SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended June 30, 1996
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 For the transition period from
__________ to __________
Commission file number 0-27390
JUNGLE STREET, INC.
(Name of small business issuer in its charter)
Utah 87-0368236
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
215 Yakima Street
Wenatchee, Washington 98801
(509) 664-9004
(Address and telephone number of principal executive offices)
Securities registered under Section 12(b) of the Exchange Act:
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None
Securities registered under Section 12(g) of the Exchange Act:
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Common Stock, $.001 par value
(Title of Class)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Securities 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 X No
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Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-B contained in this form, and no disclosure will be
contained, to the best of 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. |X|
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State issuer's revenues for its most recent fiscal year: $1,697,000.
State the aggregate market value of the voting stock held by
non-affiliates, based on the closing price for the registrant's Common
Stock on the Nasdaq Electronic Bulletin Board, as of October 11, 1996:
approximately $5,088,359.
State the number of shares outstanding of the issuer's Common Stock, as of
October 11, 1996: 14,640,745
Transitional small business disclosure format: Yes No X
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TABLE OF CONTENTS
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Item of Form 10-KSB Page
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PART I
Item 1 - Description of Business.......................................... 2
Item 2 - Description of Property.......................................... 14
Item 3 - Legal Proceedings................................................ 14
Item 4 - Submission of Matters to a Vote of Security Holders.............. 14
PART II
Item 5 - Market for the Registrant's Common Stock
and Related Shareholder Matters.................................. 15
Item 6 - Management's Discussion and Analysis of
Financial Condition and Results of Operations................... 16
Item 7 - Financial Statements............................................. 19
Item 8 - Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure........................... 43
PART III
Item 9 - Directors, Executive Officers, Promoters and Control Persons;
Compliance with Section 16(a) of the Exchange Act................ 44
Item 10 - Executive Compensation........................................... 46
Item 11 - Security Ownership of Certain Beneficial
Owners and Management............................................ 50
Item 12 - Certain Relationships and Related
Transactions..................................................... 52
Item 13 - Exhibits and Reports on Form 8-K................................. 53
SIGNATURES................................................................. 55
EXHIBIT INDEX.............................................................. 56
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PART I
PRELIMINARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
The information set forth in this report in Item 1 - "Description of
Business" and in Item 6 - "Management's Discussion and Analysis of
Financial Condition and Results of Operations" includes "forward-looking
statements" within the meaning of Section 27A of the Securities Act of
1933, as amended, and Section 21E of the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), and is subject to the safe harbor created
by those sections. Certain factors that realistically could cause results
to differ materially from those projected in the forward-looking statements
are set forth in Item 1 - "Considerations Related to the Company's
Business."
ITEM 1. DESCRIPTION OF BUSINESS
OVERVIEW
Jungle Street, Inc. ("Jungle Street") provides Internet access and
long distance telecommunications services through its wholly-owned
subsidiary, Televar Northwest, Inc. ("Televar"). Unless the context
indicates otherwise, Jungle Street and Televar are collectively referred to
herein as the "Company."
The Company is a provider of Internet and other integrated
telecommunications services for individuals and businesses. The Company's
strategy is to establish strong market share positions in rural markets
through a network of value added resellers and to gain market share in
urban markets by entering into distribution relationships with computer
retail chains and through strategic acquisitions of local and regional
Internet service providers. The Company offers subscribers a complete
Internet access solution comprised of front-end software integrated with
high quality access service and customer support, and employs a
telecommunications network that provides subscribers with direct,
high-speed access to the full range of Internet applications and resources,
including e-mail, World Wide Web browsing, File Transfer Protocol, Telenet
and Usenet. By offering competitive local service, content and support, the
Company believes it can create strong brand loyalty in the service areas in
which it operates.
In addition to providing Internet access services, the Company also
provides long distance voice and data telecommunications services to
businesses under an agreement with Association Communications, Inc., a
tariffed long distance reseller based in Seattle, Washington. Under the
agreement, the Company offers both switched and dedicated service at
competitive rates and personalized customer service to businesses located
throughout Washington.
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The Company in its current form is the result of an August 1996 merger
between a wholly-owned subsidiary of Jungle Street and Televar (the
"Merger"). Prior to the Merger, Jungle Street had no active business and
had nominal assets and liabilities. Pursuant to the terms of the merger,
Televar's shareholders received approximately 83% of the 13,968,625 shares
of the common stock of Jungle Street outstanding on the effective date of
the Merger in exchange for all of the outstanding shares of Televar's
Common Stock. On the effective date of the Merger, the officers and
directors of Televar became the officers and directors of the Company and
Jungle Street's existing officers and directors resigned. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations
Overview."
Televar was incorporated in Washington in 1984 as Apple Valley
Telephone, Incorporated. From 1984 until February 1995, Televar was
primarily in the business of providing telephone interconnection products
and services. In February 1995, Televar discontinued that business and
since that time has focused principally on providing Internet access and
long distance telephone services. Jungle Street was incorporated in Utah in
1980 to pursue real estate investment opportunities. Jungle Street
purchased two real estate parcels in Park City, Utah, which it sold at
losses in 1993 and 1994. Jungle Street was essentially inactive from August
1994 until December 1995 when it filed a registration statement to register
its common stock under Section 12(g) of the Exchange Act.
The Company's headquarters are located at 215 Yakima Street,
Wenatchee, WA 98801.
CONSIDERATIONS RELATED TO THE COMPANY'S BUSINESS
The following factors should be considered in evaluating the Company's
business and operations:
LIMITED OPERATING HISTORY; OPERATING LOSSES. The Company has had a
limited operating history in the Internet access and long distance services
industries. Although the Company has experienced recent growth in revenues,
it experienced net losses of $367,000 and $106,000, respectively, in each
of the fiscal years ended June 30, 1996 and June 30, 1995. The Company's
current focus is on developing its Internet subscriber base.
Notwithstanding cost-saving measures that the Company has implemented, it
expects for the foreseeable future to continue to incur net losses. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operation." There can be no assurance that revenue growth will continue or
that the Company will in the future achieve or sustain profitability or
positive cash flow from operations.
NEED FOR ADDITIONAL CAPITAL. The success of the Company will depend in
significant part on its ability to raise additional equity and/or debt
financing to fund existing obligations, to provide working capital, and to
finance operations and potential acquisitions. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations." The
Company's current working capital sources are insufficient to fund its
near-term
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operations. There is no assurance that the Company will be able to raise
additional capital on favorable terms or, if it raises such additional
capital, that such financing will be sufficient to permit the Company to
operate profitably.
NEW AND UNCERTAIN MARKET. The market for Internet access services and
related products is in an early stage of growth. Because this market is
relatively new and because current and future competitors are likely to
continue to introduce competing Internet connectivity and/or on-line
services and products, it is difficult to predict the rate at which the
market will grow or at which new or increased competition will result in
market saturation. See " - Internet Industry Background." If demand for
Internet services fails to grow or grows more slowly than anticipated, or
the market becomes saturated with competitors, the Company's business,
operating results and financial condition will be adversely affected.
DEPENDENCE ON NETWORK INFRASTRUCTURE. The future success of the
Company's business will depend upon the capacity, reliability and security
of its network infrastructure. The Company must continue to expand and
adapt its network infrastructure as the number of users and the amount of
information they wish to transfer increases, and to meet changing customer
requirements. The expansion and adaption of the Company's network
infrastructure will require substantial financial, operational and
management resources. There can be no assurance that the Company will be
able to expand or adapt its network infrastructure to meet additional
demand or its customers' changing requirements on a timely basis, at a
commercially reasonable cost, or at all, or that the Company will be able
to deploy successfully the contemplated network expansion. Any failure of
the Company to expand its network infrastructure on a timely basis or to
adapt into changing customer requirements or evolving industry standards
could have a material adverse effect on the Company's business, financial
condition and results of operations.
COMPETITION. The market for Internet access services is extremely
competitive. There are no substantial barriers to entry, and the Company
expects that competition will intensify in the future. The Company's
competitors include other local access providers as well as many large
companies that have substantially greater market presence and financial,
technical, marketing and other resources than the Company, including (1)
national and regional commercial Internet service providers, such as NETCOM
On-Line Communication Services, Inc., PSINet and UUNET Technologies, Inc.;
(2) established on-line services that offer Internet access, such as
America Online, Inc. ("AOL"), CompuServe Incorporated, Prodigy Services
Company, Genie, and Delphi Internet Services; (3) computer hardware and
software and other technology companies, such as IBM and Microsoft Corp.
("Microsoft"); (4) national long distance carriers, such as AT&T Corp.
("AT&T"), MCI Communications Corporation ("MCI") and Sprint Corporation
("Sprint"); (5) regional telephone companies; (6) cable operators, such as
Tele-Communications, Inc.; and (7) nonprofit or educational Internet
service providers. In addition, the Company believes that new competitors,
including large computer hardware and software, media and
telecommunications companies will enter the Internet access market,
resulting in even greater competition for the Company. See " Competition."
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Increased competition in the Internet services industry could result
in significant price competition, which in turn could result in substantial
pressure on the Company to reduce the price of its services. In addition,
competition could result in increased selling and marketing expenses and
related subscriber acquisition costs, which could adversely affect the
Company's future profitability. There can be no assurance that the Company
will be able to offset the effects of any such price reductions or increase
in operating costs by expanding its subscription base or by generating
higher revenue from enhanced services, reducing its overhead expenses or
otherwise. Increased competition could erode the Company's market share and
adversely affect the Company's business and results of operations. There
can be no assurance that the Company will have the financial resources,
technical expertise or marketing and support capabilities to continue to
compete successfully in the Internet connectivity market.
The long distance telecommunications industry also is intensely
competitive and is significantly affected by the introduction of new
services and the market activities of major industry participants.
Competition in the long distance industry is primarily based upon pricing,
customer service, network quality and value-added services. The Company
competes with AT&T, MCI, Sprint, and other national and regional long
distance carriers. Most of the Company's competitors have greater name
recognition, more extensive transmission networks and greater engineering
and marketing capabilities than the Company and have, or have access to,
substantially greater financial and personnel resources than those
available to the Company. See " - Competition." The ability of the Company
to compete effectively in the telecommunications industry will depend upon
its continued ability to provide high quality, market-driven services at
competitive prices. There can be no assurance that the Company will be able
to compete successfully with existing or future long distance
telecommunications services providers.
DEPENDENCE ON THIRD-PARTY TELECOMMUNICATIONS SERVICES. The Company
relies on third-party suppliers for its Internet feed to the Internet
"backbone," for data communications capacity via leased lines, and for
other telecommunications services. The Company's Internet feed currently is
provided by a DS-3 feed supplied by Sprint, and the Company's leased lines
currently are provided by Northwest Microwave, Sprint, GTE, US West, and
other local exchange carriers. The Company also is highly dependent upon
suppliers from which the Company purchases network equipment required to
enhance and extend its existing network. If any of the Company's suppliers
are unable or unwilling to provide or expand their current levels of
service to the Company in the future, the Company's operations could be
materially and adversely affected. Although leased telecommunications lines
are available from several alternative suppliers, there can be no assurance
that the Company could obtain substitute services from other providers at
reasonable or comparable prices or in a timely fashion.
DEPENDENCE ON VALUE ADDED RESELLERS. The Company currently derives a
significant percentage of its operating revenue from the grant of exclusive
sales territories to value added resellers ("VARs") pursuant to exclusive
sales agency agreements. Under these agreements, the Company grants VARs
exclusive rights to sell the Company's dial-up Internet access service
within specified territories, generally defined as the applicable local
exchange area,
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in return for the payment to the Company of a fixed fee. See " - The
Televar Solution." This fee is intended to cover the costs of extending
Internet services into the new market. The failure by the Company to
continue expanding its service area by entering into relationships with new
VARs could have a material adverse effect on the Company's business,
financial condition and results of operations.
The Company currently markets and distributes its Internet services
primarily through its VAR network. The Company is highly dependent on
continuing relationships with its VARs to acquire new customer accounts,
promote its service, and provide customer support. See " - Sales and
Marketing." Failure of the VARs to perform their obligations to the Company
could have a material adverse effect on the Company's business, financial
condition, and results of operation.
TECHNOLOGICAL CHANGE AND NEW SERVICES. The Internet services and
telecommunications industries have been characterized by rapidly changing
technology, frequent new product and service introductions, and evolving
industry standards and customer expectations. The Company believes that its
future success will depend on its ability to anticipate such changes and to
offer on a timely basis services that meet these evolving industry
standards and customer requirements. There can be no assurance that the
Company can successfully anticipate such changes and develop and bring new
services to market in a timely manner, or that services or technology
developed by others will not render the Company's services and technology
noncompetitive or obsolete.
CUSTOMER ATTRITION. A level of customer attrition is inherent in both
the Internet services and telecommunications services businesses. The
annual attrition rate (defined by the Company as the average number of
customers from whom revenues have terminated or been terminated as a result
of non-payment or dropped to zero usage, expressed as a percentage of the
total number of customers) in the fiscal year ended June 30, 1996, was
approximately 12% in the Company's Internet services business and
approximately 6% in its long distance services business. Although the
Company will attempt to reduce its future attrition rate in its Internet
business, there can be no assurance that this level will not be sustained
or increase.
DEPENDENCE ON KEY PERSONNEL. The Company is highly dependent on the
technical and management skills of its key employees and its ability to
identify, hire and retain additional personnel. Competition for such
personnel is intense and there can be no assurance that the Company will be
able to retain existing personnel or identify or hire additional personnel.
GOVERNMENT REGULATION. The Company is not currently subject to
regulation by the Federal Communications Commission or any other
governmental agency, other than regulations applicable to businesses
generally. Changes in the regulatory environment relating to the Internet
connectivity and telecommunications industries, including regulatory
changes that directly or indirectly affect telecommunications costs or
increase the likelihood or scope of competition from regional telephone
companies or other entities, could have an adverse
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effect on the Company's business and results of operation. The Company
cannot predict the impact, if any, that future regulation or regulatory
changes may have on its business.
EFFECTIVE CONTROL BY OFFICERS AND DIRECTORS. As of October 11, 1996,
the Company's officers and directors beneficially own, in the aggregate,
approximately 78% of the Company's outstanding Common Stock. See "Security
Ownership of Certain Beneficial Owners and Management." Because the
Company's Articles of Incorporation do not authorize cumulative voting in
the election of directors, the Company's officers and directors are, and in
the foreseeable future will continue to be, in a position to control the
Company by being able to elect the Company's Board of Directors. Moreover,
the officers and directors possess the voting power to approve or
disapprove of other matters requiring approval by the shareholders of the
Company, including significant corporate transactions. Such effective
control over the Company could have the effect of causing or delaying,
deferring, dissuading or preventing a change of control of the Company and
a corresponding increase in the share value of its Common Stock.
ABSENCE OF DIVIDENDS. The Company has not paid or declared any cash
dividends with respect to the Common Stock and has no present intention of
doing so in the foreseeable future. The Company currently anticipates that
it will retain all available funds to finance its business activities.
INTERNET INDUSTRY BACKGROUND
The Internet is a global collection of thousands of computer networks
cooperating to enable commercial organizations, educational institutions,
government agencies, and individuals to communicate electronically, access
and share information and conduct business. Use of the Internet has grown
rapidly since its commercialization in the early 1990s. Factors
contributing to the growth of the Internet include the emergence of a
preferred and dominant internetworking protocol standard; increasing
penetration of computers and modems into households and businesses; the
development of informational, entertainment and commercial applications and
resources of the Internet and the growing awareness of such resources; the
proliferation of Internet service providers ("ISPs") and commercial on-line
services; and the increasing availability of user-friendly navigational and
utility tools that permit easy access to the Internet's resources.
In addition to e-mail, file transfer, bulletin board, and other
on-line services, some of the most exciting commercial developments on the
Internet are occurring on the World Wide Web (the "Web"). The Web is a
browsing and searching system that enables users to access thousands of
computer servers located worldwide on which reside text and graphic media,
referred to as "home pages." Each home page is linked by a special
communications protocol called hypertext markup language ("html"). The html
protocol allows Internet users to view and access text, graphics, video and
audio resident on a home page or to connect instantaneously to related and
linked information on the same server or other home pages. By simplifying
navigation around the Web, software products known as "browsers," such as
Netscape Navigator, Mosaic, NetCruiser and Microsoft's Internet Explorer,
have helped
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contribute to the rapid growth of the Web. The popularity of the Web as a
commercial medium is due to its ability to facilitate global sharing of
information and resources, as well as its potential to provide an efficient
channel for advertising, marketing, and direct sales and distribution of
certain goods and information services.
With the growth and increasing commercialization of the Internet, a
large number of companies have emerged to provide Internet access and
related services and products. ISPs vary widely in geographic coverage,
customer focus, and levels of Internet access provided to subscribers.
Providers may concentrate on certain types of subscribers, such as
businesses or individuals, which differ substantially in the type of
service and support required. Providers also may differ according to
whether they provide direct or non-direct access to the Internet. Direct
access through Internet protocols such as Serial Line Interface Protocol
("SLIP") or Point-to-Point Protocol ("PPP") enable users to establish
direct connections to other computers on the Internet, including Web sites
or other users. A number of the major commercial on-line service providers
currently offer non-direct access to the Internet which requires users to
access the Internet through a host computer controlled by the service
provider. Under this architecture, users frequently are dependent on the
service provider to determine which Internet applications are available to
them. Other regional and national ISPs generally offer direct Internet
access to customers, which enables users to access the full range of
Internet resources.
THE TELEVAR SOLUTION
The Company provides a complete Internet access solution by providing
subscribers with Netscape Navigator browser software integrated with direct
access service and local customer support. The Company provides a direct
connection to the Internet through SLIP or PPP protocols, giving users
access to the full spectrum of Internet information, entertainment and
commercial resources, including e-mail, Web sites, USENET news groups and
database information (including graphics, data and public domain software).
The Company maintains a high speed, distributed client server network
that allows subscribers in the Company's coverage areas to access its
network through a local telephone call. In addition, the Company's
leased-line private network enables the Company to charge subscribers flat
monthly fees without per hour use surcharges. The Company's network is
designed to be scalable in order to support expansion of both the
subscription base and data traffic volume.
The Company currently provides local access to the Internet in 28
local calling areas encompassing approximately 90 communities in Washington
and Idaho.
THE TELEVAR STRATEGY
The Company's objective is to become a leading provider of Internet
access and telecommunications services by establishing early positions in
under-served markets as a reliable, high speed and competitively priced
access provider. The Company intends to build
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its subscription base in rural markets where competition among ISPs is less
intense by aggressively marketing its Internet services through a direct
sales force and a network of value-added resellers ("VARs") consisting of
computer dealers, networking and consulting firms and telephone
interconnect companies, and to increase its subscription base in larger,
urban markets through large-scale computer retail chains, strategic
combinations or alliances with or acquisitions of regional and local ISPs.
The Company believes that four features of its Internet access
services distinguish it from its competitors: (1) reliable, high speed
service; (2) flat rate pricing, regardless of usage volume; (3)
user-friendly access software; and (4) superior customer service and
support by local, trained professionals.
RELIABLE, HIGH SPEED SERVICE. In contrast to many of its competitors,
the Company uses a distributed client server network to provide its
Internet access services. Currently, AOL and CompuServe, as well as most
regional and local providers, use a host-centric technology. The Company's
configuration allows distribution of the network with greater flexibility
and recovery in the event of system outages.
For dial-up service, the Company's system is designed to operate at
speeds up to 33.6 kbps, compared with speeds of between 9.6 and 28.8 kbps
among major commercial on-line services and many regional and local ISPs.
For the Company's subscribers, this translates into connect and Internet
navigation times two to three times faster than these competitors. Even
among those competitors that operate at 28.8 kbps, the Company offers its
subscribers a 20% speed advantage in those locations where a 33.6 kbps
connection can be made. The Company's Sprintlink DS-3 provides significant
bandwidth, further distinguishing the Company's service from that of many
of its competitors.
PRICING. Unlike some on-line services that access the telephone
network on a rated basis and pass on this hourly rate to their customers,
the Company's leased-line private network enables the Company to charge
customers a flat monthly fee, without hourly surcharges. The Company
believes that its investment in its own network will translate into a
competitive advantage over on-line service providers that base their
pricing on a subscriber's volume of use. In addition, with local access in
the communities that it serves, the Company's subscribers can dial a local
number free of any long distance charges to gain access to the Internet
through the Company's network and equipment.
USER-FRIENDLY ACCESS SOFTWARE. In December 1995, the Company became
the first ISP in the Pacific Northwest to obtain a license to distribute
Netscape Navigator on a retail basis bundled with its own Internet access
services. Unlike the retail version of Netscape Navigator, the version
licensed to the Company is customized for use on the Company's own network
and comes with a "point and click" installation utility that installs the
software and automatically detects and configures the modem. The Company
currently offers Netscape Navigator at no charge to its annual subscribers
and at a sliding discount to its other subscribers. The Company has
developed its own packaging and installation instructions for use in the
retail environment.
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Microsoft Corporation recently offered to license Microsoft Explorer
to the Company for distribution to the Company's subscribers. The Company
intends to license Microsoft Explorer and to distribute that software to a
portion of its subscriber base at no charge in order to provide an
alternative to Netscape Navigator.
CUSTOMER SERVICE AND SUPPORT. One of the key components of the
Company's strategy is to provide superior customer service and support,
using both its in-house technical support staff and its network of VARs.
The Company provides a toll-free customer support line 12 hours a day, six
days a week. In addition, the VARs provide both face-to-face and telephonic
support in their local communities.
The Company is in the process of developing and/or acquiring a
comprehensive information system (IS) that would include billing and
accounting, network management, and customer service functions. Among other
features, the IS is expected to allow the Company to monitor subscribers'
use of the system and enable customer service personnel to be proactive in
responding to customer needs. In addition, the IS is expected to include
data sharing capability for storing and indexing information about common
problems encountered by subscribers, thereby permitting customer service
personnel to retrieve predeveloped solutions on-line in response to support
requests from subscribers. In addition to providing common responses to
common problems, the knowledge-based system should decrease the time
necessary to train new customer service representatives.
SALES AND MARKETING
The Company seeks to attract and retain Internet access customers by
emphasizing reliable, high speed service, competitive pricing,
user-friendly access software; and superior customer service and support.
An important element of the Company's sales and marketing strategy has been
the development of VARs as its primary distribution channel. In exchange
for a fixed fee payable to the Company, VARs agree to market the Company's
Internet access services in their localities and are entitled to a
commission of approximately 25% on access revenues generated over the terms
of their agreements with the Company.
VARs also provide training and support to subscribers under their
agreements with the Company. The financial incentives provided by the
Company are designed to motivate the VARs to promote the Company's services
through advertising, in-store consulting and seminar programs. The Company
also has a co-op advertising program that matches VAR contributions up to a
maximum of $1,000 per month. In addition, the Company plans to develop a
comprehensive marketing plan for its VAR program that would promote the
VARs' products and services together with the Company's services. The
Company believes that the VAR program will enable it to benefit from the
name recognition, customer relationships, and general goodwill its
distributors possess in their local markets.
The Company's marketing program seeks to create and enhance brand
awareness, elicit new subscriptions and retain existing subscribers.
Historically, the Company's marketing efforts have focused on targeted
radio promotion, advertising in trade journals and
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special interest publications, direct mailings of promotional materials,
and participation at trade shows and seminars. Based on the limited
availability of resources and the continued growth of the Company's
subscription base, media advertising has been limited. The Company's direct
sales staff handles inquiries from prospective customers and follows up on
leads generated by the VARs, promotion programs, trade shows and other
sources.
LONG DISTANCE TELECOMMUNICATIONS SERVICE
In addition to Internet access, the Company also provides long
distance voice and data telecommunications service under an agreement with
Association Communications, Inc. ("ACI"), a tariffed long distance reseller
based in Seattle, Washington. Pursuant to this agreement, which grants
Televar the right to serve as exclusive distributor of ACI's long distance
services in Eastern Washington, the Company offers both switched and
dedicated service at competitive rates and provides personalized customer
service to businesses located throughout Washington. This service is
generally sold on a monthly basis to small and medium sized businesses with
monthly long distance usage of between $400 and $4,500.
The Company offers both switched and dedicated service to its
customers. In switched service, the customer's call is routed through the
local telephone company's switch to ACI's switch in Seattle, and from there
to the ultimate destination point through a major carrier's transmission
network. For dedicated service, the Company installs a transmission line
from the customer's premises to the Company's own switch, from which the
call is routed across a leased digital T-1 lines to ACI's switch in
Seattle, bypassing the local telephone company's central office. From
there, the call is routed onto a major carrier's transmission network to
the ultimate destination point.
Unlike most commissioned sales organizations, the Company contracts to
supply telecommunications services directly with its customers.
Accordingly, although the Company currently receives commissions equal to a
percentage of the customer's monthly billing, the Company can migrate its
customers to a true resale environment when the volume of traffic justifies
such a transition. In the resale environment, as the Company's call traffic
increases it will be able to negotiate more favorable pricing from the
major carriers, thus contributing to profitability and future growth
through channels of distribution that will supplement its direct sales
force. The Company currently is exploring the option of becoming a true
reseller.
The Company's long distance service has a number of distinguishing
features that compare favorably to the competition. First, the Company
believes that it offers some of the lowest long distance rates in the
region. Second, the Company charges a flat rate calculated monthly based
upon the actual usage volume for both its switched and dedicated service.
The Company believes that business customers prefer a predictable flat rate
over complicated discount programs and that the Company's pricing structure
represents an important marketing advantage. Third, the Company offers a
variety of billing formats and services tailored to meet the needs of
business users. For example, the Company offers a "Billing on Disk" program
for larger volume customers that desire detailed bill analysis. Under this
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program, the Company will provide customers with their bills on a computer
disk so that the data may be manipulated by the customer to generate a
variety of statistical reports. In addition, a customer service
representative delivers the first monthly billing to each new customer to
ensure that the customer has received the correct billing format and
understands the information provided on the bill.
The Company began marketing its long distance service in November
1994. The Company currently has 85 customers with aggregate monthly billing
volume averaging $78,000 during the last fiscal year.
The Company emphasizes its competitively priced, high quality service
and superior customer support in marketing its long distance service. The
Company does not engage in advertising directly to end users of long
distance services, although the Company distributes printed marketing
materials to prospective users on a selected basis. Instead, the Company
relies on its sales personnel to market the Company's telecommunications
services through direct contact with potential customers. The Company
believes that, because of the extensive promotional efforts of AT&T, MCI,
and Sprint, traditional media-based forms of promotion are ineffective
marketing tools for smaller long-distance telecommunications providers like
the Company. Consequently, the Company focuses on making one-on-one
personal contact with the decision-makers at potential customers.
COMPETITION
The Internet services business is highly competitive and there are no
substantial barriers to entry, except access to capital to finance network
equipment. Currently, the Company competes with a number of national and
regional Internet service providers such as NETCOM and UUNET, as well as
with smaller regional and local providers. Competition in the long distance
industry, which also is intense, is primarily based upon pricing, customer
service, network quality, and value-added services. The Company competes
with AT&T, MCI, Sprint, and other national and regional long distance
carriers.
A number of large organizations, including large communications
carriers such as AT&T, Cable & Wireless, MCI, Sprint and the regional Bell
operating companies, are offering or have announced plans to offer Internet
or on-line services. The Company also faces significant competition from
the on-line services industry. Major on-line competitors presently include
AOL, CompuServe, Delphi, Genie, Prodigy, and the Microsoft Network. The
Company believes that additional new competitors, which may include
computer software and services, telephone, media, publishing, cable
television and other companies, are likely to enter the on-line services
market.
The ability of some of the Company's competitors to bundle Internet
access services with other popular products and services could give those
competitors an advantage over the Company. For example, Microsoft Network
offers access to the Internet as a standard integrated feature of its
Windows 95 operating system.
12
<PAGE>
Most of the Company's competitors possess financial resources
significantly greater than those of the Company and, accordingly, could
initiate and support prolonged price competition to gain market share. For
example, the communications carriers could significantly undercut the
Company's pricing for dial-up and other services due to their existing
investment in telecommunications infrastructure. If significant price
competition were to develop, the Company likely would be forced to lower
its prices, possibly for protracted period, which would have a material
adverse effect on its financial condition and results of operations and
could threaten its economic viability. In addition, the Company believes
that the Internet access and on-line services business is likely to
encounter consolidation in the near future, which could result in increased
price and other competition in the industry and consequently have an
adverse impact on the Company's business, financial condition and results
of operations.
The Company believes that the primary competitive factors for the
provision of Internet services are price, technical expertise and quality
of services, ease of use, variety of value-added services, reliability,
customer support, experience of the supplier and geographic coverage. The
Company's success in this market will depend heavily upon its ability to
provide high quality Internet connectivity and value-added Internet
services. Other factors that will affect the Company's success in this
market include the Company's continued ability to attract additional
experienced marketing, sales and management talent, and the expansion of
worldwide support, training and field service capabilities.
PROPRIETARY RIGHTS
The Company's success and ability to compete is dependent in part upon
its network technology, although the Company believes that its success is
more dependent upon its technical expertise and service orientation than
its proprietary rights. The Company relies on a combination of copyright,
trademark and trade secret laws and contractual restrictions to establish
and protect its technology. The Company's policy is to require employees
and consultants and, when obtainable, suppliers to execute confidentiality
agreements upon the commencement of their relationships with the Company.
These agreements provide that confidential information developed or made
known during the course of a relationship with the Company is to be kept
confidential and not disclosed to third parties except in specific
circumstances. There can be no assurance that the steps taken by the
Company will be adequate to prevent misappropriation of its technology or
that the Company's competitors will not independently develop technologies
that are substantially equivalent or superior to the Company's technology.
EMPLOYEES
The Company currently has 27 full time employees, including eight
employees in customer service, five in sales and marketing, six in network
operations, and eight in management and administrative functions. The
Company also employs 11 individuals on a part-time basis, 10 of whom work
in customer service. The Company believes that its relations with its
employees are good.
13
<PAGE>
ITEM 2. DESCRIPTION OF PROPERTY
The Company leases a 3,800 square foot facility in Wenatchee,
Washington, for use as its headquarters office and operations center. This
facility, which previously was used as a telephone operator services center
for Pacific Northwest Bell, is located near a GTE central office. Because
of its prior use, the building has significant conduit running between it
and the central office. Accordingly, the Company has been able to connect
its telephone and Internet equipment inexpensively via T-1 lines with the
GTE central office for the Company's Internet and long distance voice and
data communications services. Although the Company plans to retain this
facility as its operations center and believes that this space is adequate
to meet its near-term requirements, the Company may move its
administrative, sales, and management personnel to another location at some
future date.
ITEM 3. LEGAL PROCEEDINGS
The Company is currently in a dispute with a former landlord over
claims by the landlord that the Company is liable for lease payments under
a lease agreement relating to premises which the Company vacated prior to
the expiration of the lease term. The Company has accrued a provision of
$40,000 in its accounts payable to cover any contingent liability
associated with the dispute. The Company contends that the landlord failed
to work with willing and able successor tenants and failed to use
reasonable efforts to mitigate damages. The Company intends to vigorously
contest and defend the landlord's claim.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matter was submitted to a vote of security holders during the
fourth quarter of the fiscal year covered by this report.
14
<PAGE>
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND
RELATED SHAREHOLDER MATTERS.
Until February 13, 1996, there was no public market for the Company's
Common Stock. Since that date, the Common Stock has been listed on the
Nasdaq Electronic Bulletin Board under the symbol "JUNS".
The following table shows the range of high and low bids for the
Common Stock as reported by Nasdaq for each period in the fiscal years
shown below.
PERIOD High Low
------ ------- ------
1996
Third Quarter (from February 13, 1996)............. No Quotes Entered
Fourth Quarter..................................... No Quotes Entered
1997
First Quarter...................................... $1.8125 $0.625
Second Quarter (through November 8, 1996).......... $2.125 $0.875
These quotations reflect inter-dealer prices, without retail mark-up,
mark-down or commission, and may not represent actual transactions.
As of October 11, 1996, there were 448 holders of record of 14,640,745
shares of Common Stock.
The Company has never declared or paid cash dividends on the Common
Stock. The Company currently anticipates that it will retain all future
earnings to fund the operation of its business and does not anticipate
paying dividends on the Common Stock in the foreseeable future.
15
<PAGE>
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
On August 30, 1996, Jungle Street effected a merger between a
wholly-owned subsidiary formed for the purpose of the merger and Televar
(the "Merger"). The shareholders of Televar received 11,593,325 shares of
common stock of Jungle Street in the Merger, resulting in the shareholders
of Televar owning an aggregate of 83% of the 13,968,625 shares of Jungle
Street common stock outstanding on the effective date of the Merger. As a
result of the Merger, Televar became a wholly-owned subsidiary of Jungle
Street. The Televar capital stock that was converted into Jungle Street
common stock was converted based on a five-for-one conversion ratio, which
was determined pursuant to arms-length negotiations between Jungle Street
and the management of Televar. In connection with the Merger, Jungle Street
also issued an aggregate of 1,125,000 shares of common stock (approximately
8% of the outstanding common stock on a post-merger basis) to certain
consultants as compensation for services rendered to Jungle Street prior to
the Merger.
Prior to the Merger, Jungle Street was inactive and had only nominal
assets and liabilities. See "Description of Business - Overview. The
financial statements included in this report include the activity of both
Televar and Jungle Street retroactively restated to the beginning of the
periods covered by the financial statements.
RESULTS OF OPERATIONS
Revenues for the year ended June 30, 1996 were derived principally
from the Internet access and long distance service business. In the year
ended June 30, 1995, the Company received a significant percentage of its
revenues from telephone equipment sales. Those revenues ceased, however, in
February 1995 when the Company sold the assets of its telephone
interconnect business to a third party and discontinued that business. The
Company received approximately $225,000 in gross proceeds from the sale of
the interconnect business, of which $100,000 was paid in cash and
approximately $125,000 represented assumption of liabilities by the buyer.
Revenues for the year ended June 30, 1996, were $1,697,000. Of these
revenues, approximately 59% represented Internet access and VAR fee
revenues, approximately 38% represented long distance services, and
approximately 3% represented cellular services. Revenues for the year ended
June 30, 1995 were $798,500. The growth in revenues from 1995 to 1996 was
due primarily to a significant increase in Internet access service and VAR
fee revenues. The growth of the Company's Internet customer base resulted
primarily from an increase in the Company's marketing efforts. Revenues in
fiscal 1995 included a high level of telephone equipment sales and service
(approximately 55%), which is not recurring. The balance of the revenues in
1995 represented Internet access and long distance service revenues.
Costs of sales for the year ended June 30, 1996 were $1,454,000
compared with costs of sales for the year ended June 30, 1995 of $639,000.
Costs of sales consists primarily of
16
<PAGE>
software license fees and network operating costs, including leased line
and local access charges. Costs of sales increased as a percentage of
revenues from 80% in 1995 to 86% in 1996 due primarily to the expansion of
the Company's network, including the installation of additional lines in
advance of anticipated growth in the Company's subscription base.
Sales, general and administrative costs consist primarily of personnel
costs and marketing expenses. Sales, general and administrative costs were
$579,000 for the year ended June 30, 1996 compared to $139,000 for the year
ended June 30, 1995. The increase in expenses during the 1996 period
resulted primarily from addition of personnel and increased sales and
marketing efforts. The Company expects its sales and marketing expenses to
continue to increase in future periods.
Other income is comprised primarily of income received as a result of
the settlement of a dispute with one of the Company's suppliers and rental
income from a sub-lease of previously occupied office space. Other income
was $22,000 for the year ended June 30, 1996 and $12,000 for the year ended
June 30, 1995. The Company incurred interest expense of $54,000 in the year
ended June 30, 1996 compared to $12,000 in the prior year. The
period-to-period increase in interest expense was due to an increased level
of borrowings in 1996. Although the Company expects to continue
experiencing operating cash shortfalls for the foreseeable future, the
Company does not expect to continue to increase its level of borrowings.
The Company's objective is to secure additional equity capital to fund
operating cash flow shortfalls. See "- Liquidity."
LIQUIDITY
At June 30, 1996, the Company's total current assets were $213,000 and
its total current liabilities were $1,022,000 for a net working capital
deficit of $809,000.
The Company has met its cash requirements through a combination of
cash flow from operations, sales of equity securities and borrowings from
banks and other third parties. During the year ended June 30, 1996, the
Company generated net proceeds of $30,000 from private sales of common
stock. During the year ended June 30, 1996, the Company borrowed
approximately $560,000 from third parties at annual interest rates ranging
from 8.25% to 18%. The Company made repayments during the year of
approximately $100,000 under these loan arrangements. In certain cases, the
Company issued common stock in exchange for forgiveness of indebtedness and
in consideration of services rendered to the Company.
The Company currently is in default with respect to payments due to a
third party under a $20,000 promissory note that the Company issued in
April 1996. All principal and interest under the note was due in October
1996. The note is convertible at the option of the holder into common stock
of the Company at $2.50 per share.
The Company currently does not have a line of credit in place with a
commercial lender.
17
<PAGE>
The proceeds from recent offerings and borrowings, together with cash
from operations, are insufficient to fund budgeted operations for the near
term. The Company will require additional financing in order to fund its
operating plan and budget and is in discussions with several potential
equity financing sources. There is no assurance, however, that these
discussions will result in additional equity capital on terms that are
favorable to the Company or that additional financing will be available to
the Company from other sources. If the Company is unable to raise
additional capital, the Company's ability to continue operations may be
adversely affected. See Note 17 of Notes to Financial Statements.
18
<PAGE>
ITEM 7. FINANCIAL STATEMENTS
INDEX TO FINANCIAL STATEMENTS
Page
----
Independent Auditor's Report............................................. 20
Balance Sheet, June 30, 1996............................................. 21
Statements of Operations for the Years Ended June 30, 1995
and June 30, 1996...................................................... 23
Statements of Stockholders' Deficit for the Years Ended
June 30, 1995 and June 30, 1996........................................ 24
Statements of Cash Flows for the Years Ended June 30, 1995
and June 30, 1996...................................................... 26
Notes to Financial Statements............................................ 28
19
<PAGE>
To the Board of Directors
Jungle Street, Inc.
Wenatchee, Washington
We have audited the balance sheet of Jungle Street, Inc., including the
accounts of its wholly-owned subsidiary, Televar Northwest, Inc., as of
June 30, 1996 and the related statements of operations, stockholders'
deficit, and cash flows for the years ended June 30, 1996 and June 30,
1995. 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 audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audit
provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Jungle Street, Inc.,
including the accounts of its wholly-owned subsidiary Televar Northwest,
Inc., as of June 30, 1996, and the results of its operations and its cash
flows for the years ended June 30, 1996 and June 30, 1995, in conformity
with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that
Jungle Street, Inc., and its wholly-owned subsidiary Televar Northwest,
Inc., will continue as a going concern. As discussed in note 17 to the
financial statements, the Company has accumulated losses, negative working
capital, and a net capital deficit as of June 30, 1996, which raise
substantial doubt about the ability to continue as a going concern.
Management's plans in regard to these matters are also described in note
17. The financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
MANTYLA, MCREYNOLDS & ASSOCIATES
--------------------------------
Mantyla, McReynolds & Associates
Salt Lake City, Utah
October 24, 1996
20
<PAGE>
<TABLE>
<CAPTION>
JUNGLE STREET, INC.
INCLUDING THE ACCOUNTS OF ITS WHOLLY-OWNED SUBSIDIARY
TELEVAR NORTHWEST, INC.
BALANCE SHEET
JUNE 30, 1996
ASSETS
<S> <C>
Current Assets
- --------------
Cash $ 9,435
Accounts receivable, net of allowance for
doubtful accounts of $38,462 98,132
Employee advances 667
Prepaid insurance 4,275
Deferred expenses - Note 6 50,816
Note receivable - Note 7 20,000
Current portion long-term notes receivable
- Note 7 29,234
-----------
Total Current Assets 212,559
Property and Equipment - Note 5
- ----------------------
Equipment and furniture 441,098
Equipment under capital lease 83,877
Vehicles 61,031
Leasehold improvements 12,014
Less: accumulated depreciation (72,693)
-----------
Net Property and Equipment 525,327
Other Assets
- ------------
Goodwill - Note 8 125,405
Deposits 21,224
Notes receivable - Note 7 111,000
Less: current portion of notes receivable (29,234)
-----------
Total Other Assets 28,395
-----------
TOTAL ASSETS $ 966,281
===========
See accompanying notes to financial statements
</TABLE>
21
<PAGE>
<TABLE>
<CAPTION>
JUNGLE STREET, INC.
INCLUDING THE ACCOUNTS OF ITS WHOLLY-OWNED SUBSIDIARY
TELEVAR NORTHWEST, INC.
BALANCE SHEET
JUNE 30, 1996
LIABILITIES AND STOCKHOLDERS' DEFICIT
<S> <C>
Current Liabilities
- -------------------
Accounts payable $ 600,305
Payroll taxes payable 41,117
Wages payable 26,608
Commissions payable 4,125
Unearned fees - Note 6 137,341
Interest payable 3,825
Notes payable - short-term - Note 9, 10 132,435
Current portion of long-term liabilities - Note 11 75,813
----------
Total Current Liabilities
1,021,569
Long-Term Liabilities
Notes payable - Note 11 255,166
Capital leases payable - Note 12 64,247
Less: current portion of long-term liabilities (75,813)
----------
Total Long-Term Liabilities 243,600
----------
Total Liabilities 1,265,169
Stockholders' Deficit
Common stock - 50,000,000 shares authorized, $0.001 par,
1,697,420 shares issued and outstanding - Notes 1,4,10,16,19 1,697
Additional paid-in capital 376,057
Stock held in trust - Note 1 (70,000)
Accumulated deficit (606,642)
----------
Total Stockholders' Deficit (298,888)
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT $ 966,281
==========
See accompanying notes to financial statements
</TABLE>
22
<PAGE>
<TABLE>
<CAPTION>
JUNGLE STREET, INC.
INCLUDING THE ACCOUNTS OF ITS WHOLLY OWNED SUBSIDIARY
TELEVAR NORTHWEST, INC.
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED JUNE 30, 1996 AND JUNE 30, 1995
1996 1995
------------- ----------
<S> <C> <C>
Revenues - Note 3 $ 1,697,104 $ 392,803
Cost of sales 1,453,733 370,105
------------- ----------
Gross profit 243,371 22,698
Selling, general and administrative expenses 578,600 130,718
------------- -------
Net loss from operations (335,229) (108,020)
Other Income/(Expense):
Interest income -0- 414
Interest expense (53,690) (12,001)
Other income 21,655 11,662
Other expense -0- (11,930)
------------- -----------
Total Other Income/(Expense) (32,035) (11,855)
------------- ----------
Loss from continuing operations
before income taxes (367,264) (119,875)
Provision for income taxes -0- -0-
------------- ----------
Loss from continuing operations (367,264) (119,875)
Discontinued Operations:
Loss from discontinued operations -0- (56,019)
Gain from disposal of discontinued
operations -0- 69,562
------------- ----------
Total Discontinued Operations -0- 13,543
------------- ----------
Net loss $ (367,264) $ (106,332)
============= ==========
Loss per share:
Loss from continuing operations $ (.34) (.24)
Discontinued operations -0- .03
-------------- ----------
Net loss $ (.34) (.21)
============== ==========
Weighted Average Number of Shares Outstanding 1,069,261 500,300
============== ==========
See accompanying notes to financial statements.
</TABLE>
23
<PAGE>
<TABLE>
<CAPTION>
JUNGLE STREET, INC.
INCLUDING THE ACCOUNTS OF ITS WHOLLY OWNED SUBSIDIARY
TELEVAR NORTHWEST, INC.
STATEMENTS OF STOCKHOLDERS' DEFICIT
FOR THE YEARS ENDED JUNE 30, 1996 AND JUNE 30, 1995
ADDITIONAL STOCK
COMMON COMMON PAID-IN HELD ACCUMULATED STOCKHOLDERS'
SHARES STOCK CAPITAL IN TRUST DEFICIT DEFICIT
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance, June 30, 1994 500,300 $ 500 $ 78,931 $ 0 $ (133,045) $ (53,614)
Issued shares in exchange for
services 100 0 100 100
Stock split 979,700 98 (98) 0
Issued shares for purchase of
equipment 20,000 2 19,998 20,000
Net loss for the year ended
June 30, 1995 (106,332) (106,332)
Adjustment to reflect the retro-
active restatement of capital
resulting from the merger of
Jungle Street, Inc. with Televar
Northwest, Inc. (999,800) (100) 100
- -----------------------------------------------------------------------------------------------------------------------------
Balance, June 30, 1995 500,300 $ 500 $ 99,031 $ 0 $ (239,377) $ (139,846)
Issued shares to officers &
shareholders for services 150,418 15 1,489 1,504
Issued shares to employees for
services 49,000 5 485 490
Purchase of shares to be held
in trust as security for a note
payable (70,000) (70,000)
Issued shares in exchange for
services 752,250 75 9,175 9,250
Issued shares for retirement
of debt 511,665 51 306,927 306,978
Issued shares in exchange for
personal guaranty 150,000 15 (15) 0
Issued shares for cash 30,000 3 29,997 30,000
Redemption of shares to retire a
receivable (326,667) (33) (69,967) (70,000)
Net loss for the year ended
June 30, 1996 (367,264) (367,264)
See accompanying notes to financial tatements.
</TABLE>
24
<PAGE>
<TABLE>
<CAPTION>
JUNGLE STREET, INC.
INCLUDING THE ACCOUNTS OF ITS WHOLLY OWNED SUBSIDIARY
TELEVAR NORTHWEST, INC.
STATEMENTS OF STOCKHOLDERS' DEFICIT
FOR THE YEARS ENDED JUNE 30, 1996 AND JUNE 30, 1995
ADDITIONAL STOCK
COMMON COMMON PAID-IN HELD ACCUMULATED STOCKHOLDERS'
SHARES STOCK CAPITAL IN TRUST DEFICIT DEFICIT
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Adjustment to reflect the retro-
active restatement of capital
resulting from the merger of
Jungle Street, Inc. with Televar
Northwest, Inc. (1,316,666) $ (132) $ 132 $ 0
Issued shares of Jungle Street,
Inc. common stock for services 1,197,120 1,197 (1,197) 0
- -----------------------------------------------------------------------------------------------------------------------------
Balance, June 30, 1996 1,697,420 $ 1,697 $ 376,057 $ (70,000) $ (606,642) $ (298,888)
=============================================================================================================================
See accompanying notes to financial statements.
</TABLE>
25
<PAGE>
<TABLE>
<CAPTION>
JUNGLE STREET, INC.
INCLUDING THE ACCOUNTS OF ITS WHOLLY OWNED SUBSIDIARY
TELEVAR NORTHWEST, INC.
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED JUNE 30, 1996 AND JUNE 30, 1995
1996 1995
----------------- -----------------
<S> <C> <C>
CASH FLOWS PROVIDED/(USED) BY OPERATING
ACTIVITIES
Net loss $ (367,264) $ (106,332)
Adjustments to reconcile net loss to net cash
used by operating activities:
Depreciation and amortization 75,137 16,335
Issued common stock in exchange for services
and interest 41,104 100
VAR notes received for territorial rights (131,000) 0
Redeemed shares of common stock to
retire receivable (70,000) 0
Allowance for bad debt 28,027 10,615
Loss/(gain) on sales of assets (344) 6,605
(Increase)/decrease in:
Accounts receivable (71,207) (2,132)
Employee advances (667) 300
Inventory 0 63,306
Prepaid insurance (2,744) (1,531)
Deferred expenses (50,816) 0
Deposits (19,000) (1,777)
(Decrease)/increase in:
Accounts payable 506,232 24,924
Payroll taxes payable 37,134 (5,431)
Sales tax payable 0 (3,687)
Wages payable 25,133 (7,525)
Accrued commissions 4,125 0
Unearned fees 137,341 0
Accrued interest payable 3,498 324
----------------- -----------------
NET CASH PROVIDED/(USED) BY OPERATING ACTIVITIES $ 144,689 $ (5,904)
CASH FLOWS PROVIDED/(USED) BY INVESTING
ACTIVITIES
Purchases of equipment $ (399,052) $ (24,345)
Purchases of vehicles (61,031) (28,038)
Purchases of leasehold improvements (5,456) (4,832)
Proceeds from disposal of assets 24,340 38,000
Loans made 0 (4,379)
Collections on loans 4,379 59,387
Goodwill (128,255) 0
----------------- -----------------
NET CASH PROVIDED/(USED) BY INVESTING ACTIVITIES $ (565,075) $ 35,793
See accompanying notes to financial statements.
</TABLE>
26
<PAGE>
<TABLE>
<CAPTION>
JUNGLE STREET, INC.
INCLUDING THE ACCOUNTS OF ITS WHOLLY OWNED SUBSIDIARY
TELEVAR NORTHWEST, INC.
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED JUNE 30, 1996 AND JUNE 30, 1995
1996 1995
----------------- -----------------
<S> <C> <C>
CASH FLOWS PROVIDED/(USED) BY FINANCING
ACTIVITIES:
New borrowings $ 558,994 $ 91,276
Debt reduction (100,609) (113,086)
Purchase of treasury stock (70,000) 0
Issued shares of common stock for cash 30,000 0
----------------- -----------------
NET CASH PROVIDED/(USED) BY FINANCING ACTIVITIES $ 418,385 $ (21,810)
CASH AT BEGINNING OF YEAR 11,436 3,357
----------------- -----------------
CASH AT END OF YEAR $ 9,435 $ 11,436
================= =================
SUPPLEMENTAL DISCLOSURES
Noncash investing and financing transactions:
Equipment acquired by capital lease $ 0 $ 83,878
Equipment acquired by issuing shares of
common stock 0 20,000
Notes payable retired by issuing shares
of common stock 277,118 0
Interest paid $ 50,191 $ 14,245
Income taxes paid 0 0
See accompanying notes to financial statements.
</TABLE>
27
<PAGE>
JUNGLE STREET, INC.
INCLUDING THE ACCOUNTS OF ITS WHOLLY OWNED SUBSIDIARY
TELEVAR NORTHWEST, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1996
Note 1 Summary of Significant Accounting Policies
------------------------------------------
Company Background/ Basis of Presentation Jungle Street, Inc. was
incorporated July 10, 1980, under the laws of the state of Utah. In
August 1980, Jungle Street, Inc. acquired Utah real estate using
the proceeds of a limited public offering conducted in Utah. From
inception, Jungle Street, Inc. suffered losses from its real estate
operations, and, in 1993, Jungle Street sold all of its Utah real
estate and became an inactive corporation.
On August 29, 1996 Jungle Street, Inc. merged with Televar
Northwest, Inc., a Washington corporation. The merger was
accomplished through Jungle Street, Inc.'s wholly owned subsidiary,
a recently formed Washington corporation with the same name.
However, because Jungle Street's assets, liabilities and operations
are nominal, these financial statements include the activity of
both Televar Northwest, Inc. and Jungle Street, Inc., retroactively
restated to the beginning of the periods covered herein. Unless
otherwise specifically stated, the combined companies are hereafter
collectively referred to as the "Company."
The Company is in the business of providing Internet access and
long distance telephone service. The Company markets its services
primarily through a network of Value Added Resellers ("VARs") in
the geographical region of the northwestern United States. The VARS
are assigned a specific territory from which they market the
Company's services.
In February, 1995, the Company disposed of its telephone equipment
and servicing business. The Company has also been involved as a
wholesaler of cellular telephone access. However, the Company's
contract with its cellular telephone access provider has
terminated. Although the Company may re-enter this segment of
business, it is currently emphasizing Internet access and
long-distance telephone service.
Cash
----
Cash consists of cash on hand and on deposit in commercial banks.
28
<PAGE>
JUNGLE STREET, INC.
INCLUDING THE ACCOUNTS OF ITS WHOLLY OWNED SUBSIDIARY
TELEVAR NORTHWEST, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1996
Note 1 Summary of Significant Accounting Policies [continued]
------------------------------------------------------
Depreciation
------------
Property and equipment are stated at cost. Depreciation is provided
using the straight-line basis over the useful lives of the related
assets. The amounts reported as depreciation expense and
accumulated depreciation include the amortization expense and
accumulated amortization of equipment under capital lease.
Expenditures for maintenance and repairs are charged to expense as
incurred.
Loss Per Share
--------------
Loss per common share is based on the weighted average number of
common shares outstanding. Common stock equivalents have not been
included in the computation as their effect would be antidilutive.
Additional Paid-In Capital
--------------------------
The amount shown on the financial statements as additional paid-in
capital consists of proceeds from the sale or issuance of common
stock in excess of its par value, reduced by any direct expenses of
such sales or issuances.
Stock Held in Escrow
--------------------
The Company repurchased 326,666 shares of its common stock from a
founding shareholder. The consideration given for said shares was
$70,000. These shares are held in escrow as collateral for the
repayment of a note with an original principal balance of $63,000
($70,000 less a down payment of $7,000) and a remaining principal
balance of $57,155 at June 30, 1996. See note 11.
Note 2 Discontinued Operations
-----------------------
On February 28, 1995, the Company discontinued its telephone
equipment and servicing division by selling all of the assets, net
of the related liabilities, of this division. There are no
remaining assets or liabilities related to this division as of June
30, 1996. Any taxable gains reported in conjunction with this
transaction are offset by net operating losses.
29
<PAGE>
JUNGLE STREET, INC.
INCLUDING THE ACCOUNTS OF ITS WHOLLY OWNED SUBSIDIARY
TELEVAR NORTHWEST, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1996
Note 3 Significant Concentrations of Risk
----------------------------------
Credit Risk - The Company's primary operations are currently in the
geographical region of the northwestern United States. Customers of
the Company consist primarily of individuals who utilize the
Internet access capabilities offered by the Company. The accounts
receivable of the Company are unsecured.
Revenue/Supplier Risk - Revenues for the year ended June 30, 1996
were from the following sources:
Long Distance $ 646,884
Internet Access 549,563
Value Added Resellers 447,940
Cellular Access 43,724
Other 8,993
------------
$ 1,697,104
The Company's long distance business is dependant on its supplier
of wholesale long distance service. Should the supplier terminate
the Company's access capability, the Company would be forced to
seek another supplier. In addition, the Company has engaged Value
Added Resellers ("VAR") to market its Internet access in various
geographical territories. The Company has received significant fees
in conjunction with the VAR agreements sold for the year ended June
30, 1996. The Company's revenue from this segment is contingent on
the Company's ability to continue to attract VARs.
Netscape Communications provides the Internet software (See note
13) the Company includes with its Internet installation package for
its Internet Customers. Should the Company lose its rights to
distribute this software, the Company would be required to
substitute other Internet software which may not be as widely
accepted as the Netscape software.
Note 4 Related Party Transactions
--------------------------
In conjunction with the merger described in notes 1 & 16, Jungle
Street, Inc. issued 1,125,000 shares to consultants, who were
shareholders of Jungle Street, Inc prior to the merger and who
provided financial and other services to Jungle Street, Inc. The
Company also agreed to reserve 750,000 shares of its common stock
to be issued as commission to a consulting firm, which is owned and
managed by shareholders of the Company, along with a payment of
$50,000
30
<PAGE>
JUNGLE STREET, INC.
INCLUDING THE ACCOUNTS OF ITS WHOLLY OWNED SUBSIDIARY
TELEVAR NORTHWEST, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1996
Note 4 Related Party Transactions [continued]
--------------------------------------
cash, in the event capital raising services performed by the
consulting firm result in net proceeds to the Company of at least
$1,000,000.
On October 2, 1996, the Company loaned its president $12,000. The
unsecured loan bears interest at 10 % per annum, payable in 26
equal semi-monthly installments of $515, commencing October 15,
1996, until paid in full. Said payments will be withheld from the
President's semi-monthly payroll checks. There is no prepayment
penalty.
Note 5 Property and Equipment
----------------------
The major classes of assets as of the balance sheet date are as
follows:
<TABLE>
<CAPTION>
Accumulated
Asset Class Cost Depreciation Method/Life
----------------------------- ----------- ------------ ----------------
<S> <C> <C> <C>
Equipment & furniture $ 441,098 $ 46,862 SL/5 & 10 years
Equipment under capital lease 83,877 19,731 SL/5 years
Vehicles 61,031 4,563 SL/5 years
Leasehold improvements 12,014 1,537 SL/life of lease
----------- ------------
Total $ 598,020 $ 2,693
=========== ===========
</TABLE>
Note 6 Deferred Expenses/Unearned Income
---------------------------------
Deferred Expenses - The Company pays commissions to its VARs at the
time the monthly, quarterly, or annual fees are received by
customers located in the VARs' assigned territory. These
commissions are subject to offset if the underlying customers
terminate Internet access service during a quarter or year for
which the customer has prepaid and is due a refund. The Deferred
Expenses account is comprised of those commissions still subject to
offset. The Company recognizes the commission expenses paid when
such commission is no longer subject to offset. Since all
commissions will be paid within one year, the entire amount is
considered a current asset.
Unearned Income - The Company collects fees for its Internet access
service under monthly, quarterly and annual billing programs. The
Company has established an unearned fees account for recording the
advance payments, which are amortized into earnings on a monthly
basis as the services are provided.
31
<PAGE>
JUNGLE STREET, INC.
INCLUDING THE ACCOUNTS OF ITS WHOLLY OWNED SUBSIDIARY
TELEVAR NORTHWEST, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1996
Note 7 Notes Receivable
----------------
The Company has long and short-term notes receivable from VARS who
have purchased rights to various territories. The notes are
summarized as follows:
<TABLE>
<CAPTION>
Short-Term
----------
Date of Monthly Interest Original Balance
Note Payment Rate Balance 6/30/96
------- ------- -------- -------- --------
<S> <C> <C> <C> <C>
5/31/96 $500 0% $20,000 $20,000
</TABLE>
This note has a balloon payment of $17,500 due December 15, 1996.
<TABLE>
<CAPTION>
Long-Term
---------
Date of Monthly Interest Original Balance Current
Note Payment Rate Balance 6/30/96 Portion
------- ------- -------- -------- -------- -------
<S> <C> <C> <C> <C> <C>
6/28/96 $3,227 10% $100,000 $100,000 $27,452
5/31/96 442 10% 11,000 11,000 1,782
-------- -------- -------
$111,000 $111,000 $29,234
</TABLE>
Note 8 Goodwill
--------
In February, 1996, the Company entered into an agreement with a
third party to purchase certain assets, primarily computer
equipment, telephone equipment, and customer lists. The purchase
price was $147,125, with $18,870 allocated to tangible assets and
$128,255 to intangible assets (Goodwill). Goodwill is specifically
classified in this transaction as the customer base purchased by
the Company. The useful life of the goodwill is determined to be 15
years, with amortization calculated accordingly. The balance as of
June 30, 1996 is $125,405, net of accumulated amortization of
$2,850. A down payment of $60,000 was made at the closing, with the
adjustable balance of $87,125 to be paid over a term of thirty-six
months at nine percent (9%) interest. See note 11.
Note 9 Notes Payable - Short-Term - Banks
----------------------------------
The Company had a short-term note payable to a bank in the
principal amount of $55,413, due August 15, 1996, and bears
interest at 1.5% above the bank's index rate which was 9% at the
loan's inception and 8.25% on March 20, 1996. The original note was
entered into on June 8, 1995, with a maturity date of October 15,
1995. The note was renewed on October 15, 1995, January 15, 1996,
and April 15, 1996, which resulted in the current due date of
August 15,
32
<PAGE>
JUNGLE STREET, INC.
INCLUDING THE ACCOUNTS OF ITS WHOLLY OWNED SUBSIDIARY
TELEVAR NORTHWEST, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1996
Note 9 Notes Payable - Short-Term - Banks [continued]
----------------------------------------------
1996. Under the terms of the note, the interest rate would not
decrease below 9%. The Company refinanced this note with a loan
from another lender prior to the note's due date. See note 16. This
note was secured by all accounts receivable, including all local,
state, and federal tax refunds which may become due, and equipment
then owned by the Company, or subsequently acquired. The security
agreement was formalized with a financing statement [UCC-1]. The
note was personally guaranteed by two officers/shareholders of the
Company.
The Company also had a short-term note payable to a bank in the
original amount of $29,533, bearing interest at 11.99%, and
requiring payments of $577 per month for a period of 72 months. The
balance outstanding on June 30, 1996 was $4,272. The security for
this loan was a vehicle. In January, 1996, an employee of the
Company was involved in an accident with the vehicle wherein the
vehicle was completely destroyed. The insurance company has made
its final adjustment on the loss by making a joint payment to the
Company and the secured bank. The shortfall from the insurance
payment was $4,272 and was paid to the bank subsequent to June 30,
1996.
Note 10 Notes Payable - Short-Term - Individuals
----------------------------------------
The Company has two short-term notes payable to individuals. One
note was issued December 1, 1995, in the principal amount of
$52,750, and bears interest at an effective rate of 22%, with the
entire principal and interest due on March 1, 1996. The note was
renewed for $52,750, and bears interest at 18% with the entire
amount of principal and interest due August 31, 1996. When the note
was renewed, a provision was added allowing for the conversion of
the principal and interest of the note, in whole or in part, for
common stock of the Company, at a conversion rate of $2.50 per
share. Subsequent to June 30, 1996, the Company satisfied the note
in full by paying $12,497.50 in cash and issuing 45,000 shares of
common stock.
The second note was issued on April 25, 1996, in the principal
amount of $20,000, and bears interest at 18%, with entire principal
and interest due on October 26, 1996. The note provides for the
conversion of the principal and interest of the note, in whole or
in part, for common stock of the Company, at the conversion rate of
$2.50 per share, at the option of the note holder. If the note is
held to maturity, the note could be converted for up to 8,720
shares of common stock. The Company is in default with respect to
payments due under the note.
33
<PAGE>
JUNGLE STREET, INC.
INCLUDING THE ACCOUNTS OF ITS WHOLLY OWNED SUBSIDIARY
TELEVAR NORTHWEST, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1996
Note 11 Notes Payable - Long Term
-------------------------
The Company has several long term notes payable as follows:
Note payable to an individual in the original amount of
$63,000, bearing interest at 10%, and secured by 326,666
shares of the Company's common stock, which are held in escrow
pending full payment of the note. The note requires monthly
payments of $1,338 for a 60-month period December 1, 1995 and
continuing through November 1, 2000. The outstanding balance
at June 30, 1996 was $57,155.
Unsecured note payable to a company in the original amount of
$85,000, bearing interest at 8%, requiring monthly payments of
$1,325 for an 84- month period beginning July 1, 1993 and
continuing through June 1, 2000. The outstanding balance at
June 30, 1996 was $54,267
Note payable to a company in the original amount of $87,125,
bearing interest at 9%, and partially secured by certain
assets acquired under the agreement. The note requires monthly
payments of $2,771 for a 36-month period commencing June 10,
1996 and continuing through May 10, 1999. The outstanding
balance at June 30, 1996 was $85,454.
Note payable to a finance company in the original amount of
$30,375, bearing interest at 11%, and secured by a vehicle.
The note requires monthly payments of $581 for a 72-month
period commencing April 15, 1996 and continuing through March
15, 2002. The outstanding balance at June 30, 1996 was
$29,148.
Note payable to a finance company in the original amount of
$30,370, bearing interest at 10.9%, and secured by a vehicle.
The note requires monthly payments of $579 for a 72-month
period commencing April 15, 1996 and continuing through March
15, 2002 . The outstanding balance at June 30, 1996 was
$29,142.
34
<PAGE>
JUNGLE STREET, INC.
INCLUDING THE ACCOUNTS OF ITS WHOLLY OWNED SUBSIDIARY
TELEVAR NORTHWEST, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1996
Note 11 Notes Payable - Long Term [continued]
-------------------------------------
The following table sets forth the Company's principal obligations
on long term notes payable for the coming five years:
<TABLE>
<CAPTION>
Finance
Year Individual Company Company Total
---------- ---------- ----------- ---------- -----------
<S> <C> <C> <C> <C>
1996-97 $ 10,807 $ 38,624 $ 7,512 $ 56,943
1997-98 11,944 42,118 8,725 62,787
1998-99 13,199 43,750 9,735 66,684
1999-00 14,584 15,230 10,633 40,447
2000-01 6,620 -0- 12,090 18,710
Thereafter -0- -0- 9,595 9,595
---------- ----------- ---------- -----------
$ 57,154 $ 139,722 $ 58,290 $ 255,166
</TABLE>
Note 12 Capital Leases Payable
----------------------
The Company has three capital leases which were utilized for the
purchase of computer and telephone equipment used in their
operations:
<TABLE>
<CAPTION>
Equipment Monthly
Under Lease Payment
------------ --------
<S> <C> <C>
Lease 1 $ 18,047 $ 582
Lease 2 19,637 490
Lease 3 46,193 1,243
------------ --------
$ 83,877 $ 2,315
</TABLE>
The purchase option at the conclusion of each of the above lease
arrangements are 10% of the leased equipment cost at inception
($1,805), one dollar, and one dollar, respectively. Amortization on
capital lease assets for 1995-96 totaled $16,776. Accumulated
amortization through June 30, 1996 totaled $19,731.
35
<PAGE>
JUNGLE STREET, INC.
INCLUDING THE ACCOUNTS OF ITS WHOLLY OWNED SUBSIDIARY
TELEVAR NORTHWEST, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1996
Note 12 Capital Leases Payable [continued]
----------------------------------
The following table is a schedule by years of future minimum lease
payments under the capital leases, together with the present value
of the net minimum lease payments as of June 30, 1996:
Year ending June 30:
1997 $ 27,779
1998 24,866
1999 19,549
2000 4,900
2001 -0-
------------
Total minimum lease payments 77,094
Less: Amount representing interest (12,847)
---------
Present value of net minimum lease payments $ 64,247
============
Note 13 License Agreement
-----------------
The Company has a non-exclusive, non-transferrable license
("License") from Netscape Communications to distribute Netscape
Internet software in conjunction with the Company's Internet access
service. The License authorizes the Company to distribute a minimum
of 2,500 copies of said software during the one-year initial term
of the agreement. At the conclusion of the initial year (Contract
entered into December 8, 1995), the License is automatically
renewed for successive one year periods, if, during the immediately
preceding twelve months, the Company has paid Netscape for the
minimum number of copies. As of the auditors' report date, the
Company had already complied with the terms of the License for the
initial year. Additional copies of the software may be licensed
upon advance payment for the software. After the initial year of
the License, either party may terminate the License for
"convenience" upon at least sixty days prior written notice.
Note 14 Miscellaneous Income
--------------------
Miscellaneous income is comprised primarily of income received as a
result of the settlement of a dispute with one of the Company's
suppliers and rental income from a sub-lease of previously occupied
office space.
36
<PAGE>
JUNGLE STREET, INC.
INCLUDING THE ACCOUNTS OF ITS WHOLLY OWNED SUBSIDIARY
TELEVAR NORTHWEST, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1996
Note 15 Operating Leases
----------------
The Company has a lease agreement for its principal offices at an
initial rate of $1,800 per month, commencing March 15, 1995 and
terminating March 15, 2005. The lease is renewable for an
additional two years, providing the Company notifies lessor no
later than thirty (30) days prior to March 15, 2000.
Monthly rent payments shall increase by 5% on each anniversary date
of the lease. Future minimum lease payments under this agreement
are as follows:
Year Amount
---------- --------
1996-97 $ 13,058
1997-98 24,211
1998-99 25,421
1999-00 26,693
2000-01 28,027
Thereafter 115,113
--------
$242,523
The Company vacated offices at a previous location during 1995.
There is currently a dispute with the landlord, that claims the
Company is liable for lease payments through the term of the lease.
As of the auditors' report date, no agreement had been reached, nor
had a lawsuit been filed. The Company has accrued a provision of
$40,000 in its accounts payable to cover any contingent liability
associated herewith. Management contends that the landlord failed
to work with willing and able successor tenants and continually
failed to use reasonable efforts to mitigate damages. Management
intends to vigorously contest liability under the lease agreement.
Note 16 Subsequent Events
-----------------
Merger With Jungle Street, Inc.- On August 29, 1996, Televar
Northwest, Inc. merged with Jungle Street, Inc, a Washington
corporation and wholly owned subsidiary of Jungle Street, Inc. a
Utah corporation. The Washington corporation subsidiary was the
Surviving corporation in this merger, and it changed its name to
Televar, Inc.
37
<PAGE>
JUNGLE STREET, INC.
INCLUDING THE ACCOUNTS OF ITS WHOLLY OWNED SUBSIDIARY
TELEVAR NORTHWEST, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1996
Note 16 Subsequent Events [continued]
-----------------------------
Each common share of Televar Northwest, Inc. outstanding at the
time of the merger was converted to five shares of common stock in
Jungle Street. At the time of the merger, the Company had 2,363,655
shares issued and outstanding, which became 11,818,325 shares in
the merger.
In conjunction with the merger, Jungle Street, Inc. also issued
1,125,000 shares to consultants, who were shareholders of Jungle
Street, Inc prior to the merger and who provided financial and
other services to Jungle Street, Inc. The Company also agreed to
reserve 750,000 shares of its common stock to be issued as
commission to a consulting firm, which is owned and managed by
shareholders of the Company, along with a payment of $50,000 cash,
in the event capital raising services performed by the consulting
firm result in net proceeds to the Company of at least $1,000,000.
Bridge Loan - On September 25, 1996 the Company entered into a loan
agreement with a lender for $500,000 in "bridge" financing. The
loan bears interest at 18 % per annum and is secured by all assets,
tangible and intangible, including trade secrets, either now owned
or hereafter acquired, of the Company. There is no prepayment
penalty. Additional security includes any rights of the Company to
the receipt of money, either now existing or hereafter arising.
Personal guaranties were provided by the Chief Executive
Officer/Chairman and the President of the Company. The agreement
requires a $20,000 loan fee and interest payments as follows:
October 1, 1996 $ 1,250
November 1, 1996 7,500
December 1, 1996 7,500
January 1, 1997 7,500
The entire principal balance, together with all outstanding accrued
interest is due and payable on or before the earlier of: 1) January
1, 1997 or 2) the closing of an offering of common stock and/or
warrants in an amount greater than $2,000,000. However, the Company
may, at its option, extend the due date up to April 1, 1997, if the
Company is not in default under any of the terms or conditions of
the agreement, and the Company pays a third party, designated by
the lender, an extension fee of 1%, 1.5%, and 2% of the then
outstanding balance, respectively, on or before January 1, 1997,
February 1, 1997, March 1, 1997, along with the interest payment of
$7,500.
38
<PAGE>
JUNGLE STREET, INC.
INCLUDING THE ACCOUNTS OF ITS WHOLLY OWNED SUBSIDIARY
TELEVAR NORTHWEST, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1996
Note 16 Subsequent Events [continued]
-----------------------------
In addition to the forgoing, the Company executed a Common Stock
Purchase Warrant, entitling the lender to purchase 65,000 shares of
common stock at an exercise price of $1.81 per share. The warrant
may be exercised, in whole or in part, at any time through
September 25, 2001. The lender has certain registration rights with
respect to the shares.
If the Company defaults on its obligations under the Bridge loan
documents, the lender may convert its unpaid debt to unregistered
and restricted shares of the Company at a rate of $0.75 per share.
Short-Term Bank Loans - On July 1, 1996, the Company received a
$200,000 line of credit from a bank with a maturity date of January
5, 1997. The loan interest rate was variable at 2 % over the bank's
"index" rate, which was 8.25 % at the time of the loan closing.
This loan was secured by all assets, tangible and intangible, of
the Company. Concurrently, the Company received a $60,000 loan from
the same bank, which was utilized to repay in full the bank loan
described in note 9. These loans were paid in full from proceeds of
the Bridge Loan discussed above.
Promissory Note - The Company received a $100,000 loan from an
individual on September 1, 1996. The loan bears interest at 18 %
per annum, and is due and payable on the first day of each month,
beginning October 1, 1996, with a maturity date of January 31,
1997. The lender also has the right to purchase common stock of the
Company at the price of $1.00 per share, exercisable until June 30,
1997.
Lease Agreements - Since June 30, 1996, the Company has entered
into two lease agreements covering equipment used in the Company's
operations. The first lease, executed July 11, 1996, is for a
period of 36 months with monthly payments of $3,707. An option to
purchase the equipment covered under the lease at the end of the
lease term is available at an option price of $4,884. The second
lease, executed August 6, 1996 is for a period of 36 months with
monthly payments of $2,915. An option to purchase the equipment
covered under the lease at the end of the lease term is available
at an option price of $7,796.
39
<PAGE>
JUNGLE STREET, INC.
INCLUDING THE ACCOUNTS OF ITS WHOLLY OWNED SUBSIDIARY
TELEVAR NORTHWEST, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1996
Note 16 Subsequent Events [continued]
-----------------------------
Stock Incentive Plan - A Stock Incentive Plan ("Plan") was approved
by the Board of Directors in September 1996. The Plan has not yet
been submitted to the shareholders of the Company for approval. The
purpose of the Plan is to attract and retain the services of
selected employees, officers, directors, agents, consultants,
advisors, distributors, and independent contractors.
The shares to be offered under the Plan consist of the Company's
common stock. The number of shares that may be issued under the
Plan shall not exceed 3,000,000 shares. Common shares available
under the Plan shall include authorized and unissued shares or
reacquired shares. All awards granted under the Plan shall be
nonassignable and nontransferable. Should any award offered under
this Plan expire, terminate, or be canceled or forfeited, the
unissued shares subject to such award shall again be available
under the Plan.
The duration of the Plan shall continue in effect until the earlier
of: 1) ten years from the date of adoption by the Board of
Directors, or 2) the date on which all shares available for
issuance under the Plan have been issued and all restrictions on
such shares have lapsed. Termination of the Plan shall not affect
any outstanding awards, nor the rights of the Company under the
Plan.
Restrictions: 1) No employee may be granted an incentive stock
option ("ISO") award under the Plan if the aggregate fair market
value, on the date of the grant, for which an ISO is exercisable
for the first time by the optionee during any calendar year exceeds
$100,000. 2) Any employee possessing more than 10 % of the voting
power of all classes of stock of the Company may be granted an ISO
under the Plan only if the option price is at least 110 % of the
fair market value and the award is not exercisable after five years
from the date it is granted. 3) The duration of awards granted
under the Plan shall continue in effect for the period fixed by the
Board of Directors, except that no such award shall be exercisable
after the expiration of 10 years from the dated it is granted. 4)
The option price shall be determined by the Board of Directors at
the time of grant.
40
<PAGE>
JUNGLE STREET, INC.
INCLUDING THE ACCOUNTS OF ITS WHOLLY OWNED SUBSIDIARY
TELEVAR NORTHWEST, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1996
Note 16 Subsequent Events [continued]
-----------------------------
Stock Appreciation Rights: The Board of Directors may grant stock
appreciation rights in conjunction with the grant of a stock option
or as a separate award. The holder of such grant shall be entitled
to receive an amount equal in value to the excess of the fair
market value of the common shares on the date of exercise over the
fair market value on the date of the grant. Such awards may be paid
in the form of common stock of the Company valued at fair market
value, or cash, or a combination of cash and common stock. If stock
appreciation rights are granted in conjunction with stock options,
or vice versa, the grant of one shall be extended only to the same
extent and conditions as the other. Upon the exercise of a stock
appreciation right associated with a stock option, the related
stock option terminates, or vice versa.
Other Awards: The Plan also provides for the award of restricted
stock, stock bonuses, cash bonus rights, and performance units.
Loan to Officer - On October 2, 1996, the Company loaned its
president $12,000. The unsecured loan bears interest at 10 % per
annum, payable in 26 equal semi-monthly installments of $515,
commencing October 15, 1996, until paid in full. Said payments will
be withheld from the President's semi-monthly payroll checks. There
is no prepayment penalty.
Note 17 Liquidity
---------
The Company has incurred substantial losses and has a net working
capital deficit of $809,010 as of June 30, 1996. Financing the
Company's operations to date has been primarily from the sale of
capital stock and borrowings. The Company's ability to achieve a
level of profitable operations and/or additional financing may
impact the Company's ability to continue as it is presently
organized. Resolution of this issue is dependent on management's
plans to raise funding through the sale of its equity securities in
a private placement or public offering.
Note 18 Accounting for Income Taxes
---------------------------
The Company accounts for income taxes in accordance with Statement
of Financial Accounting Standards No. 109, which is effective for
fiscal years beginning after December 15, 1992. The Statement
requires the recognition of deferred tax assets and liabilities for
the temporary differences between the financial reporting basis and
tax basis of the Company's assets and liabilities at enacted tax
rates expected to be in effect when such amounts are realized or
settled. For the year ended June 30, 1996, the Company had no
significant income tax expenses due to operating losses incurred.
Any deferred tax benefit arising from the operating losses carried
forward would be offset entirely by a valuation allowance since it
is less than likely that the Company will be sufficiently
profitable in the future to take advantage of the losses carried
forward.
41
<PAGE>
JUNGLE STREET, INC.
INCLUDING THE ACCOUNTS OF ITS WHOLLY OWNED SUBSIDIARY
TELEVAR NORTHWEST, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1996
Note 19 Directors' Services Agreement
-----------------------------
Three of the Company's outside directors have agreed to serve as
financial consultants of the Company in consideration for shares in
the Company. The individuals received a total of 75,000 (25,000
each) shares in exchange for board services and 675,000 (50,000
each to two of the individuals and 575,000 to one of the
individuals) shares for financial consulting services.
These directors agreed to use their best efforts, expertise and
contacts in the financial community to present potential financing
sources to the Company and to otherwise assist the Company in its
capital-raising efforts.
At the time this agreement was executed, the Company had options to
repurchase the shares issued in conjunction with the financial
consulting services. However, in consideration for the personal
guarantees of these directors on certain debts of the Company, the
repurchase provision of this agreement was waived by the Company.
These directors are now fully vested in these shares.
42
<PAGE>
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
Not Applicable.
43
<PAGE>
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND
CONTROL PERSONS; COMPLIANCE WITH SECTION 16(A)
OF THE EXCHANGE ACT
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth information as of September 30, 1996
regarding the directors and executive officers of the Company.
<TABLE>
<CAPTION>
NAME Age Position with Company
- ---- --- ---------------------
<S> <C> <C>
Charles D. DeJong 36 Chairman of the Board and
Chief Executive Officer
Mark D. Hamilton 36 President and Director
Nick A. Gerde 51 Director
Roger P. Vallo 61 Director
Donald B. Cotton 58 Director
Donald A. Wright* 44 Director
- ----------------
<FN>
*Mr. Wright resigned as a Director of the Company effective November 6, 1996.
</FN>
</TABLE>
Charles D. DeJong is the Chief Executive Officer and Chairman of the
Company's Board of Directors. He has been with the Company since its
acquisition of Televar in August 1996 and with Televar as an owner and
officer since 1993. Mr. DeJong is a former practicing corporate attorney
and partner with a Seattle-based law firm. Mr. DeJong is responsible for
strategic planning and oversees legal and regulatory affairs of the
Company.
Mark D. Hamilton is the President of the Company. He has been with the
Company since its acquisition of Televar in August 1996 and with Televar as
an owner and officer since 1994. Mr. Hamilton is a ten-year veteran of the
telecommunications industry, having previously served as a manager for MCI
in Canada and as Chief Executive Officer of the largest prepaid long
distance calling card company in Canada. Mr. Hamilton manages the
day-to-day operations of the Company.
Donald A. Wright was a director of the Company since its acquisition
of Televar, Inc., in August 1996 until his resignation in November 1996. He
has been President of PCT Holdings, Inc., a Washington corporation, and its
predecessors since 1990.
Nick A. Gerde has been a director of the Company since August 30,
1996. Mr. Gerde has been the Vice President, Finance, and Chief Financial
Officer of PCT Holdings, Inc., a Washington corporation, and its
predecessors since February 1995, and its Treasurer since August 1996. Mr.
Gerde served as Controller/CFO of Hydraulic Repair & Design, Inc., a
regional hydraulic component repair and wholesale distribution
44
<PAGE>
company, from March 1990 through April 1993; Business Development
Specialist with the Economic Development Council of North Central
Washington from July 1993 to June 1994; and vice president and secretary of
Televar from July 1994 to February 1995. Mr.
Gerde is a certified public accountant.
Donald B. Cotton has been a director of the Company since August 1996.
He has been a director of PCT Holdings, Inc., and its predecessors since
May 1994. He was a director of Pacific Coast Technologies, Inc., from
October 1993 to October 1994. Mr. Cotton retired from GTE in 1993, where he
last served as a vice president. He is currently self-employed as a
software consultant.
Roger P. Vallo has been a director of the Company since August 1996.
He has been a director of PCT Holdings, Inc., and its predecessors since
May 1994. Mr. Vallo served as a director of Pacific Coast Technologies,
Inc., from February 1991 to November 1995 and as Secretary of that company
from July 1993 to October 1994. From 1990, he served as a director of the
predecessor of Pacific Coast Technologies, Inc., and subsequently as a
director of Pacific Coast Technologies, Inc. Mr. Vallo also is the
President and Chief Executive Officer of Prudential Preferred Properties in
Everett, Washington.
Directors of the Company hold office until the next annual meeting of
shareholders and until their successors have been elected and duly
qualified. Non-employee directors receive no salary for their services and
receive no fee from the Company for their participation in meetings,
although all directors are reimbursed for reasonable travel and other
out-of-pocket expenses in attending meetings of the Board. Executive
officers are elected by the Board of Directors of the Company at the first
meeting after each annual meeting of shareholders and hold office until
their successors are elected and duly qualified.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Based solely on a review of the copies of the forms provided to the
Company, or written representations that no other filing of forms was
required, the Company believes that during the fiscal year ended June 30,
1996, all Section 16(a) filing requirements applicable to such reporting
persons were complied with.
45
<PAGE>
ITEM 10. EXECUTIVE COMPENSATION
The following table sets forth the annual compensation of Charles D.
DeJong for services in all capacities to the Company during the fiscal year
ended June 30, 1996. No officer of the Company received annual salary and
bonuses exceeding $100,000 in the fiscal year ended June 30, 1996.
Furthermore, Mr. DeJong has not been awarded or been paid by the Company,
or has otherwise earned, any long-term compensation awards, including stock
options or other similar rights.
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
---------------------------------------
Other Annual
Fiscal Salary Bonus Compensation
NAME AND PRINCIPAL POSITION Year(1) ($) ($) ($)
- ---------------------------- ------- ------- ----- ------------
<S> <C> <C> <C> <C>
Charles D. DeJong 1996 19,086 0 0
Chairman and CEO(2)(3)
- -----------
<FN>
(1) Information is shown for Televar's fiscal year ended June 30. Mr.
DeJong was employed by Televar during this period. Information with
respect to fiscal years prior to the last completed fiscal year has
been omitted pursuant to the General Instruction to Item 402(b) of
Regulation S-B.
(2) Mr. DeJong became the Chief Executive Officer of the Company in August
1996 upon effectiveness of the Merger. See Item 1 - "Description of
Business - Overview." Prior to the Merger, Don C. Morrison served as
Chief Executive Officer of the Company. Mr. Morrison received no
compensation for his services in such capacity.
(3) The compensation shown was paid by Televar.
</FN>
</TABLE>
1996 STOCK INCENTIVE PLAN
The Company's 1996 Stock Incentive Plan (the "Plan") provides for the
award of incentive stock options ("ISOs") to key employees and the award of
non-qualified stock options ("NSOs"), stock appreciation rights ("SARs"),
bonus rights, and other incentive grants to employees and certain
non-employees (other than non-employee directors) who have important
relationships with the Company or its subsidiaries. The Plan has been
adopted by the Board of Directors but has not been submitted to the
shareholders for approval. No options or other incentive awards have been
granted under the Plan.
Administration. The Plan may be administered by the Board of Directors
or by a committee of directors or officers of the Company. The Board of
Directors has designated an Option Committee to administer the Plan. The
Option Committee determines and designates the individuals to whom awards
under the Plan should be made and the amount and terms and conditions of
the awards, except that if officers of the Company serve on the Option
Committee it may not grant options to such officers. The Option Committee
may adopt and amend rules relating to the administration of the Plan, but
only the Board of Directors may amend or terminate the Plan. The Plan is
administered in accordance with Rule 16b-3 adopted under the Exchange Act.
46
<PAGE>
Eligibility. Awards under the Plan may be made to employees, including
employee directors, of the Company and its subsidiaries, and to nonemployee
agents, consultants, advisors, and other persons (but not including
non-employee directors) that the Option Committee believes have made or
will make an important contribution to the Company or any subsidiary
thereof.
Shares Available. Subject to adjustment as provided in the Plan, a
maximum of 3,000,000 shares of Common Stock are reserved for issuance
thereunder. The maximum number of shares with respect to which options may
be granted to any person during any fiscal year is 1,000,000. If an option,
SAR or performance unit granted under the Plan expires or is terminated or
canceled, the unissued shares subject to such option, SAR or performance
unit are again available under the Plan. In addition, if shares sold or
awarded as a bonus under the Plan are forfeited to the Company or
repurchased thereby, the number of shares forfeited or repurchased are
again available under the Plan.
Term. Unless earlier terminated by the Board, the Plan will continue
in effect until the earlier of: (i) ten years from the date on which the
Plan is adopted by the Board, and (ii) the date on which all shares
available for issuance under the Plan have been issued and all restrictions
on such shares have lapsed. The Board may suspend or terminate the Plan at
any time except with respect to options, performance units, and shares
subject to restrictions then outstanding under the Plan.
Stock Option Grants. The Option Committee may grant ISOs and NSOs
under the Plan. With respect to each option grant, the Option Committee
determines the number of shares subject to the option, the option price,
the period of the option, the time or times at which the option may be
exercised (including whether the option will be subject to any vesting
requirements and whether there will be any conditions precedent to exercise
of the option), and the other terms and conditions of the option.
ISOs are subject to special terms and conditions. The aggregate fair
market value, on the date of the grant, of the Common Stock for which an
ISO is exercisable for the first time by the optionee during any calendar
year, may not exceed $100,000. An ISO may not be granted to an employee who
possesses more than 10% of the total voting power of the Company's stock
unless the option price is at least 110% of the fair market value of the
Common Stock subject to the option on the date it is granted and the option
is not exercisable five years after the date of grant. No ISO may be
exercisable after ten years from the date of grant. The option price may
not be less than 100% of the fair market value of the Common Stock covered
by the option at the date of grant.
In general, no vested option may be exercised unless at the time of
such exercise the optionee is employed by or in the service of the Company
or any subsidiary thereof, within 12 months following termination of
employment by reason of death or disability, or within three months
following termination for any other reason except for cause. Options are
nonassignable and nontransferable by the optionee except by will or by the
laws of descent and distribution at the time of the optionee's death. No
shares may be issued pursuant to the exercise of an option until full
payment therefor has been made. Upon the exercise of an option, the number
of shares reserved for issuance under the Plan will be
47
<PAGE>
reduced by the number of shares issued upon exercise of the option. As of
September 30, 1996, no options to purchase shares of Common Stock have been
granted under the Plan.
Stock Appreciation Rights. The Option Committee may grant SARs under
the Plan. Each SAR entitles the holder, upon exercise, to receive from the
Company an amount equal to the excess of the fair market value on the date
of exercise of one share of Common Stock of the Company over its fair
market value on the date of grant (or, in the case of a SAR granted in
connection with an option, the excess of the fair market value of one share
of Common Stock of the Company over the option price per share under the
option to which the SAR relates), multiplied by the number of shares
covered by the SAR or the option. Payment by the Company upon exercise of a
SAR may be made in Common Stock, in cash, or by a combination of Common
Stock and cash.
If a SAR is granted in connection with an option, the following rules
shall apply: (i) the SAR shall be exercisable only to the extent and on the
same conditions that the related option could be exercised; (ii) the SAR
shall be exercisable only when the fair market value of the stock exceeds
the option price of the related option; (iii) the SAR shall be for no more
than 100% of the excess of the fair market value of the stock at the time
of exercise over the option price; (iv) upon exercise of the SAR, the
option or portion thereof to which the SAR relates terminates; and (v) upon
exercise of the option, the related SAR or portion thereof terminates.
Each SAR is nonassignable and nontransferable by the holder except by
will or by the laws of descent and distribution at the time of the holder's
death. Upon the exercise of a SAR for shares, the number of shares reserved
for issuance under the Plan will be reduced by the number of shares issued.
Cash payments of SARs will not reduce the number of shares of Common Stock
reserved for issuance under the Plan. No SARs have been granted under the
Plan.
Restricted Stock. The Option Committee may issue shares of Common
Stock under the Plan subject to the terms, conditions, and restrictions
determined thereby. Upon the issuance of restricted stock, the number of
shares reserved for issuance under the Plan shall be reduced by the number
of shares issued. No restricted shares have been granted under the Plan.
Stock Bonus Awards. The Option Committee may award shares of Common
Stock as a stock bonus under the Plan. The Option Committee may determine
the recipients of the awards, the number of shares to be awarded, and the
time of the award. Stock received as a stock bonus is subject to the terms,
conditions, and restrictions determined by the Option Committee at the time
the stock is awarded. No stock bonus awards have been granted under the
Plan.
Cash Bonus Rights. The Option Committee may grant cash bonus rights
under the Plan in connection with (i) options granted or previously
granted, (ii) SARs granted or previously granted, (iii) stock bonuses
awarded or previously awarded, and (iv) shares issued under the Plan. Bonus
rights granted in connection with options entitle the optionee to a cash
bonus if and when the related option is exercised. The amount of the bonus
is
48
<PAGE>
determined by multiplying the excess of the total fair market value of the
shares acquired upon the exercise over the total option price for the
shares by the applicable bonus percentage. The bonus rights granted in
connection with a SAR entitle the holder to a cash bonus when the SAR is
exercised. The amount of the bonus is determined by multiplying the total
fair market value of the shares or cash received pursuant to the exercise
of the SAR by the applicable percentage. The bonus percentage applicable to
any bonus right is determined by the Option Committee but may in no event
exceed 75%. Bonus rights granted in connection with stock bonuses entitle
the recipient to a cash bonus, in an amount determined by the Option
Committee, when the stock is awarded or purchased or any restrictions to
which the stock is subject lapse. No bonus rights have been granted under
the Plan.
Performance Units. The Option Committee may grant performance units
consisting of monetary units which may be earned if the Company achieves
certain goals established by the Committee over a designated period of
time. The goals established by the Option Committee may include earnings
per share, return on shareholders' equity, return on invested capital, and
similar benchmarks. Payment of an award earned may be in cash or in Common
Stock or partly in both, and may be made when earned, or vested and
deferred, as the Option Committee determines. Each performance unit will be
nonassignable and nontransferable by the holder except by will or by the
laws of descent and distribution at the time of the holder's death. The
number of shares reserved for issuance under the Plan shall be reduced by
the number of shares issued upon payment of an award. No performance units
have been granted under the Plan.
Changes in Capital Structure. The Plan provides that if the
outstanding Common Stock of the Company is increased or decreased or
changed into or exchanged for a different number or kind of shares or other
securities of the Company or of another corporation by reason of any
recapitalization, stock split or certain other transactions, appropriate
adjustment will be made by the Option Committee in the number and kind of
shares available for grants under the Plan. In addition, the Option
Committee will make appropriate adjustments in the number and kind of
shares as to which outstanding options will be exercisable. In the event of
a merger, consolidation or other fundamental corporate transformation, the
Board may, in its sole discretion, permit outstanding options to remain in
effect in accordance with their terms; to be converted into options to
purchase stock in the surviving or acquiring corporation in the
transaction; or to be exercised, to the extent then exercisable, during a
30-day period prior to the consummation of the transaction.
CERTAIN TAX CONSIDERATIONS RELATED TO EXECUTIVE COMPENSATION
As a result of Section 162(m) of the Internal Revenue Code of 1986, as
amended, in the event that compensation paid by the Company to a "covered
employee" (the chief executive officer and the next four highest paid
employees) in a year were to exceed an aggregate of $1,000,000, the
Company's deduction for such compensation could be limited to $1,000,000.
49
<PAGE>
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table shows, to the best of the Company's knowledge
based on the records of the Company's transfer agent and the Company's
records on issuances of shares, as adjusted to reflect changes in ownership
documented in filings with the Securities and Exchange Commission made by
certain shareholders and provided to the Company pursuant to Section 16 of
the Exchange Act, and statements provided to the Company by certain
shareholders, Common Stock ownership as of October 11, 1996, by (i) each
person known by the Company to own beneficially more than 5% of the
Company's outstanding Common Stock ("Principal Shareholder"), (ii) each of
the Company's directors, (iii) Charles D. DeJong and Don C. Morrison, each
of whom served as the Company's Chief Executive Officer during the last
completed fiscal year, and (iv) all executive officers and directors of the
Company as a group.
<TABLE>
<CAPTION>
NAME/ADDRESS OF NUMBER OF SHARES PERCENTAGE OF
BENEFICIAL OWNER BENEFICIALLY OWNED(1) SHARES OUTSTANDING(2)
---------------- --------------------- ---------------------
<S> <C> <C>
Donald A. Wright
150 Manhattan Square 2,575,000 17.6%
East Wenatchee, WA
Charles D. DeJong
1934 Maiden Lane 2,134,375 14.6%
Wenatchee, WA
Mark D. Hamilton
933 College Street 2,134,375 14.6%
Wenatchee, WA
Philadep & Co.
1900 Market Street 1,335,807 9.1%
Philadelphia, PA
Nick A. Gerde (3)
1906 Rocklund Drive 1,125,000 7.7%
Wenatchee, WA
Jensen Services, Inc.
1787 E. Fort 106 Union #106 997,120 6.8%
Salt Lake City, UT 84121
Robert A. Schwiesow
200 Airport Way 950,000 6.5%
East Wenatchee, WA
Allen Dahl
7300 Madrona Drive N.E. 718,325 4.9%
Bainbridge Island, WA
Donald B. Cotton
538 Timber Ridge Drive 375,000 2.6%
Trophy Club, TX
</TABLE>
50
<PAGE>
<TABLE>
<CAPTION>
NAME/ADDRESS OF NUMBER OF SHARES PERCENTAGE OF
BENEFICIAL OWNER BENEFICIALLY OWNED(1) SHARES OUTSTANDING(2)
---------------- --------------------- ---------------------
<S> <C> <C>
Roger P. Vallo
12821 127th Avenue, SE 375,000 2.6%
Snohomish, WA
Don C. Morrison
9352 Sterling Drive -- N/A
Sandy, UT
Officers and Directors
as a group (6 persons) 11,384,195 77.8%
<FN>
(1) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission. To the Company's knowledge, each
person or entity has sole voting and sole investment power with
respect to the shares beneficially owned except as noted in Footnote
(3) below, subject to community property laws, where applicable.
(2) Rounded to the nearest 1/10th of one percent, based on 14,640,745
shares of Common Stock outstanding on October 11, 1996.
(3) Includes 900,000 shares owned in joint tenancy with Mr. Gerde's
spouse, and an aggregate of 225,000 shares owned by Mr. Gerde's
children residing therewith.
</FN>
</TABLE>
51
<PAGE>
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On October 2, 1996, the Company loaned its President $12,000. The
unsecured loan bears interest at 10% per annum, payable in 26 equal
semi-monthly installments of $515, commencing October 15, 1996, until paid
in full. The payments will be withheld from the President's semi-monthly
payroll checks. There is no prepayment penalty.
On September 25, 1996, the Chairman and the President provided
personal guaranties of the Company's obligations under a $500,000 bridge
loan. The loan bears interest at 18 % per annum and is secured by all
assets, tangible and intangible, including trade secrets, either now owned
or hereafter acquired, of the Company. The entire principal balance,
together with all outstanding accrued interest is due and payable on or
before the earlier of: 1) January 1, 1997 or 2) the closing of an offering
of common stock and/or warrants in an amount greater than $2,000,000.
However, the Company may, at its option, extend the due date up to April 1,
1997, if the Company is not in default under any of the terms or conditions
of the agreement, and the Company pays a third party, designated by the
lender, an extension fee of 1%, 1.5%, and 2% of the then outstanding
balance, respectively, on or before January 1, 1997, February 1, 1997,
March 1, 1997, along with the interest payment of $7,500.
52
<PAGE>
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
(A) EXHIBITS
EXHIBIT
NUMBER Description
------ -----------
3.1 Articles of Incorporation of Jungle Street, Inc., as filed with
the Secretary of State of the State of Utah on July 10, 1980.
3.2 Articles of Amendment to the Articles of Incorporation of Jungle
Street, Inc., filed with the Secretary of State of the State of
Utah on July 20, 1995.
3.3 Bylaws of Jungle Street, Inc.
4.1 Subscription Agreement, dated May 10, 1996, between Televar
Northwest, Inc. and Gary Arsenault.
4.2 Registration Rights Agreement, dated September 25, 1996, between
Jungle Street, Inc. and UTCO Associates, Ltd.
4.3 Common Stock Purchase Warrant, dated September 25, 1996, issued
to UTCO Associates, Ltd. by Jungle Street, Inc.
4.4 Agreement and Plan of Merger, dated August 29, 1996, among Jungle
Street, Inc., Televar Northwest, Inc., and Jungle Street, Inc., a
Washington corporation.(1)
4.5 Convertible Promissory Note from Televar Northwest, Inc., to Barb
Jorgensen, dated April 25, 1996.
10.1 Promissory Note from Jungle Street, Inc. to UTCO Associates,
Ltd., dated September 25, 1996.
10.2 Security Agreement, dated September 25, 1996, between Jungle
Street, Inc., Televar Northwest, Inc., and UTCO Associates, Ltd.
10.3 Guarantee of Loan, dated September 24, 1996, by Televar
Northwest, Inc., Charles D. DeJong, and Mark D. Hamilton in favor
of UTCO Associates, Ltd.
10.4 1996 Stock Incentive Plan
10.5 Customer Provided Access Request and Authorization, dated June 3,
1996, between Televar Northwest, Inc., and Sprint Communications
Company L.P.
10.6 Dedicated Access Charges and Special Access Surcharge Application
for Exemption, dated June 3, 1996, between Televar Northwest,
Inc., and Sprint Communications Company, L.P.
10.7 Lease Agreement and Guarantee, dated August 6, 1996, between
Televar Northwest, Inc., and Financial Pacific Co.
10.8 Lease Agreement, dated July 26, 1993, between Televar Northwest,
Inc., and E. Gus Noyd and Laura Jean Noyd.
10.9 Lease Agreement, dated June 28, 1995, between Televar Northwest,
Inc., and Cascade Leasing Company, and Equipment Lease Guaranty
made by Charles D. DeJong, Michael P. Schuyleman, and Mark D.
Hamilton in favor of Cascade Leasing Company.
10.10 Sublease Agreement, dated April 1, 1995, between Televar
Northwest, Inc., and Telewaves, Inc.
10.11 Lease Agreement, dated March 7, 1995, between Televar Northwest,
Inc., and David A. Quick and Cirri A. Quick, d/b/a DCR
Properties.
<PAGE>
10.12 Lease Agreement, effective July 15, 1996, between Televar
Northwest, Inc., and Summit Leasing, Inc.
10.13 Promissory Note from Televar Northwest, Inc., to Michael P.
Schuyleman and Janet L. Schuyleman, dated November 1, 1995.
10.14 Escrow Account Instructions and Agreement, dated October 31,
1995, between David M. Bohr, Michael P. Schuyleman and Janet L.
Schuyleman, and Televar Northwest, Inc.
10.15 Form of Televar Exclusive Sales Agency (VAR) Agreement
10.16 Independent Distributor Agreement, dated November 16, 1994
between Association Communications, Inc. and Televar Northwest,
Inc.
10.17 Promissory Note from Televar Northwest, Inc., to Robert Smith,
dated September 1, 1996.
21 List of Subsidiaries
23 Consent of Mantyla, McReynolds and Associates
27 Financial Data Schedule
- -----------
(1) Incorporated by reference to the Company's Current Report on Form 8-K
filed on September 13, 1996.
(B) REPORTS ON FORM 8-K.
On September 13, 1996, the Company filed a current report on Form 8-K
to disclose the merger of Televar with a wholly-owned subsidiary of the
Company that occurred on August 29, 1996 (Item 1). As a result of that
merger, the Company acquired a significant amount of assets other than in
the ordinary course of business (Item 2). On November 12, 1996, the Company
filed an amendment to the Form 8-K to provide the audited financial
statements of Televar required by Items 7(a) and 7(b) of Form 8-K and to
disclose the fact that the Company has elected to adopt the fiscal year of
Televar, which is June 30, as the fiscal year of the Company (Item 8).
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
JUNGLE STREET, INC.
Date: November 15, 1996 By /s/ MARK D. HAMILTON
--------------------------------
MARK D. HAMILTON
President
In accordance with the Exchange Act, this report has been signed below
by the following persons on behalf of the registrant and in the following
capacities on November 15, 1996.
Signature Title
- --------- -----
/s/ CHARLES D. DEJONG Chief Executive Officer, and Chairman of the
- ----------------------------- Board (Principal Executive Officer)
CHARLES D. DEJONG
/s/ MARK D. HAMILTON President (Principal Financial and Accounting
- ----------------------------- Officer)
MARK D. HAMILTON
/s/ NICK A. GERDE Director
- -----------------------------
NICK A. GERDE
Director
- -----------------------------
ROGER P. VALLO
Director
- -----------------------------
DONALD B. COTTON
<PAGE>
EXHIBIT INDEX
The following documents are filed herewith or have been included as
exhibits to previous filings with the Securities and Exchange Commission
and are incorporated by reference as indicated below.
EXHIBIT
NUMBER Description
------ -----------
3.1 Articles of Incorporation of Jungle Street, Inc., as filed with
the Secretary of State of the State of Utah on July 10, 1980.
3.2 Articles of Amendment to the Articles of Incorporation of Jungle
Street, Inc., filed with the Secretary of State of the State of
Utah on July 20, 1995.
3.3 Bylaws of Jungle Street, Inc.
4.1 Subscription Agreement, dated May 10, 1996, between Televar
Northwest, Inc. and Gary Arsenault.
4.2 Registration Rights Agreement, dated September 25, 1996, between
Jungle Street, Inc. and UTCO Associates, Ltd.
4.3 Common Stock Purchase Warrant, dated September 25, 1996, issued
to UTCO Associates, Ltd. by Jungle Street, Inc.
4.4 Agreement and Plan of Merger, dated August 29, 1996, among Jungle
Street, Inc., Televar Northwest, Inc., and Jungle Street, Inc., a
Washington corporation.(1)
4.5 Convertible Promissory Note from Televar Northwest, Inc., to Barb
Jorgensen, dated April 25, 1996.
10.1 Promissory Note from Jungle Street, Inc. to UTCO Associates,
Ltd., dated September 25, 1996.
10.2 Security Agreement, dated September 25, 1996, between Jungle
Street, Inc., Televar Northwest, Inc., and UTCO Associates, Ltd.
10.3 Guarantee of Loan, dated September 24, 1996, by Televar
Northwest, Inc., Charles D. DeJong, and Mark D. Hamilton in favor
of UTCO Associates, Ltd.
10.4 1996 Stock Incentive Plan
10.5 Customer Provided Access Request and Authorization, dated June 3,
1996, between Televar Northwest, Inc., and Sprint Communications
Company L.P.
10.6 Dedicated Access Charges and Special Access Surcharge Application
for Exemption, dated June 3, 1996, between Televar Northwest,
Inc., and Sprint Communications Company, L.P.
10.7 Lease Agreement and Guarantee, dated August 6, 1996, between
Televar Northwest, Inc., and Financial Pacific Co.
10.8 Lease Agreement, dated July 26, 1993, between Televar Northwest,
Inc., and E. Gus Noyd and Laura Jean Noyd.
10.9 Lease Agreement, dated June 28, 1995, between Televar Northwest,
Inc., and Cascade Leasing Company, and Equipment Lease Guaranty
made by Charles D. DeJong, Michael P. Schuyleman, and Mark D.
Hamilton in favor of Cascade Leasing Company.
10.10 Sublease Agreement, dated April 1, 1995, between Televar
Northwest, Inc., and Telewaves, Inc.
10.11 Lease Agreement, dated March 7, 1995, between Televar Northwest,
Inc., and David A. Quick and Cirri A. Quick, d/b/a DCR
Properties.
<PAGE>
10.12 Lease Agreement, effective July 15, 1996, between Televar
Northwest, Inc., and Summit Leasing, Inc.
10.13 Promissory Note from Televar Northwest, Inc., to Michael P.
Schuyleman and Janet L. Schuyleman, dated November 1, 1995.
10.14 Escrow Account Instructions and Agreement, dated October 31,
1995, between David M. Bohr, Michael P. Schuyleman and Janet L.
Schuyleman, and Televar Northwest, Inc.
10.15 Form of Televar Exclusive Sales Agency (VAR) Agreement
10.16 Independent Distributor Agreement, dated November 16, 1994
between Association Communications, Inc. and Televar Northwest,
Inc.
10.17 Promissory Note from Televar Northwest, Inc., to Robert Smith,
dated September 1, 1996.
21 List of Subsidiaries
23 Consent of Mantyla, McReynolds and Associates
27 Financial Data Schedule
- -----------
(1) Incorporated by reference to the Company's Current Report on Form 8-K
filed on September 13, 1996.
ARTICLES OF INCORPORATION
OF
JUNGLE STREET, INC.
We, the undersigned natural persons of the age of twenty-one years or
more, acting as incorporators of the corporation under the Utah Business
Corporations Act (hereinafter called the "Act") adopt the following
Articles of Incorporation for such corporation.
ARTICLE I
Name. The name of the corporation (hereinafter called the
"Corporation") is Jungle Street, Inc.
ARTICLE II
Period of Duration. The period of duration of the Corporation is
perpetual.
ARTICLE III
Purposes and Powers. The purpose for which this Corporation is
organized is to invest in real estate, short term time certificates of
deposit, government securities, investment securities not exceeding 30% of
the company's assets, other forms of investments and to engage in any and
all other lawful business.
-1-
<PAGE>
ARTICLE IV
Capitalization. The Corporation shall have the authority to issue
50,000,000 shares of stock each having a par value of one-tenth of one cent
(1 mil). All stock of the Corporation shall be of the same class and shall
have the same rights and preferences. Fully paid stock of this Corporation
shall not be liable for further call or assessment. The authorized trading
shares shall be issued at the discretion of the Directors.
ARTICLE V
Incorporators. The name and post office address of each incorporator
is:
JAMES N. BARBER
431 South 300 East
Salt Lake City, UT 84111
DANIEL A. PENTELUTE
595 East 4030 South
Murray, UT 84107
OLIN GLOVER
Duchesne, UT
ARTICLE VI
Directors. The Corporation shall be governed by a Board of Directors
consisting of no less than three (3) and no more than nine (9) directors..
Directors need not be stockholders in the Corporation but shall be elected
by the stockholders of the Corporation. The number of Directors
constituting the initial Board of Directors is three (3) and the name and
post office address of the persons who shall serve as Directors until their
successors are elected and qualified are:
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JAMES N. BARBER
431 South 300 East
Salt Lake City, UT 84111
DANIEL A. PENTELUTE
595 East 4030 South
Murray, UT 84107
OLIN GLOVER
Duchesne, UT
ARTICLE VII
Commencement of Business. The Corporation shall not commence business
until at least One Thousand Dollars ($1,000) has been received by the
Corporation as consideration for the issuance of its shares.
ARTICLE VIII
Pre-emptive Rights. There shall be no pre-emptive right to acquire
unissued and/or treasury shares of the stock of the Corporation.
ARTICLE IX
Voting of Shares. Each outstanding share of common stock of the
Corporation shall be entitled to one vote on each matter submitted to a
vote at the meeting of the stockholders. Each stockholder shall be entitled
to vote his or its shares in person or by proxy, executed in writing by
such stockholder, or by his duly authorized attorney-in-fact. At each
election of Directors, every stockholder entitled to vote in such election
shall have the right to vote in person or by proxy the number of shares
owned by him or it for as many persons as there
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<PAGE>
are directors to be elected and for whose election he or it has the right
to vote, but the shareholder shall have no right to accumulate his or its
votes with regard to such election.
ARTICLE X
Initial Registered Office and Initial Registered Agent. The address of
the initial registered office of the Corporation is 1549 South 1300 East,
Salt Lake City, Utah 84105 and the initial registered agent of the
Corporation at such address is W. Sterling Mason, Jr.
/s/ James N. Barber
--------------------------------------------
/s/ Daniel A. Pentelute
--------------------------------------------
/s/ Olin Glover
--------------------------------------------
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<PAGE>
STATE OF UTAH )
: ss
COUNTY OF SALT LAKE )
On the 7 day of July , 1980 personally appeared before me JAMES N.
BARBER, DANIEL A. PENTELUTE and OLIN GLOVER and duly acknowledged to me
that they are the persons who signed the foregoing instrument as
incorporators and that they have read the foregoing instrument and know the
contents thereof and that the same is true of their own knowledge as to
those matters upon which they operate on information and belief and as to
those matters believe them to be true.
/s/
------------------------------------------
NOTARY PUBLIC
Residing in Salt Lake City, UT
My Commission Expires
5-20-83
- ---------------------
-5-
State of Utah CO #087522
Department of Commerce
Division of Corporations and Commercial Code 1995 JUL 20 AM 9:46
Hereby certifies that the foregoing has been filed
and approved on the 30th day of July 1995
by the office of this Division and hereby issue
a certificate thereof.
Examiner _______________ Date 7/20/95
Korla T. Woods
KORLA T. WOODS
Division Director
ARTICLES OF AMENDMENT
TO THE ARTICLES OF INCORPORATION OF
JUNGLE STREET, INC.
Pursuant to the provisions of Section 16-10a-1006 of the Utah Revised
Business Corporation Act, the undersigned corporation hereby adopts the
following Articles of Amendment to its Articles of Incorporation.
FIRST: The name of the corporation is Jungle Street, Inc.
SECOND: The following amendment to the Articles of Incorporation
of Jungle Street, Inc. was duly adopted by the stockholders of the
corporation at a meeting held April 20, 1995, in the manner prescribed by
the Utah Revised Business Corporation Act.
THIRD: The amendment does not provide for any exchange,
reclassification or cancellation of issued shares; however, pursuant to a
resolution adopted by the stockholders of the corporation at the meeting
held April 20, 1995, the 50,000,000 one mill ($0.001) par value common
voting shares issued and outstanding were reverse split on a basis of 100
for one, retaining the authorized shares at 50,000,000 and retaining the
par value at one mill ($0.001) per share, with appropriate adjustments
being made in the additional paid in capital and stated capital accounts of
the corporation, and resulting in a total of 500,000 shares of one mill
($0.001) par value common voting stock being issued and outstanding. This
amendment reduced the stated capital of the corporation from $50,000 to
$500.
FOURTH: The amendment adopting the reverse split of the
corporation's common stock was adopted by the stockholders at a meeting
held April 20, 1995.
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FIFTH: This amendment was not adopted by the incorporators or the
Board of Directors without stockholder action.
SIXTH: (a) The designation and number of outstanding shares of
each class entitled to vote thereon as a class were as follows, to-wit:
CLASS NUMBER OF SHARES
Common 50,000,000
(b) The number of shares voted for such amendments was
25,220,667, with none opposing and none abstaining.
IN WITNESS WHEREOF, the undersigned President and Secretary,
having been thereunto duly authorized, have executed the foregoing Articles
of Amendment for the corporation under the penalties of perjury this 6th
day of June, 1995.
JUNGLE STREET, INC.
By /s/ DANIEL A. PENTELUTE
-------------------------------------
Daniel A. Pentelute,
President
Attest:
/s/ LOUISE PENTELUTE
- -----------------------------
Louise Pentelute, Secretary
-2-
BYLAWS OF
JUNGLE STREET, INC.,
a Utah Corporation
ARTICLE I
OFFICES
Section 1. PRINCIPAL OFFICES. The principal office for the transaction
of the business of the corporation is fixed and located at 6500 South State
Street, Murray, Utah 94107. The Board of Directors may change the principal
office from one location to another as from time to time may be necessary.
Any change of this location shall be noted by the Secretary on these Bylaws
opposite this section, or this section may be amended to state the new
location.
Section 2. OTHER OFFICES. The Board of Directors may, at any time,
establish branch or subordinate offices at any place or places.
ARTICLE II
MEETINGS OF SHAREHOLDERS
Section 1. ANNUAL MEETING. The annual meeting of shareholders may be
held on the last Saturday of March of each year at 10:00 a.m. or at such
other date and time which may be scheduled by the Board of Directors to the
extent that such scheduling is in compliance with the laws of the state of
incorporation of the Company. At this meeting, Directors shall be elected,
and any other proper business within the power of the shareholders may be
transacted. In the event that an annual meeting is not held in any year,
the Board of Directors, as then constituted, shall continue to perform
their duties until such annual or special meeting is properly called and
they, or any of them, are re-elected or replaced.
Section 2. PLACE OF MEETINGS. All annual shareholders meetings shall
be held at the Corporation's principal office, or a location selected by
the Board of Directors and notice to the shareholders as required by
Section 4 of these Articles, and all other shareholders meetings shall be
held either at the principal office or any other place within or outside
the State of Utah that may be designated either by the Board of Directors
in accordance with these Bylaws, or by the written consent of all persons
entitled to vote at the meeting, given either before or after the meeting
and filed with the Secretary of the Corporation.
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Section 3. SHAREHOLDER ACTION WITHOUT MEETING. Pursuant to Utah law,
any action which could be taken at a meeting of the shareholders may be
take without a meeting, if a written consent thereto is signed by
shareholders holding at least a majority of the voting power of the
corporation, except that if a different proportion of voting power is
required for such action at a meeting, then that proportion of written
consent shall be required.
Section 4. SPECIAL MEETINGS. A Special shareholders meeting for any
purpose whatsoever may be called at any time by the President, any
Vice-President, the Board of Directors, or one or more shareholders holding
not less than one-tenth (1/10 ) of the voting power or the Corporation.
Section 5. NOTICE OF MEETINGS. Written notices specifying the place,
day, and hour of the meeting and, in the case of a special meeting, the
general nature of the business to be transacted, shall be given not less
than ten (10) days, nor more than fifty (50) days before the date of the
meeting. Such notice must be given personally or by mail or by other means
of written communication, addressed to the shareholder at the address
appearing on the books of the corporation or given by the shareholder to
the corporation for the purpose of notice. If no such address appears or is
given by a shareholder of record entitled to vote at the meeting, notice is
given at the place where the principal executive office of the corporation
is located, or by publication at least once in a newspaper of general
circulation in the county where the principal executive office is located.
The notice shall be deemed to have been given at the time when
delivered personally or deposited in the mail or sent by other means of
written communication. An affidavit of mailing of any notice in accordance
with the provisions of this section executed by the Secretary shall be
prima facie evidence of the giving of notice.
Section 6. WAIVER OF NOTICE. A shareholder may waive notice of any
annual or special meeting by signing a written notice of waiver either
before or after the date of such meeting.
Section 7. QUORUM. The presence in person or by proxy of the holders
of at least fifty-one percent (51%) of the outstanding shares entitled to
vote at any meeting of the shareholders shall constitute a quorum for the
transaction of business. The share-holders present at a duly called or held
meeting at which a quorum is present may continue to do business until
adjournment notwithstanding the withdrawal of enough shareholders to leave
less than a quorum, any action taken (other than adjournment) is approved
by at least a majority of the shares required to constitute a quorum.
Section 8. PROXIES. Every person entitled to vote at a shareholders
meeting of the corporation, or entitled to execute written consent
authorizing action in lieu of a meeting, may do so either in person or by
proxy executed in writing by the shareholder or by his duly
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<PAGE>
authorized attorney-in-fact. No proxy shall be valid after eleven (11)
months from the date of its execution unless otherwise provided in the
proxy.
Section 9. VOTING. Except as otherwise provided in the Articles of
Incorporation or by agreement or by the Utah Business Corporation Act,
shareholders at the close of business on the record date are entitled to
notice and to vote.
Section 10. LIST OF SHAREHOLDERS. The Secretary shall prepare, 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, 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. This list shall be produced and kept at the time and place of the
meeting during the whole time thereof and may be inspected by any
shareholder present.
Section 11. INSPECTORS. At each meeting of shareholders, the chairman
of the meeting may appoint one or more inspectors of voting, whose duty it
shall be to receive and count the ballots and make a written report showing
the result of the balloting. The Secretary of the Corporation may perform
this function.
Section 12. ELECTION BY BALLOT. Election for directors need not be by
ballot unless a shareholder demands election by ballot at the meeting and
before the voting begins. The candidates receiving the highest number of
votes, up to the number of directors to be elected, shall be elected. No
cumulative voting shall be allowed.
Section 13. ORDER OF BUSINESS. The order of business at the annual
meeting of the shareholders insofar as possible, and at all other meetings
of shareholders, shall be as follows:
1. Call to order.
2. Proof of notice of meeting.
3. Reading and disposing of any unapproved minutes.
4. Reports of officers.
5. Reports of committees.
6. Election of Directors.
7. Disposition of unfinished business.
8. Disposition of new business.
9. Adjournment.
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ARTICLE III
BOARD OF DIRECTORS
Section 1. GENERAL POWERS. Subject to the provisions of the Utah
Business Corporation Act as it now or may hereafter exist, and any
limitations in the Articles of Incorporation and these Bylaws relating to
actions required to be approved by the shareholders or by the outstanding
shares, the business and affairs of the Corporation shall be managed and
all corporate powers shall be exercised by or under the direction of the
Board of Directors.
Section 2. ENUMERATION OF DIRECTORS' POWER. Without prejudice to these
general rules, and subject to the same limitation, the Board of Directors
shall have the power to:
(a) Select and remove all officers, agents and employees of the
Corporation; prescribe any powers and duties for them that are
consistent with law, with the Articles of Incorporation, and these
Bylaws; fix their compensation; and require from them security for
faithful service.
(b) Change the principal executive office or the principal
business office in the State of Utah from one location to another;
cause the Corporation to be qualified to do business in any other
state, territory, dependency, or country and conduct business within
or outside the State of Utah; and designate any place within or
outside the State of Utah for the holding of any shareholders meeting
of meetings, including annual meetings.
(c) Adopt, make, or use a corporate seal; prescribe the forms of
certificates of stock; and alter the form of the seal and certificate.
(d) Authorize the issuance of shares of stock of the corporation
on any lawful terms, in consideration of money paid, labor done,
services actually rendered, debts or securities canceled, or tangible
or intangible property actually received.
(e) Borrow money and incur indebtedness on behalf of the
Corporation, and cause to be executed and delivered for the
Corporation's purposes, in the corporate name, promissory notes,
bonds, debentures, deeds of trust, mortgages, pledges, hypothecations,
and other evidences of debt and securities.
(f) Engage in and/or adopt employment agreements, contracts, or
other employment contracts with independent contractors, companies,
government agencies, or individuals.
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<PAGE>
Section 3. NUMBER, TENURE, QUALIFICATION AND ELECTIONS. The Board of
Directors shall be fixed from time to time by resolution of the Board, but
shall not be less than three (3), nor shall it exceed nine (9). Directors
need not be shareholders of the Corporation. The number of Directors may be
increased beyond nine (9) only by approval of the outstanding shares of the
Corporation. The Directors of the Corporation shall be elected at the
annual meeting of the shareholders and shall serve until the next annual or
special meeting is properly called and they, or any of them, are re-elected
and until their successors have been elected and qualified.
Section 4. VACANCIES. A vacancy or vacancies on the Board of Directors
shall be deemed to exist in the event of the death, resignation, or removal
of any Director, or if the Board of Directors by resolution declares vacant
that office of a Director who has been declared of unsound mind by an order
of court or convicted of a felony, or if the authorized number of Directors
is increased, the shareholders fail at any meeting of shareholders at which
any Director of Directors are elected, to elect the number of Directors to
be voted for at that meeting.
Any Director may resign effective on giving written notice to the
Chairman of the Board, the President, the Secretary, or the Board of
Directors, unless a notice specifies a later time for that resignation to
become effective. If the resignation of a Director is effective at a future
time, the Board of Directors may elect a successor to take office when the
resignation becomes effective.
Vacancies on the Board of Directors may be filled by a majority of the
remaining Directors, whether or not less than a quorum, or by a sole
remaining Director, except that a vacancy created by the removal of a
Director by the vote or written consent of the shareholders or by court
order may be filled only by the vote of a majority of the shares entitled
to vote represented at a duly held meeting at which a quorum is present, or
by the unanimous written consent of the shareholders of the outstanding
shares entitled to vote. The shareholders may elect a Director or Directors
at any time to fill any vacancy or vacancies not filled by the Directors,
but any such election by written consent shall require the consent of a
majority of the outstanding shares entitled to vote, except that filling a
vacancy created by a removal of a Director shall require the written
consent of the holders of all outstanding shares entitled to vote.
Each Director so elected shall hold office until the next annual
meeting of the shareholders and until a successor has been elected and
qualified.
Section 5. ANNUAL MEETING. Immediately following each annual meeting
of shareholders, the Board of Directors may hold a regular meeting at the
place that the annual meeting of shareholders was held or at any other
place that shall have been designated by the Board of Directors for the
purpose of organization, any desired election of officers, and the
transaction of other business. Notice of this meeting shall not be
required.
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Section 6. NOTICE OF MEETINGS. Notice need not be given of regular
meetings of the Board of Directors, nor is it necessary to give notice of
adjourned meetings. Notice of special meetings shall be in writing by mail
at least four (4) days prior to the date of the meeting or forty-eighty
(48) hours' notice delivered personally or by telephone or telegraph or
telecopier. Neither the business to be transacted at, nor the purpose of
any such meeting need be specified in the notice. Attendance of a Director
at a meeting shall constitute a waiver of notice of that meeting except
when the Director attends for the express purpose of objecting to the
transaction of any business in that the meeting is not lawfully called or
convened.
Section 7. PLACE OF MEETINGS AND MEETINGS BY TELEPHONE. Regular and
special meetings of the Board of Directors may be held at any place within
or outside the State of Utah that has been designated from time to time by
the Board. In the absence of such designation, meetings shall be held at
the principal executive office of the Corporation. Any meeting, regular or
special, may be held by conference telephone, or similar communication
equipment, as long as all Directors participating in the meting can hear
one another, and all such Directors shall be deemed to be present in person
at the meeting.
Section 8. SPECIAL MEETINGS. Special meetings of the Board of
Directors for any purpose or purposes may be called at any time by the
Chairman of the Board or the President, any Vice-President, or the
Secretary.
Section 9. MAJORITY OR QUORUM. A majority of the authorized number of
Directors constitutes a quorum of the Board for the transaction of business
except as hereinafter provided.
Section 10. TRANSACTIONS OF BOARD. Except as otherwise provided in the
Articles or these Bylaws, or by law, every act or decision done or made by
a majority of the Directors present at a duly held meeting at which a
quorum is present, is the act of the Board, provided, however, that any
meeting at which a quorum was initially present may continue to transact
business notwithstanding the withdrawal of Directors if any action taken is
approved by at least a majority of the required quorum for such meeting.
Section 11. ADJOURNMENT. A majority of Directors present at any
meeting, whether or not a quorum is present, may adjourn the meeting to
another time and place. If the meeting is adjourned for more than
twenty-four (24) hours, notice of the adjournment to another time and place
must be given prior to the time of the adjourned meeting to the Directors
who were present at the time of the adjournment.
Section 12. CONDUCT OF MEETINGS. The Chairman of the Board, or if
there is no such officer, the President, or in his absence, any Director
selected by the Director present shall preside at the meeting of the Board
of Directors. The Secretary of the
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Corporation or, in the Secretary's absence any person appointed by the
presiding officer, shall act as Secretary of the Board.
Section 13. ACTION WITHOUT MEETING. Any action required or permitted
to be taken by the Board of Directors may be taken without a meeting, if
all members of the Board shall individually or collectively consent in
writing to such action. Such action by written consent shall have the same
force and effect as a unanimous vote of the Board of Directors. Such
written consent(s) shall be filed with the minutes of the proceedings of
the Board.
Section 14. FEES AND COMPENSATION OF DIRECTORS. Directors and members
of committees may receive such compensation, if any, for their services,
and such reimbursement of expenses, as may be fixed or determined by
resolution of the Board of Directors. Nothing herein contained shall be
construed to preclude any Director from serving the corporation in any
other capacity as an officer, agent, employee, or otherwise, and receiving
compensation for such services.
Section 15. APPROVAL OF BONUSES FOR DIRECTORS AND OFFICERS. No bonuses
or share in the earnings or profits of the Corporation shall be paid to any
of the officers, Directors, or employees of the Corporation except as
approved by the Board of Directors.
ARTICLE IV
OFFICERS
Section 1. OFFICERS. The officers of the Corporation shall be a
President, a Vice-President, a Secretary, and a Chief Financial Officer
(Treasurer). The Corporation may also have, at the discretion of the Board
of Directors, a Chairman of the Board, one or more Assistant Secretaries,
one or more Assistant Treasurers, and such other officers as may be
appointed in accordance with the provisions of Section 3 of this Article
IV. Any number of offices may be held by the same person, except the
offices of President and Secretary.
Section 2. ELECTION OF OFFICERS. The officers of the Corporation,
except such officers as may be appointed in accordance with the provisions
of Section 3 or Section 5 of this Article IV shall be chosen by the Board
of Directors, and each shall serve at the pleasure of the Board, subject to
the rights, if any, of an officer under any contract of employment.
Section 3. SUBORDINATE OFFICERS. The Board of Directors may appoint,
and may empower the President to appoint, such other officers as the
business of the corporation may require. Each of them shall hold office for
such period, have such authority
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and perform such duties as are provided in the Bylaws, or as the Board of
Directors may from time to time determine.
Section 4. REMOVAL AND RESIGNATION OF OFFICERS. Subject to the rights,
if any, of an officer under a contract of employment, any officer may be
removed, either with or without cause, by the Board of Directors, at any
regular or special meeting of the Board, or, except in case of an officer
chosen by the Board of Directors, by an officer upon whom such power of
removal may be conferred by the Board of Directors.
Any officer may resign at any time by giving written notice to the
Corporation. Any resignation shall take effect on the date of receipt of
that notice or at any later time specified in that notice; unless otherwise
specified in that notice. Any resignation is without prejudice to the
rights, if any, of the corporation under any contract for which the officer
is a party.
Section 5. VACANCIES IN OFFICES. A vacancy in any office because of
death, resignation, removal, disqualification, or any other cause, shall be
filled in the manner prescribed in these Bylaws for regular appointments to
that office.
Section 6. PRESIDENT. Subject to such powers, if any, as may be given
by the Bylaws or Board of Directors to other officers of the Corporation,
the President shall be the General Manager and Chief Executive Officer of
the Corporation and shall, subject to the control of the Board of
Directors, have general supervision, direction, and control of the business
and the officers of the Corporation. He shall preside at all meetings of
the shareholders and at all meetings of the Board of Directors. He shall
have the general powers and duties of management usually vested in the
office of President of a corporation, and shall have such other powers and
duties as may be prescribed by the Board of Directors or the Bylaws.
Section 7. VICE-PRESIDENT. In the absence or disability of the
President, the Vice-President designated by the Board of Directors shall
perform all the duties of the President, and when so acting shall have all
the powers of and be subject to all of the restrictions upon, the
President. The sole duty of the Vice-President of this Corporation shall be
to function as a representative of the President in such case as the
President may be absent or disabled. The Vice-President may, when not
acting in the representative capacity of the President, hold other
positions and be assigned other duties within the Corporation.
Section 8. SECRETARY. The Secretary shall keep or cause to be kept, at
the principal executive office or such other place as the Board of
Directors may direct, a book of minutes of all meetings and actions of
Directors, committees of Directors and shareholders, with the time and
place of holding, whether regular or special, and, if special, how
authorized, the notice given, the names of those present at Director
meetings or committee meetings, the number of shares present or represented
at shareholders meetings, and the proceedings.
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The Secretary shall keep, or cause to be kept, at the principal
executive office or at the office of the Corporation's transfer agent or
registrar, as determined by resolution of the Board of Directors, a record
of shareholders, or a duplicate record of shareholders showing the names of
all shareholders and their addresses, the number of shares held by each,
the number and date of certificates issued for the same, and the number and
date of cancellation of every certificate surrendered for cancellation.
The Secretary or Assistant Secretary, if they are absent or unable to
act or refuse to act, any other officer of the Corporation shall give, or
cause to be given, notice of all meetings of the shareholders, of the Board
of Directors, and of committees of the Board of Directors required by the
Bylaws or by law to be given. The Secretary shall keep the seal of the
Corporation, if one is adopted, in safe custody and shall have such other
powers and perform such other duties as may be prescribed by the Board of
Directors or by the Bylaws.
Section 9. CHIEF FINANCIAL OFFICER. The Chief Financial Officer
(Treasurer) shall keep and maintain, or cause to be kept and maintained,
adequate and correct books and records of accounts of the properties and
business transactions of the Corporation, including accounts of its assets,
liabilities, receipts, disbursements, gains, losses, capital, retained
earnings, and shares. The book of accounts shall at all reasonable times be
opened to inspection by any Director.
The Chief Financial Officer shall deposit all monies and other
valuables in the name and to the credit of the Corporation with such
depositories as may be designated by the Board of Directors. He shall
disburse the funds of the corporation as may be ordered by the Board of
Directors, shall render to the President and Directors, whenever they
request it, an account of all of his transactions as Chief Financial
Officer and of the financial condition of the Corporation, and shall have
other powers and perform other such duties as may be prescribed by the
Board of Directors or the Bylaws.
ARTICLE V
INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES,
AND OTHER AGENTS
Section 1. AGENTS, PROCEEDINGS, AND EXPENSES. For the purpose of this
Article, "agent" means any person who is or was a Director, officer,
employee, or other agent of this Corporation, or is or was serving at the
request of this Corporation as a Director, officer, employee, or agent of
another foreign or domestic corporation, partnership, joint venture, trust
or other enterprise, or was a Director, officer, employee, or agent of a
foreign or domestic corporation which was a predecessor corporation of this
corporation or of another enterprise at the request of such predecessor
corporation; "proceeding" means any threatened, pending or completed action
or proceeding, whether civil, criminal, administrative, or investigative;
and "expenses" includes, without limitation, attorneys' fees
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and any expenses of establishing a right to indemnification under Section 4
or Section 5(c) of this Article.
Section 2. ACTIONS OTHER THAN BY THE CORPORATION. This Corporation
shall defend and indemnify any person who was or is a party, or is
threatened to be made a party, to any proceeding (other than an action by
or in the right of this Corporation) by reason of the fact that such person
is or was an agent of this Corporation, against expenses, judgments, fines,
settlements and other amounts actually and reasonably incurred in
connection with such proceeding if that person acted in good faith and in a
manner that that person reasonably believed to be in the best interests of
this corporation and, in the case of a criminal proceeding, had no
reasonable cause to believe the conduct of that person was unlawful. The
termination of any proceeding by judgment, order, settlement, convicting,
or upon a pleas 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 the person reasonably believed to be in the best interest of
this Corporation or that the person had reasonable cause to believe that
the person's conduct was lawful.
Section 3. ACTIONS BY THE CORPORATION. This 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 by or in the right of
this Corporation to procure a judgment in its favor by reason of the fact
that that person is or was an agent, officer or director of this
Corporation, against expenses actually and reasonably incurred by that
person in connection with the defense or settlement of that action if that
person acted in good faith, in a manner that that person believed to be in
the best interests of this Corporation and with such care, including
reasonably inquiry, that such action would not be deemed grossly negligent
on the part of such agent. Indemnification shall be available under this
Section 3, conditioned only upon the following:
(a) In respect of any claim, issue or matter as to which that
person may be liable to this Corporation, the duty and obligation of
the Corporation to defend and indemnify such agent, officer or
director shall be absolute unless and only to the extent that the
court in which that action was brought shall determine, upon
application that, in view of all the circumstances of the case, said
person acted with reckless disregard equated to gross negligence with
regard to the specific claims made against said person;
(b) The indemnification provisions, set-forth herein are to be
interpreted as broadly as possible in their application to any
officer, director or agent of the corporation, to include accountants
and counsel for the corporation. Such interpretation shall treat these
provisions as continuing contractual obligations of the corporation
and subsequent modification shall not limit the effect of these
provisions as applied to the covered classes who were so covered, at
any time following adoption hereof.
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Section 4. SUCCESSFUL DEFENSE BY AGENT. To the extent that an agent of
this corporation has been successful on the merits or otherwise in defense
of any proceeding referred to in Section 2 or 3 of this Article, or in
defense or any claim, issue, or matter therein, the agent shall be
indemnified against expenses actually and reasonably incurred by the agent
in connection therewith. An agent shall be deemed successful if the Court
fails to make a specific finding regarding the degree of fault as set forth
in Section 3, hereinabove.
Section 5. REQUIRED APPROVAL. Except as provided in Section 4 of this
Article, any indemnification under this Article shall be made by this
Corporation only if authorized in the specific case on a determination that
indemnification of the agent is proper in the circumstances because the
agent has met the applicable standard of conduct set forth in Sections 2 or
3 of this Article, by:
(a) A majority vote of a quorum consisting of Directors who are
not parties to the proceeding;
[TWO PAGES OF ORIGINAL MISSING HERE]
ARTICLE VII
CORPORATE ACTIONS
Section 1. CONTRACTS. The Board of Directors may authorize any officer
or officers, or any agent or agents of the Corporation, to enter into any
contract or to execute and deliver any instrument in the name of and on
behalf of the Corporation, and such authority may be general or confined to
specific instances.
Section 2. LOANS. No loan shall be made by the Corporation to its
officers or Directors, and no loan shall be made by the Corporation secured
by its shares. No loan shall be made or contracted on behalf of the
Corporation and no evidences of indebtedness shall be issued in its name
unless authorized by resolution of the Board of Directors. Such authority
may be general or confined to specific instances.
Section 3. CHECKS, DRAFTS, OR ORDERS. All checks, drafts, or other
orders for the payment of money by or to the Corporation and all notes and
other evidence of indebtedness issued in the name of the Corporation shall
be signed by such officer or officers, agent or agents of the Corporation,
and in such manner as shall be determined by resolution of the Board of
Directors.
Section 4. BANK DEPOSITS. All funds of the Corporation not otherwise
employed, shall be deposited to the credit of the Corporation in such
banks, trust companies, or other depositories as the Board of Directors may
select.
11
<PAGE>
ARTICLE VIII
MISCELLANEOUS
Section 1. INSPECTION OF CORPORATE RECORDS. The stock ledger and
minute books may be kept by any information storage device if readily
convertible into legible form. Any shareholder of record, in person or by
an attorney or agent who presents proof of such position with guaranteed
signature on such proof, may, upon written demand under oath, stating
purpose, inspect for any proper purpose, the stock ledger, list of
shareholders and make written extracts of the same. Such extracts shall be
made in writing by the individual preparing or requesting such inspection
and such inspection shall be during normal business hours and shall not be
made without at least five (5) business days written notice thereof. Such
notice, to be effective must be received not at least five (5) business
days prior to the proposed inspection date, a signed receipt from the US
Postal Service shall be proof of such notice and the date of receipt.
Section 2. INSPECTION OF ARTICLES OF INCORPORATION AND BYLAWS. The
original or a copy of the Articles of Incorporation and Bylaws of the
Corporation, as amended or otherwise altered to date, and certified by the
Secretary of the Corporation, shall at all times be kept at the principal
executive office of the Corporation. Such Articles and Bylaws shall be open
for inspection to all shareholders of record or holders of voting trust
certificates at all reasonable times during the business hours of the
Corporation.
Section 3. FISCAL YEAR. The fiscal year of the Corporation shall begin
on the first day of January of each year and end at midnight on the last
day of December of the same year or as otherwise determined by the Board of
Directors.
Section 4. CONSTRUCTION AND DEFINITION. Unless the context requires
otherwise, the general provisions, rules of construction, and definitions
contained in the applicable Utah Statutes which shall govern the
construction of these Bylaws.
Without limiting the foregoing, the masculine gender where used
included the feminine and neuter; the singular number includes the plural,
and the plural number includes the singular; "shall" is mandatory and "may"
is permissive; and "person" includes the Corporation as well as a natural
person.
12
<PAGE>
ARTICLE IX
AMENDMENTS TO BYLAWS
These Bylaws may be amended at any time by a majority vote of the
Board of Directors or by a majority vote of the outstanding shares held by
the shareholders of the corporation.
CERTIFICATE OF SECRETARY OF ADOPTION BY DIRECTORS
I HEREBY CERTIFY that I am the duly elected, qualified and acting
Secretary of the above-named Corporation and that the above and foregoing
Bylaws were adopted as the Bylaws of said Corporation by unanimous vote of
the Board of Directors.
Dated: ________________________, 19____.
/s/ YOLANDA OYLER
---------------------------------------
Yolanda Oyler,
Vice President/Assistant Secretary
13
SUBSCRIPTION AGREEMENT
Mr. Charles D. DeJong
Televar Northwest, Inc.
215 Yakima Street
Wenatchee, WA 98801
Re: Offering of Common Stock
Dear Charlie:
In connection with the offer and proposed issuance (the "Offering") by
Televar Northwest, Inc., a Washington corporation (the "Company"), of up to
30,000 shares of Common Stock ("Shares") at $1.00 per share, the
undersigned prospective investor (the "Investor") and the Company hereby
agree as follows:
1. Subscription. The Investor hereby subscribes for and agrees to
purchase the number of Shares set forth on the signature page of this
Subscription Agreement (the "Agreement") at a price of $1.00 per Share,
subject to the following conditions and understandings:
a. Acceptance or Rejection. The Company, in its sole discretion
and for any reason, may accept or reject this subscription, in whole or in
part.
b. Closing. The closing of the transaction contemplated by this
Agreement is expected to take place within three (3) business days of the
date of this Agreement ("Closing"). On or before the Closing the Investor
will deliver to the Company a certified or cashier's or bank check for the
total price of the Shares subscribed for. At Closing the Company will
deliver to the Investor the certificate(s) representing the Shares in the
name of the Investor.
2. Representations and Warranties. The Investor makes the
acknowledgments, representations and warranties set forth in this Section 2
with the intent that they will be relied upon in determining the Investor's
suitability as a purchaser of Shares. If the Investor includes or consists
of more than one person or entity, the obligations of the Investor shall be
joint and several and the acknowledgments, representations and warranties
herein shall be deemed to be made by and be binding upon each such person
or entity and the respective heirs, executors, administrators, successors
and assigns.
a. No Regulatory Review. The Investor acknowledges and
understands that this is a limited offering being made solely to the
Investor and that no federal, state or other agency has made any finding or
determination as to the fairness of the investment nor made any
recommendation or endorsement of the Shares.
-1-
<PAGE>
b. Ability to Evaluate. The Investor, by reason of the Investor's
knowledge and experience in financial and business matters is capable of
evaluating the risks and merits of an investment in the Shares. The
Investor recognizes that the Shares are speculative and that investment in
the Shares involves a high degree of risk. The Investor is prepared to bear
the economic risk of an investment in the Shares and is able to withstand a
total loss of the Investor's investment in the Shares.
c. Investment Intent. The Investor acknowledges that the purchase
of Shares hereunder is being made for the Investor's own account, for
investment purposes only and not with the present intention of distributing
or reselling the Shares in whole or in part. The Investor further
understands that the Shares have not been registered under the Securities
Act of 1933, as amended (the "Act"), or under any state securities laws by
reason of specific exemptions therefrom, which depend upon, among other
things, the accuracy of the Investor's representations as expressed in this
Agreement. The Investor acknowledges that transfer of the Shares is
restricted under the Act and under applicable state securities laws. The
Investor further acknowledges that it is his or her responsibility to
consult with his or her counsel regarding the restrictions on resale of the
Shares prior to any resale thereof. Notwithstanding the foregoing, in the
event the Company registers all or any part of its common capital stock for
sale to the general public, the Investor shall have piggyback registration
rights with respect to a portion of the Shares. In particular, the Company
shall register 50% of the Shares purchased hereunder, which Shares shall
thereafter be freely tradable upon the effective date of the Registration
Statement filed with the Securities and Exchange Commission. The balance of
the Shares shall be subject to restrictions upon sale in accordance with
state and federal securities laws.
d. Investment Information. The Investor has received and read the
disclosure materials dated April 1996, consisting of the Business Plan and
Financial Statements (collectively, the "Memorandum"), prior to the
execution of this Agreement. The Investor will rely solely upon the
Memorandum and independent investigations made by the Investor in making a
decision to purchase the Shares. In particular, and without limiting the
generality of the foregoing, the Investor has not relied on, and the
Investor's decision to subscribe for Shares has not been influenced by: (i)
newspaper, magazine or other media articles or reports related to the
Company or its business; (ii) promotional literature or other materials
used by the Company for sales or marketing purposes; or (iii) any other
written or oral statement of the Company or persons purporting to represent
the Company, except the Memorandum or oral statements of management of the
Company furnished or communicated to the Investor in connection with the
Offering. The Investor has had the opportunity to discuss all aspects of
this transaction with management of the Company, has made or has had the
opportunity to make such inspection of the books and records of the Company
as the Investor has deemed necessary in connection with this investment,
and any questions asked have been answered to the satisfaction of the
Investor; however, no written representations apart from the Memorandum
have been made to the Investor.
-2-
<PAGE>
e. Confidentiality. The Investor understands that the Memorandum
is confidential. The Investor has not distributed the Memorandum, or
divulged the contents thereof, to anyone other than such legal or financial
advisors as the Investor has deemed necessary for purposes of evaluating an
investment in the Shares and no one (except such advisors) has used the
Memorandum, and the Investor has not made any copies thereof.
f. Authorization and Formation of Subscriber. The Investor, if a
corporation, partnership, trust or other form of business entity, is
authorized and otherwise duly qualified to purchase and hold Shares and
such entity has not been formed for the specific purpose of acquiring
Shares in the Offering. If the Investor is one of the aforementioned
entities, it hereby agrees that upon request of the Company it will supply
the Company with any additional written information that may be requested
by the Company.
3. Survival. The representations and warranties contained in Section 2
herein will survive the Closing.
4. Reliance on Representations and Warranties; Indemnity. The Investor
understands that the Company will rely on the representations and
warranties of the Investor herein in determining whether a sale of the
Shares to the Investor is in compliance with federal and applicable state
securities laws. The Investor hereby agrees to indemnify and hold the
Company and its officers, directors, agents, employees and affiliates
harmless from and against any and all liability, damage, cost or expense
(including reasonable attorneys' fees) incurred on account of or arising
out of: (a) any inaccuracy in the Investor's acknowledgments,
representations and warranties set forth in this Agreement; (b) the
disposition of any of the Shares which the Investor will receive, contrary
to the Investor's acknowledgments, representations and warranties in this
Agreement; (c) any suit or proceeding based upon the claim that said
acknowledgments, representations or warranties were inaccurate or
misleading or otherwise cause for obtaining damages or redress from the
Company or its affiliates or the disposition of all or any part of the
Investor's Shares; and (d) the Investor's failure to fulfill any or all of
the Investor's obligations herein.
5. Updating Information. All of the information set forth herein with
respect to the Investor, including, without limitation, all of the
acknowledgments, representations and warranties set forth herein, is
correct and complete as of the date hereof and, if there should be any
material change in such information prior to the acceptance of this
subscription by the Company, the Investor will immediately furnish the
revised or corrected information to the Company.
6. Notices. Any notices or other communications required or permitted
hereunder shall be sufficiently given if in writing and sent by registered
or certified mail, postage prepaid, return receipt requested, if to the
Company, to: Televar Northwest, Inc., 215 Yakima Street, Wenatchee,
Washington 98801, Attn: Mr. Mark Hamilton, President; if to the Investor,
at the address set forth following the Investor's signature to this
Agreement,
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<PAGE>
or to such other address as either the Company or the Investor shall
designate to the other by notice in writing.
7. Successors; Amendment. This Agreement inures to the benefit of and
is binding upon the parties to this Agreement and their heirs, executors,
administrators, successors and permitted assigns. This Agreement may be
amended, modified or terminated only by an agreement in writing, signed by
the parties to be charged by such amendment, modification or termination.
8. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Washington.
9. Signatures. The Investor declares under penalty of perjury that the
statements, acknowledgments, representations and warranties contained
herein are true, correct and complete and that this Agreement was executed
at: Wenatchee, Washington.
Number of Shares: 30,000
--------------
Total purchase price: $30,000.00
---------------
Make all certified or bank checks payable to "Televar Northwest, Inc."
Exact name(s) in which ownership
of Shares is to be registered: Garry R. Arseneault
-------------------------------------------------
Address: 509 19th St. NE
-----------------------------------------------------------------------
City, State, Zip Code: E. Wenatchee, WA 98802
---------------------------------------------------------
Subscriber Joint Subscriber: (if necessary)
- ---------- --------------------------------
Garry R. Arseneault
- ------------------------------ ---------------------------------
(Print Name) (Print Name)
/s/
- ------------------------------ ---------------------------------
(Signature) (Signature)
- ------------------------------ ---------------------------------
(Title) (Title)
Date: May 10, 1996 Date:
------------------------- ----------------------------
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<PAGE>
RECEIVED AND ACCEPTED:
$ 30,000 for 30,000 Shares
--------------------- ----------
Date: May 10, 1996
-------------------------
TELEVAR NORTHWEST, INC.
By /s/
---------------------------------
Its Chairman & CEO
------------------------------
Print Name Charles D. DeJong
-------------------------
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<PAGE>
APPENDIX: INVESTOR QUALIFICATIONS
I. ACCREDITED INVESTOR.
The Undersigned qualifies under the following category or categories
of definitions of "accredited investor" (indicate each applicable
category):
A. The Undersigned is a natural person whose individual net worth, or
joint net worth with that person's spouse, exceeds $1,000,000.
(___) Yes (___) No
B. The Undersigned is a natural person who had an individual income in
excess of $200,000 in each of the two most recent years or joint income
with that person's spouse in excess of $300,000 ($200,000 for California
residents) in each of those years and has a reasonable expectation of
realizing the same income level in the current year.
(___) Yes (___) No
C. The Undersigned is a broker or dealer registered pursuant to
Section 15 of the Securities Exchange Act of 1934, as amended.
(___) Yes (___) No
D. The Undersigned is an insurance company, a registered securities
broker or dealer, a licensed Small Business Investment Company, a
registered investment company, a business development company as defined in
Section 2(a)(48) of the Investment Company Act of 1940 or a private
business development company as defined in Section 202(a)(22) of the
Investment Advisers Act of 1940.
(___) Yes (___) No
E. The Undersigned is an organization described in Section 501(c)(3)
of the Internal Revenue Code of 1986, as amended, or a corporation,
Massachusetts or similar business trust or partnership, not formed for the
specific purpose of acquiring the Shares, with total assets in excess of
$5,000,000.
(___) Yes (___) No
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<PAGE>
F. The Undersigned is a trust with total assets in excess of
$5,000,000, not formed for the specific purpose of acquiring the Shares
offered, whose purchase is directed by a person who has such knowledge and
experience that he or she is capable of evaluating the merits and risks of
the proposed investment.
(___) Yes (___) No
G. The Undersigned is a bank, savings and loan association or similar
institution acting in its individual or fiduciary capacity, or an employee
benefit plan with total assets in excess of $5,000,000.
(___) Yes (___) No
H. The Undersigned is a Plan established and maintained by a state,
its political subdivisions, or any agency or instrumentality of a state or
its political subdivisions for the benefit of its employees, with total
assets in excess of $5,000,000.
(___) Yes (___) No
I. The Undersigned is an employee benefit plan within the meaning of
the Employment Retirement Income Security Act of 1974 ("ERISA"), the
investment decisions for which are made by a plan fiduciary, as defined in
Section 3(21) of ERISA, which is either a bank, savings and loan
association, insurance company, or registered investment adviser, or is an
employee benefit plan that has total assets in excess of $5,000,000.
(___) Yes (___) No
J. The Undersigned is an entity in which all of the equity owners are
accredited investors or individuals who are accredited investors (as
defined above).
(___) Yes (___) No
II. INDIVIDUAL.
(Please complete the following items A through C if the Investor is an
individual.)
A. Name of present employer:
----------------------------------------------
Nature of employment:
--------------------------------------------------
If self-employed, nature of business:
----------------------------------
Period of Employment: _____ years
-7-
<PAGE>
Describe the nature of other business involvement or employment
during the past 10 years:
Name of companies of which you are or have been an officer, and
office held:
Additional experience in the financial aspects of business:
Educational background (institutions attended, degrees):
Please provide below any additional information you think may be
helpful in determining that your knowledge in financial and
business matters are sufficient to enable you to evaluate the
merits and risks of this investment.
B. The Undersigned and spouse have a combined net worth, (including
the value of the Undersigned's principal residence valued at cost or based
on an appraisal by a qualified appraiser, net of encumbrances) of:
Less than $150,000 _______________
$150,000 - $500,000 _______________
$500,000 - $1,000,000 _______________
Over $1,000,000 _______________
C. Income of the Undersigned (excluding spouse's income):
1. Investor 2. Spouse
-------- ------
(if Spouse is
subscribing)
Calendar year ended 12/31/95: $_____________ $_____________
Calendar year ended 12/31/94: $_____________ $_____________
-8-
<PAGE>
Expected income from the
calendar year ending
12/31/96: $_____________ $_____________
Estimated percentage of
income currently derived
from sources other than
salary: _____% ____%
III. BUSINESS ENTITY.
(Please complete the following Items A through D if the Investor is a
business entity).
A. Nature of Entity.
The Undersigned is (check one):
_____ a corporation
_____ a partnership
B. Other Information.
(1) State of incorporation or organization:
(2) Federal Tax Identification No.:
(3) The entity was formed more than six months prior to the date
hereof, or is engaged in a regular business not solely related to the
investment contemplated hereby.
(___) Yes (___) No
(4) Net worth of entity:
Less than $150,000 _______________
$150,000 - $500,000 _______________
$500,000 - $1,000,000 _______________
Over $1,000,000 _______________
C. Total number of equity owners of the business entity (e.g., all
shareholders of a corporation or all partners in a partnership):
D. Equity owners of corporations and partnerships:
-9-
<PAGE>
(1) All equity owners are individuals and each has a net worth in
excess of $1,000,000 (calculated as specified in Item I.A.):
(___) Yes (___) No
(2) All equity owners are individuals and each had an individual
income in excess of the amounts described in I.B. for 1995 and 1994 and
expects the same level of income for 1996:
(___) Yes (___) No
IV. INDIVIDUALS AND BUSINESS ENTITIES
A. Total assets owned by the Undersigned, represented by unmarketable
investments:
( ) Less than 10%
( ) 10% - 20%
( ) 20% - 50%
( ) Over 50%
The Undersigned has invested in unmarketable securities (check one):
( ) often
( ) more than once
( ) once
( ) never
B. The Undersigned has been making investments for at least five
years:
(___) Yes (___) No
C. The Undersigned has invested in marketable securities (check one):
( ) often
( ) occasionally
( ) seldom
( ) never
D. The present or past investments of the Undersigned include (check
one or more):
( ) stocks
( ) bonds
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<PAGE>
( ) mutual funds
( ) other (please specify)
-----------------------------
----------------------------------------------------
E. The Undersigned has attached additional or supplemental information
which the Undersigned deems relevant in determining whether the investment
is suitable for the Undersigned.
(___) Yes (___) No
V. SIGNATURES
To the best of the Undersigned's knowledge and belief, the undersigned
declares that the above information is complete, true and correct in all
respects and the undersigned understands that the Company will rely on the
accuracy of such information.
EXECUTED this ___ day of _____________, 1996, at
- --------------------, -----------------------------------------.
(City) (State or Province or Country (if other
than U.S. or Canada))
- ---------------------------
Name (Please Type or Print)
- --------------------------- ------------------------------
Signature Signature of Spouse (if Spouse
is subscribing)
- ---------------------------
Title of Signator (if
Subscriber is other than an
individual)
-11-
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT ("Agreement") between Jungle Street,
Inc., a Utah corporation (the "Company"), and UTCO Associates, Ltd., a Utah
limited partnership ("Holder").
Recitals
A. The Company, as maker, has executed and delivered a Promissory Note
(the "Note") to Holder, as payee, in the original principal amount of
$500,000 which Note, upon default by the Company, is convertible by Holder
into shares of the Company's common stock, $.001 par value, at the
conversion price of $.75 per share, but which shares will be unregistered
and restricted.
B. Holder would not have agreed to accept the Note or to loan funds
thereunder unless the Company had agreed to enter into this Agreement.
Agreement
In consideration of the promises contained in this Agreement and in
the Note, and for other good and valuable consideration, the receipt and
sufficiency of which the parties acknowledge by their signatures below, the
Company and Holder agree as follows:
1. Piggyback Registrations. If the Company at any time proposed to
file a registration statement covering proposed sales by it or any of its
shareholders of shares of its capital stock in a manner which would permit
registration of shares of common stock for sale to the public (other than a
registration statement (i) covering only shares issuable upon the exercise
of employee stock options or pursuant to an employee stock purchase,
dividend reinvestment or similar plan, (ii) on Form S-4 or S-8 or any
similar form) under the U.S. Securities Act of 1933, as amended (the
"Act"), (iii) in connection with a registered public offering of the
Company's capital stock, or (iv) pursuant to Section 2 hereof, the Company
will give prompt notice to Holder of such proposed registration (which
notice shall describe the proposed filing date and the date by which the
registration rights granted pursuant to this Section 1 must be exercised,
the nature and method of any such sale or disposition of securities and
shall include a listing of the jurisdictions, if any, in which the Company
proposes to register or qualify the securities under the applicable state
securities or "Blue Sky" laws of such jurisdictions). At the request of
Holder given within thirty (30) calendar days after the receipt of such
notice by Holder (which request shall specify the number of shares Holder
requests to be included in such registration), the Company will use its
best efforts to cause all share as to which registration has been requested
by Holder to be included in such registration statement for sale or
disposition in accordance with the method described in the initial notice
given to Holder and subject to the same terms and conditions as the other
shares of capital stock being sold, and thereafter shall cause such
registration statement to be
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<PAGE>
filed and become effective; provided, however, that the Company shall be
permitted to (A) withdraw the registration statement for any reason in its
sole and exclusive discretion and upon the written notice of such decision
to Holder shall be relieved of all of its obligations under this Section 1
with respect to that particular registration; or (B) exclude all or any
portion of the shares sought to be registered by Holder from such
registration statement if the offering of the shares is an underwritten
offering and to the extent that, in the judgment of the managing
underwriter of the offering, the inclusion of such shares would be
materially detrimental to the offering of the remaining shares of capital
stock, or such delay is necessary in light of market conditions. Any shares
sought to be registered by Holder so excluded from a registration statement
shall be excluded pro rata based on the total number of shares of capital
stock being sold by all selling Holders (other than the Company).
2. Demand Registration. If at any time from and after the date of this
Agreement, the Company shall be requested in writing by Holder to effect
the registration under the Act of shares of the Company's common stock then
owned by Holder (which request shall specify the aggregate number of shares
intended to be offered and sold by Holder, shall describe the nature or
method of the proposed offer and sale thereof and shall contain an
undertaking by Holder to cooperate fully with the Company in order to
permit the Company to comply with all applicable requirements of the Act
and the rules and regulations thereunder and to obtain acceleration of the
effective date of the registration statement contemplated thereby), the
Company shall effect the registration of such securities on an appropriate
form under the Act, provided that (i) Holder may exercise the right to
request registration pursuant to this Section 2 only with respect to those
shares that, at the time such request for registration is delivered to the
Company, may not be sold to the public pursuant to Rule 144 under the Act
or any similar or successor rule; (ii) Holder's rights under this Section 2
shall be exercisable only if the shares as to which Holder requests
registration have an aggregate value of at least $250,000 based on the
average of the closing bid price for the Company's common stock as listed
on any exchange on which the Company's common stock then may be traded for
the thirty (30) trading-day period immediately preceding the date of such
request for registration; (iii) the Company shall be entitled to postpone
the filing of any registration statement otherwise required to be prepared
and filed by it pursuant to this Section 2, if at the time it receives a
request for such registration, the Company's underwriter determines that
such registration and offering would materially interfere with any existing
or then presently contemplated financing, acquisition, corporate
reorganization or other material transaction involving the Company, and the
Company promptly gives the Holder written notice of such determination,
provided, however, that such postponement shall not extend beyond the time
that such material interference continues to exist; and (iv) Holder shall
have no right to demand registration with respect to any shares with in
ninety (90) calendar days after the effective date of any registration
statement filed by the Company.
3. Registration Procedures. If and whenever this Agreement
contemplates that the Company will effect the registration under the Act of
any shares held by the Holder, the Company shall:
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<PAGE>
3.1 prepare and file with the Securities and Exchange Commission
(the "SEC") a registration statement on the appropriate form with respect
to such shares and use its best efforts to cause such registration
statement to become effective;
3.2 prepare and file with the SEC such amendments and supplements
to such registration statement and the prospectus used in connection
therewith and to take such other action as may be necessary to keep such
registrations statement effective until the earlier of (i) the completion
of the distribution of shares so registered, or (ii) expiration of the
ninety (90) day period following immediately the effective date of such
registration statement (at which time unsold shares may be deregistered),
and otherwise comply with applicable provisions of the Act and the rules
and regulations promulgated under the Act;
3.3 furnish to Holder and its counsel, and to each underwriter of
the shares to be sold by the Holder, without charge, such number of copies
of one or more preliminary prospectuses, any supplements thereto and a
final prospectus and any supplements thereto in conformity with the
requirements of the Act, and such other documents as the Holder or such
underwriter may reasonably request, in order to facilitate the public sale
or other disposition of such shares;
3.4 if, during any period in which, in the opinion of the
Company's counsel, a prospectus relating to the shares is required to be
delivered under the Act in connection with any offer or sale contemplated
by any registration statement, any event known to the Company occurs as a
result of which the prospectus would include an untrue statement of
material fact or omit to state any material fact necessary to make the
statements made therein, in light of the circumstances under which they
were made, not misleading, or if it is necessary at any time to amend or
supplement the related prospectus to comply with the Act, the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), or the respective
rules and regulations thereunder, to notify the Holder promptly and to
prepare and file with the SEC an amendment or supplement, whether by filing
such documents pursuant to the Act or the Exchange Act as may be necessary
to correct such untrue statement or omission or to make any registration
statement or the related prospectus comply with such requirements and to
furnish to Holder and its counsel such amendment or supplement to such
registration statement or prospectus;
3.5 timely to file with the SEC (i) any amendment or supplement
to any registration statement or to any related prospectus that is required
by the Act or the Exchange Act or requested by the SEC, and (ii) all
documents (and any amendments to previously filed documents) required to be
filed by the Company pursuant to Section 13(a), 13(c), 14 and 15(d) of the
Exchange Act;
3.6 within five days of filing with the SEC of (i) any amendment
or supplement to any registration statement, (ii) any amendment or
supplement to the related prospectus, or (iii) any document incorporated by
reference in any of the foregoing or any
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<PAGE>
amendment of or supplement to any such incorporated document, to furnish a
copy thereof to Holder;
3.7 to advise Holder and its counsel promptly (i) when any
post-effective amendment to any registration statement becomes effective
and when any further amendment of or supplement to the prospectus shall be
filed with the SEC, (ii) of any request or proposed request by the SEC for
an amendment or supplement to any registration statement, to the related
prospectus, to any document incorporated by reference in any of the
foregoing or for any additional information, (iii) of the issuance by the
SEC of any stop order suspending the effectiveness of any registration
statement or any order directed to the related prospectus or any document
incorporated therein by reference or the initiation or threat of any stop
order proceeding or of any challenge to the accuracy or adequacy of any
document incorporated by reference in such prospectus, (iv) of receipt by
the Company of any notification with respect to the suspension of the
qualification of the shares for sale in any jurisdiction or the initiation
or threat of any proceeding for such purpose, and (v) of the happening of
any event which makes untrue any statement of a material fact made in any
registration statement or the related prospectus as amended or supplemented
or which requires the making of a change in such registration statement or
such prospectus as amended or supplemented in order to make any material
statement therein not misleading;
3.8 use its reasonable best efforts to register or qualify the
shares covered by such registration statement under the securities or blue
sky laws of such jurisdictions as the Holder shall reasonably request
considering the nature and size of the offering and do such other acts and
things as may be reasonably necessary to enable the Holder to consummate
the public sale or other disposition in each such jurisdiction of such
shares; provided, however, that the Company shall not be obligated to
qualify as a foreign corporation to do business under the laws of any
jurisdiction in which it has not been qualified or to file any general
consent to service of process; and
3.9 use its best efforts to cause all shares sold pursuant to any
registration statement to be listed on each national securities exchange,
if any, on which such shares are then listed.
4. Agreements of Holder. Holder (i) upon receipt of a notice from the
Company of the occurrence of any event of the kind described in Subsection
3.4 shall forthwith discontinue Holder's disposition of securities included
in the registration statement until Holder receives copies of the
supplemented or amended prospectus, and (ii) if so directed by the Company,
shall deliver to the Company, at the Company's expense, all copies (other
than permanent file copies) then in Holder's possession of the prospectus
covering such securities that was in effect at the time of receipt of such
notice.
5. Withdrawal. If Holder disapproves of the terms of any offering, the
sole remedy of Holder shall be to withdraw Holder's securities therefrom by
giving written notice
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to the Company and any managing underwriter (if any). Holder's securities
of the Company so withdrawn from the offering also shall be withdrawn from
registration.
6. Participation in Underwritten Registrations. In the case of any
registration under Section 2, if Holder or the Company determines to enter
into an underwriting agreement in connection therewith, or in the case of a
registration under Section 1, if the Company determines to enter into an
underwriting agreement in connection therewith, (i) all shares of Holder's
securities to be included in such registration shall be subject to an
underwriting agreement, which shall be in customary form and contain such
terms as are customarily contained in such agreements, and (ii) no person
may participate in any such registration unless such person (A) agrees to
sell such person's securities on the basis provided in such underwriting
arrangement, and (B) completes and executes all questionnaires,
powers-of-attorney, indemnities, underwriting agreements and other
documents reasonably required under the terms of such underwriting
arrangements.
7. Registration Expenses. With respect to each registration effected
pursuant to Section 1 and Section 2 of this Agreement, the Company shall
pay the following fees, disbursements and expenses: all registration and
filing fees, printing expenses, auditors' fees, listing fees, registrar and
transfer agent's fees, fees and disbursements of counsel to the Company,
expenses (including reasonable fees and disbursements of counsel) of
complying with applicable securities or "Blue Sky" laws and the fees of any
securities exchange in connection with the review of such offering. The
underwriting discounts and commissions allocable to the shares included in
any offering shall be borne by the holders thereof.
8. Rule 144 Sales.
8.1 The Company covenants that it will file the reports required
to be filed by the Company under the Securities Act and the Exchange Act so
as to enable any Holder to sell Shares pursuant to Rule 144 under the
Securities Act.
8.2 In connection with any sale, transfer or other disposition by
any Holder of any shares pursuant to Section 4(1) of the Securities Act or
Rule 144 thereunder, the company shall cooperate with such Holder to
facilitate the timely preparation and delivery of certificates representing
shares to be sold and not bearing any Securities Act legend, and enable
certificates for such shares to be for such number of shares and registered
in such names as the selling Holders may reasonably request at least two
business days prior to any sale of shares.
9. Indemnification.
9.1 In each case of a registration of shares under the Securities
Act pursuant to this Agreement, the Company will indemnify and hold
harmless the Holder, its officers and directors, each underwriter (as
defined in the Act) and each other person, if any, who controls any of the
Holder or any such underwriter within the meaning of the Act or the
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<PAGE>
Exchange Act from and against any and all losses, claims, damages and
liabilities (including the fees and expenses of counsel in connection
therewith in connection with any governmental or regulatory investigation
or proceeding), arising out of any untrue statement or alleged untrue
statement of a material fact contained in any registration statement under
which such shares ere registered under the Act, any prospectus or
preliminary prospectus contained therein or any amendment or supplement
thereto (including, in each case, documents incorporated by reference
therein), or arising out of any omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make
the statements made therein not misleading, except insofar as such losses,
claims, damages or liabilities arise out of any such untrue statement or
omission or alleged untrue statement or omission based upon information
relating to any of the Holder, Holder's counsel or any underwriter and
furnished to the Company in writing by any of the Holder or such counsel or
underwriter; provided that the foregoing indemnification with respect to a
preliminary prospectus shall not inure to the benefit of any underwriter
(or the benefit of any person controlling such underwriter) from whom the
person asserting any such losses, claims, damages or liabilities purchased
shares to the extent such losses, claims, damages or liabilities result
from the fact that a copy of the final prospectus had not been sent or
given to such person at or prior to written confirmation of the sale of
such shares to such person.
9.2 In each case of a registration of shares under the Act
pursuant to this Agreement, Holder will indemnify and hold harmless the
Company, its directors, its officers who sign the registration statement,
its attorneys, each underwriter and each person, if any, who controls the
Company or such underwriter within the meaning of the Act or the Exchange
Act, to the same extent as the foregoing indemnity from the Company to the
Holder, but only with reference to information provided to the Company in
writing by the Holder and furnished to the Company by the Holder expressly
for use in the registration statement, any publicly available report of the
Holder published within the time frame of the registration statement, any
prospectus or preliminary prospectus contained therein or any amendment or
supplement thereto.
9.3 In case any proceeding (including any governmental
investigation) shall be instituted involving any person in respect of which
indemnity may be sought pursuant to this Section 9, such person (the
"Indemnified Party") shall promptly notify the person against whom such
indemnity may be sought (the "Indemnifying Party") in writing and the
Indemnifying Party, upon request of the Indemnified Party, shall retain
counsel reasonably satisfactory to the Indemnified Party to represent the
Indemnified Party, shall retain counsel reasonably satisfactory to the
Indemnified Party to represent the Indemnified Party and any others the
Indemnifying Party may designate in such proceeding and shall pay the fees
and disbursements of such counsel related to such proceeding. In any such
proceeding, any Indemnified Party shall have the right to retain its own
counsel, but the fees and expenses of such counsel shall be at the expense
of such Indemnified Party unless (i) the Indemnifying Party has agreed to
the retention of such counsel at its expense, or (ii) the named parties to
any such proceeding (including any impleaded parties) include both the
Indemnifying Party and the Indemnified Party, the Indemnifying Party
proposes that the same counsel represent
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<PAGE>
both the Indemnified Party and the Indemnifying Party and representation of
both parties by the counsel would be inappropriate due to actual or
potential differing interests between them. It is understood, where the
expense of separate counsel shall be borne by the Indemnifying Party
pursuant to the foregoing sentence, that the Indemnifying Party shall not,
in connection with any proceeding or related proceedings in the same
jurisdiction, be liable for the fees and expenses of more than one separate
firm qualified in such jurisdiction to act as counsel for such Indemnified
Party. The Indemnifying Party shall not be liable for any settlement of any
proceeding effected without its written consent, but if settled with such
consent or if there be a final judgment for the plaintiff, the Indemnifying
Party agrees to indemnify the Indemnified Party from and against any loss
or liability by reason of such settlement or judgment.
9.4 The indemnification pursuant to this Section 8 shall be on
such other terms and conditions as are at the time customary and reasonably
required by underwriters in public offerings, including providing for
contribution in the event indemnification provided in this Section 9 is
unavailable or insufficient.
10. Holdback Agreement. Holder agrees not to effect any public sale or
distribution of the Company's shares of capital stock during the seven (7)
calendar days prior to and the ninety (90) calendar day period beginning on
the effective date of any underwritten registration statement effected
pursuant to this Agreement (except as part of such underwritten
registration) unless the managing underwriter or underwriters with respect
to such offering otherwise agree.
11. Selection of Underwriters. The Company will have the right to
select the investment banking firm(s) acting as managing underwriter in
connection with any underwritten public offering.
12. Termination. This Agreement and all rights and obligations of the
parties to this Agreement shall terminate four (4) years after the date of
this Agreement; provided, however, that the indemnification provisions of
Section 9 shall not terminate and shall survive forever.
13. General.
13.1 Assignment. Holder's rights under this Agreement shall not
be transferable without the written consent of the Company, which consent
shall not be unreasonably withheld.
13.2 Counterparts. This Agreement may be executed in one or more
counterparts, each of which when so signed shall be deemed to be an
original, and such counterparts together shall constitute one and the same
instrument.
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<PAGE>
13.3 Entire Agreement. This Agreement sets forth the entire
agreement between the parties as to the subject matter hereof, supersedes
any and all prior or contemporaneous agreements or understandings of the
parties relating to the subject matter of this Agreement, and may not be
amended except by an instrument in writing signed by all of the parties to
this Agreement.
13.4 Governing Law. The laws of the State of Utah (without giving
effect to the choice of law provisions thereof) shall govern the
interpretation and enforcement of this Agreement.
13.5 Headings. The headings of the sections and paragraphs of
this Agreement have been inserted for convenience of reference only and do
not constitute a part of this Agreement.
13.6 Notices. All notices or other communications provided for
under this Agreement shall be in writing, and mailed, telecopied or
delivered by hand delivery or by overnight courier service, to the parties
at their respective addresses as indicated below or at such other address
as the parties may designate in writing:
If to the Company, to it at:
Jungle Street, Inc.
215 Yakima Street
Wenatchee, WA 98801
Attn: Mark D. Hamilton
If to Holder, to it at:
UTCO Associates, Ltd.
230 West 200 South, Suite 2601
Salt Lake City, Utah 84101
Attn: Robert D. Kent
With a copy to:
Durham, Evans, Jones & Pinegar
50 South Main, Suite 850
Salt Lake City, Utah 84144
Attn: Jeffrey M. Jones, Esq.
All notices and communications shall be effective as follows: When mailed,
upon three (3) business days after deposit in the mail (postage prepaid);
when telecopied, upon confirmed transmission of the telecopied notice; when
hand delivered, upon delivery; and when sent by
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<PAGE>
overnight courier, the next business day after deposit of the notice with
the overnight courier.
13.7 Remedies. Any person having rights under any provision of
this Agreement will be entitled to enforce such rights specifically, to
recover damages caused by reason of any breach of any provision of this
Agreement and to exercise all other rights granted by law.
DATED September __, 1996.
JUNGLE STREET, INC., a Utah corporation
By /s/
------------------------------------------
Its
---------------------------------------
UTCO ASSOCIATES, LTD., a Utah corporation
By
------------------------------------------
Its
---------------------------------------
-9-
THIS WARRANT AND ANY SHARES ACQUIRED UPON THE EXERCISE OF THIS WARRANT HAVE
NOT BEEN AND WILL NOT BE, AS OF THE TIME OF ISSUANCE, REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE STATE SECURITIES LAW,
AND MAY NOT BE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR ANY
EXEMPTION THEREFROM UNDER SUCH ACT. THIS WARRANT AND SUCH SHARES MAY BE
TRANSFERRED ONLY IN COMPLIANCE WITH THE CONDITIONS SPECIFIED IN THIS
WARRANT.
JUNGLE STREET, INC.
COMMON STOCK PURCHASE WARRANT
Expiring September 25, 2001
September 25, 1996
JUNGLE STREET, INC., a Utah corporation (the "Company"), for value
received, hereby certifies that UTCO Associates, Ltd. ("Holder"), is
entitled to purchase sixty-five thousand (65,000) shares of the Company's
voting common stock, par value $.001 per share (the "Warrant Stock"), at
the times and according to the terms set forth in this Warrant.
1. Terms of Warrant. This Warrant is being issued by the Company as a
fee in connection with and pursuant to that certain Promissory Note of even
date herewith made by the Company and payable to Holder. This Warrant shall
be exercisable at any time after the date hereof. The exercise price (the
"Exercise Price") of this Warrant shall be $1.81 per share of the Warrant
Stock acquired upon any such exercise.
2. Exercise of Warrant. The holder of this Warrant may exercise it
during normal business hours on any business day after the date hereof and
before 5:00 p.m., P.S.T., on September 25, 2001, or if such date is a day
on which federal or state chartered banking institutions are authorized by
law to close, then on the next succeeding day which shall not be such a
day, by surrendering this Warrant to the Company at the Company's principal
office, accompanied by an executed subscription agreement in substantially
the form annexed hereto as Exhibit "A" and by payment, in cash or by
certified or official bank check payable to the order of the Company, or by
any combination of such methods, in the amount obtained by multiplying
(a) the number of Warrant Stock designated in such subscription by (b) the
Exercise Price, whereupon such holder shall be entitled to receive the
number of duly authorized, validly issued, fully paid and nonassessable
shares of Warrant Stock as is indicated on the subscription.
3. Partial Exercise Allowed; Issuance of Substitute Warrant. This
Warrant is exercisable in whole or in part by Holder. In the event Holder
exercises this Warrant with respect to only a portion of the Warrant Stock
that could be acquired upon exercise, a
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<PAGE>
replacement Warrant ("Replacement Warrant") with identical terms except for
a corresponding reduction of the number of shares of Warrant Stock
receivable upon exercise of the Replacement Warrant shall be issued by the
Company within three (3) business days after any such partial exercise.
4. When Exercise Effective. The exercise of this Warrant shall be
deemed to have been effected immediately prior to the close of business on
the business day on which this Warrant shall have been surrendered to the
Company as provided in Section 2, and at such time the person or persons in
whose name or names any certificate or certificates for shares of Warrant
Stock shall be issued upon such exercise shall be deemed for all corporate
purposes to have become the holder of record thereof.
5. Delivery of Stock Certificates. As soon as practicable after the
exercise of this Warrant, and in any event within five (5) business days
thereafter, the Company at its expense (including the payment by it of any
applicable issue taxes) will cause to be issued in the name of and
delivered to Holder or to the person or entity such holder may direct (and
upon payment by such holder of any applicable transfer taxes), a
certificate or certificates for the number of duly authorized, validly
issued, fully paid and nonassessable shares of Warrant Stock to which the
holder or its designee shall be entitled upon such exercise.
6. Adjustment of Warrant Stock Issuable Upon Exercise. If the Company
at any time or from time to time after the date of this Warrant but before
expiration effects a split or subdivision of the outstanding shares of its
then outstanding common stock into a greater number of shares of common
stock, or if the Company effects a reverse split of the outstanding shares
of its common stock into a lesser number of shares of common stock, (by
reclassification or otherwise than by payment of a dividend in common
stock), then, and in each such case, the number of shares called for on the
face of this Warrant (or the face of any replacement Warrant issued upon
partial exercise) shall be adjusted proportionally, and the exercise price
with respect to such adjusted number of shares also shall be adjusted
proportionally.
7. Reservation of Shares. The Company will at all times reserve and
keep available, solely for issuance and delivery upon the exercise of this
Warrant, the number of shares of common stock that would be issuable upon
the exercise, in whole, of this Warrant or any replacement Warrant. All
such shares shall be duly authorized and, when issued upon such exercise,
shall be validly issued, fully paid and nonassessable with no liability on
the part of the holders thereof.
8. Ownership, Transfer and Substitution of Warrant. The Company will
treat Holder as the owner and holder of this Warrant for all purposes,
until the Company receives notice to the contrary. This Warrant shall be
transferable by Holder only in accordance with State and Federal Securities
laws, and the Company shall recognize on its books and records any lawful
transfer of this Warrant upon receipt of notice of such transfer by Holder.
Upon receipt of evidence reasonably satisfactory to the Company of the
loss, theft, destruction or
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<PAGE>
mutilation of this Warrant and, in the case of any such loss, theft of
destruction of this Warrant, upon delivery of indemnity reasonably
satisfactory to the Company in form and amount or, in the case of any such
mutilation, upon surrender of such the Company at its expense will execute
and deliver, in lieu thereof, a new Warrant of like tenor.
9. No Rights or Liabilities as Stockholder. Nothing herein shall give
or shall be construed to give Holder any of the rights of a shareholder of
the Company including, without limitation, the right to vote on matters
requiring the vote of shareholders, the right to receive any dividend
declared and payable to the holders of common stock, and the right to a
pro-rata distribution upon the Company's dissolution.
10. Authorization; No Breach. The Company represents and warrants that
(i) the Company is duly organized, validly existing, and in good standing
under the laws of the State of Utah, and has the requisite power and
authority to issue this Warrant and the Warrant Stock issuable upon the
exercise of this Warrant; (ii) the number of shares of Warrant Stock
issuable upon the entire exercise of this Warrant are presently authorized
but unissued; (iii) the issuance of this Warrant and the issuance of the
Warrant Stock issuable upon exercise of this Warrant have been authorized
and approved by all necessary corporate action; (iv) the execution,
delivery and issuance of this Warrant and the issuance of the Warrant Stock
underlying this Warrant will not violate any law, rule, regulation, order,
writ, judgment, injunction, decree or award binding on the Company or the
provision or provisions of any agreement to which the Company is a party or
is subject, or by which any of the Company's property is bound, or conflict
with or constitute a material default thereunder, or result in the creation
or imposition of any lien pursuant to the terms of any such agreement, or
constitute a breach of any fiduciary duty owed by the Company to any third
party, or require the approval of any third-party pursuant to any contract,
agreement, instrument, relationship or legal obligation to which the
Company is subject or to which any of its properties may be subject; and
(v) when issued, both this Warrant and the shares of common stock issuable
upon exercise of this Warrant shall be duly and validly issued, fully paid
and nonassessable.
11. Registration Right. If the Company shall determine to register any
of its common stock either for its own account or the account of a security
holder or holders, other than a registration relating solely to (i)
employee benefit plans, or (ii) registration on any registration form that
does not permit secondary sales, the Company will: (a) promptly give
written notice of the proposed registration to the holders of any Warrant
Stock issued or issuable upon the exercise of this Warrant (which shall
include a list of the jurisdictions in which the Company intends to attempt
to qualify such securities under applicable blue sky laws); and (b) include
in such registration (and any related qualification or other compliance
filing under applicable blue sky laws), and in any underwriting involved
therein, all or any portion of the Warrant Stock then issued or issuable
upon exercise of this Warrant as specified in a written request made by
such holders within thirty (30) days after receipt of the written notice
from the Company described in clause (a) above, provided, however, that if
the registration of which the Company gives notice is for a registered
public offering
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<PAGE>
involving an underwriting, the Company shall so advise such holders as part
of the written notice described in clause (a) above. In such event, such
holders' rights to registration pursuant to this Section 11 shall be
conditioned upon participation in such underwriting and the inclusion of
stock in the underwriting to the extent provided herein. Such holders and
the Company (and any other security holders proposing to distribute their
securities through such underwriting) shall enter into an underwriting
agreement in customary form with the representatives of the underwriter or
underwriters selected for such underwriting by the Company. Notwithstanding
any other provisions of this Section 11, if the representatives of the
underwriter or underwriters determine in good faith that marketing factors
make it advisable to impose a limitation on the number of secondary shares
to be underwritten, the number of such secondary shares, if any, that may
be included in the registration and underwriting on behalf of such holders,
and any other security holders proposing to distribute their securities of
the Company through such underwriting shall be allocated in proportion, as
nearly as practicable, to the respective amounts of securities that they
had requested to be included in such registration at the time of filing the
registration statement. If such Holders disapprove of the terms of any such
underwriting, they may elect to withdraw therefrom by written notice to the
Company and the representatives of the underwriter or underwriters.
12. Notices. All notices and other communications provided for herein
shall be delivered or mailed by first class mail, postage prepaid,
addressed (a) if to Holder, at the registered address of such holder as set
forth in the register kept at the principal office of the Company, or (b)
if to the Company, at its principal office, or to such other location as
the Company shall have furnished to each holder of any Warrants in writing,
provided that the exercise of any Warrants shall be effective only in the
manner provided in section 2.
13. Miscellaneous. This Warrant embodies the entire agreement and
understanding between the parties hereto with respect to the subject matter
hereof and supersedes all prior agreements and understandings relating to
the subject matter hereof. There are no unwritten oral agreements between
the parties with respect to the subject matter hereof. This Warrant and any
term hereof may be changed, waived, discharged or terminated only by an
instrument in writing signed by the party against which enforcement of such
change, waiver, discharge or termination is sought. This Warrant shall be
governed by the laws of the State of Utah. The headings of this Warrant are
inserted for convenience only and shall not be deemed to constitute a part
hereof.
JUNGLE STREET, INC.
By /s/ CHARLES D. DEJONG
-------------------------------------
Charles D. DeJong, CEO
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<PAGE>
Exhibit A
SUBSCRIPTION
(To be executed by the holder of the Warrant to exercise the right to
purchase common stock evidenced by the Warrant.)
To: Jungle Street, Inc.
215 Yakima Street
Wenatchee, Washington 98801
The undersigned hereby irrevocably subscribes for _________ shares of
Common Stock, par value $.001 per share, of Jungle Street, Inc., a Utah
corporation, pursuant to and in accordance with the terms and conditions of
a Warrant dated September 25, 1996 (the "Warrant"), and tenders with the
Warrant and this Subscription Agreement payment of $_______ as payment for
the shares, and requests that a certificate for such shares be issued in
the name of the undersigned and be delivered to the undersigned at the
address stated below.
---------------------------
---------------------------
---------------------------
---------------------------
The undersigned agrees that, upon issuance of the shares, the
undersigned will execute an investment letter in the form attached hereto
as Exhibit 1, to reflect that the shares are being acquired for investment
purposes and not with a view toward their resale or distribution to the
public.
-----------------------------
Signed
-----------------------------
Dated
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PROMISSORY NOTE
Wenatchee, Washington Date: April 25, 1996
Amount: $20,000 /s/
FOR VALUE RECEIVED, TELEVAR NORTHWEST, INC., a Washington Corporation,
(the "Company") "Maker" promises to pay ___________________________
"Holder" or order, the principal sum of Twenty Thousand Dollars and no/100
($20,000) in lawful money of the United States of America, on the following
terms and conditions:
1. PAYMENT OF THE NOTE:
The principal amount of this note amounting to $20,000 plus interest
at the rate of 18% per annum is due and payable on October 26, 1996.
2. OPTION FOR CONVERTABILITY TO COMMON STOCK:
At the option of the Holder, the principal and interest amounts due
under the terms of this note will be paid by the Company in whole or in
part by the issuance of Televar Northwest, Inc. common stock at the
conversion rate of $2.50 per share.
3. RIGHT OF PREPAYMENT:
Maker shall have the right to prepay the unpaid principal and interest
in whole or in part at any time without penalty.
4. NOTICES:
All notices, demands, requests, consents, approvals, and other
instruments required or permitted to be given shall be in writing and shall
be deemed to have been properly given if sent by registered or certified
mail, postage prepaid, return receipt requested, to the address set forth
below:
a. To Maker: Televar Northwest, Inc.
Attention: Mark Hamilton, President
215 Yakima Street
Wenatchee, Washington 98801
b. To Holder: Barb Jorgensen
816 Alpine Drive
Everett, WA 98203
Provided, however, that such address may be changed upon five (5) days
written notice thereof similarly given to the other party. Such notice,
demand , request, consent,
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<PAGE>
approval and other instrument shall have been deemed to have been served on
the third (3rd) day following the date of mailing.
5. DEFAULT:
If default be made in the payment of any installment when due, then,
at the option of the Holder of this Note, without prior written notice, the
entire indebtedness hereby represented shall become immediately due and
payable, time being of the essence hereof. As long as this Note is in
default, then at the option of the Holder hereof, without prior written
notice, this Note shall bear interest at the rate of Eighteen percent (18%)
per annum until Note has been paid in full.
6. COLLECTION COSTS AND ATTORNEY''S FEES:
Maker promises to pay all actual costs and fees incurred by the Holder
in the event payment is not made when due. Maker further promises that if
foreclosure proceedings, or any other action is instituted to collect this
Note or any part hereof, Maker will pay, in addition to costs and
disbursements, a reasonable sum as attorney's fees.
7. VENUE:
At the option of the Holder, venue of any action hereunder shall be
Chelan County, State of Washington.
8. WAIVER OF DEMAND:
Maker (and any endorser) hereby waives demand, presentment, protest,
or notice of any kind, and expressly agrees that if this Note or any
payment due hereunder may be extended, any such extension shall in no way
impair the liability of Maker.
9. SECURITY:
This Note is secured by the full faith and promise of the Maker,
Televar Northwest, Inc.
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<PAGE>
ACCEPTED AND APPROVED AS TO FORM:
HOLDER: MAKER:
Barb Jorgensen TELEVAR NORTHWEST, INC.
816 Alpine Drive
Everett, WA
By: /s/ BARB JORGENSEN By: /s/ CHARLES D. DEJONG
------------------------------- ------------------------------------
Charles D. DeJong, CEO & Chairman
By: /s/ MARK HAMILTON
------------------------------------
Mark Hamilton, President
WITNESS: /s/ WITNESS: /s/
-------------------------- -------------------------------
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$500,000.00 September 25, 1996
PROMISSORY NOTE
FOR VALUE RECEIVED, Jungle Street, Inc., a Utah corporation
("Borrower"), promises to UTCO Associates, Ltd., a Utah limited
partnership, (hereinafter "Lender") as follows:
1. Principal and Interest. Borrower promises to pay to Lender or order
at UTCO Associates, Ltd., 230 West 200 South, P.O. Box 11838, Salt Lake
City, UT 84103, in lawful money of the United States of America, the
principal sum of FIVE HUNDRED THOUSAND DOLLARS ($500,000.00) together with
interest on the unpaid principal balance thereon from the date hereof until
paid in full at a rate of eighteen percent (18.0%) per annum.
2. Nature of Indebtedness. This Note evidences a loan from Lender to
Borrower for short-term operating capital and the acquisition of equipment.
No part or portion of said loan shall be used for personal, family or
consumer purposes.
3. Repayment. Borrower shall pay principal and interest as follows:
a. On the following dates, Borrower shall make the following
interest only payments:
Date Amount of Interest
10/1/96 $1,250.00
11/1/96 7,500.00
12/1/96 7,500.00
1/1/97 7,500.00
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b. The entire unpaid principal balance, together with accrued
interest thereon, shall be due and payable on or before the earlier of (i)
January 1, 1997 or (ii) the closing of Borrower's proposed offering of
common stock and/or warrants in an amount greater than $2 million (the
"Offering") provided, however, that Borrower may unilaterally extend the
term of this Note to February 1, 1997 if (A) Borrower has made the interest
only payment due January 1, 1997 on or before that date, (B) Borrower is
not in default under any term or condition of this Note or any other
writing or agreement delivered to Lender in connection therewith; and (C)
Borrower pays to Synergetics Realty, Inc. (" Synergetics") on or before
January 1, 1997 an extension fee of 1% of the then outstanding balance due
and owing hereunder. Borrower may unilaterally extend the term of this Note
from February 1, 1997 to March 1, 1997 if Borrower complies with
subsections (A) and (B), above, and Borrower pays to Synergetics on or
before February 1, 1997, an extension fee of 1.5% of the then-outstanding
balance due and owing hereunder, and all unpaid interest accruing up to
February 1, 1997. Borrower may unilaterally extend the term of this Note
from February 1, 1997 to March 1, 1997 if Borrower complies with
subsections (A) and (B), above, and Borrower pays to Synergetics on or
before February 1, 1997 an extension fee of 2.0% of the then-outstanding
balance due and owing hereunder, and all unpaid interest accruing up to
February 1, 1997. Borrower may unilaterally extend the term of this Note
from March 1, 1997 to April 1, 1997 if Borrower complies with subsections
(A) and (B), above, and Borrower pays to Synergetics on or before March 1,
1997 an extension fee of 2.5% of the then-outstanding balance due and owing
hereunder, and all unpaid interest accruing up to March 1, 1997.
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c. All payments received shall be applied first to the costs of
collection, then to accrued interest and the balance, if any, to the
reduction of principal. Borrower may prepay the obligation evidenced by
this Note at any time.
4. Collateral. As collateral for the performance of all obligations
and liabilities hereunder, Borrower shall and does hereby grant or shall
cause to be granted to Lender a security interest in all of Debtor's
assets, whether now owned or hereafter acquired, and wherever located,
specifically including but not limited to Debtor's in the following types
of property:
a. All furniture, leasehold improvements, motor vehicles,
appliances, fixtures, furnishings, tools, machinery and equipment
(including computer hardware, software and firmware) and other goods of
Borrower, now owned or hereafter acquired, and all additions and accessions
thereto and replacements therefor;
b. All inventory, supplies and materials of Borrower now owned or
hereafter acquired, together with all additions and accessions thereto and
replacements therefor;
c. All accounts, accounts receivable, negotiable documents,
notes, drafts, acceptances, claims, lease rights, securities, instruments,
chooses in action, whether in contract or in tort, proceeds of lawsuits,
and general intangibles of Borrower (including, but not limited to
goodwill, permits, licenses, trademarks, trade names and trade secrets),
and all other rights of Borrower to the payment of money, now existing or
hereafter arising;
d. All deposit accounts of Borrower maintained with any bank or
other financial institution;
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<PAGE>
e. All records, papers and books of account or other documents or
papers relating to, affecting or describing any of the foregoing
Collateral, in whatever form, including without limitation all computerized
records, diskettes, programs, etc. relating thereto;
f. All of Borrower's contract rights and insurance policies;
g. All of Borrower's patents and patents pending;
h. All of Borrower's stock in and to any subsidiary; and
i. All proceeds of the foregoing Collateral. For purposes of this
Security Agreement, the term "proceeds" includes whatever is receivable or
received when Collateral or proceeds is sold, collected, exchanged or
otherwise disposed of, whether such disposition is voluntary or
involuntary, and includes, without limitation, all rights to payment,
including return premiums, with respect to any insurance relating thereto.
All of the foregoing is collectively referred to as the "Collateral".
Lender's security interest shall be further evidenced by and subject to the
terms of financing statements and such other documents as Lender may
request.
5. Loan Fee. In addition to the foregoing, Borrower shall pay
Synergetics a total loan fee equal to (i) 4 points ($20,000) plus
reasonable attorneys fees incurred by Lender in connection herewith upon
execution of this Note and (ii) warrants for the purchase of 65,000 shares
of Borrower's common stock; said warrants to be for a term of five (5)
years at an exercise price of $_________ per share.
6. Representations and Warranties. In order to induce Lender to make
the loan contemplated herein, Borrower represents and warrants to Lender as
follows:
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a. Borrower is a Utah corporation duly organized and existing
with the power to own its assets and to transact business in Washington and
in each state where its business is conducted.
b. The subsidiary of Borrower is a corporation duly organized and
existing with the power to own its assets and to transact business in
Washington and in each state where its business is conducted.
c. Borrower is now, and shall at all times in the future be, the
sole owner of all the Collateral, except for items of equipment which are
leased by Borrower. The Collateral now is and shall remain free and clear
of any and all liens, charges, security interests, encumbrances and adverse
claims, except for the following ("Permitted Liens"): (i) liens for taxes
not yet payable; (ii) additional security interests and liens consented to
in writing by Lender in its sole discretion; and (iii) security interests
being terminated substantially concurrently with this Note. Lender shall
have the right to require, as a condition to its consent under subparagraph
(ii) above, that the holder of the additional security interest or lien
sign an intercreditor agreement on terms satisfactory to Lender in its sole
discretion, acknowledge that the holder's security interest is subordinate
to the security interest in favor of Lender, and that Borrower agrees that
any uncured default in any obligation secured by the subordinate security
interest shall also constitute an Event of Default under this Note. Lender
now has, and shall continue to have, a first priority, perfected and
enforceable security interest in all of the Collateral. Borrower shall at
all times defend Lender and the Collateral against all claims of others.
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d. The execution, delivery and performance of this Note will not
violate any provision of any applicable law, regulation, order, judgment,
decree, limited partnership agreement or amendment thereto, contract,
agreement or undertaking to which Borrower is a party or which purports to
be binding on Borrower or its assets and will not result in the creation or
imposition of any lien on its assets.
e. There is no action, suit, investigation or proceeding pending,
or to the knowledge of Borrower, threatened, against Borrower, or any of
Borrower's assets, which, if adversely determined would have a material
adverse effect on the financial condition of Borrower.
f. No information, report or financial statement furnished by
Borrower to Lender in connection with this Note contains any material
misstatement of fact or omits to state a material fact or any fact
necessary to make the statements contained therein not misleading.
g. Borrower shall maintain the Collateral in good working
condition. Borrower shall not use the Collateral for any unlawful purpose.
Borrower shall immediately advise Lender in writing of any material loss or
damage to the Collateral.
h. All financial statements now or in the future delivered to
Lender have been, and shall be, prepared in conformity with generally
accepted accounting principles and now and in the future shall completely
and accurately reflect the financial condition of Borrower, on a
consolidated and consolidating basis, at the times and for the periods
therein stated. Since the last date covered by any such statement, there
has been no material adverse change in the financial condition or business
of Borrower.
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7. Covenants. While this Note is outstanding, Borrower covenants and
agrees with Lender as follows:
a. Borrower will furnish to Lender such unaudited monthly
financial statements, audited annual financial statements, all filings with
the Securities and Exchange Commission and tax returns as Lender reasonably
requires, and such additional information regarding its business affairs
and financial condition as Lender may reasonably request; provided,
however, that Lender agrees to execute a Confidentiality Agreement, in a
form reasonably acceptable to the Borrower with regard to any such non-
public documents.
b. Borrower shall notify Lender of any default under the terms of
the Note or of any litigation, proceeding or development which may have a
material adverse effect on Borrower's ability to perform under the terms of
this Note or any assignment or security agreement given in connection
herewith.
c. Borrower shall duly observe and conform to all valid
requirements of any governmental authority relative to the conduct of its
business or to its properties or assets.
d. Except in the ordinary course of business, Borrower shall not
sell, assign, convey, hypothecate, pledge, or alienate its interest in its
assets, or any part thereof and wherever located, or permit any divestiture
of title, whether voluntary or involuntary, without Lender's prior written
consent, which consent shall not be unreasonably withheld.
e. Borrower shall not change the ownership or control of any
Subsidiary without Lender's prior written consent.
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<PAGE>
f. Borrower shall provide to Lender, upon request, such
documents, certificates, records, orders and other items as Lender may
reasonably request regarding Borrower's assets.
8. Events of Default, An Event of Default shall occur if any of the
following events shall occur:
a. Failure to pay any principal or interest hereunder or under
any other obligation between Borrower, as debtor, and Lender, as creditor,
whether created before, concurrent with or after the date hereof, within
five (5) calendar days after such payment becomes due.
b. Any of the documents, statements, reports or certificates
executed and delivered now or in the future in connection herewith shall
for any reason cease to be in full force and effect, except through the act
of the Lender.
c. Any representation or warranty made by Borrower in this Note
or otherwise delivered to Lender now or in the future in connection with
Note is untrue in any material respect at the time when made.
d. An assignment by Borrower for the benefit of its creditors.
e. Filing by Borrower of a voluntary petition in bankruptcy or a
voluntary petition seeking reorganization, adjustment, readjustment of
debts or any other relief tinder the Bankruptcy Code as amended or any
insolvency act or law, state or federal, now or hereafter existing.
f. Filing of an involuntary petition against Borrower in
bankruptcy or seeking reorganization, arrangement, readjustment of debts or
any other relief under the
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<PAGE>
Bankruptcy Code as amended or under any other insolvency act or law, state
or federal, now or hereafter existing, and the continuance thereof for 60
days undismissed, unbonded, or undischarged.
g. All or any substantial part of the property of Borrower shall
be condemned, seized or otherwise appropriated or custody or control of
such property shall be assumed by any governmental agency or any court of
competent jurisdiction and shall be retained for a period of 30 days.
h. There is a material default in any term, condition, or
covenant hereof, or contained in any document given now or in the future in
connection herewith.
i. There is a material default in any term, condition or covenant
contained in any document representing an obligation in favor of any third
party which is secured by the Collateral or any other default as a result
of which said third party declares a default and exercised any remedies
affecting the Collateral.
9. Remedies. Upon default by Borrower as defined above, Lender may
declare the entire unpaid balance, together with accrued interest, to be
immediately due and payable without presentment, demand, protest or other
notice of any kind. To the extent permitted by law, Borrower waives any
rights to presentment, demand, protest, or notice of any kind in connection
with this Note. No failure or delay on the part of Lender in exercising any
right, power, or privilege hereunder shall preclude any other or further
exercise thereof or the exercise of any other right, power, or privilege
provided at law, in equity, or by contract. The rights and remedies
provided herein, including the conversion rights set forth in Section 12
hereof, are cumulative and not exclusive of any other rights or remedies.
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<PAGE>
Borrower agrees to pay all costs of collection incurred by reason of the
default, including court costs, and reasonable attorney's fees (whether or
not the attorney is a salaried employee of Lender), including such expenses
incurred before legal action or bankruptcy proceedings, during the pendency
thereof, and continuing to all such expenses in connection with appeals to
high courts arising out of matters associated herewith. If the attorney is
a salaried employee of Lender, a reasonable attorney's fee will be an
amount charged by attorneys in private practice for similar services.
10. Late Charge for Overdue Payments. In the absence of an extension
under paragraph 3(b) above, if Lender has not received the full amount of
any payment of principal or interest by the end of five (5) calendar days
after the date it is due, Borrower will pay a late charge to Lender of ten
percent (10%) of Borrower's overdue payment of principal and/or interest.
The late penalty shall apply to the interest-only payments and the payments
due on the maturity date, if not paid when due. Borrower will pay this late
charge promptly but only once on each late payment. In addition, if this
Note is in default, the interest rate will increase to thirty-six percent
(36%) per annum during the time the loan is in default. Such amount will be
compounded monthly.
11. Maximum Loan Charges. If a law that applies to this loan and sets
maximum loan charges is finally interpreted so that the interest or other
loan charges collected or to be collected in connection with this loan
exceeds any permitted legal limits, then: (i) any such loan charge shall be
reduced by the amount necessary to reduce the charge to the permitted
limit; and (ii) any sums already collected from us which exceeded the
permitted limits will be refunded to Borrower. Lender may choose to make
this refund by reducing the principal
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<PAGE>
Borrower owes under this Note or by making a direct payment to Borrower. If
a refund reduces principal, the reduction will be treated as a partial
payment.
12. Conversion. At any time after the occurrence of an Event of
Default, the holder(s) hereof may convert the Note (or any portion thereof
which is $ 1,000 or a multiple thereof) into shares of Borrower's common
stock, $.001 par value, at the conversion price of $.75 per share. The
amount of the conversion price will be subject to adjustment in the event
of any split or reverse split of such common stock, in which event the
conversion price will be adjusted as of the close of business on the date
such split or reverse split becomes effective by a proportionate reduction
or increase (as the case may be) therein. In the event Borrower
consolidates with or merges into any other corporation or transfers
substantially all of its assets to any other corporation, the surviving or
acquiring corporation will execute and deliver to the holder(s) at that
time a supplement to the Note providing that such holders have the right to
thereafter convert the Note into the kind and amount of stock or other
securities receivable upon such consolidation, merger or transfer by the
holder(s) of the number of shares of Borrower's common stock into which the
Note might have been converted immediately prior to such consolidation,
merger or transfer, and such supplement will provide for adjustments as
nearly equivalent as practicable to the adjustments provided for by the
foregoing provisions of this paragraph. The foregoing provisions of this
paragraph will apply to successive occurrences requiring adjustment as
aforesaid.
Borrower will at all times reserve and keep available, free from
pre-emptive rights, out of its authorized but unissued common stock, $.001
par value, for the purpose of effecting the conversion of the Note as
herein provided, the full number of shares of such
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<PAGE>
common stock then issuable upon the conversion of the Note. All shares of
such common stock which may be issued upon the conversion of the Note will,
upon the issuance thereof, be fully paid and nonassessable.
Lender acknowledges that the common stock to be issued upon exercise
of the conversion right described above has not been registered upon the
Securities Act of 1933, as amended (the "Act"), or any state securities
laws, and will be issued in reliance upon certain exemptions from the
registration requirements of those laws, and thus cannot be resold unless
subsequently registered under the Act or unless Borrower has first received
an opinion of competent securities counsel that an exemption from
registration is available for such resale. With regard to the restrictions
on resales of such common stock, Borrower is aware (i) of the limitations
and applicability of Securities and Exchange Commission Rule 144; and (ii)
that a restrictive legend will be placed on certificates representing the
common stock which legend will read substantially as follows:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ISSUED
PURSUANT TO A CLAIM OF EXEMPTION FROM THE REGISTRATION OR
QUALIFICATION PROVISIONS OF THE SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT"), AND STATE SECURITIES LAWS AND THEREFORE HAVE
NOT BEEN REGISTERED UNDER THE ACT OR UNDER THE SECURITIES LAWS OF
ANY STATE. THESE SECURITIES MAY NOT BE OFFERED, SOLD,
TRANSFERRED, PLEDGED OR HYPOTHECATED WITHOUT COMPLIANCE WITH THE
REGISTRATION OR QUALIFICATION PROVISIONS OF THE ACT OR APPLICABLE
STATE LAWS, OR PURSUANT TO AN AVAILABLE EXEMPTION FROM SUCH
REGISTRATION REQUIREMENTS. FURTHERMORE, THE COMPANY WILL INSTRUCT
ITS STOCK TRANSFER AGENT NOT TO RECOGNIZE ANY SALE OF THESE
SECURITIES UNLESS THE COMPANY HAS FIRST RECEIVED AN OPINION OF
COUNSEL, SATISFACTORY TO THE COMPANY AND ITS SECURITIES COUNSEL,
THAT AN EXEMPTION FROM SUCH REGISTRATION REQUIREMENTS IS
AVAILABLE.
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<PAGE>
13. Waivers. Borrower and any other person who have obligations under
this Note waive the rights of presentment, notice of dishonor, notice of
protest and notices of every other kind and nature. Borrower also waives
any defense based upon an election of remedies.
14. General Provisions, This Note shall be binding upon Borrower, its
successors and assigns. Time is of the essence hereof.
15. Governing Law; Jurisdiction; Venue. This Note and all acts and
transactions hereunder and all rights and obligations of Lender and
Borrower shall be governed by, and construed in accordance with, the laws
of the State of Utah. Any undefined term used in this Note that is defined
in the Utah Uniform Commercial Code shall have the meaning assigned to that
term in the Utah Uniform Commercial Code. As a material part of the
consideration to Lender to enter into this Note, Borrower (i) agrees that
all actions and proceedings relating directly or indirectly hereto shall at
Lender's option, be litigated in courts located within Utah, and that the
exclusive venue therefor shall be, at Lender's option, Salt Lake or the
county in which Borrower's chief executive office is located; (ii) consents
to the jurisdiction and venue of any such court and consents to service of
process in any such action or proceeding by personal delivery or any other
method permitted by law; and (iii) waives any and all rights Borrower may
have to object to the jurisdiction of any such court, or to transfer or
change the venue of any such action or proceeding.
16. Entire Agreement in Writing. This Note, and any other documents
executed in connection herewith, are the final expression of the agreement
and understanding of
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Borrower and Lender with respect to the general subject matter hereof and
supersede any previous understandings, negotiations or discussions, whether
written or oral. This written agreement, and any other documents executed
in connection herewith, may not be contradicted by evidence of any alleged
oral agreement.
DATED as of the date first above written.
JUNGLE STREET, INC., a Utah corporation
By: /s/
------------------------------------
Charles D. DeJong, CEO
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SECURITY AGREEMENT
THIS SECURITY AGREEMENT is made and entered into September ___, 1996,
by and between UTCO Associates, Ltd., a Utah limited partnership,
(hereafter "Secured Party") and Jungle Street, Inc., a Utah corporation
("JSI"), and its wholly-owned subsidiary, Televar Northwest, Inc., a
Washington corporation, (the "Subsidiary") (JSI and the Subsidiary are
sometimes hereafter collectively referred to as "Debtor").
1. Debtor hereby grants to Secured Party a security interest in all of
Debtor's assets, whether now owned or hereafter acquired, and wherever
located, specifically including but not limited to Debtor's interest in the
types of property described below (the "Collateral") to secure payment to
Secured Party of all promissory notes and other obligations of Debtor
executed and delivered concurrently herewith (the "Obligations"), including
those referred to in that certain Promissory Note (the "Note") dated
September 25, 1996 in the original principal amount of $500,000.00 between
and among JSI and Secured Party:
a. All furniture, leasehold improvements, motor vehicles,
appliances, fixtures, furnishings, tools, machinery and
equipment and other goods of Debtor, now owned or hereafter
acquired, and all additions and accessions thereto and
replacements therefor;
b. All inventory, supplies and materials of Debtor now owned or
hereafter acquired, together with all additions and
accessions thereto and replacements therefor;
c. All accounts, accounts receivable, negotiable documents,
notes, drafts, acceptances, claims, lease rights (to the
extent they are assignable without consent of the lessor),
securities, instruments, choses in action, whether in
contract or in tort, proceeds of lawsuits, and general
intangibles of Debtor (including, but not limited to
goodwill, permits, licenses, trademarks, trade names and
trade secrets), and all other rights of Debtor to the
payment of money, now existing or hereafter arising;
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d. All deposit accounts of Debtor maintained with any bank or
other financial institution;
e. All records, papers and books of account or other documents
or papers relating to, affecting or describing any of the
foregoing Collateral, in whatever form, including without
limitation all computerized records, diskettes, programs,
etc. relating thereto;
f. All of Debtor's contract rights and proceeds of insurance
policies;
g. All of Debtor's patents and patents pending;
h. All of JSI's stock in and to the Subsidiary; and
i. All proceeds of the foregoing Collateral. For purposes of
this Security Agreement, the term "proceeds" includes
whatever is receivable or received when Collateral or
proceeds is sold, collected, exchanged or otherwise disposed
of, whether such disposition is voluntary or involuntary,
and includes, without limitation, all rights to payment,
including return premiums, with respect to any insurance
relating thereto.
2. Debtor has full power and authority to execute this Security
Agreement, to perform Debtor's obligations hereunder, and to subject the
Collateral to the security interest created hereby.
3. Debtor has acquired title to and will at all times keep the
Collateral free of all liens and encumbrances, except the security interest
created hereby, except as provided in subpart (d) below. Debtor further
promises:
a. To make all payments due under the Obligations to Secured
Party and perform all the obligations to Secured Party in a
timely manner;
b. So long as any amounts are outstanding under the Note, to
furnish Secured Party with such information concerning
Debtor and the Collateral as Secured Party may from time to
time reasonably request, including, but not limited to,
current financial statements and filings with the Securities
and Exchange Commission; provided, however, that Secured
Party agrees to execute a Confidentiality Agreement, in a
form reasonably acceptable to the Debtor with regard to any
such non-public documents;
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c. To maintain the Collateral in good condition and not use the
Collateral for any unlawful purpose or in any way that would
void an effective insurance policy; and
d. The Collateral now is and shall remain free and clear of any
and all liens, charges, security interests, encumbrances and
adverse claims, except for the following ("Permitted
Liens"): (i) liens for taxes not yet payable; (ii)
additional security interests and liens consented to in
writing by Secured Party in its sole discretion; and (iii)
security interests being terminated substantially
concurrently with this Security Agreement. Secured Party
shall have the right to require, as a condition to its
consent under subparagraph (ii) above, that the holder of
the additional security interest or lien sign an
intercreditor agreement on terms satisfactory to Secured
Party in its sole discretion, acknowledge that the holder's
security interest is subordinate to the security interest in
favor of Secured Party, and that Debtor agrees that any
uncured default in any obligation secured by the subordinate
security interest shall also constitute an Event of Default
under this Security Agreement. Secured Party now has, and
shall continue to have, a first priority, perfected and
enforceable security interest in all of the Collateral. The
Collateral shall not be subject to any other liens or
security interests of any type except for the Permitted
Liens. Debtor shall at all times defend Secured Party and
the Collateral against all claims of others.
4. Unless Debtor is in default hereunder, Debtor may sell the
Collateral in the normal course of its business.
5. Debtor will pay promptly when due all taxes and assessments upon
the Collateral or for its use or operation or upon this Security Agreement
or upon the Note or any other documents evidencing the Obligations, if any.
Further, Debtor will promptly pay all obligations regarding or relating to
the Collateral necessary to maintain and preserve Debtor's rights and
interests therein.
6. Debtor will not use or permit use of the Collateral in violation of
any statute, ordinance, or state or federal regulation.
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7. With respect to the Items of Collateral listed on Exhibit "A" to
this Agreement (the "Patents"), Debtor represents and warrants as follows:
a. Debtor does not own any patents registered in, or the
subject of pending applications in, the United States Patent
and Trademark Office or any similar offices or agencies in
any other country or any political subdivision thereof,
other than those described in Exhibit "A" hereto;
b. Debtor has the sole, full and uncumbered right, title and
interest in and to each of the Patents shown on Exhibit "A"
and the registrations thereof are valid and enforceable and
in full force and effect, and none of the Patents has been
abandoned or dedicated;
c. There is no claim by any third party that any Patents are
invalid and unenforceable or do or may violate the rights of
any third person;
d. Debtor has obtained from each employee who may be considered
the inventor of patentable inventions (invented within the
scope of such employee's employment) an assignment to Debtor
of all rights to such inventions, including, without
limitation, patents.
8. With respect to the Patents, Debtor covenants and agrees as
follows:
a. Except to the extent that Secured Patty shall give its prior
written consent, Debtor will not do any act, or omit to do
any act, except as may be reasonable, in its prudent
business judgment, whereby the Patents may become abandoned
or dedicated or the remedies available against potential
infringers weakened and shall notify Secured Party
immediately if Debtor knows or becomes aware of any reason
or has reason to know that any Patent may become abandoned
or dedicated;
b. In the event that any security interest as to which any of
the Patents is or may be subject as of the date hereof shall
lapse, terminate or be cancelled or rescinded, whether by
voluntary action of Debtor or any third person secured party
in whose favor such presently attached and perfected
security interests were created, Debtor will perform all
acts and execute all documents, including, without
limitation, notices of security interest or assignments for
each relevant type of intellectual property in forms
suitable for filing with the United States Patent and
Trademark Office that may be necessary or desirable to
record, maintain, preserve, protect and perfect Secured
Party's interest in the Patents and the priority of such
lien;
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c. Other than with respect to any presently attached and
perfected security interest as of the date hereof, Debtor
will not assign, sell, mortgage, lease, transfer, pledge,
hypothecate, grant a security interest in or lien upon,
encumber, grant an exclusive or non-exclusive license, or
otherwise dispose of any of the Patents, and nothing in this
Security Agreement shall be deemed a consent by Secured
Party to any such action except as expressly permitted
herein;
d. Except as required by Debtor's senior lender, Debtor will
not, either itself or through any agent, employee, licensee
or designee, (i) file an application for the registration of
any Patent with the Patent and Trademark Office or any
similar office or agency in any other country or any
political subdivision thereof, or (ii) file any assignment
of any Patent which Debtor may acquire from a third party
with the Patent and Trademark Office or any similar office
or agency in any other country or any political subdivision
thereof, unless Debtor shall, on or prior to the date of
such filing, notify Secured Party thereof, and, upon the
request of Secured Party and subject to Secured Party's
right to so request pursuant to Section 8(b), execute and
deliver any and all assignments, agreements, instruments,
documents and papers as Secured Party may request to
evidence Secured Party's interest, if any under this
Security Agreement, in such Patent (and the goodwill and
general intangibles of Debtor relating thereto or
represented thereby);
e. Debtor will take all reasonable steps, in its prudent
business judgment, in any proceeding before the Patent and
Trademark Office or any similar office or agency in any
other country or any political subdivision thereof, to
diligently prosecute or maintain, as applicable, each
application and registration of the Patents, including,
without limitation, filing of renewals, affidavits of use,
affidavits of incontestability and opposition, interference
and cancellation proceedings (except to the extent that
dedication, abandonment or invalidation is permitted
hereunder);
f. So long as any part or portion of the Obligations remains
unpaid, Debtor shall make application to the Patent and
Trademark Office (and assign to the extent provided herein
such application to Secured Party as security) to register
any unpatented but patentable inventions developed by Debtor
or its employees (within the scope of their employment),
unless Debtor, in the exercise of its prudent business
judgment, deems any such Patent not to have any significant
commercial value or determines that its rights thereunder
are better preserved as a trade secret;
g. Debtor shall use proper statutory notice in connection with
its use of the Patents; and
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<PAGE>
h. Debtor shall at all times keep at least one complete set of
its records concerning the Patents at its chief executive
office and shall make such records available for inspection
by Secured Party at such times as Secured Party may
reasonably request.
9. In the event that any prior security interest as to which any of
JSI's stock in the Subsidiary is or may be subject as of the date hereof
shall lapse, terminate or be cancelled or rescinded, whether by voluntary
action of Debtor or any court or third person secured party in whose favor
such presently attached and perfected security interests were created,
Debtor will perform all acts, including, without limitation, delivering
physical possession of the certificates representing such stock of the
Subsidiary and executing such notices or documents as shall be necessary or
desirable for Secured Party to maintain, preserve, protect and perfect
Secured Party's security interest in such stock and the priority of such
lien.
10. With respect to that part of the Collateral which consists of
accounts receivable, whether now existing or hereafter arising and the
proceeds thereof (the "Receivables"), the parties agree as follows:
a. Until Debtor is in default, beyond any applicable cure
period, under the Note or this Security Agreement, and
contrary notice is given by Secured Party, the Debtor is
specifically authorized to (i) enforce and collect the
Receivables, at Debtor's expense, (ii) utilize the proceeds
thereof for Debtor's general business purposes in the
ordinary course of business, and (iii) as shall be
commercially reasonable, to accept the return of goods and
to reclaim, withhold or repossess goods as an unpaid seller.
In collecting, holding or remitting the proceeds of such
collections, the Debtor shall have no right to utilize the
collections in any way other than pursuant to the terms and
conditions of the Security Agreement.
b. Debtor agrees to collect the Receivables, at Debtor's
expense, with due diligence until such time as Debtor's
authority to collect is terminated pursuant to this Security
Agreement and to account to the Secured Party, at such
intervals as Secured Party may direct, for the proceeds of
these collections and, if Debtor is in default, beyond any
applicable cure period under the Note or the Security
Agreement and if Secured Party shall so
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request, by depositing such proceeds in kind in a control
collateral account at a bank designated by Secured Party
(over which account the Debtor shall have no control).
c. Upon Debtor's default beyond any applicable cure period,
under the Note or this Security Agreement, and notification
by the Secured Party to the Debtor to cease collecting on
the Receivables, Secured Party will proceed to collect said
Receivables in a commercially reasonable manner and may
deduct from the proceeds its reasonable expenses of
collection; Secured Party is authorized to receive in full
satisfaction of account debtor's obligation a sum less than
the face amount thereof.
d. Any payment made by Debtor to Secured Party or any sum
received by the Secured Party through the realization and
collection of the Receivables shall be applied to the
Obligations, whether matured or not matured, as set forth in
Section 3(c) of the Note.
e. Debtor agrees to hold Secured Party harmless from all claims
for loss or damage caused by any failure to collect
Receivables or enforce any contract or by any act or
omission on the part of the Secured Party, its agents and
employees, except intentional misconduct.
f. Debtor agrees to maintain full and accurate books of account
covering the Receivables and to deliver to Secured Party
such of the books as relate to the Receivables so requested
by Secured Party after or in connection with the termination
of Debtor's authority to collect as herein provided.
g. Debtor agrees to deliver to Secured Party on demand, or upon
the termination of the Debtor's authority to collect by
Secured Party, all of the papers in Debtor's possession
relating to the Receivables which will facilitate collection
or enforcement thereof by Secured Party, including but not
limited to, correspondence, invoices, shipping documents,
and records, sales slips, orders and order acknowledgements,
contracts and all other instruments relating thereto.
h. Secured Party or its authorized agent shall at all
reasonable times during regular business hours have the
right to inspect Debtor's ledgers, books of account and
other written records evidencing the Receivables, and, upon
termination of Debtor's authority to collect the
Receivables, such agent or agents shall at all reasonable
times during regular business hours have the right to be
present at Debtor's place of business to receive all
communications and remittances relating to said collateral.
11. The following shall constitute events of default ("Events of
Default") under this
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Security Agreement:
a. The Debtor's failure to make any payment to Secured Party
when due, or to perform any other obligations in a timely
manner;
b. The Debtor's material breach of this Security Agreement, or
any present or future rider or supplement to this Security
Agreement, or any other agreement between Debtor and Secured
Party evidencing the Obligations or securing them;
c. That any warranty, representation, or statement, made by or
on behalf of Debtor in or with respect to this Security
Agreement, is materially false at the time when made;
d. Any of the documents executed and delivered in connection
herewith shall for any reason cease to be in full force and
effect, except through the act of the Secured Party;
e. An assignment by Debtor for the benefit of its creditors;
f. Filing by Debtor of a voluntary petition in bankruptcy or a
voluntary petition seeking reorganization, adjustment,
readjustment of debts or any other relief under the
Bankruptcy Code as amended or any insolvency act or law,
state or federal, now or hereafter existing;
g. Filing of an involuntary petition against Debtor in
bankruptcy or seeking reorganization, arrangement,
readjustment of debts or any other relief under the
Bankruptcy Code as amended or under any other insolvency act
or law, state or federal, now or hereafter existing, and the
continuance thereof for 30 days undismissed, unbonded, or
undischarged;
h. All or any substantial part of the property of Debtor shall
be condemned, seized or otherwise appropriated or custody or
control of such property shall be assumed by any
governmental agency or any court of competent jurisdiction
and shall be retained for a period of 30 days; and
i. There is a material default in any term, condition or
covenant contained in any permitted Exception or any
document representing an obligation, in favor of any third
party which is secured by the Collateral and subsequently
approved by Lender or any other default as a result of which
said third party declares a default and exercised any
remedies affecting the Collateral.
12. Upon the occurrence of an Event of Default Secured Party, at its
option, may:
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a. Declare the Obligations immediately due and payable without
demand, presentment, protest or notice to Debtor, all of
which Debtor expressly waives;
b. Exercise all rights and remedies available to a secured
creditor after default, including but not limited to the
rights and remedies of secured creditors under the Uniform
Commercial Code;
c. Perform any of Debtor's obligations under this Security
Agreement for Debtor's account. Any money expended or
obligations incurred in doing so, including reasonably
attorneys' fees and interest at the highest rate permitted
by law, will be charged to Debtor and added to the
Obligations secured by this Agreement; and/or
d. Secured Party may take possession of the Collateral and may
demand payment of, institute, and maintain suits for or
compromise any and all sums due or to become due as proceeds
of the Collateral in its own name or in the name of Debtor,
and otherwise avail itself of any action it deems necessary.
13. Debtor agrees to execute all financing statements and other
necessary documents to perfect Secured Party's interest in the Collateral
as set forth herein. Borrower shall not be required to execute and deliver
any other documents that are in the possession of or pledged to the
Debtor's senior lenders as of the date of this Security Agreement.
14. No delay or failure by Secured Party in the exercise of any right
or remedy shall constitute a waiver thereof, and no single or partial
exercise by Secured Party of any right or remedy shall preclude other or
further exercise thereof or the exercise of any other right or remedy.
Secured Party shall not be deemed to have waived any of Secured Party's
rights hereunder or under any other writing signed by Debtor unless such
waiver be in writing and signed by Secured Party. No consent or waiver,
express or implied, by any party to, or of any breach or default by any
other party in, the performance of its obligations hereunder shall be
deemed or construed to be a consent to or waiver of any other breach or
default in the
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<PAGE>
performance by such other party of the same or any other obligations
hereunder. Failure on the part of a party to complain of any act of the
other party or to declare a party in default, irrespective of how long such
failure continues, shall not constitute a waiver of such party of its
rights hereunder. All Secured Party's rights and remedies, whether
evidenced hereby or by any other writings, statutes or case law, shall be
cumulative and may be exercised singularly or concurrently. Any demand upon
or notice to Debtor that Secured Party may elect to give shall be effective
when deposited in the mails or delivered to Debtor. If at any time or times
by assignment or otherwise Secured Party transfers any obligations and
collateral therefor, such transfer shall carry with it Secured Party's
powers and rights under this Agreement with respect to the obligations and
collateral transferred and the transferee shall become vested with said
powers and rights, whether or not they are specifically referred to in the
transfer.
15. Except for any notice required under applicable law to be given in
another manner, any notice or other communication required or permitted to
be given hereunder and any approval by any party shall be in writing and
shall be personally delivered or delivered by overnight courier in each
case with receipt acknowledged, or deposited in an official depository of
the United States Postal Service, first-class postage prepaid, by
registered or certified mail, return receipt requested, to the other party
or parties at the addresses listed below. All notices and other
communications shall be deemed to have been duly given on (a) the date of
receipt thereof (including all required copies thereof as set forth below)
if delivered personally or by overnight courier or (b) five (5) business
days after the date of mailing thereof (including all required copies
thereof as set forth below) if transmitted by mail. Each party may change
its
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<PAGE>
address for receipt of notices by a notice given to the other parties in
accordance with this provision. Notices shall be addressed as follows:
To the Debtor:
Jungle Street, Inc.
Televar Northwest, Inc.
215 Yakima Street
Wenatchee, WA 98801
Attn: Mark D. Hamilton
To the Secured Party:
UTCO ASSOCIATES, LTD.
P.O. Box 11838
Salt Lake City, Utah 84147
Attn: Robert D. Kent
With a copy to:
Jeffrey M. Jones, Esq.
Durham, Evans, Jones & Pinegar, P.C.
50 South Main, Suite 850
Salt Lake City, Utah 84144
16. Whenever possible, each provision of this Agreement shall be
interpreted in such manner as to be effective and valid under applicable
law but, if any provision of this Agreement shall be prohibited or invalid
under applicable law, such provision shall be ineffective to the extent of
such prohibition or invalidity without invalidating the remainder of such
provision or the remaining provisions of this Agreement.
17. This Agreement, together with the agreements and warranties herein
contained, shall inure to the benefit of Secured Party and it successors
and assigns and shall be binding upon Debtor and his respective heirs,
successors and assigns.
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<PAGE>
18. This Agreement inures to the benefit of the Secured Party, its
successors and assigns, and shall bind (as may be applicable) the
respective heirs, personal representatives, successors and assigns of
Debtor, and if more than one party shall sign this Agreement, the term
"Debtor" shall mean all such parties, and each of them, and all such
parties shall be jointly and severally obligated hereunder. Words used
herein shall take the singular or plural number, and such gender, as the
number and gender of parties Debtor herein shall require.
19. Debtor agrees to pay upon demand all of Secured Party's costs and
expenses, including reasonable attorneys' fees and legal expenses, incurred
in connection with the enforcement of this Security Agreement. Secured
Party may engage a third party as its agent to help enforce this Security
Agreement, and Debtor shall pay the costs and expenses of such enforcement.
Costs and expenses include Secured Party's reasonable attorneys' fees and
legal expenses whether or not performed by a salaried employee of Secured
Party and whether or not there is a lawsuit, including reasonable
attorneys' fees and legal expenses for bankruptcy proceedings (and
including efforts to modify or vacate any automatic stay or injunction),
all appearances in bankruptcy or insolvency proceedings, fees and expenses
incurred in connection with the appointment of a receiver, appeals, and any
anticipated post-judgment collection services. Debtor also shall pay all
court costs and such additional fees as may be directed by the court.
20. This Security Agreement may be executed in one or more
counterparts, any one of which, if originally executed, shall be binding
upon each of the parties signing thereon, and all of which taken together
shall constitute one and the same instrument. One or more photostatic
copies of this Security Agreement may be originally executed by the parties
hereto,
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<PAGE>
and such photostatic copies shall be deemed originals and shall be valid,
binding and enforceable in accordance with their terms.
21. The parties hereto represent and warrant that they have full
power, authority and legal right to execute and deliver, and to perform and
observe the provisions of, this Security Agreement and to carry out the
transactions contemplated hereby. The execution, delivery and performance
by the parties of this Security Agreement have been duly authorized by all
necessary legal action and the parties have obtained any necessary consent,
approval of, notice to, or any action by, and person, firm, corporation or
governmental entity or agency necessary or appropriate to consummate the
transaction contemplated hereby.
22. Each party agrees and covenants that it will at any time and from
time to time, upon the request of the other execute, acknowledge, deliver
or perform all such further acts, deeds, assignments, transfers,
conveyances and assurances as may be required to carry out the terms and
provisions of this Security Agreement.
23. The rights and remedies of the parties hereunder shall not be
mutually exclusive, and the exercise by any party of any right to which he
or it is entitled shall not preclude the exercise of any other right he or
it may have.
24. This Agreement and all acts and transactions hereunder and all
rights and obligations of Secured Party and Debtor shall be governed by,
and construed in accordance with, the laws of the State of Utah. Any
undefined term used in this Agreement that is defined in the Utah Uniform
Commercial Code shall have the meaning assigned to that term in the Utah
Uniform Commercial Code. As a material part of the consideration to Secured
Party to enter into this Agreement, Debtor (i) agrees that all actions and
proceedings relating directly or
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<PAGE>
indirectly hereto shall at Secured Party's option, be litigated in courts
located within Utah, and that the exclusive venue therefor shall be, at
Secured Party's option, Salt Lake County or the county in which Debtor's
chief executive office is located; (ii) consents to the jurisdiction and
venue of any such court and consents to service of process in any such
action or proceeding by personal delivery or any other method permitted by
law; and (iii) waives any and all rights Debtor may have to object to the
jurisdiction of any such court, or to transfer or change the venue of any
such action or proceeding.
25. Entire Agreement in Writing. This Security Agreement, and any
other documents executed in connection herewith, are the final expression
of the agreement and understanding of Borrower and Secured Party with
respect to the general subject matter hereof and supersede any previous
understandings, negotiations or discussions, whether written or oral. This
written agreement, and any other documents executed in connection herewith,
may not be contradicted by evidence of any alleged oral agreement.
IN WITNESS WHEREOF, this Agreement has been executed on the day and
date first above written.
"SECURED PARTY"
UTCO ASSOCIATES, LTD., a Utah limited
partnership
By:___________________________________
Its:__________________________________
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<PAGE>
"DEBTOR"
JUNGLE STREET, INC., a Utah corporation
By: /s/
Its:__________________________________
TELEVAR NORTHWEST, INC., a Washington
corporation
By: /s/
Its:__________________________________
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<PAGE>
96-271-0050
EXHIBIT "A"
TO
SECURITY AGREEMENT
BETWEEN
UTCO Associates, Ltd., a Utah limited partnership
and
Jungle Street, Inc., a Utah corporation
("Debtor")
All of Debtor's assets, whether now owned or hereafter acquired, and
wherever located, specifically including but not limited to Debtor's
interest in the types of property described below:
1. All furniture, leasehold improvements, motor vehicles,
appliances, fixtures, furnishings, tools, machinery and
equipment and other goods of Debtor, now owned or hereafter
acquired, and all additions and accessions thereto and
replacements therefor;
2. All inventory, supplies and materials of Debtor now owned or
hereafter acquired, together with all additions and
accessions thereto and replacements therefor;
3. All accounts, accounts receivable, negotiable documents,
notes, drafts, acceptances, claims, lease rights (to the
extent they are assignable without consent of the lessor),
securities, instruments, choses in action, whether in
contract or in tort, proceeds of lawsuits, and general
intangibles of Debtor (including, but not limited to
goodwill, permits, licenses, trademarks, trade names and
trade secrets), and all other rights of Debtor to the
payment of money, now existing or hereafter arising;
4. All deposit accounts of Debtor maintained with any bank or
other financial institution;
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<PAGE>
5. All records, papers and books of account or other documents
or papers relating to, affecting or describing any of the
foregoing Collateral, in whatever form, including without
limitation all computerized records, diskettes, programs,
etc. relating thereto;
6. All of Debtor's contract rights and proceeds of insurance
policies;
7. All of Debtor's patents and patents pending;
8. All of Debtor's stock in and to its subsidiary;
9. All proceeds of the foregoing collateral including whatever
is receivable or received when collateral or proceeds is
sold, collected, exchanged or otherwise disposed of, whether
such disposition is voluntary or involuntary, and including,
without limitation, all rights to payment, including return
premiums, with respect to any insurance relating thereto;
and
10. All substitutions, additions and accissions to any of the
foregoing collateral.
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GUARANTEE OF LOAN
(Televar Northwest, Inc., Charles DeJong and Mark D. Hamilton)
The undersigned (collectively referred to as "Guarantor") acknowledges
that UTCO Associates, Ltd., a Utah limited partnership (hereinafter
referred to as "Lender"), in reliance on this Guarantee, has or will accept
a certain Promissory Note in the amount of Five Hundred Thousand and no/100
Dollars ($500,000.00) (together with any modifications, extensions,
renewals or replacements thereof, the "Note") from Jungle Street, Inc., a
Utah corporation ("Borrower") and will make advances of funds pursuant to
the Note, to pay certain existing indebtedness of Borrower to Key Bank of
Washington and acquire additional computer equipment (the payment of the
obligation to KeyBank of Washington and the acquisition of said equipment
are together referred to herein as the "Lending Project.") All references
to "Loan Documents" in this Guarantee, shall mean the Note, all Guarantees,
the Security Agreement, the Registration Rights Agreement, and any other
documents or instruments relating to any such documents signed by Borrower
or by any guarantor or pledgor, and any modifications, extensions, renewals
or replacements of any of them.
Guarantor hereby acknowledges receipt of good, adequate and valuable
consideration, and Guarantor hereby unconditionally, absolutely and
irrevocably guarantees:
(1) the full and prompt payment of (a) the Note, whether at
maturity, acceleration or otherwise, (b) any other indebtedness
or liability of Borrower under or arising out of the Loan
Documents or any other agreements referred to or provided for
herein and therein, and (c) the payment of all other sums
expended by Lender, including as to (a), (b), and (c) any
additional
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advances, extensions, renewals or reductions, or any compromise,
indulgence, variation or modification thereof ("Indebtedness"),
and
(2) the performance of any and all obligations of Borrower
required by or under the Loan Documents specifically including
the obligation to pursue all construction constituting any
portion of the Lending Project ("Obligations").
Guarantor's liability hereunder shall be in the full amount owed to Lender,
including any interest, default interest, costs and fees (including,
without limitation, reasonable attorneys' fees) that arise or accrue under
the Loan Documents or that would have arisen or accrued under the Loan
Documents but for the commencement of a case under the Bankruptcy Code or
any other law governing insolvency, bankruptcy, reorganization, liquidation
or like proceeding, plus interest thereon as provided in the Note, plus the
attorneys' fees, costs and other expenses incurred by Lender in the
enforcement of this Guarantee, as further provided below (all such amounts,
including the Indebtedness, and together with the Obligations, being
referred to herein as the "Guaranteed Obligations").
By signing this Guarantee, Guarantor also agrees that:
1. Changes Do Not Affect Liability.
a. Lender may, without notice to Guarantor or Guarantor's
authorization and in its absolute discretion and without prejudice to it or
in any way limiting Guarantor's liability under this Guarantee, (i) grant
extensions of time, renewals or other indulgences and modifications to
Borrower or any other party under any of the Loan Documents, (ii) change
the rate of interest under the Note, (iii) change, amend or modify the Loan
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<PAGE>
Documents, (iv) authorize the sale, exchange, substitution, release or
subordination of any security or collateral for the Note, whether real or
personal property, (v) take additional security for the Note, whether real
or personal property, (vi) discharge or release, or fail to proceed
against, any party or parties liable for the Guaranteed Obligations, (vii)
foreclose or otherwise realize on any security or collateral for the Note,
regardless of the effect upon Guarantor's subrogation, contribution or
reimbursement rights against Borrower or any other guarantor or pledgor,
(viii) accept or make compositions or other arrangements or file or refrain
from filing a claim in any bankruptcy proceeding of Borrower or any other
guarantor or pledgor, (ix) make other or additional loans to Borrower in
such amount and at such times as Lender may determine in its discretion,
and (x) otherwise deal with Borrower or any other guarantor or party
related to the Loan or any security or collateral as Lender may determine
in its discretion.
b. Without limiting the generality of the foregoing, Guarantor
hereby agrees that Guarantor's liability shall continue even if Lender
alters any obligations under the Loan Documents in any respect or Lender's
remedies or rights against Borrower are in any way impaired or suspended
without Guarantor's consent, or Lender releases or substitutes, or impairs
or suspends, any remedy against, or fails to proceed against, any principal
obligor, or any guarantor of, or anyone else liable on the Guaranteed
Obligations, and Guarantor hereby waives any defenses based on any such
actions.
2. Guarantee of Payment and Performance.
a. Guarantor's liability under this Guarantee is a guarantee of
payment and performance of all of the Loan Documents, and not merely
collection of, the Note, and is not conditioned or contingent upon the
genuineness, validity, regularity or enforceability of any of
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<PAGE>
the Loan Documents. Guarantor hereby agrees that Guarantor is liable even
if Borrower had no liability at the time of execution of the Note or
thereafter ceases to be liable, and Guarantor hereby waives any defenses
based on the absence of such liability.
b. Guarantor hereby agrees that Guarantor's liability may be
larger in amount and more burdensome than that of Borrower. Guarantor's
liability hereunder shall continue until all sums due under the Loan
Documents have been paid in full and shall not be limited or affected in
any way by any impairment or any diminution or loss of value of any
security or collateral for the Loan, whether caused by hazardous substances
or otherwise, Lender's failure to perfect a security interest in it or any
disability or other defense of Borrower or any other guarantor or pledgor.
c. Guarantor hereby agrees that Guarantor's obligations under
this Guarantee shall not be released, diminished, impaired, reduced or
otherwise affected by the invalidity or unenforceability against Borrower
of all or any part of the obligations guaranteed hereby including, without
limitation, any invalidity or unenforceability resulting from the fact
that: (i) the act of Borrower in creating all or any part of the Guaranteed
Obligations is ultra vires, (ii) the officers or representatives of
Borrower executing and delivering the documents evidencing security or
pertaining to partnership authority were acting in excess of their
authority, (iii) the payment of the Indebtedness by Borrower would have
resulted in the violation of any usury law, (iv) the Borrower has valid
defenses, claims or offsets (whether at law, in equity or by agreement)
which render all or any part of the Guaranteed Obligations unenforceable
against Borrower, (v) the creation, performance, or repayment by Borrower
of the Guaranteed Obligations is illegal, legally impossible or
unenforceable, (vi) one or more of the documents
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<PAGE>
evidencing, securing or pertaining to the Guaranteed Obligations have been
forged, altered or is otherwise irregular or unauthentic, or (vii) the
obligations of Borrower are invalid or unenforceable for any other reason,
and Guarantor shall be liable for all of the Guaranteed Obligations as if
no such impediment to Borrower's liability existed.
3. Waivers of Certain Rights and Defenses.
a. Except as provided below, Guarantor hereby waives any and all
benefits and defenses which would otherwise require Lender to (i) proceed
against Borrower or any other guarantor or pledgor, (ii) proceed against or
exhaust any security or collateral Lender may hold, or (iii) pursue any
other right or remedy for Guarantor's benefit, and agree that Lender may
proceed against Guarantor for the obligations guaranteed herein without
taking any action against Borrower (including joining Borrower as a party
in any suit on this Guarantee) or any other guarantor or pledgor and
without proceeding against or exhausting any security or collateral Lender
holds.
b. Guarantor agrees that Lender may unqualifiedly exercise in its
sole discretion any or all rights and remedies available to it against
Borrower of any other guarantor or pledgor without impairing Lender's
rights and remedies in enforcing this Guarantee, under which Guarantor's
liabilities shall remain independent and unconditional. Guarantor's
liability shall not be affected, released or exonerated by reason of (i)
any action Lender may take or omit to take under the Loan Documents or by
release or surrender of any security held for the payment of the Loan
Documents, (ii) the failure to perfect a lien (or the unenforceability of
any lien) in any collateral intended as security for any part of the
Guaranteed Obligations, (iii) the release of, the surrender of, the
exchange of or the substitution of all any lien securing any of
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the Guaranteed Obligations to any other lien or liens covering such
collateral, and (iv) the deterioration, waste, loss or impairment
(including without limitation negligent, willful, unreasonable or
unjustifiable impairment) of any such collateral. Guarantor agrees that
Lender's exercise of certain of such rights or remedies may affect or
eliminate Guarantor's right of subrogation or recovery against Borrower and
that Guarantor may incur a partially or totally nonreimbursable liability
under this Guarantee.
c. Guarantor hereby waives diligence and all demands, protests,
presentments and notices of every kind or nature, including notices of
protest, dishonor, nonpayment, acceptance of this Guarantee and the
creation, renewal, extension, modification or accrual of any of the
Guaranteed Obligations. Guarantor further waives the right to plead any and
all statutes of limitations as a defense to Guarantor's liability hereunder
or the enforcement of this Guarantee. No failure or delay on Lender's part
in exercising any power, right or privilege hereunder shall impair any such
power, right or privilege or be construed as a waiver of or any
acquiescence therein.
d. Guarantor hereby waives (i) notice of the failure of Borrower
to pay or perform, or any default by Borrower under, any document
evidencing, securing, or pertaining to any of the Guaranteed Obligations;
and (ii) notice of any sale or foreclosure (or the posting of the
advertising for sale or foreclosure) of any collateral for any of the
Guaranteed Obligations, with the intent that Guarantor shall not be
considered a "Debtor" as defined in Section 70A-9-105 of the Utah Uniform
Commercial Code.
4. Guarantee Made with Full Knowledge. Guarantor has had the
opportunity to review the matters discussed and contemplated by the Loan
Documents, including the remedies
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<PAGE>
Lender may pursue against Borrower in the event of a default under the Loan
Documents, the value of the security of collateral for the Loan, and
Borrower's financial condition and ability to perform under the Loan.
Guarantor further agrees to keep fully informed on all aspects of
Borrower's financial condition and the performance of Borrower's
obligations to Lender and that Lender has no duty to disclose to Guarantor
any information pertaining to Borrower or any security or collateral. If
provided in the Loan Documents, Guarantor agrees that Guarantor's
bankruptcy, insolvency and other actions set forth therein may be events of
default under the Loan Documents.
5. Subrogation, Reimbursement and Contribution Rights. After default
by Borrower under any of the Loan Documents, Guarantor hereby agrees that
Guarantor shall have no right of subrogation or reimbursement against
Borrower, no right of subrogation against any collateral or security
provided for in the Loan Documents and no right of contribution against any
other guarantor or pledgor unless and until all amounts due under the Loan
Documents have been paid in full and Lender has released, transferred or
disposed of all of its right, title and interest in any collateral or
security, and Guarantor hereby waives any such right Guarantor might
otherwise have. To the extent Guarantor's waiver of these rights of
subrogation, reimbursement or contribution as set forth herein are found by
a court of competent jurisdiction to be void or voidable for any reason,
Guarantor agrees that Guarantor's rights of subrogation and reimbursement
against Borrower and Guarantor's right of subrogation against any
collateral or security shall be junior and subordinate to Lender's rights
against Borrower and to Lender's right, title and interest in such
collateral or security and Guarantor's right of contribution against
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<PAGE>
any other guarantor or pledgor shall be junior and subordinate to Lender's
rights against such other guarantor or pledgor.
6. Guarantee Continues If Payments Are Avoided or Recovered from
Lender. If all or any portion of the Guaranteed Obligations are paid or
performed, Guarantor's obligations hereunder shall continue and remain in
full force and effect in the event that all or any part of such payment or
performance is avoided or recovered directly or indirectly from Lender as a
preference, fraudulent transfer or otherwise, irrespective of (a) any
notice of revocation given by Guarantor prior to such avoidance or
recovery, and (b) payment in full of the Loan.
7. Attorneys' Fees. The prevailing party in any dispute resulting in
arbitration, litigation or other proceedings between Guarantor and Lender
shall be entitled to its costs and expenses for such proceedings, including
reasonable attorneys' fees and costs. Lender may pay someone else to help
enforce the Guaranteed Obligations and Guarantor shall pay the costs and
expenses of such enforcement. Costs and expenses include Lender's
reasonable attorneys' fees and legal expenses whether or not performed by a
salaried employee of Lender and whether or not there is a lawsuit,
including reasonable attorneys' fees and legal expenses for bankruptcy
proceedings (and including efforts to modify or vacate any automatic stay
or injunction), all appearances in bankruptcy or insolvency proceedings,
fees and expenses incurred in connection with the appointment of a
receiver, appeals, and any anticipated post-judgment collection services.
Guarantor also shall pay all court costs and such additional fees as may be
directed by the court.
-8-
<PAGE>
8. Additional Provisions.
a. The failure of any representation or warranty contained herein
to be accurate and complete in any material respect, or Guarantor's failure
to perform any material covenant contained herein shall, at the option of
Lender, make the Guaranteed Obligations, or such portion thereof as may be
designated by Lender, immediately due and payable to Lender.
b. If more than one person has signed this Guarantee, it shall be
the joint and several obligation of all such persons and Guarantor shall
hold harmless, defend, protect and indemnify Lender from any actions,
causes of action, liabilities, damages, losses and fees (including
attorneys' fees and costs) and all other claims of every nature which may
arise as a result of any dispute between or among any person executing this
Guarantee and any other persons or entities.
c. Guarantor agrees to take all actions necessary to enable
Borrower to observe and perform, and to refrain from taking any action
which would prevent Borrower from observing and performing, the Guaranteed
Obligations.
d. After default by Borrower under any of the Loan Documents, any
indebtedness of Borrower held by Guarantor, whether secured or unsecured,
and if secured, the security for the same, shall be subordinated to the
indebtedness of Borrower to Lender, and, if Lender so requests, such
indebtedness shall be collected, enforced, and received by Guarantor as a
trustee for Lender and be paid over to Lender on account of the Guaranteed
Obligations but without reducing or affecting in any manner Guarantor's
liability under this Guarantee.
-9-
<PAGE>
e. Lender may assign this Guarantee with one or more of the Loan
Documents, without in any way affecting Guarantor's liability under it or
them. This Guarantee shall inure to the benefit of Lender and its
successors and assigns and shall bind Guarantor and Guarantor's respective
heirs, executors, administrators, successors and assigns.
f. In the event of the death of any Guarantor hereunder, the
obligation of the deceased under this Guarantee shall continue in full
force and effect against the Guarantor's estate as to all of such
obligations which shall have been created or incurred by Borrower prior to
the time when Lender shall have received written notice of such death;
provided that, all obligations, of whatever kind or character, created
pursuant to the provisions of any document or agreement between Lender and
Borrower entered into prior to receipt by Lender of notice of the death of
any Guarantor shall be deemed to be an obligation created, incurred, or
arising prior to receipt of any such notice by Lender, even though advances
constituting all or a portion of such obligations be made subsequent to
receipt of such a notice by Lender. In the event of the death of a
Guarantor, this Guarantee shall remain and continue in full force as the
guarantee of each surviving Guarantor of all Guaranteed Obligations,
whether such obligations were created or incurred before or after the time
when Lender shall have received written notice of such death.
g. All notices, requests and demands to be made hereunder shall
be in writing at the address set forth below by any of the following means:
(i) personal service (including service by overnight courier service): (ii)
electronic communication, whether by telex, telegram or telecopying (if
confirmed in writing sent by personal service or by registered or
certified, first
-10-
<PAGE>
class mail, return receipt requested); or (iii) shall be deemed received
five (5) days following deposit in the mail.
h. No terms or provisions of this Guarantee may be changed,
waived revoked or amended without Lender's prior written consent. Should
any provision of this Guarantee be determined by a court of competent
jurisdiction to be unenforceable, all of the other provisions shall remain
effective.
i. The term "Borrower", as used herein, shall include, without
limitation, Borrower, Borrower's successors and assigns, Borrower as a
debtor-in-possession, and any receiver, trustee, liquidator, conservator,
custodian, or similar party hereafter appointed for Borrower or all, or
substantially all of Borrower's assets pursuant to Title 11 of the United
States Code or any successor statute thereto (the "Bankruptcy Code") or any
estate created by the commencement of a case under the Bankruptcy Code or
any other insolvency, bankruptcy, reorganization or liquidation proceeding,
or by any trustee under the Bankruptcy Code, liquidator, sequestrator or
receiver of Borrower or Borrower's property or similar person duly
appointed pursuant to any law generally governing any insolvency,
bankruptcy, reorganization, liquidation, receivership or like proceeding.
Any change in the status or form of organization of the Borrower shall have
no effect on the obligations of each Guarantor hereunder and this Guarantee
shall continue and cover the Guaranteed Obligations of the Borrower under
its new status or organization as if no change had occurred. If Borrower is
a partnership or joint venture, the term "Borrower" shall include any
technically "new" partnership or joint venture formed as a result of the
dissolution of Borrower, the addition of new partner or venturers in
Borrower or the withdrawal of partners or venturers in Borrower.
-11-
<PAGE>
j. The term "Lender," as used herein, shall include, without
limitation, Lender's successors and assigns, and any subsequent holder of
any part or all of the Guaranteed Obligations, provided however that the
rights hereunder of any subsequent holder of any portion of the Guaranteed
Obligations shall always be subordinate and inferior to the rights of
Lender hereunder with respect to any portion of the Guaranteed Obligations
which are held by Lender, and Lender shall be entitled to receive payment
and performance of the Guaranteed Obligations before any subsequent holder
shall receive any benefit hereunder.
k. This Guarantee is in addition to the guarantees of any other
guarantors and any and all of Guarantor's other guarantees of Borrower's
indebtedness or liabilities to Lender. This Guarantee shall in no way limit
or lessen any other liability, howsoever arising, Guarantor may have for
the payment of any other indebtedness of Borrower to Lender.
9. Governing Law. THIS GUARANTEE SHALL BE ENFORCED AND INTERPRETED
ACCORDING TO THE LAWS OF THE STATE OF UTAH, IRRESPECTIVE OF ITS CONFLICTS
OF LAWS RULES.
EACH OF THE UNDERSIGNED GUARANTORS ACKNOWLEDGE THAT EACH OF US
WERE AFFORDED THE OPPORTUNITY TO READ THIS DOCUMENT CAREFULLY AND
TO REVIEW IT WITH AN ATTORNEY OF EACH OF OUR CHOICE BEFORE
SIGNING IT. EACH OF US ACKNOWLEDGE HAVING READ AND UNDERSTOOD THE
MEANING AND EFFECT OF THIS DOCUMENT BEFORE SIGNING IT.
-12-
<PAGE>
Dated _______________ TELEVAR NORTHWEST, INC., a Washington
corporation
By: /s/
------------------------------------
Its: President
Dated 9/24/96 /s/
---------------------------------------
Charles DeJong
Dated _______________ /s/
---------------------------------------
Mark D. Hamilton
PROVINCE OF BRITISH COLUMBIA )
)ss.
COUNTY OF __________ )
The foregoing instrument was acknowledged before me this 24th day of
September, 1996, for and on behalf of Televar Northwest, Inc., a Washington
corporation, by Mark Hamilton, its President.
/s/
----------------------------------
NOTARY PUBLIC
Michael C. Halpen
Barrister & Solicitor
Montpellier, McKeen, ______, Talbot & Giuffre
Suite 550-999 Canada Place
World Trade Centre
Vancouver, B.C. V6C 3C8
(604) 662-8082
STATE OF WASHINGTON )
)ss.
COUNTY OF CHELAN )
The foregoing instrument was acknowledged before me this 24 day of
September, 1996, by Charles DeJong, an individual.
/s/
-----------------------------------
NOTARY PUBLIC
-13-
<PAGE>
PROVINCE OF BRITISH COLUMBIA )
)ss.
COUNTY OF __________ )
The foregoing instrument was acknowledged before me this 24th day of
September, 1996, by Mark D. Hamilton, an individual.
/s/
----------------------------------
NOTARY PUBLIC
Michael C. Halpen
Barrister & Solicitor
Montpellier, McKeen, ______, Talbot & Giuffre
Suite 550-999 Canada Place
World Trade Centre
Vancouver, B.C. V6C 3C8
(604) 662-8082
-14-
JUNGLE STREET, INC.
1996 STOCK INCENTIVE PLAN
1. Purpose. The purpose of this 1996 Stock Incentive Plan (the "Plan")
is to enable JUNGLE STREET, Inc., a Utah corporation (the "Company") to
attract and retain the services of (1) selected employees, officers and
directors of the Company or of any subsidiary of the Company and (2)
selected nonemployee agents, consultants, advisors, persons involved in the
sale or distribution of the Company's products and independent contractors
of the Company or any subsidiary.
2. Shares Subject to the Plan. Subject to adjustment as provided below
and in Section 13, the shares to be offered under the Plan shall consist of
Common Stock, $.001 par value, of the Company, and the total number of
shares of Common Stock that may be issued under the Plan shall not exceed
3,000,000 shares. The shares issued under the Plan may be authorized and
unissued shares or reacquired shares. If an option, stock appreciation
right or performance unit granted under the Plan expires, terminates or is
cancelled, the unissued shares subject to such option, stock appreciation
right or performance unit shall again be available under the Plan. If
shares sold or awarded as a bonus under the Plan are forfeited to the
Company or repurchased by the Company, the number of shares forfeited or
repurchased shall again be available under the Plan.
3. Effective Date and Duration of Plan.
(a) Effective Date. The Plan shall become effective as of the
date it is adopted by the Board of Directors. No option, stock appreciation
right or performance unit granted under the Plan to an officer who is
subject to Section 16(b) of the Securities Exchange Act of 1934, as amended
(an "Officer") or a director, and no incentive stock option, shall become
exercisable, however, until the Plan is approved by the affirmative vote of
the holders of a majority of the shares of Common Stock represented at a
shareholders meeting at which a quorum is present, and any such awards
under the Plan prior to such approval shall be conditioned on and subject
to such approval. Subject to this limitation, options, stock appreciation
rights and performance units may be granted and shares may be awarded as
bonuses or sold under the Plan at any time after the effective date and
before termination of the Plan.
(b) Duration. Unless earlier terminated by the Board of
Directors, the Plan shall continue in effect until the earlier of: (i) ten
years from the date on which the Plan is adopted by the Board of Directors,
and (ii) the date on which all shares available for issuance under the Plan
have been issued and all restrictions on such shares have lapsed. The Board
of Directors may suspend or terminate the Plan at any time except with
respect to options, performance units and shares subject to restrictions
then outstanding under the Plan. No options or other rights may be granted
after such termination or during any suspension of the Plan.
-1-
<PAGE>
Termination shall not affect any outstanding options, any right of the
Company to repurchase shares or the forfeitability of shares issued under
the Plan.
4. Administration.
(a) Board of Directors. Except as otherwise provided below, the
Plan shall be administered by the Board of Directors of the Company, which
shall determine and designate from time to time the individuals to whom
awards shall be made, the amount of the awards and the other terms and
conditions of the awards. Subject to the provisions of the Plan, the Board
of Directors may from time to time adopt and amend rules and regulations
relating to administration of the Plan, advance the lapse of any waiting
period, accelerate any exercise date, waive or modify any restriction
applicable to shares (except those restrictions imposed by law) and make
all other determinations in the judgment of the Board of Directors
necessary or desirable for the administration of the Plan. The
interpretation and construction of the provisions of the Plan and related
agreements by the Board of Directors shall be final and conclusive. The
Board of Directors may correct any defect or supply any omission or
reconcile any inconsistency in the Plan or in any related agreement in the
manner and to the extent it shall deem expedient to carry the Plan into
effect, and it shall be the sole and final judge of such expediency.
(b) Committee. The Board of Directors may delegate to a committee
of the Board of Directors or specified officers of the Company, or both
(the "Committee") any or all authority for administration of the Plan;
provided that at least two members of the Committee must be directors. If
authority is delegated to a Committee, all references to the Board of
Directors in the Plan shall mean and relate to the Committee except (i) as
otherwise provided by the Board of Directors, (ii) that only the Board of
Directors may amend or terminate the Plan as provided in Sections 3 and 14,
and (iii) that a Committee including officers of the Company shall not be
permitted to grant options to persons who are officers of the Company.
(c) Exchange Act. At any time that the Company has a class of
securities registered pursuant to Section 12 of the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), this Plan shall be administered
in accordance with Rule 16b-3 adopted under the Exchange Act and Section
162(m) of the Internal Revenue Code of 1986, as amended, and the
regulations, proposed and final, thereunder, as all may be amended from
time to time. In such event, the Board shall appoint a Committee in
accordance with Section 4(b), and each member of the Committee shall be a
"disinterested director" and an "outside director" with the meaning of such
Rule 16b-3 and Section 162(m), respectively.
(d) Limited Liability. No member of the Board of Directors or the
Committee or officer of the Company shall be liable for any action or
inaction of the entity or body, or of another person or, except in
circumstances involving bad faith, of himself or herself. Subject only to
compliance with the explicit provisions hereof, the Board of Directors may
act in its absolute discretion in all matters related to the Plan.
-2-
<PAGE>
5. Types of Awards; Eligibility. The Board of Directors may, from time
to time, take the following action, separately or in combination, under the
Plan: (i) grant Incentive Stock Options, as defined in Section 422 of the
Internal Revenue Code of 1986, as amended (the "Code"), as provided in
Sections 6(a) and 6(b); (ii) grant options other than Incentive Stock
Options ("Non-Statutory Stock Options") as provided in Sections 6(a) and
6(c); (iii) award stock bonuses as provided in Section 7; (iv) sell shares
subject to restrictions as provided in Section 8; (v) grant stock
appreciation rights as provided in Section 9; (vi) grant cash bonus rights
as provided in Section 10; (vii) grant performance units as provided in
Section 11; and (viii) grant foreign qualified awards as provided in
Section 12. Any such awards may be made to employees, including employees
who are officers or directors, and to other individuals described in
Section 1 who the Board of Directors believes have made or will make an
important contribution to the Company or any subsidiary of the Company;
provided, however, that only employees of the Company shall be eligible to
receive Incentive Stock Options under the Plan; and provided further that
non-employee directors shall not be eligible to participate in the Plan.
For purposes of the Plan, a non-employee director is a director who is not
an employee of the Company or any of its subsidiaries. The Board of
Directors shall select the individuals to whom awards shall be made and
shall specify the action taken with respect to each individual to whom an
award is made. At the discretion of the Board of Directors, an individual
may be given an election to surrender an award in exchange for the grant of
a new award.
6. Option Grants.
(a) General Rules Relating to Options.
(i) Terms of Grant. The Board of Directors may grant options
under the Plan. With respect to each option grant, the Board of
Directors shall determine the number of shares subject to the option,
the option price, the period of the option, the time or times at which
the option may be exercised (including, without limitation, whether
the option will be subject to any vesting requirements and whether
there will be any conditions precedent to exercise of the option), and
whether the option is an Incentive Stock Option or a Non-Statutory
Stock Option. At the time of the grant of an option or at any time
thereafter, the Board of Directors may provide that an optionee who
exercised an option with Common Stock of the Company shall
automatically receive a new option to purchase additional shares equal
to the number of shares surrendered and may specify the terms and
conditions of such new options.
(ii) Exercise of Options. Except as provided in Section
6(a)(iv) or as determined by the Board of Directors, no option granted
under the Plan may be exercised unless at the time of such exercise
the optionee is employed by or in the service of the Company or any
subsidiary of the Company and shall have been so employed or provided
such service continuously since the date such option was granted,
subject to Section 6(a)(iv)(G). Except as provided in Sections
6(a)(iv) and 13, options granted under the Plan may be exercised from
time to time over the period stated in each option in such amounts and
at such times as shall be prescribed by the Board of Directors,
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<PAGE>
provided that options shall not be exercised for fractional shares.
Unless otherwise determined by the Board of Directors, if the optionee
does not exercise an option in any one year with respect to the full
number of shares to which the optionee is entitled in that year, the
optionee's rights shall be cumulative and the optionee may purchase
those shares in any subsequent year during the term of the option.
Unless otherwise determined by the Board of Directors, if an Officer
exercises an option within six months of the grant of the option, the
shares acquired upon exercise of the option may not be sold until six
months after the date of grant of the option.
(iii) Nontransferability. Each Incentive Stock Option and,
unless otherwise determined by the Board of Directors with respect to
an option granted to a person who is neither an Officer nor a director
of the Company, each other option granted under the Plan, by its terms
shall be nonassignable and nontransferable by the optionee, either
voluntarily or by operation of law, except by will or by the laws of
descent and distribution of the state or country of the optionee's
domicile at the time of death.
(iv) Termination of Employment or Service.
(A) General Rule. Unless otherwise determined by the
Board of Directors, in the event the employment or service of the
optionee with the Company or a subsidiary terminates for any
reason other than because of physical disability or death as
provided in Subsections 6(a)(iv)(B) and (C), or for cause, as
provided in Subsection 6(a)(iv)(D), the option may be exercised
at any time prior to the expiration date of the option or the
expiration of three months after the date of such termination,
whichever is the shorter period, but only if and to the extent
the optionee was entitled to exercise the option at the date of
such termination.
(B) Termination Because of Total Disability. Unless
otherwise determined by the Board of Directors, in the event of
the termination of employment or service because of total
disability, the option may be exercised at any time prior to the
expiration date of the option or the expiration of 12 months
after the date of such termination, whichever is the shorter
period, but only if and to the extent the optionee was entitled
to exercise the option at the date of such termination. The term
"total disability" means a medically determinable mental or
physical impairment which is expected to result in death or which
has lasted or is expected to last for a continuous period of 12
months or more and which causes the optionee to be unable, in the
opinion of the Company and two independent physicians, to perform
his or her duties as an employee, director, officer or consultant
of the Company and to be engaged in any substantial gainful
activity. Total disability shall be deemed to have occurred on
the first day after the Company and the two independent
physicians have furnished their opinion of total disability to
the Company.
-4-
<PAGE>
(C) Termination Because of Death. Unless otherwise
determined by the Board of Directors, in the event of the death
of an optionee while employed by or providing service to the
Company or a subsidiary, the option may be exercised at any time
prior to the expiration date of the option or the expiration of
12 months after the date of death, whichever is the shorter
period, but only if and to the extent the optionee was entitled
to exercise the option at the date of death and only by the
person or persons to whom such optionee's rights under the option
shall pass by the optionee's will or by the laws of descent and
distribution of the state or country of domicile at the time of
death.
(D) For Cause. Unless otherwise determined by the Board
of Directors, if an optionee is terminated for cause or resigns
in lieu of dismissal, any option granted hereunder shall be
deemed to have terminated as of the time of the first act that
led or would have led to the termination for cause or resignation
in lieu of dismissal, and such optionee shall thereupon have no
right to purchase any shares of Common Stock pursuant to the
exercise of such option, and any such exercise shall be null and
void. Termination for "cause" shall include: (i) the violation by
the optionee of any reasonable rule or policy of the Company that
results in damage to the Company or which, after notice to do so,
the optionee fails to correct within a reasonable time; (ii) any
willful misconduct or gross negligence by the optionee in the
responsibilities assigned to him or her; (iii) any willful
failure to perform his or her job as required to meet the
objectives of the Company; (iv) any wrongful conduct of an
optionee that has an adverse impact on the Company or that
constitutes a misappropriation of the assets of the Company; (v)
unauthorized disclosure of confidential information; or (vi) the
optionee's performing services for any other company or person
that competes with the Company while he or she is employed by or
provides services to the Company, without the written approval of
the chief executive officer of the Company. "Resignation in lieu
of dismissal" shall mean a resignation by an optionee of
employment with or service to the Company if (i) the Company has
given prior notice to such optionee of its intent to dismiss the
optionee for circumstances that constitute cause, or (ii) within
two months of the optionee's resignation, the chief operating
officer or the chief executive officer of the Company or the
Board of Directors determines, which determination shall be final
and binding, that such resignation was related to an act that
would have led to a termination for cause.
(E) Amendment of Exercise Period Applicable to
Termination. The Board of Directors, at the time of grant or,
with respect to an option that is not an Incentive Stock Option,
at any time thereafter, may extend the 3-month and 12-month
exercise periods any length of time not longer than the original
expiration date of the option, and may increase the portion of an
option that is exercisable, subject to such terms and conditions
as the Board of Directors may determine.
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<PAGE>
(F) Failure to Exercise Option. To the extent that the
option of any deceased optionee or of any optionee whose
employment or service terminates is not exercised within the
applicable period, all further rights to purchase shares pursuant
to such option shall cease and terminate.
(G) Transfers; Leaves. For purposes of this Section
6(a), a transfer of employment or other relationship between or
among the Company and/or any of its subsidiaries shall not be
deemed to constitute a termination of employment or other
cessation of relationship with the Company or any of its
subsidiaries. For purposes of this Section 6(a), unless otherwise
determined by the Board of Directors, employment shall be deemed
to continue while the optionee is on military leave, sick leave
or other bona fide leave of absence (as determined by the Board
of Directors) in accordance with the policies of the Company.
(H) Holding Period. Unless otherwise determined by the
Board of Directors, if a person subject to Section 16 of the
Exchange Act exercises an option within six months of the date of
grant of the option, the shares of Common Stock acquired on
exercise of the option may not be sold until six months after the
date of grant of the option.
(I) Modification of Options. Subject to the
requirements of Section 422 of the Code (with respect to
Incentive Stock Options) and to the terms and conditions and
within the limitations of the Plan, the Board of Directors may
modify or amend outstanding options granted under the Plan. The
modification or amendment of an outstanding option shall not,
without the consent of the optionee, impair or diminish any of
his or her rights or any of the obligations of the Company under
such option. Except as otherwise provided in the Plan, no
outstanding option shall be terminated without the consent of the
optionee. Unless the optionee agrees otherwise, any changes or
adjustments made to outstanding Incentive Stock Options granted
under this Plan shall be made in such a manner so as not to
constitute a "modification," as defined in Section 425(h) of the
Code, and so as not to cause any Incentive Stock Option issued
hereunder to fail to continue to qualify as an Incentive Stock
Option as defined in Section 422(b) of the Code.
(v) Purchase of Shares. Unless the Board of Directors
determines otherwise, shares may be acquired pursuant to an option
granted under the Plan only upon receipt by the Company of notice in
writing from the optionee of the optionee's intention to exercise,
specifying the number of shares as to which the optionee desires to
exercise the option and the date on which the optionee desires to
complete the transaction, and if required in order to comply with the
Securities Act of 1933, as amended, containing a representation that
it is the optionee's present intention to acquire the shares for
investment and not with a view to distribution. Unless the Board of
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<PAGE>
Directors determines otherwise, on or before the date specified for
completion of the purchase of shares pursuant to an option, the
optionee must have paid the Company the full purchase price of such
shares in cash (including, with the consent of the Board of Directors,
cash that may be the proceeds of a loan from the Company (provided
that, with respect to an Incentive Stock Option, such loan is approved
at the time of option grant)) or, with the consent of the Board of
Directors, in whole or in part, in Common Stock of the Company valued
at fair market value, restricted stock, performance units or other
contingent awards denominated in either stock or cash, promissory
notes and other forms of consideration. The fair market value of
Common Stock provided in payment of the purchase price shall be
determined by the Board of Directors. If the Common Stock of the
Company is not publicly traded on the date the option is exercised,
the Board of Directors may consider any valuation methods it deems
appropriate and may, but is not required to, obtain one or more
independent appraisals of the Company. If the Common Stock of the
Company is publicly traded on the date the option is exercised, the
fair market value of Common Stock provided in payment of the purchase
price shall be the closing price of the Common Stock as reported in
The Wall Street Journal on the last trading day preceding the date the
option is exercised, or such other reported value of the Common Stock
as shall be specified by the Board of Directors. No shares shall be
issued until full payment for the shares has been made. With the
consent of the Board of Directors (which, in the case of an Incentive
Stock Option, shall be given only at the time of option grant), an
optionee may request the Company to apply automatically the shares to
be received upon the exercise of a portion of a stock option (even
though stock certificates have not yet been issued) to satisfy the
purchase price for additional portions of the option. Each optionee
who has exercised an option shall immediately upon notification of the
amount due, if any, pay to the Company in cash amounts necessary to
satisfy any applicable federal, state and local tax withholding
requirements. If additional withholding is or becomes required beyond
any amount deposited before delivery of the certificates, the optionee
shall pay such amount to the Company on demand. If the optionee fails
to pay the amount demanded, the Company may withhold that amount from
other amounts payable by the Company to the optionee, including
salary, subject to applicable law. With the consent of the Board of
Directors an optionee may satisfy this obligation, in whole or in
part, by having the Company withhold from the shares to be issued upon
the exercise that number of shares that would satisfy the withholding
amount due or by delivering to the Company Common Stock to satisfy the
withholding amount. Upon the exercise of an option, the number of
shares reserved for issuance under the Plan shall be reduced by the
number of shares issued upon exercise of the option.
(vi) Restrictions. Shares issued on exercise of options
granted under the Plan may be subject to restrictions on transfer,
repurchase rights, or other restrictions as determined by the Board of
Directors.
(b) Incentive Stock Options. Incentive Stock Options shall be
subject to the following additional terms and conditions:
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<PAGE>
(i) Limitation on Amount of Grants. No employee may be
granted Incentive Stock Options under the Plan if the aggregate fair
market value, on the date of grant, of the Common Stock with respect
to which Incentive Stock Options are exercisable for the first time by
that employee during any calendar year under the Plan and under all
incentive stock option plans (within the meaning of Section 422 of the
Code) of the Company or any parent or subsidiary of the Company
exceeds $100,000.
(ii) Limitations on Grants to 10 Percent Shareholders. An
Incentive Stock Option may be granted under the Plan to an employee
possessing more than 10 percent of the total combined voting power of
all classes of stock of the Company or of any parent or subsidiary of
the Company only if the option price is at least 110 percent of the
fair market value, as described in Section 6(b)(iv), of the Common
Stock subject to the option on the date it is granted and the option
by its terms is not exercisable after the expiration of five years
from the date it is granted.
(iii) Duration of Options. Subject to Sections 6(a)(ii) and
6(b)(ii), Incentive Stock Options granted under the Plan shall
continue in effect for the period fixed by the Board of Directors,
except that no Incentive Stock Option shall be exercisable after the
expiration of 10 years from the date it is granted.
(iv) Option Price. The option price per share shall be
determined by the Board of Directors at the time of grant. Except as
provided in Section 6(b)(ii), the option price shall not be less than
100 percent of the fair market value of the Common Stock covered by
the Incentive Stock Option at the date the option is granted. The fair
market value shall be determined by the Board of Directors. If the
Common Stock of the Company is not publicly traded on the date the
option is granted, the Board of Directors may consider any valuation
methods it deems appropriate and may, but is not required to, obtain
one or more independent appraisals of the Company. If the Common Stock
of the Company is publicly traded on the date the option is exercised,
the fair market value shall be deemed to be the closing price of the
Common Stock as reported in The Wall Street Journal on the day
preceding the date the option is granted, or, if there has been no
sale on that date, on the last preceding date on which a sale occurred
or such other value of the Common Stock as shall be specified by the
Board of Directors.
(v) Limitation on Time of Grant. No Incentive Stock Option
shall be granted on or after the tenth anniversary of the effective
date of the Plan.
(vi) Conversion of Incentive Stock Options. The Board of
Directors may at any time without the consent of the optionee convert
an Incentive Stock Option to a Non-Statutory Stock Option.
(c) Non-Statutory Stock Options. Non-Statutory Stock Options
shall be subject to the following terms and conditions in addition to those
set forth in Section 6(a) above:
-8-
<PAGE>
(i) Option Price. The option price for Non-Statutory Stock
Options shall be determined by the Board of Directors at the time of
grant and may be any amount determined by the Board of Directors.
(ii) Duration of Options. Non-Statutory Stock Options
granted under the Plan shall continue in effect for the period fixed
by the Board of Directors.
7. Stock Bonuses. The Board of Directors may award shares under the
Plan as stock bonuses. Shares awarded as a bonus shall be subject to the
terms, conditions, and restrictions determined by the Board of Directors.
The restrictions may include restrictions concerning transferability and
forfeiture of the shares awarded, together with such other restrictions as
may be determined by the Board of Directors. If shares are subject to
forfeiture, all dividends or other distributions paid by the Company with
respect to the shares shall be retained by the Company until the shares are
no longer subject to forfeiture, at which time all accumulated amounts
shall be paid to the recipient. The Board of Directors may require the
recipient to sign an agreement as a condition of the award, but may not
require the recipient to pay any monetary consideration other than amounts
necessary to satisfy tax withholding requirements. The agreement may
contain any terms, conditions, restrictions, representations and warranties
required by the Board of Directors. The certificates representing the
shares awarded shall bear any legends required by the Board of Directors.
Unless otherwise determined by the Board of Directors, shares awarded as a
stock bonus to an Officer may not be sold until six months after the date
of the award. The Company may require any recipient of a stock bonus to pay
to the Company in cash upon demand amounts necessary to satisfy any
applicable federal, state or local tax withholding requirements. If the
recipient fails to pay the amount demanded, the Company may withhold that
amount from other amounts payable by the Company to the recipient,
including salary or fees for services, subject to applicable law. With the
consent of the Board of Directors, a recipient may deliver Common Stock to
the Company to satisfy this withholding obligation. Upon the issuance of a
stock bonus, the number of shares reserved for issuance under the Plan
shall be reduced by the number of shares issued.
8. Restricted Stock. The Board of Directors may issue shares under the
Plan for such consideration (including promissory notes and services) as
determined by the Board of Directors. Shares issued under the Plan shall be
subject to the terms, conditions and restrictions determined by the Board
of Directors. The restrictions may include restrictions concerning
transferability, repurchase by the Company and forfeiture of the shares
issued, together with such other restrictions as may be determined by the
Board of Directors. If shares are subject to forfeiture or repurchase by
the Company, all dividends or other distributions paid by the Company with
respect to the shares shall be retained by the Company until the shares are
no longer subject to forfeiture or repurchase, at which time all
accumulated amounts shall be paid to the recipient. All Common Stock issued
pursuant to this Section 8 shall be subject to a purchase agreement, which
shall be executed by the Company and the prospective recipient of the
shares prior to the delivery of certificates representing such shares to
the recipient. The purchase agreement may contain any terms, conditions,
restrictions, representations and warranties required by the Board of
Directors. The certificates representing the shares shall bear
-9-
<PAGE>
any legends required by the Board of Directors. Unless otherwise determined
by the Board of Directors, shares issued under this Section 8 to an Officer
may not be sold until six months after the shares are issued. The Company
may require any purchaser of restricted stock to pay to the Company in cash
upon demand amounts necessary to satisfy any applicable federal, state or
local tax withholding requirements. If the purchaser fails to pay the
amount demanded, the Company may withhold that amount from other amounts
payable by the Company to the purchaser, including salary, subject to
applicable law. With the consent of the Board of Directors, a purchaser may
deliver Common Stock to the Company to satisfy this withholding obligation.
Upon the issuance of restricted stock, the number of shares reserved for
issuance under the Plan shall be reduced by the number of shares issued.
9. Stock Appreciation Rights.
(a) Grant. Stock appreciation rights may be granted under the
Plan by the Board of Directors, subject to such rules, terms, and
conditions as the Board of Directors prescribes.
(b) Exercise.
(i) Each stock appreciation right shall entitle the holder,
upon exercise, to receive from the Company in exchange therefor an
amount equal in value to the excess of the fair market value on the
date of exercise of one share of Common Stock of the Company over its
fair market value on the date of grant (or, in the case of a stock
appreciation right granted in connection with an option, the excess of
the fair market value of one share of Common Stock of the Company over
the option price per share under the option to which the stock
appreciation right relates), multiplied by the number of shares
covered by the stock appreciation right or the option, or portion
thereof, that is surrendered. No stock appreciation right shall be
exercisable at a time that the amount determined under this
subparagraph is negative. Payment by the Company upon exercise of a
stock appreciation right may be made in Common Stock valued at fair
market value, in cash, or partly in Common Stock and partly in cash,
all as determined by the Board of Directors.
(ii) A stock appreciation right shall be exercisable only at
the time or times established by the Board of Directors. If a stock
appreciation right is granted in connection with an option, the
following rules shall apply: (1) the stock appreciation right shall be
exercisable only to the extent and on the same conditions that the
related option could be exercised; (2) the stock appreciation rights
shall be exercisable only when the fair market value of the stock
exceeds the option price of the related option; (3) the stock
appreciation right shall be for no more than 100 percent of the excess
of the fair market value of the stock at the time of exercise over the
option price; (4) upon exercise of the stock appreciation right, the
option or portion thereof to which the stock appreciation right
relates terminates; and (5) upon exercise of the option, the related
stock appreciation right or portion thereof terminates. Unless
otherwise determined by
-10-
<PAGE>
the Board of Directors, no stock appreciation right granted to an
Officer or director may be exercised during the first six months
following the date it is granted.
(iii) The Board of Directors may withdraw any stock
appreciation right granted under the Plan at any time and may impose
any conditions upon the exercise of a stock appreciation right or
adopt rules and regulations from time to time affecting the rights of
holders of stock appreciation rights. Such rules and regulations may
govern the right to exercise stock appreciation rights granted prior
to adoption or amendment of such rules and regulations as well as
stock appreciation rights granted thereafter.
(iv) For purposes of this Section 9, the fair market value
of the Common Stock shall be determined as of the date the stock
appreciation right is exercised, under the methods set forth in
Section 6(b)(iv).
(v) No fractional shares shall be issued upon exercise of a
stock appreciation right. In lieu thereof, cash may be paid in an
amount equal to the value of the fraction or, if the Board of
Directors shall determine, the number of shares may be rounded
downward to the next whole share.
(vi) Each stock appreciation right granted in connection
with an Incentive Stock Option, and unless otherwise determined by the
Board of Directors with respect to a stock appreciation right granted
to a person who is neither an Officer nor a director of the Company,
each other stock appreciation right granted under the Plan by its
terms shall be nonassignable and nontransferable by the holder, either
voluntarily or by operation of law, except by will or by the laws of
descent and distribution of the state or country of the holder's
domicile at the time of death, and each stock appreciation right by
its terms shall be exercisable during the holder's lifetime only by
the holder.
(vii) Each participant who has exercised a stock
appreciation right shall, upon notification of the amount due, pay to
the Company in cash amounts necessary to satisfy any applicable
federal, state and local tax withholding requirements. If the
participant fails to pay the amount demanded, the Company may withhold
that amount from other amounts payable by the Company to the
participant including salary, subject to applicable law. With the
consent of the Board of Directors a participant may satisfy this
obligation, in whole or in part, by having the Company withhold from
any shares to be issued upon the exercise that number of shares that
would satisfy the withholding amount due or by delivering Common Stock
to the Company to satisfy the withholding amount.
(viii) Upon the exercise of a stock appreciation right for
shares, the number of shares reserved for issuance under the Plan
shall be reduced by the number of shares issued. Cash payments of
stock appreciation rights shall not reduce the number of shares of
Common Stock reserved for issuance under the Plan.
-11-
<PAGE>
10. Cash Bonus Rights.
(a) Grant. The Board of Directors may grant cash bonus rights
under the Plan in connection with (i) options granted or previously
granted, (ii) stock appreciation rights granted or previously granted,
(iii) stock bonuses awarded or previously awarded and (iv) shares sold or
previously sold under the Plan. Cash bonus rights will be subject to rules,
terms and conditions as the Board of Directors may prescribe. Unless
otherwise determined by the Board of Directors with respect to a cash bonus
right granted to a person who is neither an Officer nor a director of the
Company, each cash bonus right granted under the Plan by its terms shall be
nonassignable and nontransferable by the holder, either voluntarily or by
operation of law, except by will or by the laws of descent and distribution
of the state or country of the holder's domicile at the time of death. The
payment of a cash bonus shall not reduce the number of shares of Common
Stock reserved for issuance under the Plan.
(b) Cash Bonus Rights in Connection With Options. A cash bonus
right granted in connection with an option will entitle an optionee to a
cash bonus when the related option is exercised (or terminates in
connection with the exercise of a stock appreciation right related to the
option) in whole or in part if, in the sole discretion of the Board of
Directors, the bonus right will result in a tax deduction that the Company
has sufficient taxable income to use. If an optionee purchases shares upon
exercise of an option and does not exercise a related stock appreciation
right, the amount of the bonus, if any, shall be determined by multiplying
the excess of the total fair market value of the shares to be acquired upon
the exercise over the total option price for the shares by the applicable
bonus percentage. If the optionee exercises a related stock appreciation
right in connection with the termination of an option, the amount of the
bonus, if any, shall be determined by multiplying the total fair market
value of the shares and cash received pursuant to the exercise of the stock
appreciation right by the applicable bonus percentage. The bonus percentage
applicable to a bonus right, including a previously granted bonus right,
may be changed from time to time at the sole discretion of the Board of
Directors but shall in no event exceed 75 percent.
(c) Cash Bonus Rights in Connection With Stock Bonus. A cash
bonus right granted in connection with a stock bonus will entitle the
recipient to a cash bonus payable when the stock bonus is awarded or
restrictions, if any, to which the stock is subject lapse. If bonus stock
awarded is subject to restrictions and is repurchased by the Company or
forfeited by the holder, the cash bonus right granted in connection with
the stock bonus shall terminate and may not be exercised. The amount and
timing of payment of a cash bonus shall be determined by the Board of
Directors.
(d) Cash Bonus Rights in Connection With Stock Purchases. A cash
bonus right granted in connection with the purchase of stock pursuant to
Section 8 will entitle the recipient to a cash bonus when the shares are
purchased or restrictions, if any, to which the stock is subject lapse. Any
cash bonus right granted in connection with shares purchased pursuant to
Section 8 shall terminate and may not be exercised in the event the shares
are repurchased by the Company or forfeited by the holder pursuant to
applicable restrictions.
-12-
<PAGE>
The amount of any cash bonus to be awarded and timing of payment of a cash
bonus shall be determined by the Board of Directors.
(e) Taxes. The Company shall withhold from any cash bonus paid
pursuant to Section 10 the amount necessary to satisfy any applicable
federal, state and local withholding requirements.
11. Performance Units. The Board of Directors may grant performance
units consisting of monetary units which may be earned in whole or in part
if the Company achieves certain goals established by the Board of Directors
over a designated period of time, but not in any event more than 10 years.
The goals established by the Board of Directors may include earnings per
share, return on shareholders' equity, return on invested capital, and such
other goals as may be established by the Board of Directors. In the event
that the minimum performance goal established by the Board of Directors is
not achieved at the conclusion of a period, no payment shall be made to the
participants. In the event the maximum corporate goal is achieved, 100
percent of the monetary value of the performance units shall be paid to or
vested in the participants. Partial achievement of the maximum goal may
result in a payment or vesting corresponding to the degree of achievement
as determined by the Board of Directors. Payment of an award earned may be
in cash or in Common Stock or in a combination of both, and may be made
when earned, or vested and deferred, as the Board of Directors determines.
Deferred awards shall earn interest on the terms and at a rate determined
by the Board of Directors. Unless otherwise determined by the Board of
Directors with respect to a performance unit granted to a person who is
neither an Officer nor a director of the Company, each performance unit
granted under the Plan by its terms shall be nonassignable and
nontransferable by the holder, either voluntarily or by operation of law,
except by will or by the laws of descent and distribution of the state or
country of the holder's domicile at the time of death. Each participant who
has been awarded a performance unit shall, upon notification of the amount
due, pay to the Company in cash amounts necessary to satisfy any applicable
federal, state and local tax withholding requirements. If the participant
fails to pay the amount demanded, the Company may withhold that amount from
other amounts payable by the Company to the participant, including salary
or fees for services, subject to applicable law. With the consent of the
Board of Directors a participant may satisfy this obligation, in whole or
in part, by having the Company withhold from any shares to be issued that
number of shares that would satisfy the withholding amount due or by
delivering Common Stock to the Company to satisfy the withholding amount.
The payment of a performance unit in cash shall not reduce the number of
shares of Common Stock reserved for issuance under the Plan. The number of
shares reserved for issuance under the Plan shall be reduced by the number
of shares issued upon payment of an award.
12. Foreign Qualified Grants. Awards under the Plan may be granted to
such officers and employees of the Company and its subsidiaries and such
other persons described in Section 1 residing in foreign jurisdictions as
the Board of Directors may determine from time to time. The Board of
Directors may adopt such supplements to the Plan as may be necessary to
comply with the applicable laws of such foreign jurisdictions and to afford
participants favorable treatment
-13-
<PAGE>
under such laws; provided, however, that no award shall be granted under
any such supplement with terms which are more beneficial to the
participants than the terms permitted by the Plan.
13. Changes in Capital Structure.
(a) Stock Splits; Stock Dividends. If the outstanding Common
Stock of the Company is hereafter increased or decreased or changed into or
exchanged for a different number or kind of shares or other securities of
the Company by reason of any stock split, combination of shares or dividend
payable in shares, recapitalization or reclassification appropriate
adjustment shall be made by the Board of Directors in the number and kind
of shares available for grants under the Plan. In addition, the Board of
Directors shall make appropriate adjustment in the number and kind of
shares as to which outstanding options, or portions thereof then
unexercised, shall be exercisable, so that the optionee's proportionate
interest before and after the occurrence of the event is maintained.
Notwithstanding the foregoing, the Board of Directors shall have no
obligation to effect any adjustment that would or might result in the
issuance of fractional shares, and any fractional shares resulting from any
adjustment may be disregarded or provided for in any manner determined by
the Board of Directors. Any such adjustments made by the Board of Directors
shall be conclusive.
(b) Mergers, Reorganizations, Etc. In the event of a merger,
consolidation, plan of exchange, acquisition of property or stock,
separation, reorganization or liquidation to which the Company or a
subsidiary is a party or a sale of all or substantially all of the
Company's assets (each, a "Transaction"), the Board of Directors shall, in
its sole discretion and to the extent possible under the structure of the
Transaction, select one of the following alternatives for treating
outstanding options under the Plan:
(i) Outstanding options shall remain in effect in accordance
with their terms.
(ii) Outstanding options shall be converted into options to
purchase stock in the corporation that is the surviving or acquiring
corporation in the Transaction. The amount, type of securities subject
thereto and exercise price of the converted options shall be
determined by the Board of Directors of the Company, taking into
account the relative values of the companies involved in the
Transaction and the exchange rate, if any, used in determining shares
of the surviving corporation to be issued to holders of shares of the
Company. Unless otherwise determined by the Board of Directors, the
converted options shall be vested only to the extent that the vesting
requirements relating to options granted hereunder have been
satisfied.
(iii) The Board of Directors shall provide a 30-day period
prior to the consummation of the Transaction during which outstanding
options may be exercised to the extent then exercisable, and upon the
expiration of such 30-day period, all unexercised options shall
immediately terminate. The Board of Directors may, in its sole
-14-
<PAGE>
discretion, accelerate the exercisability of options so that they are
exercisable in full during such 30-day period.
(c) Dissolution of the Company. In the event of the dissolution
of the Company, options shall be treated in accordance with Section
13(b)(iii).
(d) Rights Issued by Another Corporation. The Board of Directors
may also grant options, stock appreciation rights, performance units, stock
bonuses and cash bonuses and issue restricted stock under the Plan having
terms, conditions and provisions that vary from those specified in this
Plan provided that any such awards are granted in substitution for, or in
connection with the assumption of, existing options, stock appreciation
rights, stock bonuses, cash bonuses, restricted stock and performance units
granted, awarded or issued by another corporation and assumed or otherwise
agreed to be provided for by the Company pursuant to or by reason of a
Transaction.
14. Amendment of Plan. The Board of Directors may at any time, and
from time to time, modify or amend the Plan in such respects as it shall
deem advisable because of changes in the law while the Plan is in effect or
for any other reason; provided that the approval of the Company's
shareholders is necessary within twelve months before or after the adoption
by the Board of Directors of any amendment that will: (a) increase the
number of shares of Common Stock to be reserved for the issuance of options
under the Plan; (b) permit the granting of stock options to a class of
persons other than those now permitted to receive stock options under the
Plan; or (c) require shareholder approval under applicable law, including
Section 16(b) of the Exchange Act. Except as provided in Sections 6(a)(iv),
9, 10 and 13, however, no change in an award already granted shall be made
without the written consent of the holder of such award.
15. Approvals. The obligations of the Company under the Plan may be
subject to the approval of state and federal authorities or agencies with
jurisdiction in the matter. The Company will use its best efforts to take
steps required by state or federal law or applicable regulations, including
rules and regulations of the Securities and Exchange Commission and any
stock exchange or quotations service on which the Company's shares may then
be listed, in connection with the grants under the Plan. The foregoing
notwithstanding, the Company shall not be obligated to issue or deliver
Common Stock under the Plan if such issuance or delivery would violate
applicable state or federal securities laws.
16. Employment and Service Rights. Nothing in the Plan or any award
pursuant to the Plan shall (i) confer upon any employee any right to be
continued in the employment of the Company or any subsidiary or interfere
in any way with the right of the Company or any subsidiary by whom such
employee is employed to terminate such employee's employment at any time,
for any reason, with or without cause, or to decrease such employee's
compensation or benefits, or (ii) confer upon any person engaged by the
Company any right to be retained or employed by the Company or to the
continuation, extension, renewal, or modification of any compensation,
contract, or arrangement with or by the Company.
-15-
<PAGE>
17. Rights as a Shareholder. The recipient of any award under the Plan
shall have no rights as a shareholder with respect to any Common Stock
until the date of issue to the recipient of a stock certificate for such
shares. Except as otherwise expressly provided in the Plan, no adjustment
shall be made for dividends or other rights for which the record date
occurs prior to the date such stock certificate is issued.
18. Securities Regulations. Shares of Common Stock shall not be issued
with respect to an option granted under the Plan unless the exercise of
such option and the issuance and delivery of such shares pursuant thereto
shall comply with all relevant provisions of law, including, without
limitation, any applicable state securities laws, the Securities Act of
1933, as amended, the Exchange Act, the rules and regulations promulgated
thereunder, applicable laws of foreign countries and other jurisdictions
and the requirements of any quotation service or stock exchange on which
the shares may then be listed, and shall be further subject to the approval
of counsel for the Company with respect to such compliance, including the
availability of an exemption from registration for the issuance and sale of
any shares hereunder. The inability of the Company to obtain, from any
regulatory body having jurisdiction, the authority deemed by the Company's
counsel to be necessary for the lawful issuance and sale of any shares
hereunder or the unavailability of an exemption from registration for the
issuance and sale of any shares hereunder shall relieve the Company of any
liability with respect of the nonissuance or sale of such shares as to
which such requisite authority shall not have been obtained. As a condition
to the exercise of an option, the Company may require the Optionee to
represent and warrant at the time of any such exercise that the shares of
Common Stock are being purchased only for investment and without any
present intention to sell or distribute such shares if, in the opinion of
counsel for the Company, such a representation is required by any relevant
provision of the aforementioned laws. The Company may place a stop-transfer
order against any shares of Common Stock on the official stock books and
records of the Company, and a legend may be stamped on stock certificates
to the effect that the shares of Common Stock may not be pledged, sold or
otherwise transferred unless an opinion of counsel is provided (concurred
in by counsel for the Company) stating that such transfer is not in
violation of any applicable law or regulation. The Board of Directors may
also require such other action or agreement by the optionees as may from
time to time be necessary to comply with the federal and state securities
laws. THIS PROVISION SHALL NOT OBLIGATE THE COMPANY TO UNDERTAKE
REGISTRATION OF THE OPTIONS OR STOCK THEREUNDER.
Adopted by the Board of Directors on _____________, 1996.
-16-
Sprint.
Business
SOL #96QW0021
CUSTOMER PROVIDED ACCESS REQUEST AND AUTHORIZATION
Televar Northwest, Inc. (Company) enters into this agreement with Sprint
Communications Company L.P. (Sprint), a Delaware Limited Partnership, for
the provisioning of the Local Exchange Carrier (LEC)/Alternate Access
Vender (AAV) service. LEC/AAV services means those telecommunications
facilities provided between the Customer's physical location and the LEC's
central office or the Sprint Point-Of-Presence to which said facilities are
connected as stated in the accompanying order forms and Sales Agreement.
By requesting Customer Provided Access, Company understands and agrees
that:
1. Sprint shall not be held responsible for payment of any charges for
LEC/AAV Service ordered by Company, including but not limited to all
financial obligations, bill verifications and termination liabilities.
2. Sprint shall have no liability or responsibility for installation,
acceptance testing, maintenance or other interaction with the LEC/AAV
with respect to any LEC/AAV Service ordered by Company, except as
expressly set forth in this Agreement.
3. Acceptance testing and maintenance conducted by Company and/or the
LEC/AAV will meet the standards set forth in the most current version
of Sprint's applicable technical publication.
4. No order shall be issued to the LEC/AAV until Sprint and Company have
executed the CPA agreement. If Sprint provides Entrance Facility,
access circuits between SWC and Sprint POP, the Company must have a
Letter of Agency and written confirmation of entrance facility
capacity. Entrance facility assignments shall be provided by Sprint
when Sprint controls such assignments. The assignment information will
include the point of interface and the appropriate interface
assignment. This agreement is deemed to be incorporated into and made
part of any LOA provided by Sprint to the Customer.
5. Synchronization of all digital facilities for WATS type services will
be derived from the Sprint Network.
6. Company is responsible for arranging its own timing and following
propel synchronization procedures on all Clearline 1.5 private line
facilities. Company may provide its own timing or derive timing from
the Sprint Network. If Company provides its own timing, it must be
traceable to a Stratum 1 reference source.
1
<PAGE>
7. If problems are incurred with the LEC/AAV Service, Company will first
route the problem to the LEC/AAV for resolution and then to Sprint.
8. Company will provide a copy of the LEC/AAV Design Layout Record (DLR)
to Sprint upon completion of LEC/AAV acceptance and 10 days prior to
connection to the Sprint Network.
9. Company will ensure issuance of a cancel/disconnect Firm Order
Commitment (FOC) within three business days of notifying Sprint of
intent to cancel and/or disconnect any sprint provided service.
Company will provide the cancel/disconnect FOC to Sprint
simultaneously with the issuance to the LEC/AAV.
10. Sprint will retain control over its entrance facilities and CPE owned
or leased by Sprint, including ports, channels, and muxes, without
limitation and can groom, move, and rehome circuits as Sprint
determines necessary in its sole discretion, with prior notification.
Company will be responsible for all local loop charges incurred in
connection with any such rearrangement of entrance facilities.
11. In addition LEC/AAV charges, Company will be responsible for Central
Office Connection Fees, Port Charges, and/or Entrance Facility
Charges, billed by Sprint. If Sprint charges are not paid in a timely
manner, Sprint can disconnect Customer Provided Access from Sprint
entrance facilities and Customer Provided Equipment.
12. Sprint service will be considered installed when Sprint interexchange
portion of the circuits/services are operational.
Executed as of:
6/03/96
- ---------------------------------- ---------------------------------------
Date Date
Televar Sprint Communications Company L.P.
- ---------------------------------- ---------------------------------------
Company
/s/ MARK HAMILTON
- ---------------------------------- ---------------------------------------
Authorized Representative Signature Name of Authorized Sales Representative
Mark Hamilton
- ---------------------------------- ---------------------------------------
Name (Please print or type) Phone Number
President
- ---------------------------------- ---------------------------------------
Title
2
<PAGE>
Sprint.
Business SOL #96QW0021 ACCESS TERM PLAN
TERM PLAN COMMITMENT
__ T-1 Sprint Provided Access
__ T-3 Sprint Provided Access
x T-3 customer Provided Access to Serving Wire Center
--
ACCESS
CHECK ONE TERM TERM CODE
MONTH TO MONTH M
ONE (1) YEAR 1
TWO (2) YEAR 2
X THREE (3) YEAR 3
FOUR (4) YEAR 4
FIVE (5) YEAR 5
All Sprint Communications Company L.P., a Delaware Limited Partnership
(Sprint), charges and other terms and conditions are governed by the
applicable Sprint tariffs as they may be amended from time to time.
The access term plan will commence for each circuit upon Sprint's
implementation of service and will continue for the initial period selected
above. Upon expiration of the access term plan, the circuit(s) will be
automatically resubscribed for the same period unless the customer notifies
Sprint, in writing, at least 45 days in advance of the access term plan
termination date. For CPA to the SWC, the term plan commitment applies to
the entrance facility.
If customer cancels Sprint circuit(s) under this plan at any time prior to
the expiration of the term plan commitment, the customer will be considered
in default of this agreement and will be assessed termination liabilities.
ACCEPTED AND AGREED:
/s/ MARK HAMILTON Televar Northwest, Inc.
- ---------------------------------- ---------------------------------------
Customer Signature Company Name
Mark Hamilton President
- ---------------------------------- ---------------------------------------
Print Name Title
3
<PAGE>
/s/ ROYCE THOMAS 206-621-7600
- ---------------------------------- ---------------------------------------
Sprint Branch Manager Sprint Rep. Phone
6-3-96
- ----------------------------------
Date
REMARKS: Customers Provided T3 Service to the Internet
Sprint Communications Company L.P. ("Sprint") hereby offers to Customer the
SprintLink products and services ("Products and Services") described and
defined in this Order. This offer will remain valid if signed by Customer
and returned to Sprint by 04/01/96.
When authorized signatories of both Sprint and Customer have signed this
Order, Sprint shall provide and Customer shall pay for the Products and
Services under the SprintLink Products and Services Terms and Conditions
incorporated herein by reference. If Customer is or becomes a SprintLink
Service Provider as defined in the Addendum to SprintLink Products and
Services Terms and Conditions ("Addendum"), then such Addendum is also
incorporated herein by reference.
Customer and Sprint hereby agree that this Order shall prevail over any
Customer-drafted purchase order and shall supersede any and all proposals,
written or oral, as well as all other communications between Customer and
Sprint relating to the products and services specified in this order except
as specifically provided below.
In the event Sprint and Customer have executed a prior written agreement
regarding the Products and Services (as specifically referenced on the face
of this Order), then where there is a conflict between such prior agreement
and this Order, such prior written agreement shall take precedence.
AGREED TO BY:
Customer Signature and Date:
/s/ MARK HAMILTON 3-27-96
- -------------------------------------------------
Name and Title:
Mark Hamilton President
- -------------------------------------------------
ACCEPTED BY SPRINT:
Signature:
- -----------------------------------------------
Name and Title
- -----------------------------------------------
5
Sprint Business
AIM#96QW0021
DEDICATED ACCESS CHARGES AND SPECIAL ACCESS SURCHARGE
APPLICATION FOR EXEMPTION
CUSTOMER BILLING NAME: Televar Northwest, Inc.
CIRCUIT TERMINATION POINT:
Address: 2001 Sixth Avenue, 19th Floor
City: Seattle State: WA Zip: 98121
DEDICATED ACCESS CHARGES:
DEDICATED ACCESS SERVICES MONTHLY RECURRING NON RECURRING
CHARGE CHARGE
T-1 Access $
T-3 Access $ 0 $ 0
Dedicated Access Lines $ $
- -
Access Coordination Fee $ $
Central Office Connection $ $
Entrance Facility Charge $ 450 $ 495
PRI D Channel $ $
PRI D Channel Backup $ $
Port Charge $19,228 $6,000
M1/3 Mux $ $
Other ISP Support Fee $ 500 $
-----------------------------
$20,178 $ 6,495
----------------------------------
All Sprint charges and other charges set forth above are subject to change.
Terms and conditions are governed by the applicable Sprint tariffs, as they
may be amended from time to time. Additional terms and conditions set forth
in Special Customer Arrangement approvals shall apply to this circuit.
- ------------------------------------------------------------------------------
SPECIAL ACCESS SURCHARGE APPLICATION FOR EXEMPTION:
The undersigned hereby certifies that he/she is an authorized
representative of the company named below and that the circuit herein is
not interconnected with the local exchange through a Private Branch
EXchange [sic] (PBX) or other device actually capable of switching traffic
to or from the local exchange, therefore, this circuit is exempted form the
special access surcharge.
-1-
<PAGE>
The undersigned warrants the accuracy of this special access surcharge
application for exemption and the undersigned shall defend, indemnify, and
hold Sprint Communications Company L.P., a Delaware Limited Partnership,
(Sprint) harmless from and against any damages, costs or expenses which
Sprint may incur by submitting this application for exemption.
It is acknowledged that acceptance or rejection of this application will be
the sole responsibility of the local telephone company, and not Sprint.
Customer Initial: _________
- ------------------------------------------------------------------------------
ACCEPTED AND AGREED:
Customer Signature: /s/ Print Name: Mark Hamilton
------------------------
Company Name: Televar Northwest, Inc. Title: President
Date: 6-3-96 Sprint Branch Manager: Royce Thomas
-2-
LEASE AGREEMENT
LEASE NUMBER __________
LESSEE
Full Legal Name - Include DBA If Applicable
Televar Northwest, Inc.
Billing Address City State Zip
215 Yakima Street Wenatchee WA 98801
VENDOR/SUPPLIER
Name City State Zip
Cisco Systems Bellevue WA 98004
EQUIPMENT DESCRIPTION, Attach separate Addendum if needed.
Quantity Type, Make, Model Number & Serial Number
SEE ATTACHED EQUIPMENT LIST
EQUIPMENT LOCATION. Complete only if equipment will not be located at
Lessee's address above.
Address City State Zip
SCHEDULE OF LEASE PAYMENTS
<TABLE>
<CAPTION>
Lease Number of Amount of Each Lease Payment X Number of Administrative+ Security= Initial
Term Payments + Prepayment Fee Deposit Amount
(Months) Due
- -------- --------- ------------------------------ ------------ --------------- ---------- -------
Rental Tax Total
Payment
------ --- -------
<C> <C> <C> <C> <C> <C> <C> <C> <C>
36 36 $2,698.91 $215.91 $2,914.82 2 $100.00 $0.00 $5,929.64
</TABLE>
Payment Due Date Interim Rental will be billed and is calculated as follows:
___1st ___15th (Monthly Rental Payment/30 days = Daily Rate)x(Number of Days
Between Acceptance Date and First Payment Date)=Total Interim
Rental
THIS LEASE IS SUBJECT OT THE TERMS AND CONDITIONS PRINTED HEREON AND ON THE
FOLLOWING PAGES, ALL OF WHICH ARE MADE A PART HEREOF AND WHICH LESSEE
ACKNOWLEDGES HAVING READ. PLEASE READ CAREFULLY BEFORE SIGNING.
THIS LEASE AGREEMENT, WHICH CONSISTS OF FOUR PAGES,
IS NOT BINDING UNTIL ACCEPTED BY LESSOR
-1-
<PAGE>
LESSEE: TELEVAR NORTHWEST, INC. LESSOR: FINANCIAL PACIFIC CO.
/s/ By_________________________________
- -------------------------------------
Charles D. Dejong CEO & Individually (Signature Only)
8/6/96 ___________________________________
(Date) (Title)
THIS IS A NON-CANCELLABLE LEASE FOR THE TERM INDICATED
FINANCIAL PACIFIC CO. through its equipment Leasing division, hereinafter
called "Lessor," hereby Leases to the Lessee, and Lessee hereby hires and
takes from Lessor all property described in this agreement or hereafter and
made a part hereof.
Continued on Following Pages
Page 1 of 4 Page Lease Agreement
-2-
<PAGE>
1. ENTIRE AGREEMENT. This Lease constitutes the entire agreement between
Lessor and Lessee. No oral agreement, guaranty, promise, condition,
representation or warranty shall be binding on Lessor. All prior
conversations, agreements or representations related hereto and/or to said
equipment are integrated herein. No modification hereof shall be binding
unless in writing signed by Lessor.
2. REPRESENTATIONS. Lessee acknowledges that no salesman or agent of the
supplier of the equipment is authorized to waive or alter any term or
condition of this Lease and no representation as to the equipment or any
matter by the supplier shall in any way effect the Lessee's duty to pay the
Lease payments and perform its other obligations as set forth in this
lease.
3. STATUTORY FINANCE LEASE. Lessee agrees and acknowledges that it is the
intent of both parties to this Lease that it qualify as a statutory finance
Lease under Article 2A of the Uniform Commercial Code. Lessee acknowledges
and agrees that Lessee has selected both: (1) the equipment; and (2) the
supplier from whom Lessor is to purchase the equipment. Lessee acknowledges
that Lessor has not participated in any way in Lessee's selection of the
equipment or of the supplier, and Lessor has not selected, manufactured, or
supplied the equipment.
LESSEE IS ADVISED THAT IT MAY HAVE RIGHTS UNDER THE CONTRACT EVIDENCING THE
LESSOR'S PURCHASE OF THE EQUIPMENT FROM THE SUPPLIER CHOSEN BY LESSEE AND
THAT LESSEE SHOULD CONTRACT THE SUPPLIER OF THE EQUIPMENT FOR A DESCRIPTION
OF ANY SUCH RIGHTS.
4. ASSIGNMENT BY LESSEE PROHIBITED WITHOUT LESSOR'S PRIOR WRITTEN CONSENT.
LESSEE SHALL NOT ASSIGN THIS LEASE OR SUBLEASE THE EQUIPMENT OR ANY
INTEREST THEREIN, OR TRANSFER THIS LEASE, OR OTHERWISE DISPOSE OF THE
EQUIPMENT COVERED HEREBY.
5. NO WARRANTY. Lessee has selected both equipment and the supplier
thereof. Lessor, not being the manufacturer of the equipment, nor
manufacturer's agent, MAKES NO WARRANTY OR REPRESENTATION, EITHER EXPRESS
OR IMPLIED, AS TO THE FITNESS FOR A PARTICULAR USE OR OTHERWISE, QUALITY,
DESIGN, CONDITION, CAPACITY, SUITABILITY, MERCHANTABILITY OR PERFORMANCE OF
THE EQUIPMENT OR OF THE MATERIAL OR WORKMANSHIP THEREOF, IT BEING AGREED
THAT THE EQUIPMENT IS LEASED "AS IS" AND THAT ALL SUCH RISKS, AS BETWEEN
THE LESSOR AND THE LESSEE, ARE TO BE BORNE BY THE LESSEE AT ITS SOLE RISK
AND EXPENSE. Lessee accordingly agrees not to assert any claim whatsoever
against the Lessor based thereon. In addition, Lessee waves any and all
rights and remedies conferred by UCC 2A-508 through 2A-522, including, but
not limited to, the Lessee's right to (a) cancel or repudiate the lease;
(b) reject or revoke acceptance of the Leased property; (c) deduct from
rental payments all or any part of any claimed damages resulting form the
Lessor's default under the Lease; (d) recover from the
-3-
<PAGE>
Lessor any general special, incidental, or consequential damages, for any
reason whatsoever. Lessee further waives any and all rights, now or
hereafter conferred by statute or otherwise, that may require the Lessor to
sell, release, or otherwise use or dispose of the Leased property in
mitigation of the Lessor's damages or that may otherwise limit or modify
any of the Lessor's rights or remedies hereunder.
6. APPLICABLE LAW AND VENUE. ALL MATTERS INVOLVING THE CONSTRUCTION,
VALIDITY, PERFORMANCE, OR ENFORCEMENT OF THIS LEASE SHALL BE GOVERNED BY
THE LAWS OF THE STATE OF WASHINGTON. THE LESSEE FURTHER AGREES THAT THE
COURTS OF THE STATE OF WASHINGTON SHALL HAVE EXCLUSIVE JURISDICTION OVER
ALL DISPUTES, SUITS, OR ACTIONS ARISING OUT OF OR IN ANY WAY CONNECTED TO
THIS LEASE. AT THE LESSOR'S OPTION, VENUE OF ANY SUCH ACTION SHALL LIE IN
PIERCE COUNTY, WASHINGTON.
7. TERM. The initial term of this lease is set forth on the first page of
this lease agreement. The term begins upon which of the following dates is
earlier: (a) the date Lessee requests Lessor to make payment to the
Supplier; or (b) the Acceptance Date as indicated on the
inspection/verification certificate.
8. LEASE PAYMENT-SECURITY DEPOSIT. The lease payments for the equipment
leased shall be in the amount designated in the schedule of payments and
shall commence on the indicated payment due date immediately following the
equipment acceptance date. Lessee shall pay Lessor said lease payments on
or before the due date and at the office of Lessor or to such other person
or place as Lessor may designate in writing. Lessee agrees to pay pro rata
rental (based on the monthly lease payments) for the period from the
Acceptance Date, indicated on the Inspection/Verification Certificate, to
the due date of the first payment. Said pro rata rental shall be in
addition to the first payment and shall be made simultaneously with the
first payment. Prepayments are credited with one payment being applied to
the first month's rental and any other prepayment(s) are applied to the
last month('s) rental(s). The security deposit as designated in the Lease
shall remain as security for performance of the terms and conditions of the
Lease and shall remain with the Lessor unto termination of the Lease,
absent breach of any terms of the Lease by Lessee unless otherwise agreed
to in writing by both parties.
9. LATE CHARGES AND COLLECTION CHARGES. A late charge of 10% of the total
monthly lease payment, or $10, whichever is greater, will be assessed when
a payment is not received within 10 days of the due date. An additional
late charge will be assessed for each month a payment remains unpaid. If
Lessee's delinquency requires additional collection efforts, a charge will
be assessed in accordance with Lessor's collection charge schedule.
10. LOCATION AND USE OF EQUIPMENT. Lessee shall keep the equipment at the
location designated in the Lease, unless Lessor in writing permits its
removal. Said equipment shall be used solely in the conduct of Lessee's
business and Lessee warrants that
-4-
<PAGE>
property leased is for commercial or business purposes and not for
consumer, personal, home or family purposes.
11. ARBITRATION. Any controversy or claim arising out of this lease or the
breach thereof may at the option of the Lessor be settled by arbitration in
accordance with the LAWS OF THE STATE OF WASHINGTON and judgment upon the
award rendered by the arbiter(s) may be entered in any court having
jurisdiction thereof. Arbitration shall be held in the City of Tacoma,
State of Washington.
12. SURRENDER OF EQUIPMENT. At the expiration of this lease, or upon demand
by Lessor pursuant to Paragraph 19 of this lease, Lessee at its expense
shall return the equipment in proper working order, condition and repair by
delivering it packed and ready for shipment to such place or on board such
carrier as Lessor may specify. WARNING: FAILURE TO PROMPTLY RETURN THE
LEASED PROPERTY MAY RESULT IN CRIMINAL PROSECUTION.
13. NOTICES. Services of all notices under this agreement shall be
sufficient if given personally or mailed to Lessor at 3901 Plaza, 3901 S.
Fife St., P.O. Box 11309, Tacoma, Washington 98411-0309, or to Lessee at
Lessee's last known address or at such other address as a party may provide
in writing from time to time. Any such notice mailed to such address shall
be effective when deposited in the United States mail duly addressed and
postage prepaid.
14. LIABILITY AND INDEMNITY - LOSS AND DAMAGE. Lessee shall indemnify and
hold Lessor harmless from any and all injury to or loss of the equipment
from whatever cause, and from all liability arising out of the manufacture,
selection, operation, use, maintenance, or delivery thereof, including
attorney's fees. In the event of loss or damage of any kind whatsoever to
the equipment, or to any part hereof, Lessee, at the option of the Lessor,
shall (a) Place the same in good condition, repair and working order; or
(b) Replace the same, with like property of the same or greater value:
provided, however, at Lessee's option, the remaining obligation of the
lease can be satisfied by the payment of the remaining unpaid lease
payments and the estimated value of the equipment at the expiration of the
lease, and other amounts due under the lease, less the net amount of the
recovery, if any, actually received by the Lessor from insurance or
otherwise for such loss or damage. Lessor shall not be obligated to
undertake by litigation or otherwise the collection of any claim against
any person for loss or damage of the equipment. Except as expressly
provided in this paragraph, total or partial destruction of any equipment
or total or partial loss of use or possession thereof to Lessee shall not
release or relieve Lessee from the duty to pay the lease payments herein
provided.
15. INSURANCE. Lessee, at its own expense, shall keep said equipment
insured for the full term of this lease and any renewals or extensions
thereof, for the full insurable value thereof against all risks of loss or
damage, and against such other risks in such amounts as Lessor may specify,
including liability insurance, with limits not less than $500,000 (bodily
-5-
<PAGE>
injury and property damage) combined single limit. Provided, however, in
those instances where Lessee is leasing equipment defined by Lessor as "
mobil equipment," Lessee shall procure and maintain, for the full lease
term, all risk physical damage insurance as opposed to insurance against
fire and theft, with extended or combined coverage. All insurance policies
must provide that no cancellation shall be effective without thirty (30)
days' prior written notice to Lessor. Lessee shall deliver to Lessor the
policies or evidence of insurance with a standard form of endorsement
attached thereto showing Lessor to be named as an additional insured,
together with receipts for the premiums thereunder. Lessee shall, at the
request of Lessor, name as Loss Payee such party who may have a security
interest in the equipment.
16. LESSEE'S FAILURE TO PAY TAXES, INSURANCE, ETC. Lessor shall have the
right, but not the obligation, without notice to or demand upon Lessee and
without releasing Lessee from any obligation hereunder, to make or do the
same and to pay, purchase, contest, or compromise any encumbrance, charge
or lien which in the judgment of Lessor appears to effect the equipment,
and in exercising such rights, incur any liability and expend whatever
amounts in its absolute discretion it may deem necessary therefore. Should
Lessee fail to provide Lessor the policies or evidence of insurance
described herein, Lessee shall be assessed as to Lessor's purchase of
insurance and also agrees that a charge therefore will be paid by the
Lessee. All sums so incurred or expended by Lessor shall be without demand
immediately due and payable by Lessee and shall bear interest at eighteen
Percent (18%) per annum if not prohibited by law, otherwise at the highest
lawful contract rate.
17. OWNERSHIP. The equipment is and shall be at all times the sole and
exclusive property of Lessor. This lease and the equipment described herein
may be subject to a preexisting security agreement in favor of a bank or
another financial institution.
18. AUTHORITY TO SIGN. If Lessee is a partnership or corporation, the
person signing the Lease on behalf of such partnership or corporation
hereby warrants that (s)he has full authority from the partnership or
corporation to sign this base and obligate the partnership or corporation.
19. DEFAULT-REMEDIES.
a) An event of default shall occur if:
(1) Lessee fails to pay any Lease installment and such failure
continues for a period of ten (10) days:
(2) Lessee shall fail to perform or observe any covenant,
condition or obligation to be performed or observed by it hereunder and
such failure continues uncured for fifteen (15) days:
(3) Lessee becomes insolvent or makes an assignment for the
benefit of creditors;
(4) Lessee applies for or consents to the appointment of a
receiver, trustee or liquidator of Lessee, or of all or a substantial part
of the assets of Lessee, or if such receiver, trustee or Liquidator is
appointed without the application or consent of Lessee, or
-6-
<PAGE>
to the extent permitted by law, if a petition is filed by or against the
Lessee under the bankruptcy act, or any amendment thereto (including
without limitation a petition for reorganization, arrangement or extension)
or under any other insolvency law or law providing for relief of debtors;
(5) Lessee attempts to remove, sell, transfer, encumber, part
with possession or sublet the equipment or any item thereof. Lessee agrees
it will not replace or substitute the equipment described herein for any
reason whatsoever without first obtaining Lessor's consent. Failure to
obtain Lessor's consent will constitute a default on part of the Lessee.
Further, the term "equipment" shall include any and all replacement or
substituted equipment, whether or not such replacement or substitution
occurred with Lessor's consent.
b) Upon the occurrence of an event of default, Lessor shall have the
right to exercise any one or more of the following remedies:
(1) To declare the entire unpaid lease payments and other sums
payable by Lessee hereunder to be immediately due and payable:
(2) Cause Lessee, at Lessee's expense, promptly to return any or
all of the equipment to Lessor, all without demand or legal process, and to
allow Lessor to enter into the premises where the equipment may be found
and take possession of or remove the same, whereupon all rights of the
Lessee in the equipment shall terminate absolutely; and
(i) Retain the equipment and all lease payments made
hereunder, or
(ii) Retain all prior lease payments and sell the equipment
at public or private sale, with or without notice to Lessee. The sale
price, less 10% for selling costs, will be credited against the remaining
unpaid lease payments, unpaid late charges, estimated value of equipment at
the expiration of the lease, charges for retaking, storage, repairing and
reselling the equipment, reasonable attorney's fees incurred by the Lessor
and other amounts due under the lease. The Lessee shall remain liable for
the deficiency and any surplus remaining after such application of proceeds
of sale shall be paid to the Lessee, or to whosoever may be lawfully
entitled to receive the same; or
(iii) Retain the equipment and all prior payments, with the
Lessee remaining liable for the unpaid lease payments, unpaid late charges,
charges for retaking and restoring equipment to proper order and working
condition, reasonable attorney's fees incurred by Lessor, together with
other amounts due under the Lease; or
(iv) Lease the equipment, or any portion thereof, for such
period, rental, and to such persons as Lessor shall select, and credit
Lessee with an amount equal to Lessor's capital cost of this new lease less
ten percent (10%) after declaring all costs and expenses incurred in
connection with the recovery, repair, storage and leasing of the equipment
in payment of the lease and other obligations due from Lessee to Lessor
hereunder, Lessee remaining responsible for any deficiency. It is agreed
that the amounts to be retained by the Lessor and the balance to be paid by
the Lessee under this paragraph (2) shall not be a penalty but shall be as
and for liquidated damages for the breach of this lease and as a reasonable
return for the use of the equipment and for the depreciation thereof.
(3) Lessor may pursue any other remedy at law or in equity.
-7-
<PAGE>
(4) No remedy hereon conferred upon or reserved to Lessor is
intended to be exclusive of any other remedy herein or by law provided, but
shall be cumulative and in addition to every other remedy available to
Lessor.
20. ATTORNEY'S FEES AND EXPENSE. In the event the Lessor is required to
retain an attorney to assist in the enforcement of its rights under this
lease agreement, it shall be entitled to a reasonable attorney's fee, in
addition to costs and necessary disbursements, whether or not suit becomes
necessary.
21. MAINTENANCE AND REPAIR. Lessor shall not be obligated to install,
erect, test, adjust, service or make repairs or replacements to the
equipment. Lessee shall not incur for Lessor's account or liability any
expense therefore without Lessor's prior written consent. Lessee shall bear
all the expense of all necessary repairs, maintenance, operation, and
replacements to be made to maintain the equipment in proper working
condition, reasonable wear and tear excepted.
22. OPERATION OF EQUIPMENT. Lessee shall cause the equipment to be operated
by competent employees only, and shall pay all expenses of operation.
Lessee shall comply with all laws and regulations relating to ownership,
possession, operation, use and maintenance of the equipment. Lessee shall
hold Lessor harmless from any and all actual or asserted violations of the
aforesaid covenant.
23. TAXES. Lessee shall pay and discharge all sales, use, property and
other tax or taxes now or hereafter imposed by any state, federal or local
government upon the equipment based upon the ownership, leasing, renting,
sale, possession or use thereof, whether the same be assessed to Lessor or
Lessee, together with any penalties or interest in connection therewith,
and will, from time to time on request of Lessor, submit written evidence
of the payment of all the governmental obligations mentioned in this
paragraph. The Lessor will, on any property tax returns required to be
filed by it, include the property covered by this lease or any substitution
or additions thereto as property in the possession of Lessee for purposes
of tax assessments.
24. LESSOR'S ASSIGNMENT. Lessee may assign the lease payments reserved
herein or all or any of Lessor's other rights hereunder. After such
assignment, Lessee waives any right Lessee may have to claim or assert any
defenses, setoffs or counterclaims against assignee of the Lessor. Lessee
will settle all claims arising out of alleged breach of warranties,
defenses, setoffs and counterclaims it may have against Lessor directly
with Lessor and not set up any such against Lessor's assignee. An assignee
of Lessor shall not be obligated to perform any of Lessor's obligations
under this lease. Lessee, on receiving notice of any such assignment, shall
abide thereby and make payment as may therein be directed. Following such
assignment, solely for the purpose of determining assignee's rights
hereunder, the term Lessor shall be deemed to include or refer to Lessor's
assignee. Lessee acknowledges that the equipment may be subject to a
security interest which is prior to Lessee's interest in the equipment.
-8-
<PAGE>
25. PERSONAL PROPERTY. The equipment is, and shall at all times be and
remain, personal property notwithstanding that the equipment or any part
thereof may now be, or hereafter become, in any manner affixed or attached
to, or imbedded in, or permanently resting upon, real property or any
building thereon, or attached in any manner to what is permanent as by
means of cement, plaster, nails, bolts, screws or otherwise. Lessee shall
obtain the necessary permission from the owner of any real property where
the equipment is to be affixed to the realty or be deemed a fixture in
order that said leased property shall at all times be severable and
removable therefrom by the Lessor, free of any right, title, claim or
interest of the property owner and of the Lessee except as herein provided.
The equipment shall at all times remain the property of Lessor.
26. LESSOR'S ENCUMBRANCES. In the event Lessor defaults in the payment of
any sum to be paid pursuant to any conditional sales contract, chattel
mortgage or purchase money security agreement, Lessee may pay the lease
payment to the holder of said encumbrance after notice of default, and to
the extent thereof such payment shall constitute payment of the base
payment to Lessor.
27. FINANCIAL STATEMENTS. The Lessor may require from time to time, and
Lessee agrees to furnish, statements setting forth the current financial
condition and operations of Lessee.
28. MISCELLANEOUS. Lessee will not change or remove any insignia or
lettering on the equipment and shall conspicuously identify each item of
the leased equipment by suitable lettering thereto to indicate Lessor's
ownership. All transportation charges shall be borne by Lessee. Lessee
waves all rights under all exemption laws. Lessee admits the receipt of a
true copy of this lease. This lease is irrevocable for the full term hereof
and for the aggregate lease payments herein reserved, and the lease
payments shall not abate by reason of termination of Lessee's right of
possession and/or the taking of possession by Lessor or for any other
reason. Delinquent lease installments and other sums due under this lease
shall bear interest at eighteen percent (18%) per annum if not prohibited
by law, otherwise at the highest lawful contract rate. Lessor at its option
may utilize this lease as a UCC financing statement for filing purposes.
Lessee grants to Lessor a specific power of attorney for Lessor to use to
sign and file on Lessee's behalf any document Lessor deems necessary to
perfect or protect Lessor's interest in the equipment or pursuant to the
Uniform Commercial Code. If Lessor is required by law to discount any
unpaid basepayment or other sums payable by Lessee hereunder, then the
parties hereto agree that the discount rate used shall be five percent (5%)
annually. If any provision of this Lease is held to be contrary to law,
such provision shall be disregarded and the remainder of this agreement
shall be enforceable according to its terms.
-9-
<PAGE>
GUARANTEE
To induce Financial Pacific Co. ("Lessor") to enter into a Lease with
Televar Northwest, Inc. ("Lessee"), the undersigned Guarantor
unconditionally guarantees to Lessor the prompt payment when due of all
Lessee's obligations to Lessor under the lease. Lessor shall not be
required to proceed against the Lessee or the equipment or enforce any
other remedy before proceeding against the undersigned. The undersigned
waives notice of acceptance hereof and all other notices or demand of any
hind to which the undersigned may be entitled. The undersigned consents to
any extensions or modifications granted to Lessee and the release and/or
compromise of any obligations of Lessee or any other obligors and
guarantors without notice and without in any way releasing the undersigned
from his or her obligations hereunder. Guarantor waives any right to
require Lessor to apply payments in a certain manner and acknowledges that
Lessor may apply payments received in the fashion most advantageous to the
Lessor. Furthermore, Guarantor waives any and all claims against the
Lessee, by subrogation or otherwise, until such time as Lessee's
obligations to Lessor are fully and finally satisfied. This is a continuing
guarantee and shall not be discharged, impaired or affected by death of the
undersigned or the existence or nonexistence of the Lessee as a legal
entity. This continuing Guarantee shall bind the heirs, administrators,
representatives, successors, and assigns of undersigned and may be enforced
by or for the benefit of any assignee or successor of Lessor.
The provisions of this Lease Guarantee shall extend to and apply to
all the obligations of the Lessee under all lease agreements executed by
Lessee for the benefit of Lessor, whether executed before or after the date
of this guarantee, and whether set forth in separate lease agreements,
schedules, applications, orders or collateral documents (all of which shall
be referred to herein, both individually and collectively, as the "Lease
Agreement"). The execution of this Lease Guarantee shall not extinguish,
release or waive any obligations, promises, or guarantees contained in any
Lease Guarantee previously executed by Guarantor for the benefit of the
Lessor.
Any married person signing this Lease Guarantee warrants that he or
she has the authority to bind and obligate his or her marital community and
that by signing, his or her marital community is obligated hereunder.
Further, by signing this Guarantee it is agreed that recourse may be
against both his or her separate property and the property of his or her
marital community on account of all of his or her obligations hereunder.
The undersigned agrees to pay a reasonable attorney's fee, and all other
costs and expenses incurred by the Lessor or its successors or assigns in
the enforcement of the Guarantee, whether or not a lawsuit is started.
Law Which Applies
THIS AGREEMENT IS GOVERNED BY WASHINGTON LAW. GUARANTOR CONSENTS TO THE
PERSONAL JURISDICTION OF THE COURTS OF THE STATE OF WASHINGTON AND THE
FEDERAL COURTS LOCATED IN THE STATE OF
-10-
<PAGE>
WASHINGTON SO THAT LESSOR MAY SUE GUARANTOR IN THE STATE OF WASHINGTON TO
ENFORCE THIS GUARANTEE. GUARANTOR AGREES NOT TO CLAIM THAT WASHINGTON IS AN
INCONVENIENT PLACE FOR TRIAL. AT LESSOR'S OPTION, THE VENUE (LOCATION) OF
ANY SUIT TO ENFORCE THIS AGREEMENT MAY BE IN PIERCE COUNTY, WASHINGTON.
GUARANTOR WAIVES THE RIGHT OF JURY TRIAL.
Whole Agreement
This Guarantee contains the entire understanding between Lessor and Guarantor.
/s/ (No Title) /s/ (No Title)
- ---------------------------------- ---------------------------------------
Charles D. Dejong Mark D. Hamilton
Date 8/6/96 Date
------------------------------- -----------------------------------
(No Title) /s/ (No Title)
- ---------------------------------- ---------------------------------------
Roger Vallo Donald A. Wright
Date Date 8/6/96
------------------------------- -----------------------------------
DELIVERY AND ACCEPTANCE AUTHORIZATION
Lessor's signature authorizes Lessor to verify by phone with a
representative of Lessee the date the Equipment was accepted by the Lessee;
the Equipment description, including the serial numbers; the schedule of
lease payments; that all necessary installation has been completed; that
the Equipment has been examined by Lessee and is in good operating order
and condition and is in all respects satisfactory to Lessee and that
Equipment is accepted by Lessee for all purposes under the lease. This
information will be recorded on an Inspection/Verification Certificate, a
copy of which will be forwarded to Lessee upon completion by Lessor. Lessee
hereby authorizes Lessor to either insert or correct the Lease and/or
Vendor name, Equipment description, Equipment location and schedule of
Lease payments. Lessee hereby authorizes Financial Pacific Co. to make
payment to the Vendor upon completion of the Inspection/Verification
Certificate.
LESSEE: Televar Northwest, Inc.
/s/ CEO & Individually Date: 8/6/96
- ---------------------------------------- ------------------
Charles D. Dejong Title
-11-
<PAGE>
EQUIPMENT LIST
LEASE NO.: __________________________
LEASE DATE: __________________________
Quantity Description
1 HSSI Cable, Male-to-Male Connectors, 10
1 Standard Router Software Documentation
1 Cisco 7500 Series IOS IP Only Feature Se
1 RSP1, RSP7 RSP7000 Interdomain Routing
1 RSP1, RSP2, RSF7000 WAN Packet
1 Cisco 7513 Power Supply Spare, AC, US
1 Cisco 7513 AC Power Supply Option (defau
1 HSSI Interface Processor
1 8-Port Serial Interface Processor
1 6 Port Ethernet Interface Processor
1 RSP 128MB DRAM Option
1 RSP Flash Credit Card: 20MB Option
1 Cisco 7513 13-slot, 2 CyBus, 1 RSP2, 1A
LESSEE: TELEVAR NORTHWEST, INC.
By: /s/
--------------------------------
Charles D. Dejong
Its: CEO & Individually
Date: 8/6/96
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ADDENDUM TO LEASE
PURCHASE AND JURISDICTION AGREEMENT
Lease No.: _______________________________________
Lease Date: _______________________________________
1. PURCHASE AGREEMENT
Upon termination of the above-referenced lease, and provided Lessee is
not in default under the terms of the lease:
Lessor agrees to sell, and Lessee hereby agrees to purchase the
equipment described in the above referenced lease for a purchase
price of $7,795.80 plus any applicable taxes and other sums due
under the lease. Lessor and Lessee agree to this modification to
paragraph 17 of the Lease Agreement and further agree to treat
the least as a financing transaction.
2. JURISDICTION AGREEMENT
The Lessee, hereby expressly agrees that the lease, lease rates,
rental rates, finance charges, each guaranty, and all documents
executed in connection with the same, shall be governed by, and
construed in accordance with the laws of the State of Washington.
Further, the Lessee agrees that the courts of the State of
Washington shall have jurisdiction of all suits and actions
arising out of the lease, and all documents executed in
connection therewith, and that venue of any such action or suit
shall be in Pierce County, State of Washington.
LESSOR: LESSEE:
Financial Pacific Company Televar Northwest, Inc.
By____________________________ By /s/
--------------------------------
Charles D. Dejong
Its____________________________ Its CEO & Individually
Date:_________________________ Date: 8/6/96
-----------------------------
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LEASE AGREEMENT
THIS AGREEMENT of lease, made and entered into this 26th day of July,
1993, by and between E. GUS NOYD and LAURA JEAN NOYD, husband and wife,
hereinafter referred to as "Lessor" and TELEVAR NORTHWEST, INC., a
Washington Corporation, hereinafter referred to as "Lessee",
W I T N E S S E T H:
1. DESCRIPTION: Lessor, for and in consideration of the rentals
hereinafter provided, and the covenants and agreements hereinafter
contained, hereby demise, let and lease unto the Lessee that property
commonly known as 238 and 240 North Mission Street, Wenatchee, Chelan
County, Washington, the legal description of which is an follows:
Legal description attached as Exhibit "A".
2. TERM OF LEASE: The term of this Lease shall be for seven (7) years
commencing the 1st day of August, 1993, and terminating on the 31st day of
July, 2000.
3. RENTAL AMOUNT.
A. The Lessee shall pay to the Lessor monthly rent as set forth
herein. All rent shall be payable on the first day of each and every month
during the term of this Lease commencing August 1, 1993. On August 1 of
each year the monthly rent shall be adjusted in accordance with the
following schedule:
Year 1 $2,600.00 per month.
Year 2 $2,975.00 per month.
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Year 3 $3,350.00 per month.
Year 4 $3,725.00 per month.
Year 5 $4,100.00 per month.
Year 6 $4,475.00 per month.
Year 7 $4,850.00 per month.
B. All rental payments shall be made to the Lessor at the
following address: NOYD PROPERTIES, P.O. Box 1509, Wenatchee, Washington
98807-1509, or the Lessee may make rental payments to the Lessor by
personally delivering said rental payments to the Lessor at 203 Orondo
Street, Wenatchee, Washington 98801. In the event that said monthly
payments are delivered to Lessor later than 5:00 p.m. on the 5th day of any
month during the term of this Lease, there shall be a late charge in the
amount of FIVE PERCENT (5%) of the monthly rental due for each month that
the rent is delinquent.
4. USE: Lessee may use and occupy the premises for office, sales,
service, and display of products being sold by Lessee. Use of premises
shall not change without prior written consent of the Lessor. No unlawful
use of the premises shall be allowed. Lessee agrees to maintain the
premises in a neat and orderly condition throughout the term of the Lease.
5. ALTERATIONS AND MODIFICATIONS: Lessee accepts the premises in the
condition now existing and shall not make any material alterations,
additions or modifications to the premises unless the same are approved by
the Lessor in advance. All alterations, additions or modifications of the
premises shall be at Lessee's expense. All such alterations, additions or
modifications shall remain as part of the premises upon termination of the
Lease. During the term of this Lease the Lessee shall do all painting and
redecorating of the interior
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of the building at its own expense. Lessee shall keep the demised premises
and the property on which the demised premises is situated free from any
liens arising out of the occupancy by Lessee, or any work or improvements
made therein at Lessee's expense and which have been consented to by
Lessor.
6. MAINTENANCE AND REPAIRS:
A. Lessor. In maintenance and repair of the premises, the
Lessor's responsibility shall be limited to maintaining the roof,
foundation and structural walls.
B. Lessee. Lessee shall maintain the interior of the premises in
a good state of repair including light fixtures, painting and replacement
of glass as may be needed. Lessee shall be responsible for all maintenance
and repairs not expressly assumed by the Lessor. Lessee shall maintain the
exterior of the premises including the landscaping.
C. Lessor shall not be liable for any damage done or occasioned
by plumbing, electrical wiring, fixtures, gas, water, steam or other pipes
or sewage, or by water, snow or ice being upon or coming through the roof,
doors, or other parts of the premises.
7. UTILITIES.
A. Lessee. The Lessee shall be responsible for all utilities and
services, including Whitman Way Assn. dues and/or operating assessments not
expressly assumed by the Lessor under this Lease. Lessee shall hold the
Lessor harmless from any liability relating to utilities and services which
are the responsibility of the Lessee.
B. Lessor. Lessor shall not be responsible for providing any
utilities or services to the premises subject to this Lease.
8. COMPLIANCE WITH LAWS AND COVENANTS.
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A. Lessee shall keep the premises in a clean, sanitary condition
and shall comply with all lawful rules and regulations, ordinances and
statutes applicable to the maintenance of the premises imposed by any
governmental authority. Lessee shall not use any portion of the premises
for any illegal purpose.
B. Lessee acknowledges that the premises are subject to mutual
covenants, restrictions, conditions and reciprocal easements of the Whitman
Way Professional Center which are of record under Chelan County Auditor's
No. 8502140037. Lessee agrees to abide by the obligations and restrictions
set forth in the aforementioned document. Lessee assumes all obligations to
the premises as set forth in the aforementioned document which is attached
hereto as Exhibit "B".
9. INSURANCE:
A. Lessor. Lessor shall keep the building insured against loss by
special perils property insurance to the extent of the reasonable insurable
value thereof.
B. Lessee. Lessee agrees to provide single limit liability
insurance with minimum limits of $500,000.00 against loss by reason of
accident causing damage to persons and/or property while on said premises
during the term of this Lease. Lessee agrees to provide Lessor with annual
written conformation that the premises are insured. Lessor shall be named
as an additional insured under any such policy. Lessee shall hold the
Lessor harmless from all damage to personal property arising out of the use
of the premises by the Lessee. Lessee shall be responsible for providing
insurance coverage for the contents of the premises.
10. TAXES:
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A. Lessor. Lessor shall pay the annual real estate taxes assessed
or levied against the premises to the extent of the dollar amount assessed
and levied for 1993 base year.
B. Lessee. Lessee shall pay all taxes levied for personal
property located on the premises and shall pay 50% of that portion of the
real property taxes assessed and levied against the premises which exceeds
the amount levied for the 1993 base year.
11. DAMAGE BY FIRE - DESTRUCTION:
A. In the event of a partial destruction of the premises by fire
or other casualty, the Lessor may elect to terminate this Lease or rebuild
and repair said premises. In the event Lessor elects to repair and rebuild,
the rent shall proportionately abate during the time between such partial
destruction and repair or rebuilding. The election to repair or rebuild
must be made within sixty (60) days after the event giving rise thereto and
pursued with due diligence and dispatch.
B. In the event the premises shall be destroyed to the extent of
50% or more of the value thereof, the Lessor may elect to rebuild or not to
rebuild and shall notify Lessee of its intention within thirty (30) days
after such destruction. In case Lessor elects to not rebuild, this Lease
shall terminate without any liability to Lessor by Lessee because of such
election.
12. SUBLEASING: Lessee may sublet portions of the premises on terms
not inconsistent with this Lease. Lessee shall not assign this Lease
without the written consent of the Lessor which shall not be unreasonably
withheld. Any such assignment or subletting shall not relieve the Lessee of
its obligations under the terms of this Lease. Lessee shall not mortgage,
pledge or in any way encumber this Lease or any part thereof without the
prior written consent of the Lessor.
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13. SIGNS: The installation of all signs or symbols posted, displayed
or erected on the exterior or interior of the premises by Lessee shall be
installed in keeping with the requirements of the City of Wenatchee and
covenants in Exhibit B.
14. PEACEABLE ENJOYMENT - RIGHT OF ENTRY.
A. Upon the commencement of the Lease term, the Lessee shall be
entitled to peaceable enjoyment of the premises free from interference by
the Lessor.
B. The Lessor, its agents and employees, shall have the right on
prior notice and at reasonable times to enter said premises for the purpose
of inspecting the same or for any other purpose required in connection with
the Lease or the Lessor's ownership of the premises.
15. DEFAULT AND REENTRY:
A. Time is of the essence of this Lease. If any rents reserved
above, or any part thereof, shall be and remain unpaid when the sum shall
become due, or if Lessee shall violate or default in any of the covenants
and agreements herein contained, the Lessor may cancel this Lease by giving
the notice required by law, and reenter the premises. Notwithstanding such
reentry by the Lessor, the liability of the Lessee for the rent provided
for herein shall not be extinguished for the balance of the term of this
Lease. Lessee covenants and agrees to make good to the Lessor any
deficiency arising from the reentry and the reletting of the premises at a
lesser rental than herein agreed to. Lessee shall pay such deficiency each
month as the amount thereof is ascertained by Lessor.
B. In the event Lessee shall become either insolvent or bankrupt,
or if a receiver is appointed, then the Lessor may cancel this Lease at its
option after giving thirty (30) days written notice.
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16. RISK OF LOSS: Risk of all loss, injury and damage to personal
property located upon or about said premises, however caused, is hereby
assumed by the Lessee notwithstanding any other provision herein to the
contrary.
17. MUTUAL RELEASE: The Lessor and the Lessee and all parties claiming
under them hereby mutually release and discharge each other from all claims
and liabilities arising from or caused by any hazard covered by insurance
on the leased premises, or covered by insurance in connection with the
property on or activities conducted on the leased property, regardless of
the cause of the damage or loss.
18. LESSOR EXONERATION: The Lessor shall not be liable for injury or
damage to person or property occurring within the lease property, unless
caused by or resulting from the negligence of the Lessor, or any of
Lessor's agents or employees in operation or maintenance of the leased
premises.
19. CONDEMNATION: If the whole of the leased premises or such portion
thereof as will make the leased premises unsuitable for the purpose herein
leased is taken by eminent domain, this Lease shall expire on the date when
the leased premises shall be so taken and the rent shall be apportioned as
of that date. Neither the Lessor nor the Lessee shall have any rights in or
to any award made to the other by the condemning authority.
20. ATTORNEYS FEES AND COSTS: In the event suit shall be brought for
any unlawful detainer of said premises, for the recovery of any rent or
other sums due under the provisions of this Lease or because of the breach
of any other covenant herein contained, the prevailing party shall be
entitled to payment by the other party of its costs incurred in such
proceeding, including a reasonable attorneys fee.
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21. NON-WAIVER OF BREACH: The failure of the Lessor to insist upon
strict performance of any of the covenants or agreements of this Lease, or
to exercise any options herein conferred in any one or more instances,
shall not be construed as a waiver or relinquishment of any such covenant
or right or any other covenant or agreement, but the same shall be and
remain in full force and effect.
22. LESSOR'S RIGHT TO CURE LESSEE'S OBLIGATION: In the event that the
Lessee fails to insure as herein required or fails to make any payment
which Lessee is obligated to make under the terms of this Lease, the Lessor
may undertake and fulfill the Lessee's obligation and any sums paid by the
Lessor shall be immediately due and payable by the Lessee to the Lessor,
including any costs and attorney's fees incurred because of the Lessee's
failure to comply with the terms of the Lease.
23. SURRENDER: At the expiration of this Lease term, the Lessee shall
surrender the leased premises in as good a condition as it was in at the
beginning of this term, reasonable use and wear and damages by the elements
excepted.
24. BINDING EFFECT: This Lease Agreement shall be binding not only on
the parties hereto, but their successors, assigns and personal
representatives.
25. LAW GOVERNING: The terms of this Lease shall be governed in
accordance with the laws of the State of Washington. Venue for any action
arising from this Lease shall be as between the Lessor and the Lessee shall
lie in Chelan County.
26. ENTIRE AGREEMENT: This Lease contains the entirety of the
agreement between the Lessor and the Lessee and shall not otherwise be
modified unless such modifications are in writing and signed by all parties
hereto.
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IN WITNESS WHEREOF, the parties hereto have hereunto set their hands
and seals the day and year first above written.
LESSOR:
/s/
--------------------------------------
E. GUS NOYD
/s/
--------------------------------------
LAURA JEAN NOYD
LESSEE:
TELEVAR NORTHWEST, INC. INC.
By: /s/
-----------------------------------
By: Its Chief Executive Officer
STATE OF WASHINGTON )
) ss.
County of Chelan )
I certify that I know or have satisfactory evidence that E. GUS NOYD
and LAURA JEAN NOYD, husband and wife, signed this instrument and
acknowledged it to be their free and voluntary act and deed for the uses
and purposes mentioned in the instrument.
DATED this 10th day of July, 1993.
/s/
---------------------------------------
Notary Public in and for the
State of Washington, residing
at Wenatchee
Commission Expires 7-20-95
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EXHIBIT "A"
That portion of Lot 1, Block 23, Suburban Home Addition to Wenatchee,
Chelan County, Washington, according to the plat thereof recorded in
Volume 1 of Plats, Page 22, described as follows:
Beginning at a point on the North line of said lot which is 30 feet
Westerly from the Northeast corner thereof; thence run Southwesterly on the
Northerly line of said Lot for 128.75 feet; thence turn left 90degrees and
run 45 feet; thence turn left and run Northeasterly parallel with the
Northerly line of said lot for 128.75 feet to the Westerly line of Mission
Street; thence turn left 90 degrees and run Northwesterly 45 feet along
said Westerly line of Mission Street to the Point of Beginning. and
Lots 4 and 5, Keefer's Addition to Wenatchee, Chelan County,
Washington, according to the Plat thereof as recorded in Volume 1 of
Plats, Page 56.
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EXHIBIT "A"
The westerly 64.25' of Lots 8, 9 and 10, Plat of Keefer's Addition, Chelan
County, Washington, according to the Plat thereof recorded in Volume 1 of
Plats, page 56, records of said County, and the easterly 13 feet of Chelan
Avenue as shown on the Plat of Keefer's Addition to Wenatchee, Chelan
County, Washington, according to the Plat thereof, being a strip of land
____ feet lying westerly of and adjacent to Lots 8, 9 and 10, Block 1, in
said Addition, EXCEPTING the northerly 20 feet of said strip, a portion
adjacent to said Lot 10. Except the north 20 feet of said Lot 10 for Street
right of way.
The easterly 70' of Lots 8, 9 and 10, Plat of Keefer's Addition, Chelan
County, Washington, according to the Plat thereof recorded in Volume 1 of
Plats, page 56, records of said County, EXCEPT the north 20 feet of said
Lot 10 for Street right of way.
Lots 4 and 5, Plat of Keefer's Addition, Chelan County, Washington,
according to the Plat thereof recorded in Volume 1 of Plats, page 56,
records of said County, also that part of Lot 1, Block 23, Suburban Home
Addition to Wenatchee, Chelan County, Washington, according to the recorded
plat thereof, described as follows: Beginning at a point on the north line
of said lot which is 30 feet westerly from the northeast corner thereof;
thence run southwesterly on the northerly line of said lot for 128.75 feet;
thence turn left 90 degrees and run 45 feet; thence turn left and run
northeasterly parallel with the northerly line of said lot for 128.75 feet
to the westerly line of Mission Street; thence turn left 90 degrees and run
northwesterly 45 feet along said westerly line of Mission Street to the
point of beginning.
Lots 6 and 7 TOGETHER WITH the Easterly 13 feet of Chelan Street adjoining
said Lots 6 and 7, Keefers Addition to Wenatchee, according to the plat
thereof recorded in Volume 1 of Plats, page 56.
SUBJECT TO any and all liens and encumbrances of record, or otherwise.
That portion of Lot 1, Block 23, Suburban Home Addition to Wenatchee,
Chelan County, Washington, described as follows:
Beginning at the southwest corner of said Lot 1 and thence running easterly
along the southerly line thereof, 15 feet to the easterly line of Chelan
Avenue as presently established; thence northerly along said easterly line,
174.08 feet to the true point of beginning; thence easterly along a line
parallel with the northerly line of said lot, 129.41 feet; thence
northerly, along a line parallel with the westerly line of said lot 43.52
feet to the northerly line of said lot; thence westerly along the northerly
line of said lot, 129.33 feet to the easterly line of Chelan Avenue; thence
southerly, along said easterly line 43.52 feet to the true point of
beginning. TOGETHER WITH that portion of the bacated alley adjacent
thereto, AND EXCEPT that portion conveyed to City of Wenatchee by deed
recorded under Auditor's File No. 723239, Book 710, page 1512.
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Part of Lot 1, Block 23, Suburban Home Addition to Wenatchee, according to
the Plat thereof recorded in Volume 1 of Plats, Page 22, records of said
county, described as follows: Commence at the most Southerly corner of said
lot and run thence easterly along the southerly line thereof for 15 feet to
present easterly right-of-way line of Chelan Avenue; thence northerly,
parallel with the westerly line of said Lot along said right-of-way line
for 130.56 feet to the TRUE POINT OF BEGINNING: thence continue on the same
course for 43.52 feet; thence run easterly, parallel with the northerly
line of said lot for 149.41 feet; thence south, parallel with the easterly
line of said lot for 43.52 feet; thence west, parallel with the Northerly
line of said lot for 149.49 feet to the TRUE POINT OF BEGINNING, EXCEPT,
that portion conveyed to City of Wenatchee by Deed recorded 12-19-72 under
auditor's file No. 725655.
Beginning at a point 15 feet east of the southwest corner of Washington, to
wit: Lot 1, Block 23, Suburban Home Addition to Wenatchee, Chelan County,
Washington, according to the recorded plat thereof, and running thence
northerly, parallel to the east line of Chelan Street, for 43.52 feet;
thence Easterly, parallel to the South line of said Lot 1, for 129.65 feet;
thence Southerly, parallel to the East line of Chelan Street, for 43.52
feet; thence westerly, parallel to the south line of said Lot 1, for 129.74
feet to the point of beginning; TOGETHER WITH the vacated alley adjoining
and adjacent to said premises on easterly side thereof. EXCEPT the Westerly
10 feet thereof deeded to the City of Wenatchee for road purposes by deed
recorded September 11, 1972, under Auditor's File No. 722718
THIS DEED is given in fulfillment of a Real Estate Contract of the above
described property, dated February 28, 1977, between the parties hereto and
is subject to encumbrances placed or suffered on the premises by the
purchasers subsequent to said date, and
SUBJECT TO easements and restrictions of record or apparent upon the
premises, and SUBJECT to matters relating to water and water rights, and
rights of way for necessary facilities for the distribution of water and
right of entry for repair and maintenance.
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EXHIBIT "B"
The westerly 54.25' of Lots 8, 9 and 10, Plat of Keefer's Addition, Chelan
County, Washington, according to the Plat thereof recorded in Volume 1 of
Plats, page 56, records of said County, and the easterly 13 feet of Chelan
Avenue as shown on the Plat of Keefer's Addition to Wenatchee, Chelan
County, Washington, according to the Plat thereof, being a strip of land 13
feet lying westerly of and adjacent to Lots 8, 9 and 10, Block 1, in said
Addition, EXCEPTING the northerly 20 feet of said strip, a portion adjacent
to said Lot 10. Except the north 20 feet of said Lot 10 for Street right of
way.
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EXHIBIT "C"
The easterly 70' of Lots 8, 9 and 10, Plat of Keefer's Addition, Chelan
County, Washington, according to the Plat thereof recorded in Volume 1 of
Plats, page 56, records of said County, EXCEPT the north 20 feet of said
Lot 10 for Street right of way.
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EXHIBIT "B"
MUTUAL COVENANTS, RESTRICTIONS, CONDITIONS AND
RECIPROCAL EASEMENTS OF THE WHITMAN WAY PROFESSIONAL CENTER
The undersigned parties declare that they have fixed and do hereby
grant easements and establish protective restrictions, covenants and
conditions, upon certain real property (sometimes hereinafter referred to
as "Whitman Way Professional Center") in the City of Wenatchee, County of
Chelan, State of Washington, such property being legally described by
Exhibit "A" attached hereto and made a part hereof.
Said parties have fixed and do hereby grant easements and establish
protective provisions, covenants, restrictions, and provide for liens and
charges (collectively hereinafter referred to as "restrictions") upon and
subject to which the leasehold and freehold interests of the parties or any
part thereof, shall be held, used, occupied, leased, subleased, assigned,
and/or transferred, each and all of which is and are for the mutual benefit
of all of such interests in such property and of every portion thereof and
of each party hereto and which shall run with each leasehold and freehold
interest or part thereof and shall inure to and pass with each such
interest and shall apply to and bind the respective successors in interest
thereof; and all and each of such restrictions are imposed upon such
interests as a mutual, equitable servitude in favor of each such interest
and each and every portion thereof. Such easements and restrictions,
covenants and conditions are as follows:
DEFINITIONS
Common Areas. All areas within the Whitman Way Professional Center
subject to non-exclusive use as hereinafter provided shall be referred to
as "common areas". Such areas shall include motor vehicle parking areas,
roadways, walkways, and the night light,
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which are provided for the convenience of permittees. None of the
landscaped areas shall be considered a common area.
Common Expense. Any expense which is to be paid for or reimbursed by a
common area charge shall be referred to as a "common expense".
Owner. Any person, firm, or corporation which owns a fee interest in
any parcel or building in the Whitman Way Professional Center, or which
holds a vendee's interest therein under a contract of purchase, shall be
referred to as "owner".
Parking Areas. The common areas used for the parking of motor
vehicles, including incidental roadways, walkways and loading and delivery
areas, situated outside any building, shall be referred to as "parking
areas".
Party. The term "party" shall mean each of the persons executing this
instrument, or their respective successors in interest thereof.
Permittees. All owners, lessees, sublessees and occupants of land and
improvements lying within the Whitman Way Professional Center and all
employees and other business invitees of such owners, lessees, sublessees
and occupants shall be referred to as "permittees".
Whitman Way Professional Center. The real property legally described
by the attached Exhibit "A" shall be referred to as the Whitman Way
Professional Center.
RESTRICTIONS, COVENANTS AND CONDITIONS
1. Management Fee. In the event the owners deem it necessary to employ
the services of a common area manager, any reasonable fee for such service
shall be a common
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expense and shall constitute a common area charge as provided in section 10
of this agreement.
2. Landscaping - Adjacent. It shall be the sole responsibility and
duty of each owner of a building to maintain and care for in a reasonably
husbandlike manner at his own expense, any landscaped areas which lie
adjacent to and adjoin any building of the Whitman Way Professional Center
owned by him or within said owners parcel.
3. Refuse. The storage and removal of all garbage and refuse from the
Whitman Way Professional Center shall be a common expense and shall
constitute a common area charge as provided in section 10 of this
agreement. All garbage and refuse must be stored in such a manner that
parking on the premises of the Whitman Way Professional Center will not be
unreasonably interfered with.
4. Insurance. Liability insurance shall be maintained by the owners to
an extent that it provides reasonably adequate coverage, including coverage
for all maintenance services, upon the common areas of the Whitman Way
Professional Center. Such insurance shall be a common expense and shall
constitute a common area charge as provided in section 10 of this
agreement.
5. Maintenance. The owners shall provide maintenance for the common
areas, including maintenance and repair of the blacktop, sidewalks and
curbs, sweeping, and any other type of upkeep or repair that shall be
necessary. Such maintenance shall be a common expense and shall constitute
a common area charge as provided in section 10 of this agreement. The
owners shall provide for the removal of snow from all of the walk ways of
the Whitman Way Professional Center, whether a common area or otherwise,
which shall be
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a common expense and shall constitute a common area charge as provided in
section 10 of this agreement.
6. Signs - General. All entrance/exit signs or other signs containing
information applicable to all of the buildings of the Whitman Way
Professional Center generally, shall be placed and maintained at the
expense of the owners as a common expense, and shall constitute a common
area charge as provided in section 10 of this agreement.
7. Signs - Specific. Any sign which is used for the purpose of
denoting the specific business or occupancy of any building shall be
constructed in a manner, size, quality and of material that is reasonable
for such building, and shall be similar to other signs of the Whitman Way
Professional Center in like respects. Such signs shall be placed either on
the building which it identifies or as near to the building it serves to
identify as is practical, or both. The cost of purchasing, placing and
maintaining such signs shall not constitute a common expense.
8. Lights. The lights lighting the common areas shall be maintained in
good repair by the owners as a common expense, and shall constitute a
common area charge as provided in section 10 of this agreement.
9. Unobstructed Ingress/Egress. It is agreed by all parties that all
roadways providing either ingress or egress for the Whitman Way
Professional Center shall remain open and unobstructed at all times, unless
otherwise necessitated due to emergency work or repair upon common areas or
utilities.
10. Common Area Charge. All of the charges which constitute a common
area charge shall be totaled each month, and the sum of such total shall be
paid by the owners
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according to their proportional ownership of the total amount of square
footage within the buildings constituting the Whitman Way Professional
Center, which is as follows:
OWNER OF BUILDING #1 2820 sq. feet 13%
OWNER OF BUILDING #2 3108 sq. feet. 14%
OWNER OF BUILDING #3 2810 sq. feet 13%
OWNER OF BUILDING #4 3712 sq. feet 17%
OWNER OF BUILDING #5 9338 sq. feet 43%
11. Lien for Common Area Charge. Each monthly common area charge shall
be a joint and several personal debt and obligation of the owner or owners
for which the same are charged as of the time the charge is made and shall
be collectible as such. The amount of any common area charge, plus interest
at the rate of twelve percent (12%), per annum, and costs, including a
reasonable attorney's fee, shall constitute a lien upon the parcel or
parcels of the Whitman Way Professional Center owned by such owner, if,
after a period of thirty (30) days after such charge has been assessed, it
shall remain unpaid. Said lien may be held in the name of any one or more
owner of a parcel of the Whitman Way Professional Center.
PARKING EASEMENTS
There are hereby created and established non-exclusive easements upon
all of the parking spaces in all of the parking areas of the Whitman Way
Professional Center. Such easements provide for the open and non-exclusive
use of all of the parking spaces in all of the parking areas of the Whitman
Way Professional Center for the purpose of providing parking for the motor
vehicles of permittees.
UTILITY EASEMENTS
-19-
<PAGE>
There are hereby created and established non-exclusive easements upon
all of the parcels of the Whitman Way Professional Center for the
maintenance, removal, use, and replacement of sewers, water and gas pipes
and systems, drainage lines and systems, electric power conduits, wires and
systems, telephone conduits, wires and systems, and other public utilities
beneath the ground surface of the common areas, provided that in the
performance of such work the persons performing such work shall:
(1) make adequate provision for the safety and convenience of all
persons using the surface of such areas;
(2) replace and repair the areas and facilities to the condition in
which they were prior to the performance of such work;
(3) hold all other parties harmless against claims including costs and
attorney's fees arising (?) the performance of such work or use of such
easements;
(4) notify in writing the party upon whose land such work has been
performed not less than thirty (30) days prior to commencement of such
work; provided, however, that in the event of an emergency, this provision
shall be deemed waived and any party may perform necessary work after oral
approval by the other party's managing employee on the premises. Such
approval shall be confirmed by letter or telegram as soon as possible
thereafter. An owner may not unreasonably withhold approval.
SEPARATE WATER METERS-PARCELS #1 & 2
In the event the owners of parcels #1 and #2 of the Whitman Way
Professional Center, as described by Exhibits "B" and "C" respectively,
determine in writing that it shall be mutually advantageous to provide a
separate water meter and service for the building
-20-
<PAGE>
situated on parcel #2, the costs associated with such an undertaking shall
be shared equally between the owners of parcels #1 and #2, unless otherwise
agreed by them in writing. Until such time as the owners of parcels #1 and
#2 agree to provide a separate water meter for parcel #2, all costs
associated with water and sewer usage for parcels #1 and #2 shall be shared
equally between the owners of such parcels, unless otherwise agreed by them
in writing.
ADMINISTRATIVE DECISIONS
All administrative decisions which are to be made by the owners of the
Whitman Way Professional Center must be agreed upon by a majority of the
building owners after each owner has been informed of the nature of the
decision to be made.
AMENDMENTS
These Mutual Covenants, Restrictions, Conditions and Reciprocal
Easements may be amended only by agreement of at least 75% of the owners of
the Whitman Way Professional Center. For the purposes of this provision,
the owner or owners of each building shall be considered an "owner", and
shall be entitled to one vote. Prior to any vote to amend this agreement,
all of the owner's must be informed as to the proposed amendment, and
consulted in regard to the propriety of such amendment being adopted.
ADDITIONAL PROPERTY
Other properties may be added to the Whitman Way Professional Center
by amendment to this agreement. The share of a common area expense to be
born by the owners of any property subsequently added to the Whitman Way
Professional Center shall be equal to the ratio of the total amount of
square footage of all the buildings located on the
-21-
<PAGE>
property to be added to this agreement pursuant to amendment to the total
square footage of all of the buildings thereafter comprising the Whitman
Way Professional Center.
CUSICK'S, INC. SAV-MART INC., the
general partner of Sav-Mart
Associates, a limited Partnership
/s/ /s/
- ----------------------------------- --------------------------------------
LONNIE DeCAMP, President
/s/ /s/
- ----------------------------------- --------------------------------------
DR. DARYL MILLER KATHLEEN MILLER, his wife
STATE OF WASHINGTON )
: ss.
COUNTY OF CHELAN )
On this 11th day of February, 1985, before me, the undersigned, a
Notary Public in and for the State of Washington, duly commissioned and
sworn, personally appeared Earl Cusick to me known to be the President of
CUSICK'S, INC., the corporation that executed the foregoing instrument, and
acknowledged the said instrument to be the free and voluntary act and deed
of said corporation, for the uses and purposes therein mentioned, and on
oath stated that he is authorized to execute the said instrument and that
the seal affixed is the corporate seal of said corporation.
WITNESS my hand and official seal hereto affixed the day and year
first above written.
/s/
--------------------------------------
NOTARY PUBLIC in and for the State
of Washington, residing at
Wenatchee
-22-
<PAGE>
STATE OF WASHINGTON )
: ss.
COUNTY OF CHELAN )
On this 7th day of February, 1985, before me, the undersigned, a
Notary Public in and for the State of Washington, duly commissioned and
sworn, personally appeared Lonnie D. DeCamp to me known to be the
__________ President of SAV-MART INC., the corporation that executed the
foregoing instrument, and acknowledged the said instrument to be the free
and voluntary act and deed of said corporation, for the uses and purposes
therein mentioned, and on oath stated that he is authorized to execute the
said instrument and that the seal affixed is the corporate seal of said
corporation.
WITNESS my hand and official seal hereto affixed the day and year
first above written.
/s/
--------------------------------------
NOTARY PUBLIC in and for the State
of Washington, residing at
E. Wenatchee
STATE OF WASHINGTON )
: ss.
COUNTY OF CHELAN )
On this day personally appeared before me DR. DARYL MILLER and
KATHLEEN MILLER, husband and wife, to me known to be the individuals
described in and who executed the within and foregoing instrument, and
acknowledged that they signed the same as their free and voluntary act and
deed for the purposes therein mentioned.
GIVEN under my hand and official seal this 8th day of February, 1984.
/s/
--------------------------------------
NOTARY PUBLIC in and for the State
of Washington, residing at
E. Wenatchee
-23-
CASCADE LEASING COMPANY 12101
P.O. BOX 2861
WENATCHEE, WA 98807
FULL LEGAL NAME AND ADDRESS OF LESSEE SUPPLIER OF EQUIPMENT (COMPLETE ADDRESS)
TELEVAR NORTHWEST, INC. VARIOUS
215 YAKIMA STREET
WENATCHEE, WA 98801
Jointly and Severally Responsible
QUANTITY DESCRIPTION, MODEL #, CATALOG #, SERIAL # OR OTHER IDENTIFICATION
E
Q L SEE EXHIBIT "A" ATTACHED HERETO AND MADE A PART HEREOF.
U E
I A
P S
M E
E D
N
T
EQUIPMENT STREET ADDRESS______________________________________________
LOCATION IF CITY____________ COUNTY_________ STATE_______ ZIP __________
DIFFERENT
TERMS AMOUNT OF EACH MONTHLY TERM OF LEASE NO. OF SECURITY
PAYMENT (PLUS SALES OTHER/SPECIFY (NO. OF MONTHS) PAYMENTS DEPOSIT
TAX, IF APPLICABLE)
1,151.60 + WA 48 48 1,242.58
TAX 90.98 =
1,242.58
TERMS AND CONDITIONS OF LEASE
1. LEASE. Lessee hereby leases from Lessor, and Lessor leases to Lessee,
the personal property described above, together with any replacement parts,
additions, repairs or accessories now or hereafter incorporated in or
affixed to it (hereinafter referred to as the "Equipment").
2. ACCEPTANCE OF EQUIPMENT. Lessee agrees to inspect the Equipment and to
execute an Acknowledgement and Acceptance of Equipment by Lessee notice, as
provided by Lessor, after the Equipment has been delivered and after Lessee
is satisfied that the Equipment is satisfactory in every respect. Lessee
hereby authorizes Lessor to insert in this Lease serial numbers or other
identifying data with respect to the Equipment.
-1-
<PAGE>
3. DISCLAIMER OF WARRANTIES AND CLAIMS: LIMITATION OF REMEDIES. THERE ARE
NO WARRANTIES BY OR ON BEHALF OF LESSOR. Lessee acknowledges and agrees by
his signature below as follows:
(a) LESSOR MAKES NO WARRANTIES EITHER EXPRESS OR IMPLIED AS TO THE
CONDITION OF THE EQUIPMENT, ITS MERCHANTABILITY, ITS FITNESS OR SUITABILITY
FOR ANY PARTICULAR PURPOSE, ITS DESIGN, ITS CAPACITY, ITS QUALITY, OR WITH
RESPECT TO ANY CHARACTERISTICS OF THE EQUIPMENT;
(b) Lessee has fully inspected the Equipment which it has requested
Lessor to acquire and lease to Lessee, and the Equipment is in good
condition and to Lessee a complete satisfaction;
(c) Lessee leases the Equipment "as is" and with all faults;
(d) Lessee specifically acknowledges that the Equipment is leased to
Lessee solely for commercial or business purposes and not for personal,
family, household, or agricultural purposes;
(e) If the Equipment is not properly installed, does not operate as
represented or warranted by the supplier or manufacturer, or is
unsatisfactory for any reason, regardless of cause or consequence, Lessee's
only remedy, if any, shall be against the supplier or manufacturer of the
Equipment and not against Lessor;
(f) Provided Lessee is not in default under this Lease, Lessor assigns
to Lessee any warranties made by the supplier or the manufacturer of the
Equipment;
(g) LESSEE SHALL HAVE NO REMEDY FOR CONSEQUENTIAL OR INCIDENTAL
DAMAGES AGAINST LESSOR; and
(h) NO DEFECT, DAMAGE, OR UNFITNESS OF THE EQUIPMENT FOR ANY PURPOSE
SHALL RELIEVE LESSEE OF THE OBLIGATION TO PAY RENT OR RELIEVE LESSEE OF ANY
OTHER OBLIGATION UNDER THIS LEASE.
The parties have specifically negotiated and agreed to the foregoing
paragraph. INITIALS /s/
4. STATUTORY FINANCE LEASE. Lessee agrees and acknowledges that it is the
intent of both parties to this Lease that it qualify as a statutory finance
lease under Article 2A of the Uniform Commercial Code. Lessee acknowledges
and agrees that Lessee has selected both: (1) the Equipment, and (2) the
supplier from whom Lessor is to purchase the Equipment. Lessee acknowledges
that Lessor has not participated in any way in Lessee's selection of the
Equipment or of the supplier, and Lessor has not selected, manufactured, or
supplied the Equipment.
LESSEE IS ADVISED THAT IT MAY HAVE RIGHTS UNDER THE CONTRACT
EVIDENCING THE LESSOR'S PURCHASE OF THE EQUIPMENT FROM THE SUPPLIER CHOSEN
BY LESSEE AND THAT LESSEE SHOULD CONTACT THE SUPPLIER OF THE EQUIPMENT FOR
A DESCRIPTION OF ANY SUCH RIGHTS.
5. ASSIGNMENT BY LESSEE PROHIBITED. WITHOUT LESSOR'S PRIOR WRITTEN CONSENT,
LESSEE SHALL NOT ASSIGN THIS LEASE OR SUBLEASE THE EQUIPMENT OR ANY
INTEREST THEREIN, OR PLEDGE OR TRANSFER THIS LEASE, OR OTHERWISE DISPOSE OF
THE EQUIPMENT COVERED HEREBY.
6. COMMENCEMENT; RENTAL PAYMENTS; INTERIM RENTALS. This Lease shall
commence upon the written acceptance hereof by Lessor and shall end upon
full performance and observance by Lessee of each and every term, condition
and covenant set forth in this Lease, any Schedules hereto and any
extensions hereof. Rental payments shall be in the amounts and frequency as
set forth on the face of this Lease or any Schedules hereto. In addition to
regular rentals, Lessee shall pay to Lessor interim rent for the use of the
Equipment prior to the due date of the first payment. Interim rent shall be
in an amount equal to 1/30th of the
<PAGE>
monthly rental, multiplied by the number of days elapsing between the date
on which the Equipment is accepted by Lessee and the commencement date of
this Lease, together with the number of days elapsing between commencement
of the Lease and the due date of the first payment. The payment of interim
rent shall be due and payable upon Lessee's receipt of invoice from Lessor.
The rental period under the Lease shall terminate following the last day of
the terms stated on the face hereof or in any Schedule hereto unless such
Lease or Schedule has been extended or otherwise modified. Lessor shall
have no obligation to Lessee under this Lease if the Equipment, for
whatever reason, is not delivered to Lessee within ninety (90) days after
Lessee signs this Lease. Lessor shall have no obligation to Lessee under
this Lease if Lessee fails to execute and deliver to Lessor an
Acknowledgement and Acceptance of Equipment by Lessee acknowledging its
acceptance of the Equipment within thirty (30) days after it is delivered
to Lessee, with respect to this Lease or any Schedule hereto.
THIS LEASE IS NOT CANCELABLE OR TERMINABLE BY LESSEE.
SEE REVERSE SIDE FOR ADDITIONAL TERMS AND CONDITIONS WHICH ARE A PART OF
THIS LEASE.
LESSEE UNDERSTANDS AND ACKNOWLEDGES THAT NO BROKER OR SUPPLIER, NOR ANY
SALESMAN, BROKER, OR AGENT OF ANY BROKER OR SUPPLIER, IS AN AGENT OF
LESSOR. NO BROKER OR SUPPLIER, NOR ANY SALESMAN, BROKER, OR AGENT OF ANY
BROKER OR SUPPLIER, IS AUTHORIZED TO WAIVE OR ALTER ANY TERM OR CONDITION
OF THIS LEASE, AND NO REPRESENTATION AS TO THE EQUIPMENT OR ANY OTHER
MATTER BY THE BROKER OR SUPPLIER, NOR ANY SALESMAN, BROKER, OR AGENT OF ANY
BROKER OR SUPPLIER, SHALL IN ANY WAY AFFECT LESSEE'S DUTY TO PAY THE
RENTALS AND TO PERFORM LESSEE'S OBLIGATIONS SET FORTH IN THIS LEASE.
LESSEE: TELEVAR NORTHWEST, INC. LESSOR: CASCADE LEASING COMPANY
/s/ DATE: 6/23/95 /s/ DATE: 6/28/95
- ----------------------------------- ---------------------------------------
CHARLES D. DEJONG, PRESIDENT
_________________________DATE______
-3-
<PAGE>
Page 1 of 2
EXHIBIT "A"
QUANTITY EQUIPMENT DESCRIPTION
PERSONAL WORKSTATIONS, INC.
10632 NE 37th CIRCLE
KIRKLAND, WA 98033
(206) 828-4223
1 HP MODEL 712/60 SYSTEM S/N 6507A51027
CAPELLA NORTHWEST, INC.
10245 MAIN STREET, STE 14
BELLEVUE, WA 98004
(206) 451-8995
6 USR954 COURIER V.34 SA MODEM
1 MOD-2E-10B LIVINGSTON 10 PORT EXPANSION
6 D25M25M-6 RS232 CABLE
6 USR954 COURIER V.34 SA MODEM
6 D25M25M-6 RS232 CABLE
19 USR954 COURIER V.34 SA MODEM
1 1200060L1 ADTRAN TSU
5 USR954 COURIER V.34 SA Modem
1 PM-2E-10 LIVINGSTON COMMUNICATIONS CENTER
THIS EXHIBIT "A" IS ATTACHED TO AND A PART OF LEASE NO. 12101, AND
CONSTITUTES A TRUE AND ACCURATE DESCRIPTION OF THE EQUIPMENT.
LESSEE: TELEVAR NORTHWEST, INC.
/s/
- -----------------------------------
CHARLES D. DEJONG, PRESIDENT
-4-
<PAGE>
Page 2 of 2
EXHIBIT "A"
QUANTITY EQUIPMENT DESCRIPTION
1 1200060L1 ADTRAN TSU
1 IRX-111 LIVINGSTON INTERNETWORK ROUTER
1 MOD-IRX-3 3 SYNC PORT EXPANSION
1 DC-6 LIVINGSTON V.35 CABLE SIX FOOT
1 PM-2E-10 LIVINGSTON COMMUNICATION SERVER
4 COURIER V.34 SA MODEM
THIS EXHIBIT "A" IS ATTACHED TO AND A PART OF LEASE NO. 12101, AND
CONSTITUTES A TRUE AND ACCURATE DESCRIPTION OF THE EQUIPMENT.
LESSEE: TELEVAR NORTHWEST, INC.
/s/
- -----------------------------------
CHARLES D. DEJONG, PRESIDENT
-5-
<PAGE>
LESSOR: CASCADE LEASING COMPANY LEASE NUMBER 12101
DATE OF LEASE JUNE 28, 1995
LESSEE: TELEVAR NORTHWEST, INC.
ACKNOWLEDGMENT AND ACCEPTANCE
OF EQUIPMENT BY LESSEE
SEE EXHIBIT "A" ATTACHED HERETO AND MADE A PART HEREOF.
Lessee hereby acknowledges that the Equipment described above has been
received in good condition and repair, has been properly installed, tested,
and inspected, and is operating satisfactorily in all respects for all of
Lessee's intended uses and purposes. Lessee hereby accepts unconditionally
and irrevocably the Equipment.
By signature below, Lessee specifically authorizes and requests Lessor to
make payment to the supplier of the Equipment. Lessee agrees that said
Equipment has not been delivered, installed, or accepted on a trial basis.
WITH THE DELIVERY OF THIS DOCUMENT TO LESSOR, LESSEE ACKNOWLEDGES AND
AGREES THAT LESSEE'S OBLIGATIONS TO LESSOR BECOME ABSOLUTE AND IRREVOCABLE
AND LESSEE SHALL BE FOREVER ESTOPPED FROM DENYING THE TRUTHFULNESS OF THE
REPRESENTATIONS MADE IN THIS DOCUMENT.
DATE OF ACCEPTANCE: LESSEE: TELEVAR NORTHWEST, INC.
6/22/95 /s/
---------------------------------------
CHARLES D. DEJONG, PRESIDENT
---------------------------------------
IMPORTANT: THIS DOCUMENT HAS
LEGAL AND FINANCIAL CONSE-
QUENCES TO YOU. DO NOT SIGN
THIS DOCUMENT UNTIL YOU HAVE I HEREBY AUTHORIZE Kris Loomis,
ACTUALLY RECEIVED ALL OF THE Office Mgr., to orally verify my/our
EQUIPMENT AND ARE COMPLETELY acceptance of the above referenced
SATISFIED WITH IT. equipment in my absence.
-6-
<PAGE>
EQUIPMENT LEASE GUARANTY
LESSOR: CASCADE LEASING COMPANY
LEASE NO: 12101
DATE OF LEASE: JUNE 28, 1995
This Guaranty Agreement made and entered into this 23rd day of June,
1995 by CHARLES D. DEJONG AND MICHAEL P. SCHUYLEMAN (hereinafter referred
to collectively as "Guarantor"), in favor of CASCADE LEASING COMPANY
(hereinafter referred to as "Lessor").
WHEREAS, it is contemplated that Lessor may enter into a lease and/or
other related agreements (hereinafter collectively "Lease") with TELEVAR
NORTHWEST, INC. (hereinafter collectively "Lessee"); and,
WHEREAS, Guarantor has an interest, financial or otherwise, in Lessee,
and it is to the benefit of Guarantor that Lessor enter into the Lease with
Lessee, and Guarantor has read the proposed Lease in full and finds the
terms of said Lease acceptable, and in recognition that Lessor would be
unwilling to enter into the Lease without the Guaranty hereinafter set
forth, and in recognition of Lessor's reliance upon the Guaranty in
entering into the Lease;
NOW, THEREFORE, in order to induce Lessor to enter into the Lease,
Guarantor, jointly and severally, unconditionally guaranties the faithful
and full performance by Lessee of all terms and conditions of the Lease. In
the event of default by Lessee, or failure to faithfully perform any of the
terms or conditions required of Lessee under the Lease, or in the event of
failure of Lessee to make any or all payments of money required of it under
the Lease, Guarantor unconditionally promises to pay to Lessor, in lawful
money of the United States, all sums at any time due and unpaid under the
Lease, plus costs of collection, including reasonable attorney fees with or
without trial, and upon appeal and review.
The obligations of Guarantor hereunder are joint and several and are
independent of the obligations of Lessee under the Lease, and a separate
action or actions may be brought against Guarantor, whether action is
brought against Lessee or whether Lessee be joined in any action or
actions, the liability of Guarantor hereunder being primary. Guarantor
hereby waives the benefit of any suretyship defenses affecting its
liability hereunder or the enforcement hereof.
Guarantor authorizes Lessor, without notice or demand, and without
affecting Guarantor's liability hereunder, from time to time to renew,
extend, accelerate, or otherwise change the payment terms or other terms of
the Lease or any part thereof. Lessor may, without notice, assign this
Guaranty in whole or in part.
-7-
<PAGE>
Guarantor hereby waives any right to require Lessor to: (a) proceed
against Lessee; (b) proceed against or exhaust any security held by Lessor;
or (c) pursue any other remedy in Lessor's power. Guarantor waives any
defense arising by reason of any defense of Lessee, or by reason of the
cessation, from any cause whatsoever, of the liability of Lessee under the
Lease. Guarantor waives any and all demands for performance, notices of
nonperformance or default, and notices of cancellation or forfeiture.
Lessor may apply all proceeds received from Lessee or others to such part
of Lessee's indebtedness as Lessor may deem appropriate without consulting
Guarantor and without prejudice to or in any way limiting or lessening the
liability of Guarantor under this Guaranty.
If Lessee is a corporation, the undersigned warrant and represent that
they are stockholders, directors or officers and/or are financially or
otherwise interested in Lessee, and, if married, their marital communities
are so interested.
This Guaranty shall not be affected or discharged by the death of the
undersigned, but shall bind Guarantor's heirs and personal representatives,
and shall inure to the benefit of any successors or assigns of Lessor.
This instrument constitutes the entire agreement between Lessor and
Guarantor. No oral or written representation not contained herein shall in
any way affect this Guaranty, which shall not be modified except by the
parties in writing. Waiver by Lessor of any provision hereof in one
instance shall not constitute a waiver as to any other instance.
IMPORTANT: THIS AGREEMENT CREATES SPECIFIC LEGAL OBLIGATIONS.
DO NOT SIGN IT UNTIL YOU HAVE FULLY READ IT.
BY SIGNING YOU COMPLETELY AGREE TO ITS TERMS.
IN WITNESS WHEREOF, the undersigned Guarantor(s) has/have executed this
Guaranty this 23rd day of June, 1995.
GUARANTOR: CHARLES D. DEJONG GUARANTOR: MICHAEL P. SCHUYLEMAN
/s/ /s/
- ----------------------------------- ---------------------------------------
Name Name
1934 Maiden Lane 1119 Washington St.
- ----------------------------------- ---------------------------------------
Home Address Home Address
Wenatchee, WA 98801 Wenatchee, WA 98801
- ----------------------------------- ---------------------------------------
City State Zip City State Zip
/s/ /s/
- ----------------------------------- ---------------------------------------
Witness Witness
-8-
<PAGE>
EQUIPMENT LEASE GUARANTY
LESSOR: CASCADE LEASING COMPANY
LEASE NO: 12101
DATE OF LEASE: JUNE 28, 1995
This Guaranty Agreement made and entered into this 23rd day of June,
1995 by MARK D. HAMILTON (hereinafter referred to collectively as
"Guarantor"), in favor of CASCADE LEASING COMPANY (hereinafter referred to
as "Lessor").
WHEREAS, it is contemplated that Lessor may enter into a lease and/or
other related agreements (hereinafter collectively "Lease") with TELEVAR
NORTHWEST, INC. (hereinafter collectively "Lessee"); and,
WHEREAS, Guarantor has an interest, financial or otherwise, in Lessee,
and it is to the benefit of Guarantor that Lessor enter into the Lease with
Lessee, and Guarantor has read the proposed Lease in full and finds the
terms of said Lease acceptable, and in recognition that Lessor would be
unwilling to enter into the Lease without the Guaranty hereinafter set
forth, and in recognition of Lessor's reliance upon the Guaranty in
entering into the Lease;
NOW, THEREFORE, in order to induce Lessor to enter into the Lease,
Guarantor, jointly and severally, unconditionally guaranties the faithful
and full performance by Lessee of all terms and conditions of the Lease. In
the event of default by Lessee, or failure to faithfully perform any of the
terms or conditions required of Lessee under the Lease, or in the event of
failure of Lessee to make any or all payments of money required of it under
the Lease, Guarantor unconditionally promises to pay to Lessor, in lawful
money of the United States, all sums at any time due and unpaid under the
Lease, plus costs of collection, including reasonable attorney fees with or
without trial, and upon appeal and review.
The obligations of Guarantor hereunder are joint and several and are
independent of the obligations of Lessee under the Lease, and a separate
action or actions may be brought against Guarantor, whether action is
brought against Lessee or whether Lessee be joined in any action or
actions, the liability of Guarantor hereunder being primary. Guarantor
hereby waives the benefit of any suretyship defenses affecting its
liability hereunder or the enforcement hereof.
Guarantor authorizes Lessor, without notice or demand, and without
affecting Guarantor's liability hereunder, from time to time to renew,
extend, accelerate, or otherwise change the payment terms or other terms of
the Lease or any part thereof. Lessor may, without notice, assign this
Guaranty in whole or in part.
-9-
<PAGE>
Guarantor hereby waives any right to require Lessor to: (a) proceed
against Lessee; (b) proceed against or exhaust any security held by Lessor;
or (c) pursue any other remedy in Lessor's power. Guarantor waives any
defense arising by reason of any defense of Lessee, or by reason of the
cessation, from any cause whatsoever, of the liability of Lessee under the
Lease. Guarantor waives any and all demands for performance, notices of
nonperformance or default, and notices of cancellation or forfeiture.
Lessor may apply all proceeds received from Lessee or others to such part
of Lessee's indebtedness as Lessor may deem appropriate without consulting
Guarantor and without prejudice to or in any way limiting or lessening the
liability of Guarantor under this Guaranty.
If Lessee is a corporation, the undersigned warrant and represent that
they are stockholders, directors or officers and/or are financially or
otherwise interested in Lessee, and, if married, their marital communities
are so interested.
This Guaranty shall not be affected or discharged by the death of the
undersigned, but shall bind Guarantor's heirs and personal representatives,
and shall inure to the benefit of any successors or assigns of Lessor.
This instrument constitutes the entire agreement between Lessor and
Guarantor. No oral or written representation not contained herein shall in
any way affect this Guaranty, which shall not be modified except by the
parties in writing. Waiver by Lessor of any provision hereof in one
instance shall not constitute a waiver as to any other instance.
IMPORTANT: THIS AGREEMENT CREATES SPECIFIC LEGAL OBLIGATIONS.
DO NOT SIGN IT UNTIL YOU HAVE FULLY READ IT.
BY SIGNING YOU COMPLETELY AGREE TO ITS TERMS.
IN WITNESS WHEREOF, the undersigned Guarantor(s) has/have executed this
Guaranty this 23rd day of June, 1995.
GUARANTOR: MARK D. HAMILTON GUARANTOR:
/s/
- ----------------------------------- ---------------------------------------
Name Name
933 College St.
- ----------------------------------- ---------------------------------------
Home Address Home Address
Wenatchee, WA 98801
- ----------------------------------- ---------------------------------------
City State Zip City State Zip
/s/
- ----------------------------------- ---------------------------------------
Witness Witness
-10-
SUBLEASE
THIS SUBLEASE made and entered into this 1st day of April, 1995, by
and between TELEVAR NORTHWEST, INC., a Washington Corporation, hereinafter
referred to as "Sublessor" and TELEWAVES, INC., a Washington Corporation,
hereinafter referred to as "Sublessee".
1. Description. Sublessor, for and in consideration of the rentals
hereinafter provided, and the covenants and agreements hereinafter
contained, hereby demise, let and lease unto the Sublessee a portion of the
building located at 240 North Mission, Wenatchee, Washington, consisting of
approximately 1025 sq. ft. A diagram of the lease premises is attached
hereto as Exhibit "A" and by this reference incorporated herein. The
parties acknowledge that this Sublease and Sublessee's tenancy created
hereunder is subject to that certain Lease Agreement dated July 26, 1993,
by and between E. Gus Noyd and Laura Jean Noyd, husband and wife, as Lessor
and Televar Northwest, Inc., therein Lessee, a copy of which is attached
hereto as Exhibit "B" and by this reference incorporated herein.
2. Term of Sublease. The term of this Sublease shall be from April 1,
1995 and terminating on the 31st day of July, 2000.
3. Rental Amount.
A. The Sublessee shall pay to the Sublessor monthly rent as set forth
herein. All rent shall be payable on the first day of each and every month
during the term of this Sublease commencing April 1, 1995. Rent shall be
increased during the term of this Sublease an follows:
SEA1-114134.1 27211-0001
1
<PAGE>
April 1, 1995 through March 31, 1996 - $ 975
April 1, 1996 through March 31, 1997 - $1,025
April 1, 1997 through March 31, 1998 - $1,080
April 1, 1998 through March 31, 1999 - $1,135
April 1, 1999 through March 31, 2000 - $1,195
April 1, 2000 through July 31, 2000 - $1,275
B. All rental payments shall be made to the Sublessor at the following
address: 215 Yakima Street, Wenatchee, Washington 98801. In the event that
said monthly payments are delivered to Sublessor later than 5:00 p.m. on
the 5th day of any month during the term of this Sublease, there shall be a
late charge in the amount of five percent (5%) of the monthly rental due
for each month that the rent is delinquent.
C. On or before April 15 /s/, 1995, Sublessee shall pay, in addition
to the regular rental payments called for herein, the sum of One Thousand
Two Hundred and Seventy Five Dollars ($1,275.00) which shall be held on
deposit as last month's rent.
4. Use. Sublessee may use and occupy the premises for office, sales,
service, and display of products being sold by Sublessee. Use of premises
shall not change without prior written consent of the Sublessor. No
unlawful use of the premises shall be allowed. Sublessee agrees to maintain
the premises in a neat and orderly condition throughout the term of the
Sublease.
5. Alterations and Modifications. Sublessee accepts the premises in
the condition now existing (*subject to stipulations in Exhibit -A- /s/)
and shall not make any material alterations, additions or modifications to
the premises unless the same are approved by the Sublessor in
2
<PAGE>
advance. All alterations, additions or modifications of the premises shall
be at the Sublessee's expense. All such alterations, additions or
modifications shall remain as part of the premises upon termination of the
Sublease. During the term of this Sublease the Sublessee shall do all
painting and redecorating of the interior of the building at its own
expense. Sublessee shall keep the demised premises and the property on
which the demised premises is situated free from any liens arising out of
the occupancy by Sublessee, or any work or improvements made therein at
Sublessee's expense and which have been consented to by Sublessor.
6. Maintenance and Repairs.
A. Sublessor. In maintenance and repair of the premises, the
Sublessor's responsibility shall be limited to maintaining the roof,
foundation and structural walls.
B. Sublessee. Sublessee shall maintain the interior of the premises in
a good state of repair including light fixtures, painting and replacement
of glass as may be needed. Sublessee shall be responsible for all
maintenance and repairs not expressly assumed by the Sublessor. Sublessee
shall maintain the exterior of the premises including the landscaping.
C. Sublessor shall not be liable for any damage done or occasioned by
plumbing, electrical wiring, fixtures, gas, water, steam or other pipes or
sewage, or by water, snow or ice being upon or coming through the roof,
doors or other parts of the premises.
7. Utilities.
A. Sublessee. The Sublessee shall be responsible for forty-five
percent (45%) of all utilities and services. Sublessee shall pay three
percent (33%) of Whitman Way Assn. dues and/or operating assessments.
Sublessee shall hold the Sublessor harmless from any liability relating to
utilities and services which are the responsibility of the Sublessee.
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B. Sublessor. Sublessor shall not be responsible for providing any
utilities or services to the premises subject to the Sublease.
8. Compliance with Laws and Covenants.
A. Sublessee shall keep the premises in a clean, sanitary condition
and shall comply with all lawful rules and regulations, ordinances and
statutes applicable to the maintenance of the premises imposed by any
governmental. authority. Sublessee shall not use any portion of the
premises for any illegal purpose.
B. Sublessee acknowledges that the premises are subject to mutual
covenants, restrictions, conditions and reciprocal easements of the Whitman
Way Professional Center which are of record under Chelan County Auditor's
No. 8502140037. Sublessee agrees to abide by the obligations and
restrictions set forth in the aforementioned document. Sublessee assumes
all obligations to the premises as set forth in the aforementioned document
which is attached hereto as a portion of Exhibit "B".
9. Insurance.
A. Sublessor. Sublessor shall keep the building insured against loss
by special perils property insurance to the extent of the reasonable
insurable value thereof.
B. Sublessee. Sublessee agrees to provide single limit liability
insurance with minimum limits of Five Hundred Thousand Dollars
($500,000.00) against loss by reason of accident causing damage to persons
and/or Sublessee agrees to provide Sublessor with annual written
conformation that the premises are insured. Sublessor shall be named as an
additional insured under any such policy. Sublessee shall hold the
Sublessor harmless from all damage to
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<PAGE>
personal property arising out of the use of the premises by the Sublessee.
Sublessee shall be responsible for providing insurance coverage for the
contents of the premises.
10. Taxes.
A. Sublessor. Sublessor shall pay the annual real estate taxes
assessed or levied against the premises to the extent of the dollar amount
assessed and levied for 1993 base year.
B. Sublessee. Sublessee shall pay all taxes levied for personal
property located on the premises and shall pay thirty three percent (33%)
of fifty percent (50%) of that portion of the real property taxes assessed
and levied against the premises which exceeds the amount levied for the
1993 base year.
11. Damage by Fire - Destruction.
A. In the event of a partial destruction of the premises by fire or
other casualty, the Sublessor may elect to terminate this Sublease or
rebuild and repair said premises. In the event Sublessor elects to repair
and rebuild, the rent shall proportionately abate during the time between
such partial destruction and repair or rebuilding. The election to repair
or rebuild must be made within sixty (60) days after the event giving rise
thereto and pursued with due diligence and dispatch.
B. In the event the premises shall be destroyed to the extent of fifty
percent (50%) or more of the value thereof, the Sublessor may elect to
rebuild or not to rebuild and shall notify Sublessee of its intention
within thirty (30) days after such destruction. in case Sublessor elects to
not rebuild, this Sublease shall terminate without any liability to
Sublessor by Sublessee because of such election.
5
<PAGE>
12. Subleasing. Sublessee may sublet portions of the premises on terms
not inconsistent with the Sublease. Sublessee shall not assign the Sublease
without the written consent of the Sublessor which shall not be
unreasonably withheld. Any such assignment or subletting shall not relieve
the Sublessee of its obligations under the terms of this Sublease.
Sublessee shall not mortgage, pledge or in any way encumber this Sublease
or any part thereof without the prior written consent of the Sublessor.
13. Signs. The installation of all signs or symbols posted, displayed
or erected on the exterior or interior of the premises by Sublessee shall
be installed in keeping with the requirements of the City of Wenatchee and
covenants in Exhibit "B".
14. Peaceable, Enjoyment - Right of Entry.
A. Upon the commencement of the Sublease term, the Sublessee shall be
entitled to peaceable enjoyment of the premises free from interference by
the Sublessor.
B. The Sublessor, its agents and employees, shall have the right on
prior notice and at reasonable times to enter said premises for the purpose
of inspecting the same or for any other purpose required in connection with
the Sublease or the Sublessor's ownership of the premises.
15. Default and Reentry.
A. Time is of the essence of this Sublease. If any rents reserved
above, or any part thereof, shall be and remain unpaid when the sum shall
become due, or if Sublessee shall violate or default in any of the
covenants and agreements herein contained, the Sublessor may cancel this
Sublease by giving the notice required by law, and reenter the premises.
Notwithstanding such reentry by the Sublessor, the liability of the
Sublessee for the rent
6
<PAGE>
provided for herein shall not be extinguished for the balance of the term
of this Sublease. Sublessee covenants and agrees to make good to the
Sublessor any deficiency arising from the reentry and the reletting of the
premises at a Sublessor rental than herein agreed to. Sublessee shall pay
such deficiency each month as the amount thereof is ascertained by
Sublessor.
B. In the event Sublessee shall become either insolvent or bankrupt,
or if a receiver is appointed, then the Sublessor may cancel this Sublease
at its option after giving thirty (30) days written notice.
16. Risk of Loss. Risk of all loss, injury and damage to personal
property located upon or about said premises, however caused, is hereby
assumed by the Sublessee notwithstanding any other provision herein to the
contrary.
17. Mutual Release. The Sublessor and the Sublessee and all parties
claiming under them hereby mutually release and discharge each other from
all claims and liabilities arising from or caused by any hazard covered by
insurance on the leased premises, or covered by insurance in connection
with the property on or activities conducted on the leased property,
regardless of the cause of damage or loss.
18. Sublessor Exoneration. The Sublessor shall not be liable for
injury or damage to person or property occurring within the lease property,
unless caused by or resulting from the negligence of the Sublessor, or any
of Sublessor's agents or employees in operation or maintenance of the
leased premises.
19. Condemnation. If the whole of the leased premises or such portion
thereof as will make the leased premises unsuitable for the purpose herein
leased is taken by eminent domain, the Sublease shall expire on the date
when the leased premises shall be so taken and
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<PAGE>
the rent shall be apportioned as of that date. Neither the Sublessor nor
the Sublessee shall have any rights in or to any award made to the other by
the condemning authority.
20. Attorneys Fees and Costs. In the event suit shall be brought for
any unlawful detainer of said premises, for the recovery of any rent or
other sums due under the provisions of the Sublease or because of the
breach of any other covenant herein contained, the prevailing party shall
be entitled to payment by the other party of its costs incurred in such
proceeding, including a reasonable attorneys fee.
21. Non-Waiver of: Breach. The failure of the Sublessor to insist upon
strict performance of any of the covenants or agreements of this Sublease,
or to exercise any options herein conferred in any one or more instances,
shall not be construed as a waiver or relinquishment of any such covenant
or right or any other covenant or agreement, but the same shall be and
remain in full force and effect.
22. Sublessor's Right to Cure Sublessee's Obligation. In the event that
the Sublessee fails to insure as herein required or fails to make any
payment which Sublessee is obligated to make under the terms of this
Sublease, the Sublessor may undertake and shall be immediately due and
payable by the Sublessee to the Sublessor, including any costs and
attorney's fees incurred because of the Sublessee's failure to comply with
the terms of the Sublease.
23. Surrender. At the expiration of this Sublease term, the Sublessee
shall surrender the leased premises in a good a condition as it was in at
the beginning of this term, reasonable use and wear and damages by the
elements excepted.
24. Binding Effect. This Sublease Agreement shall be binding not only
on the parties hereto, but their successors, assigns and personal
representatives.
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25. Law Governing. The terms of this Sublease shall be governed in
accordance with the laws of the State of Washington. Venue for any action
arising from the Sublease shall be as between the Sublessor and the
Sublessee shall lie in Chelan County.
26. Entire Agreement. This Sublease contains the entirety of the
agreement between the Sublessor and the Sublessee and shall not otherwise
be modified unless such modifications are in writing and signed by all
parties hereto.
IN WITNESS WHEREOF, the parties hereto have hereunto set their hands
and seals the day and year first above written.
TELEVAR NORTHWEST, INC. TELEWAVES, INC.
By /s/ By /s/
--------------------------------- -------------------------------------
STATE OF WASHINGTON )
)ss.
County of Chelan )
I certify that I know or have satisfactory evidence that Mark Hamilton
is the person who appeared before me, and said person acknowledged that
he/she/they signed this instrument, on oath stated that he/she/they were
authorized to execute the instrument and acknowledged it as the President
of Televar Northwest, Inc. to be the free and voluntary act of such party
for the uses and purposes mentioned in the instrument.
DATED this 21st day of April, 1995.
/s/
---------------------------------------
NOTARY PUBLIC, State of Washington
My Commission Expires 4-17-98
9
<PAGE>
STATE OF WASHINGTON )
)ss.
County of Yakima )
I certify that I know or have satisfactory evidence that Richard Blair
is the person who appeared before me, and said person acknowledged that
he/she/they signed this instrument, on oath stated that he/she/they were
authorized to execute the instrument and acknowledged it as the President
of Telewaves, Inc., to be the free and voluntary act of such party for the
uses and purposes mentioned in the instrument.
DATED this 14th day of April, 1995.
/s/
---------------------------------------
NOTARY PUBLIC, State of Washington
My Commission Expires Aug. 28 '96
10
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Exhibit -A-
As stated on page 3, paragraph 5 of the Sublease, Sublessee accepts the
building in it's "condition now existing" with the exception of the
following:
A walk through and inspection of the vacated premises on April 5, 1995
revealed damage and wear and tear on various surfaces. (see floor plan for
room numbers)
Room 1: Counter drawers rubbing and sticking
Holes above counter in wall
Room 2: Cabinet removed / left holes in wall
Molding missing by air vent
Spillage on east wall and carpet
Room 3: Cabinet removed / left hole in wall
Carpet stained by east wall
Room 4: Cabinet removed / left holes in wall
Wall paper ripped away on east wall
Carpet stains by heat duct
Room 5: Small holes in wall where pictures were hung
Telephone jack laying on floor
Hallway Area: Gouged plaster by light switch
Small hole in east wall near corner
Cabinet door scratched and missing screw on one handle.
Door Damage:
A. Outside door: Weathered, missing screw plugs on outside.
B 2nd outside door: Small gouge on outside bottom.
C. Room 1 to Hall: Small scratches.
D. Room 2: Small scratches and door frame scratched.
E. Room 3: Gouged veneer in bottom hinge area, small scratches, door
frame scratched.
F. Room 4: Dented door knob, small scratches, door frame scratched.
G. Room 5: Small scratches, door frame scratched.
Sublessee's acceptance of the condition of the office is predicated on the
repair of the damage listed above. Sublessor also agrees to install a
security door in the hall at the NW corner of room 5 and block the window
between room 1 and room 6.
Sublessor and sublessee agree that it is while it is unreasonable to expect
that the premise be in a new condition when sublessee takes possession, the
premise will be in a neat, attractive, and
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reasonably maintained state at the time of possession. This includes
cleaned carpets, fully functioning doors, cabinets, and drawers, clean and
painted wall surfaces, repaired or replaced wall paper, and fully
functioning plumbing and electrical, and mechanical fixtures.
12
LEASE AGREEMENT
THIS LEASE is made this day by and between DAVID A. QUICK and CIRRI A.
QUICK, husband and wife, doing business as DCR PROPERTIES, hereafter
referred to as LESSOR, and TELEVAR NORTHWEST, hereafter referred to as
LESSEE.
W I T N E S S E T H:
WHEREAS, the LESSOR and LESSEE wish to enter into a written agreement
for the lease of commercial space which is located at 201 South Chelan
Avenue, Wenatchee, Chelan County, Washington (hereafter referred to as the
premises):
NOW, THEREFORE, the parties hereby agree as follows:
1. PREMISES: Subject to the terms, covenants and conditions of this
Lease, LESSOR hereby leases to LESSEE commercial space located in the
downstairs of 201 South Chelan Avenue, Wenatchee, Chelan County,
Washington, which is legally described at Exhibit "A" attached hereto
incorporated by this reference.
2. TERM: This Lease shall be for a term of five years commencing March
15, 1995, and terminating March 15, 2005. The LESSEE has the option to
renew the lease for an additional two year period provided that written
notice of intent to renew is received by LESSOR no later than 30 days prior
to the end of the initial five year term. Monthly rent during the option
period is to be determined according to the same formula applicable during
the initial five year term.
3. MONTHLY RENT: LESSEE agrees to pay to LESSOR a monthly rent in
advance, without offset or deduction, in the amount of $1,800.00 per month,
commencing March 15, 1995, and subsequent monthly rent payments shall be
due on or before the same day of each succeeding month. Each and every rent
payment received more than ten days after the due date shall be subject to
a late payment penalty of ten percent (10%) for each month of part thereof
which rent is delinquent. Monthly rent shall increase by five percent (5%)
on each anniversary date of this Lease.
4. USE OF THE PREMISES: LESSEE shall use the premises exclusively for
operation known as Televar Northwest and not for any other purpose without
the prior written consent of the LESSOR, which shall not be unreasonably
withheld and shall comply with all governmental laws, ordinances,
regulations, orders and directives and all insurance requirements
applicable to LESSEE'S use of the premises.
5. TAXES AND ASSESSMENTS: LESSEE shall pay, prior to delinquency, all
personal property taxes levied and assessed against LESSEE'S equipment,
fixtures and personal property located on the premises. LESSOR shall be
responsible for all real property taxes.
LEASE AGREEMENT - 1
<PAGE>
6. UTILITIES: LESSOR shall pay for water and sewer service supplied to
the premises. All other utilities and services supplied to LESSEE shall be
paid directly by LESSEE.
7. REPAIRS AND UPKEEP: LESSEE shall, at its sole expense and cost,
maintain and keep the interior of the premises in a neat and clean
condition and state of repair. LESSEE shall be solely responsible for
repair or replacement of all glass breakage and damage. LESSOR shall, at
its own expense, maintain and repair the structural, all mechanical,
including plumbing, heating and air conditioning, and electrical systems,
and all exterior areas: provided, that the LESSEE shall pay to LESSOR the
cost of maintenance and repairs caused in part or in whole by the act,
neglect, fault or omission of the LESSEE, its agents, employees and
customers. LESSOR shall have no obligations for repair and maintenance
except as provided by this paragraph. There shall be no abatement of rent
and no liability of LESSOR by reason of any injury to or interference with
LESSEE'S business arising from LESSOR making repairs or completing
maintenance. Provided, however, LESSOR hereby covenants to conduct all such
repair and maintenance activities in a prompt and workmanlike manner and in
a way that minimizes, if not eliminates, disruptions to LESSEE'S business,
including taking efforts to reduce and/or eliminate noise and dust from
such activities and conducting such repair and maintenance activities after
normal business hours.
8. ALTERATIONS: LESSEE may make minor alterations, additions and
improvements upon the lease premises at its sole cost and expense and with
the prior written consent of the LESSOR. LESSEE agrees to hold the LESSOR
harmless from any damage, loss or expense arising from such alterations,
additions and improvements and agrees to comply with all applicable
building and safety laws, ordinances, rules and regulations. Upon
termination of this Lease, all LESSEE'S alterations, additions and
improvements, including without limitation all electrical, plumbing,
lighting, air conditioning, heating, doors, permanent partitions, carpeting
and other non-trade fixtures, shall remain upon the lease premises and be
surrendered to the LESSOR: provided, that upon written notice by the LESSOR
served on the LESSEE ten (10) days prior to termination or expiration,
LESSEE shall remove all those additions, alterations and improvements as
may be specified by the LESSOR and LESSEE shall repair and restore the
leased premises to its original condition at LESSEE'S sole cost and
expense. Provided, further, all such alterations, additions and
improvements not removed by LESSEE within 10 days of the termination of the
lease shall constitute a holdover tenancy for which rent shall be payable
to LESSOR at a daily rate based on monthly rent until all such alterations
are removed and the premises is returned to original condition. LESSOR and
LESSEE may from time to time, make separate written agreements regarding
alterations to structural and mechanical elements of the premises to allow
greater latitude to both parties to this lease. Separate written agreements
shall become part of this lease and shall not be construed to alter any
other provisions of this agreement.
9. PARKING: LESSEE shall be entitled to the use of 25% of available
parking but not less than five (5) spaces in the parking lot adjacent to
the leased premises for the use of employees, customers and guests of
LESSEE. LESSOR shall maintain the parking lot in a reasonably clean and
safe condition, including conducting such snow removal as shall be
LEASE AGREEMENT - 2
<PAGE>
necessary or appropriate to minimize the risk of property damage and/or
personal injury. LESSEE shall be responsible for snow removal on sidewalks
immediately adjacent to the premises at LESSEE'S sole expense and shall at
all times maintain liability insurance to indemnify LESSOR of any potential
personal injury or property damage liability. LESSEE shall cooperate with
other tenants in the building to remove snow from the corner of Chelan and
Yakima Streets to LESSEE'S premises.
10. ACCIDENTS AND LIABILITY: LESSOR shall not be liable for any injury
or damage to persons or property sustained by LESSEE or others on, about or
from the premises or any common area: provided, however, that LESSOR shall
be liable for any injury to property or persons on or about the leased
premises which injury results from acts of LESSOR or Lessor's agents,
employees and representatives. LESSEE agrees to indemnify, defend and hold
LESSOR harmless from any claim, action or judgment resulting from injury or
damage to persons or property suffered by any person or entity: provided,
however, that this indemnity is not intended to include and shall not be
construed to include incidents not related to the leased premises and,
further, is not intended to include and shall not be construed to include
acts of negligence by LESSOR or Lessor's agents, employees and
representatives. LESSEE shall, at its own expense, provide public liability
insurance affording minimum protection of not less than One Million Dollars
($1,000,000) per occurrence and shall list LESSOR as an additional named
insured. LESSEE shall also, at its own expense, obtain extended coverage
insurance and insure the contents of the premises to their full insurable
value against loss from fire and other casualties. LESSEE shall deliver
certificates of such insurance to LESSOR and such insurance shall not be
cancelable without thirty (30) days prior written notice to LESSOR.
11. SUBROGATION. LESSOR and LESSEE hereby mutually waive their
respective rights of recovery against each other for any loss insured by
fire, extended coverage or other property casualty insurance policies
existing for their respective benefit. Each party agrees to pay for and
obtain any special endorsements required by their respective insurers to
evidence compliance with this waiver and provide written proof of
compliance to the other upon request.
12. DAMAGE OR DESTRUCTION: In the event the leased premises shall be
damaged or destroyed by fire or other casualty, LESSOR shall have the
option to either (a) repair or rebuild within one hundred twenty (120) days
from the date of damage or destruction, or (b) not repair or rebuild and to
cancel this lease on thirty (30) days' written notice. If LESSOR fails to
give LESSEE such notice within thirty (30) days of such damage or
destruction, the monthly rental shall abate in the same ratio as the
portion of the leased premises rendered untenable bears to the whole of the
leased premises: provided, that if the damage or destruction is due to the
fault or neglect of the LESSEE, then there shall be no abatement of rent
and this Lease shall not be canceled or otherwise terminated and the
LESSEE, at its own expense, shall make all repairs to the building to
restore it to the original condition: provided, however, in an event that
the LESSEE was not responsible for damage or destruction, LESSEE shall have
the right to terminate this lease with thirty (30) days written notice
following an occurrence which partially damages or destroys the leased
premises if, in the exercise of reasonable business judgment exercised in
good faith, LESSEE determines that the leased
LEASE AGREEMENT - 3
<PAGE>
premises, as damaged or destroyed, is no longer an economically viable
location for the operation of LESSEE'S business.
13. LIENS: LESSEE shall keep the premises, and the property on which
the premises are located free from liens for labor, materials and/or
services provided to LESSEE, its agents or employees.
14. SUBORDINATION: This Lease shall be subordinate to the lien of any
mortgages, deeds of trust, leaseholds and purchase options and all other
interests that may now or hereafter affect the premises, or any part
thereof, and to all renewals, modifications or extensions of such
interests. LESSEE shall on demand execute, acknowledge and deliver to
LESSOR, without expense to LESSOR, any and all instruments necessary and
proper to effect the future subordination of this Lease.
15. CONDEMNATION: The rights and duties of the parties in the event of
condemnation shall be as follows:
a. If the whole of the leased premises shall be taken or
condemned by any competent authority for any public or quasi-public
use or purpose, this Lease shall cease and terminate as of the date on
which title shall vest thereby in that authority, and all rent paid or
payable by the LESSEE shall be apportioned and paid up to that date.
b. If only a portion of the demised premises shall be taken or
condemned, this Lease shall not terminate, but the rent payable after
the date on which LESSEE shall be required to surrender possession of
such portion shall be reduced in proportion to the deceased use
suffered by LESSEE, as the parties may agree or as shall be determined
by arbitration: provided, however, LESSEE shall have the right with
thirty (30) days written notice, to terminate this lease following
partial condemnation of the leased premises if, in the exercise of
reasonable business judgment exercised in good faith, LESSEE
determines that the leased premises, as condemned, is no longer an
economically viable location for the operation of LESSEE'S business.
c. In the event of any taking or condemnation in whole or in
part, the entire resulting award of consequential damages shall belong
to LESSOR without any deduction for the value of the unexpired term of
this Lease or for any other estate or interest in the leased premises
now or later vested in LESSEE. LESSEE hereby assigns to LESSOR all its
right, title and interest in any and all such awards. Provided,
however, that LESSOR shall reimburse LESSEE a reasonable sum for costs
incurred in relocating LESSEE'S business.
d. In the event of a partial taking, LESSEE shall promptly
proceed to restore the remainder of the leased premises to a
self-contained architectural unit and LESSOR shall pay to LESSEE the
cost of restoration, but in no event to exceed a sum equal to the
amount of the separate award made to and received by LESSOR for
consequential
LEASE AGREEMENT - 4
<PAGE>
damages. In the event there is no separate award for consequential
damage, the value shall be fixed and settled by arbitration. The
balance of any separate award or allocated amount not so used shall
belong to and be retained by LESSOR.
e. In case of any governmental action not resulting in the taking
or condemnation of any portion of the leased premises, but creating a
right to compensation, or if less than a fee title to all or any
portion of the leased premises shall be taken or condemned by any
governmental authority for use or occupancy, this Lease shall continue
in full force and effect without reduction or abatement of rent and
the rights of the parties shall be unaffected by the other provisions
of this paragraph.
16. NOTICES: All notices, requests and demands required by law or by
the terms of this Lease shall be served personally on the parties or shall
be served by certified mail, return receipt requested, at the following
address:
LESSOR: P.O. Box 3766
Wenatchee, WA 98807-3766
LESSEE: At the leased premises
Either party may designate an alternate address by written notice to
the other.
17. DEFAULT OR BREACH: Time is of the essence of this Lease. Each of
the following events shall constitute a default or breach of this Lease by
LESSEE:
a. If LESSEE, while in possession, shall file a petition in
bankruptcy or insolvency or for reorganization under any bankruptcy
act, or shall voluntarily take advantage of any such act by answer or
otherwise, or shall make an assignment for the benefit of creditors.
b. If, while in possession, involuntary proceedings under any
bankruptcy law or insolvency act shall be instituted against LESSEE,
or if a receiver or trustee shall be appointed of all or substantially
all of the property of LESSEE, and such proceedings shall not be
dismissed or the receivership or trusteeship vacated within thirty
(30) days after the institution or appointment.
c. If LESSEE shall fail to pay LESSOR any rent or expenses when
the same shall become due and shall not make payment within ten (10)
days after notice and demand by LESSOR to LESSEE.
d. If LESSEE shall fail to perform or comply with any of the
conditions of this Lease and if the nonperformance shall continue for
a period of thirty (30) days after notice and demand by LESSOR to
LESSEE, or, if the performance cannot be reasonably had within the
thirty (30) day period, LESSEE shall not in good faith have commenced
LEASE AGREEMENT - 5
<PAGE>
performance within such thirty (30) day period and shall not
diligently proceed to completion of performance.
e. If LESSEE shall vacate or abandon the leased premises or shall
cease to conduct business on the leased premises.
f. If this Lease shall be transferred by LESSEE to any other
person or party, except in the manner permitted for assignment.
18. WAIVER OF BREACH: The failure of the LESSOR to insist on strict
performance of any of the terms and conditions of this Lease shall be
deemed a waiver of the right or remedy that the LESSOR may have regarding
that specific instance or occurrence only and shall not constitute a waiver
of any subsequent or continuing breach or default. The receipt of rent by
the LESSOR, with or without knowledge or any breach or default by the
LESSEE of any of the terms and conditions of this Lease, shall be construed
as a payment for the use and occupancy of the premises by the LESSEE and no
waiver shall be claimed in favor of the LESSEE unless in writing executed
by the LESSOR.
19. LESSOR'S REMEDIES ON DEFAULT: In the event of default or breach of
LESSEE, the LESSOR shall have the following remedies:
a. CANCELLATION: LESSOR shall have the right to cancel and
terminate this Lease. The LESSEE shall have continuing liability for
damages proximately caused by the default or breach. On cancellation
LESSEE shall be liable to LESSOR for all damages resulting from
LESSEE'S breach or default, including the cost of recovering the
leased premises and LESSOR'S attorney fees, and the difference between
the then present value of this Lease and the fair market rental value
of the leased premises for the remainder of the lease term. Such sums
shall be immediately due and payable by LESSEE to LESSOR.
b. REMEDIES CUMULATIVE: The above remedy is not exclusive, and is
in addition to remedy available at law or in equity.
20. LESSEE'S REMEDIES: In the event of default or breach by the LESSOR
the LESSEE may, at its option, give written notice to the LESSOR of all
acts or omissions by the LESSOR which constitute a default or breach of
this Lease and may declare in such written notice that this Lease shall
terminate on a date certain, not less than thirty (30) days from delivery
of such notice, in the event that the LESSOR fails to cure all specified
defaults and breaches of this Lease prior to that date.
LEASE AGREEMENT - 6
<PAGE>
21. REPRESENTATIONS: The parties agree and warrant as follows:
a. LESSOR has made no representations as to the quality or
condition of the premises, provided, however, that LESSOR warrants
that all structural and mechanical elements of the premises shall
function properly.
b. LESSEE has had an opportunity to inspect the premises and
accepts the premises in their present condition: provided, that LESSEE
shall complete a punch list within fifteen (15) days of occupancy,
itemizing defects and/or incomplete items in the premises and LESSOR
shall diligently complete or repair the items listed.
22. SURRENDER OF POSSESSION: LESSEE shall peaceably and quietly
surrender and deliver the premises to LESSOR on the last day of the term of
this Lease or on cancellation, whether by way of expiration or termination
following default. The premises shall be free of any subtenancies, liens or
encumbrances granted or suffered by the LESSEE. The premises shall be left
in clean and neat condition and state of repair. LESSEE shall remove all
inventory, equipment and other personal property not specified in paragraph
8, and all such property remaining on the premises after the last day of
the term shall be conclusively presumed to have been conveyed by LESSEE to
LESSOR, without compensation, allowance or credit to the LESSEE. Upon
expiration or cancellation of this Lease or upon suspension or termination
of LESSEE'S right to occupancy of the premises, LESSEE shall deliver all
keys to the LESSOR.
23. QUIET POSSESSION: LESSEE shall enjoy and LESSOR shall defend
LESSEE'S right to enjoy quiet possession of the premises subject to the
provisions of this Lease, so long as all LESSEE'S obligations are fully and
completely performed.
24. HOLDING OVER: If LESSEE shall hold over after the expiration of
termination of the terms of this Lease with the implied or express consent
of the LESSOR, LESSEE shall remain bound by all the provisions, terms and
conditions of this Lease: except, that the tenancy shall be from month to
month.
25. ASSIGNMENT AND SUBLETTING: LESSEE shall not sublet the premises
without the LESSOR'S written consent which shall not be unreasonably
withheld. LESSEE may assign this Lease with the prior written consent of
the LESSOR, which shall not unreasonably be withheld: provided, any
proposed assignee of this Lease shall be financially responsible and shall
expressly assume and agree to perform all of the terms and conditions of
this Lease. Notwithstanding the assignment of this Lease by the LESSEE and
the written consent of the LESSOR, the LESSEE shall remain directly and
primarily liable to the LESSOR for full performance of all the terms of
this Lease.
26. SUCCESSORS AND ASSIGNS: This Lease shall be binding upon and inure
to the benefit of the parties, their successors and assigns.
LEASE AGREEMENT - 7
<PAGE>
27. RECORDATION: Neither party shall record this Lease without the
prior written consent of the other. LESSOR agrees to execute a Memorandum
of Lease for recording upon the written request of the LESSEE.
28. ATTORNEY FEES AND VENUE: In the event that an attorney is retained
for enforcement of this Lease or in the event a lawsuit is commenced, the
substantially prevailing party shall be entitled to recover the costs of
such enforcement or costs of suit, including reasonable attorney fees. The
venue of any lawsuit commenced to enforce this Lease shall be in the Chelan
County Superior Court.
29. GUARANTY: Each person executing this Lease on behalf of a
corporation, limited or general partnership, or other legal entity as
LESSEE hereby personally guarantees LESSEE'S full and timely performance of
all obligations of the Lease, on behalf of himself or herself individually
and their respective marital communities. Personal guarantees shall be
limited to twelve months following the commencement of the lease.
30. INVALID PROVISIONS: If any term or condition of this Lease or the
application of any such term or condition to any person or circumstances be
held invalid, the remainder of this Lease and its application to other
persons or circumstances shall not be effected and shall remain in full
force and effect.
31. RIDERS: This Lease is subject to the Riders attached hereto and
described as follows:
a. Lease option for upstairs portion of building.
b. Right of first refusal to purchase building.
32. PRIOR AGREEMENTS: This Lease contains the entire understanding and
agreement between the parties and all prior promises, representations and
inducements by either party have been fully performed or incorporated in
this Lease. This Lease cannot be modified except by a written instrument
executed and acknowledged by the parties.
DATED this ____ day of _________________, 199___.
LESSOR
By:____________________________________
David A. Quick
By:____________________________________
Cirri A. Quick
LEASE AGREEMENT - 8
<PAGE>
LESSEE
TELEVAR NORTHWEST, INC.
By: /s/ Charles D. DeJong
------------------------------------
Its President
By:____________________________________
STATE OF WASHINGTON )
)ss.
County of Chelan )
I certify that I know or have satisfactory evidence that David A.
Quick and Cirri A. Quick signed this instrument and on oath acknowledged it
as their free and voluntary act and deed for the uses and purposes
mentioned in the instrument.
DATED this ____ day of _______________, 199___.
By:_________________________________
Notary Public______________________
My Commission Expires:____________
STATE OF WASHINGTON )
)ss.
County of Chelan )
I certify that I know or have satisfactory evidence that Charles D.
DeJong signed this instrument, on oath stated that he/she/they was/were
authorized to execute the instrument and acknowledged it as the
__________________ and _________________ of
LEASE AGREEMENT - 9
<PAGE>
_____________________ to be the free and voluntary act of _________________
for the uses and purposes mentioned in the instrument. DATED this 7th day
of March, 1995.
By: /s/
------------------------------------
Notary Public Wenatchee
My Commission Expires: 10-15-95
LEASE AGREEMENT - 10
LEASE AGREEMENT LESSEE'S COPY
LEASE NO. 94496 EFFECTIVE DATE: July 15, 1996
- -------------------------------------------------------------------------------
LESSOR: SUMMIT LEASING, INC.
P.O. Box 7
Yakima, WA 98907-0007 (509) 575-4425
LESSEE(S): TELEVAR NORTHWEST, INC.
215 Yakima St.
Wenatchee, WA 98801 (800) 407-0002
1.0 LEASED PROPERTY. Subject to the terms and conditions of this Lease
Agreement, Lessor hereby leases to Lessee(s) the following described
personal property hereinafter referred to as "leased property":
Various computer & telephone equipment per attached schedule "1"
2.0 TERM. The term of this lease shall be for a period of 36 months and 0
days commencing July 15, 1996 and terminating at 12:00 noon on July 15,
1999.
3.0 LOCATION OF LEASED PROPERTY. The leased Property shall be located and
based and the following location:
215 Yakima St., Wenatchee, WA 98801
4.0 RENTAL. The rental for the leased property, not including applicable
sales tax or use tax (or comparable tax), hereinafter call "tax", shall be
payable as follows:
First and last months' rentals due July 15, 1996: $6,864.28
Due August 15, 1996, and upon or before the fifteenth
day of each month thereafter: $3,432.14
THIS LEASE IS SUBJECT TO THE TERMS AND CONDITIONS PRINTED HEREON AND ON THE
ACCOMPANYING PAGES, ALL OF WHICH ARE MADE A PART HEREOF AND WHICH LESSEE
ACKNOWLEDGES HAVING READ. THIS LEASE IS NOT BINDING UNTIL ACCEPTED BY
LESSOR.
1
<PAGE>
LESSOR: SUMMIT LEASING, INC.
By /s/
--------------------------------
LESSEE:
By /s/ Date: July 11, 1996
--------------------------------
(Signature of Corporate Officer)
4.1 LATE CHARGE: If the rental payments are not received within five
(5) days of the due date, a late charge shall be imposed, such amount being
five percent (5%) per month, or $5.00 whichever is greater. Late charges
shall be payable by Lessee upon demand and failure to pay the same shall
constitute an event of default under this Lease. The right of Lessor to
impose a late charge shall not be considered as a waiver of Lessor of the
right to insist upon strict performance of the terms of this lease.
5.0 TITLE - LESSEE'S INTEREST - PROTECTION OF LESSOR'S INTEREST. Title to
the leased property is now and shall remain at all times during the term of
this lease in the Lessor. It is understood that this agreement creates a
lease only of equipment and not a sale thereof, Lessee's rights hereunder
being only for the possession and use of the leased property in accordance
with the terms of this Lease Agreement. If requested by Lessor, Lessee
shall execute any and all documents deemed necessary to protect all of
Lessor's rights under this Lease Agreement and Lessor's ownership of the
leased property. Without limiting the generality of the foregoing, Lessee
agrees at Lessee's cost to mark, sign, tag or otherwise cause the leased
property to be identified as property of the Lessor. The marking,
identification, or signing shall be in such manner as reasonably required
by Lessor. Lessor reserves the right and is hereby granted authority to
enter Lessee's property for the purpose of marking, signing, tagging, or
otherwise identifying the leased property as being owned by Lessor.
6.0 SELECTION AND INSPECTION. It is understood that Lessee has requested
and selected the leased property and the supplier and/or vendor thereof,
that Lessee has either inspected the leased property or has had an
opportunity to inspect the leased property, and accepts the same in its
present condition. It is further agreed and understood that Lessor makes
and has made no representations, warranties or guarantees, except as
contained in this Lease, and specifically, that Lessor makes no express nor
implied warranties as to any matter whatsoever, including, without
limitation, the condition of the leased property, its merchantability, or
its fitness for any particular purpose. Lessee agrees and acknowledges that
it is the intent of both parties to this Lease that it qualify as a
statutory finance lease under Article 2A of the Uniform Commercial Code.
Lessee acknowledges and agrees that the Lessee has selected both (1) the
equipment; and (2) the supplier from whom the Lessor is to purchase the
equipment. Lessee acknowledges that the Lessor has not participated in any
way in the Lessee's selection of the equipment or of the supplier, and the
Lessor has not selected, manufactured or supplied the equipment. Lessee is
advised that it may have rights under the contract evidencing to the
Lessor's purchase of the equipment from the supplier
2
<PAGE>
chosen by the Lessee and that the Lessee should contact the supplier of the
equipment for a description of any such rights.
7.0 NON-ASSIGNABILITY BY LESSEE. Neither this Lease nor Lessee's rights
hereunder, including, but not limited to, the possession and use of the
leased property, shall be assignable by Lessee without the written consent
of Lessor. Further, Lessee shall not sublease nor transfer in whole or in
part the possession of the leased property without the written consent of
Lessor. It is understood that Lessee has no property rights in the leased
property, other than the right to use the same in accordance with the terms
of this agreement and Lessee shall not encumber the leased equipment by
either voluntary or involuntary lien, nor any rights under the terms of
this Lease Agreement.
8.0 MAINTENANCE, USE AND RETURN OF LEASED PROPERTY.
8.1 MAINTENANCE AND USE. Lessee shall maintain the leased property in
a good and safe operating condition and working order, using as a guide the
maintenance program prescribed in the owner's manual if any , for each item
or leased property, and shall perform, all preventive maintenance
reasonably required, including but not limited to, such preventive
maintenance required to insure full validation of a manufacturer's
warranty, if any, on the leased property. In addition, Lessee shall repair
and provide replacement parts necessary to keep the leased property in a
good and safe operating condition and working order. All replacement parts,
as required hereunder, shall immediately become the property of Lessor. It
is understood that this is a net lease and Lessor assumes no obligation
whatsoever for the maintenance, repair or replacement of the leased
property or any portion thereof.
8.2 RETURN OF LEASED PROPERTY. When the leased property is returned to
the Lessor, at the expiration of the term of this lease, or as otherwise
provided for under the terms hereof, then the same shall be returned in the
same condition as when the leased property was delivered to Lessee under
the terms of this Lease, ordinary depreciation for normal use excepted.
Unless otherwise agreed in writing, Lessee shall be responsible for
returning, at Lessee's expense, the leased property to such location in
Yakima County, State of Washington, or at such other location as may be
designated by Lessor. In the event the leased property is not returned in
such condition and state of repair, the costs incurred in replacing the
same in such condition and repair shall be paid by Lessee to Lessor, upon
demand. WARNING: FAILURE TO PROMPTLY RETURN THE LEASED PROPERTY MAY RESULT
IN CRIMINAL PROSECUTION.
9.0 RISK OF LOSS - INSURANCE - INDEMNITY - LIABILITY INSURANCE.
----------------------------------------------------------
9.1 RISK OF LOSS. Lessee hereby assumes and shall bear the entire risk
of loss and damage to the leased property from any cause whatsoever and
regardless of whether the loss is insured.
3
<PAGE>
9.2 PROPERTY INSURANCE. During the term of this Lease, Lessee shall
cause the leased property to be insured against all perils normally and
customarily insured against with an insurer acceptable to Lessor, the
equipment to be scheduled on Lessee's policy in the amount of the full
insurable value of the leased property. Lessor shall be named as an insurer
and/or loss payee under the said policy or policies to the extent of
Lessor's interest. A certificate of insurance providing for thirty (30)
days' notice of cancellation to Lessor shall be furnished by the insurer or
insurers. The proceeds of such insurance payable as a result of loss or
damage to any or all of the leased property shall be applied at the option
of Lessor as follows:
(A) Toward the replacement, restoration or repair of the leased
property which may lost, stolen, destroyed or damaged; or,
(B) Toward the payment of any obligations of Lessee hereunder or
arising out of Lessee's use and possession of the leased property. Lessee
hereby irrevocably appoints Lessor as Lessee's attorney-in-fact to make
claim for, receive payment of and execute and endorse all documents, checks
or drafts received in payment for such loss or damage under such insurance
policy or policies.
9.3 INDEMNITY - LIABILITY INSURANCE. Lessee covenants and agrees to
indemnify and hold harmless Lessor against liability of any kind of nature,
including, but not limited to, the liability arising under any statute,
ordinance or regulation in connection with the use of the leased property,
and against liability from any claim for personal injury, death or property
damage to any person or party whatsoever, including Lessee, by reason of
the transportation, installation, use or operation of the leased property,
or the condition of the leased property. To insure such indemnification and
hold harmless agreement, Lessee shall obtain and maintain in good standing
at all times during the term of this lease liability insurance in the
amount of $500,000.00 ($750,000.00 for rolling stock), or more, with Lessor
named as an additional insured under such policy or policies. For the
purpose of this paragraph, "rolling stock" shall mean any leased property
licensed for operation on public roads. Lessee should provide Lessor with a
certificate showing such insurance in effect during the term hereof, and
thirty (30) days' notice of cancellation shall be required to be given to
Lessor. Such policy shall be issued by an insurance company acceptable to
Lessor.
9.4 FAILURE TO INSURE OR PAY FOR INSURANCE. In addition to any other
remedies available hereunder, in the event Lessee fails to provide or
maintain any insurance required by this Agreement, Lessor may obtain the
same at Lessee's expense and Lessee shall reimburse Lessor for all of
Lessor's costs so incurred.
10.0 USE - OPERATION ACCORDING TO LAW. Lessee shall comply with all
applicable statutes, ordinances and regulations with respect to the use,
operation and/or condition of the leased property. No leased equipment
shall be used contrary to the provisions of any applicable insurance policy
covering said leased property, and the Lessee shall immediately indemnify
and hold Lessor harmless from any and all fines, forfeitures,
4
<PAGE>
damages or penalties resulting from the violation of any laws, ordinances,
rules or regulations.
11.0 ABATEMENT. This lease is irrevocable for the full term hereof and for
the aggregate lease payments herein reserved, and the lease payments shall
not abate by reason of termination of Lessee's right of possession and/or
the taking of possession by Lessor or for any other reason.
12.0 PERMITS, BONDS, LICENSES AND TAXES. If required, because of Lessee's
use and/or possession of the leased property, Lessee shall obtain and
provide all necessary permits, bonds, and licenses required or necessary
for the installation, use operation and/or transportation of the leased
property. Lessee shall pay, as the same shall become due and payable, all
taxes, fees, or other governmental charges levied against the leased
property by reason of its use or ownership by any governmental entity or
agency. In addition, within thirty (30) days following the date on which
such tax, fee, or other charge becomes due and payable, Lessee shall
deliver to Lessor written proof of payment thereof, upon request by Lessor.
In the event Lessee shall fail or refuse to pay any such tax, fee or other
governmental charge, Lessor shall have the right to pay the same and Lessee
shall reimburse Lessor on demand for all sums so paid by Lessor. Personal
property taxes shall be paid by..... (AGREEMENT LEFT OFF HERE)
Page 2 Initial /s/ PLEASE TURN THIS PAGE OVER AND INITIAL THE OTHER SIDE
5
<PAGE>
SCHEDULE "1"
LESSEE: TELEVAR NORTHWEST, INC.
Lease No. 94496
- -------------------------------------------------------------------------------
QTY. DESCRIPTION S/N
- -------------------------------------------------------------------------------
Vendor: ComputerLand
------------
Invoice Number: 10075
1 486DX2/66 420MB/8MB/1.44/DWM 111369
Fujitsu 101 Keyboard
Microsoft Serial Mouse
8MB F/APM/Prolinea/HP
Invoice Number: 100073
1 APM 486/66 W/8MB 111303
1 APM 486/66 W/16MB 111305
2 KFC 15" .28NI
2 Fujitsu 101 Keyboard
2 Microsoft Serial Mouse
1 8MB F/APM/Prolinea/HP
Invoice Number: 100080
Various Telephone Accessories
(coax cables, jacks, brackets, etc.)
Invoice Number: 100083
1 Replay Plus 4 Port Expander BH167530
Invoice Number: 100082
1 LT15 Update Equipment
2 Bay2 Floppy Disk Drives
1 12 Circuit ONS Card/SX200D
1 Active Voice Replay Plus MSX425B-0040
Summit Leasing, Inc.
P.O. Box 7, Yakima, WA 98907 Initial /s/
6
<PAGE>
SCHEDULE "1" CONT.
Lease No. 94496
- ------------------------------------------------------------------------------
QTY. DESCRIPTION S/N
- ------------------------------------------------------------------------------
Vendor: NCA, Incorporated
-----------------
Invoice Number: CNW153
1 Livingston Comm Server, 20 Ports 1B02772
1 Livingston Internetwork Router 1E1478
20 US Robotics Courier V.34 v. Everything 3496144 3635782
3635829 3635942
3594233 3594599
3594904 3798598
3841143 3947845
3947878 3947908
3986395 4184829
4185016 4394217
4920347 4920337
4920104 4920310
16 RS232 Cable N/A
1 AdTran 56/64k DSU 600B4926
Invoice Number: CNW184
1 3 Sync Port Expansion 1E20631
1 AdTran 56/64k DSU 611A4984
10 US Robotics Courier V.34 v. Everything 43762382 44056353
44056365 44056370
44056211 44056359
44056369 44056371
44056373 44056371
Invoice Number: CNW185
1 Livingston V.35 Cable, Six Foot N/A
Summit Leasing, Inc.
P.O. Box 7, Yakima, WA 98907 Initial /s/
7
<PAGE>
SCHEDULE "1" CONT.
Lease No. 94496
- -------------------------------------------------------------------------------
QTY. DESCRIPTION S/N
- -------------------------------------------------------------------------------
Vendor: NCA, Incorporated
-----------------
Invoice Number: CNW152
1 AdTran 56/64k DSU 611A4984
Invoice Number: CNW140
1 Livingston Internetwork Router 1E01363
w/One High Speed Port
Invoice Number: CNW139
1 US Robotics Total Control HUB 12322
4 US Robotics Quad V.34 Modern Set 306CVSO 306CVJU
306CVKA 306CVS1
1 Livingston Comm Server 20 Ports 1B02596
12 DB25P to DB25P Ten Foot N/A
Invoice Number: CNW118
1 Cray 56/64 675411
Invoice Number: 1965
1 Livingston V.35 Cable, Six Foot N/A
Invoice Number: 1960
1 Livingston Portmaster Comm. Server 1B02576
30 Ports
1 Livingston Internetwork Router 1E1363
1 AdTran TSU T1/FT1 CSU/DSU 601B2442
30 US Robotics Courier V.34 V. Everything 44056382 44056381
44056407 44056408
44056409 44056410
Summit Leasing, Inc.
P.O. Box 7, Yakima, WA 98907 Initial /s/
8
<PAGE>
SCHEDULE "1" CONT.
Lease No. 94496
- -------------------------------------------------------------------------------
QTY. DESCRIPTION S/N
- -------------------------------------------------------------------------------
Vendor: NCA, Incorporated
-----------------
44056417 44056418
44056457 44056542
44056565 44156542
44118892 44118894
44118897 44118931
44118934 44118939
44118942 44118945
44118947 44118950
44118951 44118952
44118956 44118959
44118963 44119868
44118973 44118992
30 DB25P to DB25P Ten Foot N/A
Invoice Number: 1941
20 Microcom DeskPorte 28.8P A49150578 A4915079
A4915102 A4915103
A4915104 A4915105
A4915107 A4915108
A4915109 A4915110
A4915112 A4915113
A4915114 A4915115
A4915116 A4915117
A4915118 A4915120
A4915121
Vendor: Capella Worldwide Networking, Inc.
----------------------------------
Invoice Number: 0019506-IN
2 PM Router w/1 Hg Speed Port 1E00533
1E00762
1 PM2 Exp. Server, 10 Ser Ports 1B00229
Summit Leasing, Inc.
P.O. Box 7, Yakima, WA 98907 Initial /s/
9
<PAGE>
SCHEDULE "1" CONT.
Lease No. 94496
- ------------------------------------------------------------------------------
QTY. DESCRIPTION S/N
- ------------------------------------------------------------------------------
Vendor: Capella Worldwide Networking, Inc.
----------------------------------
Invoice Number: 0019507-IN
1 PM Router w/1 Hg Speed Port 1E00608
1 PM2 Exp. Server, 10 Ser Ports 1B0526
1 AdTran TSU 544A4916
Invoice Number: 0019508-IN
5 DeskPorte 28.8P V.34 C5157946 C5157947
C5159151 C5159152
C5157948
Invoice Number: 0019509-IN
30 Cable, Male to Male
1 PM2, Exp. Server, 30 Ser. Ports 1B03225
1 PM Router w/1 Hg Speed Port 1E00356
Invoice Number: 0019515-IN
2 10 Serial Port Exp. S20-S29
1 AdTran DSU 56/64 546A7046
Invoice Number: 0019538-IN
5 Cable, Male to Male
Invoice Number: 0019968-IN
10 Serial Port Exp.
Invoice Number: 0019969-IN
10 Serial Port Exp.
Summit Leasing, Inc.
P.O. Box 7, Yakima, WA 98907 Initial /s/
10
<PAGE>
OPTION TO PURCHASE
LEASE NO. 94496
LESSOR: SUMMIT LEASING, INC.
LESSEE: TELEVAR NORTHWEST, INC.
In the event Lessee(s) has fully performed all covenants, conditions,
provisions and agreements herein required of Lessee(s), and provided
Lessee(s) is not in default in the performance of any other obligation of
Lessor, the Lessee(s) is granted the option of purchasing the leased
property at the expiration of the term of this lease for the sum of
$4,883.52 plus any applicable state sales and/or use tax. This purchase
price is the closest approximation the parties can now make of the
reasonable market value of the leased property at the expiration of the
term of this lease. Unless otherwise agreed to in writing by the lessor and
lessee(s), such sale shall be for cash to be paid on or before the
expiration date of the term of this lease. No rental payments shall be
considered as a credit of any kind or nature towards the payment of the
purchase option price as set forth herein.
This document supersedes any prior Option to Purchase previously
granted with regard to the referenced lease.
DATED this 11 day of July, 1996.
LESSOR:
SUMMIT LEASING, INC.
By: /s/
-------------------------------
LESSEE:
TELEVAR NORTHWEST, INC.
By: /s/
-------------------------------
(Signature of Corporate Officer)
1
PROMISSORY NOTE
$63,000 November 1, 1995
Wenatchee, Washington
TELEVAR NORTHWEST, INC., a Washington corporation (the "Maker") ,
promises to pay to the order of MICHAEL P. SCHUYLEMAN and JANET L.
SCHUYLEMAN, husband and wife (the "Holder"), the principal sum of
Sixty-three Thousand Dollars ($63,000), together with interest on that
amount, upon the agreements, terms and conditions provided in this
Promissory Note (the "Note"):
1. Definitions.
(a) Default. The term "Default" means any of the following
events:
(i) the Maker at any time fails to pay, when due, any sum
owing on this Note, provided if the Company shall have insufficient funds
under Washington law on the Closing Date or any succeeding payment date to
make payment of principal or interest for the shares of Stock purchased by
the Company, the Company's right to the Stock shall not be extinguished or
its non-payment deemed a breach hereunder, and payment shall be deferred
until the earliest date upon which its funds shall be sufficient to permit
such payment; provided, however, that the right to defer payment shall not
toll the accrual of interest and may be exercised only one (1) time every
twenty-four (24) months during the payment term and the deferment period
shall not be in excess of three (3) consecutive months.
(b) Default Rate. The term "Default Rate" means the rate of
interest otherwise payable on this Note plus two percent (2%).
2. Interest. All sums owing on this Note shall bear interest from the
date of this Note until paid, at a fixed rate of ten percent (10%) per
annum. Should the Maker default on any of the obligations specified in this
Note, all sums owing on the Note shall bear interest at the Default Rate.
3. Payment. On or before the 1st day of December, 1995, and on or
before the lst day of each month thereafter until the 1st day of November,
2000, the Maker shall pay One Thousand Three Hundred Thirty-eight and
41/100 Dollars ($1,338.41) to the Holder. Payments shall be applied first
to costs, expenses, and other charges provided for in this Note or incurred
by the Holder in realizing on this Note, second to interest then accrued,
and then to principal. On or before the lst day of November, 2000, the
Maker shall pay all unpaid principal and interest remaining due on the
Note, and shall pay any and all costs, expenses, and other charges due and
payable on this Note. All payments shall be made in the lawful currency of
the United States of America. All payments shall be made to the Holder at
215 Yakima Street, Wenatchee, WA, or at such other place as the Holder and
Maker may specify in writing.
-1-
<PAGE>
4. Prepayment. The Maker may prepay any amount owing on this Note
without incurring any additional charge. Notwithstanding any prepayment,
the Maker shall continue to make all succeeding installments or other
payments as they become due, until this Note is completely paid.
5. Late Payment Charge. If any installment of principal or interest
shall not be paid within ten (10) days after the date it becomes due, the
Maker shall pay a late charge equal to five percent (5%) of the delinquent
installment. The late charge shall be in addition to, and not in lieu of,
any other rights or remedies the Holder may have by virtue of any breach or
default.
6. Security. As security for the payment of all sums owing on this
Note, Maker shall deposit certificates representing 326,666 shares of
capital common stock of the Maker issued to Holder (the "Stock") with David
Bohr, Attorney at Law, 224 South Mission, Wenatchee, WA. Upon the complete
and full performance by Maker of all obligations due under this Note,
Holder, its personal representative, successor, or assigns, shall endorse
the certificate and direct David Bohr, to assign and deliver the Stock to
Maker.
7. Acceleration. If the Maker is in Default, the Holder may accelerate
all amounts owing on the Note. Such accelerated amounts shall become
immediately due and payable. If the Holder accelerates the amounts due
under this Note, the Holder shall have the right to pursue any or all of
the remedies provided in this Note, including, but not limited to, the
right initiate a lawsuit to enforce payment of this Note.
8. Remedies. Upon a Default, the Holder shall have all rights
available to it at law or in equity, including all rights available under
the Washington Uniform Commercial Code. Upon a default and ten (10) days
advance written notice to Maker, Holder may notify David Bohr of the
Default and may direct David Bohr to release the Stock to Holder and upon
receipt, Holder shall acquire any and all rights normally incident to the
ownership of the Stock, including the right to vote, receive dividends,
cause the Maker to register the Stock in the name of the Holder on the
ledger of the Maker or sell all or any portion of the Stock, subject to the
Maker's Stock transfer restrictions, at a public or private sale. Any
unpaid balance outstanding at the time of a Default, and any costs or other
expenses incurred by the Holder in realizing on this Note, shall bear
interest at the Default Rate. All rights and remedies granted under this
Note shall be deemed cumulative and not exclusive of any other right or
remedy available to the Holder.
9. Attorneys' Fees, Costs, and Other Expenses. Maker agrees to pay all
costs and expenses which the Holder may incur by reason of any Default,
including, but not limited to, reasonable attorneys' fees, expenses, and
costs incurred in any action undertaken with respect to this Note,, or any
appeal of such an action. Any judgment recovered by the Holder shall bear
interest at the Default Rate.
10. Transfer; Obligations Binding on Successors. Maker may not
transfer any of its rights, duties, or obligations under this Note without
the prior written consent of the Holder.
-2-
<PAGE>
This Note, and the duties set forth in the Note, shall bind the Maker and
its successor and assigns. All rights and powers established in this Note
shall benefit the Holder and its successors and assigns.
11. Notices. Any notice, consent, or other communication required or
permitted under this Note shall be in writing and shall be deemed to have
been duly given or made either (1) when delivered personally to the party
to whom it is directed (or any officer or agent of such party), or (2)
three days after being deposited in the United States' certified or
registered mail, postage prepaid, return receipt requested and properly
addressed to the party. A communication will be deemed to be properly
addressed if sent to the Maker at 215 Yakima Street, Wenatchee, WA, or if
sent to the Holder at 1119 Washington, Wenatchee, WA. The Maker or the
Holder may at any time during the term of this Note change the address to
which notices and other communications must be sent by providing written
notice of a new address within the United States to the other party. Any
change of address will be effective ten (10) days after notice is given.
12. Governing Law. This Note will be construed and the rights, duties,
and obligations of the parties will be determined in accordance with the
laws of the state of Washington.
13. Headings. Headings used in this Note have been included for
convenience and ease of reference only, and will not in any manner
influence the construction or interpretation of any provision of this Note.
14. Waiver. No right or obligation under this Note will be deemed to
have been waived unless evidenced by a writing signed by the party against
whom the waiver is asserted, or by its duly authorized representative. Any
waiver will be effective only with respect to the specific instance
involved, and will not impair or limit the right of the waiving party to
insist upon strict performance of the right or obligation in any other
instance, in any other respect, or at any other time. Each party signing or
endorsing this Note waives presentment, demand, protest, and notice of
nonpayment and agrees to be bound as a principal and not as a surety and
promises to pay all costs of collection, including reasonable attorneys'
fees whether or not suit is commenced.
15. Severability. The parties intend that this Note be enforced to the
greatest extent permitted bv applicable law. Therefore, if any provision of
this Note, on its face or as applied to any person or circumstance, is or
becomes unenforceable to any extent, the remainder of this Note and the
application of that provision to other persons, circumstances, or extent,
will not be impaired.
16. References. Except as otherwise specifically indicated, all
references in this Note to numbered or lettered sections or subsections
refer to sections or subsections or this Note. All references to this Note
include any subsequent amendments to the Note.
-3-
<PAGE>
17. Maximum Interest. Notwithstanding any other provisions of this
Note, any interest, fees, or charges payable by reason of the indebtedness
evidenced by this Note shall not exceed the maximum permitted by law.
"MAKER"
By /s/
-------------------------------------
Charles D. DeJong, Chairman
-4-
ESCROW ACCOUNT INSTRUCTIONS AND AGREEMENT
1. Parties. The Parties to this Agreement are DAVID M. BOHR, Attorney
at Law ("Bohr"), MICHAEL P. SCHUYLEMAN and JANET L. SCHUYLEMAN, husband and
wife ("Seller"), and TELEVAR NORTHWEST, INC., a Washington corporation
("Purchaser").
2. Documents. The documents indicated below are delivered to Bohr to
be held in escrow pursuant to the terms and conditions of this Agreement:
A. Promissory Note, dated October 31, 1995 (copy);
Purchaser/Maker: Televar Northwest, Inc.
Seller/Holder: Michael P. Schuyleman and
Janet L. Schuyleman
(hereinafter the "Collected Instrument")
B. Stock Certificate No. 9 issued by Televar Northwest, Inc.,
to Michael P. Schuyleman representing 326,666 shares of
common stock in Televar Northwest, Inc.;
D. Stock Power, endorsed in blank, for transfer of Stock
Certificate No. 9.
The above documents are delivered to Bohr on behalf of Seller and
Purchaser, their heirs, successors, assigns, and representatives. The
delivery to Bohr is intended by the parties to be irrevocable, unless
otherwise provided in a written agreement of Purchaser and Seller or
provided in this Agreement. The delivery of the above-described documents
to Bohr evidences the Purchaser's and Seller's intentions to part with all
dominion and control of the documents. This delivery shall survive the
death, incompetency, disability, or other legal disability of any other
parties. Bohr does not clear title and does not insure the validity
Wenatchee Escrow, Inc. True
Escrow Account Instructions
and Agreement -1-
<PAGE>
or legal enforceability of any documents that it holds pursuant to a
contract collection or escrow agreement. Upon payoff, Bohr will provide
Purchaser with the Stock Certificate, endorsed in blank, together with the
Promissory Note.
3. Fees. As consideration for the collection of services and
additional services, if any, Seller agrees to pay Bohr Two Hundred Dollars
($200).
4. Delivery of Documents. When Purchaser has paid all of the amounts
required by the Collected Instrument, Seller shall endorse the Stock
Certificate and authorize and instruct Bohr to deliver to the Purchaser all
of the documents held in escrow by Bohr.
5. Default/Return of Documents. If the Purchaser defaults in any
obligation under the Collected Instrument or this Agreement, the Seller may
exercise its legal remedies under the Collected Instrument or otherwise.
Seller and Purchaser hereby authorize Bohr to release the documents held in
escrow by Bohr upon the direction of Seller in the event Seller elects to
pursue such remedy pursuant to the Collected Instrument. If Seller chooses
to serve a notice of default or forfeiture on Purchaser in accordance with
the contractual provisions of the Collected Instrument, or if Seller
chooses to commence a judicial action against Purchaser, Seller agrees that
a copy of said notice or court papers will be delivered to Bohr with
evidence of their delivery to Purchaser. If Purchaser fails to comply with
the requirements of said notice or court papers, if any, by the date
required therein, Bohr is authorized to deliver the documents held in
escrow to Seller.
6. Conflicts. If Bohr receives or becomes aware of any conflicting
demands or claims with respect to this Agreement, or with respect to the
rights of the Purchaser or Seller, Bohr shall have the right to discontinue
any and all acts under this Agreement, until
Wenatchee Escrow, Inc. True
Escrow Account Instructions
and Agreement -2-
<PAGE>
the conflict is resolved to the satisfaction of Bohr. Bohr shall have the
right, but not the obligation, to commence or defend any action or
proceeding for determination of any conflict. Seller agrees to pay all
costs, damages, judgments, and expenses, including reasonable attorney's
fees, sustained by Bohr, in connection with, or arising out of this
Agreement, including but not limited to, any interpleader action brought by
Bohr. In the event Bohr files a suit in interpleader, Bohr, by that act,
shall be fully released and discharged from all other obligations imposed
by this Agreement.
7. Limited Responsibility. Bohr's obligations are especially limited
to those stated in this Agreement. Bohr will be responsible only for the
exercise of ordinary care in following the instructions herein, and shall
be relieved of any further liability.
8. Assignment. Bohr reserves the right to withdraw from this Agreement
and/or assign its obligation in this Agreement. This Agreement shall be
binding on any successor of Bohr and on any successor of the undersigned or
the Collected instrument.
9. Legal Matters. In the event Purchaser or Seller retains an attorney
to enforce the terms of this Agreement, the substantially prevailing party
shall be entitled to all costs and reasonable attorney's fees incurred at
trial, upon appeal, or without resort to suit.
The undersigned has executed this Agreement this 31st day of October,
1995.
"SELLER"
/s/
---------------------------------------
MICHAEL P. SCHUYLEMAN
SSN: ###-##-####
Address: 1119 Washington Street
Wenatchee, WA
Phone: 509-663-6205
Wenatchee Escrow, Inc. True
Escrow Account Instructions
and Agreement -3-
<PAGE>
/s/
---------------------------------------
JANET L. SCHUYLEMAN
SSN: ###-##-####
Address: 1119 Washington Street
Wenatchee, WA
Phone: 509-663-6205
"PURCHASER"
TELEVAR NORTHWEST, INC.
/s/ , Chairman
-------------------------
Address: 215 Yakima Street
Wenatchee, WA 98801
Phone: 509-664-9004
"BOHR"
/s/
---------------------------------------
DAVID M. BOHR
Wenatchee Escrow, Inc. True
Escrow Account Instructions
and Agreement -4-
TELEVAR NORTHWEST, INC.
FORM OF EXCLUSIVE SALES AGENCY AGREEMENT (VAR AGREEMENT)
THIS AGREEMENT is made this ____ day of _________, 1996, between
TELEVAR NORTHWEST, INC., a Washington corporation ("TELEVAR"), and
__________________ ("VAR"). TELEVAR is located at 215 Yakima Street,
Wenatchee, Washington 98801.
In consideration of the promises and the mutual covenants between
them, the parties agree as follows:
1. APPOINTMENTS AND ACCEPTANCE.
1.1 TELEVAR hereby appoints VAR as its exclusive selling
representative during the term of this Agreement to sell "Internet
Services," which for purposes of this Agreement are defined as those
services set forth on the attached Schedule "A," including Internet access
(individual, dedicated, and from relay accounts), TELEVAR'S licensed
versions of Netscape Navigator and Microsoft Explorer, any other Internet
software licensed by TELEVAR, and all forms of electronic advertising,
including "home pages," electronic catalogs, and shopping malls. VAR shall
be responsible for compliance with software manufacturers' licensing and
trademark usage requirements and shall indemnify TELEVAR against all costs
and damages incurred as a result of VAR's violation of same; provided that
TELEVAR shall provide VAR with written documentation of such requirements
as the same may be amended from time-to-time. The term "Internet Services"
shall not include collateral Internet products and services, including
Internet books, routers, com servers, or modems, as well as consulting,
training and seminars related to the Internet.
1.2 VAR shall market and sell TELEVAR'S Internet Services on behalf of
and in the name of TELEVAR in the Territories as defined in Schedule "A."
VAR shall not solicit nor accept any orders for Internet Services outside
the Territories to which it is assigned without the written consent of
TELEVAR. VAR agrees to manage and promote the sale of said Internet
Services through its employees and/or sales representatives.
2. SUBAGENTS.
VAR agrees that TELEVAR is authorized, in consultation with VAR, to
establish subagents for VAR to enhance distribution of Internet Services
within the Territories. VAR may establish subagents on its own behalf with
the written consent of TELEVAR, which consent shall not be unreasonably
withheld. In most cases, the subagent will be a major discount computer
retailer and/or a trade or professional association limited to selling
individual access accounts. DEALER will receive commissions on ongoing
revenue from on all subscribers sold by the subagent during the term of
this Agreement, provided that up to forty percent (40%) of VAR's monthly
commission may be applied to compensate the subagent for its sales effort
(e.g., if VAR's normal commission is 25% or $6.25 on a $25.00
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<PAGE>
account, up to 40% or $2.50 of VAR's commission can be paid to the subagent
activating the account, resulting in a net commission to VAR of $3.75 per
month).
3. AGENCY FEE.
This Agreement shall be effective upon payment by VAR to TELEVAR of a
non-refundable Agency Fee for the Territory identified as
_____________________ in the amount of _______________________ Dollars
($__________). This fee is payable as follows: _________________ Dollars
($________) down, the balance shall bear interest at 8% per annum. VAR will
begin making payments of ________________ Dollars ($_____________),
representing principal and interest, on _______________, 199__ and shall
make a payment on the first of each subsequent month until paid in full. In
the event VAR fails to make the regular monthly payment hereunder, and such
default continues for thirty (30) days, TELEVAR may cancel this Agreement
upon three (3) business days written notice.
4. SERVICE INSTALLATION.
Within thirty (30) days of receipt of payment of the Agency Fee and
delivery by the local telephone company of all necessary telephone lines,
TELEVAR agrees to (a) deliver local Internet access service to the
Territories by installing all necessary equipment and telephone lines in
the Territories and in TELEVAR's central office to accommodate up to eight
hundred (800) initial subscribers, (b) provide initial sales and service
training to VAR and its personnel, and (c) commence advance marketing of
the availability of Internet Services in the Territories. All such
equipment and telephone lines shall be the property of TELEVAR. During the
initial term of this Agreement set forth in Section 10, TELEVAR will pay
for and install all additional equipment and/or telephone lines required to
maintain quality service in the Territories, as determined solely by
TELEVAR in accordance with its service policies and targeted line-to-user
ratio.
5. LICENSE FOR PREMISES.
If required by TELEVAR to deliver Internet Services to the
Territories, VAR hereby grants TELEVAR a license to place all necessary
equipment upon VAR's premises at no cost to TELEVAR, who shall have access
to such equipment upon VAR's premises for purposes of maintenance, repair
and replacement seven (7) days per week, twenty-four (24) hours per day
upon one (1) hour advance notice. VAR agrees to provide TELEVAR with a list
of the business, home, pager and cellular telephone numbers of at least
three (3) persons who shall be available to provide access to VAR's
premises at any time in the event of an emergency, which shall include a
failure of equipment. VAR agrees that it shall provide a secure, locked
location for the equipment and shall be solely responsible for any damage
to such equipment on its premises intentionally or negligently caused by
its agents, officers, employees and invitees.
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<PAGE>
6. PRICING.
VAR shall only quote the prices and terms set by TELEVAR for its
Internet Services, which may be changed by TELEVAR upon ten (10) days
advance written notice. VAR may accept monthly, quarterly or annual service
contracts for Internet Services, providing the subscriber with immediate
access to Internet Services, so long as VAR promptly forwards the
subscriber's application for service to TELEVAR for final approval.
7. NONDISCLOSURE & NONCOMPETE.
VAR acknowledges and agrees that all subscribers for TELEVAR's
Internet Services are the property of and are owned exclusively by TELEVAR.
Except as expressly required by law or permitted by this Agreement or in a
writing signed by TELEVAR, VAR shall not disclose the names, addresses,
credit and billing records of such subscribers to any third party, nor
shall VAR solicit or influence any person, firm or corporation to use
another Internet service provider. VAR agrees that during the term of this
Agreement, and for a period of one (1) year after the termination of this
Agreement, VAR shall neither itself provide Internet Services in the
Territories nor make any contractual agreements with any other Internet
service provider to sell Internet Services in (the Territories, without the
prior written consent of TELEVAR. Provided, however, that in the event
TELEVAR fails to provide Internet Services in the Territories for a period
of thirty (30) consecutive days, VAR may contract with another Internet
service provider to provide Internet Services in the Territories, or may
provide such Internet Services on its own, and may solicit TELEVAR's
subscribers in the Territories for such purposes.
8. CUSTOMER SUPPORT.
VAR agrees to provide primary support for the Internet Services sold
by VAR. Primary support includes, but is not limited to, configuration of
computer hardware and software applications, connecting to TELEVAR's
Internet service, training on use of the Internet and specific software
applications, and all other support required to facilitate the subscribers'
use of TELEVAR's Internet Services. At VAR's option, primary support may be
provided free or at prevailing rates charged by VAR. Notwithstanding the
foregoing, TELEVAR shall provide, subject to the right of termination or
modification upon ten (10) days advance notice to VAR, telephone technical
support to subscribers within the Territories in connection with
subscribers' use of TELEVAR's Internet Services at no charge. Minimum hours
of service are Monday through Friday (excluding holidays), from 9:30 a.m.
to 9:30 p.m., Pacific Standard Time. At TELEVAR's discretion, it may
provide free telephone support after normal business hours if necessary to
provide technical support at the subscriber's convenience.
-3-
<PAGE>
9. MARKETING OBLIGATIONS.
During the term of this Agreement, VAR agrees to use reasonable
efforts to market TELEVAR's Internet Services within the Territories. To
the extent feasible by virtue of VAR's existing business, VAR shall be
deemed to be using reasonable efforts if it is conducting a regular weekly
program of advertising in the local media, conducting seminars and/or
classes at least quarterly, distributing literature to prospective users,
preloading Internet access software in computers purchased by its own
subscribers, or otherwise promoting the use of TELEVAR's Internet Services.
All advertisements, flyers, brochures, and other marketing materials shall
be approved by TELEVAR in advance. VAR shall be entitled to participate in
TELEVAR's cooperative advertising program, the terms of which may change
from time-to-time.
10. TERM.
This Agreement shall continue in force for a term of three (3) years
from the date of this Agreement, unless earlier terminated in writing by
either party as provided in Section 13. Within ninety (90) days of
expiration of the initial term, this Agreement may be extended by mutual
written consent of the parties.
11. COMMISSIONS.
11.1 TELEVAR shall pay VAR commissions as outlined in Schedule "A" of
this Agreement on the rates applicable to Internet Services then in effect
as compensation for VAR's sales. VAR shall be entitled to receive a
commission on all current individual access subscribers in the Territories,
if any, as well as future subscribers for Internet Services in accordance
with Schedule "A."
11.2 Commissions are due and payable by TELEVAR on or before the
fifteenth (15th) day of each month (checks will be mailed on this day)
following the month which TELEVAR is paid for the first month of service.
Internet Services will not be activated until TELEVAR receives payment of a
subscriber's start-up fees and first month's Internet charges. All
commissions payable under this Agreement are contingent on TELEVAR'S
acceptance of a subscriber's order. The commissions payable to VAR shall
not be reduced or otherwise offset by accounts receivable constituting bad
debt, except as expressly provided in Schedule "A."
11.3 In the event that this Agreement is terminated pursuant to
Section 6, commissions will be paid by TELEVAR to VAR on all orders
received from VAR for a period of thirty (30) days after notice of
termination and for all activation's resulting from such orders received
before the thirty-first day after such termination.
-4-
<PAGE>
12. STATUS OF PARTIES.
12.1 The parties to this Agreement intend that VAR and its sales
associates operate as independent contractors and not as employees of
TELEVAR.
12.2 VAR and its associates agree to indemnify and hold harmless
TELEVAR from any loss, damages, claim or demand whatsoever arising out of
the activities of VAR or its sales associates, its agents, employees,
directors, officers and owners. TELEVAR agrees to indemnify and hold
harmless VAR from any loss, damages, claim, or demand whatsoever arising
out of TELEVAR's activities.
12.3 VAR will conduct business in its own name and in such a manner as
it may see fit, but shall not represent itself or its employees or sales
associates as TELEVAR employee's. In all marketing of the Internet
Services, VAR shall conspicuously identify itself as an authorized agent of
TELEVAR and shall identify TELEVAR as the provider of such Internet
Services.
12.4 VAR will abide by TELEVAR's policies and communicate the same to
TELEVAR subscribers to whom VAR sells Internet Services.
12.5 Nothing contained in the Agreement shall be construed as
conferring any license or right with respect to any trademark, trade name,
brand name, logo, or the corporate name of TELEVAR, or any of TELEVAR's
suppliers. VAR may use any trademark, trade name, brand name, logo or
corporate name of TELEVAR, or of any of TELEVAR's suppliers, only with the
express written permission of TELEVAR, and only in accordance with the
terms and conditions specified by TELEVAR.
13. TERMINATION.
13.1 Failure by either party to comply with any material term or
condition of this Agreement shall entitle the other party to give the party
in default written notice requiring it to correct the default. If the party
in default has not cured the default within thirty (30) days after receipt
of the notice, the notifying party may terminate this Agreement by giving
written notice to the defaulting party effective immediately. Material
breach by VAR shall include, but is not limited to, filing a petition to
declare VAR insolvent or bankrupt which is not dismissed within thirty (30)
days; making an assignment or other arrangement for the benefit of
creditors; or being dissolved or liquidated.
13.2 Neither party shall be liable to the other for terminating this
Agreement in accordance with its terms.
-5-
<PAGE>
14. APPLICABLE LAW.
This Agreement shall be construed in accordance with the laws of the
State of Washington. Venue shall lie exclusively in the Superior Court of
Chelan County, Washington.
15. GENERAL.
15.1 All notices under this Agreement shall be sent by certified or
registered mail, postage prepaid.
15.2 Neither party shall be liable for any non-performance or delay
caused by any condition or event beyond its control, including natural
disasters, war, rioting, and failure of telephone companies to perform on a
timely basis.
15.3 The failure of either party to act upon any right it has or upon
any breach by the other party shall not constitute a waiver of that or any
other right, remedy, or breach. No waiver is effective unless made in
writing and signed by the waiving party.
15.4 This Agreement, together with the schedules as attached and as
revised from time to time, constitutes the entire Agreement between TELEVAR
and VAR relating to the subject matter hereunder and no modification of
this Agreement shall be binding on either party unless it is in writing and
signed by TELEVAR and VAR.
15.5 NEITHER PARTY SHALL BE LIABLE TO THE OTHER FOR ANY
LOSS-OF-PROFIT, INDIRECT, INCIDENTAL, SPECIAL, PUNITIVE, OR CONSEQUENTIAL
DAMAGES ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE SALE OF
INTERNET SERVICES UNDER THIS AGREEMENT.
15.6 This Agreement is freely assignable by TELEVAR at its sole and
exclusive option. VAR shall not assign this Agreement, except with the
prior written consent of TELEVAR, which consent will not be unreasonably
withheld.
15.7 In the event either party retains an attorney to enforce the
terms of this Agreement, the substantially prevailing party shall be
entitled to all court and accounting costs, together with reasonable
attorneys' fees, whether incurred at trial or upon appeal. In the event of
a breach by VAR of this Agreement, notwithstanding that litigation is not
commenced by TELEVAR to remedy the breach, continued performance of this
Agreement by TELEVAR may be conditioned upon VAR's payment of TELEVAR'S
costs and attorneys' fees incurred to remedy the breach. Failure to pay
such fees shall constitute grounds for termination of this Agreement by
TELEVAR.
-6-
<PAGE>
This Agreement has been executed in duplicate by the parties hereto on
the day and year written above.
TELEVAR NORTHWEST, INC. __________________________________
By:_____________________________ By:_______________________________
-7-
<PAGE>
SCHEDULE "A"
A. TERRITORY.
The VAR's Territories as set forth in Section 1.1 of the Agreement is the
______________ local calling areas in effect as of the date of this
Agreement, wherein subscribers can access TELEVAR's local point of presence
in those markets without long distance toll charges or reliance upon line
forwarding. Provided, however, that VAR's exclusive rights to commission
revenue within the Territories shall not extend to Dedicated Access
Accounts, Frame Relay Access Accounts, or Home Page Advertising, which may
be sold by TELEVAR or third parties, subject to account protection as set
forth below.
B. COMMISSION RATES.
The commissions payable pursuant to Section 3 of the Agreement are as
follows:
1. DEDICATED ACCESS ACCOUNTS: ___% of the Setup Charge, if any, plus
___% of the "net revenue" from ongoing monthly Dedicated Access Charges for
the term of the Agreement, exclusive of telephone company line charges, for
Dedicated Access Accounts sold by VAR; provided, however, that VAR can
protect a prospective account by submitting a lead sheet to TELEVAR, which
shall protect VAR's right to commission on that account for a period of 90
days if the account is contracted within that period. The net revenue from
Dedicated Access Charges shall be computed by taking the gross Dedicated
Access Charges and subtracting $100 per 64 KBPS line sold by VAR.
2. FRAME RELAY ACCESS ACCOUNTS: ___% of the Setup Charge, if any, plus
___% of the "net revenue" from ongoing monthly Frame Relay Access Charges
for the term of the Agreement, exclusive of telephone company line charges,
for Frame Relay Access Accounts sold by VAR; provided, however, that VAR
can protect a prospective account by submitting a lead sheet to TELEVAR,
which shall protect VAR's right to commission on that account for a period
of 90 days if the account is contracted within that period. The net revenue
from Dedicated Access Charges shall be computed by taking the gross Frame
Relay Access Charges and subtracting $25 per 56 BPS line sold by VAR.
3. INDIVIDUAL ACCESS ACCOUNTS: ___% of the "net revenue" from monthly
Individual Access Charges during the term of the Agreement. The net revenue
from Individual Access Charges shall be computed by taking the gross
revenue from Individual Access Charges and subtracting (a) the actual
monthly cost of central office lines, and (b) the actual monthly cost of
access lines. Provided, however, that in the first twelve (12) months of
the Agreement, the cost of central office and access lines shall not be
deducted from the gross revenue derived from Individual Access Charges in
computing net revenue under this Agreement.
-8-
<PAGE>
4. HOME PAGE ADVERTISING ACCOUNTS: ___% of the first month's Home Page
Charges, excluding design fees, if a Home Page lead is generated by VAR and
documented in writing to TELEVAR on a lead sheet, and that lead results in
development and placement of a Home Page on TELEVAR's system within 90 days
of the date of that lead sheet, plus an override commission of ___% on such
Home Page Charges if the VAR meets targeted quota of $_________ in new Home
Page Charges during the month.
- ---------------- --------------------
TELEVAR Initials VAR Initials
-9-
INDEPENDENT DISTRIBUTOR AGREEMENT
This Agreement is made and entered into as of this 16 day of November 1994
by and between Association Communications Inc. (henceforth knows as ACI)
having its principle place of business at 1601 Fifth Ave., Ste. 1400,
Seattle, Washington 98101 and Televar Northwest, Inc. (henceforth known as
the Independent Distributor) having its principle place of business at 240
No. Mission, Wenatchee, Washington 98801. Both ACI and Independent
Distributor are parties to this Agreement.
A. ACI is a telecommunication company providing long distance
services through its own network facilities and resell agreements
with other carriers
B. Independent Distributor is a business providing telecommunication
equipment and services and desires to provide marketing services
to ACI to sell ACI long distance services
C. ACI desires Independent Distributor to provide such marketing
services
1. ACI hereby appoints Televar Northwest, Inc. as the exclusive
Independent Distributor for Washington counties Chelan, Douglas, Grant,
Yakima, Okanogan, Kittitas, Franklin, Benton and Adams. Televar agrees to
sell as an Independent Distributor ACI's long distance telecommunications
products. Outlined in attached Schedule A are the pricing and commission
schedules herein.
2. The Independent Distributor duties include:
A. Market and promote ACI and its services
B. Provide the appropriate and proper sales effort, service and
follow-up to foster, establish and maintain business
relationships between customers and ACI.
C. Sell services at service rates established by ACI and accept
service orders at rates below the established rates only
with prior approval of ACI.
C. Submit to ACI completed Service Orders to include billing
information, rating structure and all pertinent information
for provisioning based on customer access.
D. Provide and/or program customer premises equipment for
access and routing to ACI network
3. ACI duties include:
A. Provide quality switched or dedicated telecommunication long
distance services as outlined in Schedule A to customers
submitted by Independent Distribution.
B. Provide Marketing and Sales material and support.
-1-
<PAGE>
C. Provide Customer Service to customers relating to services,
billing and general service questions.
D. Provision new Orders and facilitate customer services
requests in a timely manner
E. Provide customers monthly billing
4. The Independent Distributor and ACI agree that in no circumstance
will the Independent Distributor consider its self or represent its self as
agent, division or subsidiary of ACI.
5. Commissions to the Independent Distributor will be based on
Schedule A attached for collected balances of customers submitted by
Independent Distributor payable on the 15th of the month following 100%
collection of billed charges per account. ACI reserves the right to change
the commission schedule of compensation with thirty (30) days prior written
notice to Independent Distributor. Changes to Schedule A Commissions will
be made only in the event of direct network cost increases and the customer
Rate Per Minute charges can not be adjusted to compensate for increase.
6. No Commissions will be paid to the Independent Distributor for
sales to existing endorsing Trade Association members (banks, hospitals
software companies) unless prior approval is given by ACI.
7. The Independent Distributor will be responsible to ACI for
Uncollectable Accounts of customers submitted by the Independent
Distributor to ACI or accounts that commissions have been paid to
Independent Distributor for which service is provided per the following
Uncollectable amount levels:
Swiched Access- Dedicated Access-
$1 to $1,000 100% All Levels 100%
$1001 to $6,000 50%
$ over $6,000 100%
A. The Company will provide the Independent Distributor an
Accounts Receivable Aged Listing twice a month. Independent
Distributor shall put forth its best efforts to assist ACI
in collecting past due accounts.
B. The Uncollected amount and all fees will be deducted from
the Independent Distributor Commissions for three months.
The remaining balance, if any, will be billed directly to
the Independent Distributor.
C. In the event that the Agreement is cancelled, the
Independent Distributor remains responsible for
Uncollectable Accounts as described.
-2-
<PAGE>
8. Information communicated between the parties, including but not
limited to the terms of this Agreement, rates, customers, vendors, network
characteristics, operating procedures, marketing methods and finances,
shall be considered proprietary and confidential.
9. This Agreement shall have an initial term of one year and will be
renewed automatically on a year-to-year basis, unless either party notifies
the other party 60 days prior to the renewal date.
10. This Agreement will continue in force from the date of the
Agreement and may be subject to termination upon occurrence of any of the
following: A. Dissolution or closing of the Independent Distributor or ACI.
B. Filing of voluntary or involuntary petition of bankruptcy by either
party. C. Breach of confidentially agreement between parties relative to
business relationships, system services or service rates. D. Action of
either party that may be seen by the other to be a misrepresentation or
detrimental to the continuation of the business relationship.
Termination of Agreement for circumstances above effective with
30 day written notice. If Agreement is terminated by ACI, Independent
Distributor will receive earned Commissions for six (6) months after
termination date.
11. The Independent Distributor will not market, promote, represent
solicit business for or divert business to any other company providing the
same product offered by ACI.
12. Each of the parties shall be responsible for its negligent actions
and those of its respective officers, employees and agents. Each such
acting party shall hold harmless and indemnify the other party against any
claims, losses, liabilities, damages or expenses (including attorney fees)
that are suffered or incurred by the other party that arise directly or
indirectly out of the negligence of the acting party. Provided however, in
no event shall either party be liable to the other for the payment of
consequential damages
13. This Agreement constitutes the entire understanding of the parties
with respect to the subject matter herein.
14. If any provision of the Agreement shall be for any reason held
invalid or unenforceable, the remaining provisions shall remain in full
force and effect.
15. This Agreement may not be assigned, in whole or in part, by either
party without written consent of the other.
-3-
<PAGE>
16. This Agreement shall not be modified or amended or any term or
provision waived, without written consent of the other.
In Witness Whereof, the parties have caused this Agreement to be executed
and delivered by their duly authorized representatives as of the day and
year first above written.
Association Communications Inc. Televar Northwest, Inc.
By: /s/ By: /s/
------------------------------- -------------------------------
Name: Richard Reynolds Name: Charles D. DeJong
---------------------------- -----------------------------
Title: Pres. Title: Pres & CEO
--------------------------- ----------------------------
-4-
<PAGE>
SCHEDULE A
Territory:
ACI appoints TELEVAR as exclusive Independent Distributor for Eastern
Washington defined as that portion of the state of Washington lying East of
the Cascade Mountain crestline. The appointment as exclusive Independent
Distributor becomes effective at Agreement approval and in no way implies
any interest by TELEVAR in Eastern Washington accounts previously receiving
service from ACI.
Commissions:
<TABLE>
<CAPTION>
TELEVAR COMMISSION SCHEDULE
RATE SELL COMMISSION
CODE PRODUCT INTRA INTER ASSN ASSN
- ---- ------- ----- ----- ---- ----
<S> <C> <C> <C> <C> <C>
A1 OUTBOUND, SWITCHED $0.129 0.159 12.0% 9.5%
A2 OUTBOUND, SWITCHED $0.129 0.149 10.0% 7.5%
A3 OUTBOUND, SWITCHED $0.119 0.139 8.0% 5.5%
A4 OUTBOUND, SWITCHED $0.149 0.149 14.5% 12.0%
A5 OUTBOUND, SWITCHED $0.139 0.139 12.0% 9.5%
A6 OUTBOUND, SWITCHED $0.135 0.135 11.0% 8.5%
A7 OUTBOUND, SWITCHED $0.129 0.129 9.0% 6.5%
D1 OUTBOUND, DEDICATED $0.125 0.125 23.0% 21.5%
D2 OUTBOUND, DEDICATED $0.105 0.105 18.0% 15.5%
D3 OUTBOUND, DEDICATED $0.099 0.099 16.5% 14.0%
D4 OUTBOUND, DEDICATED $0.095 0.095 11.0% 8.5%
D5 OUTBOUND, DEDICATED $0.089 0.089 9.0% 6.5%
D6 OUTBOUND, DEDICATED $0.079 0.079 6.0% 3.5%
B1 800 INBOUND, SWITCHED $0.159 0.159 10.0% 7.5%
B2 800 INBOUND, SWITCHED $0.149 0.149 8.0% 5.5%
B3 800 INBOUND, SWITCHED $0.145 0.145 6.0% 3.5%
B4 800 INBOUND, SWITCHED $0.139 0.139 5.0% 2.5%
B1 800 INBOUND, DEDICATED $0.105 0.105 10.0% 7.5%
B2 800 INBOUND, DEDICATED $0.095 0.095 8.0% 5.5%
B3 800 INBOUND, DEDICATED $0.085 0.085 6.0% 3.5%
B4 800 INBOUND, DEDICATED $0.008 0.008 5.0% 2.5%
</TABLE>
-5-
PROMISSORY NOTE
Wenatchee, Washington Date: September 1, 1996
Amount: $100,000
FOR VALUE RECEIVED, TELEVAR NORTHWEST, INC, a Washington Corporation
(the "Company") a subsidiary of Jungle Street, Inc., a Utah Corporation
"Maker" promises to pay Robert Smith "Holder," or order, the principal sum
of One Hundred Thousand Dollars and no/100 ($100,000) in lawful money of
the United States of America, on the following terms and conditions:
1. PAYMENT OF THE NOTE:
The principal amount of this note amounting to $100,000 is due and
payable on January 31, 1997. Interest at the rate of 18% per annum is due
and payable on the first of each month, beginning with October 1, 1996.
2. OPTION:
Holder shall have an option, exercisable in writing, until June 30,
1997 to purchase common stock of the Company at a price of $ 1.00 per
share.
3. RIGHT OF PREPAYMENT:
Maker shall have the right to prepay the unpaid principal in whole or
in part at any time without penalty.
4. NOTICES:
All notices, demands, requests, consents, approvals, and other
instruments required or permitted to be given shall be in writing and shall
be deemed to have been properly given if sent by registered or certified
mail, postage prepaid, return receipt requested, to the address set forth
below:
a. To Maker: Televar Northwest, Inc.
Attn: Mark Hamilton, President
215 Yakima Street
Wenatchee, WA 98801
b. To Holder: Robert Smith
20008 Grand Ave., #201
Everett, WA 98201
Provided, however, that such address may be changed upon five (5) days
written notice thereof similarly given to the other party. Such notice,
demand, request, consent, approval and
-1-
<PAGE>
other instrument shall have been deemed to have been served on the third
(3rd) day following the date of mailing.
5. DEFAULT:
If default be made in the payment of any installment when due, then,
at the option of the Holder of this Note, without prior written notice, the
entire indebtedness hereby represented shall become immediately due and
payable, time being of the essence hereof. As long as this Note is in
default, then at the option of the Holder hereof, without prior written
notice, this Note shall bear interest at the rate of Eighteen percent (18%)
per annum until Note has been paid in full.
6. COLLECTION COSTS AND ATTORNEY'S FEES:
Maker promises to pay all actual costs and fees incurred by the Holder
in the event payment is not made when due. Maker further promises that if
foreclosure proceedings, or any other action is instituted to collect this
Note or any part hereof, Maker will pay, in addition to costs and
disbursements, a reasonable sum as attorney's fees.
7. VENUE:
At the option of the Holder, venue of any action hereunder shall be
Chelan County, State of Washington.
8. WAIVER OF DEMAND:
Maker (and any endorser) hereby waives demand, presentment, protest,
or notice of any kind, and expressly agrees that if this Note or any
payment due hereunder may be extended, any such extension shall in no way
impair the liability of Maker.
9. SECURITY:
This Note is secured by the full faith and promise of the Maker,
Televar, Inc.
ACCEPTED AND APPROVED AS TO FORM:
HOLDER: MAKER:
Robert Smith Televar, Inc.
20008 Grand Ave., #201
Everett, WA 98201 By /s/
-------------------------------------
Charles D. DeJong, CEO
By /s/ By /s/
-------------------------------- -------------------------------------
Robert Smith Mark D. Hamilton, President
WITNESS: /s/ WITNESS: /s/
-------------------------- -------------------------------
-2-
EXHIBIT 21
SUBSIDIARIES
Televar Northwest, Inc., a Washington corporation
MANTYLA, McREYNOLDS AND ASSOCIATES, C.P.A.'s
A Professional Corporation
We hereby consent to the use in the Annual Report on Form 10-KSB for the
fiscal year ended June 30, 1996, of our report dated October 24, 1996,
relating to the financial statements of Jungle Street Inc. (the "Company"),
including the accounts of its wholly-owned subsidiary, Televar Northwest,
Inc., which report appears in such Annual Report. We also consent to
incorporation by reference of our report in any other document, including a
registration statement on Form S-8, filed by the Company in accordance with
the rules promulgated under the Securities Act of 1933, as amended, and the
Securities Exchange Act of 1934, as amended.
/s/
- --------------------------------------
Mantyla, McReynolds & Associates, CPAs
Salt Lake City, Utah
November 14, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This Schedule contains summary financial information extracted from the audited
financial statements of Jungle Street, Inc., for the year ended June 30, 1996,
and is qualified in its entirety by reference thereto.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-END> JUN-30-1996
<CASH> 9,435
<SECURITIES> 0
<RECEIVABLES> 267,594
<ALLOWANCES> 38,642
<INVENTORY> 0
<CURRENT-ASSETS> 212,559
<PP&E> 598,020
<DEPRECIATION> 72,693
<TOTAL-ASSETS> 966,281
<CURRENT-LIABILITIES> 1,021,569
<BONDS> 243,600
0
0
<COMMON> 1,697
<OTHER-SE> (300,585)
<TOTAL-LIABILITY-AND-EQUITY> 966,281
<SALES> 0
<TOTAL-REVENUES> 1,697,104
<CGS> 0
<TOTAL-COSTS> 1,453,733
<OTHER-EXPENSES> 578,600
<LOSS-PROVISION> 28,429
<INTEREST-EXPENSE> 53,690
<INCOME-PRETAX> (367,264)
<INCOME-TAX> 0
<INCOME-CONTINUING> (367,264)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (367,264)
<EPS-PRIMARY> (.34)
<EPS-DILUTED> (.34)
</TABLE>
