<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended July 31, 1999
OR
[ ] 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 0-20835
LEAPNET, INC.
(Exact name of registrant as specified in its charter)
Delaware 36-4079500
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
22 West Hubbard Street, Chicago, Illinois 60610, (312) 494-0300
(Address, including zip code, and telephone number, including area code,
of registrant's principal executive offices)
N/A
---
(Former Name, Former Address & Former Fiscal Year, if changed since last report)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter periods as 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_____
---------
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practical date.
Outstanding Shares at
Class September 14, 1999
---------------------------------- -----------------------------
Common Stock - $0.01 par value 14,153,062
<PAGE>
LEAPNET, INC.
FORM 10-Q
FOR THE PERIOD ENDED
JULY 31, 1999
INDEX
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements:
Consolidated Balance Sheets --
July 31, 1999 (Unaudited)
and January 31, 1999 3
Consolidated Statements of Operations --
Three Months Ended and Six Months Ended
July 31, 1999 and 1998 (Unaudited) 5
Consolidated Statements of Cash Flows --
Six Months Ended
July 31, 1999 and 1998 (Unaudited) 6
Notes to Consolidated Financial Statements 7
ITEM 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 9
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings 14
ITEM 4. Submission of Matters to a Vote of Securities Holders 15
ITEM 6. Exhibits and Reports on Form 8-K 15
SIGNATURES 15
2
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements
LEAPNET, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
July 31, January 31,
-------- -----------
1999 1999
---- ----
(unaudited)
<S> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents............................. $13,190,821 $14,076,379
Short-term investments (Note 4)....................... 454,099 0
Accounts receivable (net of allowance of
$756,579 and $470,750, respectively)............... 6,006,628 6,433,214
Costs in excess of billings (net of allowance of
$47,000 and $10,374, respectively)................. 374,284 339,907
Prepaid expenses...................................... 274,682 262,970
----------- -----------
Total current assets............................. 20,300,514 21,112,470
Property and Equipment
Land.................................................. 158,921 158,921
Building and building improvements (Note 6)........... 1,153,684 493,473
Leasehold improvements................................ 731,186 716,656
Computer equipment.................................... 1,390,603 1,172,305
Furniture and equipment............................... 860,705 853,517
----------- -----------
4,295,099 3,394,872
Less accumulated depreciation......................... (1,379,678) (910,811)
----------- -----------
Net property and equipment....................... 2,915,421 2,484,061
Other Assets............................................. 676,585 136,839
----------- -----------
Total Assets............................................. $23,892,520 $23,733,370
=========== ===========
</TABLE>
3
<PAGE>
LEAPNET, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
July 31, January 31,
-------- -----------
1999 1999
---- ----
(unaudited)
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable................................................... $ 3,102,362 $ 2,652,819
Accrued expenses................................................... 853,874 1,120,724
Billings in excess of costs........................................ 548,198 1,331,279
Notes payable...................................................... 4,092,892 4,073,000
Current portion of long-term liabilities........................... 248,707 374,611
------------ ------------
Total current liabilities...................................... 8,846,033 9,552,433
Long-Term Liabilities
Long-term mortgage payable......................................... 1,025,543 640,445
Capital lease obligations.......................................... 0 52,908
------------ ------------
Total long-term liabilities.................................... 1,025,543 693,353
Total Liabilities..................................................... $ 9,871,576 $ 10,244,786
Commitments and Contingencies (Notes 6 and 8)
Stockholders' Equity
Preferred stock, $.01 par value, 20,000,000 shares authorized,
no shares issued or outstanding.................................. 0 0
Common stock, $.01 par value; 100,000,000 shares authorized,
14,153,062 and 14,131,785 shares issued and outstanding as of
July 31, 1999 and January 31, 1999, respectively................. 141,531 141,318
Unrealized gain on marketable securities (Note 4).................. 128,019 0
Additional paid in capital......................................... 36,606,127 36,566,638
Retained earnings.................................................. (22,703,603) (23,068,242)
less cost of 50,000 shares of common stock held in treasury........ (151,130) (151,130)
------------ ------------
Total Stockholders' Equity..................................... $ 14,020,944 $ 13,488,584
------------ ------------
Total Liabilities and Stockholders' Equity............................ $ 23,892,520 $ 23,733,370
============ ============
</TABLE>
The accompanying notes to the financial statements are an integral
part of these statements.
4
<PAGE>
LEAPNET, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
------------------ ----------------
July 31, July 31,
-------- --------
1999 1998 1999 1998
----------- ----------- ----------- -----------
(unaudited) (unaudited)
<S> <C> <C> <C> <C>
Revenues....................................... $ 9,824,844 $ 8,990,943 $17,734,106 $19,366,006
Operating expenses:
Direct costs and related expenses........... 4,064,675 3,193,429 7,160,669 6,336,049
Salaries and related expenses............... 3,648,528 4,718,918 6,925,530 9,736,636
General and administrative expenses......... 1,644,966 2,076,274 3,572,339 4,161,910
----------- ----------- ----------- -----------
Total operating expenses................ 9,358,169 9,988,621 17,658,538 20,234,595
----------- ----------- ----------- -----------
Operating income / (loss)...................... 466,675 (997,678) 75,568 (868,589)
Gain on Sale of Building.................... - 1,154,588 - 1,154,588
Interest income / (expense), net............ 109,651 (22,094) 289,072 (119,051)
----------- ----------- ----------- -----------
Income before income taxes.............. 576,326 134,816 364,640 166,948
Income tax provision........................... 0 (60,922) 0 (78,068)
----------- ----------- ----------- -----------
Net income..................................... $ 576,326 $ 73,894 $ 364,640 $ 88,880
=========== =========== =========== ===========
Per share data:
Net income per share:
Basic................................ $ 0.04 $ 0.01 $ 0.03 $ 0.01
=========== =========== =========== ===========
Diluted ............................. $ 0.04 $ 0.01 $ 0.03 $ 0.01
=========== =========== =========== ===========
Weighted average number of shares used in
Basic per share computation.......... 14,138,877 13,640,866 14,135,331 13,644,866
Diluted per share computation........ 14,191,251 13,989,668 14,187,704 13,993,668
</TABLE>
The accompanying notes to the financial statements are an
integral part of these statements.
5
<PAGE>
LEAPNET, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Six Months Ended
----------------
July 31,
--------
1999 1998
---- ----
(unaudited)
<S> <C> <C>
Cash flows from operating activities:
Net income..................................................................... $ 364,640 $ 88,880
Adjustments to reconcile net income to Net cash used in operating activities:
Depreciation and amortization............................................. 499,219 1,093,718
Deferred income taxes..................................................... 0 78,068
Gain on sale of building.................................................. 0 (1,154,588)
Changes in operating assets and liabilities:
Accounts receivable..................................................... 100,506 1,498,210
Costs in excess of billings............................................. (34,377) (1,205,181)
Prepaid expenses........................................................ (11,712) (84,286)
Other assets............................................................ (246,630) (56,047)
Accounts payable........................................................ 449,543 (1,678,049)
Accrued expenses........................................................ (266,850) (850,285)
Billings in excess of costs............................................. (783,081) 1,033,430
-------------- -------------
Net cash provided by / (used in) operating activities.......................... 71,258 (1,236,130)
-------------- -------------
Cash flows from investing activities:
Capital expenditures........................................................... (979,161) (67,101)
Capitalized software development costs......................................... (244,533) (120,986)
Issuance of notes receivable................................................... 0 1,819,770
Proceeds from sale of building................................................. 0 3,476,277
Release of escrow monies in connection
with YAR acquisition, net of expenses..................................... 0 2,725,186
-------------- -------------
Net cash (used in) / provided by investing activities.......................... (1,223,694) 7,833,146
-------------- -------------
Cash flows from financing activities:
Net outlays related to common stock issuance................................... 39,701 79,999
Net borrowings/(repayments) on:
Notes payable............................................................ 19,890 (1,655,478)
Mortgage payable......................................................... 393,486 659,025
Repayment of capital lease financing..................................... (186,199) (185,816)
-------------- --------------
Net cash provided by / (used in) financing activities.......................... 266,878 (1,102,270)
-------------- --------------
Net (decrease) / increase in cash and cash equivalents............................ (885,558) 5,494,746
Cash and cash equivalents, at beginning of period................................. 14,076,379 7,214,261
-------------- --------------
Cash and cash equivalents, at end of period....................................... $ 13,190,821 $ 12,709,007
============== ==============
Supplementary disclosure of cash paid during the period:
Interest paid.................................................................. $ 106,618 $ 279,789
Taxes paid..................................................................... $ 4,518 $ 271,400
Supplementary disclosure of noncash investing and financing activities:
Securities received from client for services rendered,
stated at fair market value (Note 4).......................................... $ 454,099 $ 0
</TABLE>
The accompanying notes to the financial statements are an integral part of
these statements.
6
<PAGE>
LEAPNET, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 -- Basis of Presentation
The accompanying unaudited consolidated financial statements and related notes
to the consolidated financial statements include the results of Leapnet, Inc.
(the "Company") and its wholly-owned subsidiaries.
On October 22, 1998, the Company sold various assets of its wholly-owned
subsidiary, One World Communications, Inc. ("One World"), as described further
in Note 3. As such, the historical operating results of One World are included
within the financial statements for the three and six months ended July 31,
1998, but are not included for the three and six months ended July 31, 1999.
The unaudited consolidated financial statements for the six month periods ended
July 31, 1999 and 1998 reflect all adjustments (consisting only of normal
recurring adjustments) which are, in the opinion of management, necessary for a
fair presentation of the financial position and operating results for the
interim periods.
The consolidated financial statements should be read in conjunction with the
consolidated financial statements and notes thereto, together with management's
discussion and analysis of financial condition and results of operations,
contained in the Company's Annual Report on Form 10-K as filed with the
Securities and Exchange Commission on April 30, 1999.
The results of operations for the three and six month periods ended July 31,
1999 are not necessarily indicative of the results of operations to be expected
for the entire fiscal year ending January 31, 2000.
Certain amounts previously reported have been reclassified to conform to current
year classifications.
NOTE 2 -- Net Income Per Share
The Company computes earnings per share in accordance with SFAS No. 128,
Earnings Per Share. Under SFAS 128, the weighted average number of common shares
used in determining basic and diluted earnings per share attributable to common
stockholders for the three and six months ended July 31, 1999 and 1998 is as
follows:
<TABLE>
<CAPTION>
Three Months Ended July 31, Six Months Ended July 31,
--------------------------- -------------------------
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Common shares outstanding--Basic 14,138,877 13,640,866 14,135,331 13,644,866
Common stock equivalents 52,248 348,802 52,373 348,802
---------- ---------- ---------- ----------
Common shares outstanding--Diluted 14,191,125 13,989,668 14,187,704 13,993,668
</TABLE>
NOTE 3 -- Divestitures
On October 22, 1998, the Company closed on the sale to Young and Rubicam, Inc.
of various assets of its One World subsidiary and the transfer of the AT&T
account of YAR Communications, Inc. ("YAR"). As consideration for the sale, the
Company received $5.3 million on October 22, 1998, and an additional $1.1
million in April 1999.
NOTE 4 -- Short Term Investments
The Company accounts for equity investments using SFAS No. 115, Accounting for
Certain Investments in Debt and Equity Securities. Under SFAS No. 115,
management determines the proper classifications of investments at the time of
receipt and reevaluates such designations as of each balance sheet date. At July
31, 1999, all securities covered by SFAS No. 115 were designated as available
for sale. Accordingly, these equity securities are stated at fair value of
$454,099 on the balance sheet with comprehensive income resulting from an
unrealized gain of $128,019 which is reported as a separate component of
stockholder's equity.
7
<PAGE>
NOTE 5 -- Line of Credit
On February 24, 1999, the Company obtained a new $10 million secured revolving
line of credit from American National Bank which replaced an existing $5 million
line of credit. The new line of credit is renewable each year and will bear
interest at a rate of 1.5% above the bank's highest CD rate. Borrowings are
collateralized by substantially all the assets of the Company, and the line of
credit agreement requires the Company to maintain certain minimum levels of
working capital and net worth. At July 31, 1999, the interest rate was 7% and
the outstanding balance on the line was $4,093,000.
NOTE 6 -Purchase of Real Estate and Mortgage
On July 2, 1999, Quantum Leap Communications, Inc. ("QLC"), a wholly-owned
subsidiary of the Company, entered into contracts to purchase a 35,000 square
foot building for $2.8 million. The purchase of the building is scheduled to
occur in three phases. As of July 31, 1999, the first portion of the building
was purchased for $500,000, of which, 20% was paid in cash and 80% was financed
as described below. The second phase of the purchase is scheduled to occur in
October 1999, at which time an additional section of the building will be
purchased for $1.3 million. The final phase of the purchase is scheduled to
occur no later than October 2000, when the remaining portion of the building is
expected to be purchased for $1 million.
On June 29, 1999, the Company obtained a 5 year $2.24 million multi-draw
mortgage loan which is secured by substantially all the assets of the Company as
the mortgage is cross-collateralized with the line of credit that is described
in Note 5. At July 31, 1999, the outstanding balance this loan was $400,000.
QLC has leased the portions of the building that it does not presently own, and
QLC is in the process of negotiating a contract to remodel the building.
NOTE 7 -- Income Taxes
As of July 31, and January 31, 1999, the Company had deferred tax assets of
approximately $8.6 million. Approximately $4.5 million of the deferred tax asset
relates to operating loss carryforwards for federal and state income tax
purposes which begin to expire in fiscal year 2011. The most significant of the
other deferred tax assets is approximately $3.3 million related to goodwill,
which was written off for financial reporting purposes during the quarter ended
October 31, 1998. This goodwill continues to have tax basis and the Company will
continue to amortize the goodwill for tax purposes.
The Company has provided a full valuation reserve against the net deferred tax
asset due to its limited operating history, recent operating losses, the
difficulty and significant judgment in projecting future operating results, the
volatility of the industry, and the transfer of the AT&T account, which had
previously provided substantial taxable income (See Note 3). Consequently, as
the Company achieves future taxable income, no income tax provision will be
recorded until the deferred taxes related to the operating loss carryforwards
have been fully utilized.
NOTE 8 -- Litigation
In November 1998, the Company filed a complaint in the Supreme court of the
State of New York against Finkle, Ross & Rost, LLP ("Finkle"), the former
accountants for Yurianna, Inc., the company from which the Company acquired
various assets of YAR, alleging breach of contract and accountant malpractice.
The action seeks damages believed to exceed $13,500,000 and such other relief as
the court deems just and equitable. In December 1998, Finkle filed a complaint
in the Supreme Court of the State of New York against the Company for $28,750
for accounting services rendered. The amount was reduced to $11,250 by Finkle.
Although Finkle had performed services for the Company, the Company intends to
vigorously oppose this claim due to the quality of services provided.
See Item 3 of the 10-K for the fiscal year ended January 31, 1999 for additional
disclosures regarding pending matters.
8
<PAGE>
NOTE 9 -- Acquisition
On June 5, 1999, the Company signed a letter of intent to acquire Nine Dots
Corporation. Nine Dots is an interactive marketing services firm specializing in
digital branding, online advertising and promotion, strategic consulting and Web
site development. The Company is conducting due diligence.
ITEM 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
The following presentation of management's discussion and analysis of the
Company's financial condition and results of operations should be read in
conjunction with the Company's consolidated financial statements, accompanying
notes thereto and other financial information appearing in the Company's Annual
Report on Form 10-K which was filed with the Securities and Exchange Commission
on April 30, 1999.
In reviewing the Company's consolidated financial statements and the discussion
of the Results of Operations that appears below, the following should be taken
into consideration.
On October 22, 1998, the Company sold various assets of its wholly-owned
subsidiary, One World Communications, Inc. ("One World") and the AT&T account of
YAR Communications, Inc. ("YAR"), as further described in Note 3 to the
Consolidated Financial Statements. As such, the historical operating results of
One World are included within the results of operations for the three and six
months ended July 31, 1998, but are not included within the three and six months
ended July 31, 1999.
Results of Operations
THREE MONTHS ENDED JULY 31, 1999 AND JULY 31, 1998
Revenues
- --------
Revenues increased to $9.8 million for the three months ended July 31, 1999 from
$9.0 million for the three months ended July 31, 1998, an increase of
approximately $0.8 million or 9%. The $0.8 million increase in revenue was
primarily due to an increase of $5.1 million in increased work with new and
existing clients as the Company continues to expand its business and clients.
Of the $5.1 million increase, approximately $361,000 or 16% stemmed from YAR's
non-AT&T related new and existing accounts. The increases were offset by
decreases in revenue primarily due to the October 1998 sale of One World and the
AT&T account of YAR which resulted in decreased revenue during the three months
ended July 31, 1999 of approximately $4.3 million.
Direct Costs and Related Expenses
- ---------------------------------
Direct Costs and Related Expenses generally consist of production costs which
include services such as filming, animation, editing, special effects,
photography and illustrations, artwork, computer design and various related
production services which are generally outsourced, along with contracted talent
and other costs related to creative executions which may include traditional
media as well as new technologies and multimedia. Direct Costs and Related
Expenses increased to $4.1 million for the three months ended July 31, 1999 from
$3.2 million for the three months ended July 31, 1998, an increase of $0.9
million or 28%. The increase is primarily due to the increased production for
both new and existing clients.
Salaries and Related Expenses
- -----------------------------
Salaries and Related Expenses consist primarily of salaries and wages for
employees, related payroll tax expenses, group medical and dental coverages,
freelance and contract labors, and recruiting expenses. Salaries and Related
Expenses decreased to $3.6 million for the three months ended July 31, 1999 from
$4.7 million for the three months ended July 31, 1998, a decrease of $1.1
million or 23%. The decrease was primarily due to the sale of One World and
restructuring efforts at YAR which together resulted in a decrease in Salaries
and Related Expenses of $2.1 million from the prior year quarter. This decrease
was offset in part by $1.0 million in salary increases primarily related to new
hires at
9
<PAGE>
the Company. As a percentage of revenue, Salaries and Related Expenses decreased
to 37% for the three months ended July 31, 1999, from 52% for the three months
ended July 31, 1998.
General and Administrative Expenses
- -----------------------------------
General and Administrative Expenses include space and facilities expenses,
corporate expenses, depreciation, insurance, legal and accounting fees and
management information system expenses. General and Administrative Expenses
decreased to $1.6 million for the three months ended July 31, 1999, from $2.1
million for the three months ended July 31, 1998, a decrease of $0.5 million or
24%. The decrease was primarily due to the sale of One World and restructuring
efforts at YAR which together resulted in a decrease of $622,000 from the prior
year quarter. The decreases were offset by $189,000 of increases at the
remaining subsidiaries as a result of increased legal costs and increased
reserves for accounts receivable and unbilled work in progress. As such, as a
percentage of revenue, General and Administrative Expenses decreased to 17% for
the three months ended July 31, 1999, from 23% for the prior year quarter.
Other Income and Expense
- ------------------------
On July 17, 1998, the Company sold a building which housed the Los Angeles
office of The Leap Partnership, Inc., a wholly-owned subsidiary of the Company.
The building was sold for $3.48 million which resulted in a $1.15 million pre-
tax gain as reported.
Interest income totaled $181,640 and $124,698 for the three months ended July
31, 1999 and 1998, respectively, and, was generated from short-term US Treasury
Notes, certificates of deposit, money market account and short-term Eurodollar
currency investments. The interest income was offset in part by interest expense
of $71,989 and $146,792, respectively, resulting in net interest income of
$109,651 and net interest expense of $22,094 for the three months ended July 31,
1999 and 1998, respectively. The Company incurred interest expense on debt that
totaled approximately $5 million as of July 31, 1999, and $7.2 million as of
July 31, 1998.
Income Taxes
- ------------
The Company's combined federal and state effective income tax rates were 0% and
45.2% for the three months ended July 31, 1999 and 1998, respectively. The 0%
effective rate for the three months ended July 31, 1999 is due to the Company's
use of previously reserved tax assets resulting from net operating losses.
As of July 31, 1999, the Company has a deferred tax asset of approximately $8.6
million. Approximately $4.5 million of the deferred tax asset relates to
operating loss carryforwards for federal and state income tax purposes which
begin to expire in fiscal year 2011. The Company had provided a full valuation
reserve against the net deferred tax asset due to its limited operating history,
recent operating losses, the difficulty and significant judgment involved in
projecting future operating results, the volatility of the industry, and the
transfer of YAR's AT&T Account. To the extent that the Company achieves future
taxable income, no provision will be recorded until the operating losses have
been fully utilized.
As of July 31, 1998, the higher effective tax rate was primarily due to higher
state and local tax rates applied to a higher level of taxable income in those
tax jurisdictions.
SIX MONTHS ENDED JULY 31, 1999 AND JULY 31, 1998
Revenues
- --------
For the six months ended July 31, 1999, revenues were $17.7 million, compared to
$19.4 million for the six months ended July 31, 1998, a decrease of $1.7 million
or 9%. The net decrease of $1.7 million is primarily due to the October 1998
Sale of One World and the AT&T account of YAR which resulted in decreased
revenue for the six months ended July 31, 1999 of approximately $8.8 million.
This decrease is offset in part by increases in revenue from new and existing
accounts at the Company of $7.1 million. During the six months ended July 31,
1999, YAR's non-AT&T related revenue remained substantially unchanged, as
compared with the six months ended July 31, 1998. There was a decrease in
revenues during the first quarter, which was offset by increased revenues from
new clients during the quarter ended July 31, 1999.
10
<PAGE>
Direct Costs and Related Expenses
- ---------------------------------
Direct Costs and Related Expenses increased to $7.2 million for the six months
ended July 31, 1999 from $6.3 million for the six months ended July 31, 1998, an
increase of $0.9 million or 14%. The net increase was primarily attributable to
the increased production with new and existing accounts.
Salaries and Related Expenses
- -----------------------------
Salaries and Related Expenses decreased to $6.9 million for the six months ended
July 31, 1999, from $9.7 million for the six months ended July 31, 1998, a
decrease of $2.8 million or 29%. The decrease was primarily due to the sale of
One World and restructuring efforts at YAR which together resulted in a decrease
of $4.3 million in Salaries and Related Expenses from the prior year six months.
The decrease was offset in part by $1.5 million in salary increases primarily
related to new hires at the Company. As a percentage of revenue, Salaries and
Related Expenses decreased to 39% for the six months ended July 31, 1999, from
50% for the prior year six months.
General and Administrative Expenses
- -----------------------------------
General and Administrative Expenses decreased to $3.6 million for the six months
ended July 31, 1999 from $4.2 million for the six months ended July 31, 1998, an
decrease of $600,000 or 14%. The decrease was primarily due to the sale of One
World and restructuring efforts at YAR which together resulted in a decrease of
$1.4 million in General Administrative Expenses from the prior year six months.
The decrease was offset by increases in General and Administrative Expenses of
approximately $800,000 for the Company for the six months ended July 31, 1999,
which consist of additional professional services, costs associated with the
Company's annual report and meeting, legal and accounting services, and
depreciation and amortization, including goodwill amortization, and increased
facilities costs. As a percentage of revenue, General and Administrative
Expenses decreased to 20% for the six months ended July 31, 1999, from 21% for
the prior year six months.
Other Income and Expense
- ------------------------
On July 17, 1998, the Company sold a building which housed the Los Angeles
office of The Leap Partnership, Inc., a wholly-owned subsidiary of the Company.
The building was sold for $3.48 million which resulted in a $1.15 million pre-
tax gain as reported.
Interest income totaled approximately $455,000 and $228,000 for the six months
ended July 31, 1999 and 1998, respectively, and, was generated from short-term
US Treasury Notes, certificates of deposit, money market account and short-term
Eurodollar currency investments. The interest income was offset in part by
interest expense of approximately $166,000 and $347,000, respectively, resulting
in net interest income of $289,000 and net interest expense of $119,000,
respectively. The Company incurred interest expense on debt that totaled
approximately $5 million and $7.2 million as of July 31, 1999 and 1998,
respectively.
Income Taxes
- ------------
Combined federal and state income tax rates were 0.0% and 46.8% for the six
months ended July 31, 1999 and 1998, respectively. The 0% effective rate for the
six months ended July 31, 1999 is due to the Company's use of previously
reserved tax assets resulting from net operating losses.
As of July 31, 1999, the Company has a deferred tax asset of approximately $8.6
million. Approximately $4.5 million of the deferred tax asset relates to
operating loss carryforwards for federal and state income tax purposes which
begin to expire in fiscal year 2011. The Company has provided a full valuation
reserve against the net deferred tax asset due to its limited operating history,
recent operating losses, the difficulty and significant judgment involved in
projecting future operating results, the volatility of the industry, and the
transfer of YAR's AT&T Account. To the extent that the Company achieves future
taxable income, no provision will be recorded until the operating losses have
been fully utilized.
As of July 31, 1998, the higher effective tax rate was primarily due to higher
state and local tax rates applied to a higher level of taxable income in those
tax jurisdictions
11
<PAGE>
Liquidity and Capital Resources
Since its inception, the Company has primarily financed its operations and
investments in property and equipment through cash generated from bank
borrowings and equipment leases, proceeds from the Initial Public Offering,
loans from a former officer of the Company and cash generated from operations.
At July 31, 1999, the Company had $11.5 million of working capital, inclusive of
approximately $13.2 million in cash and cash equivalents. Cash and cash
equivalents decreased $885,000 for the six months ended July 31, 1999. The
$885,000 decrease resulted primarily from approximately $1.2 million of
investments in capital expenditures and software development, offset by cash
generated from financing of $266,000 and from operations of $71,000.
In July 1999, Quantum Leap Communications, Inc., ("QLC"), a wholly-owned
subsidiary of the Company, entered into contracts to purchase a 35,000 square
foot building for $2.8 million to provide office facilities for its expanding
business. The purchase of the building is scheduled to occur in three phases. As
of July 31, 1999, the first portion of the building was purchased for $500,000,
of which, 20% was paid in cash and 80% was financed as described below. The
second phase of the purchase is scheduled to occur in October 1999, at which
time an additional section of the building will be purchased for $1.3 million.
The final phase of the purchase is scheduled to occur no later than October
2000, when the remaining portion of the building is expected to be purchased for
$1 million. On June 29, 1999, the Company obtained a 5 year $2.24 million multi-
draw mortgage loan which is secured by substantially all the assets of the
Company as the mortgage is cross-collateralized with the line of credit that is
described in Note 5. At July 31, 1999, the outstanding balance on this loan was
$400,000. QLC has leased the portions of the building that it does not presently
own, and QLC is in the process of negotiating a contract to remodel the
building.
On February 24, 1999, the Company obtained a new $10 million secured revolving
line of credit from American National Bank which replaced an existing $5 million
line of credit. On July 31, 1999 approximately $4.1 million was outstanding
under the facility. The new line of credit is renewable each year and bears
interest at a variable rate of 1.5% above the bank's highest CD rate. On July
31, 1999, the interest rate was 7%. Borrowings are collateralized by
substantially all the assets of the Company, and the line of credit agreement
requires the Company to maintain specified minimum levels of working capital and
net worth.
On October 22, 1998, the Company received $5.3 million in cash from the sale of
various assets of One World and the transfer of the YAR AT&T account. (See Note
3). Additional consideration of $1.1 million in cash was received on April 13,
1999.
On April 30,1998, in connection with the YAR acquisition, the Company received
$3 million in cash before related expenses, due to the release of escrowed
funds. The funds reduced the purchase price of the acquisition and the amount of
recorded goodwill.
On February 2, 1998, the Company received proceeds from a $665,000 bank loan.
The three-year balloon note bears interest at the rate of 9%, and is payable in
monthly principal and interest installments of $5,992 through January 27, 2001,
with a balloon payment of approximately $626,563 due in January 2001. The loan
is secured by a mortgage on the building in which the Company's current
principal offices are located and is personally guaranteed by an officer of the
Company.
The Company believes that the existing and future credit facilities, funds from
capital markets, funds from operations, and the cash received as discussed above
will be sufficient to meet the Company's cash requirements for at least the next
twelve months. The Company's capital requirements will depend on numerous
factors, including the rates at which the Company grows, expands its personnel
and infrastructure to accommodate growth and invests in new technologies. The
Company has various ongoing needs for capital, including working capital for
operations, project development costs and capital expenditures to maintain and
expand its operations. In addition, as part of its strategy, the Company
evaluates potential acquisitions of, or alliances with, businesses that extend
or complement the Company's business. The Company may in the future consummate
acquisitions or alliances which may require the Company to make additional
capital expenditures, and such expenditures may be significant. Future
acquisitions and alliances may be funded with available cash from seller
financing, institutional financing, issuance of common stock of the Company
and/or additional equity or debt offerings. There can be no assurance that the
Company will be able to raise any additional required capital on favorable
terms, or at all.
12
<PAGE>
Seasonality
Depending upon its client mix at any time, the Company could experience
seasonality in its business. Such seasonality arises from the timing of product
introductions and business cycles of the Company's clients and could be material
to the Company's interim results. Such cycles vary from client to client, and
the overall impact on the Company's results of operations cannot be reasonably
predicted. In addition, the advertising industry as a whole exhibits
seasonality. Typically, advertising expenditures are highest in the fourth
calendar quarter and lowest in the first calendar quarter, particularly in
January. Although the Company has too limited an operating history to exhibit
any discernible seasonal trend, as the Company matures, Management believes that
the business and results of operations could be affected by the overall
seasonality of the industry.
Dependence on Key Clients and Projects
An important part of the Company's strategy is to develop in-depth, long-term
relationships with a select group of clients in a variety of industries.
Consistent with such a strategy, a large portion of the Company's revenues has
been, and is expected to continue to be, concentrated among a relatively limited
number of nationally recognized clients. For the quarter ended July 31, 1999,
two clients accounted for 37.9% and 13.9% of consolidated revenues.
Due to the nature of the advertising business, any of the Company's clients
could at any time in the future, and for any reason, reduce its marketing
budget, alter the timing of projects, engage another entity or take in-house all
or part of the business performed by the Company. Even though the Company has
taken steps to add new accounts, diversify its client base, negotiate a greater
percentage of retainer and fixed fee arrangements with clients, diversify
through acquisitions, and develop new potential revenue streams from licensing
of proprietary software and other content, these steps may not fully mitigate
the impact that the loss of any significant account may have on the Company's
operations.
Management believes that the loss of other key clients and varying effects of
seasonality, as described above, could also have an adverse impact on the
Company's business, results of operations and financial condition, particularly
in the short term.
Year 2000
The Company's Year 2000 Task Force has completed an inventory of the hardware
and software used in its operations and has assessed its Year 2000 readiness.
Based on this effort, the Company has identified only non-material Year 2000
issues and has remedied them at little cost.
Additionally, the Company has been communicating with significant vendors and
other critical service providers to determine if such parties are Year 2000
compliant or have effective plans in place to address the Year 2000 issue and to
determine the extent of the Company's vulnerability to the failure of such
parties to remediate such issues. Based upon the responses that the Company has
received from these third parties, no material Year 2000 issues have been
identified.
The Company does not expect the impact of the Year 2000 to have a material
adverse impact on the Company's business or results of operations. However, no
assurances can be given that any unanticipated or undiscovered Year 2000
compliance problems, will not have a material adverse effect on the Company's
business and results of operations. In addition, there can be no assurance that
Year 2000 non-compliance by any of the Company's clients or significant
suppliers or vendors will not have a material adverse effect on the Company's
business or results of operations.
13
<PAGE>
Note Regarding Forward-Looking Statements
This report contains forward-looking statements (within the meaning of the
Private Securities Litigation Reform Act of 1995) that involve risks and
uncertainties. When used in this report, words such as "anticipates,"
"believes," "continues," "estimates," "expects," "goal," "may," "opportunity,"
"plans," "potential," "projects," "will," and similar expressions as they relate
to the Company or its Management are intended to identify such forward-looking
statements. A number of important factors could cause the Company's actual
results, performance or achievements for fiscal 1999 and beyond to differ
materially from that expressed in such forward-looking statements. These factors
are set forth in the Company's Registration Statement on Form S-1 (File No. 333-
05051) under the heading "Risk Factors" and also include, without limitation,
material changes in economic conditions in the markets served by the Company's
clients; changes in government regulation and legal uncertainties; competition
in the Company's industry; uncertainties relating to the developing market for
new media; changing technologies and Year 2000 compliance issues; any inability
to meet expectations in the performance of services which could lead to claims
or liabilities; seasonality; costs and uncertainties relating to establishing
new offices and bringing new or existing offices to profitability; any inability
of the Company to raise additional financing in the future on favorable terms,
or at all; potential adverse effects of litigation; the Company's dependence on
key personnel and vendors; the Company's dependence on key clients and projects
(as discussed further above under "Dependence on Key Clients and Projects"); and
possible continued volatility and wide fluctuations in the price of the
Company's stock. While the Company reduced certain expenses in fiscal 1999, as
the Company works to grow and expand the business, management will need to
increase expenses to expand operations. Management will continue to assess its
overall cost structure in relation to existing and anticipated revenues. Due to
the nature of client contracts, which are difficult to forecast precisely or for
any extended period of time, if, the Company experiences declines in client
demand, or if significant expenses precede or are not immediately followed by
increased revenues, the results of operations and financial condition may
suffer.
Item 3. Quantitative and Qualitative Disclosures about Market Risks
The Company's market risk exposures are set forth in its Annual Report on Form
10-K for the year ended January 31, 1999, and have not changed significantly,
except as follows.
In March 1999, one of the Company's subsidiaries received stock from a client in
exchange for services. The stock has appreciated through July 31, 1999 (See Note
4 to the Consolidated Financial Statements). However, the value of the equity
securities may fluctuate based on the volatility of the client's stock price and
other general market conditions. To mitigate the market risk on the equity
securities, the stock has been classified as `available for sale' as management
anticipates selling the stock within the next year and at a time when a gain may
be recorded.
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings
In November 1998, the Company filed a complaint in the Supreme
Court of the State of New York against Finkle, Ross & Rost,
L.L.P.("Finkle"), the former accountants for Yurianna, Inc., the
company from which the Company acquired various assets of YAR,
alleging breach of contract and accountant malpractice. The
action seeks damages believed to exceed $13,500,000 and such
other relief as the court deems just and equitable. In December
1998, Finkle filed a complaint in the Supreme Court of the State
of New York against the Company for $28,750 for accounting
services rendered. The amount was reduced to $11,250 by Finkle.
Although Finkle had performed services for the Company, the
Company intends to vigorously oppose this claim due to the
quality of services provided.
See Note 8 of the Notes to the Consolidated Financial Statements
and Item 3 of the 10-K for the fiscal year ended January 31, 1999
for additional disclosures regarding pending matters.
There are no other significant claims or lawsuits against the
Company.
14
<PAGE>
ITEM 4. Submission Of Matters To A Vote Of Securities Holders
a. The Company held an Annual Meeting of Stockholders (the
"Meeting") on June 15, 1999. Proxies were solicited for the
Meeting.
b. There were three matters proposed and voted on at the Meeting. All
proposals were approved by a majority of the vote. Of the 14,089,785
shares eligible to vote at the Meeting, 12,518,800 were voted at the
Meeting.
c. The first proposal at the meeting was for the election of directors
(Messrs. Gregory J. Garville and Charles J. Ruder). Of the shares
voted at the Meeting, Gregory J. Garville received 12,131,135 votes
in favor of his election, and Charles J. Ruder received 12,131,135
votes in favor of his election. As each nominee received a majority
of votes, each nominee was elected as a Director to the Company's
Board of Directors.
d. The second proposal was for the amendment of the Employee Incentive
Compensation Plan to increase the number of shares reserved under
the plan from 3.5 to 5 million shares. Of the shares voted at the
Meeting, 7,569,944 were voted in favor of this proposal, 469,423
were voted against the proposal, and 8,934 abstained from voting.
e. The third proposal was for the ratification of the appointment the
Company's auditors, Arthur Andersen LLP for fiscal year 2000. Of the
shares voted at the Meeting, 12,489,537 were voted in favor of this
proposal, 15,741 were voted against the proposal, and 13,522
abstained from voting.
ITEM 6. Exhibits and Reports on Form 8-K
a. Exhibits
10.1 Installment Note, dated June 29, 1999, issued by Quantum
Leap Communications, Inc. ("QLC"), a wholly owned
subsidiary of the Company, to American National Bank and
Trust Company of Chicago ("ANB").
10.2 Mortgage Agreement, dated June 29, 1999, between QLC and
ANB.
10.3 Security Agreement, dated June 29, 1999, between QLC and
ANB.
10.4 Guaranty Agreement, dated June 29, 1999, between QLC and
ANB.
10.5 Second Amendment, dated June 15, 1999, to the Leapnet,
Inc. (formerly "The Leap Group, Inc."), Employee
Incentive Compensation Plan.
10.6 Real Estate Sale Contract, Unit 1, dated May 27, 1999,
between QLC and FTI, Inc.
10.7 Real Estate Sale Contract, Unit 2, dated May 27, 1999,
between QLC and FTI, Inc.
10.8 Real Estate Sale Contract, Unit 3, dated May 27, 1999,
between QLC and NanoFast, Inc.
10.9 Real Estate Sale Contract, Unit 4, dated May 27, 1999,
between QLC and FTI, Inc.
11. Statement Regarding Computation of Per-Share Earnings.
27. Financial Data Schedule.
.........
b. Reports on Form 8-K
None.
Items 2, 3 And 5 Are Not Applicable And Have Been Omitted.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
LEAPNET, INC.
-------------
(Registrant)
Date: September 14, 1999 By: /s/ FREDERICK A. SMITH
---------------------------------------
Frederick A. Smith, Chairman and Chief
Executive Officer
(principal executive, financial and
accounting officer)
15
<PAGE>
LEAPNET, INC.
EXHIBIT INDEX
Exhibit
Number Exhibits
- ------ --------
10.1 Installment Note, dated June 29, 1999, issued by Quantum Leap
Communications, Inc. ("QLC"), a wholly owned subsidiary of the
Company to American National Bank and Trust Company of Chicago
("ANB").
10.2 Mortgage Agreement, dated June 29, 1999, between QLC and ANB.
10.3 Security Agreement, dated June 29, 1999, between QLC and ANB.
10.4 Guaranty Agreement dated June 29, 1999, between QLC and ANB.
10.5 Second Amendment, dated June 15, 1999, to the Leapnet, Inc.
(formerly "The Leap Group, Inc."), Employee Incentive Compensation
Plan.
10.6 Real Estate Sale Contract, Unit 1, dated May 27, 1999, between QLC
and FTI, Inc.
10.7 Real Estate Sale Contract, Unit 2, dated May 27, 1999, between QLC
and FTI, Inc.
10.8 Real Estate Sale Contract, Unit 3, dated May 27, 1999, between QLC
and NanoFast, Inc.
10.9 Real Estate Sale Contract, Unit 4, dated May 27, 1999, between QLC
and FTI, Inc.
11. Statement Regarding Computation of Per-Share Earnings
27. Financial Data Schedules
16
<PAGE>
Exhibit 10.1
American National Bank
and Trust Company of
Chicago
[LOGO]
================================================================================
INSTALLMENT NOTE (SECURED)
================================================================================
$2,240,000.00 Chicago, Illinois June 29, 1999
Due: May 31, 2004
FOR VALUE RECEIVED, the undersigned (jointly and severally if more than
one) ("Borrower"), promises to pay to the order of AMERICAN NATIONAL BANK AND
TRUST COMPANY OF CHICAGO ("Bank"), at its principal place of business in
Chicago, Illinois or such other place as Bank may designate from time to time
hereafter, the principal sum of Two Million Two Hundred Forty Thousand and
No/100 Dollars, which sum shall be due on May 31, 2004, and shall be payable in
successive installments as follows: (a) monthly installments of interest only
until (i) such time as the second draw has been funded or (ii) November 15,
1999, whichever is sooner to occur; THEN (b) fixed and level monthly
installments of principal and interest in an aggregate amount computed on a 20-
year amortization schedule; THEN (c) at such time as the third and final draw
has been funded, fixed and level monthly installments of principal and interest
in an aggregate amount computed on the then outstanding principal balance based
on a 20-year amortization schedule, with the final installment due and payable
on May 31, 2004 and equal to the balance of all amounts remaining due hereunder.
The first installment shall be due on the last day of July, 1999, and successive
installments shall be paid on the same day of each month, thereafter until paid.
Borrower's obligations and liabilities to Bank under this Note, and all
other obligations and liabilities of Borrower to Bank (including without
limitation all debts, claims and indebtedness) whether primary, secondary,
direct, contingent, fixed or otherwise, including those evidenced in rate
hedging agreements designed to protect the Borrower from the fluctuation of
interest rates, heretofore, now and/or from time to time hereafter owing, due or
payable, however evidenced, created, incurred, acquired or owing and however
arising, whether under this Note, any agreement, instrument or document
heretofore, now or from time to time hereafter executed and delivered to Bank by
or on behalf of Borrower, or by oral agreement or operation of law or otherwise
shall be defined and referred to herein as "Borrower's Liabilities".
Borrower may receive incremental sums from Bank, which in the aggregate
shall not exceed Two Million Two Hundred Forty Thousand and No/100 Dollars
($2,240,000.00). The receipt of these incremental sums shall not convert this
term loan into a revolving line of credit. Before or at such time as any
extension of an incremental sum under this Note is funded, the Borrower agrees
to execute and deliver to Bank any and all instruments or documents which the
Bank may reasonably require to give effect to a first mortgage lien on property
located at Units 2, 3 and 4 in Gibraltar Lofts--420 West Huron Condominium, 420
West Huron Street, Chicago, Illinois 60610 at such time as such units are
acquired.
The unpaid principal balance of Borrower's Liabilities due hereunder shall
bear interest from the date of disbursement until paid, computed at a daily rate
equal to the daily rate equivalent of 8.5% per annum (computed on the basis of a
360-day year and actual days elapsed); provided, however, that in the event that
-------- -------
any of Borrower's Liabilities are not paid when due, the unpaid amount of
Borrower's Liabilities shall bear interest after the due date until paid at a
rate equal to the sum of the rate that would otherwise be in effect plus 3%.
Borrower warrants and represents to Bank that Borrower shall use the
proceeds represented by this Note solely for proper business purposes and
consistently with all applicable laws and statutes.
To secure the prompt payment to Bank of Borrower's Liabilities and the
prompt, full and faithful performance by Borrower of all of the provisions to be
kept, observed or performed by Borrower under this Note and/or any other
agreement, instrument or document heretofore, now and/or from time to time
hereafter delivered by or on behalf of Borrower to Bank, Borrower grants to Bank
a security interest in and to the following property: (a) all of Borrower's now
existing and/or owned and hereafter arising or acquired monies, reserves,
deposits, deposit accounts and interest
<PAGE>
or dividends thereon, securities, cash, cash equivalents and other property now
or at any time or times hereafter in the possession or under the control of Bank
or its bailee for any purpose; (b) (i) Mortgage and Assignment of Rents and
Leases of even date herewith, as modified from time to time, made by Borrower on
property located at Unit 1 in Gibraltar Lofts--420 West Huron Condominium, 420
West Huron Street, Chicago, Illinois 60610; (ii) a first mortgage lien on
property located at Units 2, 3 and 4 in Gibraltar Lofts--420 West Huron
Condominium, 420 West Huron Street, Chicago, Illinois 60610 at such time as such
units are acquired; and (iii) all business assets of Borrower, pursuant to
Security Agreement (General) of even date herewith, as amended from time to
time, by and between Borrower and Bank; and (c) all substitutions, renewals,
improvements, accessions or additions thereto, replacements, offspring, rents,
issues, profits, returns, products and proceeds thereof, including without
limitation proceeds of insurance policies insuring the foregoing collateral (all
of the foregoing property is referred to herein individually and collectively as
"Collateral").
To further secure this Note, the Guarantor, Leapnet, Inc., a Delaware
corporation, has executed and delivered a Cross-Collateralization and Cross-
Default Agreement of even date herewith.
Regardless of the adequacy of the Collateral, any deposits or other sums at
any time credited by or payable or due from Bank to Borrower, or any monies,
cash, cash equivalents, securities, instruments, documents or other assets of
Borrower in the possession or control of Bank or its bailee for any purpose, may
be reduced to cash and applied by Bank to or setoff by Bank against Borrower's
Liabilities.
Borrower agrees to deliver to Bank immediately upon Bank's demand, such
additional collateral as Bank may request from time to time should the value of
the Collateral (in Bank's sole and exclusive opinion) decline, deteriorate,
depreciate or become impaired, or should Bank deem itself insecure for any
reason whatsoever, including without limitation a change in the financial
condition of Borrower or any party liable with respect to Borrower's
Liabilities, and does hereby grant to Bank a continuing security interest in
such other collateral, which shall be deemed to be a part of the Collateral.
Borrower shall execute and deliver to Bank, at any time upon Bank's demand
therefor, all agreements, instruments, documents and other written matter that
Bank may request, in form and substance acceptable to Bank, to perfect and
maintain perfected Bank's security interest in the Collateral or any additional
collateral. Borrower agrees that a carbon, photographic or photostatic copy or
other reproduction, of this Note or of any financing statement, shall be
sufficient as a financing statement.
Bank may take, and Borrower hereby waives notice of, any action from time
to time that Bank may deem necessary or appropriate to maintain or protect the
Collateral, and Bank's security interest therein, and in particular Bank may at
any time (i) transfer the whole or any part of the Collateral into the name of
the Bank or its nominee, (ii) collect any amounts due on Collateral directly
from persons obligated thereon, (iii) take control of any proceeds and products
of Collateral, and/or (iv) sue or make any compromise or settlement with respect
to any Collateral. Borrower hereby releases Bank from any and all causes of
action or claims which Borrower may now or hereafter have for any asserted loss
or damage to Borrower claimed to be caused by or arising from: (a) Bank's taking
any action permitted by this paragraph; (b) any failure of Bank to protect,
enforce or collect in whole or in part any of the Collateral; and/or (c) any
other act or omission to act on the part of Bank, its officers, agents or
employees, except for willful misconduct.
The occurrence of any one of the following events shall constitute a
default by the Borrower ("Event of Default") under this Note: (a) if Borrower
fails to pay any of Borrower's Liabilities when due and payable or declared due
and payable (whether by scheduled maturity, required payment, acceleration,
demand or otherwise) and such failure remains unremedied for a period of seven
(7) days; (b) if Borrower or any guarantor of any of Borrower's Liabilities
fails or neglects to perform, keep or observe any term, provision, condition,
covenant, warranty or representation contained in this Note and such failure or
neglect remains unremedied for a period of seven (7) days; (c) occurrence of a
default or an event of default under any agreement, instrument or document
heretofore, now or at any time hereafter delivered by or on behalf of Borrower
to Bank; (d) occurrence of a default or an event of default under any agreement,
instrument or document heretofore, now or at any time hereafter delivered to
Bank by any guarantor of Borrower's Liabilities or by any person or entity which
has granted to Bank a security interest or lien in and to some or all of such
person's or entity's real or personal property to secure the payment of
Borrower's Liabilities; (e) if the Collateral or any other of Borrower's assets
are attached, seized, subjected to a writ, or are levied upon or become subject
to any lien or come within the possession of any receiver, trustee, custodian or
assignee for the benefit of creditors; (f) if a notice of lien, levy or
assessment is filed of record or given to Borrower with respect to all or any of
Borrower's assets by any federal, state or local department or agency; (g) if
Borrower or any guarantor of Borrower's Liabilities becomes insolvent or
generally fails to pay or admits in writing its inability to pay debts as they
<PAGE>
become due, if a petition under Title 11 of the United States Code or any
similar law or regulation is filed by or against Borrower or any such guarantor,
if Borrower or any such guarantor shall make an assignment for the benefit of
creditors, if any case or proceeding is filed by or against Borrower or any such
guarantor for its dissolution or liquidation, or if Borrower or any such
guarantor is enjoined, restrained or in any way prevented by court order from
conducting all or any material part of its business affairs; (h) the death or
incompetency of Borrower or any guarantor of Borrower's Liabilities, or the
appointment of a conservator for all or any portion of Borrower's assets or the
Collateral; (i) the revocation, termination or cancellation of any guaranty of
Borrower's Liabilities without written consent of Bank; (j) if a contribution
failure occurs with respect to any pension plan maintained by Borrower or any
corporation, trade or business that is, along with Borrower, a member of a
controlled group of corporations or a controlled group of trades or businesses
(as described in Sections 414(b) and (c) of the Internal Revenue Code of 1986 or
Section 4001 of the Employee Retirement Income Security Act of 1974, as amended,
"ERISA") sufficient to give rise to a lien under Section 302(f) of ERISA; (k) if
Borrower or any guarantor of Borrower's Liabilities is in default in the payment
of any obligations, indebtedness or other liabilities to any third party and
such default is declared and is not cured within the time, if any, specified
therefor in any agreement governing the same; (l) if any material statement,
report or certificate made or delivered by Borrower, any of Borrower's partners,
officers, employees or agents or any guarantor of Borrower's Liabilities is not
true and correct; or (n) if Bank is reasonably insecure.
Upon the occurrence of an Event of Default, at Bank's option, without
notice by Bank to or demand by Bank of Borrower: (i) all of Borrower's
Liabilities shall be immediately due and payable; (ii) Bank may exercise any one
or more of the rights and remedies accruing to a secured party under the Uniform
Commercial Code of the relevant jurisdiction and any other applicable law upon
default by a debtor; (iii) Bank may enter, with or without process of law and
without breach of the peace, any premises where the Collateral is or may be
located, and may seize or remove the Collateral from said premises and/or remain
upon said premises and use the same for the purpose of collecting, preparing and
disposing of the Collateral; and/or (iv) Bank may sell or otherwise dispose of
the Collateral at public or private sale for cash or credit, provided, however,
that Borrower shall be credited with the net proceeds of any such sale only when
the same are actually received by Bank.
Upon an Event of Default, Borrower, immediately upon demand by Bank, shall
assemble the Collateral and make it available to Bank at a place or places to be
designated by Bank which is reasonably convenient to Bank and Borrower.
All of Bank's rights and remedies under this Note are cumulative and non-
exclusive. The acceptance by Bank of any partial payment made hereunder after
the time when any of Borrower's Liabilities become due and payable will not
establish a custom or waive any rights of Bank to enforce prompt payment hereof.
Bank's failure to require strict performance by Borrower of any provision of
this Note shall not waive, affect or diminish any right of Bank thereafter to
demand strict compliance and performance therewith. Any waiver of an Event of
Default hereunder shall not suspend, waive or affect any other Event of Default
hereunder. Borrower and every endorser waive presentment, demand and protest and
notice of presentment, protest, default, non-payment, maturity, release,
compromise, settlement, extension or renewal of this Note, and hereby ratify and
confirm whatever Bank may do in this regard. Borrower further waives any and all
notice or demand to which Borrower might be entitled with respect to this Note
by virtue of any applicable statute or law (to the extent permitted by law).
Borrower agrees to pay, immediately upon demand by Bank, any and all costs,
fees and expenses (including reasonable attorneys' fees, costs and expenses)
incurred by Bank (i) in enforcing any of Bank's rights hereunder, and (ii) in
representing Bank in any litigation, contest, suit or dispute, or to commence,
defend or intervene or to take any action with respect to any litigation,
contest, suit or dispute (whether instituted by Bank, Borrower or any other
person) in any way relating to this Note, Borrower's Liabilities or the
Collateral, and to the extent not paid the same shall become part of Borrower's
Liabilities hereunder.
This Note shall be deemed to have been submitted by Borrower to Bank and to
have been made at Bank's principal place of business. This Note shall be
governed and controlled by the internal laws of the State of Illinois and not
the law of conflicts.
TO INDUCE BANK TO ACCEPT THIS NOTE, BORROWER IRREVOCABLY AGREES THAT,
SUBJECT TO BANK'S SOLE AND ABSOLUTE ELECTION, ALL ACTIONS OR PROCEEDINGS IN ANY
WAY, MANNER OR RESPECT, ARISING OUT OF OR FROM OR RELATED TO THIS NOTE SHALL BE
LITIGATED IN COURTS HAVING SITUS WITHIN THE CITY OF CHICAGO, STATE OF ILLINOIS.
BORROWER HEREBY CONSENTS AND SUBMITS TO THE JURISDICTION OF ANY LOCAL, STATE OR
FEDERAL COURT
<PAGE>
LOCATED WITHIN SAID CITY AND STATE. BORROWER HEREBY WAIVES ANY RIGHT IT MAY HAVE
TO TRANSFER OR CHANGE THE VENUE OF ANY LITIGATION BROUGHT AGAINST BORROWER BY
BANK IN ACCORDANCE WITH THIS PARAGRAPH.
BORROWER IRREVOCABLY WAIVES ANY RIGHT TO TRIAL BY JURY IN ANY ACTION, SUIT,
COUNTERCLAIM OR PROCEEDING (I) TO ENFORCE OR DEFEND ANY RIGHTS UNDER OR IN
CONNECTION WITH THIS NOTE OR ANY AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT
DELIVERED OR WHICH MAY IN THE FUTURE BE DELIVERED IN CONNECTION HEREWITH, OR
(II) ARISING FROM ANY DISPUTE OR CONTROVERSY IN CONNECTION WITH OR RELATED TO
THIS NOTE OR ANY SUCH AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT, AND AGREES
THAT ANY SUCH ACTION, SUIT, COUNTERCLAIM OR PROCEEDING SHALL BE TRIED BEFORE A
COURT AND NOT BEFORE A JURY.
Borrower:
Address: 22 West Hubbard Street Quantum Leap Communications, Inc.
Chicago, Illinois 60610 a Delaware corporation
By: /s/ Robert C. Bramlette
-----------------------------
Vice President
-----------------------------
Printed Name
Tax I.D. Number:
<PAGE>
Exhibit 10.2
This instrument prepared /
by and after recording /
return to: /
Charlene R. Branda /
American National Bank /
Division 503 /
120 S. LaSalle Street /
Chicago, IL 60603 /
================================================================================
AMERICAN NATIONAL BANK
AND TRUST COMPANY OF CHICAGO
MORTGAGE
--------
THIS MORTGAGE is effective as of this 29th day of June, 1999 by and between
Quantum Leap Communications, Inc., a Delaware corporation, (hereinafter referred
to as "Mortgagor") and American National Bank and Trust Company of Chicago, a
national banking association, (hereinafter referred to as "Mortgagee").
WITNESSETH
WHEREAS, to secure the payment of (i) an indebtedness in the amount of TWO
MILLION TWO HUNDRED FORTY AND NO/100 DOLLARS ($2,240,000.00), to be paid with
interest thereon evidenced by a certain Installment Note (Secured) bearing even
date executed by Mortgagor and any amendments, modifications, extensions,
renewals, or replacements thereof and (ii) an indebtedness in the amount of TEN
MILLION AND NO/100 DOLLARS ($10,000,000.00), to be paid with interest thereon
evidenced by a certain Promissory Note (Secured) dated June 25, 1999 executed by
Leapnet, Inc., YAR Communications, Inc., Quantum Leap Communications, Inc. and
The Leap Partnership, Inc. ("Borrower") and any amendments, modifications,
extensions, renewals, or replacements thereof (herein collectively referred to
as the "Note") and notwithstanding anything to the contrary contained in this
Mortgage, the amount secured by this Mortgage, including all other present and
future, direct and indirect obligations and liabilities of Mortgagor and
Borrower, shall not exceed the principal sum of two times the principal amount
of the Notes at any one time outstanding, and pursuant to authority granted by
its Board of Directors, Mortgagor hereby mortgages, conveys, transfers and
grants unto Mortgagee, its successors and assigns forever, Real Estate, and all
improvements thereon, situated in the County of Cook, State of Illinois,
(hereinafter referred to as the "Mortgaged Property" or "Premises") legally
described in Exhibit "A" attached hereto and by this reference made a part
hereof; and
WHEREAS, this Mortgage shall secure any and all amendments, modifications,
extensions, renewals or replacements of the whole or any part of the
indebtedness hereby secured, however evidenced, with interest at such lawful
rate as may be agreed upon and any such renewals or extensions of any change in
the terms or rate of interest shall not impair in any manner the validity of or
priority of this Mortgage, or release the Mortgagor from personal liability for
the indebtedness hereby secured.
TOGETHER, with all buildings, and improvements now or hereafter thereto
belonging upon the Mortgaged Property or any part thereof and all fixtures now
or hereafter installed including, but not limited to, all lighting, cooling,
ventilating, air conditioning, plumbing, sprinklers, communications, electrical
systems and the equipment pertaining thereto together with the rents, issues,
profits and leases of the Mortgaged Property.
TO HAVE AND HOLD the premises unto said Mortgagee, its successors and
assigns, forever, for the purpose and uses set forth herein.
I. MORTGAGOR COVENANTS
<PAGE>
Mortgagor represents to and covenants with Mortgagee that Mortgagor holds
fee simple title to the Mortgaged Property, free and clear of any and all liens
and encumbrances except for Mortgage to Nanofast, Inc., and Mortgagor has the
power and authority to mortgage the Mortgaged Property.
Mortgagor shall maintain or cause to be maintained the Mortgaged Property
in good repair, working order, and condition and make or cause to be made, when
necessary, all repairs, renewals, and replacements, structural, non-structural,
exterior, interior, ordinary and extraordinary. Mortgagor shall refrain from and
shall not permit the commission of waste in or about the Mortgaged Property and
shall not remove, demolish, alter, change or add to the structural character of
any improvement at any time erected on the Mortgaged Property without the prior
written consent of Mortgagee, except as hereinafter otherwise provided.
Mortgagor covenants and agrees that in the ownership, operation and management
of the Premises Mortgagor will observe and comply with all applicable federal,
state and local statutes, ordinances, regulations, orders and restrictions. If
this Mortgage is on a condominium or a planned unit development, Mortgagor shall
perform all of Mortgagor's obligations under the declaration of covenants
creating or governing the condominium or planned unit development, the by-laws
and regulations of the condominium or planned unit development, and constituent
documents. Mortgagee shall have the right at any time, and from time to time, to
enter the Premises for the purpose of inspecting the same.
II. INSURANCE
Mortgagor shall at all times keep the Mortgaged Property, including all
buildings, improvements, fixtures and articles or personal property now or
hereafter situated on the Premises insured against loss or damage by fire and
such other hazards as may reasonably be required by Mortgagee, including without
limitation: (a) all-risk fire and extended coverage insurance, with vandalism
and malicious mischief endorsements, for the full replacement value of the
Premises; in an agreed amount, with inflation guard endorsement; (b) if there
are tenants under leases at the Premises, rent or business loss insurance for
the same perils described in (a) above payable at the rate per month and for the
period specified from time to time by Mortgagee; (c) boiler and sprinkler damage
insurance in an amount reasonably satisfactory to Mortgagee, if and so long as
the Premises shall contain a boiler and sprinkler system, respectively; (d) if
the Premises are located in a flood hazard district, flood insurance whenever in
the opinion of Mortgagee such protection is necessary and available; and (e)
such other insurance as Mortgagee may from time to time reasonably require.
Mortgagor also shall at all times maintain comprehensive public liability,
property damage and workmen's compensation insurance covering the Premises and
any employees thereof, with such limits for personal injury, death and property
damage as Mortgagee may reasonably require. All policies of insurance to be
furnished hereunder shall be in forms, companies, amounts and deductibles
reasonably satisfactory to Mortgagee, with mortgage clauses attached to all
policies in favor of and in form satisfactory to Mortgagee, including a
provision requiring the coverage evidenced thereby shall not be terminated or
materially modified without thirty (30) days prior written notice to Mortgagee.
Mortgagor shall deliver all policies, including additional and renewal policies,
to Mortgagee, and, in the case of insurance about to expire, shall deliver
renewal policies not less than thirty (30) days prior to their respective dates
of expiration.
Mortgagor shall not take out separate insurance concurrent in form of
contributing in the event of loss with that required to be maintained hereunder
unless Mortgagee is included thereon under a standard mortgage clause acceptable
to Mortgagee. Mortgagor immediately shall notify Mortgagee whenever any such
separate insurance is taken out and promptly shall deliver to Mortgagee the
policy or policies of such insurance.
In the event of loss Mortgagor will give immediate notice by mail to
Mortgagee, who may make proof of loss if not made promptly by Mortgagor, and
each insurance company concerned is hereby authorized and directed to make
payment for such loss directly to Mortgagee instead of to Mortgagor and
Mortgagee jointly, and the insurance proceeds, or any part thereof, shall be
applied by Mortgagee to the restoration or repair of the property damaged. In
the event of foreclosure of this Mortgage, all right, title and interest of
Mortgagor in and to any insurance policies then in force shall pass to the
purchaser at the foreclosure sale. Mortgagor shall furnish Mortgagee, without
cost to Mortgagee, at the request of Mortgagee, from time to time, evidence of
the replacement value of the Premises.
If Mortgagor fails to keep the Mortgaged Property insured in accordance
with the requirements of the Loan Documents, Mortgagee shall have the right, at
its option, to provide for such insurance and pay the premiums thereof, and any
amounts paid thereon by the Mortgagee shall bear interest at the Default Rate
(as herein defined) from the date of payment.
<PAGE>
Unless Mortgagor provides Mortgagee with evidence of the insurance coverage
required by this Mortgage, Mortgagee may purchase insurance at Mortgagor's
expense to protect Mortgagee's interests in the Mortgaged Property. This
insurance may, but need not, protect Mortgagor's interests. The coverage that
Mortgagee purchases may not pay any claim that Mortgagor makes or any claim that
is made against Mortgagor in connection with the Mortgaged Property. Mortgagor
may later cancel any insurance purchased by Mortgagee, but only after providing
Mortgagee with evidence that Mortgagor has obtained insurance as required by
this Mortgage. If Mortgagee purchases insurance for the Mortgaged Property,
Mortgagor will be responsible for the costs of that insurance, including
interest and other charges Mortgagee may impose in connection with the placement
of the insurance, until the effective date of the cancellation or expiration of
the insurance. The costs of the insurance may be added to Mortgagor's total
outstanding balance or obligation. The costs of the insurance may be more than
the cost of the insurance Mortgagor is able to obtain on its own.
III. PAYMENT OF TAXES AND ASSESSMENTS
Mortgagor shall pay before any penalty or interest attaches all general
taxes, special taxes, special assessments, water charges, sewer service charges,
and all other liens or charges levied or assessed against the Premises of any
nature whatsoever when due, and shall furnish to Mortgagee duplicate receipts of
payment therefor. If any special assessment is permitted by applicable law to be
paid in installments, Mortgagor shall have the right to pay such assessment in
installments, so long as all such installments are paid prior to the due date
thereof. With respect to any tax or assessment which Mortgagor may desire to
contest, Mortgagor shall pay such tax or assessment in full under protest in
order to prevent a default under this Mortgage on account thereof.
IV. FUNDS FOR TAXES AND INSURANCE
If required by Mortgagee, Mortgagor shall pay to Mortgagee, at the times
provided in said Note for payment of installments of principal and interest, and
in addition thereto, installments of taxes and assessments to be levied upon the
Premises, and installments of the premiums that will become due and payable to
renew the insurance hereinabove provided; said installments to be substantially
equal and to be in such amount as will assure to Mortgagee that not less than
thirty (30) days before the time when such taxes and premium respectively become
due, Mortgagor will have paid to Mortgagee a sufficient amount to pay such taxes
and premiums in full. Said amounts paid to Mortgagee hereunder need not be
segregated or kept in a separate fund and no interest shall accrue or be payable
thereon. Said amounts shall be held by Mortgagee as additional security for the
indebtedness secured hereby. Said amount shall be applied to the payment of said
taxes, assessments and insurance premiums when the same become due and payable;
provided, however, that Mortgagee shall have no liability for any failure to so
apply said amounts for any reason whatsoever. Nothing herein contained shall in
any manner limit the obligation of Mortgagor to pay taxes and to maintain
insurance as above provided. In the event of any default by Mortgagor, Mortgagee
may, at its option but without any obligation on its part so to do, apply said
amount upon said taxes, assessments and insurance premiums, and/or toward the
payment of any amounts payable by Mortgagor to Mortgagee under the Mortgage
and/or toward the payment of the indebtedness secured hereby or any portion
thereof, whether or not then due or payable. Mortgagee shall not require
payments hereunder so long as Mortgagor makes timely payment of taxes and
insurance and provides Mortgagee with evidence of same.
V. PROTECTION OF MORTGAGEE'S SECURITY
If default be made in the payment of any of the aforesaid taxes or
assessments or in making repairs or replacements or in procuring and maintaining
insurance and paying the premiums therefore, or in keeping or performing any
other covenant of Mortgagor herein, Mortgagee may, at its option and without any
obligation on its part so to do, pay said taxes and assessments, make such
repairs and replacements, effect such insurance, pay such premiums, and perform
any other covenant of Mortgagor herein. All amounts expended by Mortgagee
hereunder shall be secured hereby and shall be due and payable by Mortgagor to
Mortgagee forthwith on demand with interest thereon at the rate applicable under
the Note from the date of such expenditure.
VI. REIMBURSEMENT FOR MORTGAGEE'S LEGAL EXPENSE
In the event that Mortgagee is made a party to any suit or proceedings by
reason of the interest of Mortgagee in the Premises, Mortgagor shall reimburse
Mortgagee for all costs and expenses, including attorney's fees, incurred by
Mortgagee in connection therewith, whether or not said proceeding or suit ever
goes to trial. All amounts incurred by Mortgagee hereunder shall be secured
hereby and shall be due and payable by Mortgagor to Mortgagee forthwith on
demand with interest thereon at the rate applicable under the Note from the date
of such expenditure.
<PAGE>
VII. FINANCIAL STATEMENTS
Throughout the term of the Mortgage, Mortgagor shall cause to be furnished
to Mortgagee such financial information concerning the Mortgagor as Mortgagee
may reasonably request from time to time, the reasonably free access to the
Mortgaged Property and to inspect all work done and materials furnished in
connection with the Mortgaged Property, and to inspect all books, records and
contracts of Mortgagor relating to the Mortgaged Property.
VIII. CONDEMNATION
If all or any part of the Mortgaged Property is damaged, taken or acquired,
either temporarily or permanently, in any condemnation proceeding, or by
exercise of the right of eminent domain, the amount of any award or other
payment for such taking or damages made in consideration thereof, to the extent
of the full amount of the remaining unpaid indebtedness secured by this
instrument, is hereby assigned to Mortgagee, who is empowered to collect and
receive the same and to give proper receipts therefor in the name of Mortgagor
and the same shall be paid forthwith to Mortgagee, who shall release any such
award or monies so received or apply the same in whole or in part, after the
payment of all expenses, including reasonable costs and attorney's fees, to the
restoration or repair of the property damaged, if the property can be restored
or repaired to constitute a complete architectural unit. In the event the said
property cannot be restored or repaired to constitute a complete architectural
unit, then such award or monies received after the payment of expenses of
Mortgagee as aforesaid shall be applied on account of the unpaid principal
balance of the Note, irrespective of whether such principal balance is then due
and payable. Furthermore, in the event such award or monies so received shall
exceed the cost of restoration or repair of the property and expenses of
Mortgagee as aforesaid, then such excess monies shall be applied on account of
the unpaid principal balance of the Note, irrespective of whether such principal
balance is then due and payable.
IX. EVENTS OF DEFAULT
Each of the following shall constitute an "Event of Default" for purpose of
this Mortgage:
(A) Failure to make prompt payment, when due, of any payment of principal
or interest under the Note and such failure to pay remains unremedied
for a period of seven (7) days.
(B) Failure to promptly perform or observe any other covenant, promise,
term or agreement contained in the Mortgage, Note, assignment or parts
of any other loan document executed in connection with this loan
transaction and such failure remains unremedied for a period of seven
(7) days.
(C) Any sale, agreement, transfer, lease, agreement to transfer, grant of
security interest, mortgage, or other encumbrance or alienation of any
interest in the Mortgaged Property without the prior written consent
of Mortgagee.
(D) Failure to make prompt payment, when due, of any payment of principal
or interest under any agreement, loan documents, notes or instrument
now or hereafter delivered to Mortgagee.
(E) The commencement of any petition in Bankruptcy, whether voluntary or
involuntary by or against Mortgagor or if Mortgagor is adjudicated
bankrupt or insolvent or files any petition or answer seeking
restoration, assignment, composition, liquidation or similar relief
under the present or any future Federal or state law or seeks or
covenants to acquiesces in the appointment of any trustee, receiver,
or similar officer of Mortgagor, regarding the Mortgaged Property.
(F) Any material adverse change in the financial condition of Mortgagor or
any Guarantor of this Mortgage or the Note.
X. MORTGAGEE'S DETERMINATION OF FACTS
Mortgagee will at all times be free independently to establish to its
satisfaction and in its absolute discretion the existence or nonexistence of any
fact or facts, the existence or nonexistence of which is a condition, warranty
or covenant of this Mortgage or in any other loan documents.
<PAGE>
XI. ACCELERATION AND DEFAULT RATE
If an Event of Default occurs, Mortgagee may, at its option, declare the
whole of the indebtedness hereby secured to be immediately due and payable
without notice to Mortgagor. Then, at any time thereafter, at the sole option of
Mortgagee, the principal balance and accrued interest on the Note shall become
immediately due and payable, and any other sums secured hereby shall become
immediately due and payable. All sums coming due and payable hereunder shall
bear interest, after acceleration, at the Default Rate, which shall mean the
interest rate stated in the Note plus three percent (3%) per annum and shall
constitute additional indebtedness secured by this Mortgage. After any such
Event of Default, Mortgagee may institute or cause to be instituted, proceedings
for the realization of its rights under this Mortgage or any other loan
documents.
XII. RIGHTS, POWERS AND REMEDIES OF MORTGAGEE
When the indebtedness hereby secured, or any part thereof, shall become
due, whether by acceleration or otherwise, Mortgagee may at its election:
(A) Foreclose this Mortgage by legal action, as provided by Illinois
Statutes and this paragraph shall further authorize a power of sale as
provided by said statutes.
(B) Enter upon and take possession of the Mortgaged Property with the
irrevocable consent of Mortgagor as granted and evidenced by execution
of this Mortgage. As Mortgagee in possession, Mortgagee may hold,
operate, manage and control the Mortgaged Property and conduct
business, if any, either personally or by its agents. The Mortgagee
may collect rents and lease the Mortgaged Property, cancel or modify
existing leases and generally exercise all powers and rights
customarily incident to ownership. Mortgagee may pay out of any rents
collected, taxes, insurance, conversions, fees and any expenses
attributable to the Mortgaged Property.
(C) Upon, or at any time after the filing of a complaint or petition to
foreclose this Mortgage, Mortgagee may apply to the court for
appointment of a receiver of the Mortgaged Property. Such receiver
shall have the power to collect the rents, issues and profits of the
Mortgaged Property during the pendency of the foreclosure suit up to
and after any sale of the Mortgaged Property. The court may authorize
the receiver to apply net income from management and control of the
Mortgaged Property in whole or in part to the indebtedness secured
hereby or to any tax or special assessment which may be or become
superior to the lien hereof.
XIII. CROSS-DEFAULT CLAUSE
Any default by Mortgagor in the performance or observance of any covenant,
promise, condition or agreement hereof shall be deemed an Event of Default under
each of the loan documents, entitling Mortgagee to exercise all or any remedies
available to Mortgagee under the terms of any or all loan documents, and any
default or Event of Default under any other loan document, relating to any of
Mortgagor's obligations to Mortgagee, shall be deemed a default hereunder,
entitling Mortgagee to exercise any or all remedies provided for herein. Failure
by Mortgagee to exercise any right which it may have hereunder shall not be
deemed a waiver thereof unless so agreed in writing by Mortgagee, and the waiver
by Mortgagee of any default by Mortgagor hereunder shall not constitute a
continuing waiver of any other default or of the same default in the future.
XIV. BUSINESS PURPOSE
Mortgagor covenants that the proceeds of the loan evidenced by the Note and
secured by this Mortgage will be used for the purposes specified in Paragraph
(1) (C) of 815 ILCS 205/4, and that the principal obligation constitutes a
business loan which comes within the purview of said statute.
XV. WAIVER OF REDEMPTION
(A) Mortgagor hereby waives all rights of redemption and/or equity of
redemption which exist by statute or common law for sale under any order or
decree of foreclosure of this Mortgage on its own behalf and on behalf of each
and every person, beneficiary or any other entity, except decree or judgment
creditors of Mortgagor who may acquire any interest in or title to the Mortgaged
Property or the trust estate subsequent to the date hereof.
<PAGE>
(B) Mortgagor hereby waives the benefit of all appraisement, valuation,
stay, or extension laws now or hereafter in force and all rights of marshaling
in the event of any sale hereunder of the Mortgaged Property or any part thereof
or any interest therein.
(C) Mortgagor hereby waives the benefit of any rights or benefits provided
by the Homestead Exemption laws, if any, now or hereafter in force.
XVI. MORTGAGEE'S RIGHT OF INSPECTION
Mortgagee and/or its representative shall have the right to inspect the
Mortgaged Property at all reasonable times and access thereto shall be permitted
for that purpose.
XVII. FURTHER INSTRUMENTS
Upon request of Mortgagee, Mortgagor will execute, acknowledge and deliver
all such additional instruments and further assurances of title and will do or
cause to be done all such further acts and things as may reasonably be necessary
fully to effectuate the intent of this Mortgage.
XVIII. NOTICES
Any notice, demand, requests or other communication desired to be given or
required pursuant to the terms hereof shall be in writing and shall be delivered
by personal service or sent by registered or certified mail, return receipt
requested, postage prepaid, addressed as follows or to such other address as the
parties hereto may designate in writing from time to time:
Mortgagor: Quantum Leap Communications, Inc.
22 West Hubbard Street
Chicago, Illinois 60610
Attn. Robert C. Bramlette
Mortgagee: American National Bank and Trust Company of Chicago
120 South LaSalle Street
Chicago, Illinois 60603
XIX. SUCCESSORS AND ASSIGNS
This Mortgage and all provisions hereof shall run with the Mortgaged
Property and shall be binding upon and enforceable against Mortgagor and its
permitted successors, grantees and assigns, any subsequent owner or owners of
the Premises who acquire the Premises subject to this Mortgage and all persons
claiming under or through Mortgagor, and the word "Mortgagor" when used herein
shall include all such persons and all persons liable for the payment of the
indebtedness or any part thereof, whether or not such persons shall have
executed the Note or this Mortgage. This Mortgage and all provisions hereof
shall inure to the benefit of Mortgagee, its successors and assigns and any
holder or holders, from time to time, of the Note.
All of the covenants and conditions hereof shall run with the land and
shall be binding upon and inure to the benefit of the successors and assigns of
Mortgagor and Mortgagee, respectively, and all persons claiming through or under
them. Any reference herein to Mortgagee shall include the successors and assigns
of Mortgagee. Mortgagor shall not assign its interest without the prior written
consent of Mortgagee.
<PAGE>
XX. ENVIRONMENTAL MATTERS
(A) Mortgagor hereby represents and warrants to the Mortgagee that neither
Mortgagor, nor any of their affiliates or subsidiaries, nor, to the best of
Mortgagor's knowledge, any other person or entity, has ever caused or permitted
any Hazardous Material to be placed, held, located or disposed of in, under or
at the Premises or any part thereof, and that the Premises has never been used
by Mortgagor, or any other affiliates or subsidiaries, or, to the best of
Mortgagor's knowledge, by any other person or entity, as a temporary or
permanent dump or storage site for any Hazardous Material. "Hazardous Material"
means any hazardous, toxic, or dangerous waste, substance or material defined as
such in (or for purposes of) the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended, any so-called "Superfund" or
"Superlien" law, or any other federal, state or local statute, law, ordinance,
code, rule, regulation, order of decree regulating, relating to or imposing
liability or standards on conduct concerning any hazardous, toxic or dangerous
waste, substance or material, as now or at any time hereafter in effect.
(B) Without limitation on any other provision hereof, Mortgagor hereby
agrees to indemnify and hold Mortgagee harmless from and against any and all
losses, liabilities, damages, injuries, costs, expenses and claims of any kind
whatsoever including, without limitation, any losses, liabilities, damages,
injuries, costs, expenses or claims asserted or arising under any of the
following (collectively, "Environmental Laws"): The Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended, any so-called
"Superfund" or "Superlien" law, or any other federal, state or local statute,
law, ordinance, code, rule, regulation, order or decree, now or hereafter in
force, regulating, relating to, or imposing liability or standards on conduct
concerning any Hazardous Material paid, incurred, suffered by or asserted
against Mortgagee as a direct or indirect result of any of the following
regardless of whether or not caused by, or within the control of Mortgagor: (i)
the presence of any Hazardous Material on or under, or the escape, seepage,
leakage, spillage, discharge, emission, discharging or release of any Hazardous
Material from (a) the Premises or any part thereof, or (b) any other real
property in which Mortgagor or any of their affiliates or subsidiaries holds any
estate or interest whatsoever (including, without limitation, any property owned
by a land trust the beneficial interest in which is owned, in whole or in part,
by the beneficiary of any of its affiliates or subsidiaries), or (ii) any liens
against the Premises permitted or imposed by environmental laws, or any actual
or asserted liability or obligations of Mortgagor or any of their affiliates or
subsidiaries under any environmental laws, or (iii) any actual or asserted
liability or obligations of Mortgagor or any of its affiliates or subsidiaries
under any environmental law relating to the Premises.
(C) Mortgagor hereby agrees to comply with all applicable environmental
laws, rules and regulations related to hazardous wastes, materials and
substances.
(D) Mortgagor hereby agrees to notify Mortgagee, in writing, immediately
after Mortgagor has actual or constructive notice of the release of any
hazardous waste, material or substances onto Mortgaged Property and to take
prompt and diligent remedial action.
XXI. REMEDIES CUMULATIVE
The rights and remedies herein provided are cumulative and Mortgagee may
recover judgment on the Note, issue execution therefor, and resort to every
other right or remedy available at law or in equity, without first exhausting
and without affecting or impairing the security or any right or remedy afforded
by this Mortgage and no enumeration of special rights or powers by any provision
of this Mortgage shall be construed to limit any grant of general rights or
powers, or to take away or limit any and all rights granted to or vested in the
Mortgagee by virtue of the laws of Illinois.
XXII. INCORPORATION OF UNIFORM COMMERCIAL CODE
To the extent that this instrument may operate as a security agreement
under the Uniform Commercial Code, Mortgagee shall have all rights and remedies
conferred therein for the benefit of a secured party (as said term is defined in
the Uniform Commercial Code).
IN WITNESS WHEREOF, this Mortgage is effective as of the day and year first
above written.
QUANTUM LEAP COMMUNICATIONS, INC., a Delaware corporation
By: /s/ Robert C. Bramlette, Vice President
---------------------------------------
<PAGE>
Exhibit 10.3
American National Bank
and Trust Company of
Chicago
[LOGO]
================================================================================
SECURITY AGREEMENT (GENERAL)
================================================================================
THIS SECURITY AGREEMENT (this "Agreement"), dated as of the 29th day of
June, 1999, by and between AMERICAN NATIONAL BANK AND TRUST COMPANY OF CHICAGO
("BANK"), a national banking association with its principal place of business at
120 South LaSalle Street, Chicago, Illinois 60603, and QUANTUM LEAP
COMMUNICATIONS, INC. ("Borrower"), a Delaware corporation with its principal
place of business at 22 West Hubbard Street, Chicago, Illinois 60610, has
reference to the following facts and circumstances:
A. Pursuant to Borrower's request, Bank heretofore, now and from time to
time hereafter, has and/or may loan or advance monies, extend credit and/or
extend other financial accommodations to or for the benefit of Borrower.
B. To secure repayment of the same and all of "Borrower's Liabilities" (as
hereinafter defined), Borrower wishes to provide Bank with a security interest
in and/or collateral assignment of Borrower's assets.
NOW THEREFORE, in consideration of the terms and conditions set forth
herein and of any loans or extensions of credit heretofore, now or hereafter
made to or for the benefit of Borrower by Bank, the parties hereto agree as
follows:
1. DEFINITIONS AND TERMS
1.1 When used herein, the words, terms and/or phrases set forth below
shall have the following meanings:
A. "Accounts": all present and future rights of Borrower to payment for
goods sold or leased or for services rendered, which are not evidenced
by instruments or chattel paper, and whether or not they have been
earned by performance.
B. "Borrower's Liabilities": all obligations and liabilities of Borrower
to Bank (including without limitation all debts, claims, indebtedness
and attorneys' fees and expenses as provided for in Paragraph 6.11)
whether primary, secondary, direct, contingent, fixed or otherwise,
including Rate Hedging Obligations (as defined in subparagraph I
herein), heretofore, now and/or from time to time hereafter owing, due
or payable, however evidenced, created, incurred, acquired or owing
and however arising, whether under this Agreement or the "Other
Agreements" (hereinafter defined) or by operation of law or otherwise.
C. "Charges": all national, federal, state, county, city, municipal
and/or other governmental (or any instrumentality, division, agency,
body or department thereof, including without limitation the Pension
Benefit Guaranty Corporation) taxes, levies, assessments, charges,
liens, claims or encumbrances upon and/or relating to the "Collateral"
(as hereinafter defined), Borrower's Liabilities, Borrower's business,
Borrower's ownership and/or use of any of its assets, and/or
Borrower's income and/or gross receipts.
D. "Collateral": shall have the meaning set forth in Paragraph 2.2.
E. "Indebtedness": (i) indebtedness for borrowed money or for the
deferred purchase price of property or services; (ii) obligations as
lessee under leases which shall have been or should be, in accordance
with generally accepted accounting principles, recorded as capital
leases; (iii) obligations under direct or indirect guaranties in
respect of, and obligations (contingent or otherwise) to purchase or
otherwise acquire, or otherwise to assure a creditor against loss in
respect of, indebtedness or obligations of others of the kinds
referred to in clauses (i) or (ii) above; and (iv) liabilities with
respect to unfunded vested
<PAGE>
benefits under plans covered by Title IV of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), and in effect from
time to time.
F. "Obligor": any Person who is and/or may become obligated to Borrower
under or on account of "Accounts"
G. "Other Agreements": all agreements, instruments and documents,
including without limitation, guaranties, mortgages, deeds of trust,
notes, pledges, powers of attorney, consents, assignments, contracts,
notices, security agreements, leases, subordination agreements,
financing statements and all other written matter heretofore, now
and/or from time to time hereafter executed by and/or on behalf of
Borrower and delivered to Bank.
H. "Persons": any individual, sole proprietorship, partnership, joint
venture, trust, unincorporated organization, association, corporation,
limited liability company, institution, entity, party or government
(whether national, federal, state, county, city, municipal or
otherwise, including without limitation, any instrumentality,
division, agency, body or department thereof).
I. "Rate Hedging Obligations": shall mean any and all obligations of the
Borrower, whether absolute or contingent and howsoever and whensoever
created, arising, evidenced or acquired (including all renewals,
extensions and modifications thereof and substitutions therefor),
under (i) any and all agreements designed to protect the Borrower from
the fluctuations of interest rates, exchange rates or forward rates
applicable to such party's assets, liabilities or exchange
transactions, including, but not limited to: interest rate swap
agreements, dollar-denominated or cross-currency interest rate
exchange agreements, forward currency exchange agreements, interest
rate cap, floor or collar agreements, forward rate currency agreements
or agreements relating to interest rate options, puts and warrants,
and (ii) any and all agreements relating to cancellations, buy backs,
reversals, terminations or assignments of any of the foregoing.
J. "Year 2000 Issues": shall mean anticipated costs, problems and
uncertainties associated with the inability of certain computer
applications to effectively handle data including data on and after
January 1, 2000, as such inability affects the business, operations,
and financial condition of the Borrower and of the Borrower's material
customers, suppliers and vendors.
1.2 Except as otherwise defined in this Agreement or the Other Agreements,
all words, terms and/or phrases used herein and therein shall be defined by the
applicable definition therefor (if any) in the Illinois Uniform Commercial Code.
2. COLLATERAL
2.1 To secure the prompt payment to Bank of Borrower's Liabilities and the
prompt, full and faithful performance by Borrower of all of the provisions to be
kept, observed or performed by Borrower under this Agreement and/or the Other
Agreements, Borrower grants to Bank a security interest in and to, and
collaterally assigns to Bank, all of Borrower's property, wherever located,
whether now or hereafter existing, owned, licensed, leased (to the extent of
Borrower's leasehold interest therein), consigned (to the extent of Borrower's
ownership therein), arising and/or acquired, including without limitation all of
Borrower's: (a) Accounts, chattel paper, tax refunds, contract rights, leases,
leasehold interests, letters of credit, instruments, documents, documents of
title, patents, copyrights, trademarks, tradenames, licenses, goodwill,
beneficial interests and general intangibles; (b) all goods whose sale, lease or
other disposition by Borrower have given rise to Accounts and have been returned
to or repossessed or stopped in transit by Borrower; (c) certificated and
uncertificated securities; (d) goods, including without limitation all its
consumer goods, machinery, equipment, farm products, fixtures and inventory; (e)
liens, guaranties and other rights and privileges pertaining to any of the
Collateral; (f) monies, reserves, deposits, deposit accounts and interest or
dividends thereon, cash or cash equivalents; (g) all property now or at any time
or times hereafter in the possession, or under the control of Bank or its
bailee; (h) all accessions to the foregoing, all litigation proceeds pertaining
to the foregoing and all substitutions, renewals, improvements and replacements
of and additions to the foregoing; and (i) all books, records and computer
records in any way relating to the Collateral herein described.
<PAGE>
2.2 All of the aforesaid property and products and proceeds of the
foregoing in paragraph 2.1 above including, without limitation, proceeds of
insurance policies insuring the foregoing are herein individually and
collectively called the "Collateral". The terms used herein to identify the
Collateral shall have the same meaning as are assigned to such terms as of the
date hereof in the Illinois Uniform Commercial Code.
2.3 Borrower shall make appropriate entries upon its financial statements
and its books and records disclosing Bank's security interest in the Collateral.
2.4 All of Borrower's Liabilities shall constitute one obligation secured
by Bank's security interest in the Collateral and by all other security
interests, liens, claims and encumbrances heretofore, now and/or from time to
time hereafter granted by Borrower to Bank.
2.5 Immediately upon Borrower's receipt of that portion of the Collateral
evidenced by an agreement, instrument and/or document ("Special Collateral"),
Borrower shall mark the same to show that such Special Collateral is subject to
a security interest in favor of Bank and shall deliver the original thereof to
Bank, together with appropriate endorsement and/or specific evidence of
assignment (in form and substance acceptable to Bank) thereof to Bank.
2.6 Bank shall have the right, now and at any time or times hereafter, at
its option, without notice thereof to Borrower: (a) to notify any or all
Obligors that the Accounts and Special Collateral have been assigned to Bank and
that Bank has a security interest therein; (b) to direct such Obligors to make
all payments due from them to Borrower upon the Accounts and Special Collateral
directly to Bank; and (c) to enforce payment of and collect, by legal
proceedings or otherwise, the Accounts and Special Collateral in the name of
Bank and Borrower.
2.7 Borrower shall execute and deliver to Bank, at the request of Bank,
all agreements, instruments and documents (the "Supplemental Documentation")
that Bank reasonably may request, in form and substance acceptable to Bank, to
perfect and maintain perfected Bank's security interest in the Collateral and to
consummate the transactions contemplated in or by this Agreement or the Other
Agreements. Borrower agrees that a carbon, photographic copy or other
reproduction of this Agreement or of any financing statement, shall be
sufficient to evidence Bank's security interest.
2.8 Bank shall have the right, at any time during Borrower's usual
business hours, to inspect the Collateral and all related records (and the
premises upon which it is located) and to verify the amount and condition of or
any other matter relating to the Collateral.
2.9 Borrower warrants and represents to and covenants with Bank that: (a)
Bank's security interest in the Collateral is now and at all times hereafter
shall be perfected and have a first priority except as expressly agreed to in
writing by the Bank; (b) the offices and/or locations where Borrower keeps the
Collateral are specified at the end of this Paragraph and Borrower shall not
remove such Collateral therefrom except as may occur in the ordinary course of
business, and shall not keep any of such Collateral at any other offices or
locations unless Borrower gives Bank written notice thereof at least thirty (30)
days prior thereto and the same is within the United States of America; and (c)
the addresses specified at the end of this Paragraph include and designate
Borrower's principal executive office, principal place of business and other
offices and places of business and are Borrower's sole offices and places of
business. Borrower, by written notice delivered to Bank at least thirty (30)
days prior thereto, shall advise Bank of Borrower's opening of any new office or
place of business or its closing of any existing office or place of business and
any new office or place of business shall be within the United States of
America. Borrower has places of business at the address shown at the beginning
of this Agreement and at the locations listed below:
1) 350 West Ontario Street, Chicago, Illinois 60610
2) 420 West Huron Street, Chicago, Illinois 60610
3) _____________________________________________________________
All of the Collateral currently owned by Borrower and all of the Collateral
hereafter acquired is, or will be held or stored at the locations listed below:
1) The address of the Borrower shown at beginning of this Agreement;
2) 350 West Ontario Street, Chicago, Illinois 60610
3) 420 West Huron Street, Chicago, Illinois 60610
<PAGE>
2.10 At the request of Bank, Borrower shall receive, as the sole and
exclusive property of Bank and as trustee for Bank, all monies checks, notes,
drafts and all other payments for and/or proceeds of Collateral which come into
the possession or under the control of Borrower and immediately upon receipt
thereof, Borrower shall remit the same (or cause the same to be remitted), in
kind, to Bank or at Bank's direction.
2.11 Upon demand or an Event of Default (as hereinafter defined) or event
which with notice or lapse of time would constitute an Event of Default, Bank
may take control of, in any manner, and may endorse Borrower's name to any of
the items or payment or proceeds described in Paragraph 2.10 above and, pursuant
to the provisions of this Agreement, Bank shall apply the same to and on account
of Borrower's Liabilities.
2.12 Bank, at its option, may at any time or times hereafter, but shall be
under no obligation to, pay, acquire and/or accept an assignment of any security
interest, lien, encumbrance or claim asserted by any person against the
Collateral.
2.13 In no event shall Borrower make any sale, transfer or other
disposition of any of the Collateral not in the ordinary course of business,
except as authorized in a writing executed by Bank and delivered to Borrower. No
such authorization given by Bank to sell any specified portion of Collateral or
any items thereof, and no waiver by Bank in connection therewith shall establish
a custom or constitute a waiver of the prohibition contained in this Agreement
against such sale, with respect to any portion of the Collateral or any item
thereof not covered by said authorization.
2.14 Regardless of the adequacy of any Collateral securing Borrower's
Liabilities hereunder, any deposits or other sums at any time credited by or
payable or due from Bank to Borrower, or any monies, cash, cash equivalents,
securities, instruments, documents or other assets of Borrower in the possession
or control of Bank or its bailee for any purpose may, upon demand or an Event of
Default or event or condition which with notice or lapse of time would
constitute an Event of Default, be reduced to cash and applied by Bank to or
setoff by Bank against Borrower's Liabilities hereunder.
3. WARRANTIES, REPRESENTATIONS AND COVENANTS;
INSURANCE AND TAXES
3.1 Borrower, at its sole cost and expense, shall keep and maintain: (a)
the Collateral insured for the full insurable value against all hazards and
risks ordinarily insured against by other owners or users of such properties in
similar businesses, and (b) business interruption insurance and public liability
and property damage insurance relating to Borrower's ownership and use of its
assets. All such policies of insurance shall be in a form with insurers and in
such amounts as may be satisfactory to Bank. Borrower shall deliver to Bank the
original (or certified) copy of each policy of insurance, or a certificate of
insurance, and evidence of payment of all premiums for each such policy. Such
policies of insurance (except those of public liability) shall contain a
standard form loss payable clause, in form and substance acceptable to Bank,
showing loss payable to Bank, and shall provide that the insurance companies
will give Bank at least thirty (30) days written notice before any such policy
or policies of insurance shall be altered or canceled and that no act or default
of Borrower or any other Person or entity shall affect the right of Bank to
recover under such policy or policies of insurance in case of loss or damage.
Borrower hereby directs all insurers under such policies of insurance (except
those of public liability) to pay all proceeds payable thereunder directly to
Bank and hereby irrevocably appoints Bank as Borrower's agent and attorney-in-
fact to make, settle and adjust claims under such policies of insurance and
endorse the name of Borrower on any check, draft, instrument or other item of
payment or the proceeds of such policies of insurance.
Unless Borrower provides Bank with evidence of the insurance coverage
required by this Agreement, Bank may purchase insurance at Borrower's expense to
protect Bank's interests in the Collateral. This insurance may, but need not,
protect Borrower's interests. The coverage that Bank purchases may not pay any
claim that Borrower makes or any claim that is made against Borrower in
connection with the Collateral. Borrower may later cancel any insurance
purchased by Bank, but only after providing Bank with evidence that Borrower has
obtained insurance as required by this Agreement. If Bank purchases insurance
for the Collateral, Borrower will be responsible for the costs of that
insurance, including interest and other charges Bank may impose in connection
with the placement of the insurance, until the effective date of the
cancellation or expiration of the insurance. The costs of the insurance may be
added to Borrower's total outstanding balance or obligation. The costs of the
insurance may be more than the cost of the insurance Borrower is able to obtain
on its own.
<PAGE>
3.2 Borrower shall pay promptly, when due, all Charges, and shall not
permit any Charges to arise or remain and will promptly discharge the same.
4. WARRANTIES, REPRESENTATIONS AND COVENANTS; GENERAL
4.1 Borrower warrants and represents to and covenants with Bank that: (a)
Borrower has the right, power and capacity and is duly authorized and empowered
to enter into, execute, deliver and perform this Agreement and the Other
Agreements; (b) the execution, delivery and/or performance by Borrower of this
Agreement and the Other Agreements shall not, by the lapse of time, the giving
of notice or otherwise, constitute a violation of any applicable law or a breach
of any provision contained in Borrower's Articles of Incorporation, By-Laws,
Articles of Partnership, Articles of Organization, Operating Agreement or
similar document, or contained in any agreement, instrument or document to which
Borrower is now or hereafter a party or by which it is or may be bound; (c)
Borrower has and at all times hereafter shall have good, indefeasible and
merchantable title to and ownership of the Collateral, free and clear of all
liens, claims, security interests and encumbrances except those of Bank; (d)
Borrower is now and at all times hereafter, shall be solvent and generally
paying its debts as they mature and Borrower now owns and shall at all times
hereafter own property which, at a fair valuation, is greater than the sum of
its debts; (e) Borrower is not and will not be during the term hereof in
violation of any applicable federal, state or local statute, regulation or
ordinance that, in any respect materially and adversely affects its business,
property, assets, operations or condition, financial or otherwise; and (f)
Borrower is not in default with respect to any indenture, loan agreement,
mortgage, deed or other similar agreement relating to the borrowing of monies to
which it is a party or by which it is bound.
4.2 Borrower warrants and represents to and covenants with Bank that
Borrower shall not, without Bank's prior written consent thereto: (a) grant a
security interest in, or assign any of the Collateral to any Person or permit,
grant, or suffer a lien, claim or encumbrance upon any of the Collateral; (b)
sell or transfer any of the Collateral to any person not in the ordinary course
of business; (c) enter into any transaction not in the ordinary course of
business which materially and adversely affects Borrower's ability to repay
Borrower's Liabilities, any other obligations and liabilities of Borrower or any
third party or the Collateral; and (d) other than as specifically permitted in
or contemplated by this Agreement or the Other Agreements, encumber, pledge,
mortgage, sell, lease or otherwise dispose of or transfer, whether by sale,
loan, distribution, merger, consolidation or otherwise, any of Borrower's
assets.
4.3 Borrower warrants and represents to and covenants with Bank that
Borrower shall furnish to Bank: (a) as soon as available but not later than
ninety (90) days after the close of each fiscal year of Leapnet, Inc.
consolidated financial statements which shall include, but not be limited to,
balance sheets, income statements and statements of cash flow prepared in
accordance with generally accepted accounting principles, consistently applied,
audited by a firm of independent certified public accountants selected by and
acceptable to Bank; (b) as soon as available but not later than ninety (45) days
after the end of each fiscal quarter hereafter, consolidated financial
statements of Leapnet, Inc. certified by Leapnet, Inc. to be prepared in
accordance with generally accepted accounting principles which fairly present
the financial position and results of operations of Leapnet, Inc. and its
subsidiaries and/or affiliates for such period; and (c) such other data and
information (financial and otherwise) as Bank, from time to time, may request,
including information satisfactory to Bank regarding Leapnet, Inc. and its
subsidiaries' and/or affiliates' plan(s) for addressing Year 2000 Issues.
4.4 Borrower warrants and represents to and covenants with Bank that
Leapnet, Inc. (on a consolidated basis) shall: (i) maintain a ratio of
Indebtedness to Tangible Net Worth of not more than 1.2 to 1.0. Indebtedness
shall have the meaning set forth in Paragraph 1.1 above and "Tangible Net Worth"
shall mean the value of the total assets of Leapnet, Inc. (on a consolidated
basis) as determined in accordance with GAAP after subtracting therefrom the
aggregate amount of any intangible assets of Leapnet, Inc. (on a consolidated
basis) as determined in accordance with GAAP, including without limitation,
prepaid expenses, notes receivable and accounts receivable from a related party
of Leapnet, Inc. (on a consolidated basis); (ii) maintain a ratio of Current
Assets to Current Liabilities of not less than 1.1 to 1.0. "Current Liabilities"
means the current liabilities of Leapnet, Inc. (on a consolidated basis)
determined in accordance with GAAP and "Current Assets" means the current assets
of Leapnet, Inc. (on a consolidated basis) determined in accordance with GAAP;
and (iii) not permit its "Debt Service Coverage Ratio" to be less than 1.25 to
1.00. "Debt Service Coverage Ratio" shall mean the ratio of Cash Flow Available
to Debt Service Required. The
<PAGE>
aforementioned covenants will be measured on Borrower's fiscal quarterly basis
beginning with the fiscal year ending January 31, 2000.
4.5 Borrower will maintain its primary depositary relationship with Bank
and will establish such accounts and maintain balances therein with Bank
sufficient to cover the cost of all Bank services provided; provided however,
that nothing herein shall require Borrower to keep and maintain a specific
minimum balance in such account.
4.6 Borrower warrants and represents to and covenants with Bank that
Borrower will take all actions reasonably necessary to assure that the Year 2000
Issues will not have a material adverse effect on the business, operations or
financial condition of the Borrower. Upon the Bank's request, the Borrower will
provide the Bank with a description of its plan to address Year 2000 Issues,
including updates and progress reports. The Borrower will advise the Bank of any
reasonably anticipated material adverse effect on the business, operations or
financial condition of the Borrower as a result of Year 2000 Issues.
5. DEFAULT
5.1 The occurrence of any one of the following events shall constitute a
default by the Borrower ("Event of Default") under this Agreement: (a) if
Borrower fails to pay any of Borrower's Liabilities when due and payable or
declared due and payable (whether by scheduled maturity, required payment,
acceleration, demand or otherwise) and such failure to pay remains unremedied
for a period of seven (7) days; (b) if Borrower fails or neglects to perform,
keep or observe any term, provision, condition, covenant, warranty or
representation contained in this Agreement or any of the Other Agreements and
such failure or neglect remains unremedied for a period of seven (7) days; (c)
occurrence of a default or Event of Default under any of the Other Agreements
heretofore, now or at any time hereafter delivered by or on behalf of Borrower
to Bank; (d) occurrence of a default or an Event of Default under any agreement,
instrument or document heretofore, now or at any time hereafter delivered to
Bank by any guarantor of Borrower's Liabilities or by any Person which has
granted to Bank a security interest or lien in such Person's real or personal
property to secure the payment of Borrower's Liabilities; (e) if the Collateral
or any other of Borrower's assets are attached, seized, subjected to a writ, or
are levied upon or become subject to any lien or come within the possession of
any receiver, trustee, custodian or assignee for the benefit of creditors; (f)
if a notice of lien, levy or assessment is filed of record or given to Borrower
with respect to all or any of Borrower's assets by any federal, state, local
department or agency; (g) if Borrower or any guarantor of Borrower's Liabilities
becomes insolvent or generally fails to pay or admits in writing its inability
to pay debts as they become due, if a petition under Title 11 of the United
States Code or any similar law or regulation is filed by or against Borrower or
any such guarantor, if Borrower or any such guarantor shall make an assignment
for the benefit of creditors, if any case or proceeding is filed by or against
Borrower or any such guarantor for its dissolution or liquidation, if Borrower
or any such guarantor is enjoined, restrained or in any way prevented by court
order from conducting all or any material part of its business affairs; (h) the
death or incompetency of Borrower or any guarantor of Borrower's Liabilities, or
the appointment of a conservator for all or any portion of Borrower's assets or
the Collateral; (i) the revocation, termination, or cancellation of any guaranty
of Borrower's Liabilities without written consent of Bank; (j) if a contribution
failure occurs with respect to any pension plan maintained by Borrower or any
corporation, trade or business that is, along with Borrower, a member of a
controlled group of corporations or controlled group of trades or businesses (as
described in Sections 414(b) and (c) of the Internal Revenue Code of 1986 or
Section 4001 of ERISA) sufficient to give rise to a lien under Section 302(f) of
ERISA; (k) if Borrower or any guarantor of Borrower's Liabilities is in default
in the payment of any obligations, indebtedness or other liabilities to any
third party and such default is declared and is not cured within the time, if
any, specified therefor in any agreement governing the same; (l) if any material
statement, report or certificate made or delivered by Borrower, any of
Borrower's partners, officers, employees or agents or any guarantor of
Borrower's Liabilities is not true and correct; or (m) if Bank is reasonably
insecure.
5.2 All of Bank's rights and remedies under this Agreement and the Other
Agreements are cumulative and non-exclusive.
5.3 Upon an Event of Default, without notice by Bank to or demand by Bank
of Borrower, Borrower's Liabilities shall be immediately due and payable.
5.4 Upon an Event of Default, Bank, in its sole and absolute discretion,
may exercise any one or more of the rights and remedies accruing to a secured
party under the Uniform Commercial Code of the relevant state and any other
applicable law upon default by a debtor.
<PAGE>
5.5 Upon an Event of Default, Borrower, immediately upon demand by Bank,
shall assemble the Collateral and make it available to Bank at a place or places
to be designated by Bank which is reasonably convenient to Bank and Borrower.
Borrower recognizes that in the event Borrower fails to perform, observe or
discharge any of its obligations or liabilities under this Agreement or the
Other Agreements, no remedy of law will provide adequate relief to Bank, and
agrees that Bank shall be entitled to temporary and permanent injunctive relief
in any such case without the necessity of proving actual damages.
5.6 Upon an Event of Default, without notice, demand or legal process of
any kind, Bank may take possession of any or all of the Collateral (in addition
to Collateral of which it already has possession), wherever it may be found, and
for that purpose may pursue the same wherever it may be found, and may enter
into any of Borrower's premises where any of the Collateral may be or is
supposed to be, and search for, take possession of, remove, keep and store any
of the Collateral until the same shall be sold or otherwise disposed of, and
Bank shall have the right to store the same in any of Borrower's premises
without cost to Bank.
5.7 Any notice required to be given by Bank of a sale, lease, or other
disposition of the Collateral or any other intended action by Bank, (i)
deposited in the United States mail, postage prepaid and duly addressed to
Borrower at the address specified at the beginning of this Agreement, or (ii)
sent via certified mail, return receipt requested, or (iii) sent via facsimile,
or (iv) delivered personally, not less than ten (10) days prior to such proposed
action, shall constitute commercially reasonable and fair notice to Borrower.
5.8 Upon an Event of Default, Borrower agrees that Bank may, if Bank deems
it reasonable, postpone or adjourn any such sale of the Collateral from time to
time by an announcement at the time and place of sale or by announcement at the
time and place of such postponed or adjourned sale, without being required to
give a new notice of sale. Borrower agrees that Bank has no obligation to
preserve rights against prior parties to the Collateral. Further, to the extent
permitted by law, Borrower waives and releases any cause of action and claim
against Bank as a result of Bank's possession, collection or sale of the
Collateral, any liability or penalty for failure of Bank to comply with any
requirement imposed on Bank relating to notice of sale, holding of sale or
reporting of sale of the Collateral, and any right of redemption from such sale.
6. GENERAL
6.1 Borrower waives the right to direct the application of any and all
payments at any time or times hereafter received by Bank on account of
Borrower's Liabilities and Borrower agrees that Bank shall have the continuing
exclusive right to apply and re-apply any and all such payments in such manner
as Bank may deem advisable, notwithstanding any entry by Bank upon any of its
books and records.
6.2 This Agreement and the Other Agreements shall be binding upon and
inure to the benefit of the heirs, representatives, successors and assigns of
Borrower and Bank.
6.3 Bank's failure to require strict performance by Borrower of any
provision of this Agreement shall not waive, affect or diminish any right of
Bank thereafter to demand strict compliance and performance therewith. Any
suspension or waiver by Bank of an Event of Default by Borrower under this
Agreement or the Other Agreements shall not suspend, waive or affect any other
Event of Default by Borrower under this Agreement or the Other Agreements,
whether the same is prior or subsequent thereto and whether of the same or of a
different type. None of the undertakings, agreements, warranties, covenants and
representations of Borrower contained in this Agreement or the Other Agreements
and no Event of Default by Borrower under this Agreement or the Other Agreements
shall be deemed to have been suspended or waived by Bank unless such suspension
or waiver is by an instrument in writing signed by an officer of Bank and
directed to Borrower specifying such suspension or waiver.
6.4 If any provision of this Agreement or the Other Agreements or the
application thereof to any person, entity or circumstance is held invalid or
unenforceable, the remainder of this Agreement and the Other Agreements and the
application of such provision to other Persons, or circumstances will not be
affected thereby and the provisions of this Agreement and the Other Agreements
shall be severable in any such instance.
<PAGE>
6.5 Borrower hereby appoints Bank as Borrower's agent and attorney-in-fact
for the purpose of carrying out the provisions of this Agreement and taking any
action and executing any agreement, instrument or document which Bank may
reasonably deem necessary or advisable to accomplish the purposes hereof which
appointment is irrevocable and coupled with an interest. All monies paid for the
purposes herein, and all costs, fees and expenses paid or incurred in connection
therewith, shall be part of Borrower's Liabilities, payable by Borrower to Bank
on demand.
6.6 Except as otherwise specifically provided in this Agreement, Borrower
waives any and all notice or demand which Borrower might be entitled to receive
by virtue of any applicable statute or law, and waives presentment, demand and
protest and notice of presentment, protest, default, dishonor, non-payment,
maturity, release, compromise, settlement, extension or renewal of any and all
agreements, instruments or documents at any time held by Bank on which Borrower
may in any way be liable.
6.7 This Agreement, or a carbon, photographic, or other reproduction of
this Agreement or of any Uniform Commercial Code financing statement covering
the Collateral or any portion thereof, shall be sufficient as a Uniform
Commercial Code financing statement and may be filed as such.
6.8 Except as otherwise provided in the Other Agreements, if any provision
contained in this Agreement is in conflict with, or inconsistent with any
provision in the Other Agreements, the provision of this Agreement shall
control.
6.9 The terms and provisions of this Agreement and the Other Agreements
shall supersede any prior agreement or understanding of the parties hereto, and
contain the entire agreement of the parties hereto with respect to the matters
covered herein. This Agreement and the Other Agreements may not be modified,
altered or amended except by an agreement in writing signed by Borrower and
Bank. This Agreement shall continue in full force and effect so long as any
portion or component of Borrower's Liabilities shall be outstanding. All of
Borrower's warranties, representations, undertakings and covenants contained in
this Agreement or the Other Agreements shall survive the termination or
cancellation of the same. Should a claim ("Recovery Claim") be made upon the
Bank at any time for recovery of any amount received by the Bank in payment of
Borrower's Liabilities (whether received from Borrower or otherwise) and should
the Bank repay all or part of said amount by reason of (1) any judgment, decree
or order of any court or administrative body having jurisdiction over Bank or
any of its property; (2) any settlement or compromise of any such Recovery Claim
effected by the Bank with the claimant (including Borrower), this Agreement and
the security interests granted Bank hereunder shall continue in effect with
respect to the amount so repaid to the same extent as if such amount had never
originally been received by the Bank, notwithstanding any prior termination of
this Agreement, the return of this Agreement to Borrower, or the cancellation of
any note or other instrument evidencing Borrower's Liabilities.
6.10 This Agreement and the Other Agreements shall be governed and
controlled by the internal laws of the State of Illinois and not the law of
conflicts.
6.11 If at any time or times hereafter, whether or not Borrower's
Liabilities are outstanding at such time, Bank: (a) employs counsel for advice
or other representation, (i) with respect to the Collateral, this Agreement, the
Other Agreements or the administration of Borrower's Liabilities or the
Collateral, (ii) to represent Bank in any litigation, arbitration contest,
dispute, suit or proceeding or to commence, defend or intervene or to take any
other action in or with respect to any litigation, contest, dispute, suit or
proceeding (whether instituted by Bank, Borrower or any other Person) in any way
or respect relating to the Collateral, this Agreement, the Other Agreements, or
Borrower's affairs, or (iii) to enforce any rights of Bank against Borrower or
any other Person which may be obligated to Bank by virtue of this Agreement or
the Other Agreements including, without limitation any Obligor; (b) takes any
action with respect to administration of Borrower's Liabilities or to protect,
collect, sell, liquidate or otherwise dispose of the Collateral; and/or (c)
attempts to or enforces any of Bank's rights or remedies under this Agreement or
the Other Agreements, the reasonable costs, fees and expenses incurred by Bank
with respect to the foregoing, shall be part of Borrower's Liabilities, payable
by Borrower to Bank on demand.
6.12 BORROWER IRREVOCABLY AGREES THAT, SUBJECT TO BANK'S SOLE AND ABSOLUTE
ELECTION, ALL ACTIONS OR PROCEEDINGS IN ANY WAY, MANNER OR RESPECT, ARISING OUT
OF OR FROM OR RELATED TO THIS AGREEMENT, THE OTHER AGREEMENTS OR THE COLLATERAL
SHALL BE LITIGATED ONLY IN COURTS HAVING SITUS WITHIN THE CITY OF CHICAGO, STATE
OF ILLINOIS, AND BORROWER HEREBY CONSENTS AND SUBMITS TO THE JURISDICTION OF ANY
LOCAL, STATE OR FEDERAL COURT LOCATED WITHIN SAID CITY AND STATE. BORROWER
HEREBY WAIVES ANY RIGHT
<PAGE>
IT MAY HAVE TO TRANSFER OR CHANGE THE VENUE OF ANY LITIGATION BROUGHT AGAINST
BORROWER BY BANK IN ACCORDANCE WITH THIS PARAGRAPH.
6.13 BORROWER HEREBY IRREVOCABLY WAIVES ANY RIGHT TO TRIAL BY JURY IN ANY
ACTION, SUIT, COUNTERCLAIM OR PROCEEDING (I) TO ENFORCE OR DEFEND ANY RIGHTS
UNDER OR IN CONNECTION WITH THIS AGREEMENT, THE OTHER AGREEMENTS, OR ANY
AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED OR WHICH MAY IN THE
FUTURE BE DELIVERED IN CONNECTION HEREWITH OR THEREWITH, OR (II) ARISING FROM
ANY DISPUTE OR CONTROVERSY ARISING IN CONNECTION WITH OR RELATED TO THIS
AGREEMENT, THE OTHER AGREEMENTS OR ANY SUCH AMENDMENT, INSTRUMENT, DOCUMENT OR
AGREEMENT, AND AGREES THAT ANY SUCH ACTION, SUIT, COUNTERCLAIM OR PROCEEDING
SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY.
IN WITNESS WHEREOF, this Agreement has been duly executed as of the day and
year specified at the beginning hereof.
BORROWER:
QUANTUM LEAP COMMUNICATIONS, INC.,
a Delaware corporation
By: /s/ Robert C. Bramlette
-------------------------------------
Its: Vice President
-------------------------------------
(If not signing as an individual)
Accepted this ___29th____ day of ____June________, 1999, at Bank's
principal place of business in the City of Chicago, State of Illinois.
AMERICAN NATIONAL BANK AND
TRUST COMPANY OF CHICAGO
By: /s/ Charlene R. Branda
---------------------------------------
Its: Vice President
---------------------------------------
(If not signing as an individual)
<PAGE>
Exhibit 10.4
American National Bank
and Trust Company of
Chicago
[LOGO]
================================================================================
GUARANTY
================================================================================
WHEREAS, QUANTUM LEAP COMMUNICATIONS, INC., a corporation organized under
the laws of Delaware; with principal offices located at 22 West Hubbard Street,
Chicago, Illinois 60610 (hereafter referred to as the "Borrower"), desires or
may desire at some time and/or from time to time to obtain financial
accommodation from AMERICAN NATIONAL BANK AND TRUST COMPANY OF CHICAGO
(hereafter referred to as the "Bank"); and
WHEREAS, the undersigned guarantor is either a corporation or company,
desiring to induce the Bank, at its option, at any time, or from time to time,
to extend financial accommodation to the Borrower, and represents to the Bank
that it is organized under the laws of the State of Delaware and that the
Borrower (a) is engaged in business as a corporate affiliate or subsidiary of
the undersigned, and/or (b) is engaged in selling, marketing, using or otherwise
dealing in goods supplied to it by the undersigned, or supplies to the
undersigned goods sold, marketed, used or otherwise disposed of by the
undersigned, and/or (c) the undersigned expects to derive advantage by assisting
the Borrower in procuring financial assistance from the Bank; or the undersigned
is a(n) individual(s) or partnership desiring to induce the Bank at its option,
at any time, or from time to time, to extend financial accommodation to the
Borrower (said undersigned corporation, company, individual(s) or partnership,
as the case may be, is severally hereinafter referred to as the "undersigned").
1. NOW THEREFORE, FOR VALUE RECEIVED, and in consideration of advances, credit
or other financial accommodation heretofore, now or hereafter at any time
extended to the Borrower by the Bank, the undersigned (jointly and severally if
there is more than one guarantor) hereby unconditionally guarantee(s) the full
and prompt payment to the Bank at maturity, whether by acceleration or
otherwise, and at all times thereafter of any and all "Indebtedness".
"Indebtedness" shall mean obligations and liabilities of every kind and nature
of the Borrower to the Bank (including all indebtedness, obligations and
liabilities of partnerships, created or arising while the Borrower is or was a
member thereof), including principal and interest, however evidenced, whether
now existing or hereafter created or arising, directly or indirectly, primary or
secondary, absolute or contingent, due or to become due, or joint or several,
and however owned, held or acquired, whether through discount, overdraft,
returned checks, purchase, direct loan or as collateral, or otherwise.
The undersigned further unconditionally guarantees the prompt, full and
faithful performance and discharge by the Borrower of all of the terms,
conditions, agreements, representations and warranties on the part of the
Borrower contained in any agreement, or in any modification or addenda thereto
or substitution thereof in connection with any advance, credit or financial
accommodation afforded by the Bank to the Borrower.
The undersigned further agree(s) to pay all expenses, including, without
limitation, legal fees and court costs paid or incurred by the Bank in
endeavoring to collect the Indebtedness, or any part thereof, in enforcing this
guaranty, arising out of any post-judgment proceedings, or in defending any suit
based on any act or omission of the Bank with respect to the Indebtedness,
collateral, or this guaranty or in connection with any Recovery Claim
hereinbelow defined (hereafter, collectively referred to as "Expenses").
2. The term "Guaranteed Debt," as used herein, shall be deemed to mean an
amount equal to all of the Indebtedness plus Expenses.
3. In case of the death, incompetence, dissolution, liquidation or insolvency
(however evidenced) of the Borrower, a principal of the Borrower, or any
guarantor of the Indebtedness or in case any bankruptcy, reorganization, debt
arrangement or other proceeding under any bankruptcy or insolvency law, or any
dissolution, liquidation or receivership proceeding, is instituted by or against
the Borrower, or any of the undersigned or any other guarantor of the
Indebtedness or the inability of the Borrower or any of the undersigned to pay
debts as they mature, or in case of the assignment by the Borrower or any of the
undersigned for the benefit of creditors, then upon the occurrence of any
<PAGE>
such event, all Guaranteed Debt then existing shall at the option of the Bank,
without notice to anyone, immediately become due or accrued and be payable from
the undersigned (or any thereof if more than one guarantor).
4. All payments received from whatever source shall be applied toward the
payment of the Indebtedness in such order of application as the Bank may in its
sole discretion, from time to time elect, and this determination shall be
conclusive upon the undersigned.
5. This guaranty shall in all respects be a continuing, absolute and
unconditional guaranty, and shall remain in full force and effect with respect
to each guarantor until written notice shall have been actually received by the
Bank by first class or certified mail, of its discontinuance as to such
guarantor, or of the death or dissolution of such guarantor, and also until all
Guaranteed Debt created or existing before receipt of such notice shall have
been fully paid. In case of any such discontinuance, or death or dissolution of
any guarantor or guarantors and notice thereof to the Bank, this guaranty shall
nevertheless continue and remain in force against the other guarantor or
guarantors until discontinued as to such other guarantor or guarantors as herein
provided. No compromise, settlement, release or discharge of, or indulgence with
respect to, or failure, negligence or omission to enforce or exercise any right
against, any one or more guarantors or the fact that at any time or from time to
time, all the Guaranteed Debt may have been paid in full, shall release or
discharge the undersigned. In the event of the death of the undersigned, this
guaranty shall continue as to all Indebtedness theretofore incurred by the
Borrower even though said Indebtedness is renewed or the time of maturity of
Indebtedness is extended without the consent of the executors or administrators
of the undersigned. This guaranty shall be valid, irrespective of the validity,
regularity or enforceability of any instrument, writing or agreement relating to
any Indebtedness, whether or not such Indebtedness is due or to become due
before or after any bankruptcy or insolvency proceeding involving the Borrower.
6. The liability hereunder shall in no way be affected or impaired by any of
the following, any or all of which may be done or omitted by the Bank in its
sole discretion without notice to anyone and irrespective of whether the
Guaranteed Debt shall be increased or decreased thereby (and said Bank is hereby
expressly authorized in its sole discretion to make from time to time, without
notice to anyone): any sale, pledge, surrender, compromise, settlement,
exchange, release, renewal, extension, modification, election with respect to
any collateral under Section 1111 or any other provision or section of the
Bankruptcy Code now existing or hereinafter amended; or other disposition of or
with respect to any of said Guaranteed Debt or any security or collateral
therefor, whether or not such disposition is commercially reasonable or
accomplished in a commercially reasonable manner; and such liability shall in no
way be affected or impaired by any acceptance by the Bank of any security for,
or other guarantors or obligors of, any of the Guaranteed Debt, or by any
forbearance or indulgence by the Bank in the collection of, or any failure,
negligence or omission on its part to realize upon any thereof, or to enforce
any claims against any person or persons primarily or secondarily liable
thereon, or upon any collateral or security therefor or to enforce any lien upon
or right of appropriation of any moneys, credits or property of the Borrower in
the possession and control of the Bank, or by an application of any payments or
credits on the Guaranteed Debt. Any act or omission of any kind or at any time
upon the part of the Bank with respect to any matter whatsoever shall not in any
manner affect or impair this guaranty nor the liability thereunder. The
undersigned hereby consents to all acts and omissions of the Bank set forth
herein.
7. In order to hold the undersigned liable hereunder and to enforce this
guaranty, there shall be no obligation on the part of the Bank at any time to
resort for payment to the Borrower, or to any other guarantor, or any person,
firm or corporation liable for the Guaranteed Debt, or to any collateral,
security, property, liens or other rights or remedies of the Bank in respect to
the Guaranteed Debt or any part thereof, all of which is hereby expressly waived
by the undersigned.
8. All diligence in collection, and any presentment for payment, demand,
protest and/or notice, as to any and everyone, of protest, dishonor, default or
nonpayment, and notice of the creation and existence of any and all of the
Guaranteed Debt, and of any security therefor, and of the acceptance of this
guaranty, or extensions of credit or indulgences hereunder or of any other
matters or things whatsoever relating hereto are expressly waived.
9. The granting of additional credit from time to time by the Bank to the
Borrower in excess of the amount to which the right of recovery under this
guaranty is limited or in excess of the amount extended to the Borrower at the
time this guaranty is executed by the undersigned, without notice to the
undersigned, is hereby expressly authorized and shall in no way affect or impair
this guaranty.
10. To secure payment of the Guaranteed Debt, the undersigned grants to Bank a
security interest in all property of the undersigned, including any and all
cash, negotiable instruments, documents of title, chattel paper, securities,
<PAGE>
certificates of deposit, deposit accounts, other cash equivalents and other
assets delivered currently herewith or now or at any time hereafter in transit
to, or in the possession or control of the Bank, or any agent or bailee of Bank,
and all proceeds of all such property. The undersigned agrees that the Bank
shall have the rights and remedies of a secured party under the Uniform
Commercial Code of Illinois with respect to all of the aforesaid property,
including, without limitation thereof, the right to sell or otherwise dispose of
any or all of such property. THE UNDERSIGNED WAIVES EVERY DEFENSE, COUNTERCLAIM
OR SETOFF WHICH THE UNDERSIGNED MAY NOW HAVE OR HEREAFTER MAY HAVE TO ANY ACTION
BY THE BANK IN ENFORCING THIS GUARANTY, INCLUDING, WITHOUT LIMITATION, EVERY
DEFENSE, COUNTERCLAIM OR SETOFF WHICH THE UNDERSIGNED MAY NOW HAVE, OR HEREAFTER
MAY HAVE, AGAINST THE BORROWER OR ANY OTHER PARTY LIABLE TO THE BANK IN ANY
MANNER. As further security, any and all debts and liabilities now or hereafter
arising and owing to any of the undersigned by the Borrower, or any other party
liable to the Bank are hereby subordinated to the Bank's claims and are hereby
assigned to the Bank. The undersigned ratifies and confirms whatever the Bank
may do pursuant to the terms hereof and with respect to any collateral for the
Guaranteed Debt, and agrees that the Bank shall not be liable for any error of
judgment or mistakes of fact or law. The Bank may, without notice to anyone,
apply or set off any balances, credits, deposits, accounts, moneys or other
indebtedness at any time credited by or due from the Bank to any of the
undersigned against the Guaranteed Debt. Any notification of intended
disposition of any property required by law shall be deemed reasonable and
properly given if given at least five (5) calendar days before such disposition.
11. Should a claim ("Recovery Claim") be made upon the Bank at any time for
recovery of any amount received by the Bank in payment of the Guaranteed Debt
(whether received from the Borrower, the undersigned pursuant hereto, or
otherwise) and should the Bank repay all or part of said amount by reason of (i)
any judgment, decree, or order of any court or administrative body having
jurisdiction over the Bank or any of its property; or (ii) any settlement or
compromise of any such Recovery Claim effected by the Bank with the claimant
(including the Borrower), the undersigned shall remain jointly and severally
liable to the Bank for the amount so repaid to the same extent as if such amount
had never originally been received by the Bank, notwithstanding any termination
hereof or the return of this document to any of the undersigned or the
cancellation of any note, this guaranty or other instrument evidencing any of
the Indebtedness.
12. In the event the Bank shall sell, assign or transfer the Indebtedness or
Guaranteed Debt, or any part thereof, or grant participations therein, each and
every immediate or remote successive assignee, transferee, holder of or
participant therein, of all or any part of the Indebtedness or Guaranteed Debt
shall have the right to enforce this guaranty by suit or otherwise for the
benefit of such assignee, transferee, holder or participant, as fully as if such
assigned transferee, holder or participant were herein by name specifically
given such rights, powers and benefits; but the Bank shall have an unimpaired,
prior and superior right to enforce this guaranty for its benefit as to so much
of the Indebtedness or Guaranteed Debt as it has not been sold, assigned or
transferred.
13. No release or discharge of any one or more of the undersigned (if there is
more than one guarantor), or of any other person, whether primarily or
secondarily liable for and obligated with respect to the Guaranteed Debt, or the
institution of bankruptcy, receivership, insolvency, reorganization, dissolution
or liquidation proceedings by or against any such guarantor or person, or the
entry of any restraining or other order in any such proceeding, shall release or
discharge the undersigned or any other guarantor of the Guaranteed Debt, or any
other person, firm or corporation liable to the Bank for the Guaranteed Debt,
unless and until all of the Guaranteed Debt shall have been fully paid and this
guaranty stamped "Canceled" and returned to the undersigned.
14. No delay on the part of the Bank in the exercise of any right or remedy
shall operate as a waiver thereof, and no single or partial exercise by the Bank
of any right or remedy shall preclude any other or further exercise thereof, or
the exercise of any other right or remedy. No action of the Bank permitted
hereunder shall in any way affect or impair the rights of the Bank and the
obligation of the undersigned under this guaranty.
15. To the extent that the Borrower or any of the undersigned is a corporation,
limited liability company or partnership, all references herein to the Borrower
and to the undersigned, respectively, shall be deemed to include any successor
or successors, whether immediate or remote, to such corporation, limited
liability company or partnership.
16. This guaranty has been delivered at Chicago, Illinois, and shall be
construed according to the laws of the State of Illinois, in which state it
shall be performed by the undersigned. All actions arising directly or
indirectly as a result or in consequence of this guaranty shall, in the sole and
absolute discretion of the Bank, be instituted and litigated only in courts
having situs in the City of Chicago, Illinois, and the undersigned hereby
consents to the
<PAGE>
jurisdiction of any State or Federal Court located and having its situs in said
city and waives any right to transfer or change the venue of any litigation.
17. Wherever possible, each provision of this guaranty shall be interpreted in
such manner as to be effective and valid under applicable law, but if any
provision of this guaranty shall be prohibited by or invalid under such 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 guaranty.
18. It is agreed that the undersigned's liability hereunder is several and is
independent of any other guaranties at any time in effect with respect to all or
any part of the Indebtedness and that the undersigned's liability hereunder may
be enforced regardless of the existence of any such other guaranties.
19. This guaranty, and each and every part hereof, shall be binding upon the
undersigned (jointly and severally if there is more than one guarantor) and upon
the heirs, legal representatives, successors and assigns of the undersigned, and
shall inure to the benefit of the Bank, its successors and assigns.
20. If the undersigned guarantor is a corporation, then and in such event, the
undersigned guarantor expressly represents and warrants unto the Bank that the
execution and delivery of this guaranty has been duly authorized by resolutions
heretofore duly adopted by its Board of Directors in accordance with law and its
by-laws, that said resolutions have not been amended nor rescinded, are in full
force and effect, that the officers of the undersigned executing and delivering
this guaranty, for and on behalf of the undersigned, are duly authorized and
empowered so to act. The Bank in accepting this guaranty is expressly relying
upon the aforesaid representations and warranties.
21. This guaranty constitutes the entire agreement between the parties relating
to the subject matter hereof and is the final and complete expression of their
intent. No prior or contemporaneous negotiations, promises, agreements,
covenants or representations of any kind or nature, whether made orally or in
writing, have been made by the parties, or any of them, in negotiations leading
to this guaranty or relating to the subject matter hereof, which are not
expressly contained herein, or which have not become merged and finally
integrated into this guaranty; it being the intention of the parties hereto that
in the event of any subsequent litigation, controversy or dispute concerning the
terms and provisions of this guaranty, no party shall be permitted to offer to
introduce oral or extrinsic evidence concerning the terms and conditions hereof
that are not included or referred to herein and not reflected in writing. This
guaranty can only be changed, modified, waived or discharged if consented to in
a writing duly signed and delivered on behalf of the Bank. No conditions exist
to the legal effectiveness of this guaranty.
22. THE UNDERSIGNED HEREBY IRREVOCABLY WAIVES ANY RIGHT TO TRIAL BY JURY IN ANY
ACTION OR PROCEEDING (i) TO ENFORCE OR DEFEND ANY RIGHTS UNDER OR IN CONNECTION
WITH THIS GUARANTY OR AN AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED
IN CONNECTION HEREWITH, OR (ii) ARISING FROM ANY DISPUTE OR CONTROVERSY IN
CONNECTION WITH OR RELATED TO THIS GUARANTY, AND AGREES THAT ANY SUCH ACTION OR
PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY.
SIGNED AND SEALED by the undersigned effective this 29/th/ day of June, 1999.
Guarantor
Address: 22 West Hubbard Street Leapnet, Inc., a Delaware corporation
Chicago, Illinois 60610
By: /s/ Robert C. Bramlette
-------------------------------------
Chief Legal Officer
-------------------------------------
Printed Name
Tax I.D. Number:
<PAGE>
Exhibit 10.5
LEAPNET, INC.
SECOND AMENDMENT TO THE LEAPNET, INC.
EMPLOYEE INCENTIVE COMPENSATION PLAN
JUNE 15, 1999
This Second Amendment (the "Amendment") to The Leap Group, Inc. Employee
Incentive Compensation Plan (the "Plan") is hereby established by Leapnet, Inc.
(the "Company"), effective as of June 15, 1999.
Whereas, the Board of Directors and stockholders of the Company have approved an
amendment to the Plan which would increase the number of shares of Common Stock
available for issuance thereunder from 3,500,000 to 5,000,000;
The first sentence of Section 4.1 of the Plan is hereby amended to delete the
number "3,500,000" therein and replace it with the number "5,000,000".
Following this Amendment, the Plan shall remain in full force and effect as
amended hereby.
IN WITNESS WHEREOF, the Company has caused this Amendment to be executed by its
duly authorized officer on this fifteenth day of June, 1999.
LEAPNET, INC.
/s/ Fred Smith
-----------------------
Frederick Smith
Chief Executive Officer
<PAGE>
Exhibit 10.6
Real Estate Sale Contract
Unit 1, 420 W. Huron, Chicago, Illinois
1. Buyer to Purchase: Quantum Leap Communications, Inc. (Buyer) agrees to
-----------------
purchase at a price of $500,000 on the terms set forth herein the following
described Real Estate (the "Real Estate") in Cook County Illinois:
commonly known as Unit 1 (which includes the basement and entire first
floor less common elements), 420 W. Huron, Chicago, Illinois and with floor
area of as shown on the condominium survey together with the following
presently located thereon if any: heating, ventilation, air-conditioning
equipment, built in furniture, plans, drawings, and specifications,
maintenance manuals and records, garage door openers and remote control
units and the like, located at or used in connection with the operation and
maintenance of the Real Estate owned by Seller.
2. Seller to Sell: FTI, Inc. (Seller) agrees to sell the Real Estate and the
--------------
property described above, if any, at the price and terms set forth herein,
and to convey or cause to be conveyed to Buyer or nominee title thereto by
a recordable warranty deed, with a release of homestead rights, if any, and
a proper bill of sale subject only to: See Paragraph 25 hereof.
3. Payment: Buyer will pay within two business days from date of acceptance
-------
$1,000 as earnest money to be applied on the purchase and agrees to pay or
satisfy the balance of the purchase price, plus or minus prorations at the
time of closing as follows: The payment of the balance by cashiers check or
title company check. Earnest Money will be increased to $25,000 upon
satisfaction or waiver of the contingencies described at paragraphs 20 and
25 hereof.
4. Survey: The Real Estate is a condominium unit. Existing survey has been
------
provided by Seller.
5. Closing: The time of closing shall be on or before July 2, 1999 or on the
-------
date, if any, to which such time is extended by reason of paragraphs 10 or
11 hereof becoming operative (whichever date is later) unless subsequently
mutually agreed otherwise at the office of the mortgage lender, if any,
provided title is shown good or is accepted by Buyer.
6. Brokers Commission: Seller agrees to pay a Brokers Commission to those
------------------
persons identified as Real Estate Brokers at the end hereof in the amount
set forth or at the commission rate set forth at the end hereof. Both
parties warrant to each other that no brokers are involved in this
transaction other than those identified at the end hereof.
7. Earnest Money: The earnest money shall be deposited in cash. Cash earnest
------------
money shall be deposited in a strict joint order escrow with Chicago Title
<PAGE>
Insurance Company for the mutual benefit of the parties with the parties
respective attorneys as signatories. The escrow funds shall be deposited
into an interest bearing account with the interest payable to Buyer at
closing provided however that if this contract is terminated due to Buyers
fault and the earnest money forfeited as provided in paragraph 14 hereof,
then the interest shall be paid to Seller. Buyer shall pay any investment
fees imposed by the escrowee.
8. Code Matters: Seller warrants that Seller, its beneficiaries or agents of
------------
Seller or of its beneficiaries have received no notices from any city,
village or other governmental authority of zoning, building, fire or health
code violations in respect to the Real Estate that have not been heretofore
been corrected. Provided, however, that Condominium Association has
received a notice of certain required repairs to be made to the elevator
copies of which have been delivered to Buyer. Seller will use its best
efforts to cause the repairs to be completed prior to closing. If Seller is
unsuccessful in completing repairs prior to closing then Seller at closing
will assign to Buyer the contract for repair and credit Buyer with the
balance of the contract price so that Buyer may cause the repairs to be
completed.
9. Duplicate Original: A duplicate original of this contract, duly executed
------------------
by the Seller, if any, shall be delivered to the Buyer within 2 business
days from the date hereof, otherwise at the Buyer's option, this contract
shall become null and void and the earnest money shall be refunded to the
Buyer.
10. Title Commitment: Seller shall deliver or cause to be delivered to Buyer
----------------
or Buyer's agent, not less than 5 days prior to the time of closing, the
plat of survey and a title commitment for an owner's title insurance policy
issued by Chicago Title Insurance Company subject only to (a) the general
exceptions contained in the policy, (b) the title exceptions set forth
above, and (c) title exceptions pertaining to liens or encumbrances of a
definite or ascertainable amount which may be removed by the payment of
money at the time of closing and which Seller may so remove at that time
using the funds to be paid upon delivery of the deed (all of which are
herein referred to as the permitted exceptions). The title commitment shall
be conclusive evidence of good title as to all matters insured by the
policy, subject only to the exceptions as therein stated. Seller shall also
furnish to Buyer an affidavit of title in customary form covering the date
of the closing and showing title in Seller subject only to the permitted
exceptions in foregoing items (b) and (c) and unpermitted exceptions of
defects in the title disclosed by the survey, if any, as to which the title
insurer commits to extend insurance in the matter specified in paragraph 11
below.
11. Title Defects: If the title commitment or the survey (if one is required)
-------------
discloses either unpermitted exceptions of survey matters that render the
title unmarketable (herein referred to as "survey defects"), Seller shall
have 30 days from date of delivery thereof to have the exceptions removed
from the title commitment or to correct such survey defects or to have the
title insurer commit to insure against loss or damage that may be
occasioned by such exceptions or survey defects, and, in such event, the
time of closing shall be 35 days after delivery of the commitment or the
time expressly specified in paragraph 5 hereof, whichever is
<PAGE>
later. If Seller fails to have the exceptions removed or correct any survey
defects, or in the alternative, to obtain the commitment for title
insurance specified above as to such exceptions or survey defects within
the specified time, Buyer may terminate this contract or may elect , upon
notice to Seller within 10 days after expiration after the expiration of
the 30 day period to take title as it then is with the right to deduct from
the purchase price liens or encumbrances of a definite or ascertainable
amount. If Buyer does not so elect, this contract shall become null and
void without further action of the parties.
12. Pro Rations: Water and other utility charges, general taxes, if any, and
-----------
other similar items shall be adjusted ratably as of the time of closing. If
the amount of current general taxes is not then ascertainable the proration
shall be prorated on the basis of 110% of the most recent ascertainable
taxes. Prior to closing Seller shall remove the asbestos around the boiler.
The amount of any general taxes which may accrue by reason of new or
additional improvements shall be adjusted as follows: Seller shall pay for
all periods prior to closing All prorations are final unless otherwise
provided herein. Seller shall pay the amount of any stamp tax imposed by
State and County law on the transfer of title, and shall furnish a
completed Real Estate Transfer Declaration signed by the Seller or the
Seller's agent or meet other requirements as established by any local
ordinance with regard to a transfer or transaction tax: such tax required
by local ordinance shall be paid by Buyer.
13. Vendor and Buyer Risk: The provisions of the Uniform Vendor and Buyer Risk
---------------------
Act of the State of Illinois shall be applicable to this contract.
14. Termination: If this contract is terminated without Buyers fault, the
-----------
earnest money shall be returned to the Buyer. If the termination is caused
by Buyer's fault, then at the option of the Seller and upon notice to the
Buyer, the earnest money shall be forfeited to Sell and applied first to
the payment of Seller's expenses: the balance if any to be retained by the
Seller as liquidated damages. Provided, however, that either party may sue
for specific performance, and the earnest money shall be applied to the
purchase price.
15. Escrow Closing: At the election of either party and upon notice to the
--------------
other party not less than 5 days prior to the date of closing, this sale
shall be closed through an escrow with Chicago Title and Trust Company in
accordance with the general provisions of the usual form of Deed and Money
Escrow Agreement then in use by Chicago Title and Trust Company, with such
special provisions inserted in the escrow as may be required to conform
with this contract. The cost of the escrow shall be paid by the Seller.
Upon satisfaction or waiver of the contingencies contained in Paragraph 20
and 25 hereof the parties shall jointly open a deed and money escrow
agreement at Chicago Title and Trust Company using the form then in use by
Chicago Title and Trust Company with such special provisions inserted in
the escrow as may be required to conform with this contract. Seller's deed
shall be deposited into the escrow within 5 days after the opening of the
escrow provided, however, that said deed shall not be recorded
<PAGE>
prior to the deposit into the escrow of all of Seller's funds which shall
be done not less than 10 days prior to the closing date. In all other
respects the escrow shall conform to the provisions of this contract and
the customary provisions of deed and money escrows in the form then in use
by Chicago Title and Trust Company. The cost of the deed and money escrow
shall be paid by the Seller.
16. Time: Time is of the essence of this contract
----
17. Notices: All notices herein required or permitted shall be in writing and
-------
shall be served on the parties at the addresses following their signatures.
The mailing of a notice by certified mail, return receipt requested, shall
be sufficient service. The attorneys for the parties as shown at the end
hereof shall be agents for the service of notices. In addition to service
by certified mail notices may be served upon the attorneys by facsimile
transmission at the numbers shown herein. Proof of service may be made by
customary affidavit together with a copy of the transmission report
generated by the senders machine.
18. FIRPTA: Seller represents that he is not a foreign person as defined in
------
section 1445 of the Internal Revenue Code and is therefore exempt from the
withholding requirements of said section. Seller will furnish Buyer at
closing the Exemption Certification set forth in said Section.
19. IRPTA: (A) Buyer and Seller agree that the disclosure requirements of
-----
the Illinois Responsible Transfer Act (do) apply to the transfer
contemplated by this contract.
(B) Seller agrees to execute and deliver to Buyer and each mortgage lender
of Buyer such disclosure documents as may be required by the Illinois
Responsible Property Transfer Act.
20. Contingencies, Due Diligence: Seller has delivered the following materials
----------------------------
which Seller may possess and which are hereinafter referred to as Due
Diligence Documents:
(1) Copies of service contracts, maintenance agreements and other
contracts presently affecting the Real Estate, if any.
(2) Municipal or Fire Department Related Notices, if any.
Buyer shall have 30 days in which to satisfy itself as to the financial and
physical condition of the Real Estate. During said 30 day period Seller
shall permit Buyer or Buyer's agents to have access to the Real Estate for
the purpose of inspecting or testing the roof, parking lot, furnace,
electrical, heating, cooling, lead based paint, water supply. ventilating,
plumbing, mechanical, structural, and other systems of the Real Estate as
well as compliance with the American Disabilities Act and environmental
concerns.
<PAGE>
In the event Buyer's inspection shall reveal any material defects, in
Buyer's sole discretion, Buyer may at Buyer's option within said period
deliver to Seller its notice of termination of this Contract, whereupon
this Contract shall be null and void and Buyer shall receive back all
amounts paid by it (including any interest earned on such amounts). In
default of timely delivery of such notice of termination, the conditions of
this Paragraph shall be deemed waived. Sellers agree to cooperate fully
with Buyer in the satisfaction of the contingencies imposed by this
Contract and shall permit Buyer and its agents to enter upon the property
at all reasonable times upon reasonable notice to Seller for the purpose of
inspecting the Real Estate
21. Financing Contingency: This contract is subject to the condition that
---------------------
Buyer be able to procure within 30 days a firm commitment for a loan to be
secured by a mortgage or trust deed on the real estate in the amount of 80%
of the purchase price or such lesser sum as Buyer accepts, with interest
not to exceed 7.5% a year to be amortized over 25 years. The term of such
loan shall be at least 5 years. If, after making every reasonable effort,
Buyer is unable to procure such commitment within the time specified herein
and so notifies Seller thereof within that time, this contract shall become
null and void and all earnest money shall be returned to Buyer; provided
that if Seller, at his option, within a like period of time following
Buyer's notice, procures for Buyer such a commitment or notifies Buyer that
Seller will accept a purchase money mortgage upon the same terms, this
contract shall remain in full force and effect.
22. NOT USED.
--------
23. Representations: Sellers represent and warrant to Buyer that to the best
---------------
of Seller's knowledge now and as of the closing, that:
A. The Due Diligence documents including without limiting the generality
of the foregoing the income and expense statements furnished with respect
to a subparagraph 20(2) are true, accurate and complete in all material
respects and that all documents which are in Seller's possession and
responsive to Paragraph 20 have been delivered.
B. The person(s) signing this contract on behalf of Seller has full
authority to do so.
C. Toxic or Hazardous Waste. 1. Seller has not, and to the best of
Seller's knowledge, no other party has, spilled, disposed of, or stored on,
under, or at the Property, toxic or hazardous chemicals, waste or
substances of any kind whatsoever, whether by accident, burying, drainage,
or storage in containers, tanks, or holding areas, or by any other means
whatsoever (excepting only currently lawful quantities stored and
maintained in accordance with commercially reasonable standards and
applicable environmental laws); 2. To the best of Seller's knowledge, the
Property has never been used as a dump or landfill; 3. To the best of
Seller's knowledge, no other party has generated, released, stored, or
deposited over, beneath or on the Property (or any
<PAGE>
immediately adjacent property), any hazardous or toxic materials,
(excluding asbestos), PCBs, radioactive substances, explosives, petroleum
or petroleum by-products or urea formaldehyde (excepting only currently
lawful quantities maintained in accordance with commercially reasonable
standards and applicable environmental laws); and 4. Seller has not
received any written notices of, and to the best of Seller's knowledge
there are no material violations of any environmental laws or regulations
with respect to the Property.
D. Actions Pending. Seller has not received written notice of any, and to
Seller's Actual Knowledge there are no, proceedings (judicial or
administrative), actions or suits (including, without limitation, any
condemnation, eminent domain, annexation, land use, foreclosure or similar
proceedings) existing, pending, involving, or threatened against the
Property.
E. Title. To Seller's Actual Knowledge, Seller is the legal and equitable
owner of the Property (subject, however, to the Approved Exceptions to
Title and with full right to convey the same, and without limiting the
generality of the foregoing, Seller has not granted any options or rights
of first refusal to third parties (including, without limitation, tenants
under any Leases) to purchase or otherwise acquire any interest in the
Property including leases which may remain outstanding after the Closing.
Seller specifically disclaims any representations or warranties as to the
physical components of the improvements on the Real Estate (including
environmental matters except as set forth above). The parties further agree
that until the closing of the sale hereunder, Seller shall operate the Real
Estate in its usual and customary manner and shall maintain the Real Estate
in the same condition as at the date hereof, ordinary wear and tear
excepted. No new Leases shall be executed after the date hereof provided
Buyer is not in default hereunder or this agreement shall not have been
terminated.
24. Survival: The warranties contained in Section 23 hereof shall survive the
--------
closing provided, however, that any claim under such warranties shall be
presented to Seller in writing within 12 months of closing.
25. Condition of Title: Sellers shall within 5 business days of the date
------------------
hereof furnish to Buyer a copy of Seller's existing title policy. If in
Buyer's reasonable discretion any matters shown on said policy will
unreasonably interfere with Buyer's use of the Real Estate as an office,
Buyer may within 5 days from the date of receipt of the title policy
terminate this Contract by written notice to Seller and receive back all
moneys paid by Buyer and this Contract shall be of no further force and
effect. In default of timely notice hereunder this condition shall be
deemed satisfied and the matters set forth on said existing title policy
shall be deemed to be those matters described at Paragraph 2 on the front
hereof and the only permitted exception to title under said Paragraph 2(a).
The "Approved Exceptions to Title" (Except for Seller's mortgage, if any,
which shall be removed at closing and the leases, if any, set forth on the
rent roll. The sale shall be subject to the lien of current taxes only.)
<PAGE>
26. NOT USED.
--------
27. Execution in Counterpart: This contract may be executed in one or more
------------------------
counterparts and said counterparts taken together shall constitute one
contract.
28. Strike Throughs Language which is stricken through thus: is not part of
---------------
this contract.
29. Exchange: Sellers hereunder may desire to exchange, for other property of
--------
like kind and qualifying use within the meaning of Section 1031 of the
Internal Revenue Code of 1986, as amended and the Regulations promulgated
thereunder, fee title in the property which is the subject of this
contract. Sellers reserve the right to assign its rights, but not its
obligations, hereunder to a Qualified Intermediary as provided in IRC Reg.
1.1031(k)-1(g)(4) on or before the closing date.
30. Termination of Lease: Seller represents that the property is currently
subject to two leases for tenants located on the first floor which leases
are oral and month to month. Upon execution of this Agreement, Seller shall
promptly give notice of termination to both tenants in accordance with
Illinois law.
31 It is understood that the following subsequent to closing Buyer will be
substantially remodeling the unit which may also require work which require
in other units as well as the common elements of the condominium. In such
an event, Buyer shall obtain general liability insurance for insuring
against injury or damage to property to others and shall name as an
additional insured under such policy Buyer, the condominium board and the
owners of the other units in the building. Such insurance shall be in the
minimum amounts of $1,000,000 to each loss with an aggregate total loss
payable of $5,000,000.
<PAGE>
32. Representatives: Representatives of the Parties are as follows:
----------------
Attorney for the Seller: Edward J. FitzSimons
------------------------
30 N. LaSalle Street, Suite 3232
Chicago IL 60602
Phone 312-372-3800
Fax 312-750-6808
Attorney for the Buyer: Robert Bramlette
-----------------------
350 W. Oritario
Chicago, IL 60610
Phone 312-475-1255
Fax 312-475-1267
Listing Broker: Fred Rolison, The Ross Group, 154 West Hubbard,
---------------
Suite 200, Chicago, IL 60610, Phone 312-527-4747
Selling Broker: Fred Rolison, The Ross Group
---------------
Address of Buyer: 22 W. Hubbard, Chicago, IL 60610
-----------------
Address of Seller: 416 West Erie, Chicago, IL, Phone 312-943-4223
------------------
Date of Acceptance: 5/27/99
----------------
Dated this 27/th/ day of May, 1999
BUYER: SELLER:
Quantum Leap Communications, Inc.
/s/ Fred Smith /s/ C. Vespa
<PAGE>
Exhibit 10.7
Real Estate Sale Contract
Unit 2, 420 W. Huron, Chicago, Illinois
1. Buyer to Purchase: Quantum Leap Communications, Inc. (Buyer) agrees to
-----------------
purchase at a price of $600,000 on the terms set forth herein the following
described Real Estate (the "Real Estate") in Cook County Illinois:
commonly known as Unit 2 (which includes the entire second floor less
common elements), 420 W. Huron, Chicago, Illinois and with floor area of as
shown on the condominium survey together with the following presently
located thereon if any: heating, ventilation, air-conditioning equipment,
built in furniture, plans, drawings, and specifications, maintenance
manuals and records, garage door openers and remote control units and the
like, located at or used in connection with the operation and maintenance
of the Real Estate owned by Seller.
2. Seller to Sell: FTI, Inc. (Seller) agrees to sell the Real Estate and the
--------------
property described above, if any, at the price and terms set forth herein,
and to convey or cause to be conveyed to Buyer or nominee title thereto by
a recordable warranty deed, with a release of homestead rights, if any, and
a proper bill of sale subject only to: See Paragraph 25 hereof.
3. Payment: Buyer will pay within two business days from date of acceptance
-------
$1,000 as earnest money to be applied on the purchase and agrees to pay or
satisfy the balance of the purchase price, plus or minus prorations at the
time of closing as follows: The payment of the balance by cashiers check or
title company check. Earnest Money will be increased to $75,000 upon
satisfaction or waiver of the contingencies described at paragraphs 20 and
25 hereof.
4. Survey: The Real Estate is a condominium unit. Existing survey has been
------
provided by Seller.
5. Closing: The time of closing shall be on or before October 18, 1999 or on
-------
the date, if any, to which such time is extended by reason of paragraphs 10
or 11 hereof becoming operative (whichever date is later) unless
subsequently mutually agreed otherwise at the office of the mortgage
lender, if any, provided title is shown good or is accepted by Buyer.
6. Brokers Commission: Seller agrees to pay a Brokers Commission to those
------------------
persons identified as Real Estate Brokers at the end hereof in the amount
set forth or at the commission rate set forth at the end hereof. Both
parties warrant to each other that no brokers are involved in this
transaction other than those identified at the end hereof.
7. Earnest Money: The earnest money shall be deposited in cash. Cash earnest
-------------
money shall be deposited in a strict joint order escrow with Chicago Title
Insurance Company for the mutual benefit of the parties with the parties
<PAGE>
respective attorneys as signatories. The escrow funds shall be deposited
into an interest bearing account with the interest payable to Buyer at
closing provided however that if this contract is terminated due to Buyers
fault and the earnest money forfeited as provided in paragraph 14 hereof,
then the interest shall be paid to Seller. Buyer shall pay any investment
fees imposed by the escrowee.
If the deposit is by letter of credit, the letter of credit shall be held
by the Listing Broker for the mutual benefit of the parties. The Buyer
shall cause the letter of credit to be renewed from time to time so that at
all times prior to closing, agreement of the parties or issuance of a valid
court order the Listing Broker is always holding an unexpired letter of
credit. If within 7 days of the expiration of said letter of credit has not
been renewed, the Listing Broker shall draw down the proceeds of the letter
of credit and shall thereupon deposit the proceeds of the letter of credit
into the strict joint order escrow.
8. Code Matters: Seller warrants that Seller, its beneficiaries or agents of
------------
Seller or of its beneficiaries have received no notices from any city,
village or other governmental authority of zoning, building, fire or health
code violations in respect to the Real Estate that have not been heretofore
been corrected. Provided, however, that Condominium Association has
received a notice of certain required repairs to be made to the elevator
copies of which have been delivered to Buyer. Seller will use its best
efforts to cause the repairs to be completed prior to closing. If Seller is
unsuccessful in completing repairs prior to closing then Seller at closing
will assign to Buyer the contract for repair and credit Buyer with the
balance of the contract price so that Buyer may cause the repairs to be
completed.
9. Duplicate Original: A duplicate original of this contract, duly executed
------------------
by the Seller, if any, shall be delivered to the Buyer within 2 business
days from the date hereof, otherwise at the Buyer's option, this contract
shall become null and void and the earnest money shall be refunded to the
Buyer.
10. Title Commitment: Seller shall deliver or cause to be delivered to Buyer
----------------
or Buyer's agent, not less than 5 days prior to the time of closing, the
plat of survey and a title commitment for an owner's title insurance policy
issued by Chicago Title Insurance Company subject only to (a) the general
exceptions contained in the policy, (b) the title exceptions set forth
above, and (c) title exceptions pertaining to liens or encumbrances of a
definite or ascertainable amount which may be removed by the payment of
money at the time of closing and which Seller may so remove at that time
using the funds to be paid upon delivery of the deed (all of which are
herein referred to as the permitted exceptions). The title commitment shall
be conclusive evidence of good title as to all matters insured by the
policy, subject only to the exceptions as therein stated. Seller shall also
furnish to Buyer an affidavit of title in customary form covering the date
of the closing and showing title in Seller subject only to the permitted
exceptions in foregoing items (b) and (c) and unpermitted exceptions of
defects in the title disclosed by the survey, if any, as to which the title
insurer commits to extend insurance in the matter specified in paragraph 11
below.
<PAGE>
11. Title Defects: If the title commitment or the survey (if one is required)
-------------
discloses either unpermitted exceptions of survey matters that render the
title unmarketable (herein referred to as "survey defects"), Seller shall
have 30 days from date of delivery thereof to have the exceptions removed
from the title commitment or to correct such survey defects or to have the
title insurer commit to insure against loss or damage that may be
occasioned by such exceptions or survey defects, and, in such event, the
time of closing shall be 35 days after delivery of the commitment or the
time expressly specified in paragraph 5 hereof, whichever is later. If
Seller fails to have the exceptions removed or correct any survey defects,
or in the alternative, to obtain the commitment for title insurance
specified above as to such exceptions or survey defects within the
specified time, Buyer may terminate this contract or may elect , upon
notice to Seller within 10 days after expiration after the expiration of
the 30 day period to take title as it then is with the right to deduct from
the purchase price liens or encumbrances of a definite or ascertainable
amount. If Buyer does not so elect, this contract shall become null and
void without further action of the parties.
12. Pro Rations: Water and other utility charges, general taxes, if any, and
-----------
other similar items shall be adjusted ratably as of the time of closing. If
the amount of current general taxes is not then ascertainable the proration
shall be prorated on the basis of 110% of the most recent ascertainable
taxes.
The amount of any general taxes which may accrue by reason of new or
additional improvements shall be adjusted as follows: Seller shall pay for
all periods prior to closing All prorations are final unless otherwise
provided herein. Seller shall pay the amount of any stamp tax imposed by
State and County law on the transfer of title, and shall furnish a
completed Real Estate Transfer Declaration signed by the Seller or the
Seller's agent or meet other requirements as established by any local
ordinance with regard to a transfer or transaction tax: such tax required
by local ordinance shall be paid by Buyer.
13. Vendor and Buyer Risk: The provisions of the Uniform Vendor and Buyer Risk
---------------------
Act of the State of Illinois shall be applicable to this contract.
14. Termination: If this contract is terminated without Buyers fault, the
-----------
earnest money shall be returned to the Buyer. If the termination is caused
by Buyer's fault, then at the option of the Seller and upon notice to the
Buyer, the earnest money shall be forfeited to Sell and applied first to
the payment of Seller's expenses: the balance if any to be retained by the
Seller as liquidated damages. Provided, however, that either party may sue
for specific performance, and the earnest money shall be applied to the
purchase price.
15. Escrow Closing: At the election of either party and upon notice to the
--------------
other party not less than 5 days prior to the date of closing, this sale
shall be closed through an escrow with Chicago Title and Trust Company in
accordance with the general provisions of the usual form of Deed and Money
Escrow Agreement then in use by Chicago Title and Trust Company, with such
special provisions inserted
<PAGE>
in the escrow as may be required to conform with this contract. The cost of
the escrow shall be paid by the Seller. Upon satisfaction or waiver of the
contingencies contained in Paragraph 20 and 25 hereof the parties shall
jointly open a deed and money escrow agreement at Chicago Title and Trust
Company using the form then in use by Chicago Title and Trust Company with
such special provisions inserted in the escrow as may be required to
conform with this contract. Seller's deed shall be deposited into the
escrow within 5 days after the opening of the escrow provided, however,
that said deed shall not be recorded prior to the deposit into the escrow
of all of Seller's funds which shall be done not less than 10 days prior to
the closing date. In all other respects the escrow shall conform to the
provisions of this contract and the customary provisions of deed and money
escrows in the form then in use by Chicago Title and Trust Company. The
cost of the deed and money escrow shall be paid by the Seller.
16. Time: Time is of the essence of this contract
----
17. Notices: All notices herein required or permitted shall be in writing and
-------
shall be served on the parties at the addresses following their signatures.
The mailing of a notice by certified mail, return receipt requested, shall
be sufficient service. The attorneys for the parties as shown at the end
hereof shall be agents for the service of notices. In addition to service
by certified mail notices may be served upon the attorneys by facsimile
transmission at the numbers shown herein. Proof of service may be made by
customary affidavit together with a copy of the transmission report
generated by the senders machine.
18. FIRPTA: Seller represents that he is not a foreign person as defined in
------
section 1445 of the Internal Revenue Code and is therefore exempt from the
withholding requirements of said section. Seller will furnish Buyer at
closing the Exemption Certification set forth in said Section.
19. IRPTA: (A) Buyer and Seller agree that the disclosure requirements of
-----
the Illinois Responsible Transfer Act (do) apply to the transfer
contemplated by this contract.
(B) Seller agrees to execute and deliver to Buyer and each mortgage lender
of Buyer such disclosure documents as may be required by the Illinois
Responsible Property Transfer Act.
20. Contingencies, Due Diligence: Seller has delivered the following materials
----------------------------
which Seller may possess and which are hereinafter referred to as Due
Diligence Documents:
(1) Copies of service contracts, maintenance agreements and other
contracts presently affecting the Real Estate, if any.
(2) Municipal or Fire Department Related Notices, if any.
<PAGE>
Buyer shall have 30 days in which to satisfy itself as to the financial and
physical condition of the Real Estate. During said 30 day period Seller
shall permit Buyer or Buyer's agents to have access to the Real Estate for
the purpose of inspecting or testing the roof, parking lot, furnace,
electrical, heating, cooling, lead based paint, water supply. ventilating,
plumbing, mechanical, structural, and other systems of the Real Estate as
well as compliance with the American Disabilities Act and environmental
concerns.
In the event Buyer's inspection shall reveal any material defects, in
Buyer's sole discretion, Buyer may at Buyer's option within said period
deliver to Seller its notice of termination of this Contract, whereupon
this Contract shall be null and void and Buyer shall receive back all
amounts paid by it (including any interest earned on such amounts). In
default of timely delivery of such notice of termination, the conditions of
this Paragraph shall be deemed waived. Sellers agree to cooperate fully
with Buyer in the satisfaction of the contingencies imposed by this
Contract and shall permit Buyer and its agents to enter upon the property
at all reasonable times upon reasonable notice to Seller for the purpose of
inspecting the Real Estate
21. Financing Contingency: This contract is subject to the condition that
---------------------
Buyer be able to procure within 30 days a firm commitment for a loan to be
secured by a mortgage or trust deed on the real estate in the amount of 80%
of the purchase price or such lesser sum as Buyer accepts, with interest
not to exceed 7.5% a year to be amortized over 25 years. The term of such
loan shall be at least 5 years. If, after making every reasonable effort,
Buyer is unable to procure such commitment within the time specified herein
and so notifies Seller thereof within that time, this contract shall become
null and void and all earnest money shall be returned to Buyer; provided
that if Seller, at his option, within a like period of time following
Buyer's notice, procures for Buyer such a commitment or notifies Buyer that
Seller will accept a purchase money mortgage upon the same terms, this
contract shall remain in full force and effect.
22. NOT USED.
--------
23. Representations: Sellers represent and warrant to Buyer that to the best
---------------
of Seller's knowledge now and as of the closing, that:
A. The Due Diligence documents including without limiting the generality of
the foregoing the income and expense statements furnished with respect to a
subparagraph 20(2) are true, accurate and complete in all material respects
and that all documents which are in Seller's possession and responsive to
Paragraph 20 have been delivered.
B. The person(s) signing this contract on behalf of Seller has full
authority to do so.
C. Toxic or Hazardous Waste. 1. Seller has not, and to the best of Seller's
knowledge, no other party has, spilled, disposed of, or stored on, under,
<PAGE>
or at the Property, toxic or hazardous chemicals, waste or substances of
any kind whatsoever, whether by accident, burying, drainage, or storage in
containers, tanks, or holding areas, or by any other means whatsoever
(excepting only currently lawful quantities stored and maintained in
accordance with commercially reasonable standards and applicable
environmental laws); 2. To the best of Seller's knowledge, the Property has
never been used as a dump or landfill; 3. To the best of Seller's
knowledge, no other party has generated, released, stored, or deposited
over, beneath or on the Property (or any immediately adjacent property),
any hazardous or toxic materials, (excluding asbestos), PCBs, radioactive
substances, explosives, petroleum or petroleum by-products or urea
formaldehyde (excepting only currently lawful quantities maintained in
accordance with commercially reasonable standards and applicable
environmental laws); and 4. Seller has not received any written notices of,
and to the best of Seller's knowledge there are no material violations of
any environmental laws or regulations with respect to the Property.
D. Actions Pending. Seller has not received written notice of any, and to
Seller's Actual Knowledge there are no, proceedings (judicial or
administrative), actions or suits (including, without limitation, any
condemnation, eminent domain, annexation, land use, foreclosure or similar
proceedings) existing, pending, involving, or threatened against the
Property.
E. Title. To Seller's Actual Knowledge, Seller is the legal and equitable
owner of the Property (subject, however, to the Approved Exceptions to
Title and with full right to convey the same, and without limiting the
generality of the foregoing, Seller has not granted any options or rights
of first refusal to third parties (including, without limitation, tenants
under any Leases) to purchase or otherwise acquire any interest in the
Property including leases which may remain outstanding after the Closing.
Seller specifically disclaims any representations or warranties as to the
physical components of the improvements on the Real Estate (including
environmental matters except as set forth above). The parties further agree
that until the closing of the sale hereunder, Seller shall operate the Real
Estate in its usual and customary manner and shall maintain the Real Estate
in the same condition as at the date hereof, ordinary wear and tear
excepted. No new Leases shall be executed after the date hereof provided
Buyer is not in default hereunder or this agreement shall not have been
terminated.
24. Survival: The warranties contained in Section 23 hereof shall survive the
--------
closing provided, however, that any claim under such warranties shall be
presented to Seller in writing within 12 months of closing.
25. Condition of Title: Sellers shall within 5 business days of the date
------------------
hereof furnish to Buyer a copy of Seller's existing title policy. If in
Buyer's reasonable discretion any matters shown on said policy will
unreasonably interfere with Buyer's use of the Real Estate as an office,
Buyer may within 5 days from the date of receipt of the title policy
terminate this Contract by written notice to Seller
<PAGE>
and receive back all moneys paid by Buyer and this Contract shall be of no
further force and effect. In default of timely notice hereunder this
condition shall be deemed satisfied and the matters set forth on said
existing title policy shall be deemed to be those matters described at
Paragraph 2 on the front hereof and the only permitted exception to title
under said Paragraph 2(a). The "Approved Exceptions to Title" (Except for
Seller's mortgage, if any, which shall be removed at closing and the
leases, if any, set forth on the rent roll. The sale shall be subject to
the lien of current taxes only.)
26. NOT USED.
--------
27. Execution in Counterpart: This contract may be executed in one or more
------------------------
counterparts and said counterparts taken together shall constitute one
contract.
28. Strike Throughs Language which is stricken through thus: thus is not part
---------------
of this contract.
29. Exchange: Sellers hereunder may desire to exchange, for other property of
--------
like kind and qualifying use within the meaning of Section 1031 of the
Internal Revenue Code of 1986, as amended and the Regulations promulgated
thereunder, fee title in the property which is the subject of this
contract. Sellers reserve the right to assign its rights, but not its
obligations, hereunder to a Qualified Intermediary as provided in IRC Reg.
1.1031(k)-1(g)(4) on or before the closing date.
30. It is understood that subsequent to the date of this contract, Buyer will
be substantially remodeling the unit which may also require work which
require in other units as well as the common elements of the condominium.
In such an event, Buyer shall obtain general liability insurance for
insuring against injury or damage to property to others and shall name as
an additional insured under such policy Buyer, the condominium board and
the owners of the other units in the building. Such insurance shall be in
the minimum amounts of $1,000,000 to each loss with an aggregate total loss
payable of $5,000,000.
<PAGE>
32. Representatives: Representatives of the Parties are as follows:
---------------
Attorney for the Seller: Edward J. FitzSimons
-----------------------
30 N. LaSalle Street, Suite 3232
Chicago IL 60602
Phone 312-372-3800
Fax 312-750-6808
Attorney for the Buyer: Robert Bramlette
----------------------
350 W. Oritario
Chicago, IL 60610
Phone 312-475-1255
Fax 312-475-1267
Listing Broker: Fred Rolison, The Ross Group, 154 West Hubbard,
--------------
Suite 200, Chicago, IL 60610, Phone 312-527-4747
Selling Broker: Fred Rolison, The Ross Group
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Address of Buyer: 22 W. Hubbard, Chicago, IL 60610
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Address of Seller: 416 West Erie, Chicago, IL, Phone 312-943-4223
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Date of Acceptance: 5/27/99
----------------
Dated this 27/th/ day of May, 1999
BUYER: SELLER:
Quantum Leap Communications, Inc.
/s/ Fred Smith /s/ C. Vespa
<PAGE>
Exhibit 10.8
Real Estate Sale Contract
Unit 3, 420 W. Huron, Chicago, Illinois
1. Buyer to Purchase: Quantum Leap Communications, Inc. (Buyer) agrees to
-----------------
purchase at a price of $700,000 on the terms set forth herein the following
described Real Estate (the "Real Estate") in Cook County Illinois:
commonly known as Unit 3 (which includes the entire third floor less common
elements), 420 W. Huron, Chicago, Illinois and with floor area of as shown
on the condominium survey together with the following presently located
thereon if any: heating, ventilation, air-conditioning equipment, built in
furniture, plans, drawings, and specifications, maintenance manuals and
records, garage door openers and remote control units and the like, located
at or used in connection with the operation and maintenance of the Real
Estate owned by Seller.
2. Seller to Sell: NanoFast, Inc. (Seller) agrees to sell the Real Estate and
--------------
the property described above, if any, at the price and terms set forth
herein, and to convey or cause to be conveyed to Buyer or nominee title
thereto by a recordable warranty deed, with a release of homestead rights,
if any, and a proper bill of sale subject only to: See Paragraph 25 hereof.
3. Payment: Buyer will pay within two business days from date of acceptance
--------
$1,000 as earnest money to be applied on the purchase and agrees to pay or
satisfy the balance of the purchase price, plus or minus prorations at the
time of closing as follows: The payment of the balance by cashiers check
or title company check. Earnest Money will be increased to $75,000 upon
satisfaction or waiver of the contingencies described at paragraphs 20 and
25 hereof.
4. Survey: The Real Estate is a condominium unit. Existing survey has been
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provided by Seller.
5. Closing: The time of closing shall be on or before October 18, 1999 or on
--------
the date, if any, to which such time is extended by reason of paragraphs 10
or 11 hereof becoming operative (whichever date is later) unless
subsequently mutually agreed otherwise at the office of the mortgage
lender, if any, provided title is shown good or is accepted by Buyer.
6. Brokers Commission: Seller agrees to pay a Brokers Commission to those
-------------------
persons identified as Real Estate Brokers at the end hereof in the amount
set forth or at the commission rate set forth at the end hereof. Both
parties warrant to each other that no brokers are involved in this
transaction other than those identified at the end hereof.
7. Earnest Money: The earnest money shall be deposited in cash. Cash earnest
-------------
money shall be deposited in a strict joint order escrow with Chicago Title
<PAGE>
Insurance Company for the mutual benefit of the parties with the parties
respective attorneys as signatories. The escrow funds shall be deposited
into an interest bearing account with the interest payable to Buyer at
closing provided however that if this contract is terminated due to Buyers
fault and the earnest money forfeited as provided in paragraph 14 hereof,
then the interest shall be paid to Seller. Buyer shall pay any investment
fees imposed by the escrowee.
If the deposit is by letter of credit, the letter of credit shall be held
by the Listing Broker for the mutual benefit of the parties. The Buyer
shall cause the letter of credit to be renewed from time to time so that at
all times prior to closing, agreement of the parties or issuance of a valid
court order the Listing Broker is always holding an unexpired letter of
credit. If within 7 days of the expiration of said letter of credit has not
been renewed, the Listing Broker shall draw down the proceeds of the letter
of credit and shall thereupon deposit the proceeds of the letter of credit
into the strict joint order escrow.
8. Code Matters: Seller warrants that Seller, its beneficiaries or agents of
-------------
Seller or of its beneficiaries have received no notices from any city,
village or other governmental authority of zoning, building, fire or health
code violations in respect to the Real Estate that have not been heretofore
been corrected. Provided, however, that Condominium Association has
received a notice of certain required repairs to be made to the elevator
copies of which have been delivered to Buyer. Seller will use its best
efforts to cause the repairs to be completed prior to closing. If Seller
is unsuccessful in completing repairs prior to closing then Seller at
closing will assign to Buyer the contract for repair and credit Buyer with
the balance of the contract price so that Buyer may cause the repairs to be
completed.
9. Duplicate Original: A duplicate original of this contract, duly executed
-------------------
by the Seller, if any, shall be delivered to the Buyer within 2 business
days from the date hereof, otherwise at the Buyer's option, this contract
shall become null and void and the earnest money shall be refunded to the
Buyer.
10. Title Commitment: Seller shall deliver or cause to be delivered to Buyer
----------------
or Buyer's agent, not less than 5 days prior to the time of closing, the
plat of survey and a title commitment for an owner's title insurance policy
issued by Chicago Title Insurance Company subject only to (a) the general
exceptions contained in the policy, (b) the title exceptions set forth
above, and (c) title exceptions pertaining to liens or encumbrances of a
definite or ascertainable amount which may be removed by the payment of
money at the time of closing and which Seller may so remove at that time
using the funds to be paid upon delivery of the deed (all of which are
herein referred to as the permitted exceptions). The title commitment
shall be conclusive evidence of good title as to all matters insured by the
policy, subject only to the exceptions as therein stated. Seller shall
also furnish to Buyer an affidavit of title in customary form covering the
date of the closing and showing title in Seller subject only to the
permitted exceptions in foregoing items (b) and (c) and unpermitted
exceptions of defects in the title disclosed by the survey, if any, as to
which the title insurer commits to extend insurance in the matter specified
in paragraph 11 below.
<PAGE>
11. Title Defects: If the title commitment or the survey (if one is required)
-------------
discloses either unpermitted exceptions of survey matters that render the
title unmarketable (herein referred to as "survey defects"), Seller shall
have 30 days from date of delivery thereof to have the exceptions removed
from the title commitment or to correct such survey defects or to have the
title insurer commit to insure against loss or damage that may be
occasioned by such exceptions or survey defects, and, in such event, the
time of closing shall be 35 days after delivery of the commitment or the
time expressly specified in paragraph 5 hereof, whichever is later. If
Seller fails to have the exceptions removed or correct any survey defects,
or in the alternative, to obtain the commitment for title insurance
specified above as to such exceptions or survey defects within the
specified time, Buyer may terminate this contract or may elect , upon
notice to Seller within 10 days after expiration after the expiration of
the 30 day period to take title as it then is with the right to deduct from
the purchase price liens or encumbrances of a definite or ascertainable
amount. If Buyer does not so elect, this contract shall become null and
void without further action of the parties.
12. Pro Rations: Water and other utility charges, general taxes, if any, and
------------
other similar items shall be adjusted ratably as of the time of closing.
If the amount of current general taxes is not then ascertainable the
proration shall be prorated on the basis of 110% of the most recent
ascertainable taxes.
The amount of any general taxes which may accrue by reason of new or
additional improvements shall be adjusted as follows: Seller shall pay for
all periods prior to closing All prorations are final unless otherwise
provided herein. Seller shall pay the amount of any stamp tax imposed by
State and County law on the transfer of title, and shall furnish a
completed Real Estate Transfer Declaration signed by the Seller or the
Seller's agent or meet other requirements as established by any local
ordinance with regard to a transfer or transaction tax: such tax required
by local ordinance shall be paid by Buyer.
13. Vendor and Buyer Risk: The provisions of the Uniform Vendor and Buyer Risk
----------------------
Act of the State of Illinois shall be applicable to this contract.
14. Termination: If this contract is terminated without Buyers fault, the
------------
earnest money shall be returned to the Buyer. If the termination is
caused by Buyer's fault, then at the option of the Seller and upon notice
to the Buyer, the earnest money shall be forfeited to Sell and and applied
first to the payment of Seller's expenses: the balance if any to be
retained by the Seller as liquidated damages. Provided, however, that
either party may sue for specific performance, and the earnest money shall
be applied to the purchase price.
15. Escrow Closing: At the election of either party and upon notice to the
---------------
other party not less than 5 days prior to the date of closing, this sale
shall be closed through an escrow with Chicago Title and Trust Company in
accordance with the general provisions of the usual form of Deed and Money
Escrow Agreement then
<PAGE>
in use by Chicago Title and Trust Company, with such special provisions
inserted in the escrow as may be required to conform with this contract.
The cost of the escrow shall be paid by the Seller. Upon satisfaction or
waiver of the contingencies contained in Paragraph 20 and 25 hereof the
parties shall jointly open a deed and money escrow agreement at Chicago
Title and Trust Company using the form then in use by Chicago Title and
Trust Company with such special provisions inserted in the escrow as may be
required to conform with this contract. Seller's deed shall be deposited
into the escrow within 5 days after the opening of the escrow provided,
however, that said deed shall not be recorded prior to the deposit into the
escrow of all of Seller's funds which shall be done not less than 10 days
prior to the closing date. In all other respects the escrow shall conform
to the provisions of this contract and the customary provisions of deed and
money escrows in the form then in use by Chicago Title and Trust Company.
The cost of the deed and money escrow shall be paid by the Seller.
16. Time: Time is of the essence of this contract
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17. Notices: All notices herein required or permitted shall be in writing and
--------
shall be served on the parties at the addresses following their signatures.
The mailing of a notice by certified mail, return receipt requested, shall
be sufficient service. The attorneys for the parties as shown at the end
hereof shall be agents for the service of notices. In addition to service
by certified mail notices may be served upon the attorneys by facsimile
transmission at the numbers shown herein. Proof of service may be made by
customary affidavit together with a copy of the transmission report
generated by the senders machine.
18. FIRPTA: Seller represents that he is not a foreign person as defined in
-------
section 1445 of the Internal Revenue Code and is therefore exempt from the
withholding requirements of said section. Seller will furnish Buyer at
closing the Exemption Certification set forth in said Section.
19. IRPTA: (A) Buyer and Seller agree that the disclosure requirements of
------
the Illinois Responsible Transfer Act (do) apply to the transfer
contemplated by this contract.
(B) Seller agrees to execute and deliver to Buyer and each mortgage lender
of Buyer such disclosure documents as may be required by the Illinois
Responsible Property Transfer Act.
20. Contingencies, Due Diligence: Seller has delivered the following
----------------------------
materials which Seller may possess and which are hereinafter referred to as
Due Diligence Documents:
(1) Copies of service contracts, maintenance agreements and other
contracts presently affecting the Real Estate, if any.
(2) Municipal or Fire Department Related Notices, if any.
<PAGE>
Buyer shall have 30 days in which to satisfy itself as to the financial and
physical condition of the Real Estate. During said 30 day period Seller
shall permit Buyer or Buyer's agents to have access to the Real Estate for
the purpose of inspecting or testing the roof, parking lot, furnace,
electrical, heating, cooling, lead based paint, water supply. ventilating,
plumbing, mechanical, structural, and other systems of the Real Estate as
well as compliance with the American Disabilities Act and environmental
concerns.
In the event Buyer's inspection shall reveal any material defects, in
Buyer's sole discretion, Buyer may at Buyer's option within said period
deliver to Seller its notice of termination of this Contract, whereupon
this Contract shall be null and void and Buyer shall receive back all
amounts paid by it (including any interest earned on such amounts). In
default of timely delivery of such notice of termination, the conditions of
this Paragraph shall be deemed waived. Sellers agree to cooperate fully
with Buyer in the satisfaction of the contingencies imposed by this
Contract and shall permit Buyer and its agents to enter upon the property
at all reasonable times upon reasonable notice to Seller for the purpose of
inspecting the Real Estate
21. Financing Contingency: This contract is subject to the condition that
---------------------
Buyer be able to procure within 30 days a firm commitment for a loan to be
secured by a mortgage or trust deed on the real estate in the amount of 80%
of the purchase price or such lesser sum as Buyer accepts, with interest
not to exceed 7.5% a year to be amortized over 25 years. The term of such
loan shall be at least 5 years. If, after making every reasonable effort,
Buyer is unable to procure such commitment within the time specified herein
and so notifies Seller thereof within that time, this contract shall become
null and void and all earnest money shall be returned to Buyer; provided
that if Seller, at his option, within a like period of time following
Buyer's notice, procures for Buyer such a commitment or notifies Buyer that
Seller will accept a purchase money mortgage upon the same terms, this
contract shall remain in full force and effect.
NOT USED.
---------
23. Representations: Sellers represent and warrant to Buyer that to the best
---------------
of Seller's knowledge now and as of the closing, that:
A. The Due Diligence documents including without limiting the generality of
the foregoing the income and expense statements furnished with respect to a
subparagraph 20(2) are true, accurate and complete in all material respects
and that all documents which are in Seller's possession and responsive to
Paragraph 20 have been delivered.
B. The person(s) signing this contract on behalf of Seller has full
authority to do so.
C. Toxic or Hazardous Waste. 1. Seller has not, and to the best of
Seller's knowledge, no other party has, spilled, disposed of, or stored on,
under,
<PAGE>
or at the Property, toxic or hazardous chemicals, waste or substances of
any kind whatsoever, whether by accident, burying, drainage, or storage in
containers, tanks, or holding areas, or by any other means whatsoever
(excepting only currently lawful quantities stored and maintained in
accordance with commercially reasonable standards and applicable
environmental laws); 2. To the best of Seller's knowledge, the Property has
never been used as a dump or landfill; 3. To the best of Seller's
knowledge, no other party has generated, released, stored, or deposited
over, beneath or on the Property (or any immediately adjacent property),
any hazardous or toxic materials, (excluding asbestos), PCBs, radioactive
substances, explosives, petroleum or petroleum by-products or urea
formaldehyde (excepting only currently lawful quantities maintained in
accordance with commercially reasonable standards and applicable
environmental laws); and 4. Seller has not received any written notices of,
and to the best of Seller's knowledge there are no material violations of
any environmental laws or regulations with respect to the Property.
D. Actions Pending. Seller has not received written notice of any, and to
Seller's Actual Knowledge there are no, proceedings (judicial or
administrative), actions or suits (including, without limitation, any
condemnation, eminent domain, annexation, land use, foreclosure or similar
proceedings) existing, pending, involving, or threatened against the
Property.
E. Title. To Seller's Actual Knowledge, Seller is the legal and
equitable owner of the Property (subject, however, to the Approved
Exceptions to Title and with full right to convey the same, and without
limiting the generality of the foregoing, Seller has not granted any
options or rights of first refusal to third parties (including, without
limitation, tenants under any Leases) to purchase or otherwise acquire any
interest in the Property including leases which may remain outstanding
after the Closing.
Seller specifically disclaims any representations or warranties as to the
physical components of the improvements on the Real Estate (including
environmental matters except as set forth above). The parties further
agree that until the closing of the sale hereunder, Seller shall operate
the Real Estate in its usual and customary manner and shall maintain the
Real Estate in the same condition as at the date hereof, ordinary wear and
tear excepted. No new Leases shall be executed after the date hereof
provided Buyer is not in default hereunder or this agreement shall not have
been terminated.
24. Survival: The warranties contained in Section 23 hereof shall survive the
--------
closing provided, however, that any claim under such warranties shall be
presented to Seller in writing within 12 months of closing.
25. Condition of Title: Sellers shall within 5 business days of the date
------------------
hereof furnish to Buyer a copy of Seller's existing title policy. If in
Buyer's reasonable discretion any matters shown on said policy will
unreasonably interfere with Buyer's use of the Real Estate as an office,
Buyer may within 5 days from the date of receipt of the title policy
terminate this Contract by written notice to Seller
<PAGE>
and receive back all moneys paid by Buyer and this Contract shall be of no
further force and effect. In default of timely notice hereunder this
condition shall be deemed satisfied and the matters set forth on said
existing title policy shall be deemed to be those matters described at
Paragraph 2 on the front hereof and the only permitted exception to title
under said Paragraph 2(a). The "Approved Exceptions to Title" (Except for
Seller's mortgage, if any, which shall be removed at closing and the
leases, if any, set forth on the rent roll. The sale shall be subject to
the lien of current taxes only.)
NOT USED.
---------
27. Execution in Counterpart: This contract may be executed in one or more
------------------------
counterparts and said counterparts taken together shall constitute one
contract.
28. Strike Throughs Language which is stricken through thus: thus is not part
---------------
of this contract.
29. Exchange: Sellers hereunder may desire to exchange, for other property of
--------
like kind and qualifying use within the meaning of Section 1031 of the
Internal Revenue Code of 1986, as amended and the Regulations promulgated
thereunder, fee title in the property which is the subject of this
contract. Sellers reserve the right to assign its rights, but not its
obligations, hereunder to a Qualified Intermediary as provided in IRC Reg.
1.1031(k)-1(g)(4) on or before the closing date.
30. It is understood that subsequent to the date of this contract, Buyer will
be substantially remodeling the unit which may also require work which
require in other units as well as the common elements of the condominium.
In such an event, Buyer shall obtain general liability insurance for
insuring against injury or damage to property to others and shall name as
an additional insured under such policy Buyer, the condominium board and
the owners of the other units in the building. Such insurance shall be in
the minimum amounts of $1,000,000 to each loss with an aggregate total loss
payable of $5,000,000.
<PAGE>
32. Representatives: Representatives of the Parties are as follows:
----------------
Attorney for the Seller: Edward J. FitzSimons
------------------------
30 N. LaSalle Street, Suite 3232
Chicago IL 60602
Phone 312-372-3800
Fax 312-750-6808
Attorney for the Buyer: Robert Bramlette
-----------------------
350 W. Oritario
Chicago, IL 60610
Phone 312-475-1255
Fax 312-475-1267
Listing Broker: Fred Rolison, The Ross Group, 154 West Hubbard, Suite
---------------
200, Chicago, IL 60610, Phone 312-527-4747
Selling Broker: Fred Rolison, The Ross Group
---------------
Address of Buyer: 22 W. Hubbard, Chicago, IL 60610
-----------------
Address of Seller: 416 West Erie, Chicago, IL, Phone 312-943-4223
------------------
Date of Acceptance: 5/27/99
----------------
Dated this 27/th/ day of May, 1999
BUYER: SELLER:
Quantum Leap Communications, Inc.
/s/ Fred Smith /s/ C. Vespa
<PAGE>
Exhibit 10.9
Real Estate Sale Contract
Unit 4, 420 W. Huron, Chicago, Illinois
1. Buyer to Purchase: Quantum Leap Communications, Inc. (Buyer) agrees to
-----------------
purchase at a price of $1,000,000 on the terms set forth herein the
following described Real Estate (the "Real Estate") in Cook County
Illinois:
commonly known as Unit 4 (which includes the entire fourth floor less
common elements), 420 W. Huron, Chicago, Illinois and with floor area of as
shown on the condominium survey together with the following presently
located thereon if any: heating, ventilation, air-conditioning equipment,
built in furniture, plans, drawings, and specifications, maintenance
manuals and records, garage door openers and remote control units and the
like, located at or used in connection with the operation and maintenance
of the Real Estate owned by Seller.
2. Seller to Sell: FTI, Inc. (Seller) agrees to sell the Real Estate and the
--------------
property described above, if any, at the price and terms set forth herein,
and to convey or cause to be conveyed to Buyer or nominee title thereto by
a recordable warranty deed, with a release of homestead rights, if any, and
a proper bill of sale subject only to: See Paragraph 25 hereof.
3. Payment: Buyer will pay within two business days from date of acceptance
--------
$1,000 as earnest money to be applied on the purchase and agrees to pay or
satisfy the balance of the purchase price, plus or minus prorations at the
time of closing as follows: The payment of the balance by cashiers check
or title company check. Earnest Money will be increased to $100,000 upon
satisfaction or waiver of the contingencies described at paragraphs 20 and
25 hereof.
4. Survey: The Real Estate is a condominium unit. Existing survey has been
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provided by Seller.
5. Closing: The time of closing shall be on or between October 18, 1999 and
--------
October 15, 2000, as may be selected by Seller by written notice to Buyer
or on the date, if any, to which such time is extended by reason of
paragraphs 10 or 11 hereof becoming operative (whichever date is later)
unless subsequently mutually agreed otherwise at the office of the mortgage
lender, if any, provided title is shown good or is accepted by Buyer.
Notwithstanding the above, the time of closing shall be on the earlier of
October 15, 2000 or the first business day following the purchase of any
real property by the Seller after July 2, 1999 that has a purchase price
equal to or greater than $900,000 or on the date, if any, to which such
time is extended by reasons of paragraphs 10 or 11 hereof becoming
operative (whichever is later) at the office of the mortgage lender, if
any, provided title is accepted by Buyer.
<PAGE>
6. Brokers Commission: Seller agrees to pay a Brokers Commission to those
-------------------
persons identified as Real Estate Brokers at the end hereof in the amount
set forth or at the commission rate set forth at the end hereof. Both
parties warrant to each other that no brokers are involved in this
transaction other than those identified at the end hereof.
7. Earnest Money: The earnest money shall be deposited in cash. Cash earnest
-------------
money shall be deposited in a strict joint order escrow with Chicago Title
Insurance Company for the mutual benefit of the parties with the parties
respective attorneys as signatories. The escrow funds shall be deposited
into an interest bearing account with the interest payable to Buyer at
closing provided however that if this contract is terminated due to Buyers
fault and the earnest money forfeited as provided in paragraph 14 hereof,
then the interest shall be paid to Seller. Buyer shall pay any investment
fees imposed by the escrowee.
8. Code Matters: Seller warrants that Seller, its beneficiaries or agents of
-------------
Seller or of its beneficiaries have received no notices from any city,
village or other governmental authority of zoning, building, fire or health
code violations in respect to the Real Estate that have not been heretofore
been corrected. Provided, however, that Condominium Association has
received a notice of certain required repairs to be made to the elevator
copies of which have been delivered to Buyer. Seller will use its best
efforts to cause the repairs to be completed prior to closing. If Seller
is unsuccessful in completing repairs prior to closing then Seller at
closing will assign to Buyer the contract for repair and credit Buyer with
the balance of the contract price so that Buyer may cause the repairs to be
completed.
9. Duplicate Original: A duplicate original of this contract, duly executed
-------------------
by the Seller, if any, shall be delivered to the Buyer within 2 business
days from the date hereof, otherwise at the Buyer's option, this contract
shall become null and void and the earnest money shall be refunded to the
Buyer.
10. Title Commitment: Seller shall deliver or cause to be delivered to Buyer
----------------
or Buyer's agent, not less than 5 days prior to the time of closing, the
plat of survey and a title commitment for an owner's title insurance policy
issued by Chicago Title Insurance Company subject only to (a) the general
exceptions contained in the policy, (b) the title exceptions set forth
above, and (c) title exceptions pertaining to liens or encumbrances of a
definite or ascertainable amount which may be removed by the payment of
money at the time of closing and which Seller may so remove at that time
using the funds to be paid upon delivery of the deed
<PAGE>
(all of which are herein referred to as the permitted exceptions). The
title commitment shall be conclusive evidence of good title as to all
matters insured by the policy, subject only to the exceptions as therein
stated. Seller shall also furnish to Buyer an affidavit of title in
customary form covering the date of the closing and showing title in Seller
subject only to the permitted exceptions in foregoing items (b) and (c) and
unpermitted exceptions of defects in the title disclosed by the survey, if
any, as to which the title insurer commits to extend insurance in the
matter specified in paragraph 11 below.
11. Title Defects: If the title commitment or the survey (if one is required)
-------------
discloses either unpermitted exceptions of survey matters that render the
title unmarketable (herein referred to as "survey defects"), Seller shall
have 30 days from date of delivery thereof to have the exceptions removed
from the title commitment or to correct such survey defects or to have the
title insurer commit to insure against loss or damage that may be
occasioned by such exceptions or survey defects, and, in such event, the
time of closing shall be 35 days after delivery of the commitment or the
time expressly specified in paragraph 5 hereof, whichever is later. If
Seller fails to have the exceptions removed or correct any survey defects,
or in the alternative, to obtain the commitment for title insurance
specified above as to such exceptions or survey defects within the
specified time, Buyer may terminate this contract or may elect , upon
notice to Seller within 10 days after expiration after the expiration of
the 30 day period to take title as it then is with the right to deduct from
the purchase price liens or encumbrances of a definite or ascertainable
amount. If Buyer does not so elect, this contract shall become null and
void without further action of the parties.
12. Pro Rations: Water and other utility charges, general taxes, if any, and
------------
other similar items shall be adjusted ratably as of the time of closing.
If the amount of current general taxes is not then ascertainable the
proration shall be prorated on the basis of 110% of the most recent
ascertainable taxes. Prior to closing Seller shall remove the asbestos
around the boiler.
The amount of any general taxes which may accrue by reason of new or
additional improvements shall be adjusted as follows: Seller shall pay for
all periods prior to closing All prorations are final unless otherwise
provided herein. Seller shall pay the amount of any stamp tax imposed by
State and County law on the transfer of title, and shall furnish a
completed Real Estate Transfer Declaration signed by the Seller or the
Seller's agent or meet other requirements as established by any local
ordinance with regard to a transfer or transaction tax: such tax required
by local ordinance shall be paid by Buyer.
13. Vendor and Buyer Risk: The provisions of the Uniform Vendor and Buyer Risk
----------------------
Act of the State of Illinois shall be applicable to this contract.
14. Termination: If this contract is terminated without Buyers fault, the
------------
earnest money shall be returned to the Buyer. If the termination is
caused by Buyer's fault, then at the option of the Seller and upon notice
to the Buyer, the earnest money shall be forfeited to Sell and and applied
first to the payment of Seller's
<PAGE>
expenses: the balance if any to be retained by the Seller as liquidated
damages. Provided, however, that either party may sue for specific
performance, and the earnest money shall be applied to the purchase price.
15. Escrow Closing: At the election of either party and upon notice to the
---------------
other party not less than 5 days prior to the date of closing, this sale
shall be closed through an escrow with Chicago Title and Trust Company in
accordance with the general provisions of the usual form of Deed and Money
Escrow Agreement then in use by Chicago Title and Trust Company, with such
special provisions inserted in the escrow as may be required to conform
with this contract. The cost of the escrow shall be paid by the Seller.
Upon satisfaction or waiver of the contingencies contained in Paragraph 20
and 25 hereof the parties shall jointly open a deed and money escrow
agreement at Chicago Title and Trust Company using the form then in use by
Chicago Title and Trust Company with such special provisions inserted in
the escrow as may be required to conform with this contract. Seller's deed
shall be deposited into the escrow within 5 days after the opening of the
escrow provided, however, that said deed shall not be recorded prior to the
deposit into the escrow of all of Seller's funds which shall be done not
less than 10 days prior to the closing date. In all other respects the
escrow shall conform to the provisions of this contract and the customary
provisions of deed and money escrows in the form then in use by Chicago
Title and Trust Company. The cost of the deed and money escrow shall be
paid by the Seller.
16. Time: Time is of the essence of this contract
-----
17. Notices: All notices herein required or permitted shall be in writing and
--------
shall be served on the parties at the addresses following their signatures.
The mailing of a notice by certified mail, return receipt requested, shall
be sufficient service. The attorneys for the parties as shown at the end
hereof shall be agents for the service of notices. In addition to service
by certified mail notices may be served upon the attorneys by facsimile
transmission at the numbers shown herein. Proof of service may be made by
customary affidavit together with a copy of the transmission report
generated by the senders machine.
18. FIRPTA: Seller represents that he is not a foreign person as defined in
-------
section 1445 of the Internal Revenue Code and is therefore exempt from the
withholding requirements of said section. Seller will furnish Buyer at
closing the Exemption Certification set forth in said Section.
19. IRPTA: (A) Buyer and Seller agree that the disclosure requirements of
------
the Illinois Responsible Transfer Act (do) apply to the transfer
contemplated by this contract.
(B) Seller agrees to execute and deliver to Buyer and each mortgage lender
of Buyer such disclosure documents as may be required by the Illinois
Responsible Property Transfer Act.
<PAGE>
20. Contingencies, Due Diligence: Seller has delivered the following
----------------------------
materials which Seller may possess and which are hereinafter referred to as
Due Diligence Documents:
(1) Copies of service contracts, maintenance agreements and other
contracts presently affecting the Real Estate, if any.
(2) Municipal or Fire Department Related Notices, if any.
Buyer shall have 30 days in which to satisfy itself as to the financial and
physical condition of the Real Estate. During said 30 day period Seller
shall permit Buyer or Buyer's agents to have access to the Real Estate for
the purpose of inspecting or testing the roof, parking lot, furnace,
electrical, heating, cooling, lead based paint, water supply. ventilating,
plumbing, mechanical, structural, and other systems of the Real Estate as
well as compliance with the American Disabilities Act and environmental
concerns.
In the event Buyer's inspection shall reveal any material defects, in
Buyer's sole discretion, Buyer may at Buyer's option within said period
deliver to Seller its notice of termination of this Contract, whereupon
this Contract shall be null and void and Buyer shall receive back all
amounts paid by it (including any interest earned on such amounts). In
default of timely delivery of such notice of termination, the conditions of
this Paragraph shall be deemed waived. Sellers agree to cooperate fully
with Buyer in the satisfaction of the contingencies imposed by this
Contract and shall permit Buyer and its agents to enter upon the property
at all reasonable times upon reasonable notice to Seller for the purpose of
inspecting the Real Estate
21. Financing Contingency: This contract is subject to the condition that
---------------------
Buyer be able to procure within 30 days a firm commitment for a loan to be
secured by a mortgage or trust deed on the real estate in the amount of 80%
of the purchase price or such lesser sum as Buyer accepts, with interest
not to exceed 7.5% a year to be amortized over 25 years. The term of such
loan shall be at least 5 years. If, after making every reasonable effort,
Buyer is unable to procure such commitment within the time specified herein
and so notifies Seller thereof within that time, this contract shall become
null and void and all earnest money shall be returned to Buyer; provided
that if Seller, at his option, within a like period of time following
Buyer's notice, procures for Buyer such a commitment or notifies Buyer that
Seller will accept a purchase money mortgage upon the same terms, this
contract shall remain in full force and effect.
NOT USED.
---------
23. Representations: Sellers represent and warrant to Buyer that to the best
---------------
of Seller's knowledge now and as of the closing, that:
A. The Due Diligence documents including without limiting the generality of
the foregoing the income and expense statements furnished with respect to a
<PAGE>
subparagraph 20(2) are true, accurate and complete in all material respects
and that all documents which are in Seller's possession and responsive to
Paragraph 20 have been delivered.
B. The person(s) signing this contract on behalf of Seller has full
authority to do so.
C. Toxic or Hazardous Waste. 1. Seller has not, and to the best of
Seller's knowledge, no other party has, spilled, disposed of, or stored on,
under, or at the Property, toxic or hazardous chemicals, waste or
substances of any kind whatsoever, whether by accident, burying, drainage,
or storage in containers, tanks, or holding areas, or by any other means
whatsoever (excepting only currently lawful quantities stored and
maintained in accordance with commercially reasonable standards and
applicable environmental laws); 2. To the best of Seller's knowledge, the
Property has never been used as a dump or landfill; 3. To the best of
Seller's knowledge, no other party has generated, released, stored, or
deposited over, beneath or on the Property (or any immediately adjacent
property), any hazardous or toxic materials, (excluding asbestos), PCBs,
radioactive substances, explosives, petroleum or petroleum by-products or
urea formaldehyde (excepting only currently lawful quantities maintained in
accordance with commercially reasonable standards and applicable
environmental laws); and 4. Seller has not received any written notices of,
and to the best of Seller's knowledge there are no material violations of
any environmental laws or regulations with respect to the Property.
D. Actions Pending. Seller has not received written notice of any, and to
Seller's Actual Knowledge there are no, proceedings (judicial or
administrative), actions or suits (including, without limitation, any
condemnation, eminent domain, annexation, land use, foreclosure or similar
proceedings) existing, pending, involving, or threatened against the
Property.
E. Title. To Seller's Actual Knowledge, Seller is the legal and
equitable owner of the Property (subject, however, to the Approved
Exceptions to Title and with full right to convey the same, and without
limiting the generality of the foregoing, Seller has not granted any
options or rights of first refusal to third parties (including, without
limitation, tenants under any Leases) to purchase or otherwise acquire any
interest in the Property including leases which may remain outstanding
after the Closing.
Seller specifically disclaims any representations or warranties as to the
physical components of the improvements on the Real Estate (including
environmental matters except as set forth above). The parties further
agree that until the closing of the sale hereunder, Seller shall operate
the Real Estate in its usual and customary manner and shall maintain the
Real Estate in the same condition as at the date hereof, ordinary wear and
tear excepted. No new Leases shall be executed after the date hereof
provided Buyer is not in default hereunder or this agreement shall not have
been terminated.
<PAGE>
24. Survival: The warranties contained in Section 23 hereof shall survive the
--------
closing provided, however, that any claim under such warranties shall be
presented to Seller in writing within 12 months of closing.
25. Condition of Title: Sellers shall within 5 business days of the date
------------------
hereof furnish to Buyer a copy of Seller's existing title policy. If in
Buyer's reasonable discretion any matters shown on said policy will
unreasonably interfere with Buyer's use of the Real Estate as an office,
Buyer may within 5 days from the date of receipt of the title policy
terminate this Contract by written notice to Seller and receive back all
moneys paid by Buyer and this Contract shall be of no further force and
effect. In default of timely notice hereunder this condition shall be
deemed satisfied and the matters set forth on said existing title policy
shall be deemed to be those matters described at Paragraph 2 on the front
hereof and the only permitted exception to title under said Paragraph 2(a).
The "Approved Exceptions to Title" (Except for Seller's mortgage, if any,
which shall be removed at closing and the leases, if any, set forth on the
rent roll. The sale shall be subject to the lien of current taxes only.)
NOT USED.
---------
27. Execution in Counterpart: This contract may be executed in one or more
------------------------
counterparts and said counterparts taken together shall constitute one
contract.
28. Strike Throughs Language which is stricken through thus: thus is not part
---------------
of this contract.
29. Exchange: Sellers hereunder may desire to exchange, for other property of
--------
like kind and qualifying use within the meaning of Section 1031 of the
Internal Revenue Code of 1986, as amended and the Regulations promulgated
thereunder, fee title in the property which is the subject of this
contract. Sellers reserve the right to assign its rights, but not its
obligations, hereunder to a Qualified Intermediary as provided in IRC Reg.
1.1031(k)-1(g)(4) on or before the closing date.
30. Termination of Lease: Seller represents that the property is currently
subject to two leases for tenants located on the first floor which leases
are oral and month to month. Upon execution of this Agreement, Seller shall
promptly give notice of termination to both tenants in accordance with
Illinois law.
30. It is understood that the following subsequent to closing Buyer will be
substantially remodeling the unit which may also require work which require
in other units as well as the common elements of the condominium. In such
an event, Buyer shall obtain general liability insurance for insuring
against injury or damage to property to others and shall name as an
additional insured under such policy Buyer, the condominium board and the
owners of the other units in the building. Such insurance shall be in the
minimum amounts of $1,000,000 to each loss with an aggregate total loss
payable of $5,000,000.
32. Representatives: Representatives of the Parties are as follows:
----------------
Attorney for the Seller: Edward J. FitzSimons
------------------------
30 N. LaSalle Street, Suite 3232
Chicago IL 60602
<PAGE>
Phone 312-372-3800
Fax 312-750-6808
Attorney for the Buyer: Robert Bramlette
-----------------------
350 W. Oritario
Chicago, IL 60610
Phone 312-475-1255
Fax 312-475-1267
Listing Broker: Fred Rolison, The Ross Group, 154 West Hubbard, Suite
---------------
200, Chicago, IL 60610, Phone 312-527-4747
Selling Broker: Fred Rolison, The Ross Group
---------------
Address of Buyer: 22 W. Hubbard, Chicago, IL 60610
-----------------
Address of Seller: 416 West Erie, Chicago, IL, Phone 312-943-4223
------------------
Date of Acceptance: 5/27/99
----------------
Dated this 27th day of May, 1999
BUYER: SELLER:
Quantum Leap Communications, Inc.
/s/ Fred Smith /s/ C. Vespa
<PAGE>
EXHIBIT 11
LEAPNET, INC.
STATEMENT REGARDING COMPUTATION OF PER-SHARE EARNINGS
<TABLE>
<CAPTION>
Three Months Ended July 31, Six Months Ended July 31,
--------------------------- -------------------------------
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net income 576,326 73,894 364,640 88,880
Weighted average number of common
shares outstanding during period 14,138,877 13,640,866 14,135,331 13,644,866
Net shares issuable upon exercise of
dilutive outstanding stock options 52,248 348,802 52,373 348,802
------------- ------------- ------------- --------------
Shares used in Diluted per share
calculation 14,191,125 13,989,668 14,187,704 13,993,668
Basic earnings per common share $ 0.04 $ 0.01 $ 0.03 $ 0.01
Diluted earnings per common share $ 0.04 $ 0.01 $ 0.03 $ 0.01
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Consolidated Balance Ssheets as of July 31, 1999 and January 31, 1999, the
Consolidated Statements of Operations for the Six Months ended July 31, 1999 and
1998, and the Consolidated Statements of Cash Flows for the Six Months ended
July 31, 1999 and 1998 and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JAN-31-2000
<PERIOD-START> FEB-01-1999
<PERIOD-END> JUL-31-1999
<CASH> 13,193
<SECURITIES> 454
<RECEIVABLES> 6,763
<ALLOWANCES> (756)
<INVENTORY> 0
<CURRENT-ASSETS> 20,301
<PP&E> 4,295
<DEPRECIATION> (1,380)
<TOTAL-ASSETS> 23,893
<CURRENT-LIABILITIES> 8,846
<BONDS> 0
0
0
<COMMON> 142
<OTHER-SE> 13,879
<TOTAL-LIABILITY-AND-EQUITY> 23,893
<SALES> 0
<TOTAL-REVENUES> 17,734
<CGS> 0
<TOTAL-COSTS> 17,659
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 284
<INTEREST-EXPENSE> 166
<INCOME-PRETAX> 365
<INCOME-TAX> 0
<INCOME-CONTINUING> 365
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 365
<EPS-BASIC> .03
<EPS-DILUTED> .03
</TABLE>
