMPANY:
American Artists Film Corporation
1245 Fowler Street, NW
Atlanta, Georgia 30318
(404) 876-7373
Attn Steven D. Brown
CONSULTANT:
Stockstowatch.com, Inc.
250 Bearded Oak Drive
Suite 100
Sarasota, Florida 34232
(941) 377-8487
Attn: Steven King
4
<PAGE> 5
THIRD PARTIES:
AUSTRALIAN ADVISORS CORP.
Bay & Deveaux St. 2nd Fl.
P.O. Box N-1000
Nassau, Bahamas
ICON INTERNATIONAL, INC.
Two Stamford Plaza, 8th Floor
281 Tresser Boulevard
Stamford, Connecticut 06901
(203)328-2300
Attn: Lance Lundberg
Such notice or other communication shall be deemed to be given on the date of
receipt.
(b) If the Consultant shall cease to do business, the provisions
hereof relating to duties of the Consultant and compensation by the
Company as it applies to the Consultant shall thereupon cease to be in
effect, except for the registered Class A common stock paid by the
Third Parties to Consultant hereunder as of the date hereof.
(c) This Agreement embodies the entire agreement and understanding
between the Company, Consultant and Third Parties and supersedes any
and all negotiations, prior discussions and preliminary and prior
agreements and understandings related to the primary subject matter
hereof.
(d) This Agreement has been duly authorized, executed and delivered by
and on behalf of the Company, Consultant and Third Parties.
(e) This Agreement shall be construed and interpreted in accordance
with the laws of the State of Georgia, without giving effect to
conflicts of laws.
(f) There is no relationship, partnership, agency, employment,
franchise or joint venture between the parties. The parties have no
authority to bind the other or incur any obligations on their behalf.
(g) This Agreement and the rights hereunder may not be assigned by the
parties (except by operation of law or merger) and shall be binding
upon and inure to the benefit of the parties and their respective
successors, assigns and legal representatives.
5
<PAGE> 6
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date hereof.
AMERICAN ARTISTS FILM CORPORATION
By: /s/ STEVEN D. BROWN
------------------------------------------
Steven D. Brown, CEO/Chairman
STOCKSTOWATCH.COM, INC.
By: /s/ STEVEN KING
------------------------------------------
Steven King, President
AUSTRALIAN ADVISORS CORP.
By:
------------------------------------------
ICON INTERNATIONAL, INC.
/s/ LANCE LUNDBERG
By: ------------------------------------------
Lance Lundberg, President
6
<PAGE> 1
EXHIBIT 10.86
$25,000.00 June 26, 1998
PROMISSORY NOTE
FOR VALUE RECEIVED, American Artists Film Corporation, a Missouri
corporation (herein called "Obligor"), hereby promises to pay to the order of
Glen C. Warren, a resident of Jackson, Mississippi (herein called "Holder"), in
legal tender of the United States, without grace, at his office located at 10
Lakeland Circle, Jackson, Mississippi, or at such other place as the Holder may
hereafter designate, the sum of Twenty-Five Thousand Dollars ($25,000.00)
together with simple interest on the unpaid balance of such principal amount
outstanding from time to time hereunder at an annual interest rate equal to
prime plus one percent (1%) per annum. All principal and any accrued but unpaid
interest will be due and payable on demand but no later than September 1, 1999.
It is hereby expressly agreed that should any default be made in the
payment of principal or interest when due, the principal indebtedness evidenced
hereby and all interest accrued thereon shall, upon written demand, become due
and payable and may be collected forthwith. Notwithstanding any other provision
hereof to the contrary, Obligor shall not be deemed to be in default of payment
of principal or interest hereunder if such payment (the "Late Payment") is
received by Holder within ten (10) days following the date on which Obligor
receives written notice of said default.
Payment not made within ten (10) days of the due date shall bear interest
at the rate of prime plus one percent (1%) per annum from the original due date
until paid.
Time is of the essence of this Note, and in the event that this Note is
collected by law or through an attorney-at-law, the Obligor agrees to pay all
reasonable costs of collection.
This note is unsecured.
The Obligor shall be entitled, at any time, and from time to time, without
the consent of the Holder and without making any penalty or premium therefor, to
prepay all or any portion or portions of the outstanding principal amount
thereof.
This Note shall be governed as to the validity, interpretation,
construction, enforcement, effect, and in all respects by the laws and decisions
of the State of Georgia.
No delay or omission on the part of the Holder in exercising any rights
hereunder shall operate as a waiver of such right or any other rights under this
Note. A waiver on any occasion shall not be construed as a bar to or waiver of
any right or remedy on any future occasion.
IN WITNESS WHEREOF, the undersigned has caused these presents to be duly
executed under the seal on the date and year first above written.
"OBLIGOR"
By: /s/ Steven D. Brown
-------------------------------------
American Artists Film Corporation
1245 Fowler St., N.W.
Atlanta, Georgia 30318
"HOLDER"
/s/ Glen C. Warren
- ------------------------------------
Glen C. Warren
<PAGE> 1
EXHIBIT 10.87
AMENDMENT #1 TO
MEDIA RELATIONS AND CONSULTING AGREEMENT
JUNE 30, 1998
This notice hereby amends the compensation provision of that certain
Media Relations and Consulting Agreement dated June 23, 1998 by and between
American Artists Film Corporation (therein called "Company"), Stockstowatch.com,
Inc. (therein called "Consultant"), Australian Advisors Corp and Icon
International, Inc. (collectively therein called "Third Parties"). The
compensation provision shall be amended to include the promissory note dated
June 30, 1998 (see attached) by and between American Artists Film Corporation
(therein called "Obligor") and Stockstowatch.com, Inc. (therein called "Holder")
in the amount of $53,550.00.
IN WITNESS WHEREOF, the undersigned has caused this amendment to be
duly executed under the seal on the date and year first above written.
AMERICAN ARTISTS FILM CORPORATION
By: /s/ STEVEN D. BROWN
------------------------------------
Steven D. Brown, CEO/Chairman
STOCKSTOWATCH.COM, INC.
By: /s/ STEVEN KING
------------------------------------
Steven King, President
AUSTRALIAN ADVISORS CORP.
By:
------------------------------------
ICON INTERNATIONAL, INC.
By: /s/ LANCE LUNDBERG
------------------------------------
Lance Lundberg, President
<PAGE> 2
$53,550.00 June 30, 1998
PROMISSORY NOTE
FOR VALUE RECEIVED, American Artists Film Corporation, a Missouri
corporation (herein called "Obligor"), hereby promises to pay to the order of
Stockstowatch.com, Inc., a Florida corporation (herein called "Holder"), in
legal tender of the United States, without grace, at his office located at 250
Bearded Oak Drive, suite 100, Sarasota, Florida 34232, or at such other place as
the Holder may hereafter designate, the sum of Fifty-Three Thousand Five Hundred
and Fifty Dollars ($53,550.00) together with simple interest on the unpaid
balance of such principal amount outstanding from time to time hereunder at an
annual interest rate equal to prime plus one percent (1%) per annum. All
principal and any accrued but unpaid interest will be due and payable on demand
but no later than December 31, 1998.
It is hereby expressly agreed that should any default be made in the
payment of principal or interest when due, the principal indebtedness evidenced
hereby and all interest accrued thereon shall, upon written demand, become due
and payable and may be collected forthwith. Notwithstanding any other provision
hereof to the contrary, Obligor shall not be deemed to be in default of payment
of principal or interest hereunder if such payment (the "Late Payment") is
received by Holder within ten (10) days following the date on which Obligor
receives written notice of said default.
Payment not made within ten (10) days of the due date shall bear interest
at the rate of prime plus one percent (1%) per annum from the original due date
until paid.
Time is of the essence of this Note, and in the event that this Note is
collected by law or through an attorney-at-law, the Obligor agrees to pay all
reasonable costs of collection.
This note is unsecured.
The Obligor shall be entitled, at any time, and from time to time, without
the consent of the Holder and without making any penalty or premium therefor, to
prepay all or any portion or portions of the outstanding principal amount
thereof.
This Note shall be governed as to the validity, interpretation,
construction, enforcement, effect, and in all respects by the laws and decisions
of the State of Georgia.
No delay or omission on the part of the Holder in exercising any rights
hereunder shall operate as a waiver of such right or any other rights under this
Note. A waiver on any occasion shall not be construed as a bar to or waiver of
any right or remedy on any future occasion.
IN WITNESS WHEREOF, the undersigned has caused these presents to be duly
executed under the seal on the date and year first above written.
"OBLIGOR"
By: /s/ STEVEN D. BROWN, CEO
--------------------------------------
American Artists Film Corporation
1245 Fowler St., N.W.
Atlanta, Georgia 30318
"HOLDER"
/s/ STEVEN KING
- --------------------------------------
Steven King, President
Stockstowatch.com, Inc.
<PAGE> 1
EXHIBIT 10.88
THE SECURITIES HEREUNDER HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933 OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE RESOLD UNLESS REGISTERED
UNDER THE SECURITIES ACT OF 1933 AND APPLICABLE STATE SECURITIES LAWS OR
PURSUANT TO EXEMPTION FROM REGISTRATION
OPERATING AGREEMENT
OF
DIVERSITY ENTERTAINMENT TELEVISION/ATLANTA, LLC.
a limited liability company
organized under the Georgia Limited Liability Company Act
THIS OPERATING AGREEMENT is made and entered into as of the 30th day of
June 1997 by and among the undersigned parties. Unless otherwise indicated by
the context, as used herein the term "Members" refers to the undersigned parties
at this date and to other persons who hereafter became parties hereto in
accordance with the terms hereof.
R E C I T A L S:
1. DIVERSITY ENTERTAINMENT TELEVISION/ATLANTA, LLC (the "Company") was
formed as a Georgia limited liability company on June 12, 1997, by execution and
delivery of Articles of Organization to the Secretary of State of Georgia in
accordance with the provisions of the Georgia Limited Liability Company Act, as
amended (the "Act").
2. The business purpose of the Company is to develop and operate a large
screen video display system in the Underground Atlanta area of Atlanta, Georgia.
3. The Members desire to organize the Company with themselves as its
members and to set out the terms of their agreement with respect to the Company,
its operations, and their own respective rights and interests therein.
AGREEMENT:
In consideration of the Recitals, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties agree as follows:
<PAGE> 2
ARTICLE I
OFFICES; SEAL
1.1 Registered Office, Agent. The Company shall at all times maintain a
registered office in the State of Georgia and a registered agent at that address
but may have other offices located within or without the State of Georgia.
1.2 Principal Office. The Company shall maintain its principal office
within the State of Georgia unless otherwise determined by the Board of
Managers.
1.3 Seal. The seal of the Company shall be in such form as the Board of
Managers may from time to time determine. If it is inconvenient to use such a
seal at any time, the signature of the Company followed by the word "Seal"
enclosed in parentheses or scroll shall be deemed the seal of the Company.
ARTICLE II
LLC SHARES AND INTERESTS
2.1 LLC Shares. The ownership of the Company shall be divided initially
into 6,900 equal shares ("Limited Liability Company Shares" or "LLC Shares");
provided, however, that the said number of LLC Shares may be increased or
reduced by the Board of Managers from time to time as hereinafter provided.
2.2 Initial Members. The names, addresses and federal tax identification
numbers of the initial Members are set out in Exhibit A hereto. Each of the
initial Members shall make an initial capital contribution to the Company in
cash or in kind as set out in Exhibit A and receive in consideration thereof the
number of LLC Shares specified therein. Exhibit A is incorporated herein by
reference and made a part of this Agreement.
2.3 Additional LLC Shares. (a) The Company by action of the Board of
Managers may from time to time increase the number of LLC Shares of the Company
by selling additional LLC Shares for fair value in cash or in kind to one or
more persons who are already Members or to other persons who are not already
Members; provided, however, that the Company may not sell LLC Shares to any
person unless the person at such time (i) agrees in writing to become a party
to, and to be bound as a Member by the terms and conditions of, this Agreement,
and (ii) pays in full the agreed consideration for the LLC Shares. Upon receipt
by the Company of the agreed original capital contribution of a Member in
respect of an LLC Share, the LLC Share and the resulting Interest of the Member
shall be fully paid and non-assessable. No Member shall have any preemptive
rights with respect to the purchase of any such additional LLC Shares.
(b) In connection with the sale of additional LLC Shares the Board of
Managers may, if it deems such action to be necessary and appropriate, at the
time of the sale thereof designate
A2
<PAGE> 3
certain LLC Shares as Preferred Distribution LLC Shares. Preferred Distribution
LLC Shares shall be entitled to Preferred Distributions in accordance with
Section 8.2 of this Agreement.
2.4 Reduction of Shares. Except as prohibited by the Act, the Company by
action of the Board of Managers may from time to time agree to repurchase the
LLC Shares of a Member for fair value.
2.5 Options. The Company may also by action of the Board of Managers grant
options to such Members or non-Members as it may deem appropriate for purchase
of LLC Shares upon such terms and conditions and at such option purchase price
(not less than fair value of the LLC Shares on the date of grant) as the Board
of Managers may deem appropriate; provided, however, that upon exercise of any
such option the exercising person must satisfy the requirements of clauses (i)
and (ii) in Section 2.3(a) above.
2.6 Interests of Members. The limited liability company interest (the
"Interest") of each Member at any time shall be the percentage that the number
of LLC Shares owned by such Member constitutes of the aggregate number of LLC
Shares at such time.
2.7 LLC Share Certificates; Register. The Company shall issue certificates
to the Members evidencing their respective ownership of LLC Shares. LLC Share
certificates shall be numbered in the order in which they are issued. They shall
be signed by the President and Secretary and the seal of the Company shall be
affixed thereto. The name, address and federal tax identification number of the
Member owning the LLC Shares, the number of LLC Shares, and the date acquired
shall be entered in a register maintained by the Secretary. LLC Share
certificates exchanged or returned shall be canceled and retained by the
Secretary.
2.8 Voting. The holders of the shares of LLC Shares shall be entitled to
one vote for each LLC Share owned of record.
ARTICLE III
MEMBERS MEETINGS
3.1 Annual Meeting. A meeting of Members shall be held annually. The
annual meeting shall be held at such time and place and on such date as the
Board of Managers shall determine from time to time and as shall be specified in
the notice of the meeting.
3.2 Special Meetings. Special meetings of the Members may be called at any
time by the Board of Managers, the President or Members owning at least 50% of
the LLC Shares. Special meetings shall be held at such time and place and on
such date as shall be specified in the notice of the meeting.
3.3 Place. Annual or special meetings of Members may be held within or
without the State of Georgia.
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<PAGE> 4
3.4 Notice. Notice of annual or special Members meetings stating the
place, day and hour of the meeting shall be given in writing not less than 10
nor more than 60 days before the date of the meeting, either mailed to the last
known address of or personally given to each Member. Notice of any special
meeting of Members shall state the purpose or purposes for which the meeting is
called. Notice of any meeting at which amendments to the Operating Agreement,
merger of the Company, or the disposition of all or substantially all of the
assets of the Company are to be considered shall state such purpose. Notice of a
meeting may be waived by an instrument in writing executed before or after the
meeting. The waiver need not specify the purpose of the meeting or the business
transacted. Attendance at a meeting in person or by proxy shall constitute a
waiver of notice thereof unless the Member shall provide written notice to the
Company prior to the taking of any action by the Members at the meeting that the
Member's attendance is not to be deemed a waiver of the requirement that notice
be given or of the adequacy of any notice that may have been given to the
Members.
3.5 Quorum; Vote Required. At all meetings of Members the Members holding
a majority of the outstanding LLC Shares, whether present in person or by proxy,
shall constitute a quorum for the transaction of business. Action by the Members
on all matters shall require the affirmative vote of Members holding a majority
of the LLC Shares represented at a meeting at which a quorum is present, except
that the affirmative vote of Members holding 80% of all of the LLC Shares
outstanding shall be required (i) to approve the Company's engaging in any
business not reasonably related to the business purpose of the Company, or (ii)
to approve the Company's guaranty or collateralization of the debt of any person
other than a wholly-owned subsidiary of the Company. A lesser number may adjourn
a meeting from day to day, and shall announce the time and place to which the
meeting is adjourned.
3.6 Action in Lieu of Meeting. Any action that may be taken at a meeting
of the Members may be taken without a meeting if a consent in writing setting
forth the action so taken shall be signed by Members holding a majority of the
outstanding LLC Shares or such greater number as would be required if the action
were taken at a meeting of the Members.
ARTICLE IV
BOARD OF MANAGERS
4.1 Management. Subject to the terms of this Agreement, or any other
lawful agreement among the Members, the full and entire management of the
affairs and business of the Company shall be vested in the Board of Managers,
which shall have and may exercise all of the powers that may be exercised or
performed by the Company.
4.2 Number of Managers. The Members shall fix by resolution the precise
number of members of the Board of Managers. Managers shall be elected by and
serve at the pleasure of the Members. Membership on the Board of Managers is not
limited to Members. A majority of the Managers shall constitute a quorum for the
transaction of business. The Board of Managers shall act by the affirmative vote
of a majority of the Managers.
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<PAGE> 5
4.3 Meetings. The Managers shall meet annually, without notice, following
the annual meeting of the Members. Special meetings of the Managers may be
called at any time by the President or by a majority of the Managers, on two
days' written notice to each Manager, which notice shall specify the date, time,
and place of the meeting. Notice of a meeting may be waived by an instrument in
writing executed before or after the meeting. Managers may attend and
participate in meetings either in person or by means of communications equipment
by which all persons participating in the meeting can hear each other.
Attendance at a meeting shall constitute a waiver of notice thereof.
4.4 Action in Lieu of Meeting. Any action that may be taken at a meeting
of the Managers may be taken without a meeting if a consent in writing, setting
forth the action so taken, shall be signed by all of the Managers.
ARTICLE V
OFFICERS
5.1 General Provisions. The officers of the Company shall consist of a
President and a Secretary who shall be elected by the Board of Managers from
among its members, and such other officers, including a General Manager, as may
be elected by the Board of Managers or appointed as provided in this Agreement.
Each officer shall be elected or appointed to serve at the pleasure of the Board
of Managers. Any two or more offices may be held by the same person.
5.2 President. The President shall be the chief executive officer of the
Company and shall have general and active management of the operations of the
Company, subject to the directions and authority of the Board of Managers. The
President shall be responsible for the administration of the Company, including
general supervision of the policies of the Company and management of its
financial affairs, and shall execute bonds, mortgages or other contracts in the
name and on behalf of the Company within the general powers of the office and
otherwise in accordance with the direction and authority of the Board of
Managers.
5.3 Secretary. The Secretary shall keep minutes of all meetings of the
Members and Managers and have charge of the minute books and seal of the Company
and shall perform such other duties and have such other powers as may from time
to time be delegated to him or her by the President or the Board of Managers.
5.4 Assistant Officers. Assistants to the Secretary may be appointed by
the President or by the Board of Managers and shall have such duties as shall be
delegated to them by the President or the Board of Managers.
5.5 Vice Presidents. The Company may have one or more Vice Presidents,
elected by the Board of Managers, who shall perform such duties as may be
delegated by the President or the Board of Managers.
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ARTICLE VI
CAPITAL ACCOUNTS
6.1 Capital Accounts. "Capital Account" means an account that shall be
maintained in respect of each Member and which, as of any given date, shall be
equal to the sum of the following:
(i) The aggregate amount of cash that has been contributed to the
capital of the Company as of such date by or on behalf of such Member in
payment for its LLC Shares or otherwise; plus
(ii) The value of any property other than cash that has been
contributed to the capital of the Company as of such date by such Member in
payment for its LLC Shares or otherwise, and the amount of liabilities
assumed by any such Member under Regulation Section 1.752 or which are
secured by any Company property distributed to such Member; plus
(iii) The aggregate amount of the Company's Net Profit that has been
allocated to such Member as of such date pursuant to the provisions of
Article VII or any items of income or gain which are specifically allocated
to such Member or other positive adjustments required by the Regulations
and which have not been previously taken into account in calculating
Capital Accounts; minus
(iv) The aggregate amount of the Company's Net Loss that has been
allocated to such Member as of such date pursuant to Article VII and the
amount of any item of expense deduction or loss which is specially
allocated to such Member; minus
(v) The aggregate amount of cash and the value of all other property
(as of the date of distribution) that has been distributed to or on behalf
of such Member and the amount of any liabilities of such Member assumed by
the Company under Regulations Section 1.752 or which are secured by any
property contributed by such Member to the Company and other negative
adjustments required by the Regulations; and
(vi) In the case of a Member who has acquired all or any part of his
or her LLC Shares by succession or assignment from another Member, plus or
minus (as the case may be) an aliquot portion of the Capital Account
balance or Capital Account Deficit of such predecessor in interest at the
date of such acquisition.
6.2 The provisions of this Article and the other provisions of this
Agreement relating to the maintenance of Capital Accounts are intended to comply
with Regulations Section 1.704-1(b), and shall be interpreted and applied in a
manner consistent with such regulations.
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ARTICLE VII
TAX ALLOCATIONS AND DISTRIBUTIONS
7.1 Tax Allocations of Net Profit and Net Losses.
(a) The Company's Net Profit or Net Losses for each fiscal year for
federal and state income tax purposes shall be allocated to the Members in
proportion to, and to the extent of, their respective ownership Interests
pursuant to Article II or as it is later amended.
(b) Net Losses allocated pursuant to subsection (a) hereof shall not
exceed the maximum amount of Net Losses that can be so allocated without
causing any Member to have an Adjusted Capital Account Deficit at the end
of any fiscal year. In the event some but not all of the Members would have
Adjusted Capital Account Deficits as a consequence of an allocation of Net
Losses pursuant to subsection (a) hereof, the limitation set forth in this
subsection (b) shall be applied on a Member-by-Member basis so as to
allocate the maximum permissible Net Losses to each Member under Section
1.704-1(b)(2)(ii)(d) of the Regulations.
(c) To the extent a Member is allocated Net Losses which otherwise
would have been allocated to another Member, or a result of the application
of subsection (b) hereof, then the Member that was allocated additional Net
Losses pursuant to subsection (b) hereof shall be allocated as quickly as
possible additional Net Profit in an amount equal to such Net Losses.
7.2 Distribution of Assets. If the Company at any time distributes any of
its assets in kind to any Member, the Capital Account of each Member shall be
adjusted to account for that Member's allocable share of the Net Profits or Net
Losses that would have been realized by the Company had it sold its assets that
were distributed at their respective fair market values immediately prior to
their distribution.
7.3 Qualified Income Offset. In the event any Member unexpectedly receives
any adjustments, allocations, or distributions described in Regulations Section
1.704-1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5), or 1.704-1(b)(2)(ii)(d)(6),
items of Company income and gain shall be specially allocated to each such
Member in an amount and manner sufficient to eliminate, to the extent required
by the Regulations, the Adjusted Capital Account Deficit of such Member as
quickly as possible, provided that an allocation pursuant to this Section shall
be made only if and only to the extent that such Member would have an Adjusted
Capital Account Deficit after all other allocations provided for in this Article
have been tentatively made as if this Section were not in this Agreement.
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7.4 Gross Income Allocation. In the event any Member has a deficit Capital
Account balance at the end of any fiscal year, each such Member shall be
specially allocated items of Company income and gain in the amount of such
excess as quickly as possible, provided that an allocation pursuant to this
Section shall be made if and only to the extent that such Member would have a
deficit Capital Account balance in excess of such sum after all other
allocations provided for in this Article have been tentatively made as if the
immediately preceding Section and this Section were not in this Agreement.
7.5 Section 704(c) Allocation.
(a) Notwithstanding any other provision of this Agreement to the
contrary, any gain or loss and any depreciation or other cost recovery
deductions recognized by the Company for income tax purposes in any fiscal
year with respect to all or any part of the Company's property that is
required or permitted to be allocated among the Members in accordance with
Section 704(c) of the Code and any Regulations promulgated thereunder so as
to take into account the variation, if any, between the adjusted tax basis
of such property at the time of its contribution and the fair market value
of such property at the time of its contribution, shall be allocated to the
Members for income tax purposes in the manner so required or permitted.
(b) Any elections or other decisions relating to such allocations
shall be made by the Board of Managers in any manner that reasonably
reflects the purpose and intention of this Agreement. Allocations pursuant
to this Section are solely for purposes of federal, state and local taxes
and shall not affect, or in any way be taken into account in computing, any
Member's Capital Account or share of net profit, net loss, other items, or
distributions pursuant to any provision of this Agreement.
7.6 Section 754 Election. In connection with any permitted transfer of an
LLC Share in the Company, the Board of Managers shall cause the Company, at the
written request of the transferor, the transferee or any of the Members, on
behalf of the Company and at the time and in the manner provided in Regulations
Section 1.754-1(b), to make an election to adjust the basis of the Company's
property in the manner provided in Sections 734(b) and 743(b) of the Code, and
such transferee shall pay all costs incurred by the Company in connection
therewith, including, without limitation, attorneys' and accountants' fees that
are reasonable in the aggregate.
7.7 Adjusted Capital Account Deficit. As used herein, the term "Adjusted
Capital Account Deficit" means, with respect to any Member, the Member's
Adjusted Capital Account Deficit shall be the deficit balance, if any, in the
Member's Capital Account as of the end of the relevant fiscal year or at any
time, after giving effect to the following adjustments:
(i) Credit to the Member's Capital Account any amount which the
Member is obligated to restore pursuant to any provision of this Agreement
or is deemed obligated to restore pursuant to the penultimate sentence of
Regulations Sections 1.704-2(g)(1) and 1.704-2(i)(5); and
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(ii) Debit to the Member's Capital Account the items described in
Sections 1.704-1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5), and
1.704-1(b)(2)(ii)(d)(6) of the Regulations.
The foregoing definition of Adjusted Capital Account Deficit is intended to
comply with the provisions of Section 1.704-1(b)(2)(ii)(d) of the Regulations
and shall be interpreted consistently therewith.
7.8 Gross Asset Value. As used herein, the term "Gross Asset Value" means,
with respect to any asset, the asset's adjusted tax basis for federal income tax
purposes, except as follows:
(i) The initial Gross Asset Value of any asset contributed by a
Member to the Company shall be the gross fair market value of the asset as
determined by the contributing Member and the Company;
(ii) The Gross Asset Values of all Company assets shall be adjusted to
equal their respective gross fair market values, as determined by the Board
of Managers, as of the following times: (A) the acquisition of an
additional LLC Share in the Company by any new or existing Member in
exchange for more than a de minimis capital contribution; (B) the
distribution by the Company to a Member of more than a de minimis amount of
Company property as consideration for such Member's LLC Shares in the
Company; and (C) the liquidation of the Company within the meaning of
Regulations Section 1.704-1(b)(2)(ii)(g); provided, however, that
adjustments pursuant to clauses (A) and (B) above shall be made only if the
Board of Managers reasonably determines that such adjustments are necessary
or appropriate to reflect the relative economic interests of the Members in
the Company;
(iii) The Gross Asset Value of any Company asset distributed to any
Member shall be the gross fair market value of the asset on the date of
distribution;
(iv) The Gross Asset Values of Company assets shall be increased (or
decreased) to reflect any adjustments to the adjusted basis of such assets
pursuant to Code Section 734(b) or Code Section 743(b), but only to the
extent that such adjustments are taken into account in determining Capital
Accounts pursuant to Regulations Section 1.704-1(b)(2)(iv)(m) hereof;
provided, however, that Gross Asset Values shall not be adjusted pursuant
to this paragraph to the extent the Board of Managers determines that an
adjustment pursuant to paragraph (ii) above is necessary or appropriate in
connection with a transaction that would otherwise result in an adjustment
pursuant to this paragraph; and
(v) If the Gross Asset Value of an asset has been determined or
adjusted pursuant to paragraphs (i), (ii) or (iii) above, the Gross Asset
Value shall hereafter be
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adjusted by the depreciation taken into account with respect to the asset
for purposes of computing Net Profits and Net Losses.
7.9 Net Profits and Net Losses. As used herein, the terms "Net Profits"
and Net Losses" mean for each fiscal year or other period an amount equal to the
Company's taxable income or loss for such fiscal year or period, determined in
accordance with Code Section 703(a) (for this purpose, all items of income,
gain, loss, or deduction required to be stated separately pursuant to Code
Section 703(a)(1) shall be included in taxable income or loss), with the
following adjustments:
(i) Any income of the Company that is exempt from federal income tax
and not otherwise taken into account in computing Net Profits or Net Losses
pursuant to this Section shall be added to such taxable income or loss;
(ii) Any expenditures of the Company described in Code Section
705(a)(2)(B) or treated as Code Section 705(a)(2)(b) expenditures pursuant
to Regulations Section 1.704-1(b)(2)(iv)(i), and not otherwise taken into
account in computing Net Profits or Net Losses pursuant to this Section
shall be subtracted from such taxable income or loss;
(iii) In the event the Gross Asset Value of any Company asset is
adjusted pursuant to paragraphs (ii) or (iii) above, the amount of such
adjustment shall be taken into account as gain or loss from the disposition
of such asset for purposes of computing Net Profits or Net Losses;
(iv) Gain or loss resulting from any disposition of Company property
with respect to which gain or loss is recognized for federal income tax
purposes shall be computed by reference to the Gross Asset Value of the
property disposed of, notwithstanding that the adjusted tax basis of such
property differs from its Gross Asset Value;
(v) Notwithstanding any other provision of this Section, any items
which are specially allocated pursuant to Sections 7.3, 7.4 or 7.5 hereof
shall not be taken into account in computing Net Profits and Net Losses;
and
(vi) The amounts of the items of Company income, gain, loss or
deduction to be specially allocated pursuant to Sections 7.3, 7.4 or 7.5
hereof shall be determined by applying rules analogous to those set forth
in paragraphs (i) through (iv) above.
7.10 Special Allocations. (a) Notwithstanding anything to the contrary in
this Article:
(i) All Nonrecourse Deductions for each Fiscal Year shall be
allocated to the Members in accordance with their relative Interests.
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(ii) All Member Nonrecourse Deductions for each Fiscal Year shall be
allocated to the Members who bear the economic risk of loss with respect to
the Member Nonrecourse Debt giving rise to such deductions, in accordance
with Regulation ss.1.704-2(i)(1).
(iii) If there is a net decrease in Minimum Gain during a Fiscal Year,
then before any other allocation is made for such Fiscal Year , the Members
shall be allocated items of income and gain for such Fiscal Year (and, if
necessary, subsequent Fiscal Years) in the amount and in the proportions
necessary to satisfy the requirements of a "minimum gain chargeback" under
Regulation ss.1.704-2(f).
(iv) If there is a net decrease in Member Minimum Gain during a Fiscal
Year, then before any other allocation is made for such Fiscal year, the
Members shall be allocated items of income and gain for such Fiscal Year
(and, if necessary, subsequent Fiscal Years) in the amount and in the
proportions necessary to satisfy the requirements of a "partner nonrecourse
debt minimum gain chargeback" under Regulation ss.1.704-2(i)(4).
(v) The allocations set forth in subsections (i) through (iv) above
(the "Regulatory Allocations") are intended to comply with certain
requirements of Treasury Regulation ss.ss. 1.704-1(b) and 1.704-2.
Notwithstanding any other provision of this Section (other than the
Regulatory Allocations), the Regulatory Allocations shall be taken into
account in allocating other items of income, gain, loss and deduction among
the Members so that, to the extent possible, the net amount of such
allocation of other items and the Regulatory Allocations to each Member
shall be equal to the net amount that would have been allocated to each
such Member if the Regulatory Allocations had not occurred.
(b) As used in subsection (a) above, the following terms have the
following meanings:
(i) Member Minimum Gain means an amount determined by computing, with
respect to each Member Nonrecourse Debt, the Minimum Gain that would result
if such Member Nonrecourse Debt were treated as a nonrecourse liability,
determined in accordance with Regulation ss. 1.704-2(i)(3).
(ii) Member Nonrecourse Debt means nonrecourse Company debt for which
one or more Members bears an economic risk of loss, determined in
accordance with Regulation ss. 1.704-2(b)(4).
(iii) Member Nonrecourse Deductions means, for each Fiscal Year, the
Company deductions which are attributable to Member Nonrecourse Debt and
are characterized as "partner nonrecourse deductions" under Regulation ss.
1.704-2(i)(2).
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(iv) Minimum Gain means an amount determined by computing, with
respect to each nonrecourse liability of the Company, the amount of gain
(of whatever character), if any, that would be realized by the Company if
it disposed of (in a taxable transaction) the Company property subject to
such liability for no consideration other than full satisfaction of such
liability, and by then aggregating the amounts so computed. Such amount
shall be determined in a manner consistent with Regulation ss.1.704-2(d).
ARTICLE VIII
CASH DISTRIBUTIONS
8.1 Cash Flow. The Board of Managers, in the exercise of its discretion,
shall determine whether the financial condition and financing agreements and
commitments of the Company will permit the distribution of any monies of the
Company; provided, however, that the Board of Managers, in making such
determination, may provide for the retention of a reasonable cash reserve
(taking into consideration the availability in the future of other assets or
income of the Company), as determined by the Board of Managers, in an amount at
least equivalent to the sums determined by it in its discretion as necessary to
be retained for future growth and future contemplated capital expenditures,
expenses and obligations of the Company. The Board of Managers shall make a
determination at least as of the end of each calendar year as to whether there
are funds available for distribution.
8.2 Distribution of Cash Flow. All funds so determined by the Board of
Managers to be available for distribution (the "Distributable Funds") shall be
distributed as follows:
(i) First, until the Members holding Preferred Distribution LLC
Shares shall have received Preferred Distributions in the amounts that were
designated by the Board of Managers at the time of sale of the Preferred
Distribution LLC Shares by the Company (not to exceed $4,140,000 in the
aggregate), (A) two-thirds of the Distributable Funds shall be distributed
to the Members holding Preferred Distribution LLC Shares, and (B) the
balance of the Distributable Funds shall be distributed to the other
Members, in each case pro rata in accordance with their Interests.
(ii) Second, thereafter to all of the Members in accordance with their
Interests.
8.3 Time of Distribution. Distribution to Members shall be made quarterly
and at such other intervals as the Board of Managers in its sole discretion
deems advisable.
8.4 Limitations on Distributions. No distribution shall be made to Members
if prohibited by Section 14-11-407 of the Act.
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ARTICLE IX
PROTECTIONS AND POWERS
9.1 The Members do not intend to be liable for any debt, obligation or
liability of the Company or for any act or omission of its Managers or agents,
however arising.
9.3 The Company shall indemnify the Members, members of the Board of
Managers and officers of the Company to the maximum extent authorized by the
Act.
9.3 No Member, acting solely in his or her capacity as a Member, is an
agent of the Company.
ARTICLE X
DISSOCIATION OF A MEMBER
10.1 Dissociation. Except as otherwise provided in this article, a Member
shall cease to be a Member as of the date of the occurrence of any of the events
under Section 14-11-601(a) of the Act.
10.2 No Dissociation. Notwithstanding the Act and Section 10.1 above, a
Member shall not cease to be a Member upon the occurrence of any of the events
under Sections 14-11-601(a)(1), 14-11-601(a)(5), 14-11-601(a)(6),
14-11-601(a)(7) or 14-11-601(c) of the Act.
10.3 Death or Dissolution, etc. In the event of the death or dissolution of
a Member, or the occurrence of any of the events of Sections 14-11-601(a)(5),
(6) or (7), the Member's successor-in-interest shall, except as may be otherwise
provided by law, be deemed to be an assignee of the Member's LLC Shares and
Interest but not a Member.
10.4 No Withdrawal. No Members may by voluntary act withdraw from the
Company.
10.5 Transfer; Repurchase. A Member shall cease to be a Member of the
Company upon transfer in compliance with this Agreement of all of his or her LLC
Shares or upon repurchase thereof by the Company.
ARTICLE XI
DISSOLUTION AND WINDING UP
11.1 Dissolution. The Company shall be dissolved upon the occurrence of any
of the following events ("Dissolution Event"):
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(i) The expiration of the period fixed for the duration of the
Company as set out in the Articles of Organization of the Company, namely,
December 31, 2025;
(ii) The Members agree by majority vote of the LLC Shares to dissolve
the Company; or
(iii) The Board of Managers determines that dissolution of the Company
is appropriate and so notifies the Members.
11.2 Effect of Dissolution. Upon dissolution, the Company shall cease to
carry on its business, except as permitted by Section 14-11-605 of the Act. Upon
dissolution the Company shall file a statement of commencement of winding up
pursuant to Section 14-11-606 of the Act and publish the notice permitted by
Section 14-11-608 of the Act.
11.3 Winding Up, Liquidation and Distribution of Assets.
(a) Upon dissolution, an accounting shall be made by the Company's
independent accountants of the accounts of the Company and of the Company's
assets, liabilities and operations, from the date of the last previous
accounting until the date of dissolution. The Board of Managers shall
immediately proceed to wind up the affairs of the Company.
(b) If the Company is dissolved and its affairs are to be wound up,
the Board of Managers shall, subject to the availability of assets of the
Company for such purposes:
(i) Sell or otherwise liquidate all of the Company's assets as
promptly as practicable (except to the extent the Board of Managers
may determine to distribute any assets to the Members in kind);
(ii) Allocate any profit or loss resulting from such sales to the
Members in accordance with Article VII;
(iii) Discharge all liabilities of the Company, other than
liabilities to Members, and establish such reserves as may be
reasonably necessary to provide for contingent liabilities of the
Company;
(iv) Discharge liabilities of the Company to Members; and
(v) Make distributions to the Members in accordance with Section
8.2 of this Agreement. Any such distributions to the Members in
respect of their Interests shall be made in accordance with the time
requirements set forth in Section 1.704-1(b)(2)(ii)(b)(2) of the
Regulations.
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(c) Notwithstanding anything to the contrary in this Agreement, upon
a liquidation within the meaning of Section 1.704-1(b)(2)(ii)(g) of the
Regulations, if any Member has an Adjusted Capital Account Deficit (after
giving effect to all contributions, distributions, allocations and other
Capital Account adjustments for all taxable years, including the year
during which such liquidation occurs), such Member shall have no obligation
to make any Capital Contribution, and the negative balance of such Member's
Capital Account shall not be considered a debt owed by such Member to the
Company or to any other person for any purpose whatsoever.
(d) Upon completion of the winding up, liquidation and distribution
of the assets, the Company shall be deemed terminated.
(e) The Board of Managers shall comply with any applicable
requirements of applicable law pertaining to the winding up of the affairs
of the Company and the final distribution of its assets.
11.4 Certificate of Termination. When all debts, liabilities and
obligations have been paid and discharged or adequate provisions have been made
therefor and all of the remaining property and assets have been distributed to
the Members, a Certificate of Termination shall be executed and filed with the
Secretary of State of Georgia in accordance with Section 14-11-610 of the Act.
ARTICLE XII
DISPOSITION OF LLC SHARES
12.1 Disposition. No Member shall have the right to assign, transfer, sell,
or convey its LLC Shares in the Company or any of its rights and obligations as
a Member, without the written consent of the Board of Managers.
12.2 Securities Law Compliance. No Member shall sell, pledge or otherwise
dispose of or transfer any LLC Share unless registered under the Securities Act
of 1933, as amended, and applicable state securities laws, or an opinion is
given by counsel satisfactory to the Company that such registration is not
required.
12.3 Dispositions not in Compliance with this Article Void. Any attempted
assignment, transfer, sale or conveyance of an Interest not in compliance with
this Article is null and void.
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ARTICLE XIII
TAX MATTERS REPRESENTATIVE
13.1 The initial Tax Matter Representative, as defined in Section 6231 of
the Code, shall be Tyrone C. Johnson. A successor Tax Matter Representative may
be selected by majority vote of the Members from time to time in their
discretion.
ARTICLE XIV
AMENDMENT
14.1 Amendment. This Agreement may be amended or modified from time to time
only by vote of Members holding a majority of the LLC Shares, except that in no
event shall any amendment hereto, without the unanimous consent of the Members:
(i) Create any individual liability of any Members to any other
Members or to third parties, without express written consent of any Member
to be obligated thereby, or
(ii) Create any obligation of any Members to the Company, including
(but not by way of limitation) any obligation to pay any assessment or make
any capital contribution to the Company, without express written consent of
any Member to be obligated thereby; or
(iii) Alter or amend the voting rights of the LLC Shares or their
relative participation in the net profits and net losses of the Company; or
(iv) Extend the date specified in the Articles of Organization of the
Company for dissolution of the Company.
ARTICLE XV
MISCELLANEOUS PROVISIONS
15.1 Entire Agreement. This Agreement represents the entire Agreement among
all the Members.
15.2 No Partnership Intended for Non-tax Purposes. The Company is formed
under the Act, and the Members expressly do not intend hereby to form a
partnership under either the State Uniform Partnership Act nor the State Uniform
Limited Partnership Act. The Members do not intend to be partners one to another
or partners as to any third party.
15.3 Application of Georgia Law. This Agreement, the application and
interpretation hereof shall be governed exclusively by its terms and the laws of
the State of Georgia and specifically the Act.
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15.4 Execution of Additional Instruments. Each Member hereby agrees to
execute such other and further statements of interest and holdings,
designations, powers of attorney and other instruments necessary to comply with
any laws, rules or regulations.
15.5 Construction. When required by the context, whenever the singular form
is used in this Agreement, the same shall include the plural and vice versa, and
the masculine gender shall include the feminine and neuter genders and vice
versa.
15.6 Headings. The headings in this Agreement are inserted for convenience
only and are in no way intended to describe, interpret, define, or limit the
scope, extent or intent of this Agreement or any provision hereof.
15.7 Waivers. The failure of any party to seek redress for violation of or
to insist upon the strict performance of any covenant or condition of this
Agreement shall not prevent a subsequent act, which would have originally
constituted a violation, from having the effect of an original violation.
15.8 Rights and Remedies Cumulative. The rights and remedies provided by
this Agreement are cumulative and the use of any one right or remedy by any
party shall not preclude or waive the right to use any or all other remedies.
Such rights and remedies are given in addition to any other rights the parties
may have by law, statute, ordinance or otherwise.
15.9 Counterparts. This Agreement may be executed in counterparts, each of
which shall be deemed an original but all of which shall constitute one and the
same instrument.
15.10 Certification of Non-Foreign Status. In order to comply with Section
1445 of the Code and the applicable Treasury Regulations thereunder, in the
event of the disposition by the Company of a United States real property
interest as defined in the Code and Treasury Regulations, each Member shall
provide to the Company, an affidavit stating, under penalties of perjury, (i)
the Member's address, (ii) United States taxpayer identification number, and
(iii) that the Member is not a foreign person as that term is defined in the
Code and Treasury Regulations.
15.11 Withholding.
(a) The Company shall withhold and pay over to the Internal Revenue
Service or other applicable taxing authority, all taxes or withholdings,
and all interest, penalties, additions to tax, and similar liabilities in
connection therewith or attributable thereto (hereinafter "Withheld Taxes")
to the extent that the Board of Managers determines that such withholding
and/or payment is required by the Code or any other law, rule, or
regulation, including, without limitation, Sections 1441, 1442, 1445, or
1446 of the Code and Section 48-7-129 of the Official Code of Georgia. The
Board of Managers shall determine in good faith to which Member such
Withheld Taxes are attributable. All amounts withheld pursuant to this
paragraph with respect to any
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allocation, payment or distribution to any Member shall be treated as
amounts distributed to such Member pursuant to Article VII hereof for all
purposes of this Agreement.
(b) If an amount payable to the Company is reduced because the Member
paying that amount withholds and/or pays over to the Internal Revenue
Service or other applicable taxing authority any amount as a result of the
status of a Member, the Board of Managers shall make such adjustments to
amounts distributed and allocated among Members as it determines to be fair
and equitable. (For example, if a portion of interest income earned by the
Company is withheld by the payor and paid over to the Internal Revenue
Service because a particular Member is a non-U.S. Person, the Manger might
include such withheld and paid over amount in computing amounts available
for distribution to the Members pursuant to Article VII and rate such
withheld and paid over amount as if that amount were distributed to the
Member in satisfaction of whose tax liability such amount was withheld and
paid over.)
15.12 Banking. All funds of the Company shall be deposited in its name in
an account or accounts of a financial institution as shall be designated from
time to time by the Board of Managers. All funds of the Company shall be used
solely for the business and affairs of the Company. All withdrawals from the
Company bank accounts shall be made only upon checks or other instructions
signed by the Board of Managers or by such other persons as the Board of
Managers may designate from time to time.
15.13 Attorney-in-fact. The Members hereby severally designate and appoint
the President of the Company, as the same may be from time to time, as their
agent and attorney-in-fact for the purpose of executing on their behalf and in
their stead one or more amendments to this Agreement from time to time for the
purpose of adding new Members to this Agreement in accordance with the terms
hereof, specifying their respective ownership of LLC Shares, and identifying the
consideration to be received by the Company in payment for such LLC Shares or
the Member from whom the LLC Shares are being transferred.
15.14 Authorization to Transact Business in Other States. The Board of
Managers is authorized, empowered and directed to undertake any and all actions
that may be necessary or appropriate to enable the Company to transact business
in those states in which the Company is required to qualify to transact
business.
15.15 Determination of Matters Not Provided for in This Agreement. The
Board of Managers shall decide any questions arising with respect to the Company
and this Agreement which are not specifically or expressly provided for in this
Agreement.
15.16 Further Assurances. The Members each agree to cooperate, and to
execute and deliver in a timely fashion any and all additional documents
necessary to effectuate the purposes of the Company and this Agreement.
A18
<PAGE> 19
15.17 Time. TIME IS OF THE ESSENCE OF THIS AGREEMENT, AND TO ANY PAYMENTS,
ALLOCATIONS AND DISTRIBUTIONS SPECIFIED UNDER THIS AGREEMENT.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed and affixed their seals.
VIDEO COMMUNICATIONS NETWORK, LLC.
Attest:
/s/ Steven D. Brown By: /s/ Tyrone C. Johnson
- ---------------------------- ------------------------------------
Secretary Authorized Officer
DIAMOND CAPITAL COMPANY, INC.
Attest:
/s/ Darren A. Diamond By: /s/ Darren A. Diamond
- ---------------------------- ------------------------------------
Secretary Authorized Officer
/s/ J. Eric Van Atta
- ----------------------------
Witness
A19
<PAGE> 20
EXHIBIT A
to Operating Agreement of
DIVERSITY ENTERTAINMENT TELEVISION/ATLANTA, LLC.
a limited liability company
organized under the laws of Georgia
<TABLE>
<CAPTION>
Name, address and federal tax identification LLC Shares Capital Contribution by
number of initial Members Received Member
------------------------- -------- ------
<S> <C> <C> <C>
1. Video Communications Network, LLC. 6,762 $676.20
1245 Fowler Street, NW
Atlanta, GA 30318
Tax I.D. No.: 58-233-6921
2. Diamond Capital Company, Inc. 138 13.80
241 Webney Drive
Marietta, GA 30068
Tax I.D. No.: 58-2207456
----- -------
Totals 6,900 $690.00
===== =======
</TABLE>
A20
<PAGE> 1
EXHIBIT 10.89
$37,500.00 July 2, 1998
PROMISSORY NOTE
FOR VALUE RECEIVED, American Artists Film Corporation, a Missouri
corporation (herein called "Obligor"), hereby promises to pay to the order of
Glen C. Warren, a resident of Jackson, Mississippi (herein called "Holder"), in
legal tender of the United States, without grace, at his office located at 10
Lakeland Circle, Jackson, Mississippi, or at such other place as the Holder may
hereafter designate, the sum of Thirty-Seven Thousand Five Hundred Dollars
($37,500.00) together with simple interest on the unpaid balance of such
principal amount outstanding from time to time hereunder at an annual interest
rate equal to prime plus one percent (1%) per annum. All principal and any
accrued but unpaid interest will be due and payable on demand but no later than
September 1, 1999.
It is hereby expressly agreed that should any default be made in the
payment of principal or interest when due, the principal indebtedness evidenced
hereby and all interest accrued thereon shall, upon written demand, become due
and payable and may be collected forthwith. Notwithstanding any other provision
hereof to the contrary, Obligor shall not be deemed to be in default of payment
of principal or interest hereunder if such payment (the "Late Payment") is
received by Holder within ten (10) days following the date on which Obligor
receives written notice of said default.
Payment not made within ten (10) days of the due date shall bear interest
at the rate of prime plus one percent (1%) per annum from the original due date
until paid.
Time is of the essence of this Note, and in the event that this Note is
collected by law or through an attorney-at-law, the Obligor agrees to pay all
reasonable costs of collection.
This note is unsecured.
The Obligor shall be entitled, at any time, and from time to time, without
the consent of the Holder and without making any penalty or premium therefor, to
prepay all or any portion or portions of the outstanding principal amount
thereof.
This Note shall be governed as to the validity, interpretation,
construction, enforcement, effect, and in all respects by the laws and decisions
of the State of Georgia.
No delay or omission on the part of the Holder in exercising any rights
hereunder shall operate as a waiver of such right or any other rights under this
Note. A waiver on any occasion shall not be construed as a bar to or waiver of
any right or remedy on any future occasion.
IN WITNESS WHEREOF, the undersigned has caused these presents to be duly
executed under the seal on the date and year first above written.
"OBLIGOR"
By: /s/ Steven D. Brown
-------------------------------------
American Artists Film Corporation
1245 Fowler St., N.W.
Atlanta, Georgia 30318
"HOLDER"
/s/ Glen C. Warren
- ------------------------------------
Glen C. Warren
<PAGE> 1
EXHIBIT 10.90
[CRAWFORD LETTERHEAD]
July 16, 1998
Mr. Tyrone Johnson
President
VIDEO COMMUNICATIONS NETWORK, L.L.C.
1245 Fowler Street, N.W.
Atlanta, Georgia 30318
Dear Ty:
Please accept this letter of agreement establishing a strategic alliance with
Crawford Communications, Inc., as the network originator for Video
Communications Network, L.L.C.
As discussed, the principal scope of this alliance will encompass provisions for
satellite and fiber fed signal transmission, remote control room operation
(satellite truck access) and post production support for original and licensed
content produced for the network.
The terms of the final agreement are subject to negotiation and will be more
fully described and executed in a formal written agreement.
Crawford Communications, Inc. is excited about originating such a timely
distribution channel for film and video entertainment and looks forward to the
new business potential of this alliance.
Very truly yours,
Jesse Crawford
President
CRAWFORD COMMUNICATIONS, INC.
JC:lw
cc: Jim Schuster Vice President, Satellite Services, CCI
<PAGE> 1
EXHIBIT 10.91
July 17, 1998
Mr. Ben Noble
3261 Lenox Road, N.E.
Atlanta, Georgia 30324
RE: Extension of Letter of Agreement dated July 17, 1997
Dear Ben,
Let this letter confirm that the due date for any and all monies payable
under the above-referenced Agreement (attached hereto as Exhibit "A") has been
extended to April 17, 1999. All other terms and conditions of said Agreement
remain in full force and effect.
Accepted and Agreed to by:
American Artists Film Corporation
/s/ Steven D. Brown
- ---------------------------------
Steven D. Brown, CEO
/s. Ben Noble
- ---------------------------------
Mr. Ben Noble
<PAGE> 2
EXHIBIT 10.91
AMERICAN ARTISTS FILM CORPORATION
- --------------------------------------------------------------------------------
1245 Fowler Street, N.W. - Atlanta, GA 30318 - (404)876-7373 - FAX (404)885-9831
EXHIBIT "A"
July 17, 1997
Mr. Ben Noble
3261 Lenox Road, N.E.
Atlanta, Georgia 30324
Re: LETTER OF AGREEMENT
This letter will confirm the terms and conditions of an unsecured revolving
line of credit, in the amount of $100,000, established in favor of American
Artists Film Corporation ("AAFC"). Borrowings may be made under this agreement
for a period of 365 days, however, any remaining outstanding amounts, with
interest, will be due and payable no later than July 17, 1998. Interest,
calculated at the prime rate plus 1%, will be due and payable on a monthly
basis, no later than the 15th day of each month.
This Letter of Agreement sets forth the terms of this agreement in its
entirety.
Accepted and Agreed to by:
American Artists Film Corporation
/s/ Steven D. Brown
- ---------------------------------
Steven D. Brown, Chairman and CEO
/s/ Mr. Ben Noble
- ---------------------------------
Mr. Ben Noble
<PAGE> 1
EXHIBIT 10.92
SETTLEMENT AGREEMENT AND RELEASE
This Settlement Agreement and Release (the "Agreement") is made and
entered into, and effective as of the 24th day of July, 1998, by and among
American Artists Film Corporation ("AAFC") and Millennium Group, LLC (the
"Company"), on one hand, and Dr. Robert Voy, Dr. Michael Gross and Diana
Mount-Gross, JTWROS and Kevin Holloway (collectively "Investors") on the other
hand. The Company, AAFC and Investors are sometimes collectively referred to
herein as the Settling Parties.
RECITALS
A. The Investors own an aggregate of ten (10) membership interest units
("Interests") in the Company, a Georgia limited liability company, formed to
participate in the entertainment industry by engaging in the licensing,
production, ownership, distribution and exploitation of a sixty minute video
("Video") exploring the subject of the millennium throughout recorded history to
present day, as further described in the Millennium private placement memorandum
dated November 15, 1994, attached hereto as Exhibit "A" (the "Private
Placement).
B. The Investors have held their respective Interests for several years
in which such time and as of this date, the Company has been unable to secure a
licensing agreement with a domestic television network or cable system and has
also been unable to arrange for additional capital investments, debt or
co-venture financing, presale of territorial distribution rights or make any
additional deferments to fund the completion and distribution of the Video.
C. The Investors, at this time, wish to voluntarily convert their
Interests into common stock of AAFC. The Investors (i) are current shareholders
in AAFC, (ii) have read AAFC's most recent quarterly and annual reports, among
others, as reported to the Securities and Exchange Commission ("SEC"), (iii)
have had the opportunity to ask questions of and receive answers from the
Company and AAFC or a person or persons acting on its behalf, concerning the
Company and AAFC as well as such other information as the Investors desired and
(iv) have had all such questions answered and all information provided to their
full satisfaction.
NOW, THEREFORE, in consideration of the terms and conditions of this
Agreement, and for good and valuable consideration, the Settling Parties agree
and release each other as follows:
-1-
<PAGE> 2
1. The Company and AAFC agree that when they receive from Investors the
fully executed original of this Settlement Agreement and Release, the Company
and AAFC will cause to be delivered to Investors within ten (10) business days
an aggregate of twenty-five thousand (25,000) shares of AAFC's Class A Common
Stock, $.001 par value (the "Settlement Shares") which shall be distributed to
the Investors pro rata to their Interests as follows:
<TABLE>
<CAPTION>
No. % %
Settlement of Original of
Investor Shares Total Unit Ownership Total
- -------- ------ ----- -------------- -----
- -----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Dr. Robert Voy 7,500 30% 3 Units ($15,000) 30%
- -----------------------------------------------------------------------------------
Dr. Michael Gross and Diana
Mount-Gross, JTWROS 5,000 20% 2 Units ($10,000) 20%
- -----------------------------------------------------------------------------------
Kevin Holloway 12,500 50% 5 Units ($25,000) 50%
- -----------------------------------------------------------------------------------
TOTAL 25,000 100% 10 Units ($50,000) 100%
- -----------------------------------------------------------------------------------
</TABLE>
2. The Settlement Shares shall be issued in full, final, and complete
settlement of all claims, charges, or complaints by the Investors which arise
from or relate to the Private Placement. Further, any and all Interests, rights,
ownership, distributions, claims, etc., of every kind and nature, held by the
Investors in the Company, (and the subsequent Video) will revert to the Company
and the Company will retain ownership of all Interests, rights, ownership,
distributions, claims, etc., of every kind and nature of any and all material
developed or used for the Video including, without limitation, all rights of
ownership and copyright in all media now known or hereinafter devised in all
territories of the universe in perpetuity.
3. The Investors understand that (i) the Settlement Shares are not
being registered under the Securities Act of 1933, as amended ("1933 Act") on
the ground that the issuance thereof is exempt from registration under Section
4(2) of the 1933 Act as a transaction by an issuer not involving a public
offering, and the Company's and AAFC's reliance on this exemption is predicated
in part on the Investors' representations and warranties contained herein. The
Investors have represented that they are "accredited investors" as defined in
the 1933 Act and are acquiring the Settlement Shares for their own account, for
investment purposes only and not with a view to the sale or distribution
thereof. The Settlement Shares may not be offered for sale, sold, assigned, or
transferred unless (a) subsequently registered thereunder, (b) Investors shall
have delivered to AAFC an opinion of counsel, in a generally acceptable form, to
the effect that such securities to be sold, assigned, or transferred may be
sold, assigned, or transferred pursuant to an exemption from such registration,
or (c) Investors provide AAFC with reasonable assurances that such securities
can be sold, assigned, or transferred pursuant to Rule 144 promulgated under the
1933 Act (or a successor rule thereto); (ii) any sale of such securities made in
reliance on Rule 144 promulgated under the 1933 Act (or a successor rule
thereto) ("Rule 144") may be made only in accordance with the terms of Rule 144
and further, if Rule 144 is not applicable, any resale of such securities under
circumstances in which the seller (or the person through whom the sale is made)
may be deemed to be an underwriter (as that term is defined in the 1933 Act) may
require compliance with some other exemption under the 1933 Act
-2-
<PAGE> 3
or the rules and regulations of the SEC thereunder; and (iii) neither the
Company or AAFC nor any other person is under any obligation to register such
securities under the 1933 Act or any state securities laws or to comply with the
terms and conditions of any exemption thereunder.
4. Investors understand that the certificates or other instruments
representing the Settlement Shares and until such time as the sale of the
Settlement Shares have been registered under the 1933 Act, the stock
certificates representing the Settlement Shares shall bear a restrictive legend
in substantially the following form (and a stop transfer order may be placed
against transfer of such stock certificates):
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE
SECURITIES LAWS. THE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND
MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED, OR ASSIGNED IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES
LAWS, OR AN OPINION OF COUNSEL, IN A GENERALLY ACCEPTABLE FORM, THAT
REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR APPLICABLE STATE
SECURITIES LAWS OR UNLESS SOLD PURSUANT TO RULE 144 UNDER SAID ACT.
5. Investors severally hereby irrevocably and unconditionally release,
acquit, and forever discharges the Company and AAFC and each of their respective
predecessors, merger partners, successors, assigns, agents, officers, directors,
employees, representatives, attorneys, divisions, subsidiaries, affiliates, and
parent corporations (and former and present agents, officers, directors,
employees, representatives, and attorneys of such entities) and all persons
acting by, through, under or in concert with them or any of them (all of the
above hereafter collectively referred to as "Company Releasees"), from any and
all charges, complaints, claims, liabilities, obligations, promises, agreements,
controversies, damages, actions, causes of action, suits, rights, demands,
costs, losses, debts, and expenses (including attorneys' fees and costs actually
incurred), or nature whatsoever arising out of or in connection with the
Interests that Investors or any of its predecessors, merger partners,
successors, privies, assigns, agents, directors, officers, employees,
representatives, attorneys, divisions, insurers, indemnors, subsidiaries,
affiliates, and parent corporations (and former and present agents, officers,
directors, employees, representatives, and attorneys of such entities) may now
have, own, or hold, or that at any time heretofore had, owned, or held.
Investors expressly acknowledge that this paragraph of this Settlement Agreement
and Release is intended to include in its effect, without limitation, all such
claims that the parties do not know or suspect to exist in their favor at the
time of execution hereof, and that this Agreement contemplates the
extinguishment of any such claim or claims.
-3-
<PAGE> 4
6. The Company and AAFC hereby irrevocably and unconditionally release,
acquit, and forever discharge Investors and each Investors' predecessors,
successors, assigns, agents, officers, directors, employees, representatives,
attorneys, divisions, subsidiaries, affiliates (and former and present agents,
officers, directors, employees, representatives, and attorneys of such entities)
and all persons acting by, through, under or in concert with them or any of them
(all of the above hereafter collectively referred to as "Investors"), from any
and all charges, complaints, claims, liabilities, obligations, promises,
agreements, controversies, damages, actions, causes of action, suits, rights,
demands costs, losses, debts, and expenses (including attorneys' fees and costs
actually incurred), of any nature whatsoever arising out of or in connection
with the Interests that the Company and AAFC or any of their predecessors,
merger partners, successors, privies, assigns, agents, directors, officers,
employees, representatives, attorneys, divisions, insurers, indemnors,
subsidiaries, affiliates (and former and present agents, officers, directors,
employees, representatives and attorneys of any such entities) may now have,
own, or hold, or that at any time heretofore had, owned, or held. The Company
and AAFC acknowledge that this paragraph of this Settlement Agreement and
Release is intended to include in its effect, without limitation, all such
claims that the parties do not know or suspect to exists in their favor at the
time of execution hereof, and that this Agreement contemplates the
extinguishment of any such claim or claims.
7. Investors, the Company and AAFC represent and agree that they have
thoroughly discussed all aspects of this Settlement Agreement and Release with
their private attorneys, that they are fully aware of their right to discuss any
and all aspects of this matter with an attorney chosen by them, that they have
carefully read and fully understand all of the provisions of this Settlement
Agreement and Release, and that they are voluntarily entering into this
Settlement Agreement and Release.
8. As a further material inducement to each part to enter into this
Settlement Agreement and Release, each party hereby agrees that if it breaches
this Agreement, it will indemnify and hold all other parties harmless from and
against any and all resulting loss, cost, damage, award, or expense, including,
without limitation, all attorney's fees.
9. Investors, the Company and AAFC represent and acknowledge that in
executing this Settlement Agreement and Release, they do not rely and have not
relied on any representation or statement made by the other or by any of the
other's agents, representatives, or attorneys with regard to the subject matter,
basis or effect of this Settlement Agreement and Release or otherwise, except as
set forth specifically in this Agreement.
10. This Settlement Agreement and Release shall be binding on all
parties, and any of their predecessors, parent corporations, merger partners,
successors, privies, assigns, agents, directors, officers, employees,
representatives, attorneys, divisions, insurers, indemnors, subsidiaries,
affiliates (an former and present agents, officers, directors, employees,
representatives, and attorneys of any such divisions, subsidiaries and
affiliates) and shall inure to
-4-
<PAGE> 5
the benefit of the parties hereto and to their predecessors, parent
corporations, merger partners, successors, privies, assigns, agents, directors,
officers, employees, representatives, attorneys divisions, insurers, indemnors,
subsidiaries, affiliates (and former and present agents, officers, directors,
employees, representatives, and attorneys of any such divisions, subsidiaries
and affiliates), except as expressly limited by paragraphs Five (5) and Six (6)
hereof.
11. This Settlement Agreement and Release shall in all respects be
interpreted, enforced, and governed under the laws of the State of Georgia. The
language of all parts of this Settlement Agreement and Release shall in all
cases be construed as a whole, according to its fair meaning, and not strictly
for or against any of the parties.
12. Should any provision of this Settlement Agreement and Release be
declared or be determined by any court to be illegal or invalid, the validity of
the remaining parts, terms, or provisions shall not be affected thereby and said
illegal or invalid part, term, or provision shall be deemed not to be a part of
this Settlement Agreement and Release.
13. As used in this Settlement Agreement and Release, the masculine or
neuter gender, and singular or plural number, shall be deemed to include the
others whenever the context so indicates or requires.
14. The parties hereto represent that they have not heretofore assigned
or transferred, or purported to assign or transfer, to any person or entity, any
claim or any portion thereof or interest therein released by this Settlement
Agreement and Release and they agree to indemnify, defend and hold the other
harmless from an against any and all claims, based on or arising out of any such
assignment or transfer or purported assignment or transfer of any such claims or
based on or arising out of any subrogation to any such claims, or any portion
thereof or interest therein.
15. This Agreement does not constitute an admission of liability by any
party to any other party and the Company, AAFC and Investors expressly deny any
liability to each other. Further, the Investors agree to hold the existence and
terms of this Settlement Agreement and Release confidential and shall not
disclose the same to any third party unless required to by law. Prior to any
such required disclosure, the Investors shall provide the Company and AAFC at
least five (5) days prior notice of such disclosure.
16. This Settlement Agreement and Release sets forth the entire
agreement between the parties hereto, and fully supersedes any and all prior
agreements or understandings between the parties hereto pertaining to the
subject matter hereof.
-5-
<PAGE> 6
17. This Agreement may be executed in multiple counterparts, each of
which shall be deemed an original, but all of which shall constitute one and the
same agreement.
AGREED AS FOLLOWS:
MILLENNIUM GROUP, LLC
By: /s/ J. Eric Van Atta
-------------------------------------
J. Eric Van Atta
Its: Vice President and Secretary
AMERICAN ARTISTS FILM CORPORATION
By: /s/ Robert A. Martinez
-------------------------------------
Robert A. Martinez
Its: Chief Financial Officer & Treasurer
INVESTORS
By: /s/ Robert Voy
----------------------------------
Dr. Robert Voy
By: /s/ Michael Gross By: /s/ Diana Mount-Gross
---------------------------------- -------------------------------------
Dr. Michael Gross Diana Mount-Gross
By: /s/ Kevin Holloway
----------------------------------
Kevin Holloway
-6-
<PAGE> 1
EXHIBIT 10.93
$100,000.00 December 1, 1998
PROMISSORY NOTE
FOR VALUE RECEIVED, American Artists Film Corporation, a Missouri
corporation (herein called "Obligor"), hereby promises to pay to the order of
Glen C. Warren, a resident of Jackson, Mississippi (herein called "Holder"), in
legal tender of the United States, without grace, at his office located at 10
Lakeland Circle, Jackson, Mississippi, or at such other place as the Holder may
hereafter designate, the sum of One Hundred Thousand Dollars ($100,000.00)
together with simple interest on the unpaid balance of such principal amount
outstanding from time to time hereunder at an annual interest rate equal to
prime plus one percent (1%) per annum. All principal and any accrued but unpaid
interest will be due and payable on demand.
It is hereby expressly agreed that should any default be made in the
payment of principal or interest when due, the principal indebtedness evidenced
hereby and all interest accrued thereon shall, upon written demand, become due
and payable and may be collected forthwith. Notwithstanding any other provision
hereof to the contrary, Obligor shall not be deemed to be in default of payment
of principal or interest hereunder if such payment (the "Late Payment") is
received by Holder within ten (10) days following the date on which Obligor
receives written notice of said default.
Payment not made within ten (10) days of the due date shall bear interest
at the rate of prime plus one percent (1%) per annum from the original due date
until paid.
Time is of the essence of this Note, and in the event that this Note is
collected by law or through an attorney-at-law, the Obligor agrees to pay all
reasonable costs of collection.
This note is unsecured.
The Obligor shall be entitled, at any time, and from time to time, without
the consent of the Holder and without making any penalty or premium therefor, to
prepay all or any portion or portions of the outstanding principal amount
thereof.
This Note shall be governed as to the validity, interpretation,
construction, enforcement, effect, and in all respects by the laws and decisions
of the State of Georgia.
No delay or omission on the part of the Holder in exercising any rights
hereunder shall operate as a waiver of such right or any other rights under this
Note. A waiver on any occasion shall not be construed as a bar to or waiver of
any right or remedy on any future occasion.
IN WITNESS WHEREOF, the undersigned has caused these presents to be duly
executed under the seal on the date and year first above written.
"OBLIGOR"
By: /s/ Steven D. Brown
------------------------------------
American Artists Film Corporation
1245 Fowler St., N.W.
Atlanta, Georgia 30318
"HOLDER"
/s/ Glen C. Warren
------------------------------------
Glen C. Warren
<PAGE> 1
EXHIBIT 10.94
[American Artists Film corporation Letterhead]
July 29, 1998
VIA FEDERAL EXPRESS
Ms. Jeanette Ebaugh
P.O. Box 79531
Atlanta, GA 30357
RE: "MIRACLES"
Dear Jeanette:
This agreement ("Agreement"), is made and entered into this 29th day of
July 1998 by and between American Artists Film Corporation ("AAFC"), a Missouri
corporation and Jeanette Ebaugh ("Ebaugh"), an individual residing in the State
of Georgia.
RECITALS
1. Ebaugh is the originator and developer of the project Miracles
("Project");
2. AAFC is a development and production company in the business of
developing and producing feature length film and television productions for
worldwide distribution;
3. AAFC and Ebaugh wish to enter into an agreement whereby AAFC and Ebaugh
would co-produce the Project.
AGREED
In consideration of the mutual promises contained herein and the mutual benefits
to be derived therefrom, and other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, AAFC and Ebaugh hereby agree
as follows:
1. In the event the Project is sold and/or funded, Ebaugh's screen credits
shall include Executive Producer and Created By credits;
2. The fee for services performed by Ebaugh shall be negotiated at the
time of the sale and/or funding of the Project and shall be contingent on the
production budget. Any and all "story monies," as that term is used in the film
industry, payable by the buyer and/or funding source shall be paid to Ebaugh;
3. Ebaugh shall receive a "backend" profit participation ("Participation")
in the Project contingent on the availability, if any, of such Participation and
shall be negotiated in good faith with AAFC at the time of sale and/or funding
of the Project.
-1-
<PAGE> 2
4. Ebaugh represents and warrants that she legally has the right to enter
into this Agreement and to perform fully all of its obligations hereunder and
further represents and warrants that there are no claims or liens against the
Project that would render this Agreement invalid and that Ebaugh has not
violated any rights of privacy or publicity, or defamed or infringed any
copyright, trademark or other literary dramatic or musical right of any person,
firm, or corporation;
5. AAFC represents and warrants that it legally has the right to enter
into this Agreement and to perform fully all of its obligations hereunder.
6. This Agreement shall in all respects be interpreted, enforced, and
governed under the laws of the State of Georgia.
7. This Agreement constitutes the full and complete understanding between
the parties, supersedes all prior oral or written agreements between them and
shall not be modified except by written instrument signed by each of the
parties. The parties contemplate that a more formal agreement incorporating the
foregoing provisions, as well as provisions customary in agreements of this
nature, shall be negotiated by the parties in the near future. However, unless a
more formal agreement is signed, this Agreement shall constitute the Agreement
between the parties.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first set forth above.
AMERICAN ARTISTS FILM CORPORATION
By: /s/ J. Eric Van Atta
-------------------------------------
J. Eric Van Atta
Its: Vice President
JEANETTE EBAUGH
/s/ Jeanette Ebaugh
- -----------------------------------
-2-
<PAGE> 1
EXHIBIT 10.95
$58,000.00 July 31, 1998
PROMISSORY NOTE
FOR VALUE RECEIVED, American Artists Film Corporation, a Missouri
corporation (herein called "Obligor"), hereby promises to pay to the order of
Glen C. Warren, a resident of Jackson, Mississippi (herein called "Holder"), in
legal tender of the United States, without grace, at his office located at 10
Lakeland Circle, Jackson, Mississippi, or at such other place as the Holder may
hereafter designate, the sum of Fifty-Eight Thousand Dollars ($58,000.00)
together with simple interest on the unpaid balance of such principal amount
outstanding from time to time hereunder at an annual interest rate equal to
prime plus one percent (1%) per annum. All principal and any accrued but unpaid
interest will be due and payable on demand but no later than September 1, 1999.
It is hereby expressly agreed that should any default be made in the
payment of principal or interest when due, the principal indebtedness evidenced
hereby and all interest accrued thereon shall, upon written demand, become due
and payable and may be collected forthwith. Notwithstanding any other provision
hereof to the contrary, Obligor shall not be deemed to be in default of payment
of principal or interest hereunder if such payment (the "Late Payment") is
received by Holder within ten (10) days following the date on which Obligor
receives written notice of said default.
Payment not made within ten (10) days of the due date shall bear interest
at the rate of prime plus one percent (1%) per annum from the original due date
until paid.
Time is of the essence of this Note, and in the event that this Note is
collected by law or through an attorney-at-law, the Obligor agrees to pay all
reasonable costs of collection.
This note is unsecured.
The Obligor shall be entitled, at any time, and from time to time, without
the consent of the Holder and without making any penalty or premium therefor, to
prepay all or any portion or portions of the outstanding principal amount
thereof.
This Note shall be governed as to the validity, interpretation,
construction, enforcement, effect, and in all respects by the laws and decisions
of the State of Georgia.
No delay or omission on the part of the Holder in exercising any rights
hereunder shall operate as a waiver of such right or any other rights under this
Note. A waiver on any occasion shall not be construed as a bar to or waiver of
any right or remedy on any future occasion.
IN WITNESS WHEREOF, the undersigned has caused these presents to be duly
executed under the seal on the date and year first above written.
"OBLIGOR"
By: /s/ Steven D. Brown
-------------------------------------
American Artists Film Corporation
1245 Fowler St., N.W.
Atlanta, Georgia 30318
"HOLDER"
/s/ Glen C. Warren
- ------------------------------------
Glen C. Warren
<PAGE> 1
EXHIBIT 10.96
$6,500.00 August 6, 1998
PROMISSORY NOTE
FOR VALUE RECEIVED, American Artists Film Corporation, a Missouri
corporation (herein called "Obligor"), hereby promises to pay to the order of
Glen C. Warren, a resident of Jackson, Mississippi (herein called "Holder"), in
legal tender of the United States, without grace, at his office located at 10
Lakeland Circle, Jackson, Mississippi, or at such other place as the Holder may
hereafter designate, the sum of Six Thousand Five Hundred Dollars ($6,500.00)
together with simple interest on the unpaid balance of such principal amount
outstanding from time to time hereunder at an annual interest rate equal to
prime plus one percent (1%) per annum. All principal and any accrued but unpaid
interest will be due and payable on demand but no later than September 1, 1999.
It is hereby expressly agreed that should any default be made in the
payment of principal or interest when due, the principal indebtedness evidenced
hereby and all interest accrued thereon shall, upon written demand, become due
and payable and may be collected forthwith. Notwithstanding any other provision
hereof to the contrary, Obligor shall not be deemed to be in default of payment
of principal or interest hereunder if such payment (the "Late Payment") is
received by Holder within ten (10) days following the date on which Obligor
receives written notice of said default.
Payment not made within ten (10) days of the due date shall bear interest
at the rate of prime plus one percent (1%) per annum from the original due date
until paid.
Time is of the essence of this Note, and in the event that this Note is
collected by law or through an attorney-at-law, the Obligor agrees to pay all
reasonable costs of collection.
This note is unsecured.
The Obligor shall be entitled, at any time, and from time to time, without
the consent of the Holder and without making any penalty or premium therefor, to
prepay all or any portion or portions of the outstanding principal amount
thereof.
This Note shall be governed as to the validity, interpretation,
construction, enforcement, effect, and in all respects by the laws and decisions
of the State of Georgia.
No delay or omission on the part of the Holder in exercising any rights
hereunder shall operate as a waiver of such right or any other rights under this
Note. A waiver on any occasion shall not be construed as a bar to or waiver of
any right or remedy on any future occasion.
IN WITNESS WHEREOF, the undersigned has caused these presents to be duly
executed under the seal on the date and year first above written.
"OBLIGOR"
By: /s/ Steven D. Brown
------------------------------------
American Artists Film Corporation
1245 Fowler St., N.W.
Atlanta, Georgia 30318
"HOLDER"
/s/ Glen C. Warren
------------------------------------
Glen C. Warren
<PAGE> 1
EXHIBIT 10.97
PRODUCTION AGREEMENT
This agreement ("Agreement") is made and entered into this 10th day of
August, 1998 by and between American Artists Films, a division of American
Artists Film Corporation, a Missouri corporation, (the "Company") and Doris
Reynolds, 370 12th Avenue South, Naples, Florida 34102 (the "Consultant").
In consideration of and for the mutual promises and covenants contained
herein, and for the good and valuable consideration, the receipt of which is
hereby acknowledged, the parties hereto agree as follows:
1. RECITALS
The Company develops and produces video/television programs and feature
length films for worldwide distribution in all media markets.
The Consultant has invested considerable time and resources in the
development of a concept for a video program on the ideas and opinions of Ms.
Angela Passidomo Trafford on the subject of spiritual healing (the "Project").
2. PURPOSE
The Company and the Consultant wish to enter into an agreement for the
production of the Project for cable/television distribution. It is anticipated
the Project will be a thirty minute video.
3. DUTIES OF THE COMPANY
The Company agrees to provide the writer, director, producer and all
other production personnel necessary to produce the Project. In addition, the
Company shall have complete authority in terms of creative decisions during all
phases of production, including but not limited to, budget, cast, final script,
locations, editing and music. The Company has made no assertions to the
Consultant to the contrary. The Company also agrees to use its resources and
contacts on a best efforts basis to develop and secure a distribution agreement
for broadcast on television/cable.
4. DUTIES OF THE CONSULTANT
The Consultant agrees to provide the services of Ms. Trafford. Ms.
Trafford will be available for meetings and discussions at times mutually
acceptable to both Ms. Trafford and the Company. The Consultant also agrees to
compensate the Company for its production services in the amount of $25,000.
Such compensation will be payable as follows: $15,000 upon execution of the
Agreement and $10,000 upon completion of production services.
5. OWNERSHIP
The Company and Consultant will retain joint ownership of all rights of
every kind and nature of any and all material developed or used for the Project
as listed in section 8, including without limitation, all rights of ownership
and copyright in all media now known or hereinafter devised in all territories
of the universe in perpetuity. Other materials may be jointly developed subject
to mutual written agreement by all parties.
<PAGE> 2
6. COMPANY'S LIABILITY
The Consultant agrees to defend, indemnify, and hold the Company
harmless from and against any and all reasonable costs, expenses and liability
(including reasonable attorney's fees paid in defense of the Company) which may
in any way result pursuant to its gross negligence or willful misconduct or in
any connection with any actions or statements, on behalf of the Company, without
the prior approval or authorization of the Company or which are otherwise in
violation of applicable law. The Consultant also agrees to obtain an
indemnification agreement from Ms. Trafford in favor of the Company.
7. CONSULTANT'S LIABILITY
In the absence of gross negligence or willful misconduct on the part of
the Consultant or the Consultant's breach of this Agreement, the Consultant
shall not be liable to the Company or to any officer, director, employee,
stockholder or creditor of the Company, for any act or omission in the course of
or in connection with the rendering or providing of services hereunder. Except
in those cases where the gross negligence or willful misconduct of the
Consultant or the breach by the Consultant of this Agreement is alleged and
proven, the Company agrees to defend, indemnify, and hold the Consultant
harmless from and against any and all reasonable costs, expenses and liability
(including reasonable attorney's fees paid in the defense of the Consultant)
which may in any way result from services rendered by the Consultant pursuant to
or in any connection with this Agreement. This indemnification expressly
excludes any and all damages as a result of any actions or statements, on behalf
of the Company, made by the Consultant without the prior approval or
authorization of the Company.
8. ALLOCATION OF GROSS REVENUES
The gross revenues will be allocated in the following order:
a) All gross revenues to the Consultant until the
Consultant has recovered 100% of the production costs related
to the production of the Project.
b) All gross revenues to Consultant until Consultant has
recovered a simple twenty percent (20%) return on invested
funds (i.e. $20,000 investment would require a $4,000 return).
c) All gross revenues to Company until Company has recovered all
deferred costs of production, currently estimated at
approximately $15,000.
d) Upon completion of the allocations under items (a), (b) & (c),
any remaining gross revenues will be split equally between the
Company and Consultant.
For purposes of this Agreement, gross revenues are defined as all
proceeds received from the distribution of the Project and all related ancillary
products (i.e. books, tapes, etc.) offered during the broadcast (both nationally
and internationally) of this project and through the related Internet site.
<PAGE> 3
Consultant acknowledges that the Company has not made any express or
implied representation, warranty, guarantee or agreement as to the total amount
of revenues which will be derived from the exploitation and distribution of the
Project, nor has the Company made any express or implied representation,
warranty, guarantee or agreement that there will be any sums payable to the
Consultant hereunder. In no event shall the Company or any affiliate thereof
incur any liability based upon any claim by the Consultant that the Company
failed to realize receipts or revenue which should or could have been realized.
9. REPRESENTATIONS
The Company makes the following representations to the Consultant:
a) The Company is duly authorized and empowered to enter into this
Agreement.
b) American Artists Film Corporation is in good standing in its state
of incorporation, Missouri.
c) American Artists Film Corporation is not currently the subject of an
investigation or inquiry by the Securities and Exchange Commission, the
NASD, or any state securities commission.
The Consultant makes the following representations to the Company:
a) The Consultant is not aware of any existing lien, copyright,
agreements or commitments related to the spiritual healing concept
which forms the basis for this Project.
b) The Consultant is not presently the subject of any criminal or civil
proceedings, the outcome of which could have a materially adverse
affect upon the production and distribution of the Project.
10. SEVERABILITY
Every provision of this Agreement is intended to be severable. If any
term or provision hereof is deemed unlawful or invalid for any reason
whatsoever, such unlawfulness or invalidity shall not affect the validity of
this Agreement.
11. HEADINGS
Headings are inserted for reference and convenience only and in no way
define, limit or describe the scope of this Agreement or intent of any
provision.
12. MISCELLANEOUS
(a) Any notice or other communication between parties hereto shall be
sufficiently given if sent by certified or registered mail, postage
prepaid, or faxed and confirmed at the following locations:
<PAGE> 4
COMPANY:
American Artists Films
1245 Fowler Street, NW
Atlanta, Georgia 30318
(404) 876-7373 / (404) 885-9831(f)
Attn: Phillip Bellury
CONSULTANT:
Ms. Doris Reynolds
370 12th Avenue South
Naples, Florida 34102
(941)261-8054 / (941) 261-7866(f)
Such notice or other communication shall be deemed to be given on
the date of receipt.
(b) This Agreement embodies the entire agreement and understanding
between the Company and the Consultant and supersedes any and all
negotiations, prior discussions and preliminary and prior agreements
and understandings related to the primary subject matter hereof.
(c) This Agreement has been duly authorized, executed and delivered by
and on behalf of the Company and the Consultant.
(d) This Agreement shall be construed and interpreted in accordance
with the laws of the State of Georgia, without giving effect to
conflicts of laws.
(e) There is no relationship, partnership, agency, employment,
franchise or joint venture between the parties. The parties have no
authority to bind the other or incur any obligations on their behalf.
(f) This Agreement and the rights hereunder may not be assigned by the
parties (except by operation of law or merger) and shall be binding
upon and inure to the benefit of the parties and their respective
successors, assigns and legal representatives.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first written above.
AMERICAN ARTISTS FILMS, A DIVISION OF AMERICAN ARTISTS FILM CORPORATION
By: /s/ Rex Hauck
--------------------------------
Rex Hauck, President
CONSULTANT
By: /s/ Doris Reynolds
--------------------------------
Doris Reynolds
<PAGE> 1
EXHIBIT 10.98
$35,500.00 August 14, 1998
PROMISSORY NOTE
FOR VALUE RECEIVED, American Artists Film Corporation, a Missouri
corporation (herein called "Obligor"), hereby promises to pay to the order of
Glen C. Warren, a resident of Jackson, Mississippi (herein called "Holder"), in
legal tender of the United States, without grace, at his office located at 10
Lakeland Circle, Jackson, Mississippi, or at such other place as the Holder may
hereafter designate, the sum of Thirty-Five Thousand Five Hundred Dollars
($35,500.00) together with simple interest on the unpaid balance of such
principal amount outstanding from time to time hereunder at an annual interest
rate equal to prime plus one percent (1%) per annum. All principal and any
accrued but unpaid interest will be due and payable on demand but no later than
September 1, 1999.
It is hereby expressly agreed that should any default be made in the
payment of principal or interest when due, the principal indebtedness evidenced
hereby and all interest accrued thereon shall, upon written demand, become due
and payable and may be collected forthwith. Notwithstanding any other provision
hereof to the contrary, Obligor shall not be deemed to be in default of payment
of principal or interest hereunder if such payment (the "Late Payment") is
received by Holder within ten (10) days following the date on which Obligor
receives written notice of said default.
Payment not made within ten (10) days of the due date shall bear interest
at the rate of prime plus one percent (1%) per annum from the original due date
until paid.
Time is of the essence of this Note, and in the event that this Note is
collected by law or through an attorney-at-law, the Obligor agrees to pay all
reasonable costs of collection.
This note is unsecured.
The Obligor shall be entitled, at any time, and from time to time, without
the consent of the Holder and without making any penalty or premium therefor, to
prepay all or any portion or portions of the outstanding principal amount
thereof.
This Note shall be governed as to the validity, interpretation,
construction, enforcement, effect, and in all respects by the laws and decisions
of the State of Georgia.
No delay or omission on the part of the Holder in exercising any rights
hereunder shall operate as a waiver of such right or any other rights under this
Note. A waiver on any occasion shall not be construed as a bar to or waiver of
any right or remedy on any future occasion.
IN WITNESS WHEREOF, the undersigned has caused these presents to be duly
executed under the seal on the date and year first above written.
"OBLIGOR"
By: /s/ Steven D. Brown
-------------------------------------
American Artists Film Corporation
1245 Fowler St., N.W.
Atlanta, Georgia 30318
"HOLDER"
/s/ Glen C. Warren
- ------------------------------------
Glen C. Warren
<PAGE> 1
EXHIBIT 10.99
THE SECURITIES HEREUNDER HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933 OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE RESOLD UNLESS REGISTERED
UNDER THE SECURITIES ACT OF 1933 AND APPLICABLE STATE SECURITIES LAWS OR
PURSUANT TO EXEMPTION FROM REGISTRATION
OPERATING AGREEMENT
OF
VIDEO COMMUNICATIONS NETWORK, LLC.
a limited liability company
organized under the Georgia Limited Liability Company Act
THIS OPERATING AGREEMENT is made and entered into as of the 20th day of
August 1997 by and among the undersigned parties. Unless otherwise indicated by
the context, as used herein the term "Members" refers to the undersigned parties
at this date and to other persons who hereafter became parties hereto in
accordance with the terms hereof.
R E C I T A L S:
1. Video Communications Network, LLC (the "Company") was formed as a
Georgia limited liability company on May 14, 1996, by execution and delivery of
Articles of Organization to the Secretary of State of Georgia in accordance with
the provisions of the Georgia Limited Liability Company Act, as amended (the
"Act").
2. The Members desire to organize the Company with themselves as its
members and to set out the terms of their agreement with respect to the Company,
its operations, and their own respective rights and interests therein.
AGREEMENT:
In consideration of the Recitals, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties agree as follows:
<PAGE> 2
ARTICLE I
OFFICES; SEAL
1.1 Registered Office, Agent. The Company shall at all times maintain a
registered office in the State of Georgia and a registered agent at that address
but may have other offices located within or without the State of Georgia.
1.2 Principal Office. The Company shall maintain its principal office
within the State of Georgia unless otherwise determined by the Board of
Managers.
1.3 Seal. The seal of the Company shall be in such form as the Board of
Managers may from time to time determine. If it is inconvenient to use such a
seal at any time, the signature of the Company followed by the word "Seal"
enclosed in parentheses or scroll shall be deemed the seal of the Company.
ARTICLE II
LLC SHARES AND INTERESTS
2.1 LLC Shares. The ownership of the Company shall be divided initially
into 10,000 shares ("Limited Liability Company Shares" or "LLC Shares")
comprising 9,000 equal Ordinary LLC Shares and 1,000 equal Deferred LLC Shares;
provided, however, that the said number of LLC Shares may be increased or
reduced by the Board of Managers from time to time as hereinafter provided.
2.2 Initial Members. The names, addresses and federal tax identification
numbers of the initial Members are set out in Exhibit A hereto. Each of the
initial Members shall make an initial capital contribution to the Company in
cash or in kind as set out in Exhibit A and receive in consideration thereof the
number and class of LLC Shares specified therein. Exhibit A is incorporated
herein by reference and made a part of this Agreement.
2.3 Additional LLC Shares. The Company by action of the Board of Managers
may from time to time increase the number of LLC Shares of the Company by
selling additional Ordinary LLC Shares for fair value in cash or in kind to one
or more persons who are already Members or to other persons who are not already
Members; provided, however, that the Company may not sell LLC Shares to any
person unless the person at such time (i) agrees in writing to become a party
to, and to be bound as a Member by the terms and conditions of, this Agreement,
and (ii) pays in full the agreed consideration for the LLC Shares. Upon receipt
by the Company of the agreed original capital contribution of a Member in
respect of an LLC Share, the LLC Share and the resulting Interest (as
hereinafter defined) of the Member shall be fully paid and non-assessable. No
Member shall have any preemptive rights with respect to the purchase of any such
additional LLC Shares.
2
<PAGE> 3
2.4 Reduction of Shares. Except as prohibited by the Act, the Company by
action of the Board of Managers may from time to time agree to repurchase the
LLC Shares of a Member for fair value.
2.5 Options. The Company may also by action of the Board of Managers grant
options to such Members or non-Members as it may deem appropriate for purchase
of Ordinary LLC Shares upon such terms and conditions and at such option
purchase price (not less than fair value of the Ordinary LLC Shares on the date
of grant) as the Board of Managers may deem appropriate; provided, however, that
upon exercise of any such option the exercising person must satisfy the
requirements of clauses (i) and (ii) in Section 2.3 above.
2.6 Interests of Members. (a)Prior to the first occurrence of a Conversion
Event (as hereinafter defined), the limited liability company interest (the
"Interest") of each Member at any time shall be the percentage that the number
of Ordinary LLC Shares owned of record by such Member constitutes of the
aggregate number of Ordinary LLC Shares of all Members at such time, and any
Member holding only Deferred LLC Shares shall not have an Interest.
(b) After the first occurrence of a Conversion Event (as hereinafter
defined), the Interest of each Member at any time shall be the percentage that
the aggregate number of Ordinary and Deferred LLC Shares owned of record by such
Member constitutes of the aggregate number of Ordinary and Deferred LLC Shares
at such time.
(c) As used herein, each of the following shall be a Conversion Event:
(i) Change by the Company of its form of organization from limited
liability company to corporation.
(ii) Merger by the Company with any limited liability company or
corporation other than a majority-owned subsidiary of the Company.
(iii) A registered public offering of LLC Shares by the Company.
(iv) Sale by American Artists Film Corporation (or any corporation
into which it might be merged or which may succeed to substantially all of
its assets) of more than an aggregate of 40% of the LLC Shares owned by it
other than in connection with a sale of all or substantially all of its
assets.
2.7 LLC Share Certificates; Register. The Company shall issue certificates
to the Members evidencing their respective ownership of LLC Shares. LLC Share
certificates shall be numbered in the order in which they are issued. They shall
be signed by the President and Secretary and the seal of the Company shall be
affixed thereto. The name, address and federal tax identification number of the
Member owning the LLC Shares, the number and class of LLC Shares, and the date
acquired shall be entered in a register maintained by the Secretary. LLC Share
certificates exchanged or returned shall be canceled and retained by the
Secretary.
3
<PAGE> 4
2.8 Voting. The holders of the shares of LLC Shares shall be entitled to
one vote for each LLC Share owned of record.
ARTICLE III
MEMBERS MEETINGS
3.1 Annual Meeting. A meeting of Members shall be held annually. The
annual meeting shall be held at such time and place and on such date as the
Board of Managers shall determine from time to time and as shall be specified in
the notice of the meeting.
3.2 Special Meetings. Special meetings of the Members may be called at any
time by the Board of Managers, the President or Members owning at least 50% of
the LLC Shares. Special meetings shall be held at such time and place and on
such date as shall be specified in the notice of the meeting.
3.3 Place. Annual or special meetings of Members may be held within or
without the State of Georgia.
3.4 Notice. Notice of annual or special Members meetings stating the
place, day and hour of the meeting shall be given in writing not less than 10
nor more than 60 days before the date of the meeting, either mailed to the last
known address of or personally given to each Member. Notice of any special
meeting of Members shall state the purpose or purposes for which the meeting is
called. Notice of any meeting at which amendments to the Operating Agreement,
merger of the Company, or the disposition of all or substantially all of the
assets of the Company are to be considered shall state such purpose. Notice of a
meeting may be waived by an instrument in writing executed before or after the
meeting. The waiver need not specify the purpose of the meeting or the business
transacted. Attendance at a meeting in person or by proxy shall constitute a
waiver of notice thereof unless the Member shall provide written notice to the
Company prior to the taking of any action by the Members at the meeting that the
Member's attendance is not to be deemed a waiver of the requirement that notice
be given or of the adequacy of any notice that may have been given to the
Members.
3.5 Quorum. At all meetings of Members the Members holding a majority of
the outstanding LLC Shares, whether present in person or by proxy, shall
constitute a quorum for the transaction of business. No resolution or business
shall be transacted without the favorable vote of Members holding a majority of
the LLC Shares represented at the meeting and entitled to vote. A lesser number
may adjourn from day to day, and shall announce the time and place to which the
meeting is adjourned.
3.6 Action in Lieu of Meeting. Any action that may be taken at a meeting
of the Members may be taken without a meeting if a consent in writing setting
forth the action so taken shall be signed by Members holding a majority of the
outstanding LLC Shares.
4
<PAGE> 5
ARTICLE IV
BOARD OF MANAGERS
4.1 Management. Subject to the terms of this Agreement, or any other
lawful agreement among the Members, the full and entire management of the
affairs and business of the Company shall be vested in the Board of Managers,
which shall have and may exercise all of the powers that may be exercised or
performed by the Company.
4.2 Number of Managers. The Members shall fix by resolution the precise
number of members of the Board of Managers. Managers shall be elected by and
serve at the pleasure of the Members. Membership on the Board of Managers is not
limited to Members. A majority of the Managers shall constitute a quorum for the
transaction of business. The Board of Managers shall act by the affirmative vote
of a majority of the Managers.
4.3 Meetings. The Managers shall meet annually, without notice, following
the annual meeting of the Members. Special meetings of the Managers may be
called at any time by the President or by a majority of the Managers, on two
days' written notice to each Manager, which notice shall specify the date, time,
and place of the meeting. Notice of a meeting may be waived by an instrument in
writing executed before or after the meeting. Managers may attend and
participate in meetings either in person or by means of communications equipment
by which all persons participating in the meeting can hear each other.
Attendance at a meeting shall constitute a waiver of notice thereof.
4.4 Action in Lieu of Meeting. Any action that may be taken at a meeting
of the Managers may be taken without a meeting if a consent in writing, setting
forth the action so taken, shall be signed by all of the Managers.
ARTICLE V
OFFICERS
5.1 General Provisions. The officers of the Company shall consist of a
President and a Secretary who shall be elected by the Board of Managers from
among its members, and such other officers, including a General Manager, as may
be elected by the Board of Managers or appointed as provided in this Agreement.
Each officer shall be elected or appointed to serve at the pleasure of the Board
of Managers.
5.2 President. The President shall be the chief executive officer of the
Company and shall have general and active management of the operations of the
Company, subject to the direction and authority of the Board of Managers. The
President shall be responsible for the administration of the Company, including
general supervision of the policies of the Company and management of its
financial affairs, and shall execute bonds, mortgages or other contracts in the
name and on behalf of the Company within the general powers of the office and
otherwise in accordance with the direction and authority of the Board of
Managers.
5
<PAGE> 6
5.3 Secretary. The Secretary shall keep minutes of all meetings of the
Members and Managers and have charge of the minute books and seal of the Company
and shall perform such other duties and have such other powers as may from time
to time be delegated to him or her by the President or the Board of Managers.
5.4 Assistant Officers. Assistants to the Secretary may be appointed by
the President or by the Board of Managers and shall have such duties as shall be
delegated to them by the President or the Board of Managers.
5.5 Vice Presidents. The Company may have one or more Vice Presidents,
elected by the Board of Managers, who shall perform such duties as may be
delegated by the President or the Board of Managers.
ARTICLE VI
CAPITAL ACCOUNTS
6.1 Capital Accounts. "Capital Account" means an account that shall be
maintained in respect of each Member and which, as of any given date, shall be
equal to the sum of the following:
(i) The aggregate amount of cash that has been contributed to the
capital of the Company as of such date by or on behalf of such Member in
payment for its LLC Shares or otherwise; plus
(ii) The value of any property other than cash that has been
contributed to the capital of the Company as of such date by such Member in
payment for its LLC Shares or otherwise, and the amount of liabilities
assumed by any such Member under Regulation Section 1.752 or which are
secured by any Company property distributed to such Member; plus
(iii) The aggregate amount of the Company's Net Profit that has been
allocated to such Member as of such date pursuant to the provisions of
Article VII or any items of income or gain which are specifically allocated
to such Member or other positive adjustments required by the Regulations
and which have not been previously taken into account in calculating
Capital Accounts; minus
(iv) The aggregate amount of the Company's Net Loss that has been
allocated to such Member as of such date pursuant to Article VII and the
amount of any item of expense deduction or loss which is specially
allocated to such Member; minus
(v) The aggregate amount of cash and the value of all other property
(as of the date of distribution) that has been distributed to or on behalf
of such Member and
6
<PAGE> 7
the amount of any liabilities of such Member assumed by the Company under
Regulations Section 1.752 or which are secured by any property contributed
by such Member to the Company and other negative adjustments required by
the Regulations; and
(vi) In the case of a Member who has acquired all or any part of his
or her LLC Shares by succession or assignment from another Member, plus or
minus (as the case may be) an aliquot portion of the Capital Account
balance or Capital Account Deficit of such predecessor in interest at the
date of such acquisition.
6.2 The provisions of this Article and the other provisions of this
Agreement relating to the maintenance of Capital Accounts are intended to comply
with Regulations Section 1.704-1(b), and shall be interpreted and applied in a
manner consistent with such regulations.
ARTICLE VII
TAX ALLOCATIONS AND DISTRIBUTIONS
7.1 Tax Allocations of Net Profit and Net Losses. (a) The Company's Net
Profit or Net Losses for each fiscal year for federal and state income tax
purposes shall be allocated to the Members in proportion to, and to the extent
of, their respective ownership Interests pursuant to Article II or as it is
later amended.
(b) Net Losses allocated pursuant to subsection (a) hereof shall not
exceed the maximum amount of Net Losses that can be so allocated without causing
any Member to have an Adjusted Capital Account Deficit at the end of any fiscal
year. In the event some but not all of the Members would have Adjusted Capital
Account Deficits as a consequence of an allocation of Net Losses pursuant to
subsection (a) hereof, the limitation set forth in this subsection (b) shall be
applied on a Member-by-Member basis so as to allocate the maximum permissible
Net Losses to each Member under Section 1.704-1(b)(2)(ii)(d) of the Regulations.
(c) To the extent a Member is allocated Net Losses which otherwise
would have been allocated to another Member, or a result of the application of
subsection (b) hereof, then the Member that was allocated additional Net Losses
pursuant to subsection (b) hereof shall be allocated as quickly as possible
additional Net Profit in an amount equal to such Net Losses.
7.2 Distribution of Assets. If the Company at any time distributes any of
its assets in kind to any Member, the Capital Account of each Member shall be
adjusted to account for that Member's allocable share of the Net Profits or Net
Losses that would have been realized by the Company had it sold its assets that
were distributed at their respective fair market values immediately prior to
their distribution.
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<PAGE> 8
7.3 Qualified Income Offset. In the event any Member unexpectedly receives
any adjustments, allocations, or distributions described in Regulations Section
1.704-1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5), or 1.704-1(b)(2)(ii)(d)(6),
items of Company income and gain shall be specially allocated to each such
Member in an amount and manner sufficient to eliminate, to the extent required
by the Regulations, the Adjusted Capital Account Deficit of such Member as
quickly as possible, provided that an allocation pursuant to this Section shall
be made only if and only to the extent that such Member would have an Adjusted
Capital Account Deficit after all other allocations provided for in this Article
have been tentatively made as if this Section were not in this Agreement.
7.4 Gross Income Allocation. In the event any Member has a deficit Capital
Account balance at the end of any fiscal year, each such Member shall be
specially allocated items of Company income and gain in the amount of such
excess as quickly as possible, provided that an allocation pursuant to this
Section shall be made if and only to the extent that such Member would have a
deficit Capital Account balance in excess of such sum after all other
allocations provided for in this Article have been tentatively made as if the
immediately preceding Section and this Section were not in this Agreement.
7.5 Section 704(c) Allocation.(a) Notwithstanding any other provision of
this Agreement to the contrary, any gain or loss and any depreciation or other
cost recovery deductions recognized by the Company for income tax purposes in
any fiscal year with respect to all or any part of the Company's property that
is required or permitted to be allocated among the Members in accordance with
Section 704(c) of the Code and any Regulations promulgated thereunder so as to
take into account the variation, if any, between the adjusted tax basis of such
property at the time of its contribution and the fair market value of such
property at the time of its contribution, shall be allocated to the Members for
income tax purposes in the manner so required or permitted.
(b) Any elections or other decisions relating to such allocations shall be
made by the Board of Managers in any manner that reasonably reflects the purpose
and intention of this Agreement. Allocations pursuant to this Section are solely
for purposes of federal, state and local taxes and shall not affect, or in any
way be taken into account in computing, any Member's Capital Account or share of
net profit, net loss, other items, or distributions pursuant to any provision of
this Agreement.
7.6 Section 754 Election. In connection with any permitted transfer of an
LLC Share in the Company, the Board of Managers shall cause the Company, at the
written request of the transferor, the transferee or any of the Members, on
behalf of the Company and at the time and in the manner provided in Regulations
Section 1.754-1(b), to make an election to adjust the basis of the Company's
property in the manner provided in Sections 734(b) and 743(b) of the Code, and
such transferee shall pay all costs incurred by the Company in connection
therewith, including, without limitation, attorneys' and accountants' fees that
are reasonable in the aggregate.
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<PAGE> 9
7.7 Adjusted Capital Account Deficit. As used herein, the term "Adjusted
Capital Account Deficit" means, with respect to any Member, the Member's
Adjusted Capital Account Deficit shall be the deficit balance, if any, in the
Member's Capital Account as of the end of the relevant fiscal year or at any
time, after giving effect to the following adjustments:
(i) Credit to the Member's Capital Account any amount which the
Member is obligated to restore pursuant to any provision of this Agreement
or is deemed obligated to restore pursuant to the penultimate sentence of
Regulations Sections 1.704-2(g)(1) and 1.704-2(i)(5); and
(ii) Debit to the Member's Capital Account the items described in
Sections 1.704-1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5), and
1.704-1(b)(2)(ii)(d)(6) of the Regulations.
The foregoing definition of Adjusted Capital Account Deficit is intended to
comply with the provisions of Section 1.704-1(b)(2)(ii)(d) of the Regulations
and shall be interpreted consistently therewith.
7.8 Gross Asset Value. As used herein, the term "Gross Asset Value" means,
with respect to any asset, the asset's adjusted tax basis for federal income tax
purposes, except as follows:
(i) The initial Gross Asset Value of any asset contributed by a
Member to the Company shall be the gross fair market value of the asset as
determined by the contributing Member and the Company;
(ii) The Gross Asset Values of all Company assets shall be adjusted to
equal their respective gross fair market values, as determined by the Board
of Managers, as of the following times: (A) the acquisition of an
additional interest in the Company by any new or existing Member in
exchange for more than a de minimis capital contribution; (B) the
distribution by the Company to a Member of more than a de minimis amount of
Company property as consideration for such Member's LLC Shares in the
Company; and (C) the liquidation of the Company within the meaning of
Regulations Section 1.704-1(b)(2)(ii)(g); provided, however, that
adjustments pursuant to clauses (A) and (B) above shall be made only if the
Board of Managers reasonably determines that such adjustments are necessary
or appropriate to reflect the relative economic interests of the Members in
the Company;
(iii) The Gross Asset Value of any Company asset distributed to any
Member shall be the gross fair market value of the asset on the date of
distribution;
(iv) The Gross Asset Values of Company assets shall be increased (or
decreased) to reflect any adjustments to the adjusted basis of such assets
pursuant to Code Section 734(b) or Code Section 743(b), but only to the
extent that such adjustments are taken into account in determining Capital
Accounts pursuant to
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Regulations Section 1.704-1(b)(2)(iv)(m) hereof; provided, however, that
Gross Asset Values shall not be adjusted pursuant to this paragraph to the
extent the Board of Managers determines that an adjustment pursuant to
paragraph (ii) above is necessary or appropriate in connection with a
transaction that would otherwise result in an adjustment pursuant to this
paragraph; and
(v) If the Gross Asset Value of an asset has been determined or
adjusted pursuant to paragraphs (i), (ii) or (iii) above, the Gross Asset
Value shall hereafter be adjusted by the depreciation taken into account
with respect to the asset for purposes of computing Net Profits and Net
Losses.
7.9 Net Profits and Net Losses. As used herein, the terms "Net Profits"
and "Net Losses" mean for each fiscal year or other period an amount equal to
the Company's taxable income or loss for such fiscal year or period, determined
in accordance with Code Section 703(a) (for this purpose, all items of income,
gain, loss, or deduction required to be stated separately pursuant to Code
Section 703(a)(1) shall be included in taxable income or loss), with the
following adjustments:
(i) Any income of the Company that is exempt from federal income tax
and not otherwise taken into account in computing Net Profits or Net Losses
pursuant to this Section shall be added to such taxable income or loss;
(ii) Any expenditures of the Company described in Code Section
705(a)(2)(B) or treated as Code Section 705(a)(2)(b) expenditures pursuant
to Regulations Section 1.704-1(b)(2)(iv)(i), and not otherwise taken into
account in computing Net Profits or Net Losses pursuant to this Section
shall be subtracted from such taxable income or loss;
(iii) In the event the Gross Asset Value of any Company asset is
adjusted pursuant to paragraphs (ii) or (iii) above, the amount of such
adjustment shall be taken into account as gain or loss from the disposition
of such asset for purposes of computing Net Profits or Net Losses;
(iv) Gain or loss resulting from any disposition of Company property
with respect to which gain or loss is recognized for federal income tax
purposes shall be computed by reference to the Gross Asset Value of the
property disposed of, notwithstanding that the adjusted tax basis of such
property differs from its Gross Asset Value;
(v) Notwithstanding any other provision of this Section, any items
which are specially allocated pursuant to Sections 7.3, 7.4 or 7.5 hereof
shall not be taken into account in computing Net Profits and Net Losses;
and
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<PAGE> 11
(vi) The amounts of the items of Company income, gain, loss or
deduction to be specially allocated pursuant to Sections 7.3, 7.4 or 7.5
hereof shall be determined by applying rules analogous to those set forth
in paragraphs (i) through (iv) above.
7.10 Special Allocations. (a) Notwithstanding anything to the contrary in
this Article:
(i) All Nonrecourse Deductions for each Fiscal Year shall be
allocated to the Members in accordance with their relative Interests.
(ii) All Member Nonrecourse Deductions for each Fiscal Year shall be
allocated to the Members who bear the economic risk of loss with respect to
the Member Nonrecourse Debt giving rise to such deductions, in accordance
with Regulation ss.1.704-2(i)(1).
(iii) If there is a net decrease in Minimum Gain during a Fiscal Year,
then before any other allocation is made for such Fiscal Year , the Members
shall be allocated items of income and gain for such Fiscal Year (and, if
necessary, subsequent Fiscal Years) in the amount and in the proportions
necessary to satisfy the requirements of a "minimum gain chargeback" under
Regulation ss.1.704-2(f).
(iv) If there is a net decrease in Member Minimum Gain during a Fiscal
Year, then before any other allocation is made for such Fiscal year, the
Members shall be allocated items of income and gain for such Fiscal Year
(and, if necessary, subsequent Fiscal Years) in the amount and in the
proportions necessary to satisfy the requirements of a "partner nonrecourse
debt minimum gain chargeback" under Regulation ss.1.704-2(i)(4).
(v) The allocations set forth in subsections (i) through (iv) above
(the "Regulatory Allocations") are intended to comply with certain
requirements of Treasury Regulation ss.ss. 1.704-1(b) and 1.704-2.
Notwithstanding any other provision of this Section (other than the
Regulatory Allocations), the Regulatory Allocations shall be taken into
account in allocating other items of income, gain, loss and deduction among
the Members so that, to the extent possible, the net amount of such
allocation of other items and the Regulatory Allocations to each Member
shall be equal to the net amount that would have been allocated to each
such Member if the Regulatory Allocations had not occurred.
(b) As used in subsection (a) above, the following terms have the
following meanings:
(i) Member Minimum Gain means an amount determined by computing, with
respect to each Member Nonrecourse Debt, the Minimum Gain that would result
if such Member Nonrecourse Debt were treated as a nonrecourse liability,
determined in accordance with Regulation ss. 1.704-2(i)(3).
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<PAGE> 12
(ii) Member Nonrecourse Debt means nonrecourse Company debt for which
one or more Members bears an economic risk of loss, determined in
accordance with Regulation ss. 1.704-2(b)(4).
(iii) Member Nonrecourse Deductions means, for each Fiscal Year, the
Company deductions which are attributable to Member Nonrecourse Debt and
are characterized as "partner nonrecourse deductions" under Regulation ss.
1.704-2(i)(2).
(iv) Minimum Gain means an amount determined by computing, with
respect to each nonrecourse liability of the Company, the amount of gain
(of whatever character), if any, that would be realized by the Company if
it disposed of (in a taxable transaction) the Company property subject to
such liability for no consideration other than full satisfaction of such
liability, and by then aggregating the amounts so computed. Such amount
shall be determined in a manner consistent with Regulation ss.1.704-2(d).
ARTICLE VIII
CASH DISTRIBUTIONS
8.1 Cash Flow. The Board of Managers, in the exercise of its discretion,
shall determine whether the financial condition and financing agreements and
commitments of the Company will permit the distribution of any monies of the
Company; provided, however, that the Board of Managers, in making such
determination, may provide for the retention of a reasonable cash reserve
(taking into consideration the availability in the future of other assets or
income of the Company), as determined by the Board of Managers, in an amount at
least equivalent to the sums determined by it in its discretion as necessary to
be retained for future growth and future contemplated capital expenditures,
expenses and obligations of the Company. The Board of Managers shall make a
determination at least as of the end of each calendar year as to whether there
are funds available for distribution.
8.2 Distribution of Cash Flow. All funds so determined by the Board of
Managers to be available for distribution shall be distributed as follows:
(i) First, to repay the currently due and payable portions of any
loan (including principal and interest) made by any Member to the Company;
and
(ii) Second, to the Members in accordance with their Interests.
8.3 Time of Distribution. Distribution to Members shall be made annually
and at such more frequent times as the Board of Managers in its sole discretion
deems advisable.
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8.4 Limitations on Distributions. No distribution shall be made to Members
if prohibited by Section 14-11-407 of the Act.
ARTICLE IX
PROTECTIONS AND POWERS
9.1 The Members do not intend to be liable for any debt, obligation or
liability of the Company or for any act or omission of its Managers or agents,
however arising.
9.3 The Company shall indemnify the Members, members of the Board of
Managers and officers of the Company to the maximum extent authorized by the
Act.
9.3 No Member, acting solely in his or her capacity as a Member, is an
agent of the Company.
ARTICLE X
DISSOCIATION OF A MEMBER
10.1 Dissociation. Except as otherwise provided in this article, a Member
shall cease to be a Member as of the date of the occurrence of any of the events
under Section 14-11-601(a) of the Act.
10.2 No Dissociation. Notwithstanding the Act and Section 10.1 above, a
Member shall not cease to be a Member upon the occurrence of any of the events
under Sections 14-11-601(a)(1), 14-11-601(a)(5), 14-11-601(a)(6),
14-11-601(a)(7) or 14-11-601(c) of the Act.
10.3 Death or Dissolution, etc. In the event of the death or dissolution of
a Member, or the occurrence of any of the events of Sections 14-11-601(a)(5),
(6) or (7), the Member's successor-in-interest shall, except as may be otherwise
provided by law, be deemed to be an assignee of the Member's LLC Shares and
Interest but not a Member.
10.4 No Withdrawal. No Members may by voluntary act withdraw from the
Company.
10.5 Transfer; Repurchase. A Member shall cease to be a Member of the
Company upon transfer in compliance with this Agreement of all of his or her LLC
Shares or upon repurchase thereof by the Company.
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ARTICLE XI
DISSOLUTION AND WINDING UP
11.1 Dissolution. The Company shall be dissolved upon the occurrence of any
of the following events ("Dissolution Event"):
(i) The expiration of the period fixed for the duration of the
Company as set out in the Articles of Organization of the Company, namely,
December 31, 2025;
(ii) The Members agree by majority vote of the LLC Shares to dissolve
the Company; or
(iii) The Board of Managers determines that dissolution of the Company
is appropriate and so notifies the Members.
11.2 Effect of Dissolution. Upon dissolution, the Company shall cease to
carry on its business, except as permitted by Section 14-11-605 of the Act. Upon
dissolution the Company shall file a statement of commencement of winding up
pursuant to Section 14-11-606 of the Act and publish the notice permitted by
Section 14-11-608 of the Act.
11.3 Winding Up, Liquidation and Distribution of Assets. (a) Upon
dissolution, an accounting shall be made by the Company's independent
accountants of the accounts of the Company and of the Company's assets,
liabilities and operations, from the date of the last previous accounting until
the date of dissolution. The Board of Managers shall immediately proceed to wind
up the affairs of the Company.
(b) If the Company is dissolved and its affairs are to be wound up, the
Board of Managers shall, subject to the availability of assets of the Company
for such purposes:
(i) Sell or otherwise liquidate all of the Company's assets as
promptly as practicable (except to the extent the Board of Managers may
determine to distribute any assets to the Members in kind);
(ii) Allocate any profit or loss resulting from such sales to the
Members in accordance with Article VII;
(iii) Discharge all liabilities of the Company, other than liabilities
to Members, and establish such reserves as may be reasonably necessary to
provide for contingent liabilities of the Company;
(iv) Discharge liabilities of the Company to Members; and
(v) Make distributions to the Members pro rata in accordance with
their respective Interests. Any such distributions to the Members in
respect of their Interests
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shall be made in accordance with the time requirements set forth in Section
1.704-1(b)(2)(ii)(b)(2) of the Regulations.
(c) Notwithstanding anything to the contrary in this Agreement, upon a
liquidation within the meaning of Section 1.704-1(b)(2)(ii)(g) of the
Regulations, if any Member has an Adjusted Capital Account Deficit (after giving
effect to all contributions, distributions, allocations and other Capital
Account adjustments for all taxable years, including the year during which such
liquidation occurs), such Member shall have no obligation to make any Capital
Contribution, and the negative balance of such Member's Capital Account shall
not be considered a debt owed by such Member to the Company or to any other
person for any purpose whatsoever.
(d) Upon completion of the winding up, liquidation and distribution of the
assets, the Company shall be deemed terminated.
(e) The Board of Managers shall comply with any applicable requirements of
applicable law pertaining to the winding up of the affairs of the Company and
the final distribution of its assets.
11.4 Certificate of Termination. When all debts, liabilities and
obligations have been paid and discharged or adequate provisions have been made
therefor and all of the remaining property and assets have been distributed to
the Members, a Certificate of Termination shall be executed and filed with the
Secretary of State of Georgia in accordance with Section 14-11-610 of the Act.
ARTICLE XII
DISPOSITION OF LLC SHARES
12.1 Disposition. No Member shall have the right to assign, transfer, sell,
or convey its LLC Shares in the Company or any of its rights and obligations as
a Member, without the written consent of the Board of Managers.
12.2 Securities Law Compliance. No Member shall sell, pledge or otherwise
dispose of or transfer any LLC Shares unless registered under the Securities Act
of 1933, as amended, and applicable state securities laws, or an opinion is
given by counsel satisfactory to the Company that such registration is not
required.
12.3 Dispositions not in Compliance with this Article Void. Any attempted
assignment, transfer, sale or conveyance of any LLC Shares not in compliance
with this Article is null and void.
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ARTICLE XIII
TAX MATTERS REPRESENTATIVE
13.1 The Tax Matter Representative, as defined in Section 6231 of the Code,
shall be Tyrone C. Johnson. A successor Tax Matter Representative may be
selected by majority vote of the Members from time to time in their discretion.
ARTICLE XIV
AMENDMENT; INCORPORATION
14.1 Amendment. This Agreement may be amended or modified from time to time
only by vote of Members holding a majority of the LLC Shares, except that in no
event shall any amendment hereto, without the unanimous consent of the Members:
(i) Create any individual liability of any Members to any other
Members or to third parties, without express written consent of any Member
to be obligated thereby, or
(ii) Create any obligation of any Members to the Company, including
(but not by way of limitation) any obligation to pay any assessment or make
any capital contribution to the Company, without express written consent of
any Member to be obligated thereby; or
(iii) Alter or amend the voting rights of the LLC Shares or their
relative participation in the net profits and net losses of the Company; or
(iv) Extend the date specified in the Articles of Organization of the
Company for dissolution of the Company.
14.2 Incorporation. If the Board of Managers determines that it is in the
best interest of the Company and its Members collectively that the Company
change its form of organization from a limited liability company to a
corporation, then the Board of Managers may submit to the Members for their
approval a Plan of Incorporation of the Company under the laws of a designated
State of the United States. The Plan of Incorporation shall include copies of
the proposed Articles of Incorporation (or equivalent instrument) and Bylaws,
together with a statement of the number of shares of the corporation to be
issued to the Members in exchange for each LLC Share. If the proposal is
approved by Members holding a majority of the LLC Shares outstanding, then the
Board of Managers or its designees shall complete the incorporation of the
proposed corporation, which shall succeed to all of the assets and liabilities
of the Company and issue to each Member in respect of its LLC Shares the number
of shares of Common Stock of the corporation specified in the Plan of
Incorporation, whereupon this Operating Agreement shall be of no further force
and effect and all rights and
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obligations of the Members shall be determined instead by the Articles of
Incorporation and Bylaws of the corporation and the laws of the State of its
incorporation.
ARTICLE XV
MISCELLANEOUS PROVISIONS
15.1 Entire Agreement. This Agreement represents the entire Agreement among
all the Members.
15.2 No Partnership Intended for Non-tax Purposes. The Company is formed
under the Act, and the Members expressly do not intend hereby to form a
partnership under either the State Uniform Partnership Act nor the State Uniform
Limited Partnership Act. The Members do not intend to be partners one to another
or partners as to any third party.
15.3 Application of Georgia Law. This Agreement, the application and
interpretation hereof shall be governed exclusively by its terms and the laws of
the State of Georgia and specifically the Act.
15.4 Execution of Additional Instruments. Each Member hereby agrees to
execute such other and further statements of interest and holdings,
designations, powers of attorney and other instruments necessary to comply with
any laws, rules or regulations.
15.5 Construction. When required by the context, whenever the singular form
is used in this Agreement, the same shall include the plural and vice versa, and
the masculine gender shall include the feminine and neuter genders and vice
versa.
15.6 Headings. The headings in this Agreement are inserted for convenience
only and are in no way intended to describe, interpret, define, or limit the
scope, extent or intent of this Agreement or any provision hereof.
15.7 Waivers. The failure of any party to seek redress for violation of or
to insist upon the strict performance of any covenant or condition of this
Agreement shall not prevent a subsequent act, which would have originally
constituted a violation, from having the effect of an original violation.
15.8 Rights and Remedies Cumulative. The rights and remedies provided by
this Agreement are cumulative and the use of any one right or remedy by any
party shall not preclude or waive the right to use any or all other remedies.
Such rights and remedies are given in addition to any other rights the parties
may have by law, statute, ordinance or otherwise.
15.9 Counterparts. This Agreement may be executed in counterparts, each of
which shall be deemed an original but all of which shall constitute one and the
same instrument.
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15.10 Certification of Non-Foreign Status. In order to comply with Section
1445 of the Code and the applicable Treasury Regulations thereunder, in the
event of the disposition by the Company of a United States real property
interest as defined in the Code and Treasury Regulations, each Member shall
provide to the Company, an affidavit stating, under penalties of perjury, (i)
the Member's address, (ii) United States taxpayer identification number, and
(iii) that the Member is not a foreign person as that term is defined in the
Code and Treasury Regulations.
15.11 Withholding. (a) The Company shall withhold and pay over to the
Internal Revenue Service or other applicable taxing authority, all taxes or
withholdings, and all interest, penalties, additions to tax, and similar
liabilities in connection therewith or attributable thereto (hereinafter
"Withheld Taxes") to the extent that the Board of Managers determines that such
withholding and/or payment is required by the Code or any other law, rule, or
regulation, including, without limitation, Sections 1441, 1442, 1445, or 1446 of
the Code and Section 48-7-129 of the Official Code of Georgia. The Board of
Managers shall determine in good faith to which Member such Withheld Taxes are
attributable. All amounts withheld pursuant to this paragraph with respect to
any allocation, payment or distribution to any Member shall be treated as
amounts distributed to such Member pursuant to Article VII hereof for all
purposes of this Agreement.
(b) If an amount payable to the Company is reduced because the Member
paying that amount withholds and/or pays over to the Internal Revenue Service or
other applicable taxing authority any amount as a result of the status of a
Member, the Board of Managers shall make such adjustments to amounts distributed
and allocated among Members as it determines to be fair and equitable. (For
example, if a portion of interest income earned by the Company is withheld by
the payor and paid over to the Internal Revenue Service because a particular
Member is a non-U.S. Person, the Manger might include such withheld and paid
over amount in computing amounts available for distribution to the Members
pursuant to Article VII and rate such withheld and paid over amount as if that
amount were distributed to the Member in satisfaction of whose tax liability
such amount was withheld and paid over.)
15.12 Banking. All funds of the Company shall be deposited in its name in
an account or accounts of a financial institution as shall be designated from
time to time by the Board of Managers. All funds of the Company shall be used
solely for the business and affairs of the Company. All withdrawals from the
Company bank accounts shall be made only upon checks or other instructions
signed by the Board of Managers or by such other persons as the Board of
Managers may designate from time to time.
15.13 Attorney-in-fact. The Members hereby severally designate and appoint
the President of the Company, as the same may be from time to time, as their
agent and attorney-in-fact for the purpose of executing on their behalf and in
their stead one or more amendments to this Agreement from time to time for the
purpose of adding new Members to this Agreement in accordance with the terms
hereof, specifying their respective ownership of LLC Shares, and
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identifying the consideration to be received by the Company in payment for such
LLC Shares or the Member from whom the LLC Shares are being transferred.
15.14 Authorization to Transact Business in Other States. The Board of
Managers is authorized, empowered and directed to undertake any and all actions
that may be necessary or appropriate to enable the Company to transact business
in those states in which the Company is required to qualify to transact
business.
15.15 Determination of Matters Not Provided for in This Agreement. The
Board of Managers shall decide any questions arising with respect to the Company
and this Agreement which are not specifically or expressly provided for in this
Agreement.
15.16 Further Assurances. The Members each agree to cooperate, and to
execute and deliver in a timely fashion any and all additional documents
necessary to effectuate the purposes of the Company and this Agreement.
15.17 Time. TIME IS OF THE ESSENCE OF THIS AGREEMENT, AND TO ANY PAYMENTS,
ALLOCATIONS AND DISTRIBUTIONS SPECIFIED UNDER THIS AGREEMENT.
[Remainder of page intentionally left blank]
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IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed and affixed their seals.
AMERICAN ARTISTS FILM CORPORATION
Attest: /s/ Steven D. Brown
/s/ Eric Van Alla By: /s/ Steven D. Brown
- -------------------------- -------------------------------------
Secretary Authorized Officer
/s/ Tyrone C. Johnson (SEAL)
------------------------------------
Tyrone C. Johnson
/s/ Glen C. Warren (SEAL)
------------------------------------
Glen C. Warren
/s/ Malcolm C. Davenport (SEAL)
------------------------------------
Malcolm C. Davenport, V
/s/ Ben E. Noble (SEAL)
------------------------------------
Ben E. Noble
/s/ John W. Boyd M.D. (SEAL)
------------------------------------
John W. Boyd
<PAGE> 21
EXHIBIT A
to Operating Agreement, as amended, of
VIDEO COMMUNICATIONS NETWORK, LLC.
a limited liability company
organized under the laws of Georgia
<TABLE>
<CAPTION>
Name, address and federal Ordinary Deferred Capital
tax identification number LLC Shares LLC Shares Contribution
of initial Members Received Received by Member
------------------ -------- -------- ---------
<S> <C> <C> <C> <C>
1. American Artists Film 8,334 0 $833.40
Corporation
1245 Fowler St., NW
Atlanta, GA 30318
Tax I.D. No.: 43-1717111
2. Tyrone C. Johnson 0 1,000 50.00
1245 Fowler St., NW
Atlanta, GA 30318
Soc. Sec. No.: ###-##-####
3. Glen C. Warren 333 0 33.30
10 Lakeland Circle
Jackson, MS 39211
Soc. Sec. No.: ###-##-####
4. Malcolm C. Davenport, V 111 0 11.10
1120 N. 18th Street
Lanett, AL 36863
Soc. Sec. No.: ###-##-####
5. Ben E. Noble 111 0 11.10
3261 Lenox Rd., N.E.
Atlanta, GA 30324
Soc. Sec. No.: ###-##-####
6. John W. Boyd 111 0 11.10
411 Cherokee Drive
McComb, MS 39648
Soc. Sec. No.: ###-##-####
----- ----- -------
Total 9,000 1,000 $950.00
===== ===== =======
</TABLE>
A-1
<PAGE> 1
EXHIBIT 10.100
$26,249.00 August 26, 1998
PROMISSORY NOTE
FOR VALUE RECEIVED, American Artists Film Corporation, a Missouri
corporation (herein called "Obligor"), hereby promises to pay to the order of
Robert Martinez, a resident of Atlanta, Georgia (herein called "Holder"), in
legal tender of the United States, without grace, at his residence located at
3060 Pharr Court N., #819, Atlanta, Georgia, or at such other place as the
Holder may hereafter designate, the sum of Twenty-Six Thousand Two Hundred and
Forty-Nine 00/100 Dollars ($26,249.00) together with simple interest on the
unpaid balance of such principal amount outstanding from time to time hereunder
at an annual interest rate equal to prime plus one percent (1%) per annum. All
principal and any accrued but unpaid interest will be due and payable on demand
but no later than September 1, 1999.
It is hereby expressly agreed that should any default be made in the
payment of principal or interest when due, the principal indebtedness evidenced
hereby and all interest accrued thereon shall, upon written demand, become due
and payable and may be collected forthwith. Notwithstanding any other provision
hereof to the contrary, Obligor shall not be deemed to be in default of payment
of principal or interest hereunder if such payment (the "Late Payment") is
received by Holder within ten (10) days following the date on which Obligor
receives written notice of said default.
Payment not made within ten (10) days of the due date shall bear interest
at the rate of prime plus one percent (1%) per annum from the original due date
until paid.
Time is of the essence of this Note, and in the event that this Note is
collected by law or through an attorney-at-law, the Obligor agrees to pay all
reasonable costs of collection.
As security for this Promissory Note, Obligor hereby grants a first
priority lien against its ownership interest in the Ordinary LLC Shares of False
River, LLC. This security interest shall be limited to the amount of unpaid
principal and accrued interest outstanding under this Promissory Note.
The Obligor shall be entitled, at any time, and from time to time, without
the consent of the Holder and without making any penalty or premium therefor, to
prepay all or any portion or portions of the outstanding principal amount
thereof.
This Note shall be governed as to the validity, interpretation,
construction, enforcement, effect, and in all respects by the laws and decisions
of the State of Georgia.
No delay or omission on the part of the Holder in exercising any rights
hereunder shall operate as a waiver of such right or any other rights under this
Note. A waiver on any occasion shall not be construed as a bar to or waiver of
any right or remedy on any future occasion.
IN WITNESS WHEREOF, the undersigned has caused these presents to be duly
executed under the seal on the date and year first above written.
"OBLIGOR"
By: /s/ Steven D. Brown
-------------------------------------
American Artists Film Corporation
1245 Fowler St., N.W.
Atlanta, Georgia 30318
"HOLDER"
/s/ Robert A. Martinez
- ------------------------------------
Robert A. Martinez
<PAGE> 1
EXHIBIT 10.101
6,000.00 August 31, 1998
PROMISSORY NOTE
FOR VALUE RECEIVED, American Artists Film Corporation, a Missouri
corporation (herein called "Obligor"), hereby promises to pay to the order of
Glen C. Warren, a resident of Jackson, Mississippi (herein called "Holder"), in
legal tender of the United States, without grace, at his office located at 10
Lakeland Circle, Jackson, Mississippi, or at such other place as the Holder may
hereafter designate, the sum of Six Thousand Dollars ($6,000.00) together with
simple interest on the unpaid balance of such principal amount outstanding from
time to time hereunder at an annual interest rate equal to prime plus one
percent (1%) per annum. All principal and any accrued but unpaid interest will
be due and payable on demand but no later than September 1, 1999.
It is hereby expressly agreed that should any default be made in the
payment of principal or interest when due, the principal indebtedness evidenced
hereby and all interest accrued thereon shall, upon written demand, become due
and payable and may be collected forthwith. Notwithstanding any other provision
hereof to the contrary, Obligor shall not be deemed to be in default of payment
of principal or interest hereunder if such payment (the "Late Payment") is
received by Holder within ten (10) days following the date on which Obligor
receives written notice of said default.
Payment not made within ten (10) days of the due date shall bear interest
at the rate of prime plus one percent (1%) per annum from the original due date
until paid.
Time is of the essence of this Note, and in the event that this Note is
collected by law or through an attorney-at-law, the Obligor agrees to pay all
reasonable costs of collection.
This note is unsecured.
The Obligor shall be entitled, at any time, and from time to time, without
the consent of the Holder and without making any penalty or premium therefor, to
prepay all or any portion or portions of the outstanding principal amount
thereof.
This Note shall be governed as to the validity, interpretation,
construction, enforcement, effect, and in all respects by the laws and decisions
of the State of Georgia.
No delay or omission on the part of the Holder in exercising any rights
hereunder shall operate as a waiver of such right or any other rights under this
Note. A waiver on any occasion shall not be construed as a bar to or waiver of
any right or remedy on any future occasion.
IN WITNESS WHEREOF, the undersigned has caused these presents to be duly
executed under the seal on the date and year first above written.
"OBLIGOR"
By: /s/ Steven D. Brown
------------------------------------
American Artists Film Corporation
1245 Fowler St., N.W.
Atlanta, Georgia 30318
"HOLDER"
/s/ Glen C. Warren
------------------------------------
Glen C. Warren
<PAGE> 1
EXHIBIT 10.102
$23,000.00 September 14, 1998
PROMISSORY NOTE
FOR VALUE RECEIVED, American Artists Film Corporation, a Missouri
corporation (herein called "Obligor"), hereby promises to pay to the order of
Sandra Smallwood, a resident of Roswell, Georgia (herein called "Holder"), in
legal tender of the United States, without grace, at her residence located at
9965 Lake Forest Way, Roswell, Georgia 30076, or at such other place as the
Holder may hereafter designate, the sum of Twenty-Three Thousand Dollars
($23,000.00) together with simple interest on the unpaid balance of such
principal amount outstanding from time to time hereunder at an annual interest
rate equal to prime plus one percent (1%) per annum. All principal and any
accrued but unpaid interest will be due and payable on demand but no later than
September 1, 1999.
It is hereby expressly agreed that should any default be made in the
payment of principal or interest when due, the principal indebtedness evidenced
hereby and all interest accrued thereon shall, upon written demand, become due
and payable and may be collected forthwith. Notwithstanding any other provision
hereof to the contrary, Obligor shall not be deemed to be in default of payment
of principal or interest hereunder if such payment (the "Late Payment") is
received by Holder within ten (10) days following the date on which Obligor
receives written notice of said default.
Payment not made within ten (10) days of the due date shall bear interest
at the rate of prime plus one percent (1%) per annum from the original due date
until paid.
Time is of the essence of this Note, and in the event that this Note is
collected by law or through an attorney-at-law, the Obligor agrees to pay all
reasonable costs of collection.
As security for this Promissory Note, Obligor hereby grants a first
priority lien against its ownership interest in the Ordinary LLC Shares of False
River, LLC. This security interest shall be limited to the amount of unpaid
principal and accrued interest outstanding under this Promissory Note.
The Obligor shall be entitled, at any time, and from time to time, without
the consent of the Holder and without making any penalty or premium therefor, to
prepay all or any portion or portions of the outstanding principal amount
thereof.
This Note shall be governed as to the validity, interpretation,
construction, enforcement, effect, and in all respects by the laws and decisions
of the State of Georgia.
No delay or omission on the part of the Holder in exercising any rights
hereunder shall operate as a waiver of such right or any other rights under this
Note. A waiver on any occasion shall not be construed as a bar to or waiver of
any right or remedy on any future occasion.
IN WITNESS WHEREOF, the undersigned has caused these presents to be duly
executed under the seal on the date and year first above written.
"OBLIGOR"
By: /s/ Steven D. Brown
-------------------------------------
American Artists Film Corporation
1245 Fowler St., N.W.
Atlanta, Georgia 30318
"HOLDER"
/s/ Sandra Smallwood
- ------------------------------------
Sandra Smallwood
<PAGE> 1
EXHIBIT 10.103
[DIVERSITY ENTERTAINMENT TELEVISION LETTERHEAD AND LOGO]
DIVERSITY ENTERTAINMENT TELEVISION L.L.C./ATLANTA SALES AGREEMENT
THIS IS TO CONFIRM YOUR PURCHASE OF AIRTIME FOR INTERNATIONAL FOOD
SPECIALTIES AND ITS ASSIGNS (COLLECTIVELY "IFS") ON THE DIVERSITY ENTERTAINMENT
TELEVISION L.L.C/ATLANTA ("DETV/ATLANTA") SCREEN LOCATED AT FOUNTAIN PLAZA,
UNDERGROUND, ATLANTA.
THE SPECIFIC TERMS OF YOUR AIRTIME PURCHASE ARE AS FOLLOWS:
A) TOTAL MINUTES PURCHASED: 40,000 PER YEAR @ $25.OO PER :60 UNIT
-------------------------------------------
B) NUMBER OF SPOTS: TBD LENGTH(S): :15, :30, :60 UNITS
----------- -------------------------
C) TOTAL COST: $1,000,000.00 PER YEAR MINIMUM FOR 1999 AND 2000
--------------------------------------------------------
IFS WILL PROVIDE DETV/ATLANTA WITH ADVERTISING OR PROGRAMMING MATERIAL
ON A 1" BETASP TAPE FOR EACH ADVERTISING/PROGRAMMING SPOT TO BE AIRED AT LEAST
14 DAYS PRIOR TO ITS INITIAL AIR DATE. PLEASE SEND MATERIAL TO DETV/ATLANTA, THE
OLYMPIA BUILDING, LOFT STUDIO A, EIGHT DECATUR STREET, ATLANTA, GEORGIA
30303-2907. PRODUCTION COSTS, IF ANY, WILL BE BILLED SEPARATELY.
TERMS AND CONDITIONS
1) THIS AGREEMENT WILL NOT BE CONSIDERED BINDING UNLESS THE TERMS AND
CONDITIONS STIPULATED BELOW ARE MET AND A SIGNED ORIGINAL COPY OF THE CONTRACT
WITH CREDIT REFERENCES ARE RECEIVED BY DETV/ATLANTA.
A) THIS CONTRACT IS BINDING FOR A MINIMUM TERM OF TWO (2)
YEARS, COMMENCING ON THE DATE OF THE FIRST PURCHASE ORDER RECEIVED FROM
IFS SUBJECT TO THIS CONTRACT.
B) THIS CONTRACT IS STRICTLY CONDITIONAL UPON THE SUCCESSFUL
FUNDING AND COMPLETED CONSTRUCTION OF DETV/ATLANTA'S FIRST JUMBOTRON
LOCATION EQUAL TO $2.8 MILLION DOLLARS. THIS FUNDING HAS BEEN
IDENTIFIED BY DIVERSITY ENTERTAINMENT TELEVISION L.L.C./ATLANTA
(DETV/ATLANTA) AS THE INITIAL FUNDING NEEDED BY DETV/ATLANTA TO ACCEPT
AND EXECUTE ANY/ALL MEDIA BUYS CURRENTLY NEGOTIATED BY CONTRACT AND/OR
LETTERS OF INTENT.
C) A MINIMUM DEPOSIT OF TEN PERCENT (10%) UPON APPROVAL OF
FUNDING AS STIPULATED IN SECTION (1.B) IS REQUESTED WITH THIS CONTRACT
AND WILL BE HELD IN ESCROW AT FIRST UNION NATIONAL BANK UNTIL SUCH TIME
THAT ALL CONDITIONS OF THIS CONTRACT ARE MET AND PURCHASE ORDERS ARE
RECEIVED AGAINST THIS DEPOSIT FROM IFS.
D) TRAFFICKING OF SPOT TIME INVENTORY SOLD TO IFS WILL BE
ALLOCATED THROUGHOUT DAILY DAY-PARTED PROGRAMMING SEGMENTS ACCORDINGLY.
- FIFTY PERCENT (50%) OF ALL INVENTORY HELD BY IFS WILL BE
TRAFFICKED DURING WHAT IS DEEMED AND IDENTIFIED BY DETV/ATLANTA AS
"PRIME TIME" ADVERTISING AVAILS WITHIN THE MONDAY THROUGH FRIDAY
DAY-PARTS. MONDAY - FRIDAY: MORNING DRIVE 7 AM - 9 AM; AFTERNOON
PEAK 12 NOON - 2 PM; EVENING DRIVE 4 PM - 6 PM; AFTER SEVEN PEAK 7
PM - 10 PM.
<PAGE> 2
- THIRTY PERCENT (30%) OF ALL INVENTORY HELD BY IFS WILL BE
TRAFFICKED DURING WHAT IS DEEMED AND IDENTIFIED BY DETV/ATLANTA AS
"FRINGE" SPECIAL EVENT AVAILS WITHIN THE FOLLOWING MONDAY THROUGH
SUNDAY DAY-PARTS. MONDAY - FRIDAY: AFTERNOON FRINGE 11 AM - 12
NOON AND 2 PM - 3 PM; EVENING FRINGE 4 PM - 5 PM AND 6 PM -7 PM;
SATURDAY - SUNDAY: AFTERNOON PEAK/FRINGE 12 NOON - 3 PM; EVENING
PEAK/FRINGE 3 PM - 7 PM; AFTER SEVEN PEAK/FRINGE 7 PM - MIDNIGHT.
- TWENTY PERCENT (20%) OF ALL INVENTORY HELD BY IFS WILL BE
TRAFFICKED DURING WHAT IS DEEMED AND IDENTIFIED BY DETV/ATLANTA AS
"OFF PEAK" ADVERTISING AVAILS WITHIN THE FOLLOWING MONDAY - SUNDAY
DAY-PARTS. MONDAY - FRIDAY: MORNING OFF PEAK 9 AM - 11 AM;
AFTERNOON OFF PEAK 11 AM - 12 NOON AND 2 PM - 3 PM; EVENING OFF
PEAK 3 PM - 4 PM AND 6 PM - 7 PM; AFTER SEVEN OFF PEAK 7 PM - 12
MIDNIGHT. SATURDAY - SUNDAY: AFTERNOON OFF PEAK 12 NOON - 3 PM;
EVENING OFF PEAK 3 PM - 7 PM AND AFTER SEVEN OFF PEAK 9 PM -
MIDNIGHT.
E) WITH THIS CONTRACT, VIDEO COMMUNICATIONS NETWORK L.L.C.
(VCN), PARENT COMPANY OF DETV/ATLANTA AGREES TO GRANT IFS A RIGHT OF
FIRST REFUSAL TO PURCHASE AIR TIME INVENTORY ON FUTURE COMPANY OWNED
DETV OPERATIONS. TERMS AND CONDITIONS GOVERNING THIS RIGHT OF FIRST
REFUSAL ARE SUBJECT TO NEGOTIATIONS AND APPROVAL BY VCN.
2) DETV/ATLANTA MAY TERMINATE THIS CONTRACT UPON DEFAULT BY IFS IN THE
PROMPT PAYMENT OF BILLS WHEN DUE OR OTHER MATERIAL BREACH OF TERMS AND
CONDITIONS HEREOF AT ANY TIME UPON PRIOR NOTICE TO IFS. UPON SUCH TERMINATION,
ALL CHARGES FOR ADVERTISING COMPLETED HEREUNDER AND NOT PAID WILL BECOME
IMMEDIATELY DUE AND PAYABLE BY IFS.
3) DETV/ATLANTA MAY CANCEL ALL OR ANY PORTION OF
ADVERTISING/PROGRAMMING COVERED BY THIS CONTRACT IN ORDER TO RUN PROGRAMMING
WHICH DETV/ATLANTA DEEMS TO BE PUBLICLY SIGNIFICANT OR NEWSWORTHY, AND/OR TO RUN
SPECIAL EVENTS PROGRAMMING. IN SUCH EVENT, IFS WILL BE NOTIFIED PRIOR TO ANY
SUCH SPECIAL EVENTS SCHEDULING OR AT THE TIME OF BILLING IN THE CASE OF
NEWSWORTHY COVERAGE. IFS CAN UTILIZE THIS TIME AT AN AGREED UPON FUTURE DATE OR
AVAIL THIS TIME, FOR A FEE, TO DETV/ATLANTA FOR SPECIAL EVENT USE.
4) ADVERTISING/PROGRAMMING PROVIDED BY IFS SUBJECT TO DETV/ATLANTA'S
STANDARDS AND PRACTICES, AS AMENDED FROM TIME TO TIME, AND DETV/ATLANTA MAY
EXERCISE A CONTINUING RIGHT TO REJECT ANY ADVERTISING/PROGRAMMING, INCLUDING
(BUT NOT LIMITED TO) THE RIGHT TO REJECT FOR UNSATISFACTORY TECHNICAL QUALITY.
5) DETV/ATLANTA WILL EXERCISE NORMAL PRECAUTIONS IN THE HANDLING OF
PROPERTY AND MAIL, BUT ASSUMES NO LIABILITY FOR LOSS OR DAMAGE TO COMMERCIAL
ANNOUNCEMENTS OF PROGRAMMING MATERIAL AND OTHER PROPERTY FURNISHED BY IFS IN
CONNECTION WITH ADVERTISING/PROGRAMMING COVERED BY THIS CONTRACT OR OTHERWISE.
<PAGE> 3
6) THE AIRTIME THAT IFS IS PURCHASING MAY BE ASSIGNED AND/OR
TRANSFERRED BY IFS BY OBTAINING THE WRITTEN CONSENT OF DETV/ATLANTA, WHICH
CONSENT SHALL NOT BE UNREASONABLY WITHHELD.
7) NOTWITHSTANDING ANYTHING TO THE CONTRARY HEREIN CONTAINED, UNDER NO
CIRCUMSTANCES WILL EITHER PARTY BE LIABLE TO THE OTHER FOR COMPENSATION,
REIMBURSEMENT OR DAMAGES ON ACCOUNT OF PRESENT OR PROSPECTIVE PROFITS,
EXPENDITURES, INVESTMENTS OR COMMITMENTS, WHETHER MADE IN THE ESTABLISHMENT,
DEVELOPMENT OR MAINTENANCE OF BUSINESS REPUTATION OR GOODWILL, FOR LOSS OF DATA
OR FOR ANY OTHER REASON WHATSOEVER OR FOR WITH RESPECT TO THIS CONTRACT AND IN
NO EVENT WILL EITHER PARTY BE LIABLE TO THE OTHER FOR SPECIAL, INDIRECT,
INCIDENTAL OR CONSEQUENTIAL DAMAGES (INCLUDING LOSS OF PROFITS) OF ANY KIND
ARISING OUT OF THIS CONTRACT, EVEN IF THEY HAVE KNOWLEDGE OF THE POSSIBILITY OF
ANY SUCH POTENTIAL LOSS OR DAMAGE.
8) DETV/ATLANTA HEREBY EXPRESSLY EXCLUDES AND DISCLAIMS ALL OTHER
REPRESENTATIONS AND WARRANTIES, WHETHER EXPRESSED OR IMPLIED, INCLUDING BUT NOT
LIMITED TO ANY SUGGESTION, THAT DETV/ATLANTA WILL OPERATE, CONTINUE TO OPERATE
OR OPERATE IN ANY PARTICULAR WAY, OR THAT ANY ADVERTISING/PROGRAMMING COVERED BY
THIS CONTRACT WILL RUN OR CONTINUE TO RUN ON IT.
9) THE UNDERSIGNED SHALL INDEMNIFY AND HOLD HARMLESS DETV/ATLANTA, ITS
AFFILIATES, OFFICERS, MANAGERS, EMPLOYEES AND AGENTS (THE "INDEMNIFIED PARTIES")
WITH RESPECT TO ANY CLAIMS OR ACTIONS AGAINST THE INDEMNIFIED PARTIES, OR ANY
DAMAGES, LOSSES, LIABILITIES OR EXPENSES (INCLUDING ATTORNEYS' FEES) SUFFERED BY
INDEMNIFIED PARTIES, WHICH RESULT FROM THE REASONABLE AND PROPER USE BY
DETV/ATLANTA OF ANY ADVERTISING/ PROGRAMMING MATERIAL PROVIDED TO DETV/ATLANTA
HEREUNDER BY OR ON BEHALF OF THE UNDERSIGNED.
10) THE TERMS AND PROVISIONS OF THIS AGREEMENT SHALL BE BINDING UPON,
INURE TO THE BENEFIT OF AND BE ENFORCEABLE BY OR AGAINST THE PARTIES AND THEIR
RESPECTIVE SUCCESSORS AND ASSIGNS.
11) PAYMENT SHOULD BE MADE TO: DETV/ATLANTA, THE OLYMPIA BUILDING. LOFT
STUDIO A, EIGHT DECATUR STREET, ATLANTA, GEORGIA 30303-2907. PAYMENT IS DUE
WITHIN 15 DAYS OF RECEIPT OF INVOICE.
PLEASE CONTACT YOUR SALES REPRESENTATIVE WITH ANY QUESTIONS YOU MAY
HAVE AT 404-524-8600.
UNDERSTOOD AND AGREED TO BY:
/s/ Tyrone C. Johnson 9-23-98 /s/ Jason Slaughter 9/24/98
- ------------------------------------ ---------------------------------------
DETV/ATLANTA REPRESENTATIVE DATE ADVERTISER/AGENCY REPRESENTATIVE DATE
<PAGE> 1
EXHIBIT 10.104
HBO
As of October 5, 1998
American Artists Film Corp.
1245 Fowler Street
Atlanta, GA 30318
Attention: Renee Bishop
RE: MIRACLES
Gentlemen:
The following shall confirm the Agreement between American Artists Film
Corporation ("Producer") (Federal ID No. 58-1950450) and Home Box Office
("HBO"), a division of Time Warner Entertainment Company, L.P.
("TWE") in connection with the above- referenced program.
1. DEVELOPMENT MATERIALS
Producer shall prepare and deliver to HBO for HBO's approval
in its sole discretion:
(a) a treatment;
(b) a budget; and
(c) selects.
(collectively, the "Development Materials") for an original television program
(an original television pilot) of approximately sixty (60) minutes in length
based on the captioned project (the "Program"), and for the option set forth in
Paragraph 4, below. The Program shall focus on Benny Hinn, Reinhard Bonnke and
Pam Vinett, three televangilists who claim to have divine powers to heal the
sick. Their ministries are followed by thousands of people all over the world
and in some cases, according to medical doctors, people are miraculously being
healed.
<PAGE> 2
American Artists Film Corp.
As of October 5, 1998
Page 2
2. DELIVERY DATE
The Development Materials shall be delivered to HBO on a date
to be mutually agreed upon by the parties.
3. PAYMENT
HBO shall pay to Producer the sum of $20,663 (which shall be
credited against the license fee in the event HBO exercises its Option pursuant
to Paragraph 5, below) as full consideration for the work to be done by Producer
(including expenses) and the rights and option granted by Producer to HBO
hereunder. Payment shall be made as follows:
(a) one-half (1/2) within ten (10) days after approval of
the development budget; and
(b) on-half (1/2) within ten (10) days after execution
and delivery of this Agreement and delivery to HBO of the Development Materials
as revised pursuant to Paragraph 4, below.
4. REVISIONS AND OPTION
(a) Upon receipt by HBO of the Development Materials, HBO
shall advise Producer, within a reasonable amount of time after HBO receives
same, whether any revisions or changes are necessary and, if so requested,
Producer agrees to make such revisions and/or changes to the Treatment as soon
as possible thereafter. Commencing upon the date hereof and continuing for a
period of three (3) months after receipt by HBO of the final Development
Materials (the "Option Period"), HBO shall have the exclusive option to require
Producer to produce and deliver the Program based upon the Development Materials
(the "Option"). Not later than the end of the Option Period, HBO shall advise
Producer whether HBO elects to exercise the Option, pursuant to Paragraph 5,
below.
(b) In the event that HBO does not exercise the Option,
HBO shall have no further right, titled or interest in the Development
Materials; subject, however, to the provision of Paragraph 6 below.
<PAGE> 3
American Artists Film Corp.
As of October 5, 1998
Page 3
5. PRODUCTION
In the event that HBO elects to exercise the Option, then HBO
and Producer shall negotiate in good faith, during a six (6) month period after
HBO's exercise of the Option (the "Negotiation Period"), the terms of a
production services agreement pursuant to which (i) Producer shall produce the
Program as a producer-for-hire; (ii) HBO will be responsible for supplying all
financing required to produce the Program; (iii) HBO will own all rights, title
and interest in the Program including, without limitation, the copyright herein
and the right to distribute the Program in any and all media throughout the
world in perpetuity and (iv) Producer shall be entitled to receive 50% of 100%
of the Net Profits from HBO's distribution of the Program other than on HBO
programming services. "Net Profits" will be defined in accordance with HBO's
standard net profits definition, subject to good faith negotiation.
6. RECOUPMENT
If HBO does not exercise the Option or if HBO and Producer
fail to enter into an Agreement relating to the production of the Program,
Producer shall reimburse HBO the full amount paid to Producer by HBO hereunder
out of first monies received by Producer, directly or indirectly, in connection
with the sale, transfer, assignment, license, option or other disposition or
exploitation of the Development Materials in whole or in part. Such
reimbursement shall be made promptly after Producer's receipt of such first
monies. For purposes of this Paragraph, "first monies" shall exclude any sums
paid to Producer and intended for additional writing, research or other strictly
developmental expenses incurred in connection with the captioned project.
Producer hereby grants to HBO as security for such reimbursement a lien upon,
and first priority security interest in, the Development Materials and proceeds
of all exploitation of the Development Materials in all media. Producer shall
execute such security agreements, financing statements and other documents as
HBO deems necessary or proper to create and perfect such security interest, and
HBO shall execute such documents as are necessary to terminate such security
interest upon reimbursement of all amounts paid by HBO hereunder.
<PAGE> 4
American Artists Film Corp.
As of October 5, 1998
Page 4
7. EXCLUSIVITY
Producer shall not produce or cause the production of any
television program based on or derived from the Development Materials for
exhibition on any form of television during a period commencing on the date
hereof and ending on the later date of the expiration of the Option Period or
the Negotiation Period.
8. WARRANTY AND INDEMNITY
(a) Producer hereby warrants and represents that it has
the right to enter into this Agreement and grant all rights herein granted and
to fully perform all its obligations hereunder; that it owns or controls and
will own or control all rights relating to HBO's distribution, exhibition or
exploitation of the Development Materials or Program; that no portion of the
Development Materials shall infringe upon or violate the right of privacy of, or
right of publicity of, or constitute a libel or slander against, or defame, or
violate any copyright, trademark or service mark, common law or any other right
of, any person, firm or corporation; that Producer shall employ writers who
shall be the sole authors of the Development Materials and that all such
Development Materials shall be original with them and not copied in whole or in
part from any other work or are in the public domain or otherwise controlled and
owned by Producer; that all such writers employed by Producer shall enter into
written agreements which shall provide that such work is specifically ordered or
commissioned as a work made-for-hire and that there are no liens, claims or
encumbrances whatsoever adversely affecting, or that would or might in any way
prejudice, Producer's grant of rights to HBO herein.
(b) Producer assumes liability for, and shall indemnify,
defend, protect, save and hold harmless HBO and TWE, their partners, divisions,
subsidiary and affiliated divisions and companies, distributors, assigns,
licensees and the respective shareholders, directors, officers, employees and
agents of the foregoing (the "HBO Indemnified Parties") from and against any and
all claims, actions, suits, costs liabilities, judgments, obligations, losses,
penalties, expenses or damages (including, without limitation, legal fees and
expenses) of whatsoever kind and nature, imposed on, incurred by or
<PAGE> 5
American Artists Film Corp.
As of October 5, 1998
Page 5
asserted against any of the HBO Indemnified Parties, arising out of any breach
or alleged breach by Producer of any of its representation, warranty, covenant
made or obligation assumed, by Producer pursuant to this Agreement. The
provisions of this subparagraph 8(b) shall apply, without limitation, to claims
brought by HBO against Producer.
9. INDEPENDENT CONTRACTORS
HBO and Producer are independent contractors with respect to
each other, and nothing herein shall create any partnership, joint venture or
agency relationship between the parties hereto. Producer shall be solely
responsible for all withholding taxes, contributions to Social Security and any
other deductions and contributions which may be required by any law or any union
agreement applicable to programs produced for HBO. Producer shall hold HBO
harmless from and indemnify HBO against the payment of any such taxes or
contributions.
10. MISCELLANEOUS
(a) No waiver of any term or condition of this Agreement
shall be construed as a waiver of any other term or condition, nor shall any
waiver of any default under this Agreement be construed as a waiver of any other
default.
(b) It is contemplated that in the event the Option is
exercised and further negotiations are concluded, a more formal agreement shall
be signed by the parties hereto incorporating HBO's standard terms and
conditions for the production and distribution of a television program as well
as such other terms and conditions to which the parties shall mutually agree.
(c) The terms and conditions of this Agreement shall be
governed by the laws of the State of New York applicable to agreements entered
into and to be fully performed within such State.
(d) Producer shall not assign any of its rights or
obligations hereunder without the prior written consent of HBO. Any
<PAGE> 6
American Artists Film Corp.
As of October 5, 1998
Page 6
purported assignment without such prior written consent shall be null and void
and of no force and effect.
If the foregoing is agreeable to you, please sign below where
indicated.
Very truly yours,
HOME BOX OFFICE, a Division
of Time Warner Entertainment Co., L.P.
By /s/ Bruce Grivetti
--------------------------------------
Agreed to and Accepted as of
the date first written above
AMERICAN ARTISTS FILM CORP.
By: /s/ J. Eric Van Atta, Vice President
--------------------------------------
J. Eric Van Atta, Vice President
<PAGE> 1
EXHIBIT 10.105
$20,000.00 October 6, 1998
PROMISSORY NOTE
FOR VALUE RECEIVED, American Artists Film Corporation, a Missouri
corporation (herein called "Obligor"), hereby promises to pay to the order of
Glen C. Warren, a resident of Jackson, Mississippi (herein called "Holder"), in
legal tender of the United States, without grace, at his office located at 10
Lakeland Circle, Jackson, Mississippi, or at such other place as the Holder may
hereafter designate, the sum of Twenty Thousand Dollars ($20,000.00) together
with simple interest on the unpaid balance of such principal amount outstanding
from time to time hereunder at an annual interest rate equal to prime plus one
percent (1%) per annum. All principal and any accrued but unpaid interest will
be due and payable on demand but no later than September 1, 1999.
It is hereby expressly agreed that should any default be made in the
payment of principal or interest when due, the principal indebtedness evidenced
hereby and all interest accrued thereon shall, upon written demand, become due
and payable and may be collected forthwith. Notwithstanding any other provision
hereof to the contrary, Obligor shall not be deemed to be in default of payment
of principal or interest hereunder if such payment (the "Late Payment") is
received by Holder within ten (10) days following the date on which Obligor
receives written notice of said default.
Payment not made within ten (10) days of the due date shall bear interest
at the rate of prime plus one percent (1%) per annum from the original due date
until paid.
Time is of the essence of this Note, and in the event that this Note is
collected by law or through an attorney-at-law, the Obligor agrees to pay all
reasonable costs of collection.
This note is unsecured.
The Obligor shall be entitled, at any time, and from time to time, without
the consent of the Holder and without making any penalty or premium therefor, to
prepay all or any portion or portions of the outstanding principal amount
thereof.
This Note shall be governed as to the validity, interpretation,
construction, enforcement, effect, and in all respects by the laws and decisions
of the State of Georgia.
No delay or omission on the part of the Holder in exercising any rights
hereunder shall operate as a waiver of such right or any other rights under this
Note. A waiver on any occasion shall not be construed as a bar to or waiver of
any right or remedy on any future occasion.
IN WITNESS WHEREOF, the undersigned has caused these presents to be duly
executed under the seal on the date and year first above written.
"OBLIGOR"
By: /s/ Steven D. Brown
-------------------------------------
American Artists Film Corporation
1245 Fowler St., N.W.
Atlanta, Georgia 30318
"HOLDER"
/s/ Glen C. Warren
- ------------------------------------
Glen C. Warren
<PAGE> 1
EXHIBIT 10.106
INVESTOR RELATION SERVICES
This agreement ("Agreement") is made and entered into this 23rd day of November,
1998 between American Artists Film Corporation, a Missouri corporation (the
"Company") and Makenna Delaney & Sullivan, a California corporation ("MDS").
In consideration of and for the mutual promises and covenants contained herein,
and for the good and valuable consideration, the receipt of which is hereby
acknowledged, the parties hereto agree as follows:
1. PURPOSE.
The Company hereby retains MDS on a non-exclusive basis during the term
specified to render investor relation services to the Company, as the Company
may reasonably request, upon the terms and conditions as set forth herein.
2. TERM AND COMPENSATION.
This Agreement shall be effective for a period of twelve months commencing upon
the date first written above (the "Engagement Period"); provided, however, that
either the Company or MDS may terminate this Agreement upon ten days (10)
written notice. Upon termination of this Agreement, any remaining cash
compensation and contingent compensation provisions shall be null and void. The
Company shall pay to MDS as compensation the following:
a) Cash Compensation
<TABLE>
<CAPTION>
Due Date Amount
------------------------- ------
<S> <C>
Upon Signing $ 5,000
30 Days after Signing 8,000
60 Days after Signing 5,000
90 Days after Signing 5,000
120 Days after Signing 5,000
-------
$28,000
=======
</TABLE>
b) Stock Compensation
As additional compensation, the Company shall issue to MDS an
aggregate of 50,000 unregistered shares of its Class A common
stock.
c) Contingent Compensation
The Company agrees to incrementally issue unregistered shares of
its Class A common stock as contingent compensation based upon
performance of the Class A common share price, as quoted on the
OTC Bulletin Board, as follows:
<TABLE>
<CAPTION>
Shares Price Range *
------ -------------
<S> <C>
13,500 $2.00 to $3.99
13,500 $4.00 to $5.99
13,500 Above $6.00
</TABLE>
1
<PAGE> 2
The share price shall be based upon the closing share price over
any fifteen consecutive market day period, during the Engagement
Period, where the daily volume exceeds 1,000 shares.
The term of this agreement may be extended upon mutual written
consent of both parties for an additional six-month period
("Extended Engagement Period"), commencing on the date of
expiration of the Engagement Period. The Company shall pay MDS a
fee for services performed during the Extended Engagement Period
at a level commensurate with the fee for the Engagement Period.
The parties prior to commencement of the Extended Engagement
Period shall mutually agree to such fee.
3. DUTIES OF MDS.
During the term of this Agreement, MDS will provide the Company with such
regular and customary non-exclusive investor relation services as is reasonably
requested by the Company, provided that MDS shall not be required to undertake
duties not reasonably within the scope of the investor relation services
contemplated by this Agreement. In performance of these duties, MDS shall
provide the Company with the benefits of its best judgment and efforts. It is
understood and acknowledged by the parties that the value of services provided
by MDS is not measurable in any quantitative manner, and that MDS shall not be
obligated to spend any specific amount of time doing so. The duties of MDS may,
at the direction of the Company include, but not necessarily be limited to on a
non-exclusive basis, the following:
a) Preparation of bi-monthly investor updates, which will include
relevant milestone updates, investor-watch, stock performance
analyses, contract news, earnings/revenue growth updates,
financing news, etc.
b) Bi-monthly distribution of investor updates to 1,000 sources
(market makers, investors, etc.)
c) Comprehensive listing of investment bankers, market makers, et al
d) Investor relations tracking (documenting distribution, et al)
e) Preparation of investment marketing memorandum and valuation
4. MDS'S LIABILITY.
In the absence of gross negligence or willful misconduct on the part of MDS or
MDS's breach of this Agreement, MDS shall not be liable to the Company or to any
officer, director, employee, stockholder or creditor of the Company, for any act
or omission in the course of or in connection with the rendering or providing of
services hereunder. Except in those cases where the gross negligence or willful
misconduct of MDS or the breach by MDS of this Agreement is alleged and proven,
the Company agrees to defend, indemnify, and hold MDS harmless from and against
any and all reasonable costs, expenses and liability (including reasonable
attorney's fees paid in the defense of MDS) which may in any way result from
services rendered by MDS pursuant to or in any connection with this Agreement.
This indemnification expressly excludes any and all damages as a result of any
actions or statements, on behalf of the Company, made by MDS without the prior
approval or authorization of the Company.
2
<PAGE> 3
5. COMPANY'S LIABILITY.
MDS agrees to defend, indemnify, and hold the Company harmless from and against
any and all reasonable costs, expenses and liability (including reasonable
attorney's fees paid in defense of the Company) which may in any way result
pursuant to its gross negligence or willful misconduct or in any connection with
any actions or statements, on behalf of the Company, without the prior approval
or authorization of the Company or which are otherwise in violation of
applicable law.
6. REGISTRATION OF SHARES.
The Company agrees to file the appropriate registration statement covering the
resale of the securities, set forth in this Agreement, with the Securities and
Exchange Commission upon mutual agreement of both parties. The Company also
agrees to include within that registration statement any future "contingent
compensation" shares as set form in section 2(c) of this Agreement. Appropriate
registration shall be delivered to MDS within three-business days of filing.
7. REPRESENTATIONS
MDS makes the following representations to the Company as a condition of this
Agreement:
(a) MDS shall not make any statements about the Company, in any
capacity, without the prior approval of the Company.
(b) MDS shall clearly and adequately disclose the nature and amount of
compensation received under this Agreement (including the existence of
this Agreement) on all its disclosures to the public.
(c) MDS shall not offer or make payment of any consideration to
brokers, dealers, or others for purposes of inducing the purchase or
recommendation for the purchase of the Company's securities.
(e) MDS is not currently the subject of an investigation or inquiry by
the Securities and Exchange Commission, the NASD, or any state
securities commission.
(f) MDS's activities and operations fully comply with all applicable
state and federal securities laws and regulations.
(g) MDS is either properly registered as, or exempt from registration,
as a broker-dealer or an investment advisor.
(h) MDS understands that, as a result of its services, it may come to
possess material non-public information about the Company, and that it
has implemented internal control procedures designed to reasonably
insure that it, and none of its employees, agents, consultants or
affiliates, trade in the securities of client companies while in
possession of material non-public information.
3
<PAGE> 4
The Company makes the following representations to MDS as a condition of this
Agreement:
(a) The Company is not currently the subject of an investigation or
inquiry by the Securities and Exchange Commission, the NASD, or any
state securities commission.
(b) The Company is in good standing in its state of incorporation,
Missouri.
(c) The Company is a "reporting company" under the Securities Act of
1934 and has timely filed all of its required reports, except for Form
10-KSB for the year ended July 31, 1998.
8. SEVERABILITY.
Every provision of this Agreement is intended to be severable. If any term or
provision hereof is deemed unlawful or invalid for any reason whatsoever, such
unlawfulness or invalidity shall not affect the validity of this Agreement.
9. MISCELLANEOUS.
(a) Any notice or other communication between parties hereto shall be
sufficiently given if sent by certified or registered mail,
postage prepaid, or faxed and confirmed at the following
locations:
COMPANY:
American Artists Film Corporation
1245 Fowler Street, NW
Atlanta, Georgia 30318
(404) 876-7373
(404) 885-9831 (Fax)
Attn: Steven D. Brown
MDS:
Makenna Delaney & Sullivan
5973 Avenida Encinas
Suite 216
Carlsbad, California 92008
(760) 931-2500
(760) 931-2503 (Fax)
Attn: Bob Sullivan
Such notice or other communication shall be deemed to be given on the date of
receipt.
(b) If MDS ceases to do business, the provisions hereof relating to
duties of MDS and compensation by the Company as it applies to MDS
shall thereupon cease to be in effect.
(c) This Agreement embodies the entire agreement and understanding
between the Company and MDS and supersedes any and all negotiations,
prior discussions and preliminary and prior agreements and
understandings related to the primary subject matter hereof.
(d) This Agreement has been duly authorized, executed and delivered by
and on behalf of the Company and MDS.
4
<PAGE> 5
(e) This Agreement shall be construed and interpreted in accordance
with the laws of the State of Georgia, without giving effect to
conflicts of laws.
(f) There is no relationship, partnership, agency, employment,
franchise or joint venture between the parties. The parties have no
authority to bind the other or incur any obligations on their behalf.
(g) This Agreement and the rights hereunder may not be assigned by the
parties (except by operation of law or merger) and shall be binding
upon and inure to the benefit of the parties and their respective
successors, assigns and legal representatives.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date hereof.
AMERICAN ARTISTS FILM CORPORATION
By: /s/ Steven D. Brown, CEO
-------------------------
Steven D. Brown, CEO
MAKENNA DELANEY & SULLIVAN
By: /s/ Eric Horton
------------------------
Eric Horton, CEO
5
<PAGE> 1
EXHIBIT 10.107
CONSULTING AGREEMENT
A. This consulting agreement ("Agreement") is entered into this 7th day
of December 1998 between American Artists Entertainment Corporation, a Missouri
corporation with its principal offices at 6600 Peachtree Dunwoody Road, Building
600, Suite 250, Atlanta, Georgia 30328 (the "Company"), and Mr. Ron Qurashi, an
individual with a residence located at 1511 Valleyheart Drive, Burbank
California 91506.
B. This Agreement has been created for the purpose of defining the
relationship between the two parties during the term, as defined hereafter, in
which they join their efforts in the creation, development, packaging and
production of certain entertainment properties.
C. Properties included under this Agreement shall include all projects
created and/or developed by Mr. Qurashi or derived from literary or other works
(henceforth the "Properties"). During the term of this Agreement, Mr. Qurashi
will receive thirty three percent (33%) of all Net Revenues derived by the
Company from the Properties in all media now known or hereafter devised in all
territories of the universe, including revenues received from exploitation of
remakes, sequels and other derivative works and litigation recoveries relating
to such Properties (Net Revenues shall be defined as Gross Revenues less those
costs directly associated with the production of the particular Properties and
any related actual out-of-pocket distribution expenses.).
Mr. Qurashi will also receive either "Executive Producer" or "Producer"
credit (or other appropriate credit, such as "Created By" in the case of a
television series or feature film, and as mutually agreed upon by Mr. Qurashi
and the Company) on all projects that Qurashi conceives or originates or on
which Qurashi renders material development and/or production services.
The Properties referred to in the preceding paragraphs above shall be
defined in Exhibit "A," attached hereto and made a part hereof. Exhibit A shall
be amended from time to time as additional Properties are conceived by Mr.
Qurashi and become subject to the terms of this Agreement. All Properties shall
remain included on Exhibit A for a period of six (6) months from their date of
inclusion in such exhibit unless otherwise agreed to by the parties. At the end
of the six (6) month term all rights to such Properties shall revert in their
entirety to Mr. Qurashi unless otherwise agreed upon by both parties.
D. The term of this Agreement (the "Term") shall be for a period of
twelve (12) months from the date of signing.
<PAGE> 2
E. During the Term of this Agreement and for a period of twelve (12)
months subsequent to the end of this Agreement, Mr. Qurashi shall not divulge,
share and/or make public any trade secrets of the Company and/or its clients.
Without limiting the generality of the foregoing, such trade secrets shall
include: the identity of the Company's customers, suppliers and prospective
customers and suppliers; the identity of the Company's creditors and other
sources of financing; the Company's estimating and costing procedures and the
cost and gross prices charged by the Company for its products; the prices or
other consideration charged to or required of the Company by any of its
suppliers or potential suppliers; the Company's sales and promotional policies;
and all information relating to any of its entertainment properties. Mr. Qurashi
shall not reveal said trade secrets to others except in the proper exercise of
his duties for the Company, or use his knowledge thereof in any way that would
be detrimental to the interests of the Company, unless compelled to disclose
such information by judicial or administrative process.
F. All notices and communications hereunder shall be in writing and
shall be hand delivered or sent postage prepaid by registered or certified mail,
return receipt requested, to the addresses first above written or to such other
address of which notice shall have been given in the manner herein provided.
G. All prior agreements and understandings between the parties with
respect to the subject matter of this Agreement are superseded by this
Agreement, and this Agreement constitutes the entire understanding between the
parties. This Agreement may not be modified, amended, changed or discharged,
except by a writing signed by the parties hereto and then only to the extent
therein set forth.
H. Neither party may assign any rights under this Agreement without the
express written consent of the other.
I. No waiver of any breach of this Agreement or of any objection to any
act or omission connected herewith shall be implied or claimed by any party, or
be deemed to constitute a consent to any continuation of such breach, act or
omission, unless in writing signed by the party against whom enforcement of such
waiver or consent is sought, and then only to the extent therein set forth.
J. This Agreement and the relationship of the parties shall be governed
by, and construed in accordance with, the laws of the State of Georgia, without
giving effect to conflict of law principles.
K. If any provision of this Agreement or part thereof, is held to be
unenforceable, the remainder of such provision and this Agreement, as the case
may be, shall nevertheless remain in full force and effect.
L. This Agreement shall be binding upon and inure to the benefit of Mr.
Qurashi, the Company and the Company's successors and assigns.
<PAGE> 3
IN WITNESS WHEREOF, the parties hereto execute this Agreement and
intend to be hereby bound, effective as of the date first above written.
By: /s/ Ron Qurashi
------------------------------------------
Mr. Ron Qurashi
By: /s/ Rex Hauck
------------------------------------------
Mr. Rex Hauck, President
American Artists Entertainment Corporation
<PAGE> 4
EXHIBIT A
(AAEC AND QURASHI)
2/4/99 3:18 PM
<TABLE>
<CAPTION>
POTENTIAL STRATEGIC
PROJECT LENGTH BUDGET PRODUCTION TEAM DISTRIBUTORS PARTNERS
- ------- ------ ------ --------------- ------------ ---------
<S> <C> <C> <C> <C> <C>
1-Scenarios 8X 1-Hour 250-550k + per Writer: HBO The Idea Factory
President Kidnapped Showtime USA Today
There Heeere-ET's Landing NBC ADL
Viral Epidemic Producer: Learning
Terrorism CNN
Stock Market Crash Nat Geo
Director:
2-Emerging Viruses TBD TBD HBO Utne Reader
SHO
PBS
3-Civil Wars 6 X 52 Min 450-600k per Writer: HBO George Mag
TWA Fl 800 - James Sanders CNN Utne Reader
Ebola & Aids - Len Horowitz Learning AOL
A Civil Action - Jan Schlichlmann Producer: A&E USA Today
Pers Freedom - Kevorkian PBS
Gulf War Syndrome - Garth Nicolson
Director:
<CAPTION>
POTENTIAL CO-PRO SPONSORSHIP &
PROJECT PARTNERS UNDERWRITERS STATUS & NEXT STEPS
- ------- ---------------- ------------- -------------------
<S> <C> <C> <C>
1-Scenarios Carlton UK Possible
President Kidnapped Atlantis [HOT PROSPECT]
There Heeere-ET's Landing Sony Ent
Viral Epidemic NGT/Carlton expressed interest, could be
Terrorism a multi-media franchise developed with
Stock Market Crash The Idea Factory, Global Business
Network (scenario strategists)
interested in participating
2-Emerging Viruses Carlton UK
WGBH [HOT PROSPECT]
3-Civil Wars Carlton UK Possible Research possible "civil warriors" to
TWA Fl 800 - James Sanders WGBH focus on. Write up 1-page internal
Ebola & Aids - Len Horowitz Atlantis pitch piece and present to AAF
A Civil Action - Jan Schlichlmann Spin Cycle
Pers Freedom - Kevorkian Mount Rock
Gulf War Syndrome - Garth Nicolson Real Life
</TABLE>
Page 1
<PAGE> 5
EXHIBIT A
(AAEC AND QURASHI)
2/6/99 3:16 PM
<TABLE>
<CAPTION>
PROJECT DESCRIPTION
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
1 - Scenarios What if...The world's leading experts in the field of scenario planning will be called upon
President Kidnapped to help construct credible cause and effect models using a major event as the trigger. The show
There Heeere - ET's can ride high-profile Hollywood movies (Airforce One, The Hot Zone, Deep Impact) and create its
Landing own that tap into events and situations moving toward the center of our cultural radar screen. The
Viral Epidemic format could consist of several possible scenarios (conservative, liberal, best-case, worst-case,
Terrorism etc.) with personal dramatizations ala "Testament" in the more expensive 2-hour presentation of a
Stock Market Crash single scenario with expert interviews, stylized dramatizations and computer effects in a 1-hour
version.
- ------------------------------------------------------------------------------------------------------------------------------------
2 - Emerging Viruses, et. al. We begin with a piece of evidence - a memo from the US Navy to a California Pharmaceutical Company
regarding the development of biological agents identical to Ebola, AIDS and soft-tissue cancers...
our detective work begins and the mystery unfolds a la "60 minutes" meets "The Thin Blue Line",
with the author as hero.
- ------------------------------------------------------------------------------------------------------------------------------------
3 - Civil Wars Everyday in America everyday people are stepping forward to fight against corruption and abuse by
TWA Fl800 - James Sanders governmental organizations and corporations. This is their story. One of heroism, sacrifice, risk
Ebola & AIDS - Len Horowitz and sometimes reward. "Civil Wars" is a latter day David and Goliath that will remind us all of
A Civil Action - Jan the power of one.
Schlichtman We begin with a piece of evidence - metal allegedly from a UFO... a memo from the US Navy to a
Pers Freedom - Kevorkian California Pharmaceutical Company regarding the development of biological agents identical to
Gulf War Syndrome - Garth Ebola and AIDS... residue from missile propellant found on the back of passenger seats 27G and H
Nicolson on TWA flight 800, and our detective work begins and the mystery unfolds a la "60 Minutes" meets
"The Thin Blue Line" with the detective as hero.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Page 2
<PAGE> 1
EXHIBIT 10.108
Page 1
CSXI File:____
SUBLEASE AGREEMENT
THIS SUBLEASE AGREEMENT, made as of January ___, 1999, between CSX INTERMODAL,
INC. (Formerly CSL Intermodal, Inc. and a subsidiary of CSX Corporation) a
Delaware corporation, whose mailing address is Suite 2700, BellSouth Tower, 301
West Bay Street, Jacksonville, Florida 32202, hereinafter referred to as Lessee,
and American Artists Film Corporation, a Missouri Corporation and Steven D.
Brown individually, whose mailing address is 9965 Lake Forest Way, Roswell, GA
30076 hereinafter referred to as a Sublessee, WITNESSETH:
WHEREAS, by Lease Agreement between Embassy Row Venture, a joint
venture between New York Life Insurance Company, a New York corporation, and
Bailey & Associates, No. 1, Ltd., a Georgia limited partnership, (collectively,
"Lessor") and Lessee dated March 5, 1991, as amended by First Addendum to Lease
Agreement dated February 25, 1992, as further amended by Addendum to Lease dated
June 1, 1995, as further amended by Third Addendum to Lease Agreement dated
December 23, 1998, (the Lease Agreement, as so amended, is hereinafter called
the "Lease"), Lessor has demised and leased unto Lessee certain premises (the
"Premises") at 600 Embassy Row, Suites 250 and 220, Atlanta, Fulton County,
Georgia (the "Building"), as more particularly described in said Lease (a copy
of the Lease and its Addendums is attached hereto as Exhibit A and made a part
hereof); and
WHEREAS, Sublessee desires to sublease from Lessee, and Lessee desires
to sublease to Sublessee, that portion of the Premises comprising part of the
second (2nd) floor of the Building containing approximately 4,460 rentable
square feet, and as shown on Exhibit B attached hereto and made a part hereof
(the "Sublease Premises").
NOW THEREFORE, Lessee hereby subleases to Sublessee, and Sublessee
hereby subleases from Lessee, the Sublease Premises, on the terms and conditions
set forth herein.
1. USE.
1.1 Sublessee shall use and occupy the Sublease Premises solely
for the purpose of general office space use, and for no other purpose(s).
1.2 No portion of the Sublease Premises may be used for a scrap or
junk operation, the collection, storing, sorting or burning of refuse, deposit
of debris, garbage, sewage, or solid or waste of any kind, or for any other
unsanitary or unhealthy purposes of any kind or nature, or any other use
contrary to any laws or regulations.
1.3 Except for customary office supplies used in Sublessee's
business and stored and used in compliance with applicable laws, no portion of
the Sublease Premises may be used for the treatment, storage or disposal of
hazardous materials, hazardous substances or hazardous waste, as classified
under RCRA (Title 42 U.S. Code, Sections 6901, et al.), CERCLA (Title 42 U.S.
Code, Sections 9601-9657, et al.), or SARA (Title 42 U.S. Code, Sections
9601-9657, et al.), or for any other use or purpose requiring a federal or state
environmental permit.
1.4 The provisions of this Article I shall supplement, but not
supersede or modify, any covenants, conditions, restrictions or limitations
contained in the Lease as to the use or occupancy of the Premises (which
covenants, conditions, restrictions and limitations shall apply to Sublessee's
use and occupancy of the Sublease
<PAGE> 2
Page 2
CSXI File____
Premises).
2. LEASE TERMS INCORPORATION.
2.1 Subject to the provisions of Section 2.2 of this Sublease,
Sublessee covenants and agrees to perform and comply with all terms, conditions
and agreements of the Lease as it applies to the Sublease Premises and any
Common Areas hereinafter defined in Article 13, and shall be bound directly to
Lessee under this Sublease Agreement as to such performance and compliance.
2.2 All of the terms, provisions, covenants and conditions of the
Lease applicable to the Sublease Premises and the Common Areas are hereby made a
part of this Sublease Agreement, and this Sublease Agreement is subject to all
of the terms, provisions, covenants and conditions contained therein, except for
such provisions of the Lease as are inapplicable to the Sublease Premises or are
inconsistent with or modified or superseded by the provisions of this Sublease
Agreement. With respect to the provisions of the Lease incorporated herein, all
references to the "Premises" shall refer to the Sublease Premises and all
references to "Lessor" and "Lessee" shall refer to Lessee and Sublessee,
respectively. Without limiting the foregoing, all rights and remedies available
to Lessor under the Lease or at law or in equity with respect to an event of
default by Lessee thereunder shall be available to Lessee as against Sublessee
with an event of default by Sublessee under this Sublease Agreement. Sublessee
shall have no right to renew the term of the Lease, expand the Premises,
exercise any right of first offer, or cancel or terminate the Lease.
3. ACCEPTANCE; LESSEE IMPROVEMENTS.
3.1 Sublessee accepts the Sublease Premises and any and all
improvements therein in "As Is, Where Is" condition, unless noted in Exhibit 2,
and Sublessee acknowledges that no representations or warranties with respect to
the condition thereof have been made by Lessee or by Lessor. Without limiting
the foregoing, Lessee shall have no obligation to make any improvements,
alterations, additions or repairs to the Sublease Premises except for the
demising wall which shall be installed by Lessee at Lessee's expense and Lessee
shall have no liability whatsoever for the loss or damage to any property or the
injury or death of any person arising from the condition of the Sublease
Premises or any alteration or repair (or lack of same) to the Sublease Premises,
unless caused solely by the act or omission of Lessee or its officers, agents,
employees, contractors or servants.
3.2 Sublessee further acknowledges that any alterations,
improvements, additions or installations made by Sublessee in or to the Sublease
Premises shall be made at the sole cost and expense of Sublessee, and shall
require Lessee's and Lessor's prior written approval. Lessee approves the
improvements as shown on Exhibit "D".
4. SUBRENTAL; TERM.
4.1 Sublessee shall pay to Lessee, on a monthly basis in advance
and without notice the sum of $5,500 as subrent for the Sublease Premises,
commencing January 15, 1999, and continuing on the first day of each month
thereafter through and including January 1, 2001. No escalations in rent or
operations expense pass throughs shall be applicable under this Sublease
Agreement, and if escalations or pass throughs exist in the Master Lease then
Lessee shall remain responsible for such.
4.3 The term of this Sublease Agreement shall commence on January
15, 1999, and shall end on January 31, 2001.
<PAGE> 3
Page 3
CSXI File____
5. TAXES AND OTHER CHARGES.
5.1 Sublessee shall be solely responsible for the payment of all
taxes, assessments, license fees and other charges arising out of the conduct of
Sublessee's business on the Sublease Premises, and out of the placement by
Sublessee of its personal property, equipment or improvements in the Sublease
Premises.
6. SUBLESSEE'S COVENANTS.
6.1 Sublessee covenants that it shall occupy the Sublease Premises
in accordance with the terms and conditions of the Lease applicable to the
Sublease Premises and of this Sublease Agreement; and Sublessee shall not suffer
to be done or omit to do any act which may result in a violation of or default
under any of the terms and conditions of the Lease which Sublessee is required
to perform or comply with or of the Sublease Agreement.
6.2 Sublessee further covenants and agrees to defend and indemnify
Lessee and Lessor against and hold Lessee harmless from any and all liabilities,
claims, demands, costs, losses and expenses (including reasonable attorneys'
fees) arising out of, by reason of or resulting from: (a) Sublessee's failure to
perform or observe any of the terms and conditions of the Lease required to be
performed or complied with by Sublessee hereunder; and (b) any negligent or
willful act of Sublessee, or its officers, agents, employees, contractors or
servants in or about the Sublease Premises or other parts of the Building;
except to the extent such liabilities, claims, demands, costs, losses or
expenses are caused by the negligence or willful act of Lessee or its officers,
agents, employees, contractors or servants. This indemnity shall survive the
expiration or termination of this Sublease Agreement.
7. LESSEE'S COVENANTS.
7.1 Lessee represents to Sublessee as follows: (a) subject to
Lessor's consent to this Sublease Agreement, Lessee has full right and lawful
authority to enter into this Sublease Agreement, and possesses a leasehold
interest in and to the Sublease Premises under the Lease; and (b) the Lease is
in full force and effect, and to Lessee's knowledge, neither Lessee nor Lessor
are in default in the performance of their respective obligations under the
Lease.
7.2 Lessee covenants that: (a) any occupancy by Lessee of the
Premises shall be in accordance with the terms and conditions of the Lease, and
Lessee shall not do or suffer to be done or omit to do any act which may result
in a material violation of or a material default under any of the terms and
conditions of the Lease with respect to the Premises (except to the extent such
terms and conditions are required to be performed or complied with by Sublessee
hereunder), and, except as provided in the Lease, Lessee shall not terminate or
agree to the termination of the Lease as to the Sublease Premises prior to the
expiration of this Sublease Agreement or amend the Lease so as to affect
Sublessee's rights under this Sublease Agreement, without Sublessee's consent,
unless Sublessee is in default under the terms of this Sublease Agreement.
8. RIGHT TO ENFORCE; INDEMNIFICATION.
8.1 Lessee agrees that Sublessee shall be entitled to receive all
services and benefits from Lessor under the Lease, and that, so long as
Sublessee is not in default under this Sublease Agreement, Lessee will cooperate
with Sublessee, at Sublessee's sole cost and expense, to cause Lessor to perform
Lessor's obligations under the Lease with respect to the Sublease Premises. It
is expressly agreed by the parties, however, that Lessee does not assume any
obligation to perform the terms, covenants and conditions contained in the Lease
on the part of Lessor to be performed, or any liability for the accuracy of any
warranty or representation made by Lessor under the Lease, and that Sublessee
shall look solely to Lessor for the performance of such obligations and the
inaccuracy of any such warranties or representations. In no event shall
Sublessee have any right to terminate this Sublease Agreement, by reason of any
failure by Lessor to fulfill its obligations or other default by Lessor under
the Lease.
<PAGE> 4
Page 4
CSXI File____
8.2 Sublessee shall defend and indemnify Lessee against all
liabilities, costs and expenses (including reasonable attorneys' fees) which
may be incurred by Lessee in connection with any claim, action or proceeding so
undertaken by Sublessee against Lessor; provided, however, that if Lessee elects
to be represented by counsel of its own choosing in connection with any action
or proceeding instituted pursuant to the provisions of this Section 8.2, Lessee
shall pay all legal fees of its counsel in connection with such representation.
8.3 Lessee shall not be liable for, and Sublessee shall indemnify
and hold Lessee harmless of and from, all fines, suits, damages, claims,
demands, losses, actions, liabilities and costs (including reasonable attorneys'
fees) for any injury to person or damage to or loss of property on or about the
Sublease Premises, except to the extent the same are caused by the negligent or
willful act or omission of Lessee or its officers, agents, employees,
contractors or servants. This indemnity shall survive the expiration or
termination of this Sublease Agreement. Lessee shall not be liable or
responsible for any loss or damage to any property or the death or injury to any
person occasioned by theft, fire, act of God, public enemy, injunction, riot,
strike, insurrection, war, court order, requisition of other governmental body
or authority, by third parties or by any other matter, or for any injury or
damage or inconvenience which may arise through repair or alteration of any part
of the Sublease Premises, or failure to make repairs, or from any cause
whatsoever, except to the extent caused by the negligent or willful act or
omission of Lessee or its officers, agents, employees, contractors or servants.
In the event of any conflict or inconsistency between the provisions of this
paragraph and the provisions of Section 3.1, the provisions of Section 3.1
shall govern and control.
9. UTILITIES, EXPENSES.
9.1 Sublessee shall be solely responsible for the payment of any
and all costs and expenses for: (a) any special heating or air conditioning
(HVAC) equipment required for Sublessee's equipment; (b) any additional or
after-hours heating and air conditioning (HVAC); (c) all costs for separate
metered electricity furnished to the Sublease Premises; and (d) any telephone
service used or consumed in the Sublease Premises.
9.2 Sublessee shall contract directly with Lessor for the
performance of janitorial services not provided for in the Master Lease
Agreement for the Sublease Premises and pay Lessor for such services. As between
Lessor and Lessee, such janitorial services shall be deemed provided by Lessee
pursuant to the provisions of the Master Lease Agreement, but Sublessee shall
not be entitled to any credit against its subrental obligations for
such janitorial services.
9.3 Sublessee shall reimburse Lessee within fifteen (15) days of
written demand for any cost or expense to the extent incurred by Lessee for the
foregoing utilities.
10. INSURANCE.
10.1 Sublessee shall throughout the term of this Sublease Agreement
and at its sole cost and expense maintain in full force and effect such policies
of insurance as are required of Lessee as tenant under the Lease. In addition,
Sublessee shall keep its personal property and trade fixtures in the Sublease
Premises insured with "all risks" insurance in an amount to cover one hundred
(100) percent of the replacement cost of the property and fixtures.
10.2 All liability insurance required to be maintained by Sublessee
shall name Lessor and Lessee as additional insureds. The required insurance
shall not be subject to cancellation, amendment or modification except after at
least thirty (30) days' prior written notice to Lessor and Lessee. Certificates
of required insurance policies, in form reasonably satisfactory to Lessee, shall
be deposited with Lessee prior to the commencement of the term of this Sublease
Agreement, and renewal certificates thereof shall be deposited with Lessee no
less than ten (10) days before the end of the term of each such coverage from
time to time. The required insurance shall contain a waiver of all rights of
subrogation as such companies may have against Lessee and Lessor.
Notwithstanding any provision in the Lease permitting self-insurance, Sublessee
shall not self-insure or self-assume the risks and losses to be covered by the
insurance required to
<PAGE> 5
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CSXI File____
be maintained by Sublessee hereunder.
11. DEFAULT.
Sublessee shall be considered to have committed an "Event of Default"
under the Sublease upon the happening of any one of the following:
11.1 Failure to pay in full when due any and all installments of
subrental or any other sum required by the terms of this Sublease Agreement,
which failure shall continue for ten (10) or more days after Lessee's written
notice;
11.2 Violation of or failure to perform any term, covenant or
condition of this Sublease Agreement (including such terms and conditions of the
Lease as are incorporated herein) which violation or failure shall continue for
more than ten (10) days after Lessee's written notice, except that in the event
Sublessee is unable to cure within said ten (10) day period, Sublessee shall not
be declared in default if Sublessee has commenced the cure within said ten (10)
day period and is diligently pursuing the cure. In no event, however, shall such
cure period exceed twenty (20) days from the date of Lessee's notice, unless
Lessee and Sublessee mutually agree to an extension of the cure period;
11.3 An Event of Bankruptcy (as defined under the Lease with all
references to "Tenant" replaced by references to Sublessee);
11.4 The making of an assignment for the benefit of creditors by
Sublessee or if Sublessee admits in writing its inability to pay its debts
generally as they come due or files articles of dissolution with the appropriate
authority of the place of its incorporation;
11.5 The attachment, execution or other judicial seizure of
substantially all of Sublessee's assets located in the Sublease Premises or of
Sublessee's interest in this Sublease Agreement; and
11.6 The suspension of business by Sublessee or the abandonment of
the Sublease Premises by the Sublessee, unless prior written notice is given to
Lessee and all other terms, covenants, and conditions of the Sublease Agreement
are fulfilled.
12. REAL ESTATE BROKERS
12.1 Lessee and Sublessee each represent and warrant to the other
that Univest Asset Management, LLC represented Lessee and Richard Bowers & Co.
represented Sublessee (collectively known as "Brokers") are the sole brokers or
agents entitled to a commission or fee in connection with this Sublease
Agreement, and that neither have dealt with any other real estate broker, sales
person or finder in connection with this Sublease Agreement.
12.2 Lessee agrees to pay a commission to the Brokers referenced in
a separate document.
12.3 Sublessee and Lessee each hereby agree to indemnify and hold
the other harmless from any loss, cost, damage or expense (including reasonable
attorneys' fees) arising from the breach by the indemnifying party of the
representation herein. This indemnity shall survive the expiration or
termination of this Sublease Agreement.
13. COMMON AREAS.
13.1 Lessee agrees that Sublessee shall have the right to use, in
common with Lessee and other tenants in the Building, all hallways, elevators,
stairways, restrooms, lobby and other common areas available for use by Lessee
under the Lease, excluding any portion of the Premises not included in the
Sublease Premises, (the "Common Areas"), subject to provisions and limits of the
Lease.
<PAGE> 6
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CSXI File____
13.2 Sublessee further agrees not to allow the accumulation of
boxes, trash or other materials in such Common Areas.
14. SECURITY DEPOSIT.
Sublessee has deposited with Lessee the sum of $11,000 (the "Security
Deposit"), as security for the faithful performance by sublessee of all the
terms, covenants and conditions of this Sublease to be kept and performed by
Sublessee during the Term, including, but not limited to, the provisions
relating to the payment of Rent. Lessee may (but shall not be required to) use,
apply or retain all or any part of the Security Deposit for the payment of any
Rent or any other sum in default, or for the payment of any amount which Lessor
may spend or become obligated to spend by reason of Lessee's default. If any
portion of the Security Deposit is so used or applied, Sublessee shall, within
five (5) days after written demand therefor by Lessee, deposit cash with Lessee
in an amount sufficient to restore the Security Deposit to its original amount,
and Sublessee's failure to do so shall be a material breach of this Sublease.
Lessee shall not be required to keep the Security Deposit separate from its
general funds, and Sublessee shall not be entitled to interest thereon. If
Sublessee shall fully and faithfully perform every provision of this Lease to be
performed by it, the Security Deposit or any balance thereof then remaining
shall be returned to Sublessee, following surrender of the Premises to Lessee in
good condition, normal wear and tear excepted, within thirty (30) days
thereafter, but only if Sublessee has then made full payment of any and all
remaining Rent and other sums due to Lessee hereunder. The Security Deposit
shall not be applied as the last month's Rent hereunder.
15. NOTICES.
15.1 All notices required or permitted to be given under this
Sublease Agreement shall be in writing and shall be deemed given and delivered,
whether or not received, three (3) days after deposit in the United States Mail,
postage prepaid and properly addressed, by certified mail, return receipt
requested, at the following addresses:
To Sublessee: American Artist Corporation
Embassy Row, Building 600
6600 Peachtree Dunwoody Rd., #220
Atlanta, Georgia 30328
ATTN: Steve Brown
Steven D. Brown
9965 Lake Forest Way
Roswell, Georgia 30076
To Lessee: CSX Intermodal, Inc.
BellSouth Tower, 20th Floor
301 West Bay Street
Jacksonville, Florida 32202
ATTN: Mark Hoffmann, General Counsel
With a copy to: CSX Real Property, Inc.
BellSouth Tower, 8th Floor
301 West Bay Street
Jacksonville, Florida 32202
ATTN: Charles McSwain, Assistant Vice President
With a copy to: UNIVEST REAL ESTATE
7000 Central Parkway, Suite 970
<PAGE> 7
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CSXI File____
Atlanta, Georgia 30328
Attn: Mr. Greg T. Baxendale
15.2 In addition, any notice may be given by hand delivery to the
notice address of either party with a signed receipt obtained.
15.3 Either party may at any time designate by written notice to
the other a change in the above addresses.
16. SUCCESSORS AND ASSIGNS.
16.1 This Sublease Agreement shall be binding upon and inure to the
benefit of Lessee and the Sublessee and their respective permitted successors
and assigns.
17. END OF SUBLEASE TERM. At the end of the term of this Sublease
Agreement, Sublessee shall remove its personal property and removable trade
fixtures from the Sublease Premises, and shall deliver the Sublease Premises to
Lessee in the same condition as at the commencement of the Sublease term
(ordinary wear and tear and casualty excepted). Sublessee shall indemnify Lessee
for any loss sustained by Lessee for Sublessee's failure to comply with this
section.
18. WAIVER OF SUBROGATION. Unless prohibited under any applicable insurance
policies maintained, Lessee and Sublessee shall hereby waive any and all rights
of recovery against the other, or against the officers, employees, agents or
representatives of the other, for loss or other damage to its property or the
property of others under its control if such loss or damage is covered by any
insurance policy of such waiving party in force (whether or not described in
this Sublease Agreement) or would be covered by the insurance the waiving party
is required to maintain under this Sublease Agreement, at the time of such loss
or damage.
19. CASUALTY/CONDEMNATION. In the event of (a) a casualty constituting a
"Listed Cause" under the Lease and not resulting from the fault, negligence,
omission or other misconduct of Sublessee, its agents, employees, licensees,
invitees or visitors, or (b) a taking under the power of eminent domain causes
all or a portion of the Sublease Premises to be rendered untenantable, the
subrental payable hereunder for the period during which the damage, repair,
restoration or taking causes the Sublease Premises to be rendered untenantable
shall be abated in proportion to the square footage which Sublessee is deprived
of using.
20. LESSOR'S CONSENT. Notwithstanding any contrary provision contained
herein, the demise of the Sublease Premises contemplated under this Sublease
Agreement is conditioned upon and subject to the consent of Lessor as provided
for on Exhibit "C" attached hereto. In the event that the consent of Lessor to
this Sublease Agreement (in form acceptable to Lessee and Sublessee) is not
obtained for any reason on or before February 1, 1999 (or such later date as
approved in writing by Lessee and Sublessee), this Sublease Agreement shall
automatically terminate.
21. SUBLESSEE'S FINAL APPROVAL. This Sublease Agreement is contingent upon
final approval of Sublessee's Board of Directors which shall be granted or not
granted no later than 5 p.m. January 13, 1999. Sublessee shall give written
notice of such to Lessee's Broker via Fax.
22. ENTIRE AGREEMENT.
22.1 This Sublease Agreement contains the entire agreement between
Lessee and Sublessee relating to the Sublease Premises, and supersedes all prior
and contemporaneous negotiations, understandings and agreements, written or
oral, between the parties.
<PAGE> 8
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CSXI File____
22.2 This Sublease Agreement shall not be amended or modified, and
no waiver of any provision hereof shall be effective, unless set forth in a
written instrument executed by Lessee and Sublessee.
22.3 This Sublease Agreement shall be governed under the laws of
the State of Georgia.
IN WITNESS WHEREOF, Lessee has caused its corporate name to be signed hereto and
its corporate seal to be affixed, and Sublessee has caused its corporate name to
be signed hereto and its corporate seal to be affixed; each by its authorized
officer, all as of the date first above written.
LESSEE:
WITNESSES: CSX INTERMODAL, INC.
By: /s/ Mark S. Hoffman
- --------------------------------- ---------------------------------
(SEAL)
Print Title: Gen. Counsel
------------------------
Print Name: Mark S. Hoffman
- --------------------------------- -------------------------
SUBLESSEE:
AMERICAN ARTISTS FILM CORPORATION
By: /s/ Steven D. Brown CEO
- --------------------------------- ---------------------------------
(SEAL)
Print Title: Chief Executive Officer
------------------------
Print Name: Steve Brown
- --------------------------------- -------------------------
Steven D. Brown (Personally)
By: /s/ Steven D. Brown
- --------------------------------- ---------------------------------
SS#: ###-##-####
--------------------------------
<PAGE> 9
Exhibit I
Not Applicable
<PAGE> 10
Exhibit 2
Lessee at Lessee's expense shall cut a door opening from the Storage Room to the
rest of the Premises.
<PAGE> 11
"""""""""""
LEASE AGREEMENT
BETWEEN
EMBASSY ROW VENTURE
(Lessor)
AND
CSL Intermodal Inc., (subsidiary of CSX Corporation)
a Delaware Corporation
(Lessee)
[Suite/Building]
Suite 250/600
EMBASSY ROW OFFICE PARK
Atlanta, Georgia
(Premises)
Dated: March 5, 1991
"""""""""""
<PAGE> 12
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
1. Basic Lease Information and Certain Definitions 1
2. Premises 2
3. Term 2
4. Base Rent 3
5. Maintenance Rent 3
6. Security Deposit 5
7. Use 6
8. Parking 6
9. Abandonment of Premises 6
10. Repairs by Lessor 6
11. Repairs by Lessee 6
12. Possession 6
13. Inspection 6
14. Default 7
15. Exterior Signs 9
16. Removal of Fixtures 9
17. Services 9
19. Assignment and Subletting 10
19. Destruction or Damage 12
20. Condemnation and Orders of Governmental Authorities 12
21. Alterations and Improvements 12
22. Attorney's Fees 13
23. Homestead 13
24. Waiver of Subrogation 13
25. Indemnity 14
26. Insurance 14
27. Rules and Regulations 15
28. No Estate in Land 15
29. Holding Over 15
30. Surrender of Premises 15
31. Effect of Termination of Lease 15
32. Rights Cumulative 15
33. Notices 15
34. Time of Essence 16
35. Liens 16
36. Parties 16
37. Transfer of Tenants 16
38. Mortgages 17
39. Exculpation 17
40. Late Charges 17
41. Estoppel Certificates 17
42. Brokerage 17
43. Severability 17
44. Headings 18
45. Entire Agreement 18
46. Authority 18
47. Governing Law 18
48. Use of Name 18
49. No Easements 18
50. Work Letter 18
</TABLE>
<PAGE> 13
LEASE AGREEMENT
STATE OF GEORGIA
COUNTY OF FULTON
THIS LEASE is made this 5th day of March, 1991, by and between Embassy
Row Venture, a joint venture between New York Life Insurance Company, A New York
corporation, and Bailey & Associates, No. 1, Ltd., a Georgia limited partnership
(collectively, "Lessor"). and CSL Intermodal, Inc. ("Lessee"). (subsidiary of
CSX Corporation) a Delaware Corporation
W I T N E S S E T H:
That, for and in consideration of One Dollar ($1.00), the mutual terms,
covenants and conditions set forth herein and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
Lessor and Lessee hereby agree as follows:
1. BASIC LEASE INFORMATION AND CERTAIN DEFINITIONS. Each reference in
this Lease to information and definitions contained in the Basic Lease
Information and Definitions and each use of the terms capitalized and defined
herein shall be deemed to refer to, and shall have the respective meaning set
forth, herein:
(a) Actual Operating Expenses: See Section 5(b) below.
(b) Additional Rent: See Section 5(g) below.
(c) Adjustment Date: See Section 4(b) below.
(d) Assignment and Subletting: See Section 18 below.
(e) Base Rent: See Section 4 below.
(f) Building: The building constructed on a portion of the Land located
at Atlanta, Fulton County, Georgia.
(g) Commencement Date: That certain date on which the Term, and the
Rent payable hereunder, shall commence, as such date is determined pursuant to
Section 3 hereof, but in no event later than February 1, 1991
(h) Default Rate: See Section 14(k) below.
(i) Event of Default: See Section 14(a) below.
(j) Index: See Section 4(b) below.
(k) Insurance. See Section 26 below.
(l) Land: That certain tract or parcel of land designated as the
"Land" in Exhibit "C" attached hereto and made a part hereof by reference.
<PAGE> 14
(m) Lease Expiration Date: January 31, 1996
(n) Lease Year: See Section 3 below.
(o) Lessee's Permitted Use: Office purposes only. See Section 7 below.
(p) Lessee's Proportionate Share: See Section 5 below.
(q) Maintenance Rent: See Section 5 below.
(r) Net Rentable Area of the Premises: Notwithstanding any provision
contained herein to the contrary, Lessor and Lessee hereby agree that the Net
Rentable Area of the Premises is 5,663 square feet as of the date hereof,
subject to recalculation pursuant to Section 20 below.
(s) Net Rentable Area of the Building: 152,119 square feet, subject to
recalculation pursuant Section 20 below.
(t) Notices: See Section 33 below.
(u) Operating Expenses: See Section 5(c) below.
(v) Parking: See Section 8 below.
(w) Premises: That portion of the 2nd floor of the Building, comprised
of 5,663 square feet thereof, substantially as shown by diagonal lines drawn on
floor plan(s) attached hereto as Exhibit "A" and made a part hereof by
reference.
(x) Projection of Operating Expenses: See Section 5(a) below.
(y) Rent: Base Rent as defined in Section 4 below, and Maintenance
Rent and Additional Rent as defined in Section 5 below.
(z) Security Deposit: $8,259.00 See Section 6 below.
(aa) Services: See Section 17 below.
(bb) Target Construction Completion Date: January. 31, 1991
(cc) Term: 5 Lease Years, beginning on the Commencement Date and ending
at 11:59 p.m. on the Lease Expiration Date, unless this Lease is sooner
terminated as provided herein.
2. PREMISES. Lessor does hereby rent and lease to Lessee, and Lessee
does hereby rent and lease from Lessor, the premises (the "Premises"), which
shall be deemed to contain 5,663 rentable square feet of office space (the "Net
Rentable Area of the Premises") located on the 2nd floor(s) of an office
building (the "Building") known as 600 Embassy Row and deemed to contain l52,192
rentable square feet of office space (the "Net Rentable Area of the Building");
the Premises is more particularly set forth and designated on the floor plan
attached hereto as Exhibit "A" and made a part hereof by reference.
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<PAGE> 15
3. TERM. The term of this Lease shall be for 5 Lease Years (the
"Term"), and shall begin on the 1st day of February, 1991 (subject to adjustment
as hereinafter in this Section 3 described, the "Commencement Date"), and end at
11:59 p.m. on the 31st day of January, 1996 (the "Lease Expiration Date"),
unless this Lease is sooner terminated as hereinafter provided; provided,
however, that in the event that the construction of all improvements of the
Premises due to be completed prior to the Commencement Date (a) are completed or
substantially completed prior to said date, and Lessee occupies the Premises
prior to said date, the Commencement Date shall be such date of occupancy, and
the Term shall be lengthened accordingly; or (b) are not substantially completed
by said date, the Commencement Date shall be the date said improvements are so
substantially completed (or, in the event such substantial completion is delayed
by reason of act or omission of Lessee, the date on which such substantial
completion would have occurred absent such delaying act or omission of Lessee).
In any event, the Commencement Date shall be evidenced by a memorandum executed
by Lessor (a copy of which shall be furnished to Lessee), substantially in the
form of Exhibit "B" attached hereto and made a part hereof by reference. Such
memorandum shall be conclusive and binding on Lessee as to all matters set forth
therein unless, within ten (10) days following the giving of such memorandum,
Lessee contests Lessor's determination of the Commencement Date by providing to
Lessor in writing reasonably detailed information indicating error in such
determination. If Lessor does not agree with such information so provided by
Lessee, Lessor and Lessee shall promptly and in good faith attempt to resolve
such dispute by mutual agreement or, if such mutual, agreement cannot be
promptly reached, the parties may seek resolution through the appropriate court
located in Fulton County, Georgia, and pursuant to the laws of the State of
Georgia; provided, however, that Lessee shall pay to Lessor all Rent and all
other amounts due hereunder just as though Lessee had fully accepted Lessor's
determination of the Commencement Date until such dispute is resolved, at which
time Lessor shall (i) refund the amount, if any, due Lessee as a result of such
mutual agreement or litigation, and (ii) furnish Lessee with a final memorandum
setting the Commencement Date, which Lessor and Lessee shall both execute. The
foregoing notwithstanding, neither Lessor's failure to request the execution of,
nor Lessee's failure to execute, any such memorandum shall affect the
determination of the Commencement Date as set forth above. If the Commencement
Date as thus established is subsequent to the Commencement Date first specified
in this Section 3, the Lease Expiration Date shall nevertheless remain as
specified in this Section 3, and the Term shall be shortened accordingly.
The term "Lease Year" as used herein shall mean each twelve (12)-month
period of the Term, commencing with the first day of the month listed in the
first clause of this Section 3 as the Commencement Date and ending on the last
day of the month in which the Lease Termination Date is specified to occur,
provided that the first Lease Year shall commence with the actual Commencement
Date of this Lease and end as of 11:59 p.m. of the last day of the month in
which the Lease Expiration Date is specified to occur.
4. BASE RENT.
(a) The bass rent ("Base Rent") hereunder shall be Ninety Nine Thousand
One Hundred and Eight Dollars ($99,108.00) for the first Lease Year, payable as
hereinafter described, and for each subsequent Lease Year during the Term, the
amount determined in accordance with Section 4(b) below. Lessee shall pay to
Lessor, upon its execution of this Lease, the first month's installment of Base
Rent of $8,259.00 in advance, to be credited as the first thirty (30) days of
Base Rent following the Commencement Date. Thereafter during the first Lease
Year and for each subsequent Lease Year during the Term, Lessee shall pay to
Lessor, promptly on the first day of each month in advance during the Term,
without notice, demand, abatement, deduction Or set-off, in lawful money of the
United States of America,
-3-
<PAGE> 16
at the office of the Lessor or to such other person and/or place as Lessor may
have from time to time designated in writing, an installment of Base Rent, which
shall be $8,259.00 for the first Lease Year, and the monthly amount determined
in accordance with Section 4(b) below for each subsequent Lease Year. See
Special Stipulation #51.1.
[MATERIAL OMITTED]
-4-
<PAGE> 17
[Material Omitted]
-5-
<PAGE> 18
[Material Omitted]
-6-
<PAGE> 19
[Material Omitted]
6. SECURITY DEPOSIT. Lessee has deposited with Lessor the sum of $8,259.00
(the "Security Deposit"), as security for the faithful performance by lessee of
all the terms, covenants and conditions of this Lease to be kept and performed
by Lessee during the Term, including, but not limited to, the provisions
relating to the payment of Rent. Lessor may (but shall not be required to) use,
apply or retain all or any part of the Security Deposit for the payment of any
Rent or any other sum in default, or for the payment of any amount which Lessor
may spend to become obligated to spend by reason of Lessee's default, or to
compensate lessor for any other loss or damage which Lessor may suffer by
reason of lessee's default. If any portion of the Security Deposit is so used
or applied, Lessee shall, within five (5) days after written demand therefor by
Lessor,
-7-
<PAGE> 20
deposit cash with Lessor in an amount sufficient to restore the Security Deposit
to its original amount, and Lessee's failure to do so shall be a material breach
of this Lease. Lessor shall not be required to keep the Security Deposit
separate from Its general funds, and Lessee shall not be entitled to interest
thereon. If Lessee shall fully and faithfully perform every provision of this
Lease to be performed by it, the Security Deposit or any balance thereof then
remaining shall be returned to Lessee, following surrender of the Premises to
Lessor in good condition, normal wear and tear excepted, within thirty (30) days
thereafter, but only if Lessee has then made full payment of any and all
remaining Rent and other sums due to Lessor hereunder. The Security Deposit
shall not be applied as the last month's Rent hereunder.
7. USE. Lessee covenants and agrees that the Premises shall be used for
office purposes only and shall not be used for any illegal purpose, nor in
violation of any regulation of any governmental body, agency or officer having
jurisdiction over the Premises or the Building, nor in any manner to create any
nuisance or trespass, nor in any manner to vitiate the insurance or increase the
rate of insurance on the Premises or the Building.
8. PARKING Lessor agrees that it will provide parking on the Land as
required by applicable zoning and other local laws, ordinances, rules and
regulations for the use of the occupants of the Building, their customers,
guests and invitees. Such parking shall be available to Lessee and the other
occupants of the Building, their customers, guests and invitees on a "first
come, first serve" basis, and Lessee accepts such parking arrangements as
suitable for its purposes and requirements.
Lessor may at its option provide parking spaces and reserve same for
its own exclusive use.
9. ABANDONMENT OF PREMISES. Lessee covenants not to abandon or vacate
the Premises during the Term, and covenants to occupy the Premises for the
purpose herein stated until the expiration or earlier termination hereof.
10. REPAIRS BY LESSOR. Lessee accepts the Premises in their present
"as-is" condition and agrees that the Premises are suited for the use intended
by Lessee. Lessor shall not be required to make any repairs or improvements to
the Premises except for structural repairs necessary for safety and tenant
ability. Lessor shall keep in good order only the roof, exterior walls excluding
windows, window frames and sashes, abutting sidewalks, and air conditioning,
beating, water, sewer, electrical and sprinkler systems pertaining to the
Building, but not electric and plumbing fixtures pertaining to such systems
serving only the Premises. Lessee shall protect said systems against freezing or
other damage and shall repair at its own cost and expense any damage to said
systems caused by freezing or due to other neglect by Lessee.
11. REPAIRS BY LESSEE. Lessee shall repair partitions, all glass and
plate glass, all electric and plumbing fixtures and all machinery whatever in
the Premises. Lessee shall be liable for and shall hold Lessor harmless in
respect of damage or injury to the Premises or the person or property of Lessee,
or the property or persons of Lessor's other tenants, agents and employees and
their customers, guests, licensees and invitees, if due to act or neglect of
Lessee, or any one in its control or employ. Lessee shall at once report in
writing to Lessor any defective condition known to it which Lessor is required
to repair, and failure to so report shall make Lessee responsible for damages
resulting from any such defective condition.
12. POSSESSION. Lessor makes no representations that the Premises will
be available for occupancy on the Commencement Date first specified in Section 3
hereof. If Lessor shall be unable to give Possession of the Premises on the
Commencement Date first specified in Section 3 hereof for any reason whatsoever,
including the fault of Lessor, Lessor shall not be subject to any liability. No
such failure to give possession on such date shall in any way affect the
validity of this Lease or the obligations of Lessee
-8-
<PAGE> 21
hereunder, nor shall there be deemed to be any implied condition that Lessor
will deliver to Lessee possession of the Premises on any prescribed date. If
permission is given to Lessee enter into the possession of or to occupy office
space other than the Premises prior to the Commencement Date, Lessee covenants
and agrees that such occupancy shall be deemed to be a leasing of substitute
premises under all the terms, covenants, conditions and provisions of this
Lease, and in such event there shall be no abatement of Rent. Lessee
acknowledges that it currently has possession of the premises.
13. INSPECTION. Lessor may enter the Premises at all reasonable hours
and upon reasonable notice to exhibit same to prospective purchasers or tenants,
to inspect the Promises to see that Lessee is complying with all of its
obligations hereunder, and to make repairs required of Lessor under the terms
hereof or repairs or modifications to any adjoining space; provided, however,
that in the event of an emergency, Lessor may enter the Premises at any time
without notice to abate the emergency.
14. DEFAULT.
(a) The occurrence of any one or more of the following events shall
constitute an event of default (each an "Event of Default") of Lessee under this
Lease: (1) If Lessee fails to pay any installment of Rent hereunder as and when
such installment becomes due and such failure shall continue for more than five
(5) days after Lessor gives Lessee notice of past due Rent; (ii) If Lessee fails
to pay Rent on time more than twice in any period of twelve (12) months
(provided Lessor has given Lance written notices of the previous failures during
such twelve (12)-month period within twenty (20) days of the date such payment
was due), notwithstanding that such payments have been made within the
applicable cure period; (iii) if the Premises become vacant, deserted or
abandoned for more than ten (10) consecutive days or if Lessee falls to take
possession or the Premises on the Commencement Date or promptly thereafter, (iv)
if Lessee permits to be done anything which creates a lien Upon the Premises,
the Building or the Land and fails to discharged or bond such lien; (v) if
Lessee violates the provisions of Section 18 hereof by attempting to make an
unpermitted assignment or sublease; (vi) if Lessee fails to maintain in force
all policies of insurance required by this Lease and such failure shall continue
for more than ten (10) days after Lessor gives Lessee notice of such failure;
(vii) if any petition is filed by or against Lessee or any guarantor of this
Lease under any present or future section or chapter of the Bankruptcy Code, or
under any similar law or statute of the United States or any state thereof
(which, in the case of an involuntary proceeding, is not permanently discharged,
dismissed, stayed or vacated, as the case may be, within sixty (60) days of
commencement), or if any order for relief shall be entered against Lessee or any
guarantor of this Lease in any such proceedings, (viii) if Lessee or any
guarantor of this Lease becomes insolvent or makes a transfer in fraud of
creditors or makes an assignment for the benefit of creditors; (ix) if a
receiver, custodian or trustee is appointed for the Premises or for all or
substantially all of the assets of Lessee or of any guarantor of this Lease,
which appointment is not vacated within sixty (60) days following the date of
such appointment; (x) If Lessee falls to perform or observe any other term of
this Lease and such failure shall continue for more than ten (10) days after
Lessor gives Lessee notice of such failure, or, if such failure cannot be
corrected within such ten (10)-day period, if Lessee does not commence to
correct such default within said ten (10)-day period and thereafter diligently
prosecute the correction of same to completion within a reasonable time and In
any event prior to the time a failure to complete such correction could cause
Lessor to be subject to prosecution for violation of any law, rule, ordinance or
regulation, or causes, or could cause, a default under any mortgage. tenant
lease or other agreement applicable to the Building; or (xi) If Lessee fails to
perform any term (other than the payment of Rent) of this Lease more than three
(3) times in any period of twelve (12) months, notwithstanding that Lessee has
corrected any previous failures within the applicable cure period.
(b) Upon the occurrence of any one or more of the aforesaid Events of
Default, or upon the occurrence of any other default or defaults by Lessee under
this Lease, Lessor may, at Lessor's option, without any demand or notice
whatsoever (except as expressly required by this Section 14):
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(i) Terminate this Lease by giving Lessee notice of termination. in
which event this Lease shall expire and terminate on the date specified in such
notice of termination with the same force and effect as though the date so
specified were the Lease Expiration Date hereunder, and all rights of Lessee
under this Lease and in and to the Premises shall expire and terminate and
Lessee shall remain liable for all obligations under this Lease arising up to
the date of such termination, and Lessee shall surrender the Premises to Lessor
on the date specified in such notice, and if Lessees fails to so surrender
Lessor shall have the right, without notice. to enter upon and take possession
of the Premises and to expel or remove Lessee and its effects without being
liable for prosecution or any claim for damages therefor, or
(ii) Terminate this Lease as provided in Section 14(b)(i) hereof and
recover from Lessee all damages Lessor may incur by reason of Lessee's default,
including, without limitation, a sum which, at the date of such termination,
represents the then-value of the excess, if any, of (A) (i) all Rent, and all
other sums which would have been payable hereunder by Lessee for the period
commencing with the day following the date of such termination and ending at the
Lease Expiration Date, over (iii) the aggregate reasonable rental value of the
Premises for the same period, together with interest thereon at the Default Rate
from the date due until paid, plus (B) the costs of recovering the Premises and
all other expenses incurred by Lessor due to Lessee's default, including,
without limitation, attorney's fees at the rate set forth in Section 14(k)
hereof and interest at the Default Rate from the date such costs are incurred
until paid, plus (C) the unpaid Rent earned as of the date of termination plus
interest thereon at the Default Rate, plus (D) other sums of money and damages
owing on the date of termination by Lessee to Lessor under this Lease or in
connection with the Premises, all of which excess sum shall be deemed
immediately due and payable; or
(iii) [MATERIAL OMITTED]
(iv) Without terminating this Lease, and with or without notice to
Lessee, Lessor may, in its own name but as agent for Lessee, enter into and upon
and take possession of the Premises or any part thereof, and, at Lessor's
option, remove persons and property therefrom and such property, If any, may be
removed and stored in a warehouse or elsewhere at the cost of, and for the
account of, Lessee, all without being deemed guilty or trespass or becoming
liable for any loss or damage which may be occasioned thereby, and Lessor may
rent the Premises or any portion thereof as the agent of Lessee with or without
advertisement, and by private negotiations and for any term upon such terms and
conditions as Lessor may deem necessary or desirable In order to relet the
Premises. Lessor shall in no way be responsible or liable for any failure to
rent the Premises or any part thereof, or for any failure to collect any rents
due upon such reletting. Upon each such reletting, all rents received by Lessor
from such reletting shall be applied; first, to the payment of any indebtedness
(other than any Rent due hereunder) from Lessee to
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Lessor, including, without limitation, amounts due under Section 14(b)(iii)
hereof, including interest thereon at the Default Rate; second, to the payment
of any costs and expenses of such reletting, including, without limitation,
brokerage fees and attorney's fees and costs of alterations and repairs,
together with interest thereon at the Default Rate; third, to the payment of
Rent and other charges then due and unpaid hereunder, together with interest
thereon at the Default Rate; and the residue, if any, shall be held by Lessor to
the extent of and for application in payment of future Rent, if any becomes
owing, as the same may become due and payable hereunder. In reletting the
Premises as aforesaid, Lessor may grant rent concessions and Lessee shall not be
credited therefor. If such rents received from such reletting shall at any time
or from time to time be less than sufficient to pay to Lessor the entire sums
then due from Lessee hereunder, Lessee shall pay any such deficiency as Rent
hereunder to Lessor. Such deficiency shall, at Lessor's option, be calculated
and paid monthly. Notwithstanding any such reletting without termination, Lessor
may at any time thereafter elect to terminate this Lease for any such previous
default, provided the same has not been cured; or
(v) Without terminating this Lease, and with or without notice to
Lessee, Lessor may enter into and upon the Premises and without being liable for
prosecution or any claim for damages therefor, maintain the Premises and repair
or replace any damage thereto or do anything for which Lessee is responsible
hereunder. Lessee shall reimburse Lessor immediately upon demand for any
expenses which Lessor incurs in thus affecting Lessee's compliance under this
Lease, and Lessor shall not be liable to Lessee for any damages with respect
thereto; or
(vi) Without liability to Lessee or any other party and without
constituting a constructive or actual eviction, suspend or discontinue
furnishing or rendering to Lessee any property, material, labor, utilities or
other service, wherever Lessor is obligated to furnish or render the same, so
long as Lessee is in default under this Lease; or
(vii) [material omitted]
(viii) Foreclose any lien or security interest in any property in the
Premises which Lessor has under the terms of this Lease or the laws of the State
of Georgia including the immediate taking of possession of all property on or in
the Premises; or
(ix) Pursue such other remedies as are available at law or in equity.
(c) If this Lease shall terminate as a result of or while there exists a
default or Event of Default hereunder, any funds of Lessee held by Lessor may be
applied by Lessor to any damages payable by Lessee (whether provided for herein
or by law) as a result of such termination or default.
(d) The parties hereby waive trial by jury in any action, proceeding or
counterclaim brought by either of the parties herein against the other on any
matters whatsoever, arising out of or in any way connected with this Lease,
Lessee's use or occupancy of the Premises, or any claim of injury or damage
hereunder, and Lessee covenants and agrees that Lessee will not interpose any
counterclaim, offset or deduction in any summary proceeding brought by Lessor to
recover possession of the Premises.
(e) Neither the commencement of any action or proceeding, nor the
settlement thereof, nor entry of judgment thereon, shall bar Lessor from
bringing subsequent actions or proceedings from time to time, nor shall the
failure to include in any action or proceeding any sum or sums then due be a bar
to the maintenance of any subsequent actions or proceedings for the recovery of
such sum or sums so omitted.
(f) The foregoing provisions of this Section 14 shall apply to any renewal
or extension of this Lease.
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<PAGE> 24
(g) If any statute or rule of law shall limit any of Lessor's remedies
as hereinabove set forth, Lessor shall nonetheless be entitled to any and all
other remedies hereinabove set forth.
(h) No agreement to accept a surrender of the Premises and no act or
omission by Lessor or Lessor's agents during the Term shall constitute an
acceptance or surrender of the Premises unless made in writing and signed by
Lessor. No re-entry or taking possession of the Premises by Lessor shall
constitute an election by Lessor to terminate this Lease unless a written notice
Of such intention is given to Lessee.
(i) No provision of this Lease shall be deemed to have been waived by
either party unless such waiver is in writing and signed by the party against
whom such waiver is asserted. Lessor's acceptance of Rent following an Event of
Default hereunder shall not be construed as a waiver of such Event of Default.
No custom or practice which may grow up between the parties in connection with
the terms of this Lease shall be construed to waive or lessen either party's
right to insist upon strict performance of the terms of this Lease, without a
written notice thereof to the other party.
(j) The rights granted to Lessor in this Section 14 shall be cumulative
of every other right or remedy provided in this Lease or which Lessor may
otherwise have at law or in equity or by statute, and the exercise of one or
more rights or remedies shall not prejudice or impair the concurrent or
subsequent exercise of other rights or remedies or constitute a forfeiture or
waiver of rental or damages accruing to Lessor by reason of any Event of Default
under the Lease.
(k) In the event of the happening of any Event of Default hereunder for
which Lessor exercises any of the foregoing remedies requiring the payment of
money by Lessee, or which Lessor, in its sole and absolute discretion,
undertakes to cure, Lessee covenants to pay to or reimburse Lessor for all
amounts so due or paid to effect such cure, as the case may be, together with,
in each case, interest thereon from the date due at the lesser of (i) 2% above
the rate of interest from time to time publicly announced by Trust Company Bank
in Atlanta, Georgia or its successor, as its prime rate or (ii) the maximum
interest rate allowed by law for demand loans to Lessee in the amount of, such
required payment or reimbursement (the ""Default Rate''), and attorney's fees
actually and reasonably incurred.
15. EXTERIOR SIGNS. Lessee shall place no signs upon or within the
windows, outside walls or roof of the Premises or the Building except with the
written consent of Lessor which it may withhold in its sole discretion. Any and
all signs approved to be placed on the Premises or the Building by Lessee shall
be maintained in compliance with rules and regulations governing such signs from
time to time promulgated by Lessor, and Lessee shall be responsible to Lessor
for any damages caused by installation, use or maintenance of said signs, and
Lessee agrees, upon removal of said signs, to repair all damage incident to such
removal.
16. REMOVAL OF FIXTURES. Lessee may (if not in default hereunder),
prior to the Lease Expiration Date or the expiration of any extension or renewal
of this Lease, remove any movable or non-structural fixtures and equipment which
Lessee his placed in the Premises, provided Lessee repairs all damage to the
Premises caused by such removal (including, without limitation, any damages or
costs associated with any tenant finish or modifications installed especially
for Lessee). Upon the expiration or earlier termination of this Lease, any
fixtures or equipment not so removed in accordance with the preceding sentence
which are remaining in or on the Premises (including, without limitation, any
movable and non-structural fixtures and equipment) shall, at the option of
Lessor, either (a) become the property of Lessor, or (b) be removed from the
Premises in any manner that Lessor shall choose and be stored without liability
to Lessor for loss thereof, with Lessee being liable to Lessor for all expenses
incurred in such removal and storage of such property, together with interest on
such expenses from the date incurred at the Default Rate. Lessor may
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elect to treat a portion of such property of Lessee as becoming the property of
Lessor and may remove and store another portion of such property, and any such
allocation thus made by Lessor shall be valid and conclusive upon Lessee.
17. SERVICES. Lessor shall cause the Premises to be cleaned and
generally cared for by janitors of the Building; will furnish elevator service;
will furnish electricity for lighting and for small office machines and
equipment, and will furnish seasonal air conditioning and heat during normal
business hours, said air conditioning and heat not being furnished on Saturdays,
Sundays or holidays. To the extent that Lessee requires any of the above
services at times or in quantities other than as Lessor has agreed to provide,
and if Lessor is willing to provide such services to Lessee, the same shall be
provided at Lessee's sole cost and expense and at Lessor's cost thereof, which
cost shall include any overtime expense involved, an allocation of Lessor's
overhead, administrative and related costs, and a reasonable profit by Lessor
for providing such services. The amount and/or degree of heat or air
conditioning that may be furnished shall be at the reasonable discretion of
Lessor. No failure to furnish, or any stoppage of, the services referred to
above resulting from any cause shall make Lessor liable in any respect for
damages to any person, property or business, or be construed as an eviction of
Lessee, or entitle Lessee to any abatement of Rent or other relief from any of
Lessor's obligations under this Lease. Should any malfunction of any systems or
facilities occur within the Building or should maintenance or alterations of
such systems or facilities become necessary, Lessor shall repair the same with
reasonable diligence, and Lessee shall have no claim for rebate, abatement of
Rent or damages because of malfunctions or any such interruptions in service
beyond Lessor's control. If any interruption of services within Lessor's control
extends beyond five (5) business days, Lessee may be entitled to rental
abatement to their extent that such interruption materially and adversely
affects Lessee's use of the premises. In the event Lessee installs or utilizes
machinery, equipment or other items in the Premises or takes or fails to take
action in such a manner as to result in an increase in the cost of the
services to be provided pursuant to this Section 17 by Lessor, upon written
notice from Lessor, Lessee shall either (a) pay to Lessor all such additional
costs as specified by Lessor in such notice, or (b) promptly to discontinue
such utilization, act or omission.
18. ASSIGNMENT AND SUBLETTING.
(a) Neither Lessee nor its legal representatives or successors in
interest shall, by operation of law or otherwise, assign, mortgage, pledge,
encumber or otherwise transfer this Lease or any part hereof, or the interest of
Lessee under this Lease, or in any sublease or the rent thereunder; the Premises
or any part thereof shall never be sublet, occupied or used for any purpose by
anyone other than Lessee, without Lessee's obtaining in each instance the prior
written consent of Lessor in the manner hereinafter provided. Lessee shall not
modify, extend or amend a sublease previously consented to by Lessor without
obtaining Lessor's prior written consent thereto.
(b) An assignment of this Lease shall be deemed to have occurred
[Material Omitted]
(c) If Lessee should desire to assign this Lease or sublet the Premises
(or any part thereof) and Lessee is not then in default under this Lease, Lessee
shall give Lessor written notice at least ninety (90) days in advance of the
proposed effective date of any other proposed assignment or sublease, specifying
(i) the name and business of the proposed assignee or sublessee, (ii) the amount
and location of the space within the Premises proposed to be so subleased, (iii)
the proposed effective date and duration of the assignment or subletting, and
(iv) the proposed rent or consideration to be paid to
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Lessee by such assignee or sublessee. Lessee shall promptly supply Lessor with
such financial statements and other information as Lessor may request to
evaluate the proposed assignment or sublease. For assignments and sublettings
other than those permitted by Section 18(b) above, Lessor shall have a period of
thirty (30) days following receipt of such notice and other information
requested by Lessor within which to notify Lessee in writing that Lessor elects:
(x) to terminate this Lease as to the space so affected as of the proposed
effective date set forth in Lessee's notice, in which event Lessee shall be
relieved of all further obligations hereunder as to such space, except for
obligations under all other provisions of this Lease which expressly survive the
termination hereof; (y) to permit Lessee to assign or sublet such space;
provided, however, that, if the rental rate agreed upon between Lessee and its
proposed subtenant is greater than the rental rate that Lessee must pay Lessor
hereunder for that portion of the Premises, or if any consideration shall be
promised to or received by Lessee in connection with such proposed assignment or
sublease (in addition to rental), then fifty (50%) percent of such excess rent
and other consideration shall be considered Additional Rent owed by Lessee to
Lessor (less brokerage commissions, reasonable attorneys' fees and other
disbursements reasonably incurred by Lessee for such assignment and subletting,
if acceptable evidence of such disbursements is delivered to Lessor), and shall
be paid by Lessee to Lessor, in the case of excess rental, in the same manner
that Lessee pays Base Rent and, in the case of any other consideration, within
ten (10) business days after receipt thereof by Lessee; or (z) to refuse, in
Lessor's sole and absolute discretion, to consent to Lessee's assignment or
subleasing of such space and to continue this Lease for commercially reasonable
grounds in full force and effect as to the entire Premises. If Lessor should
fail to notify Lessee in writing of such election within the aforesaid thirty
(30)-day period, Lessor shall be deemed to have elected option (z) above. Lessee
agrees to reimburse Lessor for legal fees and any other costs incurred by Lessor
in connection with any permitted assignment or subletting and such reasonable
payment shall not be deducted from Additional Rent owed to Lessor pursuant to
clause (y) above. Lessee shall deliver to Lessor copies of all documents
executed in connection with any permitted assignment or subletting, which
documents shall be in form and substance satisfactory to Lessor and which shall
require such assignee to assume performance of all terms of this Lease on
Lessee's part to be performed. No acceptance by Lessor of any rental or any
other sum of money from any assignee, sublessee or other category of transferee
shall be deemed to constitute Lessor's consent to any assignment, sublease or
transfer.
(d) Any attempted assignment or sublease by Lessee in violation of the
terms and provisions of this Section 18 shall be void and such act shall
constitute a material breach of this Lease. In no event shall any assignment,
subletting or transfer, whether or not with Lessor's consent, relieve Lessee Of
its primary liability under this Lease for the Term, and Lessee shall in no way
be released from the full and complete performance of all of the terms hereof.
If Lessor takes possession of the Premises before the Lease Expiration Date,
Lessor shall have the right, at its option, to terminate all subleases, or to
take over any sublease of the Premises or any portion thereof and such subtenant
shall attorn to Lessor, as its landlord, under all the terms and obligations of
such sublease occurring from and after such date, but excluding previous acts,
omissions, negligence or defaults of Lessee and any repair or obligation in
excess of available net insurance proceeds or condemnation awards.
(e)(i) Lessee acknowledges that this Lease is a lease of nonresidential
real property and therefore agrees that Lessee, as the debtor in possession, or
the trustee for Lessee (collectively "the Trustee") in any proceeding under
Title 11 of the United States Bankruptcy Code relating to bankruptcy, as amended
(the "Bankruptcy Code"), shall not seek or request any extension of time to
assume or reject this Lease or to perform any obligations of this Lease which
arise from or after the order of relief.
(ii) If the Trustee proposes to assume or to assign this Lease or
sublet the Premises (or any portion thereof) to any person which shall have made
a bona-fide offer to accept an assignment of this Lease or a subletting on terms
acceptable to the Trustee, then the Trustee shall give Lessor and its mortgagees
of which Lessee has notice written notice setting forth the name and address of
such person and the terms and conditions of such
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offer, no later than twenty (20) days after receipt of such offer, but in any
event no later than ten (10) days prior to the date on which the Trustee makes
application to the Bankruptcy Court for authority and approval to enter into
such assignment or subletting. Lessor shall have the prior right and option, to
be exercised by written notice to the Trustee given at any time prior to the
effective date of such proposed assignment or subletting, to accept an
assignment of this Lease or subletting of the Premises upon the same terms and
conditions and for the same consideration, if any, as the bona-fide offer made
by such person, less any brokerage commissions which may be payable out of the
consideration to be paid by such person for the assignment or subletting of this
Lease.
(iii) The Trustee shall have the right to assume Lessee's rights and
obligations under this Lease only if the Trustee: (A) promptly cures or provides
adequate assurance that the Trustee will promptly cure any default under this
Lease; (B) compensates or provides adequate assurance that the Trustee will
promptly compensate Lessor for any actual pecuniary loss incurred by Lessor as a
result of Lessee's default under this Lease; and (C) provides adequate assurance
of future performance under this Lease. Adequate assurance of future performance
by the proposed assignee shall include, as a minimum, that: (I) any proposed
assignee of this Lease shall deliver to Lessor a security deposit in an amount
equal to at least three (3) months' Rent accruing under this Lease; (II) any
proposed assignee of this Lease shall provide to Lessor an audited financial
statement, dated no later than six (6) months prior to the effective date of
such proposed assignment or sublease, with no material change therein as of the
effective date, which financial statement shall show the proposed assignee to
have a net worth equal to at least twelve (12) months' Rent accruing under this
Lease, or, in the alternative, the proposed assignee shall provide a guarantor
of such proposed assignee's obligations under this Lease, which guarantor shall
provide an audited financial statement meeting the requirements of (II) above
and shall execute and deliver to Lessor a guaranty agreement in form and
substance acceptable to Lessor; and (III) any proposed assignee shall grant to
Lessor a security interest in favor of Lessor in all furniture, fixtures and
other personal property to be used by such proposed assignee in the Premises.
All payments of Rent required of Lessee under this Lease, whether or not
expressly denominated as such in this Lease, shall constitute rent for the
purposes of Title 11 of the Bankruptcy Code.
(iv) The parties agree that for the purposes of the Bankruptcy Code
relating to (A) the obligation of the Trustee to provide adequate assurance that
the Trustee will "promptly" cure defaults and compensate for actual pecuniary
loss, the word "promptly" shall mean that cure of defaults and compensation will
occur no later than sixty (60) days following the filing of any motion or
application to assume this Lease; and (B) the obligation of the Trustee to
compensate or to provide adequate assurance that the Trustee will promptly
compensate Lessor for "actual pecuniary loss", the term "actual pecuniary loss"
shall mean, in addition to any other provisions contained herein relating to
Lessor's damages upon default, payments of Rent, including interest at the
Default Rate on all unpaid Rent and other obligations of Lessee to pay money
under this Lease, all attorneys' fees and related costs of Lessor incurred in
connection with any default of Lessee and in connection with Lessee's bankruptcy
proceedings.
(v) Any person or entity to which this Lease is assigned pursuant to
the provisions of the Bankruptcy Code shall be deemed, without further act or
deed, to have assumed all of the obligations arising under this Lease and each
of the conditions and provisions hereof on and after the date of such
assignment. Any such assignee shall, upon the request of Lessor, forthwith
execute and deliver to Lessor an instrument, in form and substance acceptable to
Lessor, confirming such assumption.
(f) Lessor shall have the right to sell, transfer, assign, pledge and
convey all or any part of the Building and any and all of Lessor's rights under
this Lease. In the event that Lessor assigns or otherwise conveys its rights
under this Lease, Lessor shall be entirely freed and released from any
obligations accruing thereafter under the Lease, and Lessee agrees to look
solely to Lessor's successor-in-interest for performance of such obligations.
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19. DESTRUCTION OR DAMAGE. Should the Premises be destroyed or so
damaged by fire or other casualty that, in the reasonable opinion of Lessor,
rebuilding or repairs cannot be completed within one hundred eighty (180) days
from the date of such fire or casualty, then Lessor may terminate this Lease,
in which event Rent hereunder shall be abated from the date of such damage or
destruction. However, if the damage or destruction is such that, in the
reasonable opinion of Lessor, rebuilding or repairs can be completed within one
hundred and eighty (180) days, Lessor covenants and agrees to make such repairs
to the extent that there are available insurance proceeds to fund the repairs
with reasonable promptness and dispatch, and to allow Lessee an abatement in the
Rent then payable hereunder for such time as the Premises are untenantable or
proportionately for such portion of the Premises as shall be untenantable, and
Lessee covenants and agrees that the terms of this Lease shall not be otherwise
altered.
20. CONDEMNATION AND ORDERS OF GOVERNMENTAL AUTHORITIES.
(a) If all or any part of the Premises or the Building is permanently
taken or condemned by any competent authority for any public use or purpose
(including a deed given in lieu of condemnation), which taking or condemnation
renders the Premises substantially untenantable, this Lease shall terminate as
of the date title vests in such authority, and the Rent then payable hereunder
shall be apportioned as of such date.
(b) If any part of the Premises or the Building is taken or condemned
for any public use or purpose (including a deed given in lieu of condemnation)
and this Lease is not terminated pursuant to Section 20(a) above, the Rent then
payable hereunder shall be reduced for the period Of such taking by an amount
which bears the same ratio to such Rent as then payable as the number of square
feet of the Net Rentable Area of the Premises so taken or condemned bears to the
Net Rentable Area of the Premises specified in Section 2 above. Lessor, upon
receipt and to the extent of the award in condemnation or proceeds of sale,
shall make necessary repairs and restorations (exclusive of leasehold
improvements and personal property installed by Lessee) to restore the Premises
remaining to as near its former condition as circumstances will reasonably
permit, and to the Building to the extent necessary to constitute the portion of
same not so taken or condemned as a completed architectural unit. In the event
of any taking or condemnation described in this Section 20(b), the Net Rentable
Area of the Premises and the Net Rentable Area of the Building shall be reduced,
respectively, for all purposes under this Lease by the number of square feet of
the Net Rentable Area of the Premises and the Net Rentable Area of the Building
so taken or condemned. Nothing in this Section 20(b) shall prohibit the further
adjustment after such taking of Maintenance Rent hereunder in accordance with
the provisions of Section 5 hereof.
(c) Lessor shall be entitled to receive the entire price or award from
any cash sale, taking or condemnation without any payment to Lessee, and Lessee
hereby assigns to Lessor Lessee's interest, if any, in such award; provided,
however, that Lessee shall have the right separately to pursue against the
condemning authority an award in respect of the loss, if any, to the leasehold
improvements paid for by Lessee without any credit or allowance from Lessor.
(d) Lessee agrees, at its own expense, to promptly comply with all
requirements of any legally-constituted public authority made necessary by
reason of Lessee's occupancy of the Premises.
21. ALTERATIONS AND IMPROVEMENTS
(a) Lessee shall not at any time during the term hereof make any
alterations to the Premises without first obtaining Lessor's written consent
thereto, which consent Lessor shall not unreasonably withhold or delay;
provided, however, that Lessor shall not be deemed unreasonable by refusing to
consent to any alterations which are visible from the exterior of the Building
or Premises, which will or are likely to cause any weakening of
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<PAGE> 29
any part of the structure of the Premises or the Building or which will or are
likely to cause damage or disruption to the Building systems or which are
prohibited by any underlying mortgage, all of which alteration requests Lessor
may reject in its sole discretion. Should Lessee desire to make any alterations
to the Premises, Lessee shall submit all plans and specifications for such
proposed alterations to Lessor for Lessor's review before Lessee allows any such
work to commence, and Lessor shall approve or disapprove such plans and
specifications for any of the reasons set forth in this Section 21(a) or for any
other reason reasonably deemed sufficient by Lessor. Lessee shall select and use
only contractors, subcontractors or other service personnel from those listed on
Lessor's approved list maintained by Lessor in its management office. Upon
Lessee's receipt of written approval from Lessor and any required approval of
any mortgagee of Lessor, and upon Lessee's payment to Lessor of a reasonable fee
prescribed by Lessor for the work of Lessor and Lessor's employees and
representatives in reviewing and approving such plans and specifications, Lessee
shall have the right to proceed with the construction of all approved
alterations, but only so long as such alterations are in strict compliance with
the plans and specifications so approved by Lessor and with the provisions of
this Section 21, including the use of contractors and service personnel approved
in advance by Lessor in writing. All alterations shall be made at Lessee's
expense, either by Lessee's contractors approved in advance by Lessor, or, at
Lessee's option, by Lessor on terms reasonably satisfactory to Lessee, including
a reasonable fee of actual expenses to Lessor to cover Lessor's overhead. In no
event, however, shall Lessee or its contractors or repair personnel be permitted
to do or allow any work affecting the Building systems.
(b) All construction, alterations and repair work done by, or for,
Lessee shall (i) be performed in such a manner as to maintain harmonious labor
relations, (ii) not adversely affect the safety of the Building or the Premises
or the systems thereof; (iii) comply with all building, safety, fire, plumbing,
electrical and other codes and governmental and insurance requirements, (iv) not
result in any usage in excess of building standard of water, electricity, gas or
other utilities or of heating, ventilating or air-conditioning (either during or
after such work) unless prior written arrangements satisfactory to Lessor are
made with respect thereto, (v) be completed promptly and in a first-class and
workmanlike manner and, if applicable, in compliance with, and subject to, all
of the provisions of Exhibit "E" hereto, and (vi) not disturb other tenants in
the Building.
(c) All leasehold improvements, alterations and other physical
additions made to, or installed by or for Lessee in, the Premises shall be
insured by Lessee, including Lessee's furniture, personal property and movable
trade fixtures. Lessee shall remove, at Lessee's expense, all furniture,
personal property, movable trade fixtures and, if directed to or permitted to do
so by Lessor in writing, and to the extent that the removal of the same will not
cause any structural damage to the Premises or the Building, all, or any part
of, the leasehold improvements, alterations and other physical additions made by
Lessee to the Premises, on or before the expiration date or earlier termination
of this Lease; Lessee shall repair, or promptly reimburse Lessor for the cost of
repairing, all damage done to the Premises or the Building by such removal. Any
leasehold improvements, alterations or physical additions made by Lessee which
Lessor does not direct or permit Lessee to remove at any time during or at the
end of the term shall become the property of Lessor without any payment to
Lessee. If Lessee fails to remove any of Lessee's furniture, personal property
or movable trade fixtures by the expiration date or earlier termination of this
Lease or, if Lessee fails to remove any leasehold improvements and other
physical additions made by Lessee to the Premises which Lessor has in writing
directed Lessee to remove, Lessor shall have the right, on the fifth (5th) day
after Lessor's delivery of written notice to Lessee, to deem such property
abandoned by Lessee and to remove, store, sell, discard or otherwise deal with
or dispose of such abandoned property in a commercially-reasonable manner.
Lessee shall be liable for all costs of such disposition of Lessee's abandoned
property, and Lessor shall have no liability to Lessee in any respect regarding
such property of Lessee. The provisions of this Section 21(c) shall survive the
expiration or earlier termination of this Lease.
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<PAGE> 30
22. ATTORNEY'S FEES. Lessee agrees to pay all attorney's fees and
expenses Lessor incurs in enforcing any of the obligations of Lessee under this
Lease, or in any litigation or negotiation in which Lessor shall, without fault,
become involved through or an account of this Lease.
23. HOMESTEAD. Lessee waives all homestead rights and exemptions which
he may have under any law as against any obligation owing under this Lease.
Lessee hereby assigns to Lessor his homestead exemption.
24. WAIVER OF SUBROGATION. Each party hereto waives any and every claim
which may arise in its favor against the other party hereto during the term of
this Lease, or any renewal or extension hereof, for any and all loss of, or
damage to, any of its property located within or upon or constituting a part of
the Premises leased hereunder, if such loss or damage is covered by valid and
collectible fire and extended coverage insurance policies, and only to the
extent that such loss or damage is recoverable under said insurance policies.
Said mutual waivers shall be in addition to, and not in limitation or derogation
of, any other waiver or release contained in this Lease with respect to any loss
of, or damage to, property of the parties hereto. Inasmuch as the above mutual
waivers will preclude the assignment of any claim described above by way of
subrogation (or otherwise) to an insurance company (or any other person), each
party hereto agrees immediately to give to each insurance company which has
issued to it policies of fire and extended coverage insurance written notice of
the terms of said mutual waivers and to have said insurance policies properly
endorsed, if necessary, to prevent the invalidation of said insurance coverage
by reason of said waivers.
25. INDEMNITY. Lessee waives all claims against Lessor for damage to
any property or injury to, or death of, any person in, upon, or about the
Building arising at any time and from any cause other than solely by reason of
the negligence or willful misconduct of Lessor, its agents, employees,
representatives, or contractors, and Lessee shall indemnify Lessor and shall
hold Lessor harmless from any damage to any property or injury to, or death of,
any person arising from the use of such building by Lessee or its agents,
employees, representatives, contractors, or invitees. Lessor shall indemnify and
shall hold Lessee harmless from any damage to any property or injury to, or
death of, any person arising from any event, regardless of cause (except as
herein provided), which occurs within the Building excluding the premises (and
inside the Premises if caused by the negligence or willful misconduct of Lessor,
its agents, employees, representatives, or contractors), unless such damage or
injury results from the negligence or willful misconduct of Lessee or its
agents, employees, representatives, contractors, licensees, servants, or
invitees. The foregoing indemnity obligations of Lessee and Lessor shall include
attorneys' fees, investigation costs and all other costs and expenses incurred
by Lessee or Lessor, as the case may be, from the first notice that any claim or
demand has been made or may be made. The provisions of this Section 25 shall
survive the termination of this Lease with respect to any damage, injury or
death occurring before such termination. If Lessor is made party to any
litigation commenced by or against Lessee, or relating to this Lease or to the
Premises, and provided that in any such litigation Lessor is not finally
adjudicated to be at fault, then Lessee shall pay all costs and expenses,
including attorneys' fees and court costs, reasonably incurred by or imposed
upon Lessor because of any such litigation, and the amount of all such costs and
expenses, including attorneys' fees and court costs, shall be a demand
obligation owing by Lessee to Lessor.
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<PAGE> 31
26. INSURANCE.
(a) Lessee, at its sole expense, shall obtain and keep in force
during the Term the following insurance:
(i) Broad-form all Risk insurance insuring Lessee's interest in the
Premises and all property located in the Premises, including furniture,
equipment fittings, installations, fixtures, supplies and any other personal
property, leasehold improvements alterations ("Lessee's Property") against fire,
vandalism, malicious mischief, earthquake and other perils insured against by
extended coverage, in an amount equal to the full replacement value, it being
understood that no lack or inadequacy of insurance by Lessee shall in any event
make Lessor subject to any claim by virtue of any theft or loss or damage to any
uninsured or inadequately insured property;
(ii) Comprehensive general public liability insurance including
personal injury, bodily injury, broad-form property damage, operations hazard,
elevator, owner's and contractor's protective coverage, contractural liability,
products and completed operations liability and use of all owned, non-owned and
hired vehicles, in limits not less than $3,000,000.00 inclusive on a claims
basis or such higher limits as Lessor may require from time to time during the
term of this Lease provided such higher limits are required by Lessor for
tenants of comparable size in the Building or are reasonably necessitated by
Lessee's particular use of the Premises;
(iii) Worker's Compensation and Employer's Liability insurance, with a
waiver of subrogation endorsement, in form and amount satisfactory to Lessor and
as required by law; and
(iv) Any other form or forms or amounts of insurance or any changes or
endorsements to the insurance required herein as Lessor or any mortgagee of
Lessor may require from time to time, provided such higher limits are required
for tenants of comparable size in premises similar to the Building or are
reasonably necessitated by Lessee's particular use of the Premises.
(b) The insurance required to be maintained by Lessee hereunder shall
be issued by nationally-recognized responsible insurance carriers licensed to do
business in the State of Georgia. Lessee shall have the right to include the
insurance required by Section 26(a) under Lessee's policies of "blanket
insurance", provided that no other loss which may also be insured by such
blanket insurance shall affect the insurance coverages required hereby and
provided Lessee delivers to Lessor a certificate specifically stating that such
coverages apply to Lessor, the Premises and the Building. All such policies
of insurance or certificates thereof shall name Lessee and Lessor as named
insureds thereunder and shall name all mortgagees of Lessor as additional named
insureds of which Lessee has been notified, all as their respective interests
may appear. All such policies or certificates shall be issued by insurers,
acceptable to Lessor and in form and with deductibles, if any, satisfactory from
time to time to Lessor. Lessee shall deliver to Lessor certificates with copies
of policies, together with satisfactory evidence of payment of premiums for such
policies by the commencement date and, with respect to renewals of such
policies, not later than forty-five (45) days prior to the and of the expiring
term of coverage. All policies of insurance should be primary and Lessee shall
not carry any separate or additional insurance concurrent in form or
contributing in the event of any loss or damage with any insurance required to
be maintained by Lessee under this Lease. Upon Lessor's request Lessee shall
deliver to Lessor certified copies of such policies. All such policies and
certificates shall contain an agreement by the insurers to notify Lessor and any
mortgagee of Lessor in writing, by Registered U.S. mail, return receipt
requested, not less than forty-five (45) days before any material change,
reduction in coverage, cancellation, including cancellation for non-payment of
premium, or other termination thereof or change therein and shall include a
clause or endorsement denying the insurer any rights of subrogation against
Lessor, if such clause or endorsement is
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<PAGE> 32
obtainable without additional cost to Lessee. Lessee hereby waives any right of
recovery against Lessor for injury or loss due to hazards covered by policies of
insurance required to be carried by Lessor under this Lease.
(c) Lessor shall insure, or cause to be insured, the Building against
damage with casualty insurance in an amount not less than ninety percent (90%)
of the replacement value of the Building and with such deductibles as Lessor
reasonably deems appropriate, and comprehensive general public liability
insurance, in such amounts and with such deductibles as Lessor reasonably deems
appropriate. Notwithstanding any contribution by Lessee to the cost of insurance
premiums, as provided hereinabove, Lessor shall not carry insurance of any kind
on Lessee's Property, and Lessee hereby agrees that Lessee shall have no right
to receive any proceeds from any insurance policies carried by Lessor.
(d) Lessee shall not knowingly conduct or permit to be conducted in the
Premises any activity, or place any equipment in or about the Premises or the
Building, which will invalidate the insurance coverage in effect or increase the
rate of fire insurance or other insurance on the Premises or the Building, and
Lessee shall comply with all requirements and regulations of Lessor's casualty
and liability insurer. If any invalidation of coverage or increase in the rate
of fire insurance or other insurance occurs or is threatened by any insurance
company due to any act or omission by Lessee, or its agents, employees,
representatives or contractors, such statement or threat shall be conclusive
evidence that the increase in such rate is due to such act of Lessee or the
contents or equipment in or about the Premises, and, as a result thereof, Lessee
shall be liable for such increase and shall reimburse Lessor therefor upon
demand. Any such sum shall be considered rental payable with the next monthly
installment becoming due under this Lease. In no event shall Lessee introduce or
permit to be kept on the Premises or brought into the Building any
dangerous, noxious, radioactive or explosive substance.
(e) Notwithstanding anything to the contrary in this Section 26.00,
upon prior written notice to Lessor, Lessee may insure the amount of any
insurance required to be carried under Section 26.00 (a) under any plan of
self-insurance which it may from time to time have in force and effect provided
it furnishes upon request evidence satisfactory to Lessor and Lessor's lender of
the existence of an insurance reserve adequate for the risks covered by such
plan of self-insurance, or (b) under a blanket policy, or policies, covering
other liabilities of Lessee and its subsidiaries, controlling or affiliated
corporations, or (c) partly under such a plan of self-insurance and partly under
such blanket policies. Any portion of any risk for which Lessee is self-insured
shall be deemed to be an insured risk under this lease.
27. RULES AND REGULATIONS. The rules and regulations attached to this
Lease as Exhibit "D" shall be and are hereby made a part of this Lease. Lessee,
its employees and agents, will perform and abide by said rules and regulations,
and any amendments or additions to said rules and regulations as may be made
from time to time by Lessor in its sole and absolute discretion.
28. NO ESTATE IN LAND. This Lease shall create the relationship of
Lessor and Lessee between the parties hereto, no estate shall pass out of
Lessor. Lessee has only a usufruct, not subject to levy and sale, and not
assignable by Lessee except as provided in Section 18 hereof.
29. HOLDING OVER. If Lessee remains in possession of the Premises after
expiration of the term hereof, with Lessor's acquiescence and without any
express agreement of the parties, Lessee shall be a tenant under a
month-to-month tenancy at double the Rent (including Base Rent, Maintenance Rent
and all Additional Rent) in effect at the end of this Lease (and subject to all
terms and conditions of this Lease except as modified by this Section 29), and
there shall be no renewal of this Lease by operation of law.
30. SURRENDER OF PREMISES. At the expiration or earlier termination of
this Lease, Lessee shall surrender the Premises and keys thereto to Lessor, in
the same condition as at commencement or the term, natural wear and tear only
excepted.
31. EFFECT OF TERMINATION OF LEASE. No termination of this Lease prior
to the Lease Expiration Date, by lapse of time or otherwise, shall affect
Lessor's right to collect Rent for the period prior to termination thereof.
32. RIGHTS CUMULATIVE. All rights, powers and privileges conferred
hereunder upon Lessor shall be cumulative but not restrictive to those given at
law or in equity.
33. NOTICES.
(a) Any notice, election, or other communication required or permitted
hereunder shall be in writing and shall be either (i) delivered in person to the
following named parties, (ii) sent by certified or registered United States
mail, return receipt requested, postage and charges prepaid, to the following
addresses:
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<PAGE> 33
TO LESSOR: Charles J. Lauckhardt
Greystone Realty Corporation, for
New York Life Insurance Company
Two Pickwick Plaza, 3rd Floor
Greenwich, Connecticut 06830
WITH COPY TO: Jeffrey R. DuFresne
Greystone Realty Corporation
6190 Powers Ferry Road, Suite 200
Atlanta, Georgia 30339
WITH A COPY TO: Mr. William F. Bailey
Bailey & Associates
6190 Powers Ferry Road Suite 100
Atlanta, Georgia 30339
WITH A COPY TO: Mr. Mark Young
Manager
Intermodal Systems, Inc.
600 Embassy Row Suite 250
Atlanta, Georgia 30328
TO LESSEE: Mr. M. McNeil Porter
200 International Circle
Suite 4500
Hunt Valley, MD 21031
(b) Any notice, election or other communication delivered or mailed as
aforesaid shall, if delivered in person, be deemed received upon date of
delivery, if couriered by same day or overnight delivery service be deemed
received on the date of delivery to such addressee or address regardless if
accepted, and if mailed, such notice shall be deemed received upon date of
actual receipt or on the third (3rd) calendar day subsequent to date of
postmark, whichever is earlier.
(c) Each party hereof may change its address and addressee for notice,
election, and other communication from time to time by notifying the other
parties hereto of the new address and addressee in the manner provided for
giving notice herein.
(d) Any notice shall be deemed received if provided as aforesaid to any
of the above-named attorneys and to the above-named parties, regardless if
accepted or rejected.
34. TIME OF ESSENCE. Time is of the essence of this Lease.
35. LIENS. Lessee shall not suffer or give cause for the filing of any
lien against the Premises, the Building or the Land, and the existence of any
such lien of any nature against the Premises, the leasehold interest of Lessee
therein, the Building or the Land shall constitute a breach of this Lease.
36. PARTIES. "Lessor", as used in this Lease, shall include Lessor and
its heirs, executors, legal representatives, successors and assigns and
successors in title to the Building and the Premises, it being agreed and
understood by Lessee that Lessor may at any time freely transfer its entire
interest in the Building and the Premises, or any part thereof. "Lessee" shall
include Lessee and its heirs, executors, legal representatives, permitted
successors and, if this Lease is validly assigned or sublet, its assigns or
sublessees. "Lessor" and "Lessee" shall include male and female, singular and
plural, corporation, partnership or individual, as may fit the particular
parties.
37. [material omitted]
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<PAGE> 34
[material omitted]
38. MORTGAGES. Lessee's rights hereunder shall be subject and
subordinate to any bona fide mortgage or deed to secure debt which is now or may
hereafter be placed upon the Building by Lessor; provided, however, that, upon
foreclosure of any such mortgage or upon sale of the Premises under a power of
sale contained in any such deed to secure debt, the owner of the Building
pursuant to such foreclosure or sale shall have the right (to which Lessee
hereby specifically agrees), exercisable by written notice to Lessee mailed
within thirty (30) days after the date of such foreclosure or sale, either to
affirm this Lease, in which event this Lease shall remain in full force and
effect between such owner and Lessee in accordance with its terms, or to
terminate this Lease, in which event this Lease and all rights of the parties
hereto shall fully and finally terminate on the thirtieth (30th) day after the
date of mailing of such notice by such owner. Except for termination of this
Lease by the owner following such foreclosure or sale, this Lease shall not be
terminated under this Section 38 so long as Lessee is not in default in the
observance and performance of its covenants hereunder and Lessee shall be
entitled to quiet enjoyment of the Premises. Lessee shall, upon the request of
Lessor, execute and deliver such documentation or instruments which shall
evidence the subordination of this Lease to the lien of any mortgage or deed to
secure debt now or hereafter placed upon Lessor's interest in the Premises, the
Building or any future additions thereto.
39. EXCULPATION. Notwithstanding anything elsewhere in this Lease to
the contrary, in the event of default hereunder by Lessor, unless Lessor shall
voluntarily cure said default or satisfy any claim asserted against Lessor, the
recourse of Lessee shall be against Lessor's interest in the Premises and Lessee
shall look solely to Lessor's interest in the Premises for satisfaction of any
judgment rendered against Lessor arising out of a default hereunder.
40. LATER CHARGES. All Rent, fees, contributions, interest or other
sums which Lessee is required to pay under this Lease shall be paid on or
before the date due. A late charge of three (3%) of the amount due shall be
paid as an administrative charge for any amount that is not timely paid, it
being agreed and understood that such late charge shall be payable in addition
to, and not in substitution for, any interest payable on such unpaid sums
hereunder.
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<PAGE> 35
41. ESTOPPEL CERTIFICATES. At any time during the Term, upon fifteen (15)
days prior written notice to Lessee by Lessor, requesting such action by
Lessee, Lessee shall execute, acknowledge and deliver to Lessor a statement in
writing, certifying to any third party identified by Lessor, that this Lease is
unmodified and in full force and effect and that Lessee has no knowledge of any
uncured default of Lessor under this Lease (or, if there have been any
modifications that the same is in full force and effect as modified and stating
the modifications, and, if there are any defaults, setting them forth in
reasonable detail), the Commencement Date and the dates to which Rent and other
charges hereunder have been paid. Any such statement delivered pursuant to this
Section 41 may be relied upon by any such third party.
42. BROKERAGE Lessee and Lessor each represent and warrant to the other
that it has not entered into any agreement with, or otherwise had any dealings
with, any broker or agent except Bailey & Associates in connection with the
negotiation or execution of this Lease which could form the basis of any claim
by any such broker or agent for a brokerage fee or commission, finder's fee, or
any other compensation of any kind or nature in connection herewith, and each
party shall, and hereby agrees to, indemnify and hold the other harmless from
all costs (including, but not limited to, court costs, investigation costs, and
attorneys' fees), expenses, or liability for commissions or other compensation
claimed by any broker or agent with respect to this Lease which arise out of any
agreement or dealings, or alleged agreement or dealings, between the
indemnifying party and any such agent or broker. This provision shall survive
the expiration or earlier termination of this Lease.
43. SEVERABILITY. Every agreement contained in this Lease is, and shall be
construed as, a separate and independent agreement. If any term of this Lease
or the application thereof to any person or circumstances shall be invalid and
unenforceable, the remainder of this Lease, or the application of such term to
persons or circumstances other than those as to which it is invalid or
unenforceable, shall not be affected.
44. HEADINGS. The section headings contained in this Lease are for
convenience only and shall not enlarge or limit the scope or meaning of the
various and several sections hereof. Words in the singular number shall be held
to include the plural, unless the context otherwise requires.
45. ENTIRE AGREEMENT. This Lease and the exhibits and riders attached
hereto set forth the entire agreement between the parties and cancel all prior
negotiations, arrangements, brochures, agreements, and understandings, if any,
between Lessor and Lessee regarding the subject matter of this Lease. No
amendment or modification of this Lease shall be binding or valid unless
expressed in a writing executed by both parties hereto.
46. AUTHORITY. If Lessee signs as a corporation, execution hereof shall
constitute a representation and warranty by Lessee that Lessee is a duly
organized and existing corporation under the laws of the state of its
incorporation, that Lessee has been and is qualified to do business in the State
of Georgia and in good standing with the State of Georgia, that the corporation
has full right and authority to enter into this Lease, and that all persons
signing on behalf of the corporation were authorized to do so by appropriate
corporate action. If Lessee signs as a partnership, trust, or other legal
entity, execution hereof shall constitute a representation and warranty by
Lessee that Lessee has complied with all applicable laws, rules, and
governmental regulations relative to Lessee's right to do business in the State
of Georgia that such entity has the full right and authority to enter into this
Lease, and that all persons signing on behalf of Lessee were authorized to do so
by any and all necessary or appropriate partnership, trust, or other actions.
47. GOVERNING LAW. This Lease shall be governed by and construed under the
laws of the State of Georgia. Any action brought to enforce or interpret this
Lease shall be brought in the court of appropriate jurisdiction in Fulton
County, Georgia. Should any provision of this Lease require judicial
interpretation, Lessor and Lessee hereby agree and stipulate that the court
interpreting or considering same shall not apply the presumption
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<PAGE> 36
that the terms hereof shall be more strictly construed against a party by reason
of any rule or conclusion that a document should be construed more strictly
against the party who itself or through its agent prepared the same, it being
agreed that all parties hereto have participated in the preparation of this
Lease and that each party had full opportunity to consult legal counsel of its
choice before the execution of this Lease.
48. USE OF NAME. Lessee shall not, without the prior written consent of
Lessor, use the name of the Building for any purpose other than as the address
of the business to be conducted by Lessee in the Premises, and Lessee shall not
do or permit the doing of anything in connection with Lessee's business or
advertising which in the reasonable judgment of Lessor may reflect unfavorably
on Lessor, the Building or the Land or confuse or mislead the public as to any
apparent connection or relationship between Lessee and Lessor, the Building or
the Land.
49. NO EASEMENTS. Any elimination or shutting off of light, air or view by
any structure which may be erected on lands adjacent to the Building shall in
no way affect this Lease and Lessor shall have no liability to Lessee with
respect thereto.
50. WORK LETTER. If applicable, the work letter regarding Lessor's and
Lessee's obligations to perform construction and finish work in the Premises and
the Building is attached hereto as Exhibit "E" and made a part hereof by
reference.
IN WITNESS WHEREOF, the parties have hereunto set their hands and seals, the
day and year first above written.
LESSOR:
By: Bailey & Associates, No. 1 Ltd.
By: Bailey Realty, Inc.
Managing General Partner
By: /s/ WILLIAM F. BAILEY
----------------------------------------
Name : William F. Bailey
Title: President
Attest: /s/ JAMES E. GRIFFIN
-----------------------------------
Name : James E. Griffin
Title: Vice President
LESSEE:
By: /s/ M. MCNEIL PORTER
----------------------------------------
Name : M. McNeil Porter
Title: President
By: /s/ DOUGLAS R. RIDGWAY
----------------------------------------
Name : Douglas R. Ridgway
Title: Director Quality & Administration
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<PAGE> 37
SPECIAL STIPULATIONS. Insofar as the following special stipulations
conflict with any of the foregoing provisions, the following shall control:
51.1 The Lessor and Lessee agree that the base rental rate will be
increased in accordance with the rent schedule below:
<TABLE>
<CAPTION>
MONTHLY ANNUAL
MONTHS RENTAL RENTAL
------ ------- ------
<S> <C> <C>
1 - 12 $ 8,259.00 $ 99,108.00
13 - 24 $ 8,672.00 $104,064.00
25 - 36 $ 9,106.00 $109,272.00
37 - 48 $ 9,561.00 $114,732.00
49 - 60 $10,039.00 $120,468.00
</TABLE>
51.2 The Lessee and Lessor agree to the following termination options:
1) The Lessee will have the option to terminate the lease at the end
of thirty six (36) month (February 28, 1994) by providing six (6)
months advance written notice (September 1, 1993) and by paying a
termination fee equal to One Hundred Fifty Thousand Dollars
($150,000.00). Said termination fee to be paid upon Lessee's
written notice.
2) The Lessee will have the option to terminate lease at the end of
forty eight (48) month (February 28, 1995) by providing six (6)
months advanced written notice (September 1, 1994) and by paying a
cancellation fee equal to Seventy Five Thousand ($75,000.00)
Dollars. Said termination fee to be paid upon Lessees written
notice.
51.3 The Lessor agrees to provide the Lessee with an ongoing first right
of refusal on approximately 1,900 square feet of contiguous space located on the
2nd floor as set forth on Exhibit "F", subject to existing first right of
refusals. The Lessee will have ten (10) business days after written
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<PAGE> 38
notice by Lessor of a bona fide offer to lease said space and to exercise
First Right of Refusal. The rental rate will equal the rate the Lessee is
paying at the time the additional space is leased.
51.4 The Lessor agrees to provide the first month of occupancy rent free
(March 1, 1991 through March 31, 1991).
51.5 The lessor agrees that the lessee will have the right on an advanced
reservation basis to use the Conference Facility operated by Academy Insurance
Company on the fourth (4th) floor of Building 600, in accordance with Academy's
usage policies, a maximum of six (6) occasions per calendar year of the term at
no cost (does not include use of audio-visual equipment) on a availability
bases. This right will remain in effect as long as Academy Insurance Company is
a tenant in the building and permits the use of their facility.
51.6 The Lessor agrees that Lessee shall have the right, at it's cost, to
install a card reader access security system and to institute an emergency
access card system or any other security measure deemed reasonably necessary
and desirable by lessee in the premises.
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<PAGE> 39
EXHIBIT A
THE PREMISES
EMBASSY ROW
Building D
Second Floor
<PAGE> 40
EXHIBIT B
COMMENCEMENT DATE MEMORANDUM
(LESSOR LETTERHEAD)
(LESSEE NAME/ADDRESS)
Dear
This is to give you notice pursuant to Section 3 of that certain Lease
Agreement (the "Lease") dated __________________ between Embassy Row Venture, a
joint venture between New York Life Insurance Company, a New York Corporation,
and Bailey & Associates, No. 1 Ltd., a Georgia Limited Partnership,
collectively as Lessor, and ______________________, as Lessee, that all
improvements of the Premises are substantially completed as of the date hereof
and thus, the "Commencement Date" pursuant to Section 3 of the Lease
is _________________.
EMBASSY ROW VENTURE
By: Bailey & Associates for
Embassy Row Venture
By:
---------------------------------
Name: James E. Griffin
Title: Vice President
<PAGE> 41
EXHIBIT C
THE LAND
EMBASSY ROW
All that certain tract or parcel of land situate, lying and being in Land Lot 20
of the 17th District of Fulton County, Georgia, containing 38.176 acres, and
depicted as Phase I and Phase II and Adjacent Land on that certain plat of
survey denominated "Plat of Embassy Row" by Travis N. Pruett, Sr., Registered
Surveyor for Travis Pruett & Associates, P.C., dated April 12, 1983, reference
to which plat is hereby made. Said property is more particularly described in
accordance with said plat as follows:
BEGIN at a point on the South land lot line of said Land Lot 20, which point is
the point of intersection of said South land lot line with the presently
existing (widened to 80 feet in width) Westerly right-of-way of
Peachtree-Dunwoody Road, and from said point of beginning run thence North 87
degrees 04' 27" West along the South land lot line of said Land Lot 20 a
distance of 820.77 feet to a monument; thence run North 02 degrees 38' 42" East
a distance of 302.35 feet to a 1 inch crimp top; thence run North 87 degrees 41'
50" West a distance of 303.54 feet to a right-of-way monument located on the
Easterly right-of-way of Georgia 400 Expressway (a/k/a Turner-McDonald Parkway);
thence run North 02 degrees 04' 10" East along the Easterly right-of-way of
Georgia 400 Expressway a distance of 520.74 feet to a right-of-way monument;
thence run North 01 degrees 42' 33" East along the Easterly right-of-way of
Georgia 400 Expressway a distance of 262.51 feet to a right-of-way monument;
thence run North 04 degrees 05' 32" East along the Easterly right-of-way of
Georgia 400 Expressway a distance of 258.38 feet to a 1/2 inch rebar; thence run
North 06 degrees 36' 15" East along the Easterly right-of-way of Georgia 400
Expressway a distance of 3.45 feet to a right-of-way monument; thence run North
00 degrees 24' 09" East along the Easterly right of way of Georgia 400
Expressway a distance of 259.78 feet to a 1/2 inch rebar; thence run South 87
degrees 56' 31" East a distance of 1073.96 feet to a 5/8 inch rebar located on
the recently widened (to 80 feet in width) Westerly right-of-way of
Peachtree-Dunwoody Road; thence run in a generally Southerly direction along the
recently widened (to 80 feet in width) Westerly right-of-way of
Peachtree-Dunwoody Road the following courses and distances: South 08 degrees
38' 52" West a distance of 14.47 feet; South 05 degrees 35' 09" West a distance
of 65.55 feet; South 02 degrees 54' 23" West a distance of 62.98 feet; South 01
degrees 24' 36" West a distance of 68.7 feet; and South 00 degrees 25' 42" West
a distance of 53.04 feet to a 1/2 inch rebar; thence run in a generally
Southerly direction along the Westerly side of the presently existing (widened
to 80 feet in width) right-of-way of Peachtree-Dunwoody Road the following
courses and distances: South 00 degrees 34' 26" East a distance of 85.59 feet;
South 00 degrees 43' 30" East a distance of 82.04 feet; South 02 degrees 11' 17"
East a distance of 78.73 feet; South 01 degrees 47' 38" East a distance of 80.79
feet; South 01 degrees 51' 07" East a distance of 80.32 feet; South 02 degrees
01' 58" East a distance of 80.25 feet; South 01 degrees 39' 40" East a distance
of 81.66 feet; South 01 degrees 14' 25" East a distance of 81.38 feet; South 00
degrees 15' 08" East a distance of 85.75 feet; South 01 degrees 50' 59" East a
distance of 88.20 feet; South 02 degrees 45' 35" East a distance of 83.21 feet;
South 02 degrees 20' 50" East a distance of 92.29 feet; South 01 degrees 08' 22"
East a distance of 81.49 feet; South 00 degrees 45' 09" East a distance of 78.88
feet; South 00 degrees 30' 28" West a distance of 81.84 feet; South 03 degrees
34' 47" West a distance of 63.5 feet; and South 09 degrees 17' 38" West a
distance of 53.04 feet to a point on the South land lot line of said Land Lot
20, which point is the point of beginning.
<PAGE> 42
EXHIBIT D
RULES AND REGULATIONS
1. Sidewalks, doorways, vestibules, halls, stairways and similar areas
shall not be obstructed by tenants or their officers, agents, servants and
employees, or used for any purpose other than ingress and egress to and from
the Premises and for going from one part of the Building to another part of the
Building.
2. Plumbing fixtures and appliances shall be used only for the purposes
for which constructed, and no sweepings, rubbish, rags or other unsuitable
material shall be thrown or placed therein. The cost of repairing any stoppage
or damage resulting to any such fixtures or appliances located in premises
leased by a tenant from misuse on the part of such tenant or such tenant's
officers, agents, servants and employees shall be paid by such tenant.
3. No signs, posters, advertisements or notices shall be painted or
affixed on any of the windows or doors or other parts of the Building or the
Land, except of such color, size and style, and in such places, as shall be
first approved by Lessor. No nails, hooks or screws shall be driven into or
inserted in any part of the Building, except by building maintenance personnel.
4. If required, directories will be placed by Lessor, at Lessor's own
expense, in conspicuous places in the Building. No other directories shall be
permitted.
5. The Premises shall not be used for conducting any barter, trade or
exchange of goods or sale through promotional give-away gimmicks or any
business involving the sale of secondhand goods, insurance salvage stock or
fire sale stock, and shall not be used for any auction or pawnshop business,
any fire sale, bankruptcy sale, going-out-of-business sale, moving sale, bulk
sale or any other business which, because of merchandising methods or
otherwise, would tend to lower the character of the Building.
6. Tenants shall not do anything, or permit anything to be done, in or
about the Building or the Land, or bring or keep anything therein, that will in
any way increase the possibility of fire or other casualty or obstruct or
interfere with the rights of, or otherwise injure or annoy, other tenants, or
do anything in conflict with the valid pertinent laws, rules or regulations of
any governmental authority, or which would cause any policy or policies of fire
or other insurance in respect of the Premises, the Building or the Land
(including any other improvements thereon) to be cancelled or voidable.
7. No tenant shall place a load upon any floor of the Premises which
exceeds the floor load per square foot which such floor was designed to carry or
which is allowed by applicable building codes. Lessor may prescribe the weight
and position of all safes and heavy installations which Lessee desires to place
in the Premises so as properly to distribute the weight thereof.
8. Lessor shall have the authority to prescribe the weight and position
of safes or other heavy equipment which may overstress any portion of the
floor. All damage done to the Building by the improper placing of heavy items
which overstress the floor will be repaired at the sole expense of Lessee.
9. Each tenant shall notify Lessor when safes or other heavy equipment
are to be taken into or out of the building. Moving of such items shall be done
under the supervision of Lessor or its agents, after receiving written
permission from Lessor.
10. Corridor doors, when not in use, shall be kept closed.
D-1
<PAGE> 43
11. All deliveries must be made via the service access at the loading dock
at such times and at such locations thereon as Lessor may from time to time
designate. Prior approval must be obtained from Lessor for any deliveries that
must be received after normal business hours.
12. Each tenant shall cooperate with the Building employees in keeping the
Premises neat and clean.
13. Nothing shall be swept or thrown into the corridors, halls, elevator
shafts or stairways. No birds, animals or reptiles, or any other creatures,
shall be brought into or kept in or about the Building or the Land.
14. Should a tenant require telegraphic, telephonic, annunciator or any
other communication service, Lessor will direct the electricians and installers
where and how the wires are to be introduced and placed, and none shall be
introduced or placed except as Lessor shall direct.
15. Lessee shall not make or permit any improper noises in the Building or
the Land, or otherwise interfere in any way with other tenants or persons
having business with them.
16. No equipment of any kind shall be operated on the Premises that could
in any way annoy any other tenant in the Building without the consent of Lessor.
17. Business machines and mechanical equipment belonging to Lessee which
cause noise and/or vibration that may be transmitted to the structure of the
Building or to any leased space so as to be objectionable to Lessor or any
tenants in the Building shall be placed and maintained by Lessee, at Lessee's
expense, in settings of cork, rubber or spring-type noise and/or vibration
eliminators sufficient to eliminate vibration and/or noise.
18. Lessees shall not use or keep in the Building or the Land any
inflammable or explosive fluid or substance, or any illuminating material,
unless it is battery-powered and approved by Lessor.
19. Lessees, employees or agents, or anyone else who desires to enter the
Building after normal business hours, may be required to sign in upon entry and
sign out upon leaving, giving the location during such person's stay and such
person's time of arrival and departure.
20. Lessor has the right to evacuate the Building in event of emergency or
catastrophe.
21. If any governmental license(s) or permit(s) shall be required for the
proper and lawful conduct of Lessee's business, Lessee, before occupying the
Premises, shall procure and maintain such license(s) or permit(s) for Lessor's
inspection. Lessee shall at all times comply with the terms of any such
license(s) or permit(s).
22. Lessor shall have the right, exercisable without notice and without
liability to any tenant, to change the name and street address of the Building.
23. Garbage, trash, rubbish and refuse shall not be burned or unduly
accumulated, and shall be kept in sanitary closed containers approved by Lessor
so as not to be visible to the public within the demised area. The following
rules and regulation shall apply to "dry" trash: (1) all "dry" trash shall be
properly bagged in plastic bags and sealed; and (2) all "dry" trash shall be
delivered at such times and in such areas on the loading dock or other areas
approved by Lessor as may be designated from time to time by Lessor. The
following rules and regulations apply to "semi-wet" and "wet" garbage: (1) each
tenant
D-2
<PAGE> 44
shall be solely responsible for the cost of purchasing such equipment as is
necessary to convert "wet" garbage into a sanitary condition satisfactory to
Lessor for disposal after delivery by each tenant to a designated area on the
loading dock; and (2) if, at Lessor's sole responsibility to pay all reasonable
costs incurred to install such improvements in any area designated by Lessor.
24. Lessee will not display, paint or place, or cause to be displayed,
painted or placed, any handbills, bumper stickers or other advertising or
promotional materials or devices on any vehicles parked in the parking areas of
the Building, whether belonging to Lessee or to Lessee's employees or agents or
to any other person.
25. Lessee shall use the common areas of the Building for ingress and
egress only, and shall not use any portion of such common areas for business of
promotional purposes, nor shall Lessee place any obstruction (including,
without limitation, vending machines) thereon.
26. Lessor shall have the right to designate the company who will supply
vending machines and service, if any, to the Premises; provided, however, that
such company must supply such vending machines and service on terms and at
rates reasonably comparable to the then market rate for supplying such vending
machines and service in office space similar to the Premises in [Atlanta,
Georgia].
27. Lessor reserves the right to rescind any of these Rules and
Regulations and make such other and further rules and regulations as in the
judgment of Lessor shall from time to time be needed for the safety,
protection, care and cleanliness of the Building, the operation thereof, the
preservation of good order therein, and the protection and comfort of its
tenants, their agents, employees and invitees, which Rules and Regulations,
when made and when notice thereof is given to a tenant, shall be binding upon
such tenant in like manner as if originally herein prescribed. In the event of
any conflict, inconsistency or other difference between the terms and
provisions of these Rules and Regulations, as now or hereafter in effect, and
the terms and provisions of any lease now or hereafter in effect between Lessor
and any tenant in the Building, Lessor shall have the right to rely on the term
or provision in either such lease or such Rules and Regulations which is most
restrictive on such tenant and most favorable to Lessor. Nothing herein
contained shall be construed so as to deem Lessor to be a guarantor or insurer
of the health and safety of Lessee or Lessee's employees, agents, licensees or
invitees.
D-3
<PAGE> 45
EXHIBIT E
WORK LETTER
ARTICLE I
LESSEE'S OBLIGATIONS
1.01 (a) Lessee shall submit the approved Working Drawings and
Specifications (as defined below) to Lessor as soon as reasonably possible.
Within twenty-one (21) days of its receipt of such documents, Lessor shall
submit the Working Drawings and Specifications to Contractor and obtain and
deliver Contractor's bid for constructing the Leasehold Improvements in
accordance with the Working Drawings and Specifications to Lessee.
(b) As soon as reasonably possible after the execution of this Lease,
but in any event not later than November 30, 1990, Lessee shall provide Lessor
with both (i) an approved final space plan for the Premises, together with
detailed specifications for constructing the Leasehold Improvements, finish
schedules and mechanical, electrical, plumbing and structural construction
plans with detailed specifications for the Leasehold Improvements all prepared
by Lessee's Space Planner (collectively, the "Working Drawings and
Specifications") and (ii) an approved bid for the construction of the Leasehold
Improvements by Bailey & Associates or such other contractor as Lessor may
select in its sole discretion ("Contractor") obtained in accordance with this
Section 1.01(b) and evidenced by an executed Lessee Expenditure Authorization
(as defined below) ("L.E.A.") delivered to Lessor.
(c) Notwithstanding any renegotiation of bids Lessee wishes to pursue
or changes that it desires to effectuate in the Working Drawings and
Specifications, if Lessee fails to deliver the approved Working Drawings and
Specifications and the approved L.E.A. to Lessor by the date set forth in
subparagraph (a) above, then this failure shall be deemed a "Lessee Delay"
pursuant to Section 3.01(b) below.
1.02 Unless otherwise agreed to in writing by Lessor and Lessee, all
work involved in the construction and installation of the Leasehold
Improvements shall be carried out by Contractor under the sole direction of
Lessor. Lessee shall cooperate with Lessor, Contractor and Lessee's Space
Planner to promote the efficient and expeditious completion of such work.
1.03 Lessee shall be further responsible for the following:
(a) Payment of the following:
(i) All costs, including professional fees, of Lessee's Space
Planner which are related to the review and preparation of the Working Drawings
and Specifications (collectively referred to as "Planning Costs"):
(ii) All costs to complete the construction of Lessee's Work,
including but not limited to the cost of all labor and materials supplied by
Contractor and Lessor and their respective material suppliers, independent
contractors and subcontractors to construct and complete Lessee's Work, the
cost of any changes made in the Lessee's Work, Contractor's profit and overhead
expenses, all design costs and the cost of furniture and equipment initially
installed in the Premises (the Planning Costs and the amount in this Section
1.03(a)(ii) are collectively referred to as "Lessee's Construction Costs").
(b) Lessee shall pay Lessee's Construction Costs as follows:
(i) On the date Contractor begins construction of the Leasehold
Improvements, Lessee shall pay to Lessor twenty-five percent (25%) of the
amount by which the amount indicated on the L.E.A. exceeds the Improvement
Credit;
E-1
<PAGE> 46
(ii) Lessee shall pay to Lessor three (3) monthly payments, the first such
payment on the first day of the month immediately following the commencement of
the construction of the Leasehold Improvements, the second such payment on the
first day of the second month immediately following the commencement of the
construction of the Leasehold Improvements, and the third such payment on the
first day of the third month immediately following the commencement of the
construction of the Leasehold Improvements. Each such payment shall be
twenty-five percent (25%) of the amount by which the amount indicated on the
L.E.A. exceeds the Improvement Credit.
(iii) Lessee shall pay to Lessor, upon Substantial Completion of the
Leasehold Improvements, the remainder of Lessee's Construction Costs plus any
other costs owing by Lessee to Lessor in connection with the construction of the
Leasehold Improvements, such amount to be indicated on a statement delivered by
Lessor to Lessee.
(c) Lessee agrees that in the event it fails to make any payment required
in this Exhibit E in a timely manner, including but not limited to those
payments due under Section 1.03(a) above, Lessor, in addition to any and all
other remedies allowed it by law or in equity, shall have the same rights and
remedies against Lessee as in the Event of Default of payment of Rent under this
Lease.
1.04 Under no circumstances whatsoever will Lessee, or Lessee's authorized
representative, including but not limited to Contractor, ever alter or modify or
in any manner disturb any of the Building systems (as discussed in Section 20 of
this Lease). Only under Lessor's express written permission and under direct
supervision of Lessor or Lessor's authorized representative shall Lessee or
Lessee's authorized representative alter, modify or in any manner disturb any
Building system.
1.05 All design, construction and installation of Lessee's Work shall
conform to the requirements of this Lease, including but not limited to Section
21 hereof, and all applicable laws and regulations, including but not limited to
all building, plumbing and electrical codes and the requirements of any
authority having jurisdiction over, or with respect to, such work. All work and
materials required under the Working Drawings and Specifications, including all
materials, finishes, furniture and workmanship shall be subject to the prior
written approval of Lessor. The Working Drawings and Specifications, including
but not limited to the design and layout of the Premises, are subject to
Lessor's prior written approval, which shall be given in accordance with the
terms of this Lease, including specifically Section 21 hereof.
1.06 Lessor shall have no obligation to commence or to allow commencement
of construction or installation of any of the Leasehold Improvements in the
Premises until Lessor shall have approved the Working Drawings and
Specifications and Lessee shall have approved the L.E.A. for such work as
required by Section 1.01 hereof.
ARTICLE 2
LESSOR'S OBLIGATIONS
2.01 Shell Condition. Prior to the Date of Substantial Completion, Lessor
shall have completed the following improvements to the Building (collectively,
"Lessor's Work"):
(a) Exterior, including front door, into the Premises;
(b) Unfinished concrete floors throughout the Premises, broom clean and
ready for Building Standard floor;
(c) Electrical conduit from the main switchgear stubbed into the
Premises;
E-2
<PAGE> 47
(d) Chilled water service brought up to the Premises; and
(e) Unfinished CMU demising walls.
2.02 Improvement Credit. Lessor shall contribute $44,500.00 (the
"Improvement Credit") toward reimbursement of Lessee's Construction Costs (to
the extent of the Improvement Credit). The Improvement Credit must be used for
reimbursement of all Lessee's actual costs of constructing the Leasehold
Improvements. Lessor will apply the Improvement Credit to pay Lessee's
Construction Costs in constructing the Leasehold Improvements, pursuant to
Section 1.03(a)(ii) as such costs are incurred. [The parties also acknowledge
that certain portions of the Leasehold Improvements could be installed under
Lessor's underlying base building contract. If the parties elect to do this, all
costs and fees that Lessor incurs as a result of such installation shall be
reimbursed to Lessor from the Improvement Credit.]
ARTICLE 3
LESSEE DELAY
3.01 Lessee's obligation for the payment of Rent under this Lease for the
Premises shall commence on the Commencement Date specified in Section 2 of this
Lease. The term "Lessee Delay" shall refer to each day that:
(a) Lessee fails to deliver the final Lessee-approved Working Drawings and
Specifications to Lessor by the date required in Article 1 above; or
(b) Lessee fails to execute and deliver an approved L.E.A. for
construction of Lessee's Work by the date required in Article 1 above; or
(c) Construction is delayed because of changes by Lessee in the Working
Drawings and Specifications; or
(d) Construction is delayed because of requirements by Lessee of
materials, finishes or installations, including but not limited to any delays
caused by failure to obtain or to receive delivery or installation of any such
materials in a timely manner.
E-3
<PAGE> 48
ARTICLE 4
DEFINITIONS
The following terms shall have the meanings herein specified for all
purposes of this Exhibit C, and, in addition to the terms defined herein, the
definitions in the Basic Lease Information and otherwise in this Lease shall
also apply to this Exhibit E.
4.01 "Building Standard" means the quantity and quality of materials,
finishes and workmanship from time to time specified as such by Lessor in its
discretion for the Building;
4.02 "Contractor" means Bailey & Associates or such other Contractor as
Lessor may from time to time appoint to construct and install the Leasehold
Improvements in the Premises.
4.03 "Leasehold Improvements" shall mean the aggregate of Lessor's Work
and Lessee's Work.
4.04 "Lessee's Expenditure Authorization" means an authorization by Lessee
to Lessor, prior to the commencement of any Lessee's Work by Lessor, to expend
funds on behalf of Lessee for Lessee's Work on the Premises, to be given in
writing in the form attached hereto and incorporated herein as Exhibit A.
4.05 "Lessee's Work" means any items, other than those items set forth in
Section 2.01 of this Exhibit E, which are designed, supplied, constructed,
installed and finished by Lessor on behalf of Lessee as provided herein,
including but not limited to any subsequent changes requested by Lessee and
approved by Lessor in its discretion.
4.06 "Lessor's Work" means the Building Standard items, if any, which are
supplied, installed and/or finished by Lessor pursuant to Article 2, according
to Building Standard specifications.
4.07 "Non-Building Standard" means all materials, finishes and workmanship
used in connection with the construction and installation of the Leasehold
Improvements which deviate from Building Standard in terms of quantity or
quality (or both).
4.08 "Space Planner" shall collectively refer to the architects, space
planners and mechanical and electrical engineers that Lessee and Lessor may
respectively engage to prepare or review the Working Drawings and
Specifications for the Leasehold Improvements as contemplated by Article 1
hereof.
4.09 "Substantial Completion" shall occur when Bailey & Associates or such
other architect as Lessor may designate ("Architect") certifies that
construction of the Leasehold Improvements are sufficiently complete in
accordance with the Working Drawings and Specifications that Lessee can occupy
or utilize the Premises or designated portion thereof for the use for which it
is intended. The "Date of Substantial Completion" shall be the date on which
Architect issues its written certification of such occurrence.
4.10 "Target Construction Completion Date" shall be that date on which the
parties intend to have achieved Substantial Completion of the Leasehold
Improvements provided for herein at the time that this Lease is executed and
prior to approval of the Working Plans and Specifications.
E-4
<PAGE> 49
EXHIBIT F
---------
FIRST RIGHT OF REFUSAL
----------------------
EMBASSY ROW
Building D
Second Floor
<PAGE> 50
1ST ADDENDUM TO LEASE BETWEEN
EMBASSY ROW VENTURE
AND CSL INTERMODAL INC.
(subsidiary of CSX Corporation, a Delaware Corporation)
THIS AGREEMENT, made and entered into this 22 day of February 1992 by and
between EMBASSY ROW VENTURE, a joint venture between New York Life Insurance
Company, a New York corporation and Bailey & Associates No. 1 Ltd., a Georgia
Ltd. Partnership in which Bailey Realty, Inc., a Georgia corporation, is its
managing general partner (hereinafter referred to as "Lessor"), and CSL
INTERMODAL INC., a Delaware corporation (hereinafter referred to as "Lessee"),
W I T N E S S E T H:
WHEREAS, the parties hereto entered into a certain lease agreement dated
March 5, 1991 (hereinafter called the "Master Lease"), which agreement provided
that Lessee would lease from Lessor 5,663 rentable square feet of office space
(hereinafter the "premises") as is more particularly described in the Master
Lease, at an address known as 600 Embassy Row Suite 250 according to the
present system of numbering of addresses in Atlanta, Fulton County, Georgia;
and;
WHEREAS, Lessee has requested that Lessor provide an additional 1,968
rentable square feet of office space for rental by Lessee under the terms and
conditions specified in said above-referenced lease; and as provided herein,
WHEREAS, Lessor has agreed to provide said additional office space upon
said terms and conditions:
NOW THEREFORE, in consideration of the mutual covenants flowing to and
from each of the parties hereto, it is hereby agreed as follows:
Page 1
<PAGE> 51
1. Lessor does hereby lease to Lessee, and Lessee does hereby rent and
lease from Lessor, the above referenced 1,968 rentable square feet on the
second (2nd) floor, Suite 220 of 600 Embassy Row (Building D) at Embassy Row
Office Park as indicated on Exhibit "A" attached hereto.
2. The lease term for said additional office space shall be the term from
April 1, 1992 the date of occupancy and shall continue until the original lease
terminates (January 31, 1996).
3. The rental rate for said additional office space shall be the rate
Lessee pays under the Master Lease ($18.38 per square foot, $36,168.00 per
annum; $3,014.00 per month) plus increases as set forth in the Master Lease
Special Stipulation 51.1.
4. The Lessor will provide a tenant improvement allowance of $29,520.00
of this amount $4,000 will be credited to existing outstanding Tenant
Improvements. The balance of $25,520 will be used to build the premises
according to plans dated February 12, 1992. Any improvement costs in excess of
this amount will be paid by CSL Intermodal.
5. The Lessor agrees to provide the Lessee with a First Right to Lease
approximately 5,000 square feet on the second (2nd) floor of the building
(attached as Exhibit "B"); subject to existing first rights. The lease rate
will equal the then current rate CSX is paying. The Lessor will provide $12.00
per square foot for improvements as long as three (3) years remain on the Lease.
6. The Lessor and Lessee agree that Paragraph 51.2 Subsection 1) (option
to terminate on February 28, 1994) of the Master Lease will be deleted in its
entirety. However, 51.2 Subsection 2) (option to terminate February 28, 1995)
will remain in full force and effect.
7. All other terms, conditions and provisions of the Master Lease (not
in conflict hereof), shall be applicable and the parties hereto shall be bound
thereby.
Page 2
<PAGE> 52
IN WITNESS WHEREOF, the parties hereto have caused their names to be
affixed by their duly authorized representatives this the day and year first
above written.
<TABLE>
<S> <C>
Signed, sealed and delivered EMBASSY ROW VENTURE
in the presence of: Bailey & Associates, No. 1 Ltd.
/s/ Sharon Rouse
- ---------------------------- Bailey Realty, Inc.
Witness Managing General Partner
/s/ Juanita S. Williams By: /s/ Wm. F. Bailey
- ---------------------------- ---------------------------
Notary Public Wm. F. Bailey, President
Attest: /s/ James E. Griffin
-----------------------
James E. Griffin, V.P.
Signed, sealed and delivered CSL INTERMODAL INC.
in the presence of:
/s/ By: /s/ Roland E. Livingston
- ---------------------------- ---------------------------
Witness
/s/ Attest: /s/
- ---------------------------- -----------------------
Notary Public General Counsel
My Commission Expires: May 1, 1994
</TABLE>
Page 3
<PAGE> 53
EXHIBIT A
EMBASSY ROW
Building D
Second Floor
<PAGE> 54
EXHIBIT B
EMBASSY ROW
Building D
Second Floor
<PAGE> 55
2ND ADDENDUM TO LEASE
BETWEEN
EMBASSY ROW JOINT VENTURE
AND
CSX INTERMODAL, INC. (SUBSIDIARY OF CSX CORPORATION)
THIS AGREEMENT, made and entered into this 1st day of June, 1995 by
and between New York Life Insurance Company, a New York Corporation
(hereinafter the "Lessor"), and CSX INTERMODAL, INC. (subsidiary of CSX
Corporation), a Delaware corporation (Formally known as CSL Intermodal, Inc.)
(hereinafter the "Lessee");
WITNESSETH:
WHEREAS, Embassy Row Venture and Lessee entered into a certain lease
agreement dated March 5, 1991 (hereinafter called the "Master Lease"), which
agreement provided that Lessee would lease from Lessor Five Thousand-Six Hundred
Sixty-Three (5,663) rentable square feet of office space (hereinafter the
"premises") as is more particularly described in the Master Lease, at an address
known as Suite 250, 600 Embassy Row, Atlanta, Georgia 30328 according to the
present system of numbering addresses in Atlanta, Georgia 30328 according to the
present system of numbering addresses in Atlanta and Fulton County, Georgia; and
WHEREAS, Embassy Row Venture and Lessee entered into a certain lease
addendum dated February 25, 1992, which agreement provided that Lessee would
lease from Lessor One Thousand-Nine Hundred Sixty Eight (1,968) rentable square
feet of additional office space on the Second Floor, Suite 220 in Building 600
Embassy Row under the terms and conditions specified in said above-referenced
Master Lease and as further provided in said addendum; and,
WHEREAS, Lessor and Lessee have agreed to a renewal of the Premises
totaling Seven Thousand-Six Hundred Thirty-One (7,631) square feet as outlined
below and attached as exhibit "A", upon the following terms and conditions:
<PAGE> 56
NOW THEREFORE, in consideration of the mutual covenants flowing to and
from each of the parties hereto as set forth below;
1. Lessor does hereby lease to Lessee, and Lessee does hereby rent
and lease from Lessor, the above referenced Seven Thousand-Six Hundred
Thirty-One (7,631) rentable square feet on the Second Floor, Suites 250 and 220
of 600 Embassy Row Office Park as indicated on Exhibit "A" and attached hereto.
(The Net Rentable Area).
2. The lease term shall be extended for a period of five (5) years
from the current expiration date of January 31, 1996 (February 1, 1996 through
January 31, 2001).
3. Commencing April 1, 1995, the monthly rental will be adjusted to
equal Eleven Thousand One Hundred and Twenty Nine dollars ($11,129.00) with
escalations as set forth in Section 4 hereunder.
4. MAINTENANCE RENT. For each calendar year of the Term that the
"Operating Expenses" (as hereinafter defined) exceed the actual operating
expenses for 1995, (if in 1995, less than Ninety-Five Percent (95%) of the Net
Rentable Area of the building is fully occupied, all components of operating
expenses (as hereinafter defined) shall be adjusted for such year to the amount
which Lessor reasonable estimates would have been incurred had the building been
fully occupied) per square foot of the Net Rentable Area of the Building, Lessee
covenants and agrees to pay to Lessor, as maintenance rent ("Maintenance Rent"),
a percentage of such excess Operating Expenses based on the ratio of the New
Rentable Area of the Premises to the Net Rentable Area of the Building, which is
and for all purposes shall be deemed to be Five Percent (5%) ("Lessee's
Proportionate Share").
(a) For the purpose of calculating Maintenance Rent to be paid
pursuant to the terms of this Section 4(a), Lessor shall make a good-faith
estimate of the Operating Expenses (the "Projection of Operating Expenses") it
expects to be incurred with respect to the Building for each calendar year after
the calendar year during which this Lease is executed. The Projection of
Operating Expenses shall be made by Lessor not less than thirty
<PAGE> 57
(30) days prior to the commencement of such calendar year. Lessor shall deliver
to Lessee a written statement setting forth the Projection of Operating Expenses
for such following year and shall provide therewith a calculation of the
increase in monthly installments of Rent, which shall thereafter include Base
Rent and Maintenance Rent, as well as any Additional Rent (as hereinafter
defined), payable hereunder, such increase to become effective January 1 of such
following year; provided, however, that failure of Lessor to provide any such
statement shall not relieve Lessee of its obligation to pay Base Rent and
Maintenance Rent at the rate then in effect under this Lease, within thirty (30)
days of the date Lessee receives such statement from Lessor, provided that such
notice is given by March 31st of the following year. Lessee shall pay any
increase in monthly Rent reflected thereby, effective retroactively to January 1
of such year. Lessor and Lessee acknowledge that Maintenance Rent is based on
the Operating Expenses for a fully-occupied Building. Therefore, Lessor and
Lessee agree that, at any time at which less than ninety-five percent (95%) of
the Net Rentable Area of the Building is fully occupied during any full or
fractional calendar year during the Term, the Operating Expenses shall be
adjusted for such year to the amount which Lessor reasonably estimates would
have been incurred had the Building been fully occupied.
(b) For each calendar year during the Term, commencing with the calendar
year immediately subsequent to the calendar year in which this Lease is
executed, within ninety (90) days following the end of such calendar year, or at
such later time as Lessor shall be able to determine the same, Lessor shall
compute the actual amount of the Operating Expenses (the "Actual Operating
Expenses") of the Building for the calendar year last ended, and shall notify
Lessee in writing of the same. If the Actual Operating Expenses exceed the
Projection of Operating Expenses for such prior calendar year, Lessee shall,
within thirty (30) days of the date of such written notice from Lessor to
Lessee, pay to Lessor an amount equal to the excess of the adjusted annual
Maintenance Rent payable by Lessee, based on the Actual Operating
<PAGE> 58
Expenses for such year, over the annual Maintenance Rent actually paid by Lessee
during such year, based on the Projection of Operating Expenses. The obligation
to make such payment shall survive the expiration or earlier termination of this
Lease. In the event that the adjusted Maintenance Rent payable by Lessee, based
on the Actual Operating Expenses for such previous calendar year, is less than
Maintenance Rent actually paid by Lessee during such year, based on the
Projection of Operating Expenses, Lessor shall credit such excess to the monthly
installments of Rent payable after the date of Lessor's notice as provided
above, until such excess has been exhausted, or if this Lease shall expire prior
to full application of such excess and Lessee has then made full payment of any
and all remaining Rent and other sums due to Lessor hereunder, Lessor shall pay
to Lessee the balance thereof not theretofore applied to such monthly
installments of Rent promptly after the Lease Expiration Date. No interest or
penalties shall accrue on any amount which Lessor is obligated to credit or pay
to Lessee by reason of this Section 5(b).
(c) The term "Operating Expenses" shall include all expenses, cost and
charges incurred by Lessor for the operation, maintenance or repair of the
Building and shall include, but not be limited to, the following:
(i) The cost of all taxes and assessments levied or imposed with
respect to the Building and the real property (the "Land") on which it is
situated, which is more particularly described in Exhibit "C" attached hereto
and made a part hereof by reference, including, without limitation, all taxes
relating to the operation, maintenance, repair or ownership of the Building and
the Land (for purposes of this Section 4(c)(i), a tax assessment, levy,
imposition or charge intended wholly or partially as a capital levy or otherwise
on Rent received by Lessor, or a license fee measured by Rent payable by Lessee
to Lessor, or any other such additional or substitute tax, assessment, levy,
imposition or charge, is deemed to be included within the term "taxes");
(ii) The cost of any managing agents employed for the operation and
maintenance of the Building and the Land;
<PAGE> 59
(iii) The labor costs for any employees engaged on behalf of any such
managing agent or on behalf of Lessor to the extent engaged with respect to the
Building and the Land, including without limitation, costs related to the
following: payroll, social security, unemployment and other similar taxes;
worker's compensation, hospitalization and group insurance; uniforms and the
cleaning thereof; pension and retirement plans; and other reasonable benefits.
The classes of labor employed may include any classification of employees
utilized for comparable office buildings in Atlanta, Georgia including, but not
limited to, the following: building superintendents, their assistants and
clerical staff; floor directors; window cleaners and miscellaneous handymen;
cleaners and janitors; landscaping personnel; watchmen and persons engaged in
patrolling and protecting the Building or the Land; carpenters, engineers,
mechanics, electricians and plumbers; or personnel engaged exclusively in
supervising any of the persons mentioned above;
(iv) The cost of water, sewer, gas, electricity (including, without
limitation, fuel adjustment charges), fuel, light, heat, steam, natural gas and
other utilities utilized in the Building and on the Land, and any taxes thereon;
(v) The cost of premiums of casualty, liability (to include, without
limitation, all-risk coverage) and other insurance related to the Building and
the Land;
(vi) The cost of repairs and maintenance to the Building and the Land
not constituting capital improvements; provided, however, that the amortization
over a reasonable period of time as selected by Lessor of any expenses for
capital improvements made with the intent of reducing Operating Expenses shall
be included as "Operating Expenses";
(vii) The cost of materials, supplies and replacement tools and
equipment for repairs and maintenance to the Building and the Land;
(viii) The cost for security services for the Building and the Land
(or, if applicable, the pro rata cost thereof relative to the surrounding
development);
<PAGE> 60
(ix) The cost of janitorial and cleaning supplies and services for the
Building and the Land;
(x) The cost of window cleaning for the Building;
(xi) The cost of landscaping services provided for the Building and
the Land (and, if applicable, the pro rata cost thereof relative to the
surrounding development);
(xii) The cost of services contracted for and/or provided by Lessor
and attributable to the operation, repair and maintenance of the Building,
including, without limitation, any such services related to the heating, air
conditioning, ventilating, plumbing, electrical, elevator or other systems of
the Building;
(xiii) The cost of services for telephone, telegraph, stationery,
postage, advertising and office administration attributable to the Building
and the Land;
(xiv) The cost of legal, accounting or other professional services
incurred in connection with the Building and the Land; and
(xv) All other reasonable operating or maintenance expenses
attributable or appropriately allocated to the operation or maintenance of the
Building and the Land.
"Operating Expenses" shall not include the following:
(i) Labor costs in respect of individual partners of Lessor, or if
such partner or a successor of Lessor be a corporation, then in respect of
officers or directors of such partner or successor;
(ii) Any insurance premium to the extent that Lessor is reimbursed for
such premium;
(iii) The cost of any items for which Lessor is reimbursed by
insurance or otherwise compensated; and
(iv) The cost of any additions to the Building subsequent the date
of the original construction thereof, or any alterations or refurbishing of
space in the Building, so long as such cost is incurred after the date of
execution of this Lease.
(e) In determining the amount of Operating Expenses, if Lessor is not
furnishing any particular work or service, the cost
<PAGE> 61
of which if performed by Lessor would constitute an Operating Expense to a
Lessee who has undertaken to perform such work or service, Operating Expenses
shall be deemed for the purposes of this Section 5 to be increased by an amount
equal to the additional Operating Expenses which would have reasonably been
incurred during such period by Lessor if it had, at its own expense, furnished
such work or service to such Lessee.
(f) Upon thirty (30) days' prior written request of Lessee on or before
April 30 of any calendar year during the term of this Lease, Lessor agrees to
provide to Lessee a reasonable breakdown of the Operating Expenses for the
previous calendar year, at such time as such information is available
(g) In addition to Base Rent and Maintenance Rent payable hereunder,
Lessee shall, during the Term (to include the calendar years in which this Lease
commences and terminates), pay all taxes assessed against leasehold improvements
made by or for Lessee, and all other sums at any time due from Lessee to Lessor
under this Lease, as additional rent ("Additional Rent") hereunder. Lessee
agrees, on request of Lessor, to furnish Lessor a list of the leasehold
improvements not taxed as personal property and owned by Lessee, together with
the cost therefor, and Lessee agrees to pay Lessor, as Additional Rent, an
amount equal to the taxes assessed against such improvements, computed on the
basis of the cost of such improvements (as adjusted by the equalization of
valuation made by such taxing authority), multiplied by the rate of taxation
against real property in Fulton County, Georgia, for such year.
(h) All sums payable pursuant to the provision of this Section 5 by
Lessee, or which are at the expense of Lessee, are deemed and considered to be
Rent hereunder, and, if not paid, Lessor shall have all the rights and remedies
provided in this Lease, at law or in equity for the non-payment of Rent. All
Rent payable pursuant to the terms of this Section 5 by Lessee to Lessor shall
be paid promptly as and when the same shall become due and payable, without
notice, demand, abatement, deduction or set-off, and shall be paid to such
person or persons and at such locations
<PAGE> 62
or addresses as Lessor may from time to time designate in writing.
5. The Lessor will provide a tenant improvement allowance of Seven Dollars
($7.00) per rentable square foot; Fifty Three Thousand Four Hundred and
Seventeen Dollars ($53,417) for retrofit of the premises.
6. All other terms, conditions and provisions of the Master Lease (not in
conflict hereof), shall be applicable and the parties hereto shall be bound
thereby.
IN WITNESS WHEREOF, the parties hereto have caused their names to be
affixed by their duly authorized representatives this the day and year first
above written.
Signed, sealed and delivered
in the presence of:
/s/ BRENDA KAYE HANEY By: /S/
- ------------------------- ------------------------
Witness VP Law & Administration
/s/ BRENDA KAYE HANEY Attest: /S/ BRENDA KAYE HANEY
- ------------------------- ---------------------
Notary Public
1/1/97
Signed, sealed and delivered NEW YORK LIFE INSURANCE
in the presence of: COMPANY, a New York corporation, as
successor Lessor to Embassy Row Venture
/S/ and as current owner of Embassy Row
- ------------------------ Office Park
Witness
/s/ JANE A. JABLONSKI By Its Agent, Greystone Realty Corporation
- ------------------------
Notary Public By: /s/ CHARLES J. LAUCKHARDT
MY COMMISSION EXPIRES MAR. 31 1997 ---------------------------
[SEAL]
Title: Charles J. Lauckhardt
------------------------
Executive Vice President
<PAGE> 63
EXHIBIT A
THE PREMISES
EMBASSY ROW
Building D
Second Floor
<PAGE> 64
EXHIBIT B
NOT APPLICABLE
<PAGE> 65
EXHIBIT C
THE LAND
EMBASSY ROW
All that certain tract or parcel of land situate, lying and being in Land Lot
20 of the 17th District of Fulton County, Georgia, containing 38.176 acres, and
depicted as Phase I and Phase II and Adjacent Land on the certain plat of
survey denominated "Plat of Embassy Row" by Travis N. Pruett, Sr., Registered
Surveyor for Travis Pruett & Associates, P.C., dated April 12, 1933, reference
to which plat is hereby made. Said property is more particularly described in
accordance with said plat as follows:
BEGIN at a point on the South land lot line of said Land Lot 20, which point is
the point of intersection of said South land lot line with the presently
existing (widened to 80 feet in width) Westerly right-of-way of
Peachtree-Dunwoody Road, and from said point of beginning run thence North 87
degrees 04' 27" West along the South land lot line of said Land Lot 20 a
distance of 820.77 feet to a monument; thence run North 02 degrees 38' 42" East
a distance of 302.35 feet to a 1 inch crimp top; thence run North 87 degrees
41' 50" West a distance of 303.54 feet to a right-of-way monument located on the
Easterly right-of-way of Georgia 400 Expressway (a/k/a Turner-McDonald
Parkway); thence run North 02 degrees 04' 10" East along the Easterly
right-of-way of Georgia 400 Expressway a distance of 520.74 feet to a
right-of-way monument; thence run North 01 degrees 42' 33" East along the
Easterly right-of-way of Georgia 400 Expressway a distance of 262.51 feet of a
right-of-way monument; thence run North 04 degrees 05' 32" East along the
Easterly right-of-way of Georgia 400 Expressway a distance of 258.38 feet to a
1/2 inch rebar; thence run North 06 degrees 36' 15" East along the Easterly
right-of-way of Georgia 400 Expressway a distance of 3.45 feet to a
right-of-way monument; thence run North 00 degrees 24' 09" East along the
Easterly right of way of Georgia 400 Expressway a distance of 259.78 feet to a
1/2 inch rebar; thence run South 87 degrees of 56' 31" East a distance of
1073.96 feet to a 5/8 inch rebar located on the recently widened (to 80 feet in
width) Westerly right-of-way of Peachtree-Dunwoody Road; thence run in a
generally Southerly direction along the recently widened (to 80 feet in width)
Westerly right-of-way of Peachtree-Dunwoody Road the following courses and
distances: South 08 degrees 38' 52" West a distance of 14.47 feet; South 05
degrees 35' 09" West a distance of 65.55 feet; South 02 degrees 52' 23" West a
distance of 62.98 feet; South 01 degrees 24' 36" West a distance of 68.7 feet;
and South 00 degrees 25' 42" West a distance of 53.04 feet to a 1/2 inch
rebar; thence run in a generally Southerly direction along the Westerly side of
the presently existing (widened to 80 feet in width) right-of-way of
Peachtree-Dunwoody Road the following courses and distances: South 00 degrees
34' 26" East a distance of 85.59 feet; South 00 degrees 43' 30" East a distance
of 82.04 feet; South 02 degrees 11' 17" a distance of 78.73 feet; South 01
degrees 47' 38" East a distance of 80.79 feet; South 01 degrees 51' 07" East a
distance of 80.32 feet; South 02 degrees 01' 58" East a distance of 80.25 feet;
South 01 degrees 39' 40" East a distance of 81.66 feet; South 01 degrees 14'
25" East a distance of 81.38 feet; South 00 degrees 15' 08" East a distance of
85.75 feet; South 01 degrees 50' 59" East a distance of 88.20 feet; South 02
degrees 45' 35" East a distance of 83.21 feet; South 02 degrees 20' 50" East a
distance of 92.29 feet; South 01 degrees 08' 22" East a distance of 81.49 feet;
South 00 degrees 45' 09" East a distance of 78.88 feet; South 00 degrees 30'
28" West a distance of 81.84 feet; South 03 degrees 34' 47" West a distance of
63.5 feet; and South 09 degrees 17' 38" West a distance of 53.04 feet to a
point on the South land lot line of said Land Lot 20, which point is the point
of beginning.
<PAGE> 66
THIRD ADDENDUM TO LEASE AGREEMENT
This Addendum, made and entered into this 23rd day of December, 1998, by and
between CARRAMERICA REALTY CORPORATION, a Maryland corporation (successor to
New York Life Insurance Company, a New York Corporation, successor to Embassy
Row Venture) (hereinafter referred to as "Landlord"), and CSX INTERMODAL, INC.
(subsidiary of CSX Corporation), a Delaware corporation (hereinafter referred
to as "Tenant").
WITNESSETH:
WHEREAS, Landlord and Tenant entered into a Lease Agreement dated March 5, 1991
(the Lease), for certain Premises located at 6600 Peachtree Dunwoody Road, 600
Embassy Row, Suite 250, Atlanta, Georgia, 30328, hereinafter referred to as the
"Lease";
WHEREAS, on February 25, 1992, the Lease was amended by Addendum to Lease to
add to the Premises Suite 220 containing 1,968 rentable square feet bringing
the total rentable square footage to 7,631 rentable square feet; and
WHEREAS, on June 1, 1995, the Lease was further amended by Second Addendum to
Lease to extend the Lease for a period of five years; and
WHEREAS, Lessor and Lessee desire to amend the Lease to effect a contraction of
the current rentable square footage contained in the Premises. Lessee desires
to relinquish 3,171 rentable square feet, reducing the rentable square footage
of the Premises to 4,460;
NOW THEREFORE, in consideration of the Premises the sum of TEN DOLLARS ($10.00)
in hand paid by Tenant to Landlord, and for good and valuable consideration,
the receipt and sufficiency of which is hereby acknowledged, the parties hereto
agree as follows:
1. CONTRACTION OF PREMISES. Subject to the provisions of Section 5 below,
Tenant has given, granted and surrendered, and by these presents does
give, grant and surrender unto Landlord, its successors and assigns, a
portion of the Premises demised under the Lease which are located in
Building 600, Suite 250, containing 3,171 square feet, as shown on Exhibit
A attached hereto and incorporated herein by this reference (the
"Contraction Space"), and all the rights, usufruct, title and interest of
the Tenant in and to the Contraction Space, effective as of December 31,
1998 (the "Contraction Date"). Effective on the Contraction Date, the
Lease is terminated with respect to the Contraction Space, but the parties
hereto hereby specifically acknowledge and confirm that the Lease shall
remain in full force and effect with respect to the balance of the
Premises, containing 4,460 square feet of rentable area. From and after
the Contraction Date, Tenant shall have no interest in the Contraction
Space. On or before the Contraction Date, Tenant shall vacate the
Contraction Space, and surrender possession of the Contraction Space to
Landlord and deliver the same to Landlord in a broom-clean condition.
Tenant shall defend, indemnify and hold Landlord harmless from and against
any and all claims, losses and liabilities for damages resulting from the
failure of Lessee
1
<PAGE> 67
or of any assignee, sublessee or other occupant claiming by or through
Lessee to surrender possession upon the Contraction Date, including,
without limitation, any claims made by and succeeding lessee, and such
obligations shall survive the termination of the Lease with respect to the
Contraction Space.
TERMINATION FEE/RENT.
A. As a condition to Landlord's willingness to terminate the Lease with
respect to the Contraction Space, Tenant shall pay to Landlord as a
Termination Fee the sum of Five Thousand and 00/100 Dollars
($5,000.00) on or before December 31, 1998.
B. Commencing January 1, 1999, the monthly base rental shall be
adjusted to equal $6,504.17 (Six thousand five hundred four and
17/100 dollars).
C. Commencing January 1, 1999, Lessee's Pro-rata Share for Operating
Expense purposes shall be adjusted to equal 2.93%.
3. ERECTION OF DEMISING WALL. Tenant acknowledges and agrees that in order to
effect the contraction of the Premises as set forth herein, Landlord, at no
cost or expense to Tenant, will be required to erect a demising wall between
the Contraction Space and the remaining Premises. Tenant also acknowledges
and agrees that during the period of Landlord's work to erect said demising
wall Tenant shall be occupying the Premises and that noise, dust, relocation
of Tenant's property and other activities associated with such work may be
disruptive to the business operations of Tenant in the Premises.
Nevertheless, Tenant hereby waives and releases any and all claims, causes
of action and actions against Landlord and its agents related to Landlord's
construction of the demising wall, except for any claim against Landlord
caused solely by the negligence or willful misconduct of Landlord or its
agents, contractors, or employees. Landlord shall impose upon the contractor
which will be performing the work a requirement that the contractor will
agree to use reasonable efforts to not unreasonably interfere with the
conduct of Tenant's business operations. No rental shall abate as a result
of or arising from Landlord's construction work. Tenant shall, upon notice
from Landlord or Landlord's contractor, permit Landlord or Landlord's
contractor to have access to the Premises as required to effect the
construction of the demising wall and to remove or relocate forthwith, at
Tenant's sole cost and expense, such portion or all of the personal property
belonging to Tenant from such portion of the Premises then being affected by
the construction of the demising wall as Landlord or Landlord's contractor
shall reasonably request in connection with the prosecution of such work.
4. CONTINGENCY. Landlord and Tenant acknowledge and agree that Landlord's
agreement to effect the contraction of the Premises as described in this
Addendum is expressly contingent upon Landlord's entering into a lease
agreement with New York Life, which is acceptable to Landlord, in its sole
discretion, for the lease by New York Life of the Contraction Space. If
Landlord is unable for any reason, or for no reason, to enter into such
lease agreement with New York Life on or before the Contraction Date, the
2
<PAGE> 68
Premises shall not be contracted and Tenant shall not be released from any
of its obligations under the Lease with respect to the Contraction Space
through the remainder of the Term of the Lease. IF LANDLORD AND NEW YORK
LIFE DO NOT ENTER INTO SUCH LEASE AGREEMENT, AND TENANT HAS PAID THE
TERMINATION FEE AS OUTLINED IN ARTICLE 2 HEREIN, LANDLORD SHALL RETURN TO
TENANT THE $5,000 TERMINATION FEE AND THIS TERMINATION AGREEMENT SHALL BE
NULL AND VOID.
5. CONTINUED LIABILITY OF TENANT. Notwithstanding anything contained herein
to the contrary, Landlord specifically reserves unto itself the right to
pursue a claim for nonpayment of, and Tenant shall remain liable for
payment of and agrees to pay, any sums owing under the Lease with respect
to the Contraction Space, including any indemnity obligations of Tenant,
through and including the Contraction Date. All of the obligations of
Tenant set forth in this Section shall survive the termination of the
Lease with respect to the Contraction Space and the surrender of the
Contraction Space.
6. BROKER DISCLOSURE. Pursuant to Georgia Real Estate Commission Regulation
520-1-08, CarrAmerica Realty Corporation makes the following disclosure
concerning this Lease transaction:
A. In this transaction, CarrAmerica Realty Corporation represents
Landlord and not Tenant.
B. IN THIS TRANSACTION, UNIVEST ASSET MANAGEMENT LLC REPRESENTS TENANT
AND NOT LANDLORD.
C. In this transaction, any real estate commission due CarrAmerica
Realty Corporation shall BE PAID BY LANDLORD. ANY REAL ESTATE
COMMISSION DUE UNIVEST ASSET MANAGEMENT LLC shall be paid by TENANT.
EXCEPT as hereby modified and amended, all other terms, provisions, covenants
and conditions of the Lease shall remain and in full force and effect.
IN WITNESS WHEREOF, Landlord and Tenant have caused this Third Addendum to
Lease Agreement to be executed by their duly authorized representatives on the
day and year above written.
[Signatures Appear on Next Page]
3
<PAGE> 69
LANDLORD:
CarrAmerica Realty Corporation,
a Maryland corporation (successor to Century Lake L.P.,
a Georgia limited partnership)
By: /s/ J. Thad Ellis
-------------------------------
Name: J. Thad Ellis
-----------------------------
Title: Vice President
----------------------------
TENANT:
CSX Intermodal, Inc.
(subsidiary of CSX Corporation,
a Delaware corporation)
By: /s/ Asok Chaudhuri
-------------------------------
Name: Asok Chaudhuri
-----------------------------
Title: Vice President Finance
----------------------------
Attest:
---------------------------
Name:
-----------------------------
Title:
----------------------------
(CORPORATE SEAL)
4
<PAGE> 70
EXHIBIT A
THE CONTRACTION SPACE
[To be Attached]
5
<PAGE> 71
EXHIBIT B
[Univest Real Estate]
<PAGE> 72
EXHIBIT "C"
CONSENT AND AGREEMENT
*CarrAmerica Realty Corporation ("Prime Lessor"), the lessor under the
Prime Lease (the "Prime Lease") set forth in the attached and foregoing sublease
agreement (the "Sublease") between CLS Intermodal, Inc., as sublessor
("Sublessor") and American Artists Film Corporation, as sublessee ("Sublessee"),
does hereby consent to the subleasing of the subleased premises as described in
the Sublease (the "Sublease Premises") by Sublessor to Sublessee pursuant to and
in accordance with the provisions of the Sublease; provided, however, such
consent shall not release Sublessor from the full and faithful performance by
Sublessor of all the terms, conditions and agreements contained in the Prime
Lease and shall not be deemed a waiver or release of any of Sublessor's
covenants, liabilities and obligations to Prime Lessor under the Prime Lease;
and, provided further, that upon a default by Sublessor in the payment of any
base rental, additional rent or other amounts due under the Prime Lease, Prime
Lessor shall have, in addition to its other rights and remedies under the Prime
Lease, the right to collect and receive from Sublessee, upon written demand from
Prime Lessor to Sublessor and Sublessee at the addresses for notices contained
in the Sublease, any rental due and payable under the Sublease by Sublessee to
Sublessor, and any such sums so collected and received shall be applied by Prime
Lessor to any amounts due from Sublessor under the Prime Lease in such order as
Prime Lessor elects, and, in furtherance of the foregoing, Sublessor hereby
assigns to Prime Lessor the rent and other sums due from Sublessee and hereby
authorizes and directs Sublessee to pay such rent directly to Prime Lessor,
provided, however, that until the occurrence of a default under the Prime Lease,
Sublessor shall have the license to continue collecting such rent from
Sublessee; and, provided further, it is agreed that for all purposes Prime
Lessor is not a party to the Sublease. No such collection of rent directly from
Sublessee shall be deemed a waiver of any of Sublessor's covenants contained in
the Prime Lease or the acceptance by Prime Lessor of Sublessee as tenant under
the Prime Lease. The consent by Prime Lessor to the foregoing Sublease shall not
be deemed an approval of any future assignment of the Prime Lease or of the
Sublease or any subsequent subletting of the Sublease Premises or any portion
thereof. Any such future assignment or subletting by Sublessee shall be made
subject to Prime Lessor's prior written consent, and any such future assignment
or subletting by Sublessor shall be made subject to Prime Lessor's prior written
consent. Any such assignment or subletting by either Sublessor or Sublessee (or
each of them) without the prior written consent of Prime Lessor shall be null
and void. No assignment of the Prime Lease or Sublease and no subletting of the
Sublease Premises or any portion thereof shall release Sublessor from any of its
covenants, liabilities, or obligations to Prime Lessor under the Prime Lease. By
consenting to the Sublease, Prime Lessor in no way agrees to perform or to be
obligated to perform any service on behalf of Sublessee under the Sublease, but
shall continue to provide any services to the Sublease Premises in accordance
with the terms and conditions of the Prime Lease. Sublessee shall have no rights
or claims against Primer Lessor, but shall instead look solely to Sublessor for
any such claims. Any and all options, including without limitation, expansion
options, renewal options and rights of first refusal or negotiation, granted
pursuant to the Prime Lease are not assignable and shall be null and void and of
no further force or effect on and after the effective date of the Sublease.
Sublessee agrees by its acceptance of this Consent that Prime Lessor shall have
the right to continue or terminate the Sublease, in Prime Lessor's sole and
absolute discretion, upon any expiration or earlier termination of the Prime
Lease, and Sublessee agrees to recognize and attorn to Prime Lessor in the event
that Prime Lessor elects under such circumstances to continue the Sublease,
Sublessor and Sublessee agree by their acceptance of this Consent that the
Sublease shall not be amended or modified without the prior written consent of
Prime Lessor, and that the Prime Lease remains in full force and effect, without
modification and is binding on Sublessor, as lessee thereunder, and Sublessor
hereby ratifies and affirms the same. Sublessor and Sublessee represent and
warrant to Prime Lessor that (except with respect to Univest Asset Management,
LLC ["Broker"], which broker Sublessor represents has acted as agent solely
*CarrAmerica Realty Corporation (successor to New York Life Insurance Company,
successor to Embassy Row Venture)
<PAGE> 73
for Sublessor in connection with the Sublease) no broker, agent, commission
salesperson, or other person has represented either Sublessor or Sublessee in
the negotiations for and procurement of the Sublease and of the Sublease
Premises and that (except with respect to Broker, which shall be paid a
commission by Sublessor pursuant to the terms of a separate written commission
agreement between Sublessor and Broker) no commissions, fees, or compensation of
any kind are due and payable in connection with the Sublease to any broker,
agent, commission salesperson, or other person.* Sublessor and Sublessee hereby
agree to indemnify and hold Prime Lessor harmless from all loss, cost and damage
(including reasonable attorneys' fees and court costs) suffered or incurred by
Prime Lessor as a result of a breach by Sublessor or Sublessee of the
representation and warranty contained in the immediately preceding sentence or
as a result of Sublessor's or Sublessee's failure to pay commissions, fees or
compensation due to any broker who represented Sublessor or Sublessee,
respectively, whether or not disclosed. Prime Lessor has required the execution
and delivery of this Consent by Sublessor and Sublessee as a condition to the
execution and delivery of this Consent by Prime Lessor. In the event that this
Consent is not executed and delivered by Prime Lessor, then substantial benefits
that otherwise would have inured to the benefit of Sublessor and Sublessee would
not occur. Accordingly, Sublessor and Sublessee agree that each has received
good and adequate consideration for the execution and delivery of this Consent.
This Consent does not constitute recognition of any deviations, alterations or
substitutions from the terms and conditions of the Prime Lease.
*Richard Bowers & Company has represented Sublessee and will be paid a
commission by Sublessor.
IN WITNESS WHEREOF, the undersigned Prime Lessor has hereunto set its hand
and seal this ___ day of ____, 19__.
"PRIME LESSOR":
By: /s/
-------------------------------
Title: Managing Director
--------------------------
[SEAL]
Acknowledged, agreed to and accepted Acknowledged, agreed to and accepted
this ___ day of ___ 19__. this ___ day of ___ 19__.
"SUBLESSOR": "SUBLESSEE":
CSX Intermodal, Inc. American Artists Film Corp.
- ------------------------ ---------------------------
By: /s/ Mark. S. Hoffman By: /s/ Steven D. Brown
-------------------- -----------------------
Title: Gen. Counsel Title: CEO
--------------- --------------------
[SEAL] [SEAL]
<PAGE> 74
EXHIBIT "D"
None
<PAGE> 1
EXHIBIT 10.109
EXTENSION LETTER FOR PROMISSORY NOTES
DATED AS OF DECEMBER 31, 1998
This Extension Letter hereby amends those certain Promissory Notes
listed below by and between American Artists Film Corporation (therein called
"Obligor") and Steven D. Brown, (therein called "Holder") and extends the due
dates of said Promissory Notes for a period of 365 days with all principal and
any accrued but unpaid interest due on or before December 31, 1999.
<TABLE>
<CAPTION>
Date of Promissory Note Amount of Promissory Note
----------------------- -------------------------
<S> <C> <C>
(1) As of July 31, 1997 $ 6,423.00
(2) August 8, 1995 $ 9,691.00
(3) April 17, 1995 $ 27,500.00
(4) August 16, 1994 $ 5,101.00
(5) March 31, 1994 $ 2,613.17
(6) December 31, 1993 $ 18,514.86
</TABLE>
IN WITNESS WHEREOF, the undersigned has caused this Extension Letter to
be duly executed under the seal on the date and year first above written.
"OBLIGOR"
By: /s/ ROBERT MARTINEZ
--------------------------------------
American Artists Film Corporation
1245 Fowler St., N.W.
Atlanta, Georgia 30318
"HOLDER"
/s/ STEVEN D. BROWN
- ------------------------------
Steven D. Brown
<PAGE> 1
EXHIBIT 10.110
EXTENSION LETTER FOR PROMISSORY NOTES
DATED AS OF DECEMBER 31, 1998
This Extension Letter hereby amends those certain Promissory Notes
listed below by and between American Artists Film Corporation (therein called
"Obligor") and Rex Hauck, (therein called "Holder") and extends the due dates of
said Promissory Notes for a period of 365 days with all principal and any
accrued but unpaid interest due on or before December 31, 1999.
<TABLE>
<CAPTION>
Date of Promissory Note Amount of Promissory Note
----------------------- -------------------------
<S> <C> <C>
(1) As of July 31, 1997 $ 10,468.00
(2) April 17, 1995 $ 17,500.00
(3) August 15, 1994 $ 4,499.00
(4) February 1, 1994 $ 2,603.28
(5) December 31, 1993 $ 19,696.51
</TABLE>
IN WITNESS WHEREOF, the undersigned has caused this Extension Letter to
be duly executed under the seal on the date and year first above written.
"OBLIGOR"
By: /s/ ROBERT MARTINEZ
-------------------------------------
American Artists Film Corporation
1245 Fowler St., N.W.
Atlanta, Georgia 30318
"HOLDER"
/s/ REX HAUCK
- -----------------------------
Rex Hauck
<PAGE> 1
EXHIBIT 10.111
EXTENSION LETTER FOR PROMISSORY NOTES
DATED AS OF DECEMBER 31, 1998
This Extension Letter hereby amends that certain Promissory Note dated
as of July 31, 1997 for $1,500.00, by and between American Artists Film
Corporation (therein called "Obligor") and Tyrone Johnson, (therein called
"Holder") and extends the due date of said Promissory Note for a period of 365
days with all principal and any accrued but unpaid interest due on or before
December 31, 1999.
IN WITNESS WHEREOF, the undersigned has caused this Extension Letter to
be duly executed under the seal on the date and year first above written.
"OBLIGOR"
By: /s/ ROBERT MARTINEZ
--------------------------------------
American Artists Film Corporation
1245 Fowler St., N.W.
Atlanta, Georgia 30318
"HOLDER"
/s/ TYRONE JOHNSON
- ----------------------------------
Tyrone Johnson
<PAGE> 1
EXHIBIT 10.112
EXTENSION LETTER FOR PROMISSORY NOTES
DATED AS OF DECEMBER 31, 1998
This Extension Letter hereby amends that certain Promissory Note dated
as of December 31, 1998 for $30,000.00, by and between American Artists Film
Corporation (therein called "Obligor") and Vivian W. Jones, (therein called
"Holder") and extends the due date of said Promissory Note for a period of 365
days with all principal and any accrued but unpaid interest due on or before
December 31, 1999.
IN WITNESS WHEREOF, the undersigned has caused this Extension Letter to
be duly executed under the seal on the date and year first above written.
"OBLIGOR"
By: /s/ ROBERT MARTINEZ
-------------------------------------
American Artists Film Corporation
1245 Fowler St., N.W.
Atlanta, Georgia 30318
"HOLDER"
/s/ VIVIAN W. JONES
- -----------------------------------
Vivian W. Jones
<PAGE> 1
EXHIBIT 10.113
EXTENSION LETTER FOR PROMISSORY NOTES
DATED AS OF DECEMBER 31, 1998
This Extension Letter hereby amends that certain Promissory Note dated
as of July 31, 1997 for $20,800.00, by and between American Artists Film
Corporation (therein called "Obligor") and J. Eric Van Atta, (therein called
"Holder") and extends the due date of said Promissory Note for a period of 365
days with all principal and any accrued but unpaid interest due on or before
December 31, 1999.
IN WITNESS WHEREOF, the undersigned has caused this Extension Letter to
be duly executed under the seal on the date and year first above written.
"OBLIGOR"
By: /s/ ROBERT MARTINEZ
------------------------------------
American Artists Film Corporation
1245 Fowler St., N.W.
Atlanta, Georgia 30318
"HOLDER"
/s/ J. ERIC VAN ATTA
- ------------------------------------
J. Eric Van Atta
<PAGE> 1
EXHIBIT 10.114
EXTENSION LETTER FOR PROMISSORY NOTES
DATED AS OF DECEMBER 31, 1998
This Extension Letter hereby amends those certain Promissory Notes
listed below by and between First Light Entertainment Corporation (therein
called "Obligor") and Vivian W. Jones, (therein called "Holder") and extends the
due dates of said Promissory Notes for a period of 365 days with all principal
and any accrued but unpaid interest due on or before December 31, 1999.
<TABLE>
<CAPTION>
Date of Promissory Note Amount of Promissory Note
----------------------- -------------------------
<S> <C> <C>
(1) As of July 31, 1997 $ 9,600.00
(2) As of July 31, 1996 $ 28,000.00 ($5,000 balance outstanding)
(3) As of May 6, 1995 $ 20,000.00
</TABLE>
IN WITNESS WHEREOF, the undersigned has caused this Extension Letter to
be duly executed under the seal on the date and year first above written.
"OBLIGOR"
By: /s/ J. ERIC VAN ATTA
--------------------------------------
First Light Entertainment Corporation
1245 Fowler St., N.W.
Atlanta, Georgia 30318
"HOLDER"
/s/ VIVIAN W. JONES
- ---------------------------------
Vivian W. Jones
<PAGE> 1
EXHIBIT 10.115
EXTENSION LETTER FOR PROMISSORY NOTES
DATED AS OF DECEMBER 31, 1998
This Extension Letter hereby amends that certain Promissory Note dated
as of July 31, 1997 for $1,000.00, by and between First Light Entertainment
Corporation (therein called "Obligor") and Steven D. Brown, (therein called
"Holder") and extends the due date of said Promissory Note for a period of 365
days with all principal and any accrued but unpaid interest due on or before
December 31, 1999.
IN WITNESS WHEREOF, the undersigned has caused this Extension Letter to
be duly executed under the seal on the date and year first above written.
"OBLIGOR"
By: /s/ J. ERIC VAN ATTA
--------------------------------------
First Light Entertainment Corporation
1245 Fowler St., N.W.
Atlanta, Georgia 30318
"HOLDER"
/s/ STEVEN D. BROWN
- ------------------------------
Steven D. Brown
<PAGE> 1
EXHIBIT 10.116
$37,000.00 January 15, 1999
PROMISSORY NOTE
FOR VALUE RECEIVED, American Artists Film Corporation, a Missouri
corporation (herein called "Obligor"), hereby promises to pay to the order of
Glen C. Warren, a resident of Jackson, Mississippi (herein called "Holder"), in
legal tender of the United States, without grace, at his office located at 10
Lakeland Circle, Jackson, Mississippi, 39216, or at such other place as the
Holder may hereafter designate, the sum of Thirty-Seven Thousand Thousand
Dollars ($37,000.00) together with simple interest on the unpaid balance of such
principal amount outstanding from time to time hereunder at an annual interest
rate equal to prime plus one percent (1%) per annum. All principal and any
accrued but unpaid interest will be due and payable on demand.
It is hereby expressly agreed that should any default be made in the
payment of principal or interest when due, the principal indebtedness evidenced
hereby and all interest accrued thereon shall, upon written demand, become due
and payable and may be collected forthwith. Notwithstanding any other provision
hereof to the contrary, Obligor shall not be deemed to be in default of payment
of principal or interest hereunder if such payment (the "Late Payment") is
received by Holder within ten (10) days following the date on which Obligor
receives written notice of said default.
Payment not made within ten (10) days of the due date shall bear
interest at the rate of prime plus one percent (1%) per annum from the original
due date until paid.
Time is of the essence of this Note, and in the event that this Note is
collected by law or through an attorney-at-law, the Obligor agrees to pay all
reasonable costs of collection.
This note is unsecured.
The Obligor shall be entitled, at any time, and from time to time,
without the consent of the Holder and without making any penalty or premium
therefor, to prepay all or any portion or portions of the outstanding principal
amount thereof.
This Note shall be governed as to the validity, interpretation,
construction, enforcement, effect, and in all respects by the laws and decisions
of the State of Georgia.
No delay or omission on the part of the Holder in exercising any rights
hereunder shall operate as a waiver of such right or any other rights under this
Note. A waiver on any occasion shall not be construed as a bar to or waiver of
any right or remedy on any future occasion.
IN WITNESS WHEREOF, the undersigned has caused these presents to be
duly executed under the seal on the date and year first above written.
"OBLIGOR"
By: /s/ Robert A. Martinez
------------------------------------
American Artists Film Corporation
1245 Fowler St., N.W.
Atlanta, Georgia 30318
"HOLDER"
/s/ Glen C. Warren
- -------------------------
Glen C. Warren
<PAGE> 1
EXHIBIT 10.117
$19,500.00 January 15, 1999
PROMISSORY NOTE
FOR VALUE RECEIVED, American Artists Film Corporation, a Missouri
corporation (herein called "Obligor"), hereby promises to pay to the order of
Sandra Smallwood, a resident of Roswell, Georgia (herein called "Holder"), in
legal tender of the United States, without grace, at her residence located at
9965 Lake Forest Way, Roswell, Georgia 30076, or at such other place as the
Holder may hereafter designate, the sum of Nineteen Thousand Five Hundred
Dollars ($19,500.00) together with simple interest on the unpaid balance of such
principal amount outstanding from time to time hereunder at an annual interest
rate equal to prime plus one percent (1%) per annum. All principal and any
accrued but unpaid interest will be due and payable on demand but no later than
September 1, 1999.
It is hereby expressly agreed that should any default be made in the
payment of principal or interest when due, the principal indebtedness evidenced
hereby and all interest accrued thereon shall, upon written demand, become due
and payable and may be collected forthwith. Notwithstanding any other provision
hereof to the contrary, Obligor shall not be deemed to be in default of payment
of principal or interest hereunder if such payment (the "Late Payment") is
received by Holder within ten (10) days following the date on which Obligor
receives written notice of said default.
Payment not made within ten (10) days of the due date shall bear
interest at the rate of prime plus one percent (1%) per annum from the original
due date until paid.
Time is of the essence of this Note, and in the event that this Note is
collected by law or through an attorney-at-law, the Obligor agrees to pay all
reasonable costs of collection.
As security for this Promissory Note, Obligor hereby grants a first
priority lien against its ownership interest in the Ordinary LLC Shares of False
River, LLC. This security interest shall be limited to the amount of unpaid
principal and accrued interest outstanding under this Promissory Note.
The Obligor shall be entitled, at any time, and from time to time,
without the consent of the Holder and without making any penalty or premium
therefor, to prepay all or any portion or portions of the outstanding principal
amount thereof.
This Note shall be governed as to the validity, interpretation,
construction, enforcement, effect, and in all respects by the laws and decisions
of the State of Georgia.
No delay or omission on the part of the Holder in exercising any rights
hereunder shall operate as a waiver of such right or any other rights under this
Note. A waiver on any occasion shall not be construed as a bar to or waiver of
any right or remedy on any future occasion.
IN WITNESS WHEREOF, the undersigned has caused these presents to be
duly executed under the seal on the date and year first above written.
"OBLIGOR"
By: /s/ Robert Martinez
-----------------------------------------
American Artists Film Corporation
1245 Fowler St., N.W.
Atlanta, Georgia 30318
"HOLDER"
/s/ Sandra Smallwood
- ------------------------------
Sandra Smallwood
<PAGE> 1
EXHIBIT 10.118
HBO LOGO
As of February 1, 1999
American Artists Film Corp.
Embassy Row
Building 600, Suite 250
6600 Peachtree/Dunwoody Road
Atlanta, GA 30328
Attention: Renee Bishop
RE: "MIRACLES"
Gentlepersons:
We refer to the Development Agreement between American Artists Film
Corp. ("Producer") and Home Box Office, a Division of Time Warner Entertainment
Company, L.P. ("HBO"), dated as of October 5, 1998, in connection with the
above-referenced program (the "Agreement"). All terms used herein that are
defined in the Agreement shall have the same meanings herein as in the
Agreement.
Producer and HBO have agreed to amend the Agreement and the purpose of
this letter agreement (the "Amendment") is to set forth our mutual agreement
with respect to such Amendment.
For good and valuable consideration, the receipt and sufficiency of
which are hereby mutually acknowledged, Producer and HBO agree to amend the
Agreement as follows:
1. Producer will prepare and deliver to HBO on or before April 30,
1999, for HBO's approval in its sole discretion (a) additional research
materials (the "Additional Research"); (b) a treatment incorporating the
Additional Research; (c) a production budget; and (d) a shooting schedule
(collectively, the "Additional Development Materials") in connection with the
Program.
2. The term of the Option is hereby extended and will end three (3)
months following HBO's receipt of the final Additional Development Materials.
3. Paragraph 3 of the Agreement is hereby amended and in addition to
the compensation set forth therein, HBO shall pay Producer the sum of $37,376
(which sum shall be credited against the license fee in the event HBO exercises
the Option).
-1-
<PAGE> 2
Payment will be made as follows: (a) 50% immediately; and (b) 50%
within ten (10) days after the later of (i) execution and delivery of this
Amendment; and (ii) delivery to HBO of the Additional Development Materials.
4. The Additional Development Materials shall be deemed part of the
Development Materials for all purposes whatsoever.
Except as amended hereby, all other terms of the Agreement shall remain
unaltered and in full force and effect.
If the foregoing correctly sets forth our understanding, please execute
in the spaces provided below and return all enclosed copies of this Amendment to
HBO. Upon execution by HBO, this Amendment shall be effective as of the date
hereof.
Very truly yours,
HOME BOX OFFICE, a
Division of Time Warner
Entertainment Company, L.P.
By: /s/ Sharon Werner
----------------------------------------
Title: Vice President
Accepted and agreed to as of
the date first written above:
AMERICAN ARTISTS FILM CORP.
By: /s/ J. Eric Van Atta
- ------------------------------------
Title: Vice President
-2-
<PAGE> 1
EXHIBIT 10.119
$10,000.00 February 1, 1999
PROMISSORY NOTE
FOR VALUE RECEIVED, American Artists Film Corporation, a Missouri
corporation (herein called "Obligor"), hereby promises to pay to the order of
Norman J. Hoskin, a resident of Boca Raton, Florida (herein called "Holder"), in
legal tender of the United States, without grace, at his office located at 200
E. Palmetto Park Road, Suite 200, Boca Raton, Florida, 33432, or at such other
place as the Holder may hereafter designate, the sum of Ten Thousand Dollars
($10,000.00) together with simple interest on the unpaid balance of such
principal amount outstanding from time to time hereunder at an annual interest
rate equal to prime plus one percent (1%) per annum. All principal and any
accrued but unpaid interest will be due and payable on demand.
It is hereby expressly agreed that should any default be made in the
payment of principal or interest when due, the principal indebtedness evidenced
hereby and all interest accrued thereon shall, upon written demand, become due
and payable and may be collected forthwith. Notwithstanding any other provision
hereof to the contrary, Obligor shall not be deemed to be in default of payment
of principal or interest hereunder if such payment (the "Late Payment") is
received by Holder within ten (10) days following the date on which Obligor
receives written notice of said default.
Payment not made within ten (10) days of the due date shall bear
interest at the rate of prime plus one percent (1%) per annum from the original
due date until paid.
Time is of the essence of this Note, and in the event that this Note is
collected by law or through an attorney-at-law, the Obligor agrees to pay all
reasonable costs of collection.
This note is unsecured.
The Obligor shall be entitled, at any time, and from time to time,
without the consent of the Holder and without making any penalty or premium
therefor, to prepay all or any portion or portions of the outstanding principal
amount thereof.
This Note shall be governed as to the validity, interpretation,
construction, enforcement, effect, and in all respects by the laws and decisions
of the State of Georgia.
No delay or omission on the part of the Holder in exercising any rights
hereunder shall operate as a waiver of such right or any other rights under this
Note. A waiver on any occasion shall not be construed as a bar to or waiver of
any right or remedy on any future occasion.
IN WITNESS WHEREOF, the undersigned has caused these presents to be
duly executed under the seal on the date and year first above written.
"OBLIGOR"
By: /s/ Robert A. Martinez
--------------------------------------
American Artists Film Corporation
1245 Fowler St., N.W.
Atlanta, Georgia 30318
"HOLDER"
/s/ Norman Hoskin
- ----------------------------------
Norman J. Hoskin
<PAGE> 1
EXHIBIT 10.120
$11,000.00 February 16, 1999
PROMISSORY NOTE
FOR VALUE RECEIVED, American Artists Film Corporation, a Missouri
corporation (herein called "Obligor"), hereby promises to pay to the order of
Steven D. Brown, a resident of Roswell, Georgia (herein called "Holder"), in
legal tender of the United States, without grace, at his residence located at
9965 Lake Forest Way, Roswell, Georgia 30076, or at such other place as the
Holder may hereafter designate, the sum of Eleven Thousand Dollars ($11,000.00)
together with simple interest on the unpaid balance of such principal amount
outstanding from time to time hereunder at an annual interest rate equal to
prime plus one percent (1%) per annum. All principal and any accrued but unpaid
interest will be due and payable on demand but no later than September 1, 1999.
It is hereby expressly agreed that should any default be made in the
payment of principal or interest when due, the principal indebtedness evidenced
hereby and all interest accrued thereon shall, upon written demand, become due
and payable and may be collected forthwith. Notwithstanding any other provision
hereof to the contrary, Obligor shall not be deemed to be in default of payment
of principal or interest hereunder if such payment (the "Late Payment") is
received by Holder within ten (10) days following the date on which Obligor
receives written notice of said default.
Payment not made within ten (10) days of the due date shall bear
interest at the rate of prime plus one percent (1%) per annum from the original
due date until paid.
Time is of the essence of this Note, and in the event that this Note is
collected by law or through an attorney-at-law, the Obligor agrees to pay all
reasonable costs of collection.
As security for this Promissory Note, Obligor hereby grants a first
priority lien against its ownership interest in the Ordinary LLC Shares of False
River, LLC. This security interest shall be limited to the amount of unpaid
principal and accrued interest outstanding under this Promissory Note.
The Obligor shall be entitled, at any time, and from time to time,
without the consent of the Holder and without making any penalty or premium
therefor, to prepay all or any portion or portions of the outstanding principal
amount thereof.
This Note shall be governed as to the validity, interpretation,
construction, enforcement, effect, and in all respects by the laws and decisions
of the State of Georgia.
No delay or omission on the part of the Holder in exercising any rights
hereunder shall operate as a waiver of such right or any other rights under this
Note. A waiver on any occasion shall not be construed as a bar to or waiver of
any right or remedy on any future occasion.
IN WITNESS WHEREOF, the undersigned has caused these presents to be
duly executed under the seal on the date and year first above written.
"OBLIGOR"
By: /s/ Robert A. Martinez
------------------------------------------
American Artists Film Corporation
1245 Fowler St., N.W.
Atlanta, Georgia 30318
"HOLDER"
/s/ Steven Brown
- ------------------------------
Steven D. Brown
<PAGE> 1
EXHIBIT 10.121
CONSULTING AGREEMENT
This agreement ("Agreement") is made and entered into this day 19 of
February, 1999 between American Artists Film Corporation, a Missouri corporation
(the "Company") and Fontenelle, LLC ("Consultant"), a Nevada limited liability
company.
RECITALS
A. The Company is a multi-faceted entertainment company committed to
the creation, production and distribution of original, innovative programming
and films for a variety of media. The Company has also developed a concept for
the installation and operation of a network of large screen video display
("LSVD") units.
B. The Consultant is generally knowledgeable in the areas of business
operations and plan implementation, possesses a high level of experience in the
entertainment/LSVD industry and is experienced in evaluating and developing
strategic business plans.
C. The Company wishes to engage the Consultant on a nonexclusive basis
as an independent contractor to utilize Consultant's general business and
entertainment/LSVD industry experience and contacts and to further develop and
refine its strategic business plan.
D. The Consultant is willing to be so retained on the terms and
conditions as set forth in this Agreement.
AGREEMENT
NOW, THEREFORE, in consideration of the promises and the mutual
agreements hereinafter set forth, the parties hereto agree as follows:
1. Engagement. The Company hereby retains and engages Consultant to
perform the following consulting services (the "Consulting Services"):
a. Review and evaluate the Company's current business plan and
remain knowledgeable about the contents thereof;
b. Work with the Company's management to develop and prepare a
detailed strategic business plan as well as periodically revise said plan as
required during the Term of this Agreement;
c. Provide general strategic advice and consultation to the
Company's management on all matters pertaining to the business of the Company,
and;
d. Provide introductions to entertainment/LSVD industry contacts.
2. Duties Expressly Excluded. This Agreement expressly excludes the
Consultant from providing any and all capital formation and/or public relation
services to the Company inclusive of but not limited to (i) direct or indirect
promotion of the Company's securities; (ii) assistance in making of a market in
the Company's securities; and (iii) assistance in obtaining debt and/or equity
financing.
-1-
<PAGE> 2
3. Consideration. As full and complete consideration for the
performance by the Consultant of the Consulting Services, the Company will issue
to the Consultant 800,000 shares of the Company's Class A common stock, $0.001
par value (the "Shares"). In the event that Consultant does not completely
perform the Consulting Services (for any reason, including the death or
incapacity of Consultant), then for each month that Consultant does not perform
the Consulting Services during the Term, one sixth (1/6) of the Shares (as
adjusted for stock splits, reverse stock splits, stock dividends or
distributions or other reclassifications of the Company's capital stock) shall
be returned to the Company and canceled. Consultant agrees to purchase shares in
the open market, if necessary, to fulfill such obligation to return shares to
the Company.
The Shares will be issued as soon as practicable following
execution of this Agreement and the filing of a registration statement under the
Securities Act of 1933, as amended, on Form S-8 (or other available form)
covering the issuance of the Shares to Consultant.
4. Term. This Agreement shall be effective for a term of six (6) months
starting from the date first written above unless sooner terminated upon mutual
written agreement of the parties hereto.
5. Expenses. Consultant shall bear his out-of-pocket costs and expenses
incident to performing the Consulting Services, without a right of reimbursement
from the Company unless such expenses are pre-approved by the Company.
6. Consultant's Liability. In the absence of gross negligence or
willful misconduct on the part of the Consultant or the Consultant's breach of
any terms of this Agreement, the Consultant shall not be liable to the Company
or to any officer, director, employee, stockholder or creditor of the Company,
for any act or omission in the course of or in connection with the rendering or
providing of services hereunder. Except in those cases where the gross
negligence or willful misconduct of the Consultant or the breach by the
Consultant of any terms of this Agreement is alleged and proven, the Company
agrees to defend, indemnify, and hold the Consultant harmless from and against
any and all reasonable costs, expenses and liability (including reasonable
attorney's fees paid in the defense of the Consultant) which may in any way
result from services rendered by the Consultant pursuant to or in any connection
with this Agreement. This indemnification expressly excludes any and all damages
as a result of any actions or statements, on behalf of the Company, made by the
Consultant without the prior approval or authorization of the Company.
7. Company's Liability. The Consultant agrees to defend, indemnify, and
hold the Company harmless from and against any and all reasonable costs,
expenses and liability (including reasonable attorney's fees paid in defense of
the Company) which may in any way result pursuant to its gross negligence or
willful misconduct or in any connection with any actions taken or statements
made, on behalf of the Company, without the prior approval or authorization of
the Company or which are otherwise in violation of applicable law.
8. Representations. The Consultant makes the following representations:
(a) Consultant has no prior or existing legally binding obligations
that are in conflict with its entering into this Agreement;
(b) Consultant shall not offer or make payment of any consideration
to brokers, dealers, or others for purposes of inducing the purchase, making of
a market or recommendation for the purchase of the Company's securities;
-2-
<PAGE> 3
(c) Consultant is not currently the subject of an investigation or
inquiry by the Securities and Exchange Commission, the NASD, or any state
securities commission;
(d) Consultant's activities and operations fully comply with now and
will comply with in the future all applicable state and federal securities laws
and regulations;
(e) Consultant is either properly registered as, or exempt from
registration, as a broker-dealer or an investment advisor;
(f) Consultant understands that, as a result of its services, it may
come to possess material non-public information about the Company, and that it
has implemented internal control procedures designed to reasonably to insure
that it and none of its employees, agents, consultants or affiliates, trade in
the securities of client companies while in possession of material non-public
information;
(g) During the Term of this Agreement and for a period of two year
thereafter, the Consultant shall treat as the Company's confidential trade
secrets all data, information, ideas, knowledge and papers pertaining to the
affairs of the Company. Without limiting the generality of the foregoing, such
trade secrets shall include: the identity of the Company's customers, suppliers
and prospective customers and suppliers; the identity of the Company's creditors
and other sources of financing; the Company's estimating and costing procedures
and the cost and gross prices charged by the Company for its products; the
prices or other consideration charged to or required of the Company by any of
its suppliers or potential suppliers; the Company's sales and promotional
policies; and all information relating to entertainment programs or properties
being produced or otherwise developed by the Company. The Consultant shall not
reveal said trade secrets to others except in the proper exercise of its duties
for the Company, or use their knowledge thereof in any way that would be
detrimental to the interests of the Company, unless compelled to disclose such
information by judicial or administrative process; provided, however, that the
divulging of information shall not be a breach of this Agreement to the extent
that such information was (i) previously known by the party to which it is
divulged, (ii) already in the public domain, all through no fault of the
Consultant, or (iii) required to be disclosed by Consultant pursuant to judicial
or governmental order. The Consultant shall also treat all information
pertaining to the affairs of the Company's suppliers and customers and
prospective customers and suppliers as confidential trade secrets of such
customers and suppliers and prospective customers and suppliers, and:
(h) Consultant agrees to notify the Company immediately if, at any
time, any of the representations and warranties made by the Consultant herein
are no longer true and correct or if a breach of any of the representations and
warranties made by the Consultant herein occurs.
9. The Company makes the following representations:
(a) The Company is not currently the subject of an investigation or
inquiry by the Securities and Exchange Commission, the NASD, or any state
securities commission.
(b) The Company is in good standing in its state of incorporation,
Missouri.
(c) The Company is a "reporting company" under the Securities Act of
1934 and has timely filed all of its required reports, except for its Form
10-KSB for the year ended July 31, 1998 and its Form 10-QSB for the quarter
ended October 31, 1998.
-3-
<PAGE> 4
(d) The Company and its senior management are not aware of any
materially adverse events not previously disclosed in the Company's annual and
quarterly reports with the Securities and Exchange Commission.
10. Entire Agreement. This Agreement embodies the entire agreement and
understanding between the Company and the Consultant and supersedes any and all
negotiations, prior discussions and preliminary and prior agreements and
understandings related to the primary subject matter hereof. This Agreement
shall not be modified except by written instrument duly executed by each of the
parties hereto.
11. Waiver. No waiver of any of the provisions of this Agreement shall
be deemed, or shall constitute a waiver of any other provision, nor shall any
waiver constitute a continuing waiver. No waiver shall be binding unless
executed in writing by the party making the waiver.
12. Assignment and Binding Effect. This Agreement and the rights
hereunder may not be assigned by the parties (except by operation of law or
merger) and shall be binding upon and inure to the benefit of the parties and
their respective successors, assigns and legal representatives.
13. Notices. Any notice or other communication between the parties
hereto shall be sufficiently given if sent by certified or registered mail,
postage prepaid, or faxed and confirmed at the following locations:
Company:
American Artists Film Corporation
6600 Peachtree Dunwoody Road, Bldg. 600, Suite 250
Atlanta, Georgia 30318
Attn: Steven D. Brown
Consultant:
Fontenelle, LLC
345 North Maple Drive, Suite 358
Beverly Hills, California 90210
Attn: Steven Antebi
or at such other location as the addressee may have specified in a notice duly
given to the sender as provided herein. Such notice or other communication shall
be deemed to be given on the date of receipt.
14. Severability. Every provision of this Agreement is intended to be
severable. If any term or provision hereof is deemed unlawful or invalid for any
reason whatsoever, such unlawfulness or invalidity shall not affect the validity
of this Agreement.
15. Governing Law. This Agreement shall be construed and interpreted in
accordance with the laws of the State of Georgia, without giving effect to
conflicts of laws.
16. Headings. The headings of this Agreement are inserted solely for
the convenience of reference and are not part of, and are not intended to
govern, limit or aid in the construction of any term or provision hereof.
-4-
<PAGE> 5
17. Further Acts. Each party agrees to perform any further acts and
execute and deliver any further documents that may be reasonably necessary to
carry out the provisions and intent of this Agreement.
18. Acknowledgment Concerning Counsel. Each party acknowledges that it
had the opportunity to employ separate and independent counsel of its own
choosing in connection with this Agreement.
19. Independent Contractor Status. There is no relationship,
partnership, agency, employment, franchise or joint venture between the parties.
The parties have no authority to bind the other or incur any obligations on
their behalf.
20. Counterparts. This Agreement may be executed simultaneously in two
or more counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of
the date first written above.
AMERICAN ARTISTS FILM CORPORATION
By: /s/ Steven D. Brown
------------------------------------------
Steven D. Brown, CEO
FONTENELLE, LLC
By: /s/ Steven Antebi
------------------------------------------
Steven Antebi, Authorized Officer
-5-
<PAGE> 1
EXHIBIT 10.122
CONSULTING AGREEMENT
This agreement ("Agreement") is made and entered into this 19 day of
February, 1999 between American Artists Film Corporation, a Missouri corporation
(the "Company") and F T Enterprises, Inc. ("Consultant"), a California
corporation.
RECITALS
A. The Company is a multi-faceted entertainment company committed to
the creation, production and distribution of original, innovative programming
and films for a variety of media. The Company has also developed a concept for
the installation and operation of a network of large screen video display
("LSVD") units.
B. The Consultant is generally knowledgeable in the areas of business
operations and plan implementation, possesses a high level of experience in the
entertainment/LSVD industry and is experienced in evaluating and developing
strategic business plans.
C. The Company wishes to engage the Consultant on a nonexclusive basis
as an independent contractor to utilize Consultant's general business and
entertainment/LSVD industry experience and contacts and to further develop and
refine its strategic business plan.
D. The Consultant is willing to be so retained on the terms and
conditions as set forth in this Agreement.
AGREEMENT
NOW, THEREFORE, in consideration of the promises and the mutual
agreements hereinafter set forth, the parties hereto agree as follows:
1. Engagement. The Company hereby retains and engages Consultant
to perform the following consulting services (the "Consulting Services"):
a. Review and evaluate the Company's current business plan and
remain knowledgeable about the contents thereof;
b. Work with the Company's management to develop and prepare a
detailed strategic business plan as well as periodically revise said plan as
required during the Term of this Agreement;
c. Provide general strategic advice and consultation to the
Company's management on all matters pertaining to the business of the Company,
and;
d. Provide introductions to entertainment/LSVD industry
contacts.
2. Duties Expressly Excluded. This Agreement expressly excludes
the Consultant from providing any and all capital formation and/or public
relation services to the Company inclusive of but not limited to (i) direct or
indirect promotion of the Company's securities; (ii) assistance in making of a
market in the Company's securities; and (iii) assistance in obtaining debt
and/or equity financing.
-1-
<PAGE> 2
3. Consideration. As full and complete consideration for the
performance by the Consultant of the Consulting Services, the Company will issue
to the Consultant 400,000 shares of the Company's Class A common stock, $0.001
par value (the "Shares"). In the event that Consultant does not completely
perform the Consulting Services (for any reason, including the death or
incapacity of Consultant), then for each month that Consultant does not perform
the Consulting Services during the Term, one sixth (1/6) of the Shares (as
adjusted for stock splits, reverse stock splits, stock dividends or
distributions or other reclassifications of the Company's capital stock) shall
be returned to the Company and canceled. Consultant agrees to purchase shares in
the open market, if necessary, to fulfill such obligation to return shares to
the Company.
The Shares will be issued as soon as practicable following
execution of this Agreement and the filing of a registration statement under the
Securities Act of 1933, as amended, on Form S-8 (or other available form)
covering the issuance of the Shares to Consultant.
4. Term. This Agreement shall be effective for a term of six (6)
months starting from the date first written above unless sooner terminated upon
mutual written agreement of the parties hereto.
5. Expenses. Consultant shall bear his out-of-pocket costs and
expenses incident to performing the Consulting Services, without a right of
reimbursement from the Company unless such expenses are pre-approved by the
Company.
6. Consultant's Liability. In the absence of gross negligence or
willful misconduct on the part of the Consultant or the Consultant's breach of
any terms of this Agreement, the Consultant shall not be liable to the Company
or to any officer, director, employee, stockholder or creditor of the Company,
for any act or omission in the course of or in connection with the rendering or
providing of services hereunder. Except in those cases where the gross
negligence or willful misconduct of the Consultant or the breach by the
Consultant of any terms of this Agreement is alleged and proven, the Company
agrees to defend, indemnify, and hold the Consultant harmless from and against
any and all reasonable costs, expenses and liability (including reasonable
attorney's fees paid in the defense of the Consultant) which may in any way
result from services rendered by the Consultant pursuant to or in any connection
with this Agreement. This indemnification expressly excludes any and all damages
as a result of any actions or statements, on behalf of the Company, made by the
Consultant without the prior approval or authorization of the Company.
7. Company's Liability. The Consultant agrees to defend,
indemnify, and hold the Company harmless from and against any and all reasonable
costs, expenses and liability (including reasonable attorney's fees paid in
defense of the Company) which may in any way result pursuant to its gross
negligence or willful misconduct or in any connection with any actions taken or
statements made, on behalf of the Company, without the prior approval or
authorization of the Company or which are otherwise in violation of applicable
law.
8. Representations. The Consultant makes the following
representations:
(a) Consultant has no prior or existing legally binding
obligations that are in conflict with its entering into this Agreement;
(b) Consultant shall not offer or make payment of any
consideration to brokers, dealers, or others for purposes of inducing the
purchase, making of a market or recommendation for the purchase of the Company's
securities;
-2-
<PAGE> 3
(c) Consultant is not currently the subject of an
investigation or inquiry by the Securities and Exchange Commission, the NASD, or
any state securities commission;
(d) Consultant's activities and operations fully comply with
now and will comply with in the future all applicable state and federal
securities laws and regulations;
(e) Consultant is either properly registered as, or exempt
from registration, as a broker-dealer or an investment advisor;
(f) Consultant understands that, as a result of its services,
it may come to possess material non-public information about the Company, and
that it has implemented internal control procedures designed to reasonably to
insure that it and none of its employees, agents, consultants or affiliates,
trade in the securities of client companies while in possession of material
non-public information;
(g) During the Term of this Agreement and for a period of two
year thereafter, the Consultant shall treat as the Company's confidential trade
secrets all data, information, ideas, knowledge and papers pertaining to the
affairs of the Company. Without limiting the generality of the foregoing, such
trade secrets shall include: the identity of the Company's customers, suppliers
and prospective customers and suppliers; the identity of the Company's creditors
and other sources of financing; the Company's estimating and costing procedures
and the cost and gross prices charged by the Company for its products; the
prices or other consideration charged to or required of the Company by any of
its suppliers or potential suppliers; the Company's sales and promotional
policies; and all information relating to entertainment programs or properties
being produced or otherwise developed by the Company. The Consultant shall not
reveal said trade secrets to others except in the proper exercise of its duties
for the Company, or use their knowledge thereof in any way that would be
detrimental to the interests of the Company, unless compelled to disclose such
information by judicial or administrative process; provided, however, that the
divulging of information shall not be a breach of this Agreement to the extent
that such information was (i) previously known by the party to which it is
divulged, (ii) already in the public domain, all through no fault of the
Consultant, or (iii) required to be disclosed by Consultant pursuant to judicial
or governmental order. The Consultant shall also treat all information
pertaining to the affairs of the Company's suppliers and customers and
prospective customers and suppliers as confidential trade secrets of such
customers and suppliers and prospective customers and suppliers, and;
(h) Consultant agrees to notify the Company immediately if, at
any time, any of the representations and warranties made by the Consultant
herein are no longer true and correct or if a breach of any of the
representations and warranties made by the Consultant herein occurs.
9. The Company makes the following representations:
(a) The Company is not currently the subject of an
investigation or inquiry by the Securities and Exchange Commission, the NASD, or
any state securities commission.
(b) The Company is in good standing in its state of
incorporation, Missouri.
(c) The Company is a "reporting company" under the Securities
Act of 1934 and has timely filed all of its required reports, except for its
Form 10-KSB for the year ended July 31, 1998 and its Form 10-QSB for the quarter
ended October 31, 1998.
-3-
<PAGE> 4
(d) The Company and its senior management are not aware of any
materially adverse events not previously disclosed in the Company's annual and
quarterly reports with the Securities and Exchange Commission.
10. Entire Agreement. This Agreement embodies the entire agreement and
understanding between the Company and the Consultant and supersedes any and all
negotiations, prior discussions and preliminary and prior agreements and
understandings related to the primary subject matter hereof. This Agreement
shall not be modified except by written instrument duly executed by each of the
parties hereto.
11. Waiver. No waiver of any of the provisions of this Agreement shall
be deemed, or shall constitute a waiver of any other provision, nor shall any
waiver constitute a continuing waiver. No waiver shall be binding unless
executed in writing by the party making the waiver.
12. Assignment and Binding Effect. This Agreement and the rights
hereunder may not be assigned by the parties (except by operation of law or
merger) and shall be binding upon and inure to the benefit of the parties and
their respective successors, assigns and legal representatives.
13. Notices. Any notice or other communication between the parties
hereto shall be sufficiently given if sent by certified or registered mail,
postage prepaid, or faxed and confirmed at the following locations:
Company:
American Artists Film Corporation
6600 Peachtree Dunwoody Road, Bldg. 600, Suite 250
Atlanta, Georgia 30318
Attn: Steven D. Brown
Consultant:
F T Enterprises, Inc.
345 North Maple Drive, Suite 358
Beverly Hills, California 90210
Attn: David Antebi
or at such other location as the addressee may have specified in a notice duly
given to the sender as provided herein. Such notice or other communication shall
be deemed to be given on the date of receipt.
14. Severability. Every provision of this Agreement is intended to be
severable. If any term or provision hereof is deemed unlawful or invalid for any
reason whatsoever, such unlawfulness or invalidity shall not affect the validity
of this Agreement.
15. Governing Law. This Agreement shall be construed and interpreted in
accordance with the laws of the State of Georgia, without giving effect to
conflicts of laws.
16. Headings. The headings of this Agreement are inserted solely for
the convenience of reference and are not part of, and are not intended to
govern, limit or aid in the construction of any term or provision hereof.
-4-
<PAGE> 5
17. Further Acts. Each party agrees to perform any further acts and
execute and deliver any further documents that may be reasonably necessary to
carry out the provisions and intent of this Agreement.
18. Acknowledgment Concerning Counsel. Each party acknowledges that it
had the opportunity to employ separate and independent counsel of its own
choosing in connection with this Agreement.
19. Independent Contractor Status. There is no relationship,
partnership, agency, employment, franchise or joint venture between the parties.
The parties have no authority to bind the other or incur any obligations on
their behalf.
20. Counterparts. This Agreement may be executed simultaneously in two
or more counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of
the date first written above.
AMERICAN ARTISTS FILM CORPORATION
By: /s/ Steven D. Brown
---------------------------------------
Steven D. Brown, CEO
F T ENTERPRISES, INC.
By: /s/ David Antebi
----------------------------------------
David Antebi, Authorized Officer
-5-
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT
CERTIFIED PUBLIC ACCOUNTANTS
American Artists Entertainment Corporation
Atlanta, Georgia
We hereby consent to the incorporation by reference of our report dated March
2, 1999 relating to the consolidated financial statements of American Artists
Entertainment Corporation (formerly American Artists Film Corporation) included
in the Company's Annual Report on Form 10-KSB as of and for each of the years
ended July 31, 1998 and 1997 in the Registration Statement on Form S-8
pertaining to the American Artists Film Corporation 1996 Stock Option Plan, as
Amended.
BDO Seidman, LLP
Atlanta, Georgia
March 9, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE COMPANY'S
CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED JULY 31, 1998 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1
<CURRENCY> US DOLLARS
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUL-31-1998
<PERIOD-START> AUG-01-1997
<PERIOD-END> JUL-31-1998
<EXCHANGE-RATE> 1
<CASH> 35,568
<SECURITIES> 0
<RECEIVABLES> 99,998
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 134,181
<DEPRECIATION> 105,960
<TOTAL-ASSETS> 1,647,030
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 6,440
<OTHER-SE> (656,071)
<TOTAL-LIABILITY-AND-EQUITY> 1,647,030
<SALES> 2,450,958
<TOTAL-REVENUES> 2,450,958
<CGS> 1,812,299
<TOTAL-COSTS> 4,349,618
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 57,647
<INCOME-PRETAX> (1,956,307)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,956,307)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,956,307)
<EPS-PRIMARY> (.30)
<EPS-DILUTED> (.30)
</TABLE>
