As filed with the Securities and Exchange Commission on January 22, 1998
Registration No. 333-39805
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------------------------
AMENDMENT NO. 1 TO
FORM SB-2
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
GALACTICOMM TECHNOLOGIES, INC.
(Exact name of registrant as specified in its charter)
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FLORIDA 7373 65 0624233
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(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
or organization) Classification Code No.) Identification No.)
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4101 S.W. 47TH AVENUE
SUITE 101
FT. LAUDERDALE, FLORIDA 33314
(954) 583-5990
(Address of principal executive offices)
PETER BERG, CHAIRMAN AND CHIEF EXECUTIVE OFFICER
GALACTICOMM TECHNOLOGIES, INC.
4101 S.W. 47TH AVENUE
SUITE 101
FT. LAUDERDALE, FLORIDA 33314
(954) 583-5990
(Name and address of agent for service)
Copies to:
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LESLIE J. CROLAND, ESQ. PHILLIP B. SCHWARTZ, ESQ.
JEFF T. MIHM, ESQ. STEWART H. LAPAYOWKER, ESQ.
LUCIO, MANDLER, CROLAND, BRONSTEIN, AKERMAN, SENTERFITT & EIDSON, P.A.
GARBETT, STIPHANY & MARTINEZ, P.A. ONE S.E. 3RD AVENUE, 28TH FLOOR
701 BRICKELL AVENUE, SUITE 2000 MIAMI, FLORIDA 33131-1704
MIAMI, FLORIDA 33131 (305) 374-5600
(305) 579-0012 (305) 374-5095 (FAX)
(305) 579-4722 (FAX)
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Approximate date of proposed sale to the public: AS SOON AS REASONABLY
PRACTICABLE AFTER THE EFFECTIVE DATE OF THIS REGISTRATION STATEMENT.
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c) or
Rule 462(d) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If delivery of the Prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
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CALCULATION OF REGISTRATION FEE
====================================================================================================================================
TITLE OF EACH CLASS AMOUNT PROPOSED MAXIMUM PROPOSED
OF SECURITIES TO BE TO BE OFFERING PRICE AGGREGATE AMOUNT OF
REGISTERED REGISTERED PER SHARE OFFERING PRICE(1) REGISTRATION FEE
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Units(2)(3).................. $ $10,350,000 $3,136.36
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Units underlying
Representative Unit
Purchase Option.............. $ $ 1,080,000 $ 327.27
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Common Stock, par
value $.0001, included --- --- ---
in Units(2)(4)...............
- ------------------------------------------------------------------------------------------------------------------------------------
Common Stock Purchase
Warrants(2)(5)............... --- --- ---
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Common Stock, par
value $.0001, underlying
Warrants(2)(6)............... $ $ 6,750,000 $2,045.45
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Common Stock, par
value $.0001, underlying
Bridge Warrants(7)........... $ 3,591,000 $1,088.18
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Total........................ $21,771,000 $6,597.26
====================================================================================================================================
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(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457.
(2) Includes Units subject to the Underwriters' over-allotment option.
(3) Each Unit contains one share of common stock, par value $.0001 per share
("Common Stock"), and one Common Stock Purchase Warrant. No portion of the
offering price is attributable to the Warrants.
(4) Represents Common Stock within the Units, including the Units underlying
the Representative Unit Purchase Option. The registration fee for such
Common Stock is included within the Units.
(5) Represents Warrants within the Units, including the Units underlying the
Representative Unit Purchase Option.
(6) Issuable upon exercise of the Warrants, together with such indeterminable
number of shares of Common Stock as may be issuable by reason of the anti-
dilution provisions contained therein. The exercise of two warrants is
required to purchase one share of Common Stock, subject to adjustment.
(7) Issuable upon exercise of the Bridge Warrants, together with such
indeterminable number of shares of Common Stock as may be issuable by
reason of the anti-dilution provisions contained therein.
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Securities and Exchange Commission, acting
pursuant to said Section 8(a), may determine.
EXPLANATORY NOTE
This Registration Statement contains two forms of prospectus: (i) one to be
used in connection with the offer of Units by the Company (the "Prospectus");
and (ii) the other to be used in connection with the offer of an aggregate of
957,600 shares of Common Stock by certain selling shareholders (the "Selling
Shareholder Prospectus") underlying warrants (the "Bridge Warrants") issued in
October 1997 in connection with a bridge financing by the Company. The Bridge
Warrants are exercisable until October 27, 2000 to purchase an aggregate of
957,600 shares of Common Stock at an exercise price of $3.75 per share. See
"Recent Financings." The Prospectus and the Selling Shareholder Prospectus will
be identical in all respects except for the alternate pages for the Selling
Shareholder Prospectus included herein which are labeled "Alternate."
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INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
PROSPECTUS SUBJECT TO COMPLETION, DATED JANUARY 22, 1998
_____ UNITS
GALACTICOMM TECHNOLOGIES, INC.
EACH UNIT CONTAINS ONE SHARE OF COMMON STOCK
AND ONE REDEEMABLE COMMON STOCK PURCHASE WARRANT
Galacticomm Technologies, Inc. (the "Company") hereby offers units
("Units"), each Unit consisting of one share of common stock, par value $.0001
per share (the "Common Stock"), and one Redeemable Common Stock Purchase Warrant
(the "Warrant") of the Company. Two Warrants will entitle the holder to purchase
one share of Common Stock at a price equal to 120% of the initial public
offering price of the Units, during the period commencing (the "First Exercise
Date") 90 days after the date of this Prospectus, or on such earlier date as may
be determined by the Company and First Equity Corporation of Florida (the
"Representative") as the representative of the several Underwriters named herein
("Underwriters") and ending on the third anniversary of the date of this
Prospectus. No fractional shares will be issued upon exercise of the Warrants.
Outstanding Warrants are redeemable by the Company commencing 30 days after the
First Exercise Date upon 30 days prior written notice to the holders thereof, if
the average closing bid and asked price of the Common Stock for a period of 20
consecutive trading days is at least equal to 150% of the exercise price of the
Warrants. The Common Stock and Warrants will be detachable from the Units and
separately transferable commencing on the First Exercise Date. The number of
shares underlying the Warrants and the exercise price thereof is subject to
adjustment in certain circumstances.
Prior to this offering, there has been no public market for the Units, the
Common Stock or the Warrants. The Company has applied to list the Units, the
Common Stock and the Warrants on the Nasdaq SmallCap Stock Market ("Nasdaq")
under the symbols "GALAU," "GALA," and " GALAW," respectively. There
can be no assurance that such securities will be accepted for listing or, if
accepted, that an active trading market will develop or be sustained. It is
currently anticipated that the initial public offering price for the Units will
be between $ and $ per Unit. See "Underwriting" for information relating to the
factors considered in determining the initial public offering price.
THIS OFFERING INVOLVES A HIGH DEGREE OF RISK, SPECULATIVE SECURITIES AND
IMMEDIATE SUBSTANTIAL DILUTION AND SHOULD BE CONSIDERED ONLY BY INVESTORS WHO
CAN AFFORD THE LOSS OF THEIR ENTIRE INVESTMENT. SEE "RISK FACTORS" BEGINNING ON
PAGE 7 AND "DILUTION" ON PAGE 16.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
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UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC COMMISSIONS(1) COMPANY(2)(3)
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Per Unit ........................ $_______ $_______ $_______
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Total ........................... $_______ $_______ $_______
====================================================================================================================================
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(1) The Company has agreed to: (i) pay the Representative a non-accountable
expense allowance equal to 3% of the gross proceeds of the sale of the
Units; (ii) sell to the Representative, for nominal consideration,
four-year options (exercisable commencing one year after the date of this
Prospectus) to purchase up to Units at an exercise price equal to 120% of
the public offering price of the Units offered hereby; and (iii) indemnify
the Underwriter against certain liabilities, including liabilities under
the Securities Act of 1933 (the "Securities Act"). See "Underwriting."
(2) Before deducting offering expenses payable by the Company estimated to be
approximately $375,000 and the Representative's 3% non-accountable expense
allowance payable by the Company in connection with this offering.
(3) The Company has granted the Underwriters an option exercisable within 45
days after the date hereof to purchase up to additional Units on the same
terms set forth above, solely for the purpose of covering over-allotments,
if any. If such option is exercised in full, the total Price to Public,
Underwriting Discounts and Commissions and Proceeds to Company will be $ ,
$ and $ , respectively. See "Underwriting."
THE UNITS ARE BEING OFFERED BY THE UNDERWRITERS ON A "FIRM COMMITMENT" BASIS
SUBJECT TO PRIOR SALE, RECEIPT AND ACCEPTANCE BY THE UNDERWRITERS, APPROVAL OF
CERTAIN MATTERS BY COUNSEL, AND CERTAIN OTHER CONDITIONS. THE UNDERWRITERS
RESERVE THE RIGHT TO WITHDRAW OR CANCEL SUCH OFFER AND TO REJECT ANY OFFER, IN
WHOLE OR IN PART. IT IS EXPECTED THAT DELIVERY OF THE CERTIFICATES FOR THE
SECURITIES OFFERED HEREBY WILL BE MADE AGAINST PAYMENT THEREFOR ON OR ABOUT
__________, 1998.
FIRST EQUITY CORPORATION
The date of this Prospectus is __________, 1998
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CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN, OR OTHERWISE AFFECT THE PRICE OF THE UNITS, THE COMMON
STOCK AND THE WARRANTS, INCLUDING OVER-ALLOTMENT, STABILIZING TRANSACTIONS,
SYNDICATE SHORT COVERING TRANSACTIONS AND PENALTY BIDS. FOR A DESCRIPTION OF
THESE ACTIVITIES, SEE "UNDERWRITING."
All trademarks, service marks, tradenames and related products referred to
in this Prospectus, other than as they relate directly to the Company's products
and services, are the property of their respective owners and the Company
disclaims ownership of same.
2
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SUMMARY
THE FOLLOWING SUMMARY DOES NOT PURPORT TO BE COMPLETE AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO THE MORE DETAILED INFORMATION AND FINANCIAL
STATEMENTS (INCLUDING THE NOTES THERETO) APPEARING ELSEWHERE IN THIS PROSPECTUS.
IN NOVEMBER 1996, THE COMPANY MERGED WITH TESSIER TECHNOLOGIES, INC. ("TTI") AND
ACQUIRED GALACTICOMM, INC., ITS OPERATING SUBSIDIARY. UNLESS THE CONTEXT
OTHERWISE REQUIRES OR UNLESS OTHERWISE NOTED: (I) ALL REFERENCES TO THE
"COMPANY" THROUGHOUT THIS PROSPECTUS REFER TO THE COMBINED OPERATIONS OF THE
COMPANY, GALACTICOMM, INC. AND TTI; (II) ALL FINANCIAL DATA IN THIS PROSPECTUS
REFLECTS THE PRO FORMA COMBINED OPERATIONS OF THE COMPANY, GALACTICOMM, INC. AND
TTI AS IF THE COMPANY HAD ACQUIRED SUCH COMPANIES ON JANUARY 1, 1995 OR 1996;
AND (III) ALL INFORMATION IN THIS PROSPECTUS GIVES EFFECT TO A 4.061771824 TO
ONE REVERSE STOCK SPLIT WHICH OCCURRED IN SEPTEMBER 1997. SEE "MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS--INTRODUCTION."
THE COMPANY
Galacticomm Technologies, Inc. (the "Company") develops, markets, licenses
and supports software that enables users to communicate and conduct business
over the Internet, intranets, or other online communications systems. The
majority of the Company's software products are derived from the Company's
flagship product, Worldgroup v3.0 for Windows NT and Windows 95, which is an
integrated suite of five communications programs (E-mail, Polls and
Questionnaires, Newsgroups, Shared File Libraries and Chat) that enables an
individual or enterprise to establish an online system, an intranet or website
and also enables users to access certain of such programs using only a standard
browser, such as Microsoft's Internet Explorer or Netscape's Navigator.
Scheduled for release in March 1998, Worldgroup v3.1 will allow complete access
to all of such Worldgroup programs using only a standard browser. The Company
estimates that Worldgroup and its predecessor product, Major BBS, have been
installed on more than 10,000 online systems worldwide, including systems
currently operated by Fortune 500 companies, financial institutions and
government agencies.
Worldgroup features an open (non-proprietary) set of interfaces, which
allow Worldgroup to serve as the software platform for specific communication
solutions for a variety of businesses and industries. In conjunction with third
party developers, the Company has designed intranets and other online systems
for specific projects relating to education, trading, online gaming, virtual
office and home television. In addition, over 200 independent software
developers have designed more than 500 available products that enhance online
systems which utilize the Worldgroup software. Worldgroup software is currently
available in 10 languages.
The Company has recently released or has under development for release
during 1998 several products, including:
WEBCAST. Released in March 1997, WebCast allows users to make live audio
and visual broadcasts, and broadcast pre-recorded videos on demand, over the
Internet to viewers who need only use a standard web browser to receive the
broadcast, unlike presently available competitive products which require viewers
to download special client software. The Company markets WebCast directly to
individual consumers and to businesses through computer catalogs, retail outlets
and bundling agreements with camera manufacturers. The Company has recently
entered into strategic alliances to bundle WebCast with cameras and other
hardware recently introduced by Eastman Kodak, Boca Research, Specom
Technologies, Best Data Products and Aztech New Media Corp.
WORLDLINK. Scheduled for release by March 1998, Worldlink allows a
Worldgroup community to link with other Worldgroup systems. The Company believes
that the future development and organization of online communities will result
in additional Worldgroup systems and present opportunities to introduce new
products for Worldgroup system users. Worldlink with a graphical interface for
users is currently being beta-tested.
ACTIBASE. Released in December 1997, Actibase is an Internet database
connectivity program that is fully integrated with the Worldgroup server.
Actibase enables a company to publish any of its databases directly onto the
Worldwide Web, with only limited knowledge of computer database programming.
Actibase is offered as a stand-alone product as well as an add-on product to
Worldgroup and WebCast.
NETDISC. NetDisc is an advertising vehicle that uses the Internet and a CD
Rom disc to promote products to a specifically targeted market of consumers. The
Company's netDisc technology incorporates advertising video clips and website
links to advertisers' web pages. NetDisc's game format allows users to win
promotional prizes. In conjunction with advertising agencies and magazine
publishers, the Company intends to insert the netDisc in magazines, the first
installment of which is anticipated to be the June 1998 issue of MOTOR TREND
magazine.
The Company's objective is to become a leading developer of communications
software for the Internet, intranet and other online communications systems. The
Company intends to achieve its objective by: (i) developing customized intranets
and other applications using Worldgroup as the software foundation; (ii)
continually upgrading Worldgroup and other programs and offering new programs
that deliver customers high levels of performance, ease of use and security; and
(iii) establishing strategic alliances to increase sales and facilitate market
acceptance of the Company's products.
3
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The Company's executive offices are located at 4101 S.W. 47th Avenue, Suite
101, Fort Lauderdale, Florida 33314. The Company can be reached by telephone at
(954) 583-5990 or through its website at http:/www.gcomm.com.
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THE OFFERING
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THE SECURITIES OFFERED............... Units at an estimated offering price
of between $ and $ for each Unit.
THE UNITS............................ Each Unit contains one share of Common
Stock and one Redeemable Common Stock
Purchase Warrant. The Common Stock and
the Warrants will be detachable from the
Units the First Exercise Date (as
defined immediately below).
THE WARRANTS......................... Two Warrants entitle a holder to
purchase one share of Common Stock at an
exercise price per share equal to 120%
of the initial offering price of a Unit.
The Warrants will be exercisable during
the period commencing ("First Exercise
Date") 90 days after the date of this
Prospectus, or on such earlier date as
may be determined by the Company and the
Representative, and ending on the third
anniversary of the date of this
Prospectus. The Warrants will be
redeemable by the Company, commencing 30
days after the First Exercise Date upon
30 days written notice, if the average
of the closing bid and asked price of
the Common Stock for 20 consecutive
trading days ending three trading days
prior to the date of the redemption
notice is at least equal 150% of the
exercise price of the Warrants. The
Warrants are subject to adjustment under
certain circumstances. See "Description
of Securities--Warrants."
COMMON STOCK OUTSTANDING PRIOR
TO THE OFFERING.................. 4,422,651 shares(1)
COMMON STOCK OUTSTANDING AFTER
THE OFFERING...................... shares (1)(2)
USE OF PROCEEDS ..................... The Company intends to use the proceeds
from this offering for: (i) advertising
and marketing programs, (ii) repayment
of indebtedness; (iii) research and
development; (iv) working capital; and
(v) capital expenditures. See "Use of
Proceeds."
PROPOSED NASDAQ SMALLCAP
MARKET SYMBOLS.................... Units -- "GALAU"
Common Stock -- "GALA"
Warrants -- "GALAW"
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(1) Includes 48,849 shares of Common Stock underlying a convertible
promissory note that will be automatically converted on the effective date
of this Prospectus. See "Certain Transactions--Wallenberg Trust and UA
Partners Investments." Does not include: (i) 370,000 shares of Common Stock
under the Company's 1997 Stock Option Plan, of which options to purchase
164,337 shares of Common Stock are currently outstanding; (ii) 393,143
shares of Common Stock reserved for issuance upon the exercise of
outstanding options outside the 1997 Stock Option Plan; (iii) 173,482 shares
of Common Stock reserved for issuance upon the exercise of two warrants; and
(iv) 957,600 shares of Common Stock reserved for issuance upon the exercise
of the warrants (the "Bridge Warrants") issued in connection with the
Company's October 1997 Bridge Financing. See "Management--Stock Option
Plan," "Management--Stock Option Plan," "Management--Employment Agreement,"
"Recent Financings," and "Certain Transactions."
(2) Does not include: (i) shares of Common Stock reserved for issuance upon the
exercise of the over-allotment option and the Warrants included as part of
the over-allotment option; (ii) shares of Common Stock issuable upon
exercise of the Warrants included as part of the Units offered hereby;
(iii) shares of Common Stock reserved for issuance upon the exercise of the
Representative Unit Purchase Option ("UPO") and the Warrants included as
part of the UPO.
4
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RISK FACTORS........................ The securities offered hereby are
speculative and involve a high degree of
risk and immediate, substantial dilution
and should not be purchased by investors
who cannot afford the loss of their
entire investment. Prospective investors
are urged to carefully review the "Risk
Factors" starting on page 7 before
making an investment decision.
5
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SUMMARY HISTORICAL FINANCIAL DATA
Set forth below is summary historical financial data of the Company for the
year ended December 31, 1996 (audited) and for the nine month periods ended
September 30, 1996 and 1997 (unaudited). The summary financial information
should be read in conjunction with the Company's consolidated financial
statements and related notes and the "Management's Discussion and Analysis of
Financial Condition and Results of Operations" section contained herein.
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YEAR ENDED NINE MONTHS ENDED
12/31/96 9/30/96 9/30/97
---------- ------- -------
STATEMENT OF OPERATIONS DATA:
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Revenues............................ $ 1,692,743 $ 1,159,246 $ 2,688,421
Total operating costs and expenses 2,673,699 1,170,670 4,456,174
Loss from operations................ (980,956) (11,424) (1,767,753)
Other expense, net................ (60,312) (3,559) (144,373)
------------- ------------- -------------
Net loss............................ $ (1,041,268) $ (14,983) $ (1,912,126)
============= ============= =============
Net loss per share.................. $ (0.32) $ (0.01) $ (0.38)
============= ============= =============
Shares used in computing net loss
per share(1)...................... 3,229,101 2,982,455 5,030,371
========= ========= ==========
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SEPTEMBER 30, 1997
------------------------------------------
PRO FORMA
12/31/96 9/30/97 PRO FORMA(2) AS ADJUSTED(3)
-------- ------- ----------- -------------
BALANCE SHEET DATA
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Cash $ 1,466,392 $ 64,486 $1,520,411
Working capital (deficiency)........ (475,580) ( 1,524,464) 130,036
Goodwill, net of amortization....... 2,079,334 1,875,819 1,875,819
Total assets........................ 4,434,020 3,745,275 5,574,200
Short-term obligations.............. 393,575 278,575 80,000
Long-term obligations............... 1,393,999 1,381,899 3,271,227
Shareholders' equity ............... $ 949,566 $ 221,362 $ 432,034 $
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(1) Certain common stock and common stock equivalents issued by the Company
within 12 months of the date of this Prospectus have been included in the
calculation of number of shares used in calculating net loss per share
(using the treasury stock method).
(2) Pro forma balance sheet data gives effect to the Company's receipt in
October 1997 of loans aggregating $2,100,000 which are being used by the
Company to fund its operations pending completion of this offering (the
"Bridge Financing") and the application of the net proceeds therefrom. See
"Recent Financings."
(3) Adjusted to give effect to the sale of Units offered hereby at an
assumed initial offering price of $ per share and the application of net
proceeds therefrom after deduction of underwriting discounts and commissions
and estimated expenses of the offering. See "Use of Proceeds."
SUMMARY PRO FORMA FINANCIAL DATA
Set forth below is summary pro forma financial data which gives effect
to the Company's November 1996 acquisition of Galacticomm, Inc. and merger with
Tessier Technologies, Inc. ("TTI") as if such transactions were consummated on
January 1, 1995 or 1996. The pro forma data is unaudited and is not necessarily
indicative of the results of operations of the Company had the Company acquired
Galacticomm, Inc. and TTI on January 1, 1995 or 1996.
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YEAR ENDED NINE MONTHS ENDED
12/31/95 12/31/96 9/30/96
-------- -------- -----------------
STATEMENT OF OPERATIONS DATA:
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Revenues..................................... $ 9,211,139 $ 6,189,505 $ 5,402,806
Cost of revenues............................. 2,897,036 2,515,462 2,310,845
Total operating costs and expenses....... 6,986,378 7,240,672 4,331,813
Loss from operations......................... (672,275) (3,566,629) (1,239,852)
Other expense, net......................... (354,329) (655,321) (56,300)
Net loss..................................... $ (1,026,604) $ (4,221,950) $ (1,296,152)
Net loss per share........................... $ (0.34) $ (1.31) $ (0.43)
Shares used in computing net loss
per share(1)............................... 2,982,455 3,229,101 2,982,455
</TABLE>
(1) Certain common stock and common stock equivalents issued by the Company
within 12 months of the date of this Prospectus have been included in the
calculation of number of shares used in calculating net loss per share
(using the treasury stock method).
6
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RISK FACTORS
AN INVESTMENT IN THE UNITS OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK.
IN ADDITION TO THE OTHER INFORMATION CONTAINED IN THIS PROSPECTUS, PROSPECTIVE
INVESTORS SHOULD CAREFULLY REVIEW THE FOLLOWING RISKS BEFORE MAKING AN
INVESTMENT IN THE UNITS OFFERED HEREBY. THIS INVESTMENT IS NOT RECOMMENDED FOR
THOSE WHO CANNOT BEAR THE RISKS DESCRIBED BELOW.
THIS PROSPECTUS CONTAINS "FORWARD-LOOKING" STATEMENTS. FORWARD LOOKING
STATEMENTS ARE STATEMENTS ABOUT EVENTS THAT HAVE NOT OCCURRED. THEY INCLUDE
STATEMENTS ABOUT THE COMPANY'S FUTURE PLANS, GROWTH STRATEGIES AND INDUSTRY
TRENDS. THEY ALSO INCLUDE STATEMENTS WITH WORDS SUCH AS "ANTICIPATE," "INTEND,"
"BELIEVE," "PLAN," "ESTIMATE," AND "EXPECT." THESE FORWARD LOOKING STATEMENTS
ARE BASED LARGELY ON THE COMPANY'S EXPECTATIONS AND ARE SUBJECT TO A NUMBER OF
RISKS AND UNCERTAINTIES, MANY OF WHICH ARE BEYOND THE COMPANY'S CONTROL. ACTUAL
RESULTS COULD DIFFER MATERIALLY FROM THESE FORWARD LOOKING STATEMENTS AS A
RESULT OF THE FACTORS DESCRIBED IN THE FOLLOWING SECTION AS WELL AS ELSEWHERE IN
THIS PROSPECTUS. IN LIGHT OF THESE RISKS AND UNCERTAINTIES, THERE CAN BE NO
ASSURANCE THAT THE FORWARD-LOOKING INFORMATION CONTAINED IN THIS PROSPECTUS WILL
IN FACT TRANSPIRE OR PROVE TO BE ACCURATE.
LIMITED OPERATING HISTORY; ACCUMULATED DEFICIT
The Company was incorporated in December 1995 and therefore has only a
limited operating history. Although the Company's operating subsidiary,
Galacticomm, Inc., has conducted operations since 1985, Galacticomm, Inc.'s
business and operations have only been operated by the Company and its
management team since November 1996. Furthermore, the Company's business plan is
significantly different from and larger in scope than Galacticomm, Inc.'s
historic business. Accordingly, the Company's prospects must be considered in
light of the risks, expenses and difficulties frequently encountered by
companies in their early stage of development, particularly companies in new and
rapidly evolving markets, such as computer software and the Internet. To address
these risks, the Company must, among other things, respond to competitive
developments, endeavor to attract, retain and motivate qualified persons, and
continue to upgrade its technologies and commercialize products and services
incorporating such technologies. There can be no assurance that the Company will
be successful in addressing such risks. The Company has incurred net losses
since inception. As of September 30, 1997, the Company had an accumulated
deficit of $2,972,495. Pursuant to its business strategy, the Company
expects to continue to make expenditures on new product introductions and
product upgrades, marketing, and research and development, all of which will
adversely affect operating results until revenues from sales of such products
reach a level at which these costs are supported. There can be no assurance that
the Company will achieve or sustain profitability.
FLUCTUATIONS IN QUARTERLY RESULTS
The Company's quarterly operating results have varied significantly in the
past and the Company expects that they will continue to vary in the future.
Sales in any one quarter may fluctuate based upon a number of factors,
including: (i) the timing of the release of new products or product upgrades by
the Company or its competitors, (ii) the size and timing of individual orders by
customers, (iii) deferral of orders by customers in anticipation of new products
or product upgrades, (iv) technological changes in the operating systems upon
which the Company's products run, and (v) changes in the Internet or other
networking technology. Fluctuations in operating results may increase as a
result of the Company's business strategy to develop and sell customized
applications to larger customers to meet their specific requirements. See
"--Length of Sales Cycles." The Company believes it will be difficult to predict
the timing of these types of sales because they are subject to both designing
the solution to meet the customer's needs and convincing the customer to
purchase the products, and other risks over which the Company has little or no
control. The Company's expenses for each quarter are generally fixed and the
Company is generally unable to adjust its spending quickly enough to compensate
for unexpected shortfalls in sales. Consequently, a significant shortfall in
revenues in any quarter could immediately harm the Company's operating results.
As a result, the Company believes that period-to-period comparisons of its
operating results will not necessarily be meaningful and should not be relied
upon as an indication of future performance.
PRODUCT CONCENTRATION
Revenues from Worldgroup (and related tools and add-ons) accounted for
approximately fifty-seven percent of the Company's product sales revenues for
the nine month period ended September 30, 1997. Although the Company has
recently introduced several new software products in an effort to, among other
things, diversify its sources of revenues, the Company expects that sales of and
licenses for the use of Worldgroup (and other software products which are based
on the Worldgroup platform) will continue to account for a significant portion
of the Company's revenues. Consequently, declines in demand for Worldgroup and
related products, whether as a result of competition, technological change or
otherwise, will have a material adverse effect on the Company's business,
operating results and financial condition.
7
<PAGE>
NEW PRODUCT DEVELOPMENT AND RAPID TECHNOLOGICAL CHANGE
The market for the Company's software and services is characterized by
rapidly changing technology and industry standards. The introduction of products
embodying new technologies and the emergence of new industry standards can
quickly render existing software obsolete and unmarketable. The Company's future
success will depend in part on its ability to enhance existing products and
services and to develop and introduce new products and services to meet changing
customer demands. Specifically, the Company's new products (and enhancements)
must: (i) incorporate new and evolving industry standards, (ii) continue to
offer improved performance and features, (iii) respond to evolving customer
needs, and (iv) achieve market acceptance. The development of new products and
services or enhanced versions of existing products and services entails
significant technical risks. There can be no assurance that the Company will be
successful in developing and marketing product enhancements or new services and
products that respond to technological change or evolving industry standards,
that the Company will not experience difficulties that could delay or prevent
the successful development, introduction and marketing of these services or
products, or that its new services and products will adequately meet the
requirements of the marketplace and achieve market acceptance. If the Company is
unable, for technological or other reasons, to develop and introduce new
services or products in a timely and cost-effective manner or to address
compatibility, inoperability or other issues raised by technological changes or
new industry standards, the Company's business, operating results and financial
condition could be materially and adversely affected.
COMPETITION
The Company faces intense and increasing competition from other software
companies. The Company's Worldgroup line of products faces competition from a
number of products that permit information exchange in ways similar to
Worldgroup, including: (i) Microsoft Back Office; (ii) Lotus Domino, and (iii)
Novell's Intranet Ware. WebCast, the Company's web broadcast software, competes
with products offered by, among others, White Pine Software, Inc., Progressive
Networks, Xing Technology Corporation, NetSpeak, VocalTec, Vivo Software, Inc.
and VDOnet Corporation. Webcast is the only product presently available in the
market that allows users to make live audio and visual broadcasts, and broadcast
pre-recorded videos on demand, over the Internet to viewers who need only use a
standard web browser to receive the broadcast. All other presently available
competitive products require users to download client software. Many of the
Company's competitors are substantially larger than the Company, have greater
financial resources and name recognition than the Company, and longer operating
histories in the Internet and intranet markets and greater technical and
marketing resources than the Company. As a result, such competitors may have a
competitive advantage over the Company in that such companies may be able to
respond more quickly than the Company to new or emerging technologies and
changes in customer needs, or to devote greater resources than the Company to
the development, promotion and sale of their products. The Company competes on
the basis of: (i) price, (ii) ease of use and performance of its products and
(iii) responsive and reliable service. There can be no assurance that the
Company will be able to successfully compete against its current or future
competitors.
LENGTH OF SALES CYCLES
The Company must successfully develop new sales methods and adjust to
longer sales cycles. A component of the Company's current business strategy is
to develop customized applications using its Worldgroup technology as a platform
for such applications. The Company intends to develop customized products on its
own or with third party software developers and then sell these products to
companies, government agencies or other organizations. These types of customers
tend to carefully review their software purchases and require the software
seller to educate them about how the product works. Consequently, sales to these
customers generally take longer to complete. Furthermore, the final sale to
these customers often requires approval of the chief executive officer (for
companies) or a review board (for government agencies). The Company expects to
invest a significant amount of time and resources in the sales process for these
types of customers before it completes any such sales. Thus, the Company's
revenues for a particular period may be impacted if sales to such customers
forecasted to close in that period are delayed by reason of the education or
approval process, or otherwise. In addition, the Company's financial condition
could be harmed if a number of these types of customers eventually decide not to
purchase the Company's products.
UNCERTAINTY REGARDING TRADEMARK PROTECTION
Although the Company has several pending trademark applications with the
United States Patent and Trademark Office (the "PTO"), the Company has only one
federal registration, for the trademark "Galacticomm." No assurance can be given
that the PTO will grant registrations for the Company's pending trademark
applications. Among other things, it is possible that the Company's trademarks,
including "WebCast," could be deemed to be generic by the PTO, in which case
neither the Company nor any third party could claim exclusive rights to such
term. In such event, the Company intends to associate the
8
<PAGE>
generic term with registrable or registered trademarks or logos in order to gain
trademark protection over the resulting composite mark.
In July 1997, the Company became aware of the existence of a third party
which may claim a prior right in the trademark "Worldgroup." The Company and the
third party are presently discussing a co-existence arrangement whereby the
Company would have the right, without the payment of a royalty, to continue to
use the trademark "Worldgroup" on its present products and services. Although
the third party does not presently distribute products that compete with the
Company's products, the licensing arrangement presently under discussion would
not preclude the third party from using the "Worldgroup" trademark in
competition with the Company. Also in July 1997, the Company became aware that
several other third parties filed applications for registration for the
trademark "WebCast," before the Company filed its application. If "WebCast" is
determined not to be generic and one of the third party applications matures
into a registration, then such third party will have superior rights to the
Company.
If a third party has superior rights to any of the Company's trademarks,
the Company believes that when the Company first commenced use of its
trademarks, it acted innocently, unintentionally, and without knowledge of the
existence of any third party's purported rights in such marks. Furthermore, if
the third party user of "Worldgroup" decides to enforce its trademark rights
through an infringement action, the Company believes that valid defenses exist
with respect to any such action, including, without limitation, waiver, estoppel
and laches and that as a result thereof, any liability of the Company should be
limited to injunctive relief prohibiting the Company from future use of such
mark. Trademark litigation is expensive and complex and the outcome of such
litigation is difficult to predict. Generally, if a court were to find that the
Company unintentionally infringed a third party's mark, the Company's liability
would be limited to its actual net profit from the sale of infringing products,
the third party's actual damages, and injunctive relief. On the other hand, if a
court were to find that the Company has wilfully infringed a third party's
trademark, the Company could be enjoined from further use of the trademark and
could be liable, under the federal Lanham Act, for the lesser of: (i) the
Company's net profit stemming from the sale of infringing products and (ii) the
third party's actual damages, plus three times the greater of: (a) the Company's
profit from the sale of the infringing product, and (b) the third party's actual
damages, plus prejudgment interest, attorneys' fees, and the cost of litigation.
OTHER INTELLECTUAL PROPERTY AND PROPRIETARY RIGHTS
The Company regards its software as proprietary and attempts to protect it
with copyrights, restrictions on disclosure, copying and transferring title, and
enforcement of trade secret laws. Despite these precautions, it is possible for
unauthorized third parties to copy the Company's products and it may be possible
for them to obtain and use information that the Company regards as proprietary.
Although the Company has filed a federal patent application with respect to
netDisc, no assurance can be given as to the issuance of a patent or as to the
breadth or degree of protection any issued patent may afford. In addition,
existing copyright laws give only limited protection to its software and some
foreign countries' laws do not protect proprietary rights to the same extent as
United States laws. Consistent with the general practice of software developed
for retail sale, the Company licenses its products primarily under "shrink wrap"
license agreements that are not signed by licensees and therefore may be
unenforceable under the laws of certain jurisdictions. Except to the extent
noted above with respect to certain trademark matters, the Company is not aware
that it is infringing or violating any proprietary rights of any third party
relating to the Company or the Company's products. The computer software market
is characterized by frequent and substantial intellectual property litigation
and it is possible that third parties might assert infringement claims against
the Company in the future. If this occurs, the Company might be forced into
costly litigation or have to obtain a license to the intellectual property
rights of others. It is possible that such licenses may not be available on
reasonable terms, or at all. The Company currently licenses some of its
technology from third parties. For a description of the material terms of the
Company's third party licenses, see "Business--Proprietary Rights and
Intellectual Property." In the future, such third party technology licenses may
not be available to the Company on commercially reasonable terms, if at all. If
the Company cannot maintain any of these technology licenses, it is possible
that product shipments could be delayed and the Company's financial condition
could be harmed.
DEPENDENCE ON THE INTERNET
The success of the Company's products and services depends on the
continued development and growth of the Internet and on the need of businesses
and other organizations to continue to develop private intranets. The Internet
is new and evolving and may not develop into the large commercial marketplace
that many predict. The following factors could slow the growth of the Internet:
(i) inadequate development of the necessary infrastructure (e.g., reliable
network backbone), (ii) untimely development of affordable complementary
products, (e.g., high speed modems), (iii) delays in the development or adoption
of new standards to handle increased levels of Internet activity, or (iv)
increased government regulation. The number of Internet and intranet users has
grown significantly over the last few years and is expected to continue to grow.
9
<PAGE>
See "Business--Industry Background." No assurance can be given that the Internet
infrastructure will continue to support the demands placed on it by this
continued growth. The Company's financial condition could be harmed if the
Internet does not become a viable commercial marketplace.
POTENTIAL FOR UNDETECTED ERROR
The Company's software may contain undetected errors or "bugs" when first
introduced or when new versions are released. To prevent defects, the Company
seeks to test its products before they are commercially released. Despite its
quality control efforts, it is possible that the Company may release new
products (or upgrades of existing products) that contain bugs. The Company's
inadvertent release of products containing bugs could result in: (i) revenue
loss, (ii) delay in market acceptance of the product, (iii) increased service
costs, and (iv) damage to the Company's reputation.
DEPENDENCE ON KEY EMPLOYEES
The Company's success depends on the performance of the senior management,
particularly the Chief Executive Officer, Peter Berg, and the President, Yannick
Tessier. Mr. Berg and Mr. Tessier are also two of the largest shareholders of
the Company. See "Principal Shareholders." Although the Company has entered into
employment agreements with each of Mr. Berg and Mr. Tessier which do not expire
until November 20, 1999, such employment agreements may be terminated by the
employee upon notice for any reason. See "Management -- Employment Agreements."
The Company's success also depends on its ability to retain and motivate other
key employees, particularly software developers, software programmers and
customer support personnel. Competition for these types of employees is intense
and no assurance can be given that the Company will be able to attract or retain
satisfactory personnel. The loss of the services of Mr. Berg, Mr. Tessier or
other key employees could harm the Company's prospects for success. The Company
carries key man life insurance on Messrs. Berg and Tessier in the amount of
$1,000,000 each.
MANAGEMENT OF A GROWING BUSINESS
The Company intends to expand its business and operations by continuing to
improve Worldgroup, its flagship communications software product, developing new
products, designing customized applications for customers, and creating a global
network of Worldgroup communities. This growth strategy will place significant
demands on the Company's executive officers and financial resources. To be
successful, the Company must continue to implement and improve its operational
and financial systems and to expand, train and manage its employee base. No
assurance can be given that management will be able to successfully manage a
rapidly growing business as will be required to fully exploit the market for the
Company's products and services. Furthermore, the Company may acquire new
companies or products in the future, although the Company does not presently
have any understandings, commitments or agreements with respect to any
acquisition. Acquisitions involve many unique risks including assimilating
acquired operations and products and the diversion of management's attention
from the Company's primary business.
ANTI-TAKEOVER PROVISIONS
The Company's Articles of Incorporation and Bylaws contain provisions that
may have the effect of discouraging certain transactions involving an actual or
threatened change of control of the Company. See "Description of
Securities--Certain Provisions of the Articles and Bylaws." Furthermore, the
Company's Articles of Incorporation authorizes the issuance of 1,000,000 shares
of "blank check" preferred stock with such designation, rights and preferences
as may be determined from time to time by the Board of Directors. Accordingly,
the Board of Directors is empowered, without shareholder approval, to issue
preferred stock with dividend, liquidation, conversion, voting or other rights
that could materially adversely affect the voting power or other rights of the
holders of the Common Stock. In the event of issuance, the preferred stock could
be utilized, under certain circumstances, as a method of discouraging, delaying,
or preventing a change in control of the Company. Although the Company has no
present intention to designate a series or issue any shares of its preferred
stock, there can be no assurance that the Company will not do so in the future.
To the extent takeover attempts are discouraged by the foregoing provisions,
temporary fluctuations in the market price of the Common Stock, which may result
from actual or rumored takeover attempts, may be inhibited.
ABSENCE OF DIVIDENDS
The Company has not paid any dividends and does not expect to pay any
dividends in the foreseeable future and intends to retain earnings, if any, to
provide funds for general corporate purposes and the implementation of the
Company's business plan.
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<PAGE>
IMMEDIATE AND SUBSTANTIAL DILUTION OF ___ PERCENT TO PUBLIC INVESTORS
The purchase price of the Units substantially exceeds the net tangible
book value of the Common Stock (which at September 30, 1997 was negative).
Assuming a $ offering price per Unit, purchasers will experience immediate
and substantial dilution in the adjusted net tangible book value per share after
this offering in the amount of $ per share or % of the offering price per Unit.
In addition, the Company may issue a substantial number of additional shares of
Common Stock in the future upon the exercise of options and warrants having an
exercise price below the initial public offering price of the Units. The
issuance of a material number of such shares may have the effect of increasing
the dilution to new investors in this offering. See "Dilution."
DETERMINATION OF OFFERING PRICE AND EXERCISE PRICE; NO ASSURANCE OF PUBLIC
MARKET
Prior to this offering, there has been no public market for the Units, the
Warrants or the Common Stock. The Company has applied to list the Units, the
Warrants, and the Common Stock for quotation on the NASDAQ SmallCap Market. No
assurance can be given that such securities will be accepted for listing, or, if
accepted, that a trading market for such securities will develop, or be
sustained. The initial public offering price of the Units and the exercise price
and other terms of the Warrants have been determined by negotiation between the
Company and the Representative and may not be indicative of the market price for
the securities after the offering. The market prices for securities of emerging
companies, especially those involved in computers and high technology, have
historically been highly volatile and may be unrelated or disproportionate to
the operating performance of such companies. Future announcements concerning the
Company or its competitors, including technological innovations or new
commercial products, may have a significant impact on the market price of the
Company's securities. See "Underwriting."
CURRENT PROSPECTUS AND STATE REGISTRATION NEEDED TO EXERCISE WARRANTS
The Warrants may only be exercised if a current prospectus relating to the
Common Stock is then in effect under the Securities Act. While the Company will
use its best efforts to maintain the effectiveness of a current prospectus, the
Company cannot guarantee that it will be able to do so. After a registration
statement becomes effective, it may require continuous updating by the filing of
post-effective amendments. A post-effective amendment is required (i) when, for
a prospectus that is used more than nine months after the effective date of the
registration statement, the information contained therein (including the
certified financial statements) is as of a date more than 16 months prior to the
use of the prospectus, (ii) when facts or events have occurred which represent a
fundamental change in the information contained in the registration statement,
or (iii) when any material change occurs in the information relating to the plan
of distribution of the securities registered by such registration statement.
Furthermore, the Warrants may only be exercised if the Common Stock is qualified
for sale or exempt from qualification in the state where the holder of the
Warrant resides. The Warrants may have no value if the Common Stock underlying
the Warrants is not qualified or exempt from qualification in a particular
state, or if a prospectus is not kept current.
REDEMPTION OF WARRANTS
The Warrants are subject to redemption by the Company, at any time
commencing 30 days after the First Exercise Date upon 30 days' prior written
notice to the holders thereof, if the average of the closing bid and asked price
for the Common Stock for a period of 20 consecutive trading days ending three
trading days prior to the date of the redemption notice is at least equal to
150% of the exercise price of the Warrants. In the event that the Warrants are
called for redemption by the Company, Warrant holders will have 30 days during
which they may exercise their rights to purchase shares of Common Stock. In the
event a current prospectus is not available, the Warrants may not be exercised
and the Company will be precluded from redeeming the Warrants. If holders of the
Warrants elect not to exercise them upon notice of redemption, and the Warrants
are subsequently redeemed prior to exercise, the holders would lose the benefit
of the difference between the market price of the underlying Common Stock as of
such date and the exercise price of such Warrants, as well as any possible
future price appreciation in the Common Stock. As a result of an exercise of the
Warrants, existing shareholders would be diluted and the market price of the
Common Stock may be adversely affected. See "Description of Securities
- -Warrants."
ADJUSTMENTS TO WARRANT EXERCISE PRICE AND EXERCISE DATE AND IMPACT OF WARRANT
EXERCISE ON MARKET
The Company, in its sole discretion, and in accordance with the terms of
the Warrant Agreement with the Warrant Agent, may reduce the exercise price of
the Warrants and extend the time within which the Warrants may be exercised,
depending on such things as current market conditions, the market price of the
Common Stock and the Company's need for additional capital. Further, in the
event that the Company issues certain securities or makes certain distributions
to the
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<PAGE>
holders of its Common Stock, the exercise price of the Warrants (and the shares
of Common Stock issuable on exercise thereof) may be proportionately reduced.
Any such price reductions (assuming exercise of the Warrants) will provide less
money for the Company and could possibly adversely affect the market price of
the Company's securities. Furthermore, if a substantial number of Warrants are
exercised within a reasonably short period of time after the right to exercise
commences, the resulting increase in the amount of Common Stock of the Company
in the trading market could substantially affect the market price of the Common
Stock. See "Description of Securities - Warrants."
CONTINUING RELATIONSHIP WITH UNDERWRITERS; POTENTIAL INFLUENCE.
Following this offering, the Company will have certain continuing
relationships with the Representative. The Company has agreed with the
Representative to: (i) sell the Representative, for nominal consideration, the
UPO; (ii) grant the Representative the right, for a period of three years after
the date of this Prospectus, to nominate a designee to the Company's board of
directors; and (iii) grant the Representative the right, for a period of two
years after the date of this Prospectus, to represent the Company in connection
with any public or private offering, merger or acquisition. The foregoing
relationships may allow the Representative to have a continuing influence over
the Company's operations and its future capital raising ability. See
"Description of Securities" and "Underwriting."
EXERCISE OF OUTSTANDING OPTIONS AND WARRANTS
In addition to the Warrants to be issued in connection with this offering
( Warrants if the over-allotment option is exercised in full), the Company, upon
completion of this offering, will sell the Representative Unit Purchase Option
("UPO"), which will entitle the Representative to purchase Representative Units.
See "Underwriting." The Company has also issued Bridge Warrants to purchase an
aggregate of 957,600 shares of Common Stock at an exercise price of $3.75 per
share until October 27, 2000. See "Recent Financings." The shares of Common
Stock underlying the UPO and Bridge Warrants have been included in the
Registration Statement of which this Prospectus forms a part. See "Description
of Securities--Registration Rights and Sales by Certain Shareholders."
Furthermore, the Company has 164,337 outstanding options under the Company's
1997 Stock Option Plan with an exercise price of $6.50 per share and options and
warrants to purchase an aggregate of 566,625 shares of Common Stock outside
the Company's 1997 Stock Option Plan, that are exercisable at prices below the
estimated initial offering price of the Units offered hereby. See "Description
of Securities--Outstanding Option and Warrants." It may be expected that the
such options and warrants will be exercised only if it is advantageous to the
holders thereof. Therefore, during the period in which such options and warrants
may be exercised, the holders thereof are given the opportunity to profit from a
rise in the market price of the Common Stock. To the extent that such options
and warrants are exercised, dilution to the interests of the Company's
shareholders will occur. Further, the terms upon which the Company will be able
to obtain additional capital may be adversely affected since the holders of such
options and warrants can be expected to exercise them at a time when the Company
would, in all likelihood, be able to obtain any needed capital on terms more
favorable to the Company than those provided by such options and warrants.
SHARES ELIGIBLE FOR FUTURE SALE; REGISTRATION RIGHTS
Sales of a substantial number of shares of Common Stock in the public
market following this offering could adversely affect the market price for the
Common Stock. Immediately prior to the date of this Prospectus, there are
4,422,651 shares of Common Stock issued and outstanding, which includes
48,849 shares of Common Stock reserved for issuance through the automatic
conversion of the UA Partners Note on the date of this Prospectus. See "Certain
Transactions." Of such amount, shareholders owning an aggregate of shares of
Common Stock have agreed not to sell or otherwise dispose of their shares of
Common Stock for a period of one year from the date of this Prospectus without
the prior written consent of the Representative. Subject to such lock-up period,
the outstanding shares of Common Stock may be sold without registration under
the Securities Act in compliance with Rule 144. In general, under Rule 144, a
person who has satisfied a one-year holding period may under certain
circumstances sell, within any three-month period, a number of shares which does
not exceed the greater of 1% of the outstanding shares of Common Stock or the
reported average weekly trading volume in the four weeks preceding the sale.
Rule 144 also permits, under certain circumstances, the sale of shares without
any quantity limitation by a person who is not an affiliate of the company and
who has satisfied a two year holding period. See "Description of
Securities--Shares Eligible for Future Sale." In addition, the Company has
granted certain demand and registration rights with respect to shares of issued
and outstanding Common Stock and shares of Common Stock underlying the Bridge
Warrants, the UPOs and other options and warrants. The shares of Common Stock
underlying the Bridge Warrants have been included in the Registration Statement
of which this Prospectus forms a part, although such shares may not be sold
prior to six months from the date of this Prospectus, unless otherwise agreed to
by the Representative. The exercise of registration rights would permit a large
number of shares to become freely tradeable without restriction
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<PAGE>
(subject to any lock-up arrangements) under the Securities Act immediately upon
effectiveness of such registration. See "Description of Securities--Registration
Rights and Sales by Certain Shareholders."
POSSIBLE DELISTING OF SECURITIES FROM NASDAQ AND RISKS OF COMMON STOCK TRADING
BELOW $5.00 PER SHARE.
Upon consummation of this offering, the Common Stock, the Warrants and the
Units (collectively the "Securities") are expected to be listed on the NASDAQ
SmallCap Market. In order to qualify for continued listing on the SmallCap
Market, the Company will be subject to compliance with maintenance and corporate
governance requirements, including: (i) net tangible assets of at least $2
million, market capitalization of $35,000,000, or net income of $500,000; (ii) a
public float of at least 500,000 shares valued at $1 million or more; (iii) at
least two market makers; (iv) at least 300 shareholders; and (v) a minimum bid
price of $1.00 per share. The corporate governance requirements for the SmallCap
Market require distribution of annual and interim reports to shareholders, a
minimum of two independent directors, an audit committee comprised of a majority
of independent directors, an annual shareholder meeting, a quorum requirement,
solicitations of proxies, review of conflicts of interest, shareholder approval
for certain corporate actions and voting rights protection. In the event that
the Company is unable to satisfy the requirements for continued quotation on
NASDAQ, trading in the Securities would be conducted in the over-the-counter
market in what are commonly referred to as the "pink sheets" or on the OTC
Bulletin Board. As a result, an investor may find it more difficult to dispose
of or obtain accurate quotations as to the price of the Securities. In addition,
if the Securities are suspended or terminated from NASDAQ and at such time has a
market price of less than $5.00 per share, then the sale of the Common Stock
would become subject to certain "penny stock" regulations adopted by the
Securities and Exchange Commission which impose sales practice requirements on
broker-dealers. For example, broker-dealers selling the Securities would, prior
to effecting the transaction, be required to provide their customers with a
document which discloses the risks of investing in the Securities. Furthermore,
if the person purchasing the Securities is someone other than an accredited
investor or an established customer of the broker-dealer, the broker-dealer must
also approve the potential customer's account by obtaining information
concerning the customer's financial situation, investment experience and
investment objectives. The broker-dealer must also make a determination whether
the transaction is suitable for the customer and whether the customer has
sufficient knowledge and experience in financial matters to be reasonably
expected to be capable of evaluating the risk of transactions in the Securities.
Accordingly, if the listing of the Securities is suspended or terminated from
NASDAQ and is trading for less than $5.00 per share, the penny stock regulations
may restrict the ability of broker-dealers to sell the Securities and may affect
the ability of purchasers in this offering to sell the Securities in the
secondary market.
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<PAGE>
USE OF PROCEEDS
The net proceeds that the Company will receive from the sale of the Units
offered hereby, based upon an assumed offering price of $ per Unit and after
deduction of underwriting discounts, the non-accountable expense allowance and
other offering expenses, will be approximately $6,933,000 ($8,029,200 if the
over-allotment option is exercised in full). The Company intends to use such
proceeds as follows:
<TABLE>
<CAPTION>
APPROXIMATE
APPLICATION OF PROCEEDS DOLLAR AMOUNT PERCENTAGE
----------------------- ------------- ----------
<S> <C>
Advertising and Marketing Programs(1) $2,750,000
Repayment of Bridge Notes(2) $2,150,000
Repayment of Indebtedness to Shareholders(3) $ 67,000
Research and Development(4) $ 800,000
Working Capital and General Corporate Purposes(5) $ 741,000
Capital Expenditures(6) $ 425,000
</TABLE>
- -----------
(1) Includes expenditures for trade shows, product catalogs, print
advertising, cooperative dealer advertising, public relations and the
hiring of sales and marketing personnel.
(2) Repayment of principal and estimated interest under the Bridge Notes sold
in connection with the Bridge Financing. The Bridge Notes bear interest
at a rate of 10% per year and are due and payable at the closing of this
offering. See "Recent Financings."
(3) Repayment of: (i) a 10% note in the amount of $50,000 to Yannick
Tessier which is payable by the Company on the effective date of this
offering; and (ii) repayment of interest (estimated at approximately
$15,000) accrued under the 10% convertible secured UA Partners Note,
which interest is due and payable within five days of the effective date
of this Prospectus. The principal amount of the UA Partners Note will be
repaid by the Company through the automatic conversion of such note into
an aggregate of 48,849 shares of Common Stock on the date of this
Prospectus. See "Certain Transactions."
(4) Includes the hiring of research and development personnel and purchase of
software development tools and related equipment. See "Business--Research
and Development."
(5) Proceeds from the exercise of the over-allotment option, if any, will be
added to working capital. (6) For leasehold improvements, office furniture
and modules and computer equipment.
The foregoing represents the Company's best estimate of its allocation of
the net proceeds from this offering based upon the current state of the
Company's business operations, its current plans and current economic
conditions. Based on the Company's current proposed plans and assumptions
relating to the implementation of its business strategy, the Company anticipates
that net proceeds from this offering will be sufficient to satisfy its
contemplated cash requirements for at least 18 months following the consummation
of this offering. Future events, including the problems, delays, expenses and
complications frequently encountered by software companies as well as changes in
regulatory, political and competitive conditions affecting the Company's
business and the success or lack thereof of the Company's business strategy, may
necessitate shifts in the allocation of funds. The Company also reserves the
right to allocate the net proceeds for acquisitions. The Company does not have
any present understandings, commitments or agreements with respect to an
acquisition. Pending use of the proceeds of this offering, the Company may
invest such funds in interest bearing accounts, certificates of deposit, money
market funds or similar short-term investments.
14
<PAGE>
CAPITALIZATION
The left hand column of the following table presents the actual
capitalization of the Company as of September 30, 1997. The middle column of
this table presents the pro forma capitalization of the Company at September
30, 1997, after giving effect to the Bridge Financing and the application of the
proceeds therefrom. See "Recent Financings." The right hand column has been
adjusted to give effect to: (i) the sale of the Units offered hereby (based upon
an assumed offering price of $ per share) and the application of the proceeds
therefrom; and (ii) the conversion of the Wallenberg Trust Note and the UA
Partners Note. See "Certain Transactions--Wallenberg Trust and UA Partners
Investment." This table should be read in conjunction with the Company's
financial statements and notes thereto beginning on page F-1 of this Prospectus.
<TABLE>
<CAPTION>
SEPTEMBER 30, 1997 (UNAUDITED)
ACTUAL PRO FORMA AS ADJUSTED(1)
------ ------------------------------
<S> <C> <C> <C>
Notes Payable and Short-Term Borrowings.................. $ 198,575 $ --- $
Notes Payable - Shareholder.............................. 80,000 80,000
Long-term Debt........................................... 1,381,899 1,381,899
Bridge Notes (all long-term debt)........................ --- 1,889,328
Shareholders' Equity:
Preferred Stock, par value $.001 per share,
1,000,000 shares authorized;
none outstanding....................................... --- ---
Common Stock, par value $.0001 per share; 20,000,000
shares authorized; 3,829,907 shares issued and
outstanding actual and pro forma
and shares as adjusted............................ 383(2) 383(2) (3)
Additional Paid-in Capital............................... 3,193,474 3,404,146
Accumulated Deficit ..................................... (2,972,495) (2,972,495)
221,362 432,034
Total Capitalization .................................. $1,881,836 $3,783,261 $
</TABLE>
(1) Assumes an initial public offering price of $ per Unit, and no exercise
of: (i) the Warrants, (ii) the Underwriter's over-allotment option and
(iii) the Representative Unit Purchase Option.
(2) Excludes: (i) 370,000 shares of Common Stock reserved for issuance upon
the exercise of stock options under the Company's 1997 Stock Option Plan,
of which 164,337 options are presently issued and outstanding; (ii)
393,143 shares of Common Stock which may be acquired upon the exercise of
options granted outside the 1997 Stock Option Plan; (iii) 173,482 shares
of Common Stock which may be acquired upon the exercise of two warrants;
(iv) the shares of Common Stock underlying the Wallenberg Trust Note and
UA Partners Note; and (v) 957,600 shares of Common Stock reserved for
issuance upon the exercise of the Bridge Warrants.
(3) Includes 543,895 shares of Common Stock issued to the Wallenberg
Trust on December 31, 1997 upon conversion of the Wallenberg Trust
Note and 48,849 shares of Common Stock to be issued to UA Partners
upon the conversion of the UA Partners Note as of the date of this
Prospectus.
15
<PAGE>
DIVIDEND POLICY
Holders of the Common Stock are entitled to cash dividends when, as and if
declared by the Board of Directors out of funds that are legally available for
such dividends. The Company does not anticipate the declaration or payment of
any dividends in the foreseeable future. The Company intends to retain earnings,
if any, to finance the development and expansion of its business. Future
dividend policy will be subject to the discretion of the Board of Directors and
will be contingent upon future earnings, if any, the Company's financial
condition, capital requirements, general business conditions and such other
factors as the Board of Directors deems relevant. Future dividends may also be
subject to covenants contained in loan agreements, other financing documents or
the terms of any preferred stock. Therefore, there can be no assurance that cash
dividends of any kind will ever be paid.
DILUTION
Dilution is the difference between the price paid for the Units and the
"net tangible book value" per share of the Company's Common Stock before this
offering. Net tangible book value per share represents the amount of the
Company's tangible assets less the amount of its liabilities, divided by the
number of the Company's outstanding securities.
At September 30, 1997, the Company had a negative net tangible book value
of ($2,140,745), or ($0.56) per share. On a pro forma basis, after giving effect
to the Bridge Financing, the Company would have had a negative net tangible book
value of ($2,002,573), or approximately ($0.52) per share. See "Recent
Financings."
After giving effect to the sale of Units offered hereby at an assumed
price of $ per share and the Company's receipt of the net proceeds from this
offering less underwriting discounts, the non-accountable expense allowance and
other estimated offering expenses, and without giving effect to the
Underwriter's over-allotment option, the Representative Unit Purchase Option or
the exercise of the Warrants or any other outstanding options or warrants, the
pro forma net tangible book value of the Company as adjusted at September
30, 1997 would be approximately $ , or $
per share. Accordingly, the cash investment by investors in this offering of $
per share will be diluted immediately by approximately $ per share or %. The
aggregate increase in the net tangible book value to the present shareholders,
at no additional cost to them, will be approximately $ per share. The following
table illustrates the per share dilution effect:
Public offering price per share........................... $
Pro Forma Net tangible book value per
share before offering .................................. $(0.52)
Increase per share attributable to
payments by public investors............................ --
Adjusted pro forma net tangible book value
per share after offering................................ --
Dilution of net tangible book value
per share to public investors .......................... $
The foregoing assumes no exercise of the Underwriter's over-allotment
option. If the Underwriter's over-allotment option is exercised in full, the net
tangible book value per share at September 30, 1997, as adjusted for this
offering, would be $ , and dilution of net consolidated tangible book value per
share to public investors would be $ or %.
The following table summarizes the difference between public investors
and current shareholders of the Company with respect to the number of shares
purchased from the Company, the total consideration paid to the Company (based
upon an assumed exercise price of $ per Unit and before deduction of
underwriting discounts, the non-accountable expense allowance and other
estimated offering expenses) and the applicable average purchase price per
share:
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE PRICE
NUMBER PERCENTAGE AMOUNT PERCENTAGE PER SHARE
------ ---------- ------ ---------- ---------
<S> <C> <C>
Public Investors........................ % $ % $
Current Shareholders................... 4,422,651 % $4,710,698 % $1.07
Total................................... 100% $ 100%
</TABLE>
16
<PAGE>
The foregoing table gives effect to the automatic conversion of the UA
Partners Note into 48,849 shares of Common Stock on the date of this Prospectus,
but assumes no exercise of: (i) 164,337 shares of Common Stock which may be
acquired upon the exercise of outstanding options under the Company's 1997 Stock
Option Plan; (ii) 393,143 shares of Common Stock which may be acquired upon the
exercise of options granted outside the 1997 Stock Option Plan; (iii) 173,482
shares of Common Stock which may be acquired upon exercise of two warrants; (iv)
957,600 shares of Common Stock which may be acquired upon the exercise of the
Bridge Warrants; (v) shares of Common Stock reserved for issuance upon the
exercise of the over-allotment option and the Warrants included as part of the
over-allotment option; (vi) shares of Common Stock issuable upon exercise of the
Warrants included as part of the Units offered hereby; and (vii) shares of
Common Stock reserved for issuance upon the exercise of the Representative Unit
Purchase Option ("UPO") and the Warrants included as part of the UPO. See
"Management--Stock Option Plan," "Management--Employment Agreements," "Certain
Transactions" and "Recent Financings." To the extent that the foregoing options
and warrants are exercised, there will be further dilution to new investors.
RECENT FINANCINGS
In October 1997, the Company issued and sold 42 bridge units ("Bridge
Units"), each Bridge Unit consisting of an unsecured non-negotiable promissory
note in the principal amount of $50,000 ("Bridge Note") and a warrant ("Bridge
Warrant") to purchase 19,000 shares of Common Stock (collectively, the "Bridge
Financing"). The Bridge Notes, which bear interest at a rate of 10% per year,
are due and will be paid at the closing of this offering from the proceeds of
this offering. See "Use of Proceeds." The Bridge Warrants entitle the holders
thereof to purchase one share of Common Stock at a price of $3.75 per share
until October 27, 2000. The holders of the Bridge Warrants have agreed not to
transfer the Bridge Warrants or the shares of Common Stock underlying such
warrants for a period of 180 days following this offering. An aggregate of
957,600 shares of Common Stock underlying the Bridge Warrants (including the
159,600 shares underlying the Warrants issued to the Representative, as noted
below) have been included in the registration statement of which this Prospectus
forms a part. See "Description of Securities--Registration Rights and Sales by
Certain Shareholders." In exchange for serving as the placement agent for the
Bridge Financing, the Company paid the Representative: (i) cash compensation
equal to 10 percent of the principal amount of the Bridge Notes; (ii) a
non-accountable expense allowance equal to three percent of the principal amount
of the Bridge Notes and certain accountable expenses totaling $10,000; and (iii)
warrants to purchase 159,600 shares on terms substantially the same as the
Bridge Warrants. After deducting these and other expenses of the Bridge
Financing, the Company received net proceeds of approximately $1,627,000 from
the Bridge Financing. See "Management's Discussion and Analysis of Financial
Condition and Results of Operation--Liquidity and Capital Resources."
In June 1997, the Company completed a private placement (the "Private
Placement") of an aggregate of 259,802 shares of Common Stock to nine persons
for an aggregate consideration of $970,762 or $3.74 per share.
17
<PAGE>
SELECTED HISTORICAL FINANCIAL DATA
Set forth below is selected historical financial data of: (i) the Company
for the year ended December 31, 1996 (audited) and for the nine month
periods ended September 30, 1997 and 1996 (unaudited); and (ii) Galacticomm,
Inc. for the year ended December 31, 1995 and the ten month period ended October
31, 1996. The financial data as of and for the nine month periods ended
September 30, 1997 and 1996 has not been audited, but, in the opinion of
management, such consolidated financial statements include all material
adjustments necessary for a fair presentation. The following selected financial
information should be read in conjunction with the Company's consolidated
financial statements and related notes and with "Management's Discussion and
Analysis of Financial Condition and Results of Operation."
<TABLE>
<CAPTION>
GALACTICOMM TECHNOLOGIES, INC. GALACTICOMM, INC.
---------------------------------------------------- -------------------------
TEN MONTHS
YEAR ENDED NINE MONTHS ENDED YEAR ENDED ENDED
12/31/96 9/30/96 9/30/97 12/31/95 10/31/96
---------- ------- ----------------- --------- --------
STATEMENT OF OPERATIONS DATA:
<S> <C> <C> <C> <C> <C>
Revenues............................ $ 1,692,743 $ 1,159,246 $ 2,688,421 $ 7,487,983 $ 3,293,876
Cost of revenues.................... 758,050 594,214 682,738 1,737,170 1,005,595
Selling, general and administrative. 1,531,130 557,424 2,376,280 3,602,809 2,382,613
Depreciation........................ 47,533 18,495 130,698 131,713 150,185
Goodwill amortization............... 38,665 537 394,140 - -
Compensation expense on warrants.... - - 113,760 443,242 529,139
Customer support.................... 72,772 - 324,513 425,924 387,797
Research and development............ 225,549 - 434,045 1,034,174 638,200
Total operating expense............. 2,673,699 1,170,670 4,456,174 7,375,032 5,093,529
Profit (loss) from operations....... (980,956) (11,424) (1,767,753) 112,951 (1,799,653)
Other expense, net.................. (60,312) (3,559) (144,373) (198,025) (468,153)
Net loss............................ $ (1,041,268) $ (14,983) $ (1,912,126) $ (85,074) $ (2,267,806)
Net loss per share.................. $ (0.32) $ (0.01) $ (0.38)
Shares used in computing net loss
per share......................... 3,229,101(1) 2,982,455(1) 5,030,371(1)
</TABLE>
<TABLE>
<CAPTION>
GALACTICOMM TECHNOLOGIES, INC.
SEPTEMBER 30, 1997
---------------------------------------
PRO FORMA
12/31/96 9/30/97 PRO FORMA(2) AS ADJUSTED(3)
-------- ------- ----------- -------------
BALANCE SHEET DATA
<S> <C> <C> <C> <C>
Cash ............................... $ 1,466,392 $ 64,486 $ 1,520,411 $
Working capital (deficiency)........ (475,580) (1,524,464) 130,036
Goodwill, net of amortization....... 2,079,334 1,875,819 1,875,819
Total assets........................ 4,434,020 3,745,275 5,574,200
Short-term obligations.............. 393,575 278,575 80,000
Long-term obligations............... 1,393,999 1,381,899 3,271,227
Shareholders' equity ............... $ 949,566 $ 221,362 $ 432,034 $
</TABLE>
- ------------
(1) All common stock and common stock equivalents issued by the Company within
twelve months of the date of this Prospectus have been included in the
calculation of number of shares used in calculating net loss per share
(using the treasury stock method).
(2) Pro forma balance sheet data gives effect to the Bridge Financing and the
application of the net proceeds therefrom. See "Recent Financings."
(3) Adjusted to gives effect to the sale of Units offered hereby at an
assumed initial offering price of $ per share and the application
of net proceeds therefrom after deduction of underwriting discounts and
commissions and estimated expenses of the offering. See "Use of Proceeds."
18
<PAGE>
SELECTED PRO FORMA FINANCIAL DATA
Set forth below is selected pro forma financial data which gives effect to
the Company's November 1996 acquisition of Galacticomm, Inc. and merger with
Tessier Technologies, Inc. ("TTI") as if such transactions were consummated on
January 1, 1995 or 1996. The pro forma data is unaudited but, in the opinion of
management, such financial statements include all material adjustments necessary
for a fair presentation. The pro forma data is not necessarily indicative of the
results of operations of the Company had the Company acquired Galacticomm, Inc.
and TTI on January 1, 1995 or 1996.
<TABLE>
<CAPTION>
PRO FORMA
-----------------------------------------------
YEAR ENDED NINE MONTHS ENDED
12/31/95 12/31/96 9/30/96
-------- -------- -----------------
<S> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues..................................... $ 9,211,139 $ 6,189,505 $ 5,402,806
Cost of revenues............................. 2,897,036 2,515,462 2,310,845
Selling, general and administrative.......... 4,514,023 4,381,252 3,061,992
Depreciation and amortization................ 569,015 1,005,963 362,424
Compensation expense on warrants............. 443,242 529,139 -
Customer support............................. 425,924 460,569 351,028
Research and development..................... 1,034,174 863,749 556,369
------------- ------------- --------------
Total operating expense...................... 6,986,378 7,240,672 4,331,813
------------- ------------- --------------
Loss from operations......................... (672,275) (3,566,629) (1,239,143)
Other expense, net........................... (354,329) (655,321) (56,300)
------------ ------------- --------------
Net loss..................................... $ (1,026,604) $ (4,221,950) $ (1,296,152)
============ ============= =============
Net loss per share........................... $ (0.34) $ (1.31) $ (0.43)
============ ============= ==============
Shares used in computing net loss
per share(1) .............................. 2,982,455 3,229,101 2,982,455
============ ============= ==============
</TABLE>
(1) All common stock and common stock equivalents issued within twelve months
of the date of this Prospectus have been included in the calculation of
number of shares used in calculating net loss per share (using the
treasury stock method).
19
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
INTRODUCTION
The Company was incorporated in December 1995 under the name i-View
Software, Inc. and acquired its primary operating subsidiary, Galacticomm, Inc.,
on November 21, 1996. In April 1997, the Company changed its name to Galacticomm
Technologies, Inc.
Galacticomm, Inc. was formed in 1985 as an online service offering
multiplayer games. In 1986, Galacticomm, Inc. developed Major BBS, a
character-based computer bulletin board software product which allowed users in
different locations access to a common operating environment. In 1995,
Galacticomm, Inc. shifted its primary focus from the BBS market to the
significantly larger Internet and intranet market through the development and
release of Worldgroup 1.0, a client/server software program with an easy to use,
Windows-based graphic user interface. See "Business--Worldgroup."
The Company acquired Galacticomm, Inc. through the issuance of an
aggregate of 193,158 shares of Common Stock and $668,413 in cash. The
acquisition was financed through the sale of Common Stock and the issuance of
convertible notes to Union Atlantic Partners I Limited ("UA Partners") and
Hemingfold Investments Limited ("Hemingfold"), which has transferred its
interest in such notes to the Peder Sager Wallenberg Charitable Trust (the
"Wallenberg Trust"), an affiliate of Hemingfold. See "Certain
Transactions--Wallenberg Trust and UA Partners Investment." Immediately prior to
the Company's acquisition of Galacticomm, Inc., the Company acquired Tessier
Technologies, Inc. ("TTI") by merger. Prior to such merger, TTI was a leading
value added reseller of Major BBS and Worldgroup that had developed over 20
add-on products for these platforms. Prior to the acquisition of Galacticomm,
Inc., the Company designed, developed and licensed i-View, a turnkey software
package developed on the Worldgroup platform that enables the creation,
operation and administration of an online subscription service with real time
audio and video to subscribers through several connectivity methods. Using the
i-View software, the Company, prior to the acquisition of Galacticomm, Inc.,
offered adult entertainment subscription services to third parties, although, as
a condition to the investment by the Wallenberg Trust and UA Partners in the
Company in November 1996, the Company divested itself of all adult-entertainment
business.
The Company's revenues and operating results have varied substantially
from period to period, are likely to continue to vary in the future and should
not be relied upon as an indication of future results. See "Risk
Factors--Fluctuations in Quarterly Results." The Company has historically
operated with no significant backlog. The Company's quarterly results may be
affected by the Company's focus on customized software for use by specific
customers or specific industries. See "Business--Worldgroup Customized
Applications."
At September 30, 1997, the Company had a net goodwill balance of
$1,875,819 as a result of the merger with TTI and the acquisition of
Galacticomm, Inc. The goodwill associated with the TTI merger (approximately
$161,000 at September 30, 1997) is being amortized over a three year period. The
goodwill balance associated with the Galacticomm, Inc. acquisition is being
amortized over a five year period. Consequently, annual earnings of the Company
will be negatively effected by approximately $487,000 until 1999 and thereafter
by approximately $450,000 per year until 2001.
RESULTS OF OPERATIONS
The results of operations discussed below for the nine months ended
September 30, 1996 and the years ended December 31, 1996 and 1995 reflect the
operations of the Company combined with the operations of Galacticomm, Inc. and
TTI as if the Company had acquired such companies on January 1, 1995 or 1996.
The Company has not provided a comparative discussion with respect to the
historic results of the Company, since it does not believe that such comparisons
are meaningful. The pro forma financial information included herein is unaudited
and is not necessarily indicative of the results that would have actually
occurred had the Company acquired Galacticomm, Inc. and TTI at January 1, 1995
or 1996, nor is it necessarily indicative of future results of operations. Among
other things, prospective investors should be aware that the cost structure of
the pro forma combined companies for the nine month period ended September 30,
1996 was significantly different than the cost structure of the Company on a
historical basis for the nine month period ended September 30, 1997, including
significant differences between such periods in the number of persons employed,
occupancy costs and sales and marketing strategies. Consequently, reductions in
the Company's expenses between such periods are not necessarily indicative of
efficiencies achieved by the Company in the 1997 period.
20
<PAGE>
NINE MONTHS ENDED SEPTEMBER 30, 1997 AS COMPARED WITH PRO FORMA NINE MONTHS
ENDED SEPTEMBER 30, 1996 (ASSUMES THE ACQUISITION OF GALACTICOMM, INC. AND TTI
HAD OCCURRED ON JANUARY 1, 1996)
Net revenues for the nine month period ended September 30, 1997
decreased 50% from $5,402,806 for the nine month period ended
September 30, 1996 to $2,688,421 for the comparable period in 1997. The
decrease in revenue was primarily attributable to reduced software product
revenues as a result of: (i) increased competition from other software companies
in connection with the emergence of Internet-based standards and technologies in
the market for the Company's products; and (ii) to a lesser extent, the
Company's decision to de-emphasize the sale of modems and certain other hardware
products in late 1996. In response to the competitive pressure and rapid
technological change in the market for the Company's products, the Company has
recently redesigned Worldgroup to be compatible with the evolving standards of
the Internet. In December 1996, the Company introduced Worldgroup v3.0 for
Windows NT with Active HTML interface for several Worldgroup applications
permitting access to a Worldgroup server through the Internet using a standard
web browser. The Company expects to release Worldgroup v3.1 in March 1998,
offering all applications in Active HTML interface. See "Business--Worldgroup."
The Company has additionally recently released or has under development for
release several additional Internet-based products, including WebCast, Actibase
and netDisc. See "Business--Worldgroup."
For the nine month period ended September 30, 1997, the consolidated
revenues of the Company were derived 63% from software related products,
royalties and licensing fees, 10% from hardware product sales, and 20% from
billing and collection services provided to Worldgroup communities for
collecting fees charged to customers for membership and Internet access. See
"Business--Services." The Company anticipates that, as a percentage of net
revenues, software revenues will increase as the Company implements its business
strategy, and that, as a percentage of net revenues, revenues from the sale of
hardware will decrease in the future. Revenues from billing and collection
services, as a percentage of net revenues, are expected to remain constant in
the near term.
Cost of revenues consists primarily of direct hardware and software
product costs. For the nine month period ended September 30, 1997, cost of
revenues decreased 70% from $2,310,845 in the 1996 period to $682,738 in the
1997 period. This decrease was primarily attributed to lower hardware related
product costs and lower costs for billing and collection services as a result of
lower component revenues for the period.
Gross profit for the nine month period ended September 30, 1997 decreased
35% from $3,091,961 in the 1996 period to $2,005,683 in the 1997 period. As a
percentage of revenues, gross profit increased by 32% from 57% for the nine
month period ended September 30, 1996 to 75% for the comparable period in 1997.
The Company expects gross profits from period to period to fluctuate based on
the mix of distribution channels used by the Company, the mix of products sold
during that period, and the mix of product revenues versus service revenues.
Generally, the Company realizes higher gross profits on direct product sales
than on product sales through distributors, resellers and other indirect
channels and higher gross profits on product revenues than on service revenues.
The increase in gross profits as a percentage of revenues for the nine months
ended September 30, 1997 resulted from the Company's decision to focus on
software sales and other higher margin products and on selling products through
direct versus indirect channels of distribution. The Company expects to continue
to realize higher gross profits as a percentage of revenue by increasing the mix
of software products, royalty and licensing revenues, although this increase may
be offset by the distribution of the Company's products through indirect
channels.
Selling, general, and administrative ("SG&A") expenses for the nine month
period ended September 30, 1997 decreased 22% from $3,061,992 in 1996 to
$2,376,280 in 1997. SG&A expenses consist primarily of employee compensation,
trade show expenses, professional services and office expenses.
Depreciation and amortization for the nine month period ended September
30, 1997 increased 45% from $362,424 in 1996 to $524,838 in 1997. Such increase
results from an increase of $394,140 in amortization of intangibles, which
primarily represents the amortization of goodwill resulting from the Company's
acquisitions over periods of three to five years. Such increase was offset by a
decrease of $239,484 in depreciation expense due to the change in the
depreciable life of computer equipment from 5 years to 3 years and the resultant
full depreciation of certain assets during 1996.
Stock-related compensation expense for the nine month period ended
September 30, 1997 amounted to $113,760 as a result of the issuance of warrants
by two of the Company's officers, directors and stockholders to another
stockholder of the Company. See "Certain Transactions," and Note 12(c) to the
consolidated financial statements of the Company included elsewhere in this
Prospectus. Stock-related compensation expenses related to such warrants is not
expected to recur in future periods. There were no stock-related compensation
expenses for the nine month period ended September 30, 1996.
21
<PAGE>
Customer support expenses for the nine month period ended September 30,
1997 decreased 8% from $351,028 in the 1996 period to $324,513 in 1997 period.
This decrease was primarily caused by lower telecommunications costs in the 1997
period.
Research and development expenses for the nine month period ended
September 30, 1997 decreased 22% from $556,369 to $434,045 in 1997. The Company
expects that research and development expenses will increase in the future as
the Company expands its product development activities. See "Business--Research
and Development."
Other expenses, net of other income, for the nine month period ended
September 30, 1997 increased 156% from $56,300 in 1996 to $144,373 in 1997. Such
increase in other expenses resulted primarily from interest expense related to
the Wallenberg Trust and UA Partners convertible secured notes and amortization
of related financing costs and expense related to the issuance of an aggregate
of 22,857 shares of Common Stock to five persons to cancel certain royalty
rights pursuant to the terms of five agreements. Such increase was partially
offset by a business interruption insurance claim of approximately $39,000
during the 1997 period.
As a result of the foregoing factors, net loss for the nine month period
ended September 30, 1997 increased $615,974 from $1,296,152 in 1996 to
$1,912,126 in 1997.
PRO FORMA YEAR ENDED DECEMBER 31, 1996 AS COMPARED WITH PRO FORMA YEAR ENDED
DECEMBER 31, 1995 (ASSUMES IN BOTH CASES THAT THE ACQUISITION OF GALACTICOMM,
INC. AND TTI HAD OCCURRED ON JANUARY 1, 1995 OR 1996, RESPECTIVELY)
Net revenues for the year ended December 31, 1996 decreased 33% from
$9,211,139 in 1995 to $6,189,505 in 1996. The release of Worldgroup 1.0 in the
second quarter of 1995 generated revenues in 1995 which were not matched in
1996, during which year revenues from software sales suffered as a result of the
Company's delay in upgrading Worldgroup to be fully compatible with the evolving
standards of the Internet. In addition, Galacticomm, Inc. curtailed its Network
Integration Service division ("NIS") and discontinued the development of
software products based on the UNIX operating system in 1996 and instead focused
its efforts on the development of a Worldgroup version operating on the Windows
NT platform. The discontinuation of the NIS and UNIX operating divisions in 1996
reduced revenues by approximately $794,000 in 1996. During the year ended
December 31, 1996 consolidated revenues of the Company were derived 68% from
software related products, royalties and licensing fees, 14% from hardware
sales, and 17% from billing and collection services.
Cost of revenues for the year ended December 31, 1996 decreased 13% from
$2,897,036 in 1995 to $2,515,462 in 1996. The decrease in cost of revenues for
1996 was due to lower 1996 software product revenues.
Gross profit for the year ended December 31, 1996 decreased 42% from
$6,314,103 in 1995 to $3,674,043 in 1996. The 1996 gross profit decrease of
$2,640,060 is primarily the result of lower software sales in 1996. As a
percentage of revenue, gross profit decreased 14% from 69% in 1995 to 59% in
1996.
Selling general, and administrative expenses for the year ended December
31, 1996 decreased 3% from $4,514,023 in 1995 to $4,381,252 in 1996. As a
percentage of revenue, SG&A increased 47% from 49% in 1995 to 72% in 1996. In
November 1996, the new management of the Company adopted new business strategies
which modified systems and procedures to better monitor and budget SG&A expenses
for the future.
Depreciation and amortization for the year ended December 31, 1996
increased 77% from $569,015 in 1995 to $1,005,963 in 1996. Such increase
resulted from the amortization of intangible assets resulting from the Company's
acquisitions in 1996, and the change in depreciation from five years to three
years of the depreciable useful life of the Company's technology and equipment.
Stock related compensation expense for the year ended December 31, 1996
increased 16% from $443,242 in 1995 to $529,139 in 1996. The 1995 expense
related to premature exercises of certain stock options by a former employee of
Galacticomm, Inc. and the 1996 expense related to the conversion by former
employees of Galacticomm, Inc. of phantom stock units into shares of common
stock.
Customer support expenses for the year ended December 31, 1996 increased
8% from $425,924 in 1995 to $460,569 in 1996. The increase during 1996 resulted
from the introduction of Worldgroup 1.0 in the second quarter of 1995.
Research and development expenses for the year ended December 31, 1996
decreased 16% from $1,034,174 in 1995 to $863,749 in 1996. The discontinuance of
the NIS and UNIX divisions in 1996 was, in part, responsible for this decrease.
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Other expense, net of other income, for the year ended December 31, 1996
increased $300,992 from $354,329 in 1995 to $655,321 in 1996. The Company's
decision in November 1996 to terminate its lease obligation for the rental of a
new operating facility was the primary cause for this increase. The cost of
lease termination ($380,040) is non recurring, and is shown as part of other
expenses for 1996.
As a result of the foregoing, net loss for the year ended December 31,
1996 increased $3,195,346 from $1,026,604 in 1995 to $4,221,950 in 1996.
LIQUIDITY AND CAPITAL RESOURCES
The Company financed the acquisition of Galacticomm, Inc. in November 1996
and has financed its operations since such time primarily through the sale of
debt and equity securities in private transactions as described below.
The Company acquired 99.9 percent of the outstanding common stock of
Galacticomm, Inc. in November 1996 and February 1997 through the issuance of an
aggregate of 193,158 shares of Common Stock and $755,915 in cash consideration.
The acquisition of Galacticomm, Inc. was financed through investments in the
Company by the Wallenberg Trust and UA Partners, pursuant to which the Company
received net proceeds of $2,610,641 from the sale of 537,337 shares of Common
Stock and the issuance of secured 10% convertible promissory notes in the
aggregate principal amount of $1,375,000, which notes have been fully converted
into shares of Common Stock as of the date of this Prospectus. See "Certain
Transactions--Wallenberg Trust and UA Partners Investment."
In June 1997, the Company received net proceeds of $844,553 from the sale
of 259,802 shares of Common Stock to nine persons in a private transaction. The
Company used $100,000 of the proceeds to pay down its existing credit facility
with a financial institution and allocated the balance of such funds for working
capital and general corporate purposes. In October 1997, the Company completed
the Bridge Financing, pursuant to which the Company issued and sold $2,100,000
principal amount of Bridge Notes and Bridge Warrants to purchase an aggregate of
957,600 shares of Common Stock. The Company will pay all principal and interest
(at a rate of 10 percent per year) outstanding on the Bridge Notes from the
proceeds of this offering. See "Use of Proceeds." The Company used approximately
$272,500 from the proceeds of the Bridge Financing to repay certain
indebtedness, including approximately $200,000 of outstanding amounts under the
Company's line of credit with a financial institution. Approximately $107,000 of
the proceeds from the Bridge Financing were allocated to build out and make
improvements to the Company's office space, and the balance was allocated for
working capital and general corporate purposes.
The Company has been approved for the continuation of its $200,000 line of
credit with a financial institution, which line of credit will be guaranteed by
Galacticomm, Inc. and Messrs. Berg and Tessier. Such line of credit bears
interest at an annual rate of 1.5% above the applicable prime rate.
At September 30, 1997, the Company had an accumulated deficit of
$2,972,495 and its current liabilities exceeded current assets by $1,524,464.
The Company is not currently generating positive cash flow from operations and,
pursuant to its business strategy, the Company expects to continue making
expenditures on new product introductions and upgrades, marketing, research and
development and therefore does not expect to generate positive cash flow from
operations until revenues from sales of such products reach a level at which
these costs are supported. In addition to the introduction of new products and
product upgrades, the Company plans to achieve positive cash flow from
operations by increasing sales of current products through increased product
marketing, targeted sales efforts focused on, among others, value added
resellers and strategic alliances with third party computer software and
hardware companies, including co-branding, licensing, OEM and bundling
agreements. There can be no assurance that the Company will achieve or sustain
positive cash flow from operations or profitability.
The Company anticipates, based on its currently proposed plans and
assumptions relating to operations, that the net proceeds from the sale of the
Units offered hereby, together with projected cash flow from operations, will be
sufficient to satisfy its contemplated cash requirements for at least 18 months
from the date hereof.
The Company's material commitments consist of the lease of a T-3
fiberoptic digital circuit for $17,500 per month until April 15, 2000 and the
lease of its office space. See "Business--Facilities." The Company is also
obligated under its employment and consulting agreements for salaries and fees
equal to approximately $68,000 per month. See "Management -- Employment
Agreements" and "Certain Transactions -- Consulting Agreements with Union
Atlantic." The Company intends to use approximately $425,000 of the proceeds
from this offering to build out and make improvements to its office space and
for office furniture and modules and computer equipment.
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BUSINESS
INTRODUCTION
The Company develops, markets, licenses and supports software that enables
users to communicate and conduct business over the Internet, intranets, or other
online communications systems. The majority of the Company's software products
are derived from the Company's flagship product, Worldgroup v3.0 for Windows NT
and Windows 95, which is an integrated suite of five communications programs
(E-mail, Polls and Questionnaires, Newsgroups, Shared File Libraries and Chat)
that enables an individual or enterprise to establish an online system, an
intranet or website and also enables users to access certain of such programs
using only a standard browser, such as Microsoft's Internet Explorer or
Netscape's Navigator. Scheduled for release in March 1998, Worldgroup v3.1 will
allow complete access to all of such Worldgroup programs using only a standard
browser. The Company estimates that Worldgroup and its predecessor product,
Major BBS, have been installed on more than 10,000 online systems worldwide,
including systems currently operated by Fortune 500 companies, financial
institutions and government agencies.
Worldgroup features an open (non-proprietary) set of interfaces, a
scalable infrastructure that can grow with a company's needs, and multiple means
of connectivity, including the Internet. Such features allow Worldgroup to serve
as the software platform for specific communication solutions for a variety of
businesses and industries. In conjunction with third party developers, the
Company has designed intranets and other online systems for specific projects
relating to education, trading, online gaming, virtual office and home
television. Worldgroup's open set of interfaces has allowed third party
developers to design and sell add-ons that supplement Worldgroup's standard
features. As a result, over 200 independent software developers have designed
more than 500 available products that enhance online systems which utilize the
Worldgroup software. Worldgroup software is currently available in 10 languages.
The Company has recently released or has under development for release
during 1998 several products, including:
WEBCAST. Released in March 1997, WebCast allows users to make live audio
and visual broadcasts, and broadcast pre-recorded videos on demand, over the
Internet to viewers who need only use a standard web browser to receive the
broadcast, unlike presently available competitive products which require viewers
to download special client software. The Company markets WebCast directly to
individual consumers and to businesses through computer catalogs, retail outlets
and bundling agreements with camera manufacturers. The Company has recently
entered into strategic alliances to bundle WebCast with cameras and other
hardware recently introduced by Eastman Kodak, Boca Research, Specom
Technologies, Best Data Products and Aztech New Media Corp.
WORLDLINK. Scheduled for release in March 1998, Worldlink allows a
Worldgroup community to link with other Worldgroup systems. The Company believes
that the future development and organization of online communities will result
in additional Worldgroup systems and present opportunities to introduce new
products for Worldgroup system users. Worldlink with an Active HTML interface is
currently being beta-tested.
ACTIBASE. Released in December 1997, Actibase is an Internet database
connectivity program that is fully integrated with the Worldgroup server
database. Actibase enables a company to publish any of its databases directly
onto the Worldwide Web, with only limited knowledge of computer database
programming. Actibase is offered as a stand-alone product as well as an add-on
product to Worldgroup and WebCast.
NETDISC. NetDisc is an advertising vehicle that uses the Internet and a CD
Rom disc to promote products to a specifically targeted market of consumers. The
Company's netDisc technology incorporates advertising video clips and website
links to advertisers' web pages. NetDisc's game format allows users to win
promotional prizes. In conjunction with advertising agencies and magazine
publishers, the Company intends to insert the netDisc in magazines, the first
installment of which is anticipated to be the June 1998 issue of MOTOR TREND
magazine.
The Company's objective is to become a leading developer of communications
software for the Internet, intranet and other online communications systems. The
Company intends to achieve its objective by: (i) developing customized intranets
and other applications using Worldgroup as the software foundation; (ii)
continually upgrading Worldgroup and other programs and offering new programs
that deliver customers high levels of performance, ease of use and security; and
(iii) establishing strategic alliances to increase sales and facilitate market
acceptance of the Company's products.
The Company was incorporated in December 1995 under the name i-View
Software, Inc. In November 1996, the Company acquired its primary operating
subsidiary, Galacticomm, Inc., the developer of Major BBS and Worldgroup. Also
in November 1996, the Company merged with TTI, a leading value added reseller of
Major BBS and Worldgroup that had developed over 20 add-on products for these
platforms. For additional information regarding such acquired companies, see
"Management's Discussion
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and Analysis of Financial Condition and Results of Operations--Introduction." In
April 1997, the Company changed its name to Galacticomm Technologies, Inc. The
Company's executive offices are located at 4101 S.W. 47th Avenue, Suite 101,
Fort Lauderdale, Florida 33314. The Company can be reached by telephone at (954)
583-5990 or through its website at http:/www.gcomm.com.
INDUSTRY BACKGROUND
THE INTERNET AND THE WORLDWIDE WEB
Online communication has grown dramatically since 1987, when the Company
first began offering communications software. It is currently estimated that
over 40 million people exchange information and communicate electronically using
personal computers. By the year 2000, this number is expected to increase to
over 200 million.
The convergence of communications and computers was greatly accelerated in
the 1990s by the market acceptance and commercialization of the Internet, a
global web of computer networks. Developed in 1969, this "network of networks"
allows any computer connected to the Internet to communicate with any other
computer using a common telecommunication protocol. Originally subsidized by the
United States government, funding for the Internet infrastructure and backbone
operations shifted to the private sector in the 1990s as the number of
commercial entities relying on the Internet for business communications and
commerce increased. The rapid growth of the Internet has been caused by the
emergence of a network of servers and information available on the Internet
called the World Wide Web (the "Web"). The Web, which is based on a
client-server model and a set of standards for information access and
navigation, can be accessed using software that allows non-technical users to
exploit the capabilities of the Internet. Electronic documents are published on
Web servers in a common format called the Hypertext Markup Language ("HTML").
Web client software (known as browsers) can retrieve these documents across the
Internet by making requests using a standard protocol called Hypertext Transfer
Protocol ("HTTP"). The most common commercial browsers currently in use are
Microsoft Internet Explorer and Netscape Navigator.
The explosive growth of online communications has created increasing
demand for software solutions that enable users to interact and communicate more
efficiently and effectively. Forrester Research, Inc. estimates that the
combined Internet and intranet worldwide software market will increase from $382
million in 1996 to $8.5 billion in 1999. Uses for such software include the
following:
INTRANETS AND OTHER ONLINE SYSTEMS
Businesses and other enterprises use personal computers to help their
employees communicate and collaborate with each other. Organizations have
developed Bulletin Board Systems ("BBSs"), local area networks (LANs) and Wide
Area Networks (WANs) and other closed systems (collectively, "Online Systems")
to electronically connect their employees as well as their customers. In
addition, the technology and protocols of the Internet have been applied to
expand the use of private data networks through the development of intranets. An
intranet is a network using the TCP/IP protocol of the Internet that connects an
organization's computers in a way that makes information more accessible and
facilitates navigation through all the resources and applications of the
organization's computing environment. In many instances, the same software
applications in use on the Internet and Online Systems can be applied to
intranets, thereby broadening the market for such software applications. See
"Business--Worldgroup Customized Applications."
ONLINE COMMERCE
Commercial uses of the Internet and Online Systems include
business-to-business and business-to-consumer transactions, product marketing,
advertising, entertainment, electronic publishing, electronic services and
customer support. This new medium offers innovative opportunities for retail and
mail order businesses to target and manage a wider customer base. Companies from
many industries are using the Web to publish product and company information,
provide customer support, allow customers to buy products online, and to collect
customer feedback and demographic information interactively. The Company, as
well as other software companies make use of the Internet and Online Systems to
offer technical support for products and save shipping costs by making software
updates available electronically through copying or "downloading" procedures.
Other businesses, such as financial institutions and brokerage firms, are also
appearing online as the Internet provides access to a growing base of home,
business and education customers. International Data Corporation has predicted
that the amount of commerce conducted over the Web will increase from $2.6
billion in 1996 to more than $220 billion during 2001.
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ONLINE COMMUNITIES
Online "communities" are one of the fastest growing areas of the Internet,
according to a recent report by BUSINESS WEEK. An online community is a network
of users that communicate with one another via computer. Online communities may
be commercial or private, small or large. Prior to the advent of the Internet,
online communities existed through Bulletin Board Systems, which consist of a
personal computer running a software program onto which users would typically
connect through a standard telephone line. Many applications that are now
standard on the Internet such as newsgroups, file transfers and E-mail were
initially introduced on BBSs. Pioneering software that enabled the creation of
online communities included the Company's Major BBS software, which the Company
offered from 1987 until 1995, when the Company introduced Worldgroup. The
Company believes that, based upon a report on the Company prepared by an
independent third party, Major BBS, the predecessor to Worldgroup, was, by 1994,
the industry leader in the corporate market segment for BBS software.
Until recently, online communities were primarily organized for
non-commercial purposes. The attraction to members of these communities is the
ability to interact with users with similar interests locally or worldwide.
Members engage in real-time conversation in chat rooms, post messages on a
variety of topics in newsgroups or on bulletin boards or play interactive games,
known as MUDs. Increasingly, businesses are creating online communities to
attract and make sales to consumers. The premise behind these commercial online
communities is that consumers will visit and stay longer at a website or Online
System where they can interact with others who share a common interest. To
encourage interaction between consumers and to retain users at their site,
businesses have added online chat rooms, bulletin boards, e-mail and other
software applications to their commercial website or Online System.
WORLDGROUP
The Company's communication software products are designed to connect
people and information over the Internet, Intranets and Online Systems. The
majority of the Company's software products are based on the Company's flagship
product, Worldgroup, a comprehensive client/server software and development tool
that allows users in different locations to exchange ideas and information using
a variety of connection methods, including the Internet, dial up modem, LANs,
WANs, integrated services digital network (ISDN) and serial connection. Using
Worldgroup, businesses can establish an interactive web site (or improve an
existing website), organizations can establish intranets and exchange data with
remote employees, suppliers and customers, and entrepreneurs can create their
own online community similar to services such as America Online as well as offer
their customers access to the Internet. The Company estimates that the
Worldgroup software and its predecessor, Major BBS, have been installed on over
10,000 online servers worldwide, including systems currently operated by
Symantec Corporation, General Electric, U.S. Robotics, Citibank, the United
States Air Force and the National Weather Service. These servers reach an
estimated 1.1 million end-users who use and interact with the Company's
software. Worldgroup software is currently available in 10 languages.
Worldgroup is both an out-of-the-box product and a software platform that
can be configured to provide communications solutions for different businesses
and industries. Out of the box, Worldgroup is a suite of popular client/server
applications, including:
ELECTRONIC MAIL. Electronic mail or E-mail allows users to deliver a
private message to others who need not be there when the message arrives.
Worldgroup's E-mail has the following features: file attachments, carbon
copies, mail forwarding, distribution lists, offline filing cabinets, "new
mail" notification, and return receipt.
POLLS AND QUESTIONNAIRES. This feature allows the Worldgroup system
operator or administrator ("Worldgroup Administrator") to create
questionnaires, application forms or opinion polls to ascertain market
research and other information about customers and other users.
FORUMS. Popularly known as newsgroups, forums allow users to post messages
and respond to messages posted by others. A Worldgroup Administrator can
configure up to 10,000 separate forums for online discussions.
TELECONFERENCING. Popularly known as chat, the teleconference application
allows users to establish real-time conversations. Teleconferencing
enables group meetings where participants can exchange files in real time
with other users while continuing the conversation. The Worldgroup
Administrator can create up to 65,535 different channels, each with its
own moderator and topic.
FILE LIBRARIES. File Libraries allow users to share program and document
files. Users can search files by library, category, file names, file date,
descriptive words, and popularity. A Worldgroup Administrator can limit
user access to particular files or programs.
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With the release of Worldgroup v3.0 for Windows NT/95 in December 1996,
the Company introduced Active HTML interfaces which permit access to a
Worldgroup server using only a standard Web browser. This "thin client" access,
where there is no need to download client software or employ other controls,
makes access to a Worldgroup system as convenient as accessing any website.
Currently, both the Sign-Up and File Libraries applications of Worldgroup have
been converted to Active HTML. The Company is in the process of converting other
applications (including Registry, Polls & Questionnaires, Account Display/Edit,
Teleconference and forums) to Active HTML for inclusion in Worldgroup v3.1,
which is scheduled for release in March 1998.
In addition to its thin client capabilities, all Worldgroup applications
continue to be available using the Company's proprietary client software,
Worldgroup Manager. The use of Worldgroup Manager has many practical advantages
over current thin client technology, including reduced bandwidth needs, greater
real time interactivity between users, and the ability to compute "offline". The
Company's client software is offered at no cost and can be launched from the Web
directly through the Worldgroup plug-in for Netscape Navigator, Microsoft
Internet Explorer and Oracle Power Browser.
Worldgroup has been designed for multiple connectivity. Users can access a
Worldgroup system through dial-up modems, ISDN, Novell-based networks (SPX), and
packet-switched X.25 networks as well as the Internet and TCP/IP based networks.
Multiple connectivity has several advantages over Internet-only connectivity,
including enabling fixed bandwidth connections, alternative access routes if the
primary route is "down" or otherwise not available, and better security for
private transactions. Worldgroup v3.0 is designed to run on DOS, as well as the
Windows NT and Windows 95 operating systems.
In addition to being an out-of-the-box product, Worldgroup is a
development platform. The Company believes that one of Worldgroup's key
strengths is its standard set of interfaces or open architecture. Through
Worldgroup's application programming interfaces (APIs) and development kits,
over 200 independent software vendors have developed and market applications
that can be easily added on to an Internet or Online System using Worldgroup's
software. This allows Worldgroup users to pick and choose additional
applications for a Worldgroup system depending on their needs. For example, if a
group calendar/scheduling program is desired, an add-on application entitled
Community Calendar can be seamlessly integrated into the Worldgroup system. The
Company and independent software vendors currently offer over 500 add-on
applications for Worldgroup, including add-ons that allow a Worldgroup system to
offer: (i) outgoing online fax service; (ii) an online shopping mall; (iii) form
templates for workflow environments; (iv) video conferencing with
point-to-point, broadcast, and theater-replay video; (v) group scheduling; (vi)
online publishing; and (vii) SLIP/PPP Internet access to users and optional
support for Radius security and accounting protocol for terminal server
equipment. Several of these add-on applications are embedded in the Worldgroup
software and therefore can be electronically distributed to and immediately
launched by the users upon payment. To allow independent software vendors,
system operators and system integrators to create such add-ons as well as other
customize client-side applications, the Company offers a Worldgroup developer
kit for $699, which contains the source code for the five core Worldgroup
applications and in-depth developer information. Additional "extended" source
suites and application option source packages are available with a wide range of
prices.
The Company believes that significant opportunities exist for the sale of
Worldgroup into emerging markets. It is estimated that 80% of the total demand
for Internet access originates in the United States. One of the primary reasons
for the lack of Internet access in other countries is cost. In certain Eastern
European, Asian and Latin American countries which do not have an established
telecommunications infrastructure, the cost of access to high speed Internet
networks can be as much as 10 times the cost in the United States. Consequently,
the Company believes that the Worldgroup product operating as a bulletin board
using existing telephone systems (as opposed to high speed Internet networks)
offers an attractive and economically feasible solution in emerging markets. The
Company's strategy is to develop a loyal customer base in such markets. The
Company currently sells its products in 29 countries.
Worldgroup's ability to offer advanced communications technology to third
world countries has been recognized by the United Nations Development Programme
Global Technology Group, which, in January 1997, selected Worldgroup to the
United Nations Flag Technology Program.
The suggested retail price for Worldgroup v3.0 for access by eight
simultaneous users is $699. The number of simultaneous users can be increased to
up to 256 simultaneous users through the purchase of additional user packs, at
prices ranging from $55 to $65 per additional user connection.
Worldgroup Customized Applications
Using Worldgroup as the foundation, the Company, working in conjunction
with third party developers, has designed intranets and other communications
systems for a number of industries and customers, including the following:
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REAL-TIME GLOBAL TRADING SOLUTIONS
The Company is targeting manufacturers and distributors of commodities
worldwide to utilize its software for real-time trading and consolidating of
commodities. The Company has entered into a venture with World Commerce Online
("World Commerce") which has launched Floraplex, a private extranet for the
floral industry that allows growers, importers, exporters, wholesalers and mass
merchandisers to execute purchases over the Internet from any place in the
world. The system also provides for the payment of purchases and helps in the
consolidation of freight and other shipping items. Pursuant to a Reseller
Agreement, dated March 27, 1997, between the Company and World Commerce, the
Company receives 6% of the gross revenues collected by World Commerce and 20% of
any maintenance fees generated by the system. Such amounts are in addition to
the up front revenues that the Company receives for the license of its
Worldgroup server software. World Commerce is expected to attempt to offer this
solution to a variety of other commodity-based organizations worldwide, although
no assurances can be given that World Commerce will be successful in selling
this software product to other industries. Accordingly, the Company is unable,
at this time, to estimate the impact that the Company's Reseller Agreement with
World Commerce will have on its results of operations. Such agreement expires in
March 2000.
ONLINE GAMING
Worldgroup is currently being utilized in the development of on-line
casino games for both the entertainment and casino marketplace. The Company
sells its software to Atlantic Entertainment which offers a program called
I.C.E. (Internet Casino Extension). I.C.E. is marketed to domestic and
international casinos who want to provide a non-monetary form of casino gaming
to their casino customers to encourage patronage. The Company itself has no
intent to offer such gaming activities online.
EDUCATION
The Company has designed software which is a ready to use classroom
intranet designed to connect teachers, student, parents and administrators
online. This software offers "managed" Internet access to schools, enabling
students to browse the Worldwide Web, but only to sites approved by teachers and
school administrators.
TELEVISION SET-TOP INTERNET CONNECTIVITY
The Worldgroup client/server software has been configured to allow
manufacturers of set-top terminals to provide Internet access to the home
television set and to provide e-mail and other communications programs to the
end consumer. The Company licenses its software to Intercon P/C, Inc. who is
installing Worldgroup software as the foundation of its set-top box called
"Spider."
New Products
The Company has recently released or has under development for release
during 1998 the following products:
WEBCAST
Introduced in March 1997, WebCast is an Internet multi-media software
product which enables websites to broadcast live or pre-recorded audio and video
over the Internet to viewers who need only use a standard web browser to receive
the broadcast. All other presently available competitive products require
viewers to download special client software. Business and other applications of
WebCast include: (i) the ability to have customer service representatives or
technicians talking live with customers, (ii) the ability to have staff meetings
with remote offices, and (iii) parents away from home checking on their children
or other family members. WebCast v2.0, offering video on demand and clientless
audio capabilities, was released by the Company in October 1997.
The Company currently offers three WebCast products--WebCast Personal,
WebCast ProServer and WebCast Lite. WebCast Personal is designed for individual
users and allows up to 4 simultaneous viewers. In addition to its audio and
video capabilities, WebCast Personal provides teleconferencing, caller ID, call
blocking, password authorization and an address book. The suggested retail price
of WebCast Personal is $49.95.
WebCast ProServer is designed for commercial applications and allows up to
255 simultaneous viewers. WebCast is built upon the Worldgroup v3.0 platform and
therefore offers, in addition to audio and video, all of the standard and add-on
features available for Worldgroup, such as E-mail, teleconference, file
libraries and polling. The suggested retail price of WebCast ProServer is $995,
with each additional video stream retailing for $100.
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The Company also offers at no cost WebCast Lite, a promotional version of
WebCast that permits users the opportunity to try the WebCast product. The
Company has entered into bundling agreements with a number of manufacturers of
web cameras, pursuant to which WebCast Lite has been incorporated into their
respective products. After demonstrating WebCast Lite, users may then purchase
WebCast Personal or WebCast ProServer from the Company. See "--Sales, Marketing
and Distribution."
In August 1997, the Company entered into a licensing agreement with Boca
Research, Inc., pursuant to which the Company has granted Boca Research a
license to include WebCast Lite and related technology in their modems, video
conferencing and other hardware products, in exchange for royalty payments that
are determined based on the amount and type of product sold by Boca Research. If
Boca Research fails to pay royalties of at least $100,000 in any quarter or at
least $120,000 in two consecutive quarters, the Company has the right to
renegotiate the terms of such license agreement.
NETDISC
NetDisc is a CD-ROM and Internet game developed by the Company that allows
advertising agencies and others to simultaneously promote several products or
companies to a targeted market of consumers. Each netDisc CD-Rom contains video
clips from an advertiser and links to an advertiser's web page. The Company's
netDisc CD-ROM will be distributed through direct marketing or in magazines
aimed at a particular market segment. Buyers of such magazines are presented
with the opportunity to win prizes in the netDisc game by viewing the various
advertisers' videos on the CD-ROM and by visiting such advertisers web site. For
each such visit, buyers earn Galact-a-Buck $ game scrip that can be redeemed for
prizes. The Company is in discussions with Peterson Publishing, pursuant to
which it is anticipated that the first installment of netDisc will be inserted
in the June 1998 issue of MOTOR TREND magazine. The Company has filed a
patent application with respect to netDisc. See "--Proprietary Rights and
Intellectual Property."
ACTIBASE
Released in December 1997, Actibase is an ODBC compliant database
connectivity program which is fully integrated with the Worldgroup server
database. Actibase enables a company to publish any of their databases directly
onto the Worldwide Web, with only limited knowledge of computer programming or
HTML. Actibase features include dynamically generated SQL and HTML Code, a drag
and drop form editor and security options. Actibase, as a stand alone product,
includes support for eight simultaneous users with user count upgrades
available. Actibase is fully integrated into the Company's other product lines
as an add-on to Worldgroup and WebCast.
WORLDLINK
There are approximately 500 Worldgroup communities operating with the
Company's Worldgroup and/or Major BBS software. Unlike larger Online Systems,
such as America Online and Microsoft Network, Worldgroup communities are
typically formed by users and entrepreneurs with a common interest in a
particular subject (e.g. horse racing) or by users who are located in the same
geographic area. The Company believes that localized service is attractive to
users in much the same way that a local newspaper appeals to many readers over a
national one. One of the drawbacks to local Online Systems, however, is the need
for users traveling outside their local area to make a long-distance telephone
call to connect into their local system.
To meet this need, the Company has created Worldlink, an add-on
application to Worldgroup designed to connect Worldgroup systems to each other
to create a global network of Worldgroup communities. Worldlink has been
developed to act as a central hub that enables users of a Worldgroup system in
one location to interact and communicate with users of a different Worldgroup
system. Worldlink presently operates in terminal mode and is capable of
connecting up to 250 systems operating on Worldgroup v.1 or v.2. In March 1998,
Worldlink will be upgraded to: (i) operate in client/server mode as well as
terminal mode; (ii) connect up to 60,000 Worldgroup systems and 16 million
simultaneous users; and (iii) include Worldgroup v.3's thin client access via
Active HTML. The Company's objective is to ultimately create a global network of
Worldgroup communities. The ability of the Company to successfully launch a
global network of Worldgroup communities is subject to a number of risks, many
of which (such as the participation of individual Worldgroup communities) are
beyond the control of the Company. No assurance can be given that the Company
will be successful in developing a global community of Worldgroup systems.
SALES, MARKETING AND DISTRIBUTION
The Company markets and distributes its products through distributors and
resellers, as well as directly to end-users. The Company's WebCast Personal
product recently entered the consumer retail market and is now being offered for
sale throughout North America by CompUSA, Computer City and Fry's Electronics.
Historically, the Company has relied on its distribution network for a
substantial portion of its sales. The Company's primary distributors in the
United States are Ingram Micro Inc. and DistribuPro, Inc. Internationally, the
Company distributes its products through Sisnet, S.A. and a network of 30
resellers located
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in 29 countries. In addition, the Company has established a network of preferred
distributors, identified as Ambassador Dealers, many of whom also act as system
integrators and value added resellers. The Company provides its Ambassador
Dealers with special training programs, promotional incentives and marketing
programs. Although the Company uses these and other means to encourage its
distributors to focus primarily on the promotion and sale of the Company's
products, the Company's distributors may also represent other lines of products
that compete with the Company's products and no assurance can be given that
these distributors will not give higher priority to the sale of competing
products.
The Company has recently increased its efforts to make direct sales to
end-users in an effort to increase gross profits. Direct sales by the Company
are made by mail order to end users who are solicited through catalogs such as
CDW, PC Zone, Tiger Direct, MicroWarehouse and PC Connections. In addition,
direct sales are made through the Company's direct mailing and telesales efforts
aimed at Internet service providers and other end-users. The Company publishes a
magazine, VISIONS, aimed at educating end-users about the capabilities of the
Company's products. VISIONS, which includes articles about the Company, its
recent product releases and development efforts, is distributed to the Company's
installed customer base, as well as to the Company's Ambassador Dealers and
other distributors of the Company's products. The Company also markets its
products on its Web site, which contains demonstrations, free downloads of
certain products and significant other information regarding the Company's
products and services.
The Company intends to increase the sales and distribution of WebCast and
its other products by incorporating promotional versions of the Company's
software into computer hardware, such as web cameras and modems, that are
manufactured and marketed by other companies. Through these bundling
arrangements, end purchasers of the computer hardware have an opportunity to try
the Company's software and, if desired, to purchase a fully-functional version
of the Company's software. These arrangements generally provide that the
Company's software is, at no cost to the Company, advertised on the package for
the hardware product and that the hardware manufacturer receives a percentage of
the purchase price of any software purchased from the Company as a result of
such arrangement. To date, the Company has entered into agreements with Eastman
Kodak, Boca Research, Aztech New Media Corp., Best Data and Specom to bundle
WebCast Lite with computer hardware products offered by such companies.
The Company's marketing and sales efforts are supported by a sales and
marketing force of 10 people operating from the Company's headquarters in Fort
Lauderdale, Florida. The Company intends to add five more employees in marketing
and sales following the closing of this offering. There can be no assurance that
such expansion will be successfully completed, or that the cost of such
expansion will not exceed the revenues generated.
RESEARCH AND PRODUCT DEVELOPMENT
The market for the Company's products is characterized by rapidly changing
technology and frequent new product introductions. The Company's future success
depends on its ability to enhance its existing products and to develop new
products that: (i) incorporate new and evolving industry standards, (ii) respond
to evolving customer requirements, and (iii) achieve market acceptance. The
primary aim of the Company's research and development efforts is to identify
emerging online communications technology and standards and develop products
that address evolving market needs. Specifically, the Company intends to improve
and upgrade its existing product, and to develop and introduce new products that
deliver customers high levels of performance, ease of use and security.
The Company has incurred significant research and development costs over
the past two years to convert the Company's software to the Internet and
intranet markets. Research and development costs, on a combined pro forma basis,
were $863,749 and $1,034,174 for the fiscal years ended December 31, 1996 and
1995, respectively, and $434,045 for the nine month period ended
September 30, 1997. The Company believes that significant research and
development costs will continue to be incurred in the future to successfully
implement the Company's business strategy.
SERVICES
SUPPORT PROGRAMS
The Company has made a commitment to provide timely, high quality
technical support to meet the diverse needs of its customers and partners and to
facilitate the purchase and use of its products. Presently included at no
additional charge with each purchase of Worldgroup v3.0 NT/95 is 120 minutes of
technical support through the Company's toll-free telephone number. Additional
support is available at the cost of $2.00 per minute, although the Company
offers reduced rates through prepaid support plans. Customer support is also
available at no cost to customers through a number of additional means,
including E-mail and facsimile responses. The Company also publishes a list of
answers to frequently asked questions and hosts a customer support forum on its
website.
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Using the Company's own WebCast product, the Company recently began
offering live video customer service through the Company's website at
http://www.gcomm.com. This service allows the Company's customers to see a live
image of and speak to the Company's customer support personnel. The Company
believes it is one of only a very few companies in the world offering live video
customer service.
TRAINING
The Company offers several different training courses to system operators,
integrators and resellers. Topics covered in these courses include system
installation, configuration, administration, security and troubleshooting.
Prices for the two to three day courses range from $595 to $995 per person.
WORLDGROUP BILLING SERVICES
The Company offers Worldgroup communities a 900 telephone number
collection service as an alternative means to credit cards and direct billing to
collect the fees they charge customers for membership and Internet access. The
900 telephone number collection service allows an end user to obtain and pay for
membership and internet access provided by a particular Worldgroup community by
dialing a 900 number. Such fees are paid by the end user to the telephone
company as part of monthly phone bills and remitted to the Company after
deducting telephone company and service bureau collection fees. The Company in
turn remits such membership and internet access fees to the Worldgroup community
after deducting a service fee of approximately 10 percent.
COMPETITION
The communications software industry is intensely competitive. Many of the
Company's competitors are substantially larger and have much greater financial
resources and name recognition than the Company. They also have longer operating
histories in the Internet and intranet markets and greater technical and
marketing resources than the Company. To maintain or increase its position in
the industry, the Company will need to continually enhance its current product
line, and introduce new products and services. There can be no assurance,
however, that the Company will be able to compete successfully in the future, or
that competition will not have a material adverse effect on the Company's
business, financial condition and results of operations.
The Company's Worldgroup product faces competition from a number of
products that permit information exchange in ways similar to Worldgroup,
including: (i) Microsoft Back Office; (ii) Lotus Domino, (iii) Novell's Intranet
Ware; and (iv) Netscape's SuiteSpot. While these and other competitive products
offer features similar to Worldgroup, the Company believes that Worldgroup
maintains a competitive advantage over these products in terms of price,
availability of add-on applications, ease of use and administration.
WebCast, the Company's software for Web cameras, competes with products
offered by White Pine Software, Inc., Progressive Networks, Vxtreme, Inc., Xing
Technology Corporation, NetSpeak, VocalTec, Vivo Software, Inc. and VDOnet
Corporation. The Company competes against these products in terms of price
and the fact that no special client software, other than Netscape Navigator 2.0
or above or Microsoft's Internet Explorer 4.0 or above web browser, is required
to view the WebCast video or audio stream. All other presently available
competitive products require viewers to download client software See
"--Products-WebCast."
Actibase, the Company's Internet database connectivity program, competes
with, among others, Claris' Filemaker Pro, Microsoft's InterDev and Topspeed's
Clarion. The Company competes against these products in terms of price and
product features.
PROPRIETARY RIGHTS AND INTELLECTUAL PROPERTY
The Company regards its software as proprietary and attempts to protect it
with copyrights, trademarks, restrictions on disclosure, copying and
transferring title and enforcement of trade secret laws. Despite these
precautions, it is possible for unauthorized third parties to copy the Company's
products and it may be possible for them to obtain and use information that the
Company regards as proprietary. Although the Company has filed a federal patent
application with respect to netDisc, no assurance can be given as to the
issuance of a patent or as to the breadth or degree of protection any issued
patent may afford. In addition, existing copyright laws give only limited
protection to its software and some foreign countries' laws do not protect
proprietary rights to the same extent as United States laws. Consistent with the
general practice of software developed for retail sale, the Company licenses its
products primarily under "shrink wrap" license agreements that are not signed by
licensees and therefore may be unenforceable under the laws of certain
jurisdictions. Although the Company has several pending trademark applications
with the United States Patent and Trademark Office (the "PTO"), the Company has
only one federal registration, for the trademark "Galacticomm." No assurance can
be given that the PTO will grant registrations for the Company's pending
trademark applications. Among other things, it is possible that the Company's
trademarks, including "WebCast," could be deemed
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to be generic by the PTO, in which case neither the Company nor any third party
could claim exclusive rights to such term. In such event, the Company intends to
associate the generic term with registrable or registered trademarks or logos in
order to gain trademark protection over the resulting composite mark.
In July 1997, the Company became aware of the existence of a third party
which may claim a prior right in the trademark "Worldgroup." The Company and the
third party are presently discussing a co-existence arrangement whereby the
Company would have the right, without the payment of a royalty, to continue to
use the trademark "Worldgroup" on its present products and services. Although
the third party does not presently distribute products that compete with the
Company's products, the licensing arrangement presently under discussion would
not preclude the third party from using the "Worldgroup" trademark in
competition with the Company. Also in July 1997, the Company became aware that
several other third parties filed applications for registration for the
trademark "WebCast," before the Company filed its application. If "WebCast" is
determined not to be generic and one of the third party applications matures
into a registration, then such third party will have superior rights to the
Company.
If a third party has superior rights to any of the Company's trademarks,
the Company believes that when the Company first commenced use of its
trademarks, it acted innocently, unintentionally, and without knowledge of the
existence of any third party's purported rights in such marks. Furthermore, if
the third party user of "Worldgroup" decides to enforce its trademark rights
through an infringement action, the Company believes that valid defenses exist
with respect to any such action, including, without limitation, waiver, estoppel
and laches and that as a result thereof, any liability of the Company should be
limited to injunctive relief prohibiting the Company from future use of such
mark. Trademark litigation is expensive and complex and the outcome of such
litigation is difficult to predict. Generally, if a court were to find that the
Company unintentionally infringed a third party's mark, the Company's liability
would be limited to its actual net profit from the sale of infringing products,
the third party's actual damages, and injunctive relief. On the other hand, if a
court were to find that the Company has wilfully infringed a third party's
trademark, the Company could be enjoined from further use of the trademark and
could be liable, under the federal Lanham Act, for the lesser of: (i) the
Company's net profit stemming from the sale of infringing products and (ii) the
third party's actual damages, plus three times the greater of: (a) the Company's
profit from the sale of the infringing product, and (b) the third party's actual
damages, plus prejudgment interest, attorneys' fees, and the cost of litigation.
Except to the extent noted above with respect to certain trademarks, the
Company does not believe that its products infringe on the rights of third
parties. The computer software market is characterized by frequent and
substantial intellectual property litigation and it is possible that third
parties might assert infringement claims against the Company in the future. If
this occurs, the Company might be forced into costly litigation or have to
obtain a license to the intellectual property rights of others. It is possible
that such licenses may not be available on reasonable terms, or at all.
The Company currently licenses the following technology from third
parties: (i) audio playback for java receiver software from Vosaic LLC
("Vosaic") allows WebCast users to hear live audio through a standard web
browser, pursuant to a Software License Agreement, dated September 19, 1997, for
which the Company pays Vosaic a royalty equal to 7% of the retail price of any
WebCast product that includes such software; (ii) multimedia graphical display
technology from Lead Technology, Inc., pursuant to an agreement, dated September
29, 1995, for which the Company pays Lead Technology, Inc. a royalty of $75 for
each sale of Worldgroup Developer's Kit and $20 for each upgrade; (iii) TCP/IP
data transport for Worldgroup for DOS from Pacific Softworks Inc., for which
royalties are limited to a maximum of $30,000; (iv) a database engine for
Worldgroup, ActiBase and WebCast from Novell, Inc. for which no royalties are
paid; and (v) VBX technology for the Worldgroup Manager from Sheridan Software,
for which no royalties are paid. In the future, these third party technology
licenses may not be available to the Company on commercially reasonable terms,
if at all. If the Company cannot maintain any of these technology licenses, it
is possible that product shipments could be delayed and the Company's financial
condition could be harmed.
GOVERNMENT REGULATIONS
The Company does not believe that its business activities are currently
subject to direct regulation by any government agency, other than regulations
applicable to business generally, and there are currently few laws or
regulations directly applicable to access to or commerce on the Internet.
However, due to the increasing popularity and use of the Internet, it is
possible that laws and regulations may be adopted with respect to the Internet,
covering issues such as user privacy, pricing and characteristics and quality of
products and services. For example, Congress recently passed the Communications
Decency Act of 1996 prohibiting the distribution of obscene or indecent material
over the Internet, although this law was recently held unconstitutional by the
United States Supreme Court. The adoption of any such laws or regulations may
decrease the growth of the Internet, which could in turn decrease the demand for
the Company's products and increase the Company's cost of doing business or
otherwise have an adverse effect on the Company's business, operating results or
financial condition.
Furthermore, the application of existing laws governing issues such as
property ownership, libel and personal privacy on the Internet is uncertain.
Because material may be downloaded by an online or Internet service facilitated
by the Company, there is a potential risk that claims may be made against the
Company for defamation, negligence, copyright or trademark infringement or
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other theories based on the nature and content of such materials. Although the
Company carries general liability insurance, the Company's insurance may not
cover potential claims of this type, or may not be adequate to indemnify the
Company for all liability that may be imposed. Any imposition of liability that
is not covered by insurance or is in excess of insurance coverage could have a
material adverse effect on the Company's business, results of operations and
financial condition.
FACILITIES
The Company leases 11,129 square feet of office space for its corporate
headquarters in Fort Lauderdale, Florida, including approximately 2,000 of
square feet that the Company commenced occupying in September 1997. The monthly
rent under this lease is $9 per square foot (plus applicable taxes), which
amount increases annually by four percent. The Company has options to extend the
lease for up to an additional six years past its present expiration date in
2001. The Company also has an option to lease approximately 6,000 square feet of
adjacent office space should the Company need additional space. The Company
intends to use a portion of the proceeds from this offering to build out and
improve its leasehold. See "Use of Proceeds."
EMPLOYEES
As of the date of this Prospectus, the Company employs 33 persons,
including 15 in engineering and support, 10 in sales and marketing, 1 in
production and 7 in administration and accounting. None of its employees are
currently represented by a union or any other form of collective bargaining
unit. The Company regards its relations with employees as good.
LEGAL PROCEEDING
A suit was filed against the Company on December 16, 1997 in the United
States District Court for the District of New Mexico by DataSafe Publications,
Inc. ("DataSafe"), a reseller of the Company's products, alleging price fixing,
price discrimination, resale price maintenance, predatory practices, breach of
contract and economic coercion by the Company under federal antitrust laws and
New Mexico state laws. DataSafe seeks treble the amount of its actual damages
alleged to be in excess of $1.5 million and costs and expenses. The Company will
file a response denying that it has engaged in any of the alleged conduct and
will defend the action vigorously. Although no assurance can be given, the
Company believes, based upon special antitrust counsel's preliminary
investigation and advice, that the ultimate outcome of the suit will not have a
material adverse effect on the Company's business or financial position.
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MANAGEMENT
DIRECTORS AND OFFICERS OF THE COMPANY
The following table sets forth certain information concerning the
directors and executive officers of the Company:
<TABLE>
<CAPTION>
NAME AGE POSITION WITH THE COMPANY
---- --- -------------------------
<S> <C> <C>
Peter Berg 42 Chairman, Chief Executive Officer and Secretary
Yannick Tessier 29 President and Director
Timothy Mahoney 41 Director
David Manovich 46 Director
Claus Stenbaek 36 Director
T. Michael Love 32 Chief Financial Officer
</TABLE>
PETER BERG has served as the Chairman of the Board, Chief Executive
Officer and Secretary of the Company since November 1996 when the Company
acquired Galacticomm, Inc. See "Certain Transactions." From December 1995 to
November 1996, Mr. Berg was the President and Secretary of the Company. Prior to
founding the Company, Mr. Berg was, since May 1992, the Sr. Vice President of
Marketing of Integrated Communications Network, Inc. (and its predecessor
company Visions Communications, Inc.), a direct response marketing firm. Mr.
Berg received his bachelor of science degree, MAGNA CUM LAUDE, from Florida
State University.
YANNICK TESSIER has served as the President of the Company since November
1996 when Tessier Technologies, Inc. was merged into the Company. See "Certain
Transactions." Prior to joining the Company, Mr. Tessier was the Chief Executive
Officer of TTI, which he founded in 1989. Mr. Tessier has over 12 years of
experience in online software development, systems integration and product
distribution. Mr. Tessier has an associates degree in accounting.
TIMOTHY MAHONEY has served as a director of the Company since January
1997. Mr. Mahoney has over 15 years of experience with the operations and
management of technology companies. He founded and served as the president of
the consumer products business for SyQuest Technology, a manufacturer of
removable cartridge disk drives from 1991 to 1994. He also founded and served as
the president of Rodime Systems, a computer disk-drive sub-system manufacturer
from 1986 to 1991. Mr. Mahoney has, since 1994, served as a managing member of
Union Atlantic L.C., a consulting firm specializing in emerging technology
companies and presently serves as Union Atlantic's designee to the Board. See
"Certain Transactions." Mr. Mahoney received an Masters of Business
Administration degree from George Washington University.
DAVID MANOVICH has served as a director of the Company since December
1997. Mr. Manovich has over 10 years experience with Apple Computer, Inc.,
("Apple"), where he served in a variety of management and sales executive
positions. From March 1997 until he joined the Company, Mr. Manovich was
executive vice president, worldwide sales and services for Apple. During the
period from January 1992 until January 1996, Mr. Manovich's positions with Apple
included vice president of the consumer sales division, director of channel
sales, director of marketing for the personal computer business division and
country manager for Apple UK. In addition, Mr. Manovich was from May 1996 to
March 1997 vice president of sales for Fujitsu PC Corporation, where he was
responsible for establishing and managing Fujitsu's retail and distribution
channels in the Americas. Mr. Manovich received a Masters of Business
Administration in Finance and a bachelor of science in business administration
from the University of Montana. Mr. Manovich is a certified public accountant.
CLAUS STENBAEK has served as a director of the Company since January 1997.
Effective January 1, 1998, Mr. Stenbaek will be the Managing Director of Tallard
B.V., an affiliate of the Wallenberg Trust. In 1997, he was Managing Director of
Lemshaga Consulting AB, a consulting services firm. From 1995 to 1997 Mr.
Stenbaek was the Managing Director of Rakerise Ltd. a financial and business
advisory firm to companies specializing in information technology, distribution,
real estate and finance. From 1991 to 1995, Mr. Stenbaek was the finance
director of F.L. Smidth & Cia, an engineering company involved in cement
machinery and minerals processing. Prior thereto, Mr. Stenbaek was, among other
things, a senior management consultant with Andersen Consulting in their London
office. Mr. Stenbaek received his bachelor of science in management accounting
from Copenhagen Business School and an Executive Masters of Business
Administration from Institute of Business, Madrid, Spain. Mr.
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Stenbaek is the designee of the Wallenberg Trust to the Board, pursuant to the
Wallenberg Trust Stock Purchase Agreement, as amended. See "Certain
Transactions."
T. MICHAEL LOVE has served as the Company's Chief Financial Officer since
August 1997. Prior to joining the Company, Mr. Love was, since January 1995,
Director of Mergers and Acquisitions at Blockbuster Entertainment Group, a
division of Viacom, Inc., where he was responsible for its global acquisition
efforts in the consolidating video industry as well as other acquisition, sale
and joint venture transactions. From January 1988 through January 1995, Mr. Love
was a member of KPMG Peat Marwick's financial services audit practice, where,
since 1992, he served as Manager and then Senior Manager. Mr. Love received his
bachelor of science degree in accounting and finance from Florida State
University.
OTHER KEY EMPLOYEES
PAUL ROUB, age 30, has served as the Company's Director of Engineering
since March, 1997. Prior to becoming the Director of Engineering, Mr. Roub was a
programmer with the Company specializing in server-side 32-bit development. From
1993 to 1996, Mr. Roub was a programmer with Equitrac Corporation and, from 1990
to 1993, he was a programmer with PC's & Programs.
RICHARD SKURNICK, age 33, has been employed by the Company since 1989 and,
for the past three years, has served as the Company's Management Information
Systems manager. Mr. Skurnick, who has significant programming experience,
served as the Project Manager for Worldgroup v3.0 and developed the Company's
customer database program.
MANUEL RODRIGUEZ, age 36, has served as the Company's Director of
International Sales since August 1997. Since 1996, Mr. Rodriguez served as the
Territory Manager - Latin America at Madge Networking. From 1994 to 1996, he was
National Corporate Network Sales Manager at Best Internet Communications and
from 1992 to 1994, he was an account executive at Swift Software, a software
bundling company. Mr. Rodriguez works directly with Robert O'Brien, a marketing
consultant to the Company. For information with respect to Mr. O'Brien, see
"Certain Transactions--Consulting Agreements with Union Atlantic."
COMPENSATION OF DIRECTORS
The Company does not presently pay any cash compensation to the directors
of the Company for serving on the board. On January 14, 1997, the Company
granted Mr. Stenbaek an immediately exercisable three year option to purchase
6,155 shares of Common Stock at an exercise price of $2.56 per share as
consideration for serving on the board. On December 15, 1997, the Company
granted Mr. Manovich a three year option to purchase 30,000 shares of Common
Stock at an exercise price of $3.75 per share as consideration for serving on
the board.
COMMITTEES OF THE BOARD AND INDEPENDENT DIRECTORS
The Company has established a compensation committee and intends to
establish an audit committee of the Board of Directors. The compensation
committee, which is comprised of Messrs. Mahoney and Stenbaek, is responsible
for the review and approval of the compensation of the Company's employees, the
administration of the 1997 Stock Option Plan and related compensation matters.
The Company intends to add at least one additional independent director
to its Board.
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<PAGE>
SUMMARY COMPENSATION TABLE
The following table provides the cash and other compensation paid or
accrued by Galacticomm Technologies, Inc. to its Chief Executive Officer and
President.
<TABLE>
<CAPTION>
LONG TERM
ANNUAL COMPENSATION COMPENSATION
------------------------------------------- --------------
SECURITIES
NAME AND FISCAL UNDERLYING ALL OTHER
PRINCIPAL POSITION YEAR SALARY BONUS OPTIONS/SARS COMPENSATION
- ------------------- ------ ------ ----- -------------- ------------
<S> <C> <C> <C> <C> <C>
Peter Berg, 1997 $170,961 ---- 177,263 ------
Chief Executive 1996 $73,461 ---- ------- ------
Officer 1995 $0 ---- ------- ------
1997 $170,961 ---- 177,263 ------
Yannick Tessier,
President
</TABLE>
OPTION GRANTS
The following table sets forth the stock option grants to the Company's
Chief Executive Officer and President made during the fiscal year ended December
31, 1997. No stock appreciation rights have been granted to date.
<TABLE>
<CAPTION>
OPTION GRANTS IN LAST FISCAL YEAR
% OF TOTAL
SECURITIES OPTIONS GRANTED
UNDERLYING TO EMPLOYEES IN EXERCISE OR BASE EXPIRATION
NAME OPTIONS GRANTED FISCAL YEAR PRICE PER SHARE DATE
- ---- --------------- --------------- ---------------- ----------
<S> <C> <C> <C> <C>
Peter Berg 177,263 34% $3.74 (1)
Yannick Tessier 177,263 34% $3.74 (1)
</TABLE>
- -------------
(1) Such options expire in one-third increments on November 20, 2002,
November 20, 2003 and November 20, 2004. See "--Employment Agreements."
EMPLOYMENT AGREEMENTS
The Company has entered into an employment agreement with each of Peter
Berg, the Chairman and Chief Executive Officer of the Company, and Yannick
Tessier, the President of the Company. The employment agreements provide for an
annual salary of $175,000 for each officer, which salary will increase each
contract year by 10 percent of the prior year's salary. Messrs. Berg and Tessier
are also eligible to receive an annual cash bonus at the discretion of the
Compensation Committee of the Board of Directors. Pursuant to their respective
employment agreements, Messrs. Berg and Tessier have each been granted options
to purchase 177,263 shares of Common Stock at an exercise price of $3.74 per
share. Such options vest one-third on November 21, 1997, one-third on November
21, 1998 and the final one-third on November 21, 1999. Such options expire five
years after the respective date of vesting. Pursuant to the terms of their
respective employment agreements, the Company provides Messrs. Berg and Tessier
with an automobile allowance of $600 per month and a term life insurance policy
in the amount of $1,000,000.
The employment agreements provide for a three-year term that expires
November 20, 1999, which term may be terminated earlier by the Company with or
without cause (as defined in the employment agreements). Such employment
agreements may be
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<PAGE>
terminated earlier by the employee with or without "good reason," which is
defined to include: (i) a significant decrease in the employee's
responsibilities; (ii) a material change in the employee's position; (iii) a
reduction in the employee's salary; or (iv) a change in the location of the
Company's executive offices outside of Broward, Palm Beach or Dade County,
Florida or a requirement that employee change his permanent residence outside of
Broward, Palm Beach or Dade County, Florida. If such employment agreement is
terminated for any reason, other than by the Company for cause, death or
disability or by the employee without good reason, then the employee is entitled
to receive his salary under the employment agreement for the greater of the
remaining term of the agreement or 12 months from the date of termination.
Pursuant to the employment agreements, the Company has agreed to indemnify
each of Messrs. Berg and Tessier to the fullest extent permitted by law for any
action related to his employment with the Company or for serving as a director
of the Company.
The Company has also entered into a two-year employment agreement, dated
August 25, 1997, with T. Michael Love, the Company's Chief Financial Officer,
pursuant to which Mr. Love receives an annual salary of $120,000 and has been
granted options under the Company's 1997 Stock Option Plan to purchase 34,468
shares of Common Stock at an exercise price of $6.50 per share. See "--Stock
Option Plan". The Company may terminate Mr. Love's employment with the Company
with cause, as such term is defined in his employment agreement. If the Company
terminates such employment without cause, Mr. Love will receive his salary for a
six month period following the date of termination and stock options which would
have vested at the end of the vesting period then in effect shall automatically
vest.
Each of the Company's employment agreements with Messrs. Berg, Tessier and
Love impose prohibitions against the disclosure of confidential information and
contains non-compete provisions. There can be no assurance that these provisions
will protect the Company from unauthorized disclosure or use of its proprietary
information, nor can there be any assurance that these provisions will be held
enforceable in whole or in part by a court if they are contested by an employee.
STOCK OPTION PLAN
The Company has adopted the 1997 Stock Option Plan (the "1997 Plan").
Pursuant to the 1997 Plan, options to acquire a maximum of 370,000 shares of
Common Stock may be granted to directors, executive officers, employees
(including employees who are directors), independent contractors and consultants
of the Company. Options to purchase 164,337 shares at an exercise price of $6.50
per share are presently outstanding under the 1997 Plan, none of which are
currently exercisable.
The 1997 Plan is administered by the Compensation Committee of the Board
of Directors. The Compensation Committee determines which persons will receive
options and the number of options to be granted to such persons. The
Compensation Committee also interprets the provisions of the 1997 Plan and makes
all other determinations that it may deem necessary or advisable for the
administration of the 1997 Plan. No more than 37,000 options may be granted to a
single person in any fiscal year.
Pursuant to the 1997 Plan, the Company may grant ISOs (Incentive Stock
Options) and NQSOs (Non-Qualified Stock Options). The price at which the Common
Stock may be purchased upon the exercise of ISOs granted under the 1997 Plan are
required to be at least equal to the per share fair market value of the Common
Stock on the date particular options are granted. Options granted under the 1997
Plan may have maximum terms of not more than 10 years and are not transferable,
except by will or the laws of descent and distribution. None of the ISOs under
the 1997 Plan may be granted to an individual owning more than 10 percent of the
total combined voting power of all classes of stock issued by the Company unless
the purchase price of the Common Stock under such option is at least 110 percent
of the fair market value of the shares issuable on exercise of the option
determined as of the date the option is granted, and such option is not
exercisable more than five years after the grant date. ISOs granted under the
1997 Plan are subject to the restriction that the aggregate fair market value
(determined as of the date of grant) of options which first become exercisable
in any calendar year cannot exceed $100,000. Generally, options granted under
the 1997 Plan may remain outstanding and may be exercised at any time up to six
months after the person to whom such options were granted is no longer employed
or retained by the Company or serving on the Company's Board of Directors.
Pursuant to the 1997 Plan, unless otherwise determined by the Compensation
Committee, one-fourth of the options granted to an individual are exercisable 90
days after grant, one-fourth are exercisable on the first anniversary of such
grant, one-fourth are exercisable on the second anniversary and the final
one-fourth are exercisable on the third anniversary of such grant. However,
one-half of all outstanding options under the 1997 Plan shall become immediately
exercisable upon a "change in control" of the
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Company. The remaining one-half of the outstanding options shall become
exercisable upon the first anniversary of a "change in control" of the Company.
A "change in control" is generally deemed to occur when: (i) any person (other
than Messrs. Berg or Tessier) becomes the beneficial owner of or acquires voting
control with respect to more than 50 percent of the Common Stock, (ii) a change
occurs in the composition of a majority of the Company's Board of Directors
during a two-year period, provided that a change with respect to a member of the
Company's Board of Directors shall be deemed not to have occurred if the
appointment of a member of the Company's Board of Directors is approved by a
vote of at least 75 percent of the individuals who constitute the then existing
Board of Directors, or (iii) the approval by the shareholders of the Company of
the sale of all or substantially all of the assets of the Company.
The 1997 Plan provides for appropriate adjustments in the number and type
of shares covered by the 1997 Plan and options granted thereunder in the event
of any reorganization, merger, recapitalization or certain other transactions
involving the Company.
INDEMNIFICATION PROVISIONS
Pursuant to the Company's Articles of Incorporation and Bylaws, officers
and directors of the Company are entitled to be indemnified by the Company to
the fullest extent allowed under Florida law for claims brought against them in
their capacities as officers and directors. Indemnification is allowed if the
officer or director acts in good faith and, in the case of conduct in his
official capacity, in a manner reasonably believed to be in the best interests
of the Company, or in all other cases, with a reasonable belief that his conduct
was at least not opposed to the Company's best interests. In the case of
criminal proceedings, it is necessary that an officer or director have no
reasonable cause to believe his conduct was unlawful. In addition, the Company
has agreed to indemnify Messrs. Berg and Tessier pursuant to their employment
agreements with the Company. See "--Employment Agreements." Accordingly, it is
possible that indemnification may occur for liabilities arising under the
Securities Act. The Underwriting Agreement also contains provisions under which
the Company and the Underwriters have agreed to indemnify each other (including
officers and directors) against certain liabilities under the Securities Act.
See "Underwriting." Insofar as indemnification for liabilities arising under the
Securities Act may be permitted for directors, officers and controlling persons
of the Company pursuant to the foregoing provisions or otherwise, the Company
has been advised that in the opinion of the SEC, such indemnification is against
public policy as expressed in the Securities Act and is, therefore,
unenforceable.
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CERTAIN TRANSACTIONS
TESSIER TRANSACTION
Pursuant to a Stock Issuance Agreement, dated August 26, 1996, among the
Company, Peter Berg and Yannick Tessier, the Company agreed to issue to Mr.
Tessier shares of the Company's Common Stock equal to the number of shares of
Common Stock held by Peter Berg. Such shares were thereafter issued to Mr.
Tessier in connection with an Agreement and Plan of Merger ("Merger Agreement"),
dated November 20, 1996, pursuant to which the Company acquired Tessier
Technologies, Inc. ("TTI"), a company controlled by Mr. Tessier. In connection
with such transaction, Mr. Tessier received 1,215,749 shares of Common Stock and
two former shareholders of TTI received an aggregate of 66,434 shares of Common
Stock in exchange for their shares of TTI common stock. Mr. Tessier was elected
to the Board of Directors of the Company and was appointed the President of the
Company upon completion of such transaction. A Worldgroup online community
operated by Tessier that was initially excluded from the assets acquired by the
Company in the November 20, 1996 transaction was subsequently acquired by the
Company in June 1997 for $30,000, payable in 12 equal monthly installments. Mr.
Tessier advanced $50,000 to TTI in 1996 to fund operations and was issued a 10%
note in the amount of $50,000, which is payable by the Company on the effective
date of this offering.
WALLENBERG TRUST AND UA PARTNERS INVESTMENTS
Effective November 21, 1996, the Company raised a total of $2,750,000 from
the sale of shares of Common Stock and convertible notes to Hemingfold
Investments, Ltd. ("Hemingfold") and Union Atlantic Partners I Limited ("UA
Partners"). On November 21, 1996, the Company used approximately $611,476 of
such proceeds to acquire substantially all of its interests in the shares of
Galacticomm, Inc. See "--Acquisition of Galacticomm, Inc." The remaining
proceeds of this funding were allocated to working capital. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
In September 1997, Hemingfold transferred all of its rights and interests
in the agreements described below to Kenworthy Investments, Limited, a
wholly-owned subsidiary of the Peder Sager Wallenberg Charitable Trust (the
"Wallenberg Trust"), an affiliate of Hemingfold. Accordingly, references to the
Wallenberg Trust below and elsewhere in this Prospectus refer to Hemingfold for
all periods prior to such transfer.
In connection with the transaction with the Wallenberg Trust, the Company
entered into a Stock Purchase Agreement (the "Wallenberg Trust Stock Purchase
Agreement"), whereby the Wallenberg Trust received 488,488 shares of Common
Stock in exchange for $1,250,000 in cash or $2.56 per share. Pursuant to the
Wallenberg Trust Stock Purchase Agreement, the Wallenberg Trust was originally
granted the following rights with respect to such shares of Common Stock: (i)
piggyback registration rights ("Piggyback Registration Rights") for up to four
registrations; (ii) demand registration rights ("Demand Registration Rights")
for one registration; (iii) tag-along rights ("Tag Along Rights") that require
that such shares be included on a pro rata basis in certain sales of Common
Stock by either Peter Berg or Yannick Tessier; and (iv) bring along rights
("Bring Along Rights") that require that such shares be included on a pro rata
basis in certain offers for the purchase of the Common Stock of either Peter
Berg or Yannick Tessier for a three year period ending November 20, 1999. The
Wallenberg Trust Stock Purchase Agreement originally provided that the shares
acquired by the Wallenberg Trust would additionally be granted: (x) certain
anti-dilution rights if the Company issued securities below $2.56 per share; (y)
preemptive rights for any future issuance of the Company's securities; and (z)
certain rachet rights which would have entitled the Wallenberg Trust to receive
approximately 247,077 shares of Common Stock if the Company's after tax earnings
for the year ended December 31, 1997 were less than $1,000,000 and approximately
123,538 shares of Common Stock if the Company's after tax earnings for such
period were between $1,000,000 and $1,500,000. By letter agreement, dated
September 8, 1997, the ratchet rights, the anti-dilution rights and preemptive
rights were waived in exchange for the Company's September 1997 issuance of
73,859 shares of Common Stock to the Wallenberg Trust. Messrs. Berg and Tessier
have, for so long as the Wallenberg Trust beneficially owns more than 20 percent
of the outstanding Common Stock, agreed to vote their shares in favor of one
person nominated by the Wallenberg Trust to the Board of Directors of the
Company, and, on the earlier of March 31, 1998 or the date of this Prospectus,
three persons nominated by the Wallenberg Trust. The current nominee of the
Wallenberg Trust is Claus Stenbaek. See "Management--Directors and Officers of
the Company."
Simultaneous with the Wallenberg Trust Stock Purchase Agreement, the
Wallenberg Trust loaned the Company $1,250,000 and received a Convertible
Promissory Note (the "Wallenberg Trust Note"), dated November 21, 1996. On
December 31, 1997, the Wallenberg Trust converted all principal and interest
($1,391,780) outstanding under such note into 543,895 shares of
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Common Stock based upon the conversion rate of $2.56 per share set forth in
the Wallenberg Trust Note. The shares of Common Stock issued upon conversion of
the Wallenberg Trust Note have been granted the same Piggyback Registration,
Demand Registration, Tag Along and Bring Along Rights as those granted in
connection with the Wallenberg Trust Stock Purchase Agreement.
On November 21, 1996, the Company entered into a Stock Purchase Agreement
(the "UA Partners Stock Purchase Agreement") with UA Partners, pursuant to which
UA Partners acquired 48,849 shares of Common Stock for cash consideration of
$125,000 or $2.56 per share and loaned the Company $125,000. In exchange for the
loan, the Company issued a Convertible Promissory Note ("UA Partners Note") to
UA Partners. Other than the number of shares purchased and amount loaned, the
terms of the UA Partners Stock Purchase Agreement and the UA Partners Note are
identical in all material respects to the Wallenberg Trust Stock Purchase
Agreement and the Wallenberg Trust Note (since converted). By letter agreement,
dated September 8, 1997, UA Partners waived the ratchet rights, the
anti-dilution rights and preemptive rights originally set forth in the UA
Partners Stock Purchase Agreement were waived in exchange for the Company's
September 1997 issuance of 7,386 shares of Common Stock. The outstanding
principal of the UA Partners Note will be automatically converted into 48,849
shares of Common Stock (based upon a conversion price of $2.56 per share) as of
the date of this Prospectus. Interest on such note accrues at a rate of 10% per
year and will be paid from the proceeds of this offering. See "Use of Proceeds."
The UA Partners Note is secured by, among other things, the accounts, inventory,
equipment and general intangibles of the Company, which security interest will
terminate upon conversion of such note and the payment of all accrued interest.
In connection with their loans to the Company, the Wallenberg Trust and UA
Partners entered into an Intercreditor Agreement with the Company and Union
Atlantic L.C. ("Union Atlantic"). Pursuant to this agreement, the Wallenberg
Trust and UA Partners have appointed Union Atlantic to serve as their collateral
agent with respect to the loans made to the Company under the Wallenberg Trust
Note and the UA Partners Note and have agreed that, in the event of default by
the Company under such notes, the parties will share any payments in proportion
to the amount outstanding under their respective notes from the Company.
The Wallenberg Trust purchased 66,902 shares of Common Stock in the
Private Placement and 10 Bridge Units in the Bridge Financing. UA Partners
purchased two Bridge Units in the Bridge Financing. See "Recent Financings."
CONSULTING AGREEMENTS WITH UNION ATLANTIC
The Company has engaged the services of Union Atlantic since November
1996. Union Atlantic is a consulting firm specializing in emerging technology
companies. Timothy Mahoney, who is a managing member of Union Atlantic, is also
a director of the Company. See "Management--Directors and Officers of the
Company" for additional information regarding Mr. Mahoney's experience with
respect to the operations and management of technology companies. Pursuant to
one of two consulting agreements that the Company has entered into with Union
Atlantic, Union Atlantic is entitled to receive a monthly fee of $10,000 until
June 30, 2001 for providing consulting services with respect to the Company's
operations, administration, corporate development and marketing and distribution
strategies. Union Atlantic owns all of the outstanding voting securities of
Union Atlantic Partners I Limited ("UA Partners"), which acquired 48,849 shares
of Common Stock and the UA Partners Note in November 1996. See "--Wallenberg
Trust and UA Partners Investments." In connection with the UA Partners
investment, the Company paid Union Atlantic the following amounts for
identifying the Wallenberg Trust to the Company: (i) cash compensation of
$357,500; (ii) a three-year warrant to purchase 139,708 shares of Common Stock
at an exercise price of $2.56 per share with Demand and Piggyback Registration
Rights; and (iii) 78,133 shares of Common Stock. Similarly, the Company paid
Union Atlantic the following amounts for identifying investors in the June 1997
Private Placement: (y) cash compensation of $126,209; and (z) a three-year
warrant to purchase 33,774 shares of Common Stock at an exercise price of $3.74
per share with Demand and Piggyback Registration Rights. Pursuant to the
consulting agreement between Union Atlantic and the Company, Union Atlantic has
designated Mr. Mahoney as its representative to the Company's Board of
Directors.
Pursuant to its second consulting agreement with the Company, Union
Atlantic is providing the Company with the services of Robert O'Brien, a sales
and marketing specialist with over 25 years experience, including positions with
Truevision Corporation, Ulsi Systems, Inc., Softsmith Corporation, and Gap
Stores, Inc. The Company pays Union Atlantic a fee of $7,000 per month for Mr.
O'Brien's services and has agreed to reimburse Mr. O'Brien for business expenses
approved by the Company. Pursuant to such consulting agreement which expires
December 31, 1998, the Company has granted Mr. O'Brien an immediately
exercisable, three year option to purchase 2,462 shares of Common Stock at an
exercise price of $2.56 per share. The shares of Common Stock underlying such
option have been granted Demand and Piggyback Registration Rights. Mr. O'Brien
has also been
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granted an option to purchase 7,386 shares of Common Stock at a per share price
of $6.50 under the Company's 1997 Stock Option Plan.
ACQUISITION OF GALACTICOMM, INC.
The Company owns 99.9 percent of Galacticomm, Inc.'s common stock. In
November 1996, the Company acquired 8,037,203 shares of the common stock of
Galacticomm, Inc. (representing approximately 96% of Galacticomm, Inc.'s then
issued and outstanding shares of common stock) in exchange for the issuance of
150,263 shares of Common Stock and cash of $611,476. In February 1997, the
Company acquired an additional 848,404 shares of the common stock of
Galacticomm, Inc. in exchange for the issuance of 42,895 shares of Common Stock
and cash consideration of $56,937.
BERG AND TESSIER GRANT OF WARRANTS TO THE WALLENBERG TRUST
Peter Berg, Yannick Tessier and a third minority shareholder of the
Company have granted the Wallenberg Trust the right to purchase an aggregate of
615,496 shares of Common Stock from them at an exercise price of $3.25 per
share, pursuant to three warrants, dated March 15, 1997 (the "Private
Warrants"). On October 17, 1997, the parties agreed to extend the expiration
date of the Private Warrants from December 31, 1997 to March 31, 1998, as a
result of which the Company recognized an expense of approximately $30,000 in
the fourth quarter of 1997. The Wallenberg Trust may exercise the Private
Warrants at any time prior to March 31, 1998 and will be deemed to have
exercised the Private Warrants automatically on the date of this Prospectus. To
guarantee the Wallenberg Trust's payment of the exercise price for the Private
Warrants, the parties have entered into an escrow agreement (the "Warrant
Escrow"), pursuant to which certificates representing an aggregate of 615,496
shares of Common Stock underlying the Private Warrants (the "Escrowed Shares")
and the $2,000,000 aggregate exercise price (the "Escrowed Funds") have been
placed in escrow. On October 17, 1997, the escrow agreement was amended by the
parties to direct the escrow agent to use $500,000 of the Escrowed Funds to
purchase 10 Bridge Units in the name of the Wallenberg Trust. See "Recent
Financings." Such Bridge Units have been placed in the Warrant Escrow. If the
Private Warrants are exercised prior to March 31, 1998, the escrow agent will
distribute to the Wallenberg Trust the Escrowed Shares and the Bridge Warrants
included in such Bridge Units and will distribute to the three shareholders the
Escrowed Funds and the Bridge Notes included in such Bridge Units. If the
Private Warrants are not exercised by the Wallenberg Trust prior to March 31,
1998, the Escrowed Funds and Units will be returned to the Wallenberg Trust and
the Escrowed Shares will be returned to the three shareholders. A total of
$200,000 of the Escrowed Funds was loaned to the Company, which amount was
repaid to the Warrant Escrow at the closing of the Bridge Financing.
In consideration for the payment of $50,000 to the Company by the
Wallenberg Trust, the Company has granted the Wallenberg Trust the same
Piggyback Registration Rights and Demand Registration Rights with respect to the
shares of Common Stock underlying the Private Warrants as have been granted
under the Wallenberg Trust Stock Purchase Agreement. See "--Wallenberg Trust and
UA Partners Investments." The Company will not receive any of the proceeds from
the exercise of the Private Warrants.
Although the Company may have lacked sufficient disinterested independent
directors to ratify one or more of the foregoing transactions at the time that
they were initiated, the Company believes that the foregoing transactions
between the Company and its officers, directors and five percent or greater
shareholders were on terms no less favorable to the Company than those which
could have been obtained from unaffiliated parties. Any future material
transactions between the Company and its officers, directors or five percent or
greater shareholders will be on terms no less favorable to the Company than
could be obtained from unaffiliated parties.
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PRINCIPAL SHAREHOLDERS
The following table sets forth with respect to: (i) each person (or group)
who is known by the Company to own beneficially more than 5% of the Common
Stock, (ii) each of the Company's directors, (iii) each of the named executive
officers, and (iv) all directors and executive officers of the Company as a
group, certain information with respect to the beneficial ownership of the
Company's outstanding Common Stock as of the date of this Prospectus and as
adjusted to reflect: (a) the sale by the Company of the Units offered hereby;
and (b) the automatic exercise of the Private Warrants on the date of this
Prospectus. See "Certain Transactions--Berg and Tessier Grant of Warrants to the
Wallenberg Trust." Unless otherwise specified, the address of each shareholder
is the address of the Company set forth herein.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY PERCENTAGE BENEFICIALLY OWNED(1)
NAME OF BENEFICIAL OWNER OWNED(2) BEFORE OFFERING AFTER OFFERING
- ------------------------ ------------------- --------------- --------------
<S> <C> <C>
Peter Berg................................................... 1,215,749(3) 25.7% %
Yannick Tessier.............................................. 1,215,749(4) 25.7% %
Peder Sager Wallenberg Charitable Trust.................. 1,978,640(5) 42.8% %
Bayard Trust Company, Limited............................ 1,978,640(5) 42.8% %
Mees Pierson Management (Guernsey) Limited............... 1,978,640(5) 42.8% %
Insinger S.A. .............................................. 2,462,807(5)(6) 50.7% %
Timothy Mahoney ............................................. 226,955(6) 5.3% %
David Manovich............................................... 30,000(7) * *
Claus Stenbaek............................................... 6,155(8) * *
All directors and executive officers as
a group (four persons)....................................... 2,704,456 60 % %
</TABLE>
- -----------
(1) Percentage of ownership is based on 4,422,651 shares of Common Stock
outstanding immediately prior to this offering and shares of Common Stock
outstanding immediately after this offering. All such amounts include 48,849
shares of Common Stock underlying the UA Partners Note that will be
automatically converted on the effective date of this Prospectus. See "Certain
Transactions--Wallenberg Trust and UA Partners Investments." An asterisk in the
foregoing table indicates beneficial ownership of less than one percent.
(2) Calculated pursuant to Rule 13d-3(d)1 of the Exchange Act. Shares not
outstanding that are subject to options or other rights exercisable by the
holder thereof within 60 days of the date of this Prospectus are deemed
outstanding for the purposes of calculating the number and percentage owned by
such shareholder and all directors and officers as a group, but not deemed
outstanding for the purpose of calculating the percentage owned by each other
shareholder listed.
(3) Includes 295,438 shares of Common Stock over which Mr. Berg has granted the
Wallenberg Trust an option to purchase such shares at a per share exercise price
of $3.25, which options will be exercised automatically upon the effective date
of this offering. Also includes 36,902 shares of Common Stock over which Mr.
Berg has granted options to a total of nine persons to purchase such shares at a
per share exercise price of $3.05. Does not include options granted to Mr. Berg
to purchase an aggregate of 177,263 shares of Common Stock which are not
exercisable within 60 days of the date hereof. Such options were granted in
connection with Mr. Berg's employment agreement with the Company.
(4) Includes 295,438 shares of Common Stock over which Mr. Tessier has granted
the Wallenberg Trust an option to purchase such shares at a per share exercise
price of $3.25, which options will be automatically exercised upon the effective
date of this offering. Also includes 36,957 shares of Common Stock over which
Mr. Tessier has granted options to a total of five persons to
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purchase such shares at a per share exercise price of $3.05. Does not include
options granted to Mr. Tessier to purchase an aggregate of 177,263 shares of
Common Stock which are not exercisable within 60 days of the date hereof. Such
options were granted in connection with Mr. Tessier's employment agreement with
the Company.
(5) Includes: (i) an aggregate of 615,496 shares of Common Stock which will be
acquired by the Wallenberg Trust on the effective date of this Prospectus upon
the automatic exercise of options granted by Messrs. Berg and Tessier and
another stockholder of the Company; (ii) 543,895 shares of Common Stock acquired
upon the conversion of Wallenberg Trust Note; and (iii) 190,000 shares of Common
Stock underlying Bridge Warrants. See "Certain Transactions." The trustees of
the Wallenberg Trust are Bayard Trust Company Limited ("Bayard") and Mees
Pierson Management (Guernsey), Limited ("Mees Pierson"). Bayard is a
wholly-owned subsidiary of Insinger S.A. and has designated two of its directors
- -- Martyn D. Crespel and John B. Wilson -- to act on behalf of Bayard. Mees
Pierson is a subsidiary of Fortis AG and Fortis AMEV (collectively "Fortis") and
has designated two of its directors -- Paul Backhouse and Julie Scott -- to act
on behalf of Mees Pierson. Integro Trust (Jersey) Ltd., a subsidiary of Insinger
S.A., serves as trustee for three trusts -- the Hive Trust, the Coach Trust and
the Cascade Trust -- that beneficially own an aggregate of 257,212 shares of
Common Stock. Insinger S.A., a publicly-traded Luxembourg bank holding company,
disclaims any pecuniary interest in such shares or in the Wallenberg Trust
shares for which Bayard or Integro Trust (Jersey) Ltd. serves as the trustee.
Mr. Crespel, who serves as a director of Integro Trust (Jersey) Ltd., separately
beneficially owns 27,157 shares of Common Stock. Insinger S.A. also beneficially
owns 226,955 shares of Common Stock beneficially owned by Bayard Management
Services (BVI) Limited, a wholly-owned subsidiary of Insinger S.A. and one of
the managing members of Union Atlantic L.C. For a description of such
securities, see footnote 6 immediately below. Peder Sager Wallenberg disclaims
any beneficial ownership of the shares of Common Stock owned beneficially or of
record by the Wallenberg Trust. The address of Bayard and the Wallenberg Trust
is c/o Bayard, 2nd Floor, Queen's House, Don Road, St.Helier Jersey JEI 4HP,
Channel Islands, Great Britain. The address of Insinger S.A. is Residence Centre
du St Esprit, 1A, rue du St Esprit, L-1475, Luxembourg. The address of Mees
Pierson and Fortis, an international insurance, banking and investment company,
is Boulevard Emile Jacqmain 53, 1000 Brussels, Belgium.
(6) Represents: (i) warrants to purchase an aggregate of 57,827 shares of Common
Stock distributed by Union Atlantic, L.C. ("Union Atlantic") to the managing
members of Union Atlantic; (ii) 26,044 shares of Common Stock distributed by
Union Atlantic to the managing members of Union Atlantic; (iii) 48,849 shares of
Common Stock, issuable to Union Atlantic Partners I, Limited ("UA Partners")
upon conversion of the UA Partners Note; (iv) 48,849 shares of Common Stock
owned by UA Partners; (v) 7,386 shares issued to UA Partners to cancel certain
ratchet and other rights; and (vi) 38,000 shares of Common Stock underlying
Bridge Warrants. See "Certain Transactions."
(7) Represents warrants to purchase 30,000 shares of Common Stock. See
"Management--Compensation of Directors."
(8) Represents warrants to purchase 6,155 shares of Common Stock. See
"Management--Compensation of Directors." Mr. Stenbaek, who serves on the Board
of Directors of the Company as a representative of the Wallenberg Trust,
disclaims any beneficial ownership of the Common Stock owned beneficially or of
record by the Wallenberg Trust.
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DESCRIPTION OF SECURITIES
The following section does not purport to be complete and is qualified
in its entirety by reference to the detailed provisions of the Company's
Articles of Incorporation and Bylaws, copies of which have been filed with
the Company's Registration Statement on Form SB-2, of which this Prospectus
forms a part.
The Company's authorized capital consists of 20,000,000 shares of Common
Stock, par value $.0001 per share, and 1,000,000 shares of preferred stock, par
value $.001 per share (the "Preferred Stock").
COMMON STOCK
On the date of this Prospectus, there are 66 shareholders of record who
own 4,422,651 shares of issued and outstanding Common Stock, which includes
48,849 shares of Common Stock reserved for issuance upon the automatic
conversion of the UA Partners Note on the date of this Prospectus. See "Certain
Transactions." Upon completion of this offering, there will be shares of Common
Stock issued and outstanding. Each outstanding share of Common Stock is entitled
to one vote, either in person or by proxy, on all matters that may be voted upon
by the owners thereof at meetings of the shareholders. The holders of Common
Stock: (i) have equal ratable rights to dividends from funds legally available
therefor, when, as and if declared by the Board of Directors of the Company,
(ii) are entitled to share ratably in all of the assets of the Company available
for distribution to holders of Common Stock upon liquidation, dissolution or
winding up of the affairs of the Company, (iii) do not have preemptive,
subscription or conversion rights, or redemption or sinking fund provisions
applicable thereto, and (iv) are entitled to one non-cumulative vote per share
on all matters on which shareholders may vote at all meetings of shareholders.
The rights of the holders of Common Stock will be subject to, and may be
adversely affected by, the rights of the holders of any series of preferred
stock that may be issued in the future, including voting, dividend, and
liquidation rights.
The holders of shares of Common Stock of the Company do not have
cumulative voting rights, which means that the holders of more than 50% of such
outstanding shares, voting for the election of directors, can elect all of the
directors of the Company if they so choose and, in such event, the holders of
the remaining shares will not be able to elect any of the Company's directors.
UNITS
Each of the Units offered hereby consists of one share of Common Stock
and one Warrant. Neither the Common Stock nor the Warrants included in the Units
may be separately traded or transferred until the First Exercise Date.
WARRANTS
The Warrants will be issued in registered form pursuant to the terms of
a Warrant Agreement (the "Warrant Agreement") between the Company and
Continental Stock Transfer & Trust Co., New York, New York, as warrant agent
(the "Warrant Agent").
The Company has authorized the issuance of up to Warrants to purchase an
aggregate of shares of Common Stock (exclusive of securities issuable pursuant
to the Representative Unit Purchase Option) and has reserved an equivalent
number of shares of Common Stock for issuance upon exercise of such Warrants.
None of the Warrants are currently issued and outstanding.
For every two Warrants, the holder is entitled to purchase one share of
Common Stock upon payment of the exercise price set forth on the cover page of
this Prospectus, subject to adjustment. The Warrants are exercisable at any time
commencing (the "First Exercise Date") 90 days after the date of this
Prospectus, or on such earlier date as may be determined by the Company and the
Representative, and ending on the third anniversary of the date of this
Prospectus, provided that at such time a current prospectus relating to the
Common Stock is in effect and the Common Stock is qualified for sale or exempt
from qualification under applicable state securities laws. The Warrants are not
transferrable separately from the Common Stock issued with such Warrant as part
of the Units until the First Exercise Date.
The Company may, at its option, redeem all, but not less than all,
outstanding Warrants, commencing 30 days after the First Exercise Date upon not
less than 30 days prior notice to the registered holders of the Warrants for a
redemption price of $.05
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for each share of Common Stock to which the Warrant holder would then be
entitled upon exercise of the Warrants being redeemed, in the event that: (i)
there exists a current prospectus relating to the Common Stock issuable upon
exercise of the Warrants under an effective registration statement filed with
the Securities and Exchange Commission and the issuance of the Common Stock upon
exercise of the Warrants has been qualified for sale or exempt from
qualification under applicable state securities laws, and (ii) the shares of
Common Stock of the Company have had an average closing bid and asked price of
not less than 150% of the Warrant exercise price for a period of 20 consecutive
trading days ending three trading days prior to the date of the redemption
notice. Holders of Warrants will automatically forfeit their rights to purchase
the shares of Common Stock issuable upon exercise of such Warrants unless the
Warrants are exercised before 5:00 p.m. (Miami time) on the date set for
redemption. All of the outstanding Warrants may be affected. A notice of any
redemption of the redemption date is required to be mailed to each of the
registered holders of the Warrants by first class mail, postage prepaid, 30 days
before the date fixed for redemption. The notice of redemption is required to
specify the date fixed for redemption, and the right to exercise the Warrants
shall terminate at 5:00 p.m. (Miami time) on the redemption date.
The Warrants may be exercised upon surrender of the certificates
therefor on or prior to the final exercise date (as explained above) at the
offices of the Warrant Agent with the "Subscription Form" on the reverse side of
the certificate(s) completed and executed as indicated, accompanied by payment
(in the form of certified or cashier's check payable to the order of the
Company) of the full exercise price for the number of Warrants being exercised.
The holders of the Warrants will not have any of the rights or
privileges of shareholders of the Company (except to the extent they own Common
Stock of the Company) prior to the exercise of the Warrants. The exercise price
of the Warrants and the number of shares of Common Stock issuable upon the
exercise thereof are subject to adjustment upon the occurrence of certain evens
such as stock splits, stock dividends or the like, as set forth in the Warrant
Agreement.
In the event of a capital reorganization of the Company,
reclassification of the Common Stock or a consolidation or merger of the Company
with or into, or a disposition of substantially all of the Company's properties
and assets to, any other corporation, the Warrants then outstanding will
thereafter be exercisable into the kind and amount of shares of stock or other
securities or property (including cash) to which the holders thereof would have
been entitled if they had exercised such Warrants and received shares of Common
Stock immediately prior to such reorganization, reclassification, consolidation,
merger or disposition, consistent with the requirements for exercise set forth
in the Warrant Agreement.
For the life of the Warrants, the Warrant holders have the opportunity
to profit from a rise in the market price of the Common Stock without assuming
the risk of ownership of the shares of Common Stock issuable upon the exercise
of the Warrants, with a resulting dilution in the interest of the Company's
shareholders by reason of exercise of Warrants at a time when the exercise price
is less than the market price for the Common Stock. Further, the terms on which
the Company could obtain additional capital during the life of the Warrants may
be adversely affected as a result of the Warrants being outstanding. The Warrant
holders may be expected to exercise their Warrants at a time when the Company
would, in all likelihood, be able to obtain any needed capital by an offering of
Common Stock on terms more favorable than those provided for by the Warrants.
For a holder to exercise the Warrants there must be a current
registration statement in effect with the Securities and Exchange Commission and
registration or qualification with, or approval from, various state securities
agencies with respect to the shares or other securities underlying the Warrants.
The Company has agreed to use its best efforts to cause a registration statement
with respect to such securities under the Securities Act to continue to be
effective during the term of the Warrants and to take such other actions under
the laws of various states as may be required to cause the sale of Common Stock
upon exercise of Warrants to be lawful, unless such action would cause the
Company to be subject to general service of process or require it to amend its
charter documents or any action taken by the Company's board of directors.
However, the Company will not be required to honor the exercise of Warrants if,
in the opinion of the Company's Board of Directors upon advice of counsel, the
sale of securities upon exercise would be unlawful.
The Company is not required to issue fractional shares of Common Stock,
and in lieu thereof will make a cash payment based upon the current market value
of such fractional shares. A holder of the Warrants will not possess any voting
or any other rights as a shareholder of the Company unless he or she exercises
the Warrants.
The Warrant exercise price was arbitrarily determined by negotiation
between the Company and the Representative. The Company may reduce the exercise
price of the Warrants or extend the warrant expiration date upon notice to
Warrant holders. The
45
<PAGE>
foregoing is merely a summary of the rights and privileges of the holders of
Warrants, and is qualified in its entirety by reference to the Warrant
Agreement.
OUTSTANDING OPTIONS, WARRANTS AND CONVERTIBLE SECURITIES
On the date of this Prospectus, the following shares of Common
Stock may be acquired upon the exercise or conversion of outstanding
options, warrants (exclusive of the Warrants) or convertible securities: (i)
164,337 shares of Common Stock upon the exercise of presently issued and
outstanding stock options granted under the Company's 1997 Stock Option Plan;
(ii) 393,143 shares of Common Stock upon the exercise of outstanding options
granted outside of the 1997 Stock Option Plan; (iii) 173,482 shares of Common
Stock which may be acquired upon the exercise of two warrants; (iv) 48,849
shares of Common Stock underlying the UA Partners convertible promissory
note which will be automatically converted on the date of this
Prospectus; and (v) 957,600 shares of Common Stock reserved for issuance upon
the exercise of the Bridge Warrants, which amount includes warrants to purchase
159,600 shares of Common Stock granted to the Representative for serving as the
placement agent of the Bridge Financing. See "Recent Financings."
REGISTRATION RIGHTS AND SALES BY CERTAIN SHAREHOLDERS
The Company has granted Demand Registration Rights and Piggyback
Registration Rights to the Wallenberg Trust, UA Partners, Union Atlantic and
Robert O'Brien with respect to an aggregate of 2,002,766 shares of Common
Stock held by them and/or issuable to them upon conversion or exercise of
promissory notes or warrants held by them. See "Certain Transactions." The
Demand Registration Rights are limited to one registration and may not be
exercised until the earlier of November 20, 1999 or the date the Company's
equity securities are publicly traded. The Piggyback Registration Rights provide
that if the Company proposes to register any of its securities under the Act,
the holders of such rights are entitled to include shares of Common Stock in the
registration. Such registration rights are subject to certain conditions and
limitations, among them the right of the underwriters of a registered offering
to limit the number of shares included in such registration.
Pursuant to the terms of the UPOs sold to the Representative in
connection with this offering, the Company has agreed that, for a period of four
years beginning on the first anniversary of this offering, that upon written
demand of the holders of a majority of the UPOs it will, on one occasion,
register for sale in a public offering under the Securities Act all or any
portion of the securities issuable upon exercise of the UPOs. See
"Underwriting." Any such registration would be at the Company's expense. The
Company has also agreed to include such underlying securities in any appropriate
registration statement which is filed by the Company during the four years
beginning one year from the date of this Prospectus.
In connection with the Bridge Financing, the Company agreed to register
the shares of Common Stock underlying the Bridge Warrants in a registration
statement for an initial public offering of the Company's securities. See
"Recent Financings." Accordingly, an aggregate of 957,600 shares of Common Stock
underlying the Bridge Warrants have been included in the registration statement
of which this Prospectus forms a part. Such registration includes 159,600 shares
of Common Stock underlying Bridge Warrants granted to the Representative for
serving as the placement agent of the Bridge Financing. The Bridge Warrants are
exercisable at price of $3.75 per share until October 27, 2000. Holders of the
Bridge Warrants have agreed not to sell or transfer the shares of Common Stock
underlying the Bridge Warrants for a six-month period following the date of this
Prospectus unless otherwise agreed to by the Representative. Sales of Common
Stock after the expiration of the six month period by such selling shareholders
or even the potential of such sales will likely have an adverse effect on the
market prices of the Units, Common Stock and the Warrants.
PREFERRED STOCK
The Company's Board of Directors has the authority to issue 1,000,000
shares of Preferred Stock, $.001 par value, none of which is issued and
outstanding, in one or more series and to fix, by resolution, conditional, full,
limited or no voting powers, and such designations, preferences and relative,
participating, optional or other special rights, if any,and the qualifications,
limitations or restrictions thereof, if any, including the number of shares in
such series (which the Board may increase or decrease as permitted by Florida
law), liquidation preferences, dividend rates, conversion or exchange rights,
redemption provisions of the shares constituting any series, and such other
special rights and protective provision with respect to any class or series as
the Board may deem advisable without any further vote or action by the
shareholders. Any shares of Preferred Stock so issued would have priority over
the Common Stock with respect to dividend or liquidation rights or both and
could have voting and other rights
46
<PAGE>
of shareholders. The issuance of Preferred Stock with voting or conversion
rights may adversely affect the voting rights of the holders of Common Stock.
The Company has no present plans to issue shares of Preferred Stock.
CERTAIN PROVISIONS OF THE ARTICLES AND BYLAWS
GENERAL. A number of provisions of the Articles of Incorporation
("Articles") and Bylaws ("Bylaws") of the Company concern matters of corporate
governance and the rights of shareholders. Certain of these provisions, as well
as the ability of the Board of Directors to issue shares of Preferred Stock and
to set the voting rights, preferences and other terms thereof, may be deemed to
have an anti-takeover effect and may discourage takeover attempts not first
approved by the Board of Directors (including takeovers which certain
shareholders may deem to be in their best interests). To the extent takeover
attempts are discouraged, temporary fluctuations in the market price of the
Common Stock, which may result from actual or rumored takeover attempts, may be
inhibited. These provisions, together with the ability of the Board to issue
Preferred Stock without further shareholder action, also could delay or
frustrate the removal of incumbent Directors or the assumption of control by
shareholders, even if such removal or assumption would be beneficial to
shareholders of the Company. These provisions also could discourage or make more
difficult a merger, tender offer or proxy contest, even if they could be
favorable to the interests of shareholders, and could potentially depress the
market price of the Common Stock. The Board of Directors believes that these
provisions are appropriate to protect the interests of the Company and all of
its shareholders.
MEETINGS OF SHAREHOLDERS. The Bylaws provide that a special meeting of
shareholders may be called by the Board of Directors or the holders of not less
than 10% of the outstanding Common Stock entitled to vote at such a meeting
unless otherwise required by law. The Company's Bylaws provide that only those
matters set forth in the notice of the special meeting may be considered or
acted upon at that special meeting, unless otherwise provided by law. In
addition, the Bylaws set forth certain advance notice and informational
requirements and time limitations on any director nomination or any new business
which a shareholder wishes to propose for consideration at an annual meeting of
shareholders.
INDEMNIFICATION AND LIMITATION OF LIABILITY. The Articles provide that
directors, officers and employees and agents of the Company shall be indemnified
by the Company to the fullest extent authorized by Florida law, as it now exists
or may in the future be amended, against all expenses and liabilities reasonably
incurred in connection with service for or on behalf of the Company. The
Articles also provide that the right of directors and officers to
indemnification shall not be exclusive of any other right possessed or hereafter
acquired under any bylaw, agreement, vote of shareholders or otherwise.
AMENDMENT OF BYLAWS. The Articles provide that the Bylaws may be amended
or repealed by the Board of Directors or by the shareholders. Such action by the
Board of Directors requires the affirmative vote of a majority of the directors
then in office. Such action by the shareholders requires the affirmative vote of
the holders of at least two-thirds of the total votes eligible to be cast by
holders of voting stock with respect to such amendment or repeal at an annual
meeting of shareholders or a special meeting called for such purposes.
SHARES ELIGIBLE FOR FUTURE SALE
After completion of this offering, the Company will have shares of
Common Stock outstanding assuming no exercise of the Warrants, the Bridge
Warrants, the Underwriters' over-allotment option, the Representative Unit
Purchase Option or any other outstanding options or warrants. Of these shares,
all of the shares of Common Stock included in the Units offered hereby will be
freely tradeable without restriction or further registration under the
Securities Act, unless purchased by "affiliates" of the Company, as that term is
defined in Rule 144. The remaining 4,422,651 shares of Common Stock were
issued and sold by the Company in private transactions and are eligible for
public sale only if registered under the Securities Act, sold in accordance with
Rule 144 thereunder or pursuant to an exemption from registration.
In general, under Rule 144 under the Securities Act as currently in
effect, any affiliate of the Company or any person (or persons whose shares are
aggregated in accordance with the Rule) who has beneficially owned restricted
securities for at least one year would be entitled to sell within any
three-month period a number of shares that does not exceed the greater of 1% of
the outstanding shares of Common Stock or the reported average weekly trading
volume in the over-the-counter market for the four weeks preceding the sale.
Sales under Rule 144 are also subject to certain manner of sale restrictions and
notice requirements and to the availability of current public information
concerning the Company. Persons who have not been affiliates of the Company for
at least three months and who have held their shares for more than two years are
entitled to sell restricted securities without regard to the volume, manner of
sale, notice and public information requirements of Rule 144.
47
<PAGE>
The Company, its executive officers, directors and shareholders (other
than those noted below) have agreed that for a period of one year from the date
of this Prospectus, they will not, without the prior written consent of the
Representative, offer, sell, contract to sell, or otherwise dispose of, any
shares of Common Stock or any securities convertible into, or exercisable or
exchangeable for, shares of Common Stock. See "Underwriting." Such lock-up does
not apply to the following securities:___________________________________. The
Representative, in its sole discretion at any time and without notice, may
release any and all shares from the lock-up agreement and permit holders of the
shares to resell all or any portion of their shares prior to the expiration of
the one-year lock-up period.
Prior to this offering, there has been no market for the Company's
securities and no prediction can be made as to the effect, if any, that market
sales of shares of Common Stock or the availability of such shares for sale will
have on the market prices prevailing from time to time. The possibility that
substantial amounts of shares of Common Stock may be sold in the public market
may adversely affect prevailing market prices for the shares of Common Stock
and/or may impair the Company's ability to raise equity capital in the future.
TRANSFER AGENT AND WARRANT AGENT
The transfer agent for the Common Stock and the Warrant Agent for the
Warrants is Continental Stock Transfer & Trust Co., New York, New York.
UNDERWRITING
The Underwriters named below, for whom First Equity Corporation of
Florida is acting as Representative, have severally agreed, subject to the terms
and conditions of the Underwriting Agreement (a copy of which is an exhibit to
the Registration Statement filed with the Commission of which this Prospectus is
a part) to purchase and pay for the number of Units from the Company set forth
opposite their respective names below:
UNDERWRITERS NUMBER OF UNITS
- ------------ ---------------
First Equity Corporation of Florida................
Total............................................
The Units are being sold on a firm commitment basis. The Underwriting
Agreement provides, however, that the obligations of the several Underwriters to
purchase and pay for the Units are subject to certain conditions precedent,
including approval of certain legal matters by counsel. The Underwriters are
committed to purchase all of the Units offered hereby if any are purchased. The
Units are being offered by the Underwriters, subject to prior sale, when, as and
if delivered to and accepted by the Underwriters.
The Representative has advised the Company that the Underwriters
propose initially to offer the Units to the public at the public offering price
set forth on the cover page of this Prospectus. The Underwriters may allow to
certain dealers who are members of the National Association of Securities
Dealers, Inc. ("NASD") concessions not to exceed $____ per Unit, of which amount
a sum not in excess of $.____ per Unit may be re-allowed by such dealers to
other dealers who are members of the NASD. Although the Representative will
not change the public offering price until after the initial public offering
has been completed, the concessions and the reallowances may be changed by the
Representative thereafter.
The Company has granted to the Underwriters an option, exercisable not
later than 45 days after the date of this Prospectus, to purchase from the
Company at the public offering price, less underwriting discounts and the
non-accountable expense allowance, up to additional Units. The Underwriters may
exercise this option in whole or, from time to time, in part, for the sole
purpose of covering over-allotments, if any, made in connection with the sale of
the Units offered hereby. To the extent the Underwriters exercise such option,
each Underwriter will have a firm commitment, subject to certain conditions, to
purchase that number of the additional Units.
The Company has agreed to pay the Representative a non-accountable
expense allowance equal to 3% of the gross proceeds of this offering (including
the sale of any Units subject to the over-allotment option), of which $25,000
has been paid as of the date of this Prospectus. The Company has also agreed to
pay all expenses in connection with qualifying the Units offered
48
<PAGE>
hereby for sale under the laws of such states as the Representative may
designate, including fees and expenses of counsel (up to $25,000) retained for
such purposes by the Representative and the costs and disbursements in
connection with qualifying the offering with the NASD.
The Company has agreed, upon closing of this offering, to sell to the
Representative and its designees, for $75.00, Representative Unit Purchase
Options ("UPOs") which entitle the Representative to purchase Units (the
"Representative Units"), exclusive of Units sold under the Underwriters'
over-allotment option. The UPOs will be exercisable for a four-year term,
commencing one year from the effective date of the offering, at an exercise
price equal to $ (120% of the public offering price of the Units offered
hereby). The Representative Units, issuable upon exercise of the UPOs, consist
of one share of Common Stock and a non-redeemable Warrant. The UPOs will be
restricted from sale, transfer, assignment or hypothecation (other than to
officers and partners of the Representative or to other NASD members
participating in the offering or their officers or partners) for one year
following the date of this Prospectus. The number of Units covered by the UPOs
and the exercise price are subject to adjustment upon the subdivision,
combination or reclassification of the Common Stock, or certain mergers and
consolidations.
It may be expected that the UPOs will be exercised only if it is
advantageous to the Representative. Therefore, during the period in which the
UPOs may be exercised, the holders thereof are given, at a nominal cost, the
opportunity to profit from a rise in the market price of the Common Stock. To
the extent that the UPOs are exercised, dilution to the interests of the
Company's shareholders will occur. Further, the terms upon which the Company
will be able to obtain additional equity capital may be adversely affected since
the holders of the UPOs can be expected to exercise them at a time when the
Company would, in all likelihood, be able to obtain any needed capital on terms
more favorable to the Company than those provided in the UPOs. Any gain from the
sale of the shares issued upon exercise of the UPOs or the underlying
Representative Warrants or the shares underlying the Representative Warrants may
be deemed additional underwriter compensation to the Representative. The Company
has granted the Representative certain registration rights with respect to the
securities underlying the UPOs. See "Description of Securities -- Registration
Rights and Sales by Certain Shareholders."
The Company has also granted to the Representative the right, for a
period of three years after the date of this Prospectus, to nominate a designee
of the Representative for election to the Board of Directors of the Company. The
Company's officers, directors and shareholders (other than___) have agreed to
vote their shares of Common Stock in favor of such designee. The Representative
has not yet exercised its right to designate such a person. In addition, the
Company has granted to the Representative for a period of two years after the
date of this Prospectus the right to represent the Company in connection with
any merger or acquisition involving the Company for which the Company intends to
use the services of an investment banker or a financial advisor and a right of
first refusal to manage any public or private offering of the Company's
securities. The Company does not presently anticipate incurring any expenses
related to these arrangements with the Representative.
The Representative acted as placement agent for the Company in
connection with the Bridge Financing and was paid a placement fee equal to: (i)
cash compensation equal to 10 percent of the principal amount of the Bridge
Notes; (ii) a non-accountable expense allowance equal to 3 percent of the
principal amount of the Bridge Notes and certain accountable expenses totaling
$10,000; and (iii) warrants to purchase 159,600 shares of Common Stock on
substantially the same terms as the Bridge Warrants, which shares have been
included in the registration statement of which this Prospectus forms a part.
See "Description of Securities -- Registration Rights and Sales by Certain
Shareholders."
The holders of an aggregate of shares of Common Stock ( % of the
outstanding shares of the Company's Common Stock after giving effect to this
offering, but without giving effect to the issuance, if any, of shares pursuant
to the over-allotment option), consisting of all the officers and directors of
the Company, and all shareholders of the Company (other than___), have agreed
not to sell, transfer or otherwise dispose of any beneficial interest in any
Common Stock owned by them, other than gifts and intra-family transfers (so long
as the holders remain subject to the restrictions), for a period of 12 months
following the date of this Prospectus, without the prior written consent of the
Representative.
Prior to this offering there has been no public trading market for the
Units, the Common Stock of the Warrants. Consequently, the initial public
offering price of the Units and the exercise price of the Warrants have been
determined by negotiation between the Company and the Representative, do not
necessarily bear any relationship to the Company's assets, book value, revenues
or other established criteria of value, and should not be considered indicative
of the actual value of the Company's securities. Factors considered in
determining such public offering price, in addition to prevailing market
conditions, include the history of and prospects for the industry in which the
Company competes, an assessment of the Company's management, its past and
present operations, the prospects of the Company, market prices of similar
securities of comparable publicly-traded companies, the general condition of the
securities market and such other factors as were deemed relevant.
In connection with the offering, the Underwriters may engage in
transactions that stabilize, maintain or otherwise affect the prices of the
Units, the Common Stock and the Warrants. Specifically, the Underwriters may
overallot the offering,
49
<PAGE>
creating a syndicate short position. The Underwriters may bid for and purchase
Units, shares of Common Stock and Warrants in the open market to cover such
syndicate short position or to stabilize the price of the Units, the Common
Stock and the Warrants. The Underwriters may also reclaim selling concessions
allowed to a dealer for distributing the Units in the offering, if the
Underwriters repurchase previously distributed Units in transactions to cover
short positions, in stabilization transactions or otherwise. Any of these
activities may stabilize or maintain the market price of the Units, the Common
Stock and the Warrants above independent market levels. The Underwriters are not
required to engage in these activities, and may end any of these activities at
any time.
The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act, or to contribute to
payments the Underwriters may be required to make.
The Representative has informed the Company that it does not expect
sales to discretionary accounts by the Underwriters to exceed 5% of the total
number of Units offered hereby. See "Principal Shareholders."
In connection with the Underwriting Agreement, Messrs. Berg and Tessier
will on the closing of this offering enter into a Voting Agreement with the
Company, pursuant to which Messrs. Berg and Tessier will agree, for a period of
two years following the closing of this offering, to vote all voting securities
beneficially owned by them in the same proportion as the votes cast by
non-affiliates of the Company in any vote of the shareholders of the Company on
the following two matters: (i) a liquidation of the Company; or (ii) any
business combination in which the Company is not the surviving corporation or
any sale of all or substantially all of the Company's assets.
The foregoing includes a summary of all material terms of the
Underwriting Agreement. Such summary, however, is qualified in its entirety
by reference to the copy of the form of Underwriting Agreement filed as an
exhibit to the Company's Registration Statement of which this Prospectus forms a
part.
LEGAL MATTERS
The validity of the issuance of the securities being offered hereby
will be passed upon for the Company by Lucio, Mandler, Croland, Bronstein,
Garbett, Stiphany & Martinez, P.A., Miami, Florida. Akerman, Senterfitt &
Eidson, P.A, Miami, Florida is acting as counsel for the Underwriter in
connection with this offering.
EXPERTS
The consolidated financial statements of the Company as of and for the
year ended December 31, 1996 and the financial statements of Galacticomm, Inc.
for the year ended December 31, 1995 and the ten months ended October 31, 1996
have been included herein and in the registration statement in reliance upon the
reports of KPMG Peat Marwick LLP, independent certified public accountants,
appearing elsewhere herein and upon the authority of said firm as experts in
auditing and accounting.
AVAILABLE INFORMATION
This Prospectus constitutes a part of a Registration Statement on Form
SB-2 filed by the Company with the Securities and Exchange Commission under the
Securities Act with respect to the Units offered hereby. This Prospectus omits
certain of the information contained in the Registration Statement, and
reference is hereby made to the Registration Statement and related exhibits and
schedules for further information with respect to the Company and the Common
Stock offered hereby. Any statements contained herein concerning the provisions
of any document are not necessarily complete, and in each such instance
reference is made to the copy of such document filed as an exhibit to the
Registration Statement. Each such statement is qualified in its entirety by such
reference. The Registration Statement and the exhibits and schedules forming a
part thereof can be inspected and copies at the public reference facilities
maintained by the Securities and Exchange Commission at Room 124, Judiciary
Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and should also be
available for inspection and copying at the following regional offices of the
Securities and Exchange Commission: 7 World Trade Center, Suite 1300, New York,
New York 10007; and Northwestern Atrium Center, 500 West Madison Street, Suite
1400, Chicago, Illinois 60661-2511. Copies of such material can be obtained from
the Public Reference Section of the Securities and Exchange Commission, 450
Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. The
Registration Statement may also be obtained from the Securities and Exchange
Commission's website on the Internet, the address of which is
http://www.sec.gov. Consistent with the requirements for continued inclusion on
the NASDAQ Stock Market, the Company intends to furnish its shareholders with
annual reports containing financial statements certified by independent auditors
and quarterly reports for the first three quarters of each year containing
unaudited financial statements.
50
<PAGE>
<TABLE>
<CAPTION>
INDEX TO FINANCIAL STATEMENTS
GALACTICOMM TECHNOLOGIES, INC. AND SUBSIDIARY PAGE NUMBERS
------------
<S> <C>
Report of Independent Auditors......................................................................................F-2
Consolidated Balance Sheets as of December 31, 1996
and (Unaudited) as of September 30, 1997 ...........................................................................F-3
Consolidated Statements of Operations for the year ended December 31, 1996
and (Unaudited) for each of the nine months ended September 30, 1997 and 1996 ......................................F-4
Consolidated Statements of Shareholders' Equity for the year ended December 31, 1996
and (Unaudited) for the nine months ended September 30, 1997........................................................F-5
Consolidated Statements of Cash Flows for the year ended December 31, 1996
and (Unaudited) for the nine months ended September 30, 1997 and 1996 ..............................................F-6
Notes to Consolidated Financial Statements..........................................................................F-7
GALACTICOMM, INC.
Report of Independent Auditors......................................................................................F-22
Statements of Operations for the year ended December 31, 1995
and for the ten months ended October 31, 1996.......................................................................F-23
Statements of Cash Flows for the year ended December 31, 1995
and for the ten months ended October 31, 1996 ......................................................................F-24
Notes to Financial Statements.......................................................................................F-25
PRO FORMA
Unaudited Pro Forma Consolidated Statement of Operations of Galacticomm Technologies, Inc.
for the year ended December 31, 1996................................................................................F-31
</TABLE>
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
To The Board of Directors
Galacticomm Technologies, Inc.
Fort Lauderdale, Florida:
We have audited the accompanying consolidated balance sheet of Galacticomm
Technologies, Inc. and subsidiary as of December 31, 1996, and the related
consolidated statements of operations, shareholders' equity and cash flows for
the year then ended. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Galacticomm
Technologies, Inc. and subsidiary as of December 31, 1996 and the results of
their operations and their cash flows for the year then ended in conformity with
generally accepted accounting principles.
/s/ KPMG PEAT MARWICK LLP
Miami, Florida
September 9, 1997, except as to notes
12(a) and 12(c), which are as of
October 28, 1997, the last paragraph
of note 1 and note 6, which are as of
January 8, 1998 and note 12(e), which
is as of January 20, 1998
F-2
<PAGE>
<TABLE>
<CAPTION>
GALACTICOMM TECHNOLOGIES, INC.
AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, SEPTEMBER 30,
ASSETS 1996 1997
------ ---- ----
(Unaudited)
<S> <C> <C>
Current assets:
Cash $ 1,466,392 64,486
Accounts receivable, net of allowance of $90,363 in 1996 and
$164,000 in 1997 31,762 382,094
Inventories 83,730 92,694
Prepaid expenses and other current assets 32,991 78,276
----------- -----------
Total current assets 1,614,875 617,550
Property and equipment, net 544,569 563,450
Goodwill, net 2,079,334 1,875,819
Deferred debt issuance 139,359 78,386
Deferred offering costs 10,000 407,902
Other assets 45,883 202,168
------------ -----------
Total assets $ 4,434,020 3,745,275
============ ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable 395,994 893,986
Notes payable and short-term borrowings 343,575 198,575
Notes payable-shareholder 50,000 80,000
Deferred revenues 305,145 212,476
Accrued expenses 921,678 722,767
Other current liabilities 74,063 34,210
------------ ------------
Total current liabilities 2,090,455 2,142,014
Convertible promissory notes 1,375,000 1,375,000
Other liabilities 18,999 6,899
------------ ------------
Total liabilities 3,484,454 3,523,913
------------ -----------
Commitments and contingencies
Shareholders' equity:
Preferred stock; $.001 par value; 1,000,000 shares
authorized; none issued - -
Common stock; $.0001 par value; 20,000,000 shares
authorized; 3,423,108 shares issued and
outstanding December 31, 1996; 3,829,907 shares
issued and outstanding September 30, 1997 342 383
Additional paid-in capital 2,009,593 3,193,474
Accumulated deficit (1,060,369) (2,972,495)
------------ -----------
Total shareholders' equity 949,566 221,362
------------ -----------
Total liabilities and shareholders' equity $ 4,434,020 3,745,275
============ ===========
</TABLE>
See accompanying notes to consolidated financial statements.
F-3
<PAGE>
<TABLE>
<CAPTION>
GALACTICOMM TECHNOLOGIES, INC.
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
NINE MONTHS ENDED
YEAR ENDED SEPTEMBER 30,
DECEMBER 31, ------------------------------------
1996 1997 1996
---- ---- ----
(Unaudited)
<S> <C> <C> <C>
Revenue:
Licensing fee and royalties $ 1,482,510 274,286 1,159,246
Product sales 210,233 2,414,135 -
---------- --------- ----------
Total revenue 1,692,743 2,688,421 1,159,246
Operating costs and expenses:
Cost of revenue 758,050 682,738 594,214
Selling, general and administrative 1,531,130 2,376,280 557,424
Depreciation 47,533 130,698 18,495
Amortization of intangibles 38,665 394,140 537
Compensation expense on warrants - 113,760 -
Research and development 225,549 434,045 -
Customer support 72,772 324,513 -
----------- ---------- ----------
Total costs and expenses 2,673,699 4,456,174 1,170,670
----------- ---------- ----------
Loss from operations (980,956) (1,767,753) (11,424)
Other income (expense):
Interest expense (91,217) (171,508) (4,268)
Other income, net 30,905 27,135 709
----------- ---------- ----------
(60,312) (144,373) (3,559)
----------- ---------- ----------
Net loss $ (1,041,268) (1,912,126) (14,983)
=========== ========== ==========
Net loss per share $ (0.32) (.38) (.01)
==== === ===
Number of shares used in calculating net loss per
share 3,229,101 5,030,371 2,982,455
=========== ========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE>
<TABLE>
<CAPTION>
GALACTICOMM TECHNOLOGIES, INC.
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
Year ended December 31, 1996 and unaudited
nine months ended September 30, 1997
COMMON STOCK ADDITIONAL
NUMBER OF PAR PAID-IN ACCUMULATED
SHARES VALUE CAPITAL DEFICIT TOTAL
------ ----- ------- ------- -----
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1995 1,375,192 $ 137 19,863 (19,101) 899
Capital contributions - - 29,684 - 29,684
Stock issued to acquire Tessier 1,282,183 128 194,967 - 195,095
Stock issued in private placement (net of $139,359
of issuance costs) 537,337 54 1,235,587 - 1,235,641
Stock issued to acquire Galacticomm 228,396 23 529,492 - 529,515
Net loss for the year ended December 31, 1996 - - - (1,041,268) (1,041,268)
-------- --- -------- --------- ---------
Balance, December 31, 1996 3,423,108 342 2,009,593 (1,060,369) 949,566
Stock issued to acquire Galacticomm (unaudited) 42,895 4 139,891 - 139,895
Warrants issued (unaudited) - - 113,760 - 113,760
Stock issued in private placement (net of $126,209 of issuance
costs) (unaudited) 259,802 27 844,526 - 844,553
Stock issued to terminate royalty agreement (unaudited) 22,857 2 85,712 - 85,714
Stock issued for ratchet rights (unaudited) 81,245 8 (8) - -
Net loss for the nine months ended September 30, 1997
(unaudited) - - - (1,912,126) (1,912,126)
--------- --- --------- --------- ----------
Balance, September 30, 1997 (unaudited) 3,829,907 $ 383 3,193,474 (2,972,495) 221,362
========= === ========= ========= ==========
See accompanying notes to consolidated financial statements.
</TABLE>
F-5
<PAGE>
<TABLE>
<CAPTION>
GALACTICOMM TECHNOLOGIES, INC.
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED
YEAR ENDED SEPTEMBER 30,
DECEMBER 31, -------------------------------
1996 1997 1996
---- ---- ----
(Unaudited)
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss $ (1,041,268) (1,912,126) (14,983)
Adjustments to reconcile net loss to net cash (used in)
provided by operating activities:
Depreciation and amortization 86,198 577,101 19,032
Loss on sale of property and equipment 10,373 15,368 -
Compensation expense on warrants - 113,760 -
Non-cash royalties expense - 85,714 -
Changes in assets and liabilities, net of
effects of purchase
business combinations:
Accounts receivable 65,692 (415,332) (80,178)
Inventories 8,046 (8,964) -
Prepaid expenses and other current assets 13,372 (45,285) (71,982)
Other assets (33,571) (156,285) 4,959
Accounts payable and accrued expenses 525,744 299,081 160,834
Deferred revenue (50,383) (92,669) -
Other liabilities (37,963) (51,953) -
----------- ----------- -------
Net cash (used in) provided by operating activities (453,760) (1,591,590) 17,682
----------- ----------- -------
Cash flows from investing activities:
Purchases of property and equipment (150,220) (168,904) (150,220)
Proceeds from the sale of property and equipment 65,000 - -
Acquisitions, net of cash acquired (548,911) 56,937 -
----------- ----------- -------
Net cash used in investing activities (634,131) (111,967) (150,220)
----------- ----------- -------
Cash flows from financing activities:
Proceeds from notes payable 80,000 - 206,358
Proceeds from convertible promissory notes 1,375,000 - -
Proceeds from loans receivable - - 8,122
Repayments on notes payable (35,000) (145,000) -
Net proceeds from the sale of common stock 1,235,641 844,553 29,685
Debt issuance costs (139,359) - -
Offering costs (10,000) (397,902) -
Additional capital contributions 29,684 - -
----------- ----------- -------
Net cash provided by investing activities
2,535,966 301,651 244,165
----------- ----------- -------
Net increase (decrease) in cash 1,448,075 (1,401,906) 111,627
Cash, beginning of period 18,317 1,466,392 18,317
----------- ----------- -------
Cash, end of period $ 1,466,392 64,486 129,944
=========== =========== =======
Supplemental disclosure of cash flow information:
Cash paid during the period for interest $ 12,016 68,750 1,738
=========== ============ =======
</TABLE>
See accompanying notes to consolidated financial statements.
F-6
<PAGE>
GALACTICOMM TECHNOLOGIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1996 and (unaudited) September 30, 1997
(1) THE COMPANY AND LIQUIDITY
Galacticomm Technologies, Inc. and subsidiary (the "Company") develops
and licenses computer software applications and tools. The Company was
incorporated in December 1995 under the name of Iview Software, Inc.
("Iview"), and changed its name to Galacticomm Technologies, Inc. after
acquiring Galacticomm, Inc. ("Galacticomm") in November 1996 (see note
2). The Company was originally incorporated with 5,000,000 authorized
shares, par value $.001. At that time, 687,596 shares were issued of
which 607,875 were owned by the Chairman and Chief Executive Officer.
The consideration paid for these founders shares was $20,000. During
1996 the founding shareholders contributed an additional $29,684
bringing the per share price for the founders shares to $.036 per
share. On November 19, 1996, the Board of Directors approved the
recapitalization of the Company which increased the authorized shares
of common stock from 5,000,000 shares to 20,000,000, reduced the par
value from $.001 per share to $.0001 per share and effected a 2 for 1
split of the Company's common stock, increasing the number of shares
issued and outstanding to 1,375,192. In September 1997, the Company
effected a 4.061771824 for one reverse split of the Company's common
stock. The par value of each common share remained $0.0001 and a total
of $1,048 was reclassified from common stock to additional paid-in
capital. All share and per share amounts have been restated to
retroactively reflect the reverse stock split. In addition, the
Company's Board of Directors recommended and the shareholders approved
the authorization of 1,000,000 shares of preferred stock, par value
$0.001 per share.
Prior to the acquisition of Galacticomm, Iview developed, marketed and
supported software that enabled individuals to broadcast and receive
video and audio signals over the Internet and on dial-up networks and
offered online subscription services using such software. Galacticomm
was incorporated in July 1985 and develops and sells network-centric
software applications and tools. Its primary product, Worldgroup, a
client-server software, is a platform that merges Bulletin Board
Systems, E-Mail, and Worldgroup functions that enable enterprises to
provide client/server applications over the Internet and Intranet and
secure external data exchanges with customers, field agents, suppliers,
and others. On November 21, 1996, the Company merged with Tessier
Technologies, Inc. (see note 2). Tessier specialized in the on-line
software industry selling platform software from Galacticomm. Tessier
also developed its own line of software as add-ons to the baseline
products in both business and entertainment.
F-7
(Continued)
<PAGE>
GALACTICOMM TECHNOLOGIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
At December 31, 1996, the Company's current liabilities exceeded its
current assets by $475,580. Additionally, the Company incurred a net
loss of $1,041,268 for the year ended December 31, 1996. The
accompanying unaudited September 30, 1997 financial statements indicate
that these situations are continuing as current liabilities exceeded
current assets by $1,524,464 at September 30, 1997 and a net loss of
$1,912,126 was incurred for the nine months ended September 30, 1997.
Pursuant to its business strategy, the Company expects to continue
making expenditures on new product introductions, marketing, research
and development. As such, the Company expects to incur a loss in 1997
and does not expect to generate cash flow from operating activities
during 1997 sufficient to offset such expenditures. The Company's
losses have been funded through the sale of debt and equity securities
and during October 1997, the Company completed a bridge loan financing.
However, the Company is currently operating at a negative cash flow
position.
The Company plans to achieve positive cash flow from operations by
introducing new products and product upgrades and by increasing sales
of current products through increased marketing; targeted sales efforts
focused on, among others, value added resellers; and strategic
alliances with third party computer software and hardware companies,
including co-branding, licensing, OEM and bundling agreements. In
addition, the Company intends to improve its cash flow position by
raising additional capital through an initial public offering of its
securities [see note 12(a)] and, if necessary prior thereto, obtaining
interim debt financing.
There is no assurance that such conditions or events will occur.
(2) ACQUISITIONS
On August 26, 1996 the Company entered into an agreement with the
principal and controlling shareholder of Tessier to issue him shares of
the Company's common stock such that he would have the same percentage
interest in the Company as that of the then current controlling
shareholder (36 percent). On November 20, 1996, this agreement was
consummated as part of a merger between the Company and Tessier. Under
the plan of merger the Company acquired Tessier in exchange for
1,282,183 shares of the Company's common stock valued at $195,095.
On November 21, 1996, the Company acquired 96 percent of the
outstanding common stock of Galacticomm in exchange for 228,396 shares
of the Company's common stock valued at $529,515 and $698,978 in cash.
Such amounts include consideration of 150,263 shares of common stock
valued at $329,495 and $611,476 in cash exchanged for Galacticomm's
prior shareholder's interests, and $287,522 of acquisition costs
consisting of $87,502 in cash and 78,133 shares of common stock valued
at $2.56 per share (see note 8). Certain shares of the Galacticomm
common stock acquired by the Company on November 21, 1996 were subject
to a stock purchase warrant (the "Galacticomm Warrant") that had been
granted to certain third parties by the previous owner of such
Galacticomm common stock. In connection with the cancellation of the
Galacticomm Warrant, the two majority shareholder's of the Company
granted such holders 73,859 warrants (the "New Warrants") to purchase
shares of the Company's common stock. The New Warrants bear an exercise
price of $3.05 per warrant and may be exercised at any time through
November 21, 1999. The fair value of the New Warrants was immaterial to
the Company's acquisition of Galacticomm.
F-8
(Continued)
<PAGE>
GALACTICOMM TECHNOLOGIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The above transactions were recorded under the purchase method of
accounting. Accordingly, the results of operations of Tessier and
Galacticomm for the period from October 31, 1996 to December 31, 1996
have been included in the accompanying consolidated financial
statements. The operations from October 31, 1996 to November 20, 1996
for Tessier and to November 21, 1996 for Galacticomm, are not material
to the consolidated financial statements. The purchase prices have been
allocated to assets acquired and liabilities assumed based on the fair
market values at the dates of acquisition. The fair value of assets
acquired and liabilities assumed is as follows:
GALACTICOMM TESSIER
----------- -------
Current assets $ 347,136 44,360
Property and equipment 451,113 66,141
Goodwill 1,911,431 206,627
Current liabilities (1,452,338) (38,114)
Long-term liabilities (28,849) (83,919)
---------- --------
$ 1,228,493 195,095
========== ========
The consolidated statement of operations for the nine months ended
September 30, 1996 do not include Tessier and Galacticomm.
The following unaudited pro forma financial information for the Company
for the year ended December 31, 1996 gives effect to the Tessier and
Galacticomm acquisitions as if they had occurred on January 1, 1996,
after including the impact of certain adjustments, such as amortization
of goodwill and interest expense related to financings obtained to fund
the acquisitions. In management's opinion, the unaudited pro forma
combined results of operations are not necessarily indicative of the
actual results that would have occurred had the acquisition been
consummated at January 1, 1996, or of future operations of the acquired
companies under the ownership and management of the Company.
Revenues, net $ 6,189,505
=========
Net loss $ (4,221,950)
=========
Net loss per share $ (1.31)
=========
(3) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(A) UNAUDITED INTERIM FINANCIAL INFORMATION
The unaudited consolidated balance sheet as of September 30,
1997, and the unaudited consolidated statements of operations
and cash flows for the nine months ended September 30, 1997 and
1996 and the unaudited consolidated statement of shareholders'
equity for the nine months ended September 30, 1997 include, in
the opinion of management, all adjustments (consisting only of
normal recurring adjustments) necessary to present fairly the
Company's consolidated financial position, results of operations
and cash flows. Operating results for nine months ended
September 30, 1997 are not necessarily indicative of the results
that may be expected for the year ending December 31, 1997.
F-9
(Continued)
<PAGE>
GALACTICOMM TECHNOLOGIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(B) BASIS OF CONSOLIDATION
The consolidated financial statements include the accounts of
Galacticomm Technologies, Inc. and its wholly-owned subsidiary,
Galacticomm Inc. All intercompany transactions and accounts have
been eliminated in consolidation.
(C) CASH FLOWS
The Company considers investments with maturities of three
months or less, when purchased, to be cash equivalents.
(D) ACCOUNTS RECEIVABLE
Accounts receivable are principally from distributors and
end-users of the Company's products. The Company performs
periodic credit evaluations of its customers and has recorded an
allowance for potential credit losses and product returns of
$90,363 at December 31, 1996. The Company is subject to rapid
changes in technology and shifts in consumer demand which could
result in credit losses and product returns in excess of the
Company's reserves at December 31, 1996.
(E) INVENTORIES
Inventory is stated at the lower of cost or market. Cost is
determined using the first-in, first-out ("FIFO") method.
The Company's inventories consist primarily of software media,
manuals and related packaging materials and hardware and
hardware components which are subject to rapid technological
obsolescence or reduction in value as a result of new products
developed by competitors or as a result of normal competitive
pressures. The Company periodically estimates an allowance for
obsolete inventory based on current market conditions. Changes
in the marketplace may significantly affect management's
estimates.
(F) LONG-LIVED ASSETS
Property and equipment are stated at cost less accumulated
depreciation. Property and equipment are depreciated using the
straight-line method over the estimated useful lives of the
assets. Maintenance and repairs are charged to expense as
incurred; betterments are capitalized. Upon the sale or
retirement of assets, the related cost and accumulated
depreciation are removed from the assets and any gain or loss is
recognized.
Goodwill, which represents the excess of purchase price over
fair value of net assets acquired, is amortized on a
straight-line basis over the expected periods to be benefited,
generally three to five years. During 1996 approximately $38,000
was recorded as goodwill amortization expense.
The Company implemented the provisions of Statement of Financial
Accounting Standards No. 121, "ACCOUNTING FOR THE IMPAIRMENT OF
LONG-LIVED ASSETS AND FOR LONG-LIVED ASSETS TO BE DISPOSED OF,"
effective January 1, 1996. The Company reviews its long-lived
assets (property, plant and equipment, and related intangible
assets that arose from business combinations accounted for under
the purchase method) for impairment whenever events or
circumstances indicate that the carrying amount of an asset may
not be recoverable. If the sum of the expected cash flows,
undiscounted and
F-10
(Continued)
<PAGE>
GALACTICOMM TECHNOLOGIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
without interest, is less than the carrying amount of the asset,
an impairment loss is recognized as the amount by which the
carrying amount of the assets exceeds its fair value. The
adoption of Statement No. 121 had no impact on the Company's
financial position or results of operations.
(G) REVENUE RECOGNITION
Sales are recognized at the time the product is shipped, in
accordance with the provisions of American Institute of
Certified Public Accountants Statement of Position 91-1,
"Software Revenue Recognition." While the Company has no
obligations to perform future services subsequent to shipment,
the Company provides telephone customer support as an
accommodation to purchasers of its products. Costs associated
with this effort are not significant and are expensed as
incurred. Sales to distributors are subject to agreements
allowing limited rights of return and price protection. The
Company provides reserves for estimated future returns,
exchanges and price protection. The Company offers distributors
co-op funds that are used to promote the Company's products.
These funds are generally paid as a credit against outstanding
invoices and are included in marketing expense during the period
in which the revenue is recognized.
At December 31, 1996 the Company had deferred revenues recorded
in the accompanying balance sheet related to customer
subscriptions paid in advance.
(H) SOFTWARE LICENSING AGREEMENTS
During February and April 1996 the Company entered into service
agreements with two marketing and sales companies ("Sales
Companies"). Under these agreements there were various
compensation arrangements for sales services. For prepaid
services the Company received 45 percent of the prepaid amount.
In November 1996, the Company terminated these agreements and
entered into new licensing agreements with the two Sales
Companies to use the Company's service mark. These agreements
require royalties of 12 percent of the licensee's gross revenue
and expire in 1999. The revenue is recognized as the gross
revenue is reported by the licensees. During 1996 the revenue
from all the above agreements was approximately $1,480,000.
(I) SOFTWARE DEVELOPMENT COSTS
The Company accounts for software development costs under
Statement of Financial Accounting Standards No. 86, "Accounting
for Costs of Computer Software to Be Sold, Leased or Otherwise
Marketed" ("FAS 86"). Under FAS 86, the costs associated with
software development are required to be capitalized after
technological feasibility has been established. Costs incurred
by the Company subsequent to the establishment of technological
feasibility have been insignificant and, as a result, the
Company has not capitalized any development costs.
F-11
(Continued)
<PAGE>
GALACTICOMM TECHNOLOGIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(J) INCOME TAXES
The Company elected S corporation status effective upon
inception and maintained that status until October 29, 1996,
when it became a taxable corporation. Under S corporation
status, each shareholder is individually responsible for
reporting their share of taxable income or loss. Accordingly,
through October 29, 1996, no provision for Federal income taxes
has been reflected in the accompanying consolidated financial
statements. A provision for state income taxes is made where
applicable. Given that the Company has incurred net losses since
inception, had the Company been a taxable corporation prior to
October 30, 1996, no provision for income taxes would have been
recorded.
Beginning October 30, 1996, the Company follows the asset and
liability method of accounting for income taxes in accordance
with Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes" (Statement 109). Under Statement
109, deferred tax assets and liabilities are recognized for the
future tax consequences attributable to differences between the
financial statement carrying amounts of existing assets and
liabilities and their respective tax bases. Deferred tax assets
and liabilities are measured using enacted tax rates expected to
apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. Under
Statement 109, the effect on deferred tax assets and liabilities
of a change in tax rates is recognized in income in the period
that includes the enactment date.
(K) STOCK OPTION PLAN
The Company accounts for its stock option plan (see note 12) in
accordance with the provisions of SFAS No. 123, Accounting for
Stock-Based Compensation, which permits entities to recognize as
expense over the vesting period the fair value of all
stock-based awards on the date of grant. Alternatively, SFAS No.
123 also allows entities to apply the provisions of Accounting
Principles Board ("APB") Opinion No. 25, Accounting for Stock
Issued to Employees and provide pro forma net income and pro
forma earnings per share disclosures for employee stock option
grants as if the fair-value-based method defined in SFAS No. 123
had been applied. Under APB Opinion No. 25, compensation expense
would be recorded on the date of grant only if the current
market price of the underlying stock exceeded the exercise
price. The Company has elected to apply the provisions of APB
Opinion No. 25 and provide the pro forma disclosure provisions
of SFAS No. 123.
(L) NET LOSS PER SHARE
Net loss per share is based on the weighted average number of
shares of common stock and common stock equivalents outstanding
during the period. In accordance with a Securities and Exchange
Commission (SEC) Staff Accounting bulletin, certain common stock
and common stock equivalents issued within a 12-month period
prior to the initial filing of a registration statement relating
to an initial public offering are treated as outstanding for the
entire period (using the treasury stock method).
(M) FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts of cash and cash equivalents, accounts
receivable, accounts payable and notes payable approximates fair
value because of the short maturity of these instruments.
F-12
(Continued)
<PAGE>
GALACTICOMM TECHNOLOGIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The fair value of each of the Company's long-term debt
instruments is based on the amount of future cash flows
associated with each instrument discounted using the Company's
current borrowing rate for similar debt instruments of
comparable maturity. The carrying amounts approximate the
estimated fair value at December 31, 1996.
(N) USE OF ESTIMATES
Management of the Company has made a number of estimates and
assumptions relating to the reporting of assets and liabilities
and the disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of
revenues and expenses during the reporting period to prepare
these financial statements in conformity with generally accepted
accounting principles. Significant estimates are primarily
related to provisions for sales returns, bad debt and obsolete
inventory. Actual results could materially differ from these
estimates.
(4) PROPERTY AND EQUIPMENT
Property and equipment consisted of the following at December 31, 1996:
<TABLE>
<CAPTION>
ESTIMATED
USEFUL LIFE
-----------
<S> <C> <C>
Equipment $ 464,023 5 years
Furniture and fixtures 105,875 7 years
Software 13,464 3 years
--------
583,362
Less accumulated depreciation and amortization 38,793
--------
$ 544,569
========
</TABLE>
(5) INCOME TAXES
Income tax expense for the year ended December 31, 1996 was $0, and
differed from the amounts computed by applying the United States
federal income tax rate of 34 percent to pretax losses as a result of
the following:
<TABLE>
<CAPTION>
<S> <C>
Computed "expected" tax benefit $ 354,031
Increase (reduction) in income taxes resulting from:
State income tax benefit, net of federal 35,439
Various non-deductible expenses (3,928)
S-corporation earnings from January 1, 1996 to October 29, 1996
not subject to corporate tax (54,716)
Increase in the valuation allowance for deferred tax assets
(330,826)
-------------
$ -
=============
</TABLE>
F-13
(Continued)
<PAGE>
GALACTICOMM TECHNOLOGIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and liabilities at December 31,
1996 are presented below:
Deferred tax assets:
Allowances for returns and bad debts $ 9,143
Net operating loss carryforwards 339,730
Goodwill 8,852
Accrued expenses 5,303
---------
Total gross deferred tax assets 363,028
Less valuation allowance (330,826)
---------
Total deferred tax asset 32,202
Deferred tax liabilities:
Property and equipment 32,202
---------
Net deferred tax asset $ -
=========
Realization of deferred tax assets associated with net operating loss
carryforwards is dependent upon generating sufficient taxable income
prior to their expiration. Management believes that there is a risk
that these net operating loss carryforwards may expire unused and,
accordingly has established a valuation allowance for the deferred tax
asset.
The Company's net operating loss carry forward of $902,817 expires in
the year 2011.
(6) DEBT
At December 31, 1996, debt consisted of the following:
(A) NOTES PAYABLE
The Company's subsidiary has a line of credit with a bank for
$300,000 which bears interest at the bank's prime rate plus 1
percent. During May 1997, the Company repaid $100,000 of the
outstanding amount on the line of credit and entered into a
$200,000 line of credit due on demand with a final maturity of
September 30, 1997. At December 31, 1996, $298,575 was
outstanding under the line of credit agreement. The line is
secured by the Company's accounts receivable, inventory and
other assets, and is personally guaranteed by an officer of the
Company [see note 12(a)]. All amounts outstanding under the line
of credit were repaid during October 1997. The Company has been
approved for the continuation of its credit line which will bear
interest at prime plus 1.5 percent.
The Company issued five notes payable in the original total
amount of $80,000, each due on demand, with interest rates of 12
percent per annum. At December 31, 1996 the total unpaid
principal balance was $45,000. These notes were repaid during
January 1997.
Under the terms of the notes, the Company is obligated to pay a
royalty ("Royalty") to the creditors equivalent to a certain
percentage (ranging from 1.0 percent to 2.0 percent) of the
Company's gross revenues while the notes are outstanding.
Additionally, after the notes are repaid, the Company is
obligated to pay a royalty to the creditors equivalent to a
certain percentage (ranging from 0.5 percent to 1.5 percent) of
the Company's net revenue (the "Additional Royalty").
F-14
(Continued)
<PAGE>
GALACTICOMM TECHNOLOGIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
During August 1997 the Company terminated the Royalty and
Additional Royalty obligation by issuing 22,857 shares of the
Company's common stock and paying $72,500 of accrued royalties
to such creditors. In connection with the issuance of such
common stock, the Company recognized related expense of
approximately $86,000, representing the fair value of the common
stock.
(B) CONVERTIBLE PROMISSORY NOTES
On November 21, 1996, the Company received proceeds in the
amount of $1,375,000 from the issuance of secured convertible
promissory notes payable to two shareholders of the Company.
These notes are secured by all of the Company's tangible and
intangible assets. Each note bears interest at a rate of 10
percent per annum and interest is payable quarterly. The notes
each mature at the earliest to occur of:
(i) November 21, 1998;
(ii) The completion of a private placement offering by the
Company greater than $3,000,000; or
(iii) The completion of an IPO of equity or debt securities by
the Company.
In addition, upon (a) written demand of the creditors or (b)
written demand of the Company on or before April 15, 1998, if
the Company's audited financial statements for the year ended
December 31, 1997 show after tax earnings greater than
$1,000,000, all principal and accrued interest due and payable
under these notes may be converted into shares of the Company's
common stock equal to the unpaid outstanding amount of the notes
divided by the conversion price of $2.56 per share, the fair
value of the Company's common stock on the date of the debt
issuance.
On September 8, 1997, the convertible notes were amended such
that upon the occurrence of any of the following events all
principal due under the notes shall be converted into that
number of shares of common stock equal to the outstanding
principal balance divided by the conversion price of $2.56 per
share and all accrued interest shall be paid by the Company:
(i) Upon the occurrence of events (a) or (b) as detailed in the
preceding paragraph or
(ii) On the date that the Company's IPO is declared effective by
the SEC.
On December 31, 1997, one of the holders of the convertible
promissory notes converted $1,250,000 of the principal due under
such notes, plus accrued interest of $141,781, into 543,895
shares of the Company's common stock, at the conversion price of
$2.56 per share.
During 1997, the Company did not make the quarterly interest
payments due on March 31, June 30 and (unaudited) September 30.
The Company has obtained a waiver from the holder of the
convertible promissory notes of $125,000 outstanding at December
31, 1997, waiving all such interest payments until March 31,
1998.
F-15
(Continued)
<PAGE>
GALACTICOMM TECHNOLOGIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(C) NOTE PAYABLE-SHAREHOLDER
At December 31, 1996, note payable - shareholder includes a
non-interest bearing note payable totaling $50,000. On December
31, 1997, this note payable was amended to bear interest at 10
percent, with repayment due at the earlier of the completion of
an IPO of equity or debt securities of the Company, or December
31, 1998.
(7) ACCRUED EXPENSES
Accrued expenses consist of the following at December 31, 1996:
Salaries, wages and other compensation $ 307,306
Professional fees 115,620
Rent 138,953
Interest 80,000
Sales returns 34,000
Other 245,799
-------
$ 921,678
=======
(8) SHAREHOLDERS' EQUITY
On November 21, 1996 the Company completed a private placement for
$1,375,000 in convertible notes payable (see note 6(b)) and 537,337
shares of its common stock at $2.56 per share. Under the terms of the
stock-purchase agreement for the sale of the 537,337 shares, the buyers
of such shares were granted piggy-back, demand registration and
antidilution rights and certain other rights. On September 8, 1997, the
Company issued such buyers 81,245 shares of the Company's common stock
in exchange for the buyers retraction of certain rights which were in
the original stock purchase agreement. The material terms of the
contractual rights relinquished originally entitled the buyers to a
certain number of shares of the Company's common stock, for no
additional consideration, based on the Company's after-tax earnings for
the year ending December 31, 1997. Furthermore, the September 8, 1997
agreement also provided that the buyers would relinquish certain
preemptive and anti-dilution rights contained in the original agreement
upon completion of an IPO. As a result of the issuance of the
additional 81,245 shares, the par value of $8 of the additional shares
issued was reclassified from additional paid-in capital to common
stock.
In connection with the private placement and the acquisition of
Galacticomm, the Company issued the following consideration in exchange
for consulting and advisory services with respect to the Company's
finances to a consultant who is a current shareholder of the Company:
(i) a warrant to purchase 139,708 shares of the Company's common stock
at an exercise price of $2.56 per warrant having an approximate fair
value of $28,000, (ii) 78,133 shares of the Company's common stock
having an approximate fair value of $200,000, and (iii) cash of
$357,500. Accordingly, of the total consideration, (i) approximately
$140,000 was allocated as a direct cost of the common stock issued in
the private placement, (ii) approximately $140,000 was allocated to the
convertible debt issued in the private placement and such amount was
capitalized as a deferred financing cost and (iii) approximately
$300,000 was allocated to the Company's acquisition of Galacticomm and
such amount was included in the Company's purchase price of
Galacticomm.
F-16
(Continued)
<PAGE>
GALACTICOMM TECHNOLOGIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(9) 401(K) RETIREMENT PLAN
The Company's subsidiary, Galacticomm, maintains a 401(k) retirement
plan. All of Galacticomm's employees who have attained the age of 21
and completed one year of service are eligible. The plan allows vesting
at 20 percent per year beginning in the second year of service.
Participants can contribute up to 15 percent of their annual
compensation and Galacticomm may make discretionary contributions.
Galacticomm made no contributions during 1996.
On April 1, 1997 and effective January 1, 1997, the 401(k) retirement
plan was amended to allow eligibility for employees after having
completed 6 months of service and vesting at 25 percent per year
beginning in the first year of service.
(10) COMMITMENTS AND CONTINGENCIES
(A) LEASES
The Company leases its main administrative office and warehouse
premises under a lease which expired on May 13, 1997. On July
21, 1997, the Company entered into a new lease agreement for
such premises which runs through October 2001. The Company also
leases office equipment under operating leases. The following
summarizes future minimum obligations under non-cancelable
operating leases:
DECEMBER 31
-----------
1997 $ 99,135
1998 101,198
1999 104,858
2000 109,010
2001 93,850
--------
$ 508,051
========
F-17
(Continued)
<PAGE>
GALACTICOMM TECHNOLOGIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Total rent expense under operating leases was $31,045 for the year
ended December 31, 1996.
(B) EMPLOYMENT AGREEMENTS
On November 21, 1996, the Company entered into employment
contracts through November 20, 1999 with two of its officers
that include commitments for a base salary plus bonuses (at the
discretion of the Compensation Committee of the Board of
Directors). The base salary commitment for each officer for the
years ended December 31, 1997, 1998 and 1999 is approximately
$175,000, $195,000 and $195,000, respectively. In addition, on
June 30, 1997, each officer was granted stock options for
177,263 shares of common stock with an exercise price of $3.74
per share. One-third of the options vested on November 21, 1997
and an additional one-third vests each year thereafter. The
options expire five years from the respective vesting dates and
any non-vested options shall be forfeited upon termination of
employment.
On August 25, 1997 the Company entered into an employment
contract through August 24, 1999 with its chief financial
officer that includes a commitment for an annual base salary of
$120,000 and the granting of 34,468 stock options with an
exercise price of $6.50 under the Company's 1997 Stock Option
Plan (see note 12(d)).
(C) CONSULTING AGREEMENT
On November 20, 1996, the Company entered into a consulting
agreement with a shareholder to perform consulting and advisory
services with respect to the operations and finances of the
Company. The consulting fee under this agreement is $10,000 per
month until June 30, 2001. Other than the monthly fee, no
material commitments exist under the Company's agreement with
such consultant.
On January 15, 1997 the Company entered into a second consulting
agreement with such shareholder pursuant to which the Company
engages the services of an employee of such shareholder to
develop the Company's sales and marketing strategies. The fee
under this agreement for the services of such employee is $7,000
per month and the agreement expires December 31, 1998. Under
such consulting agreement, the Company also issued an option to
such employee to acquire 2,462 shares of the Company's common
stock at a per share price of $2.56. Such option is immediately
exercisable and has a three year life. In addition, such
employee has been granted options to purchase 7,386 shares of
common stock under the Company's 1997 Stock Option Plan at an
exercise price of $6.50 per share. The fair value of such
options are immaterial to the consolidated financial statements.
(D) PAYROLL TAXES
During August 1997, the Company reached a settlement with the
IRS relating to payroll taxes due for 1996 employee wages. The
amount of such settlement was $89,000 and is reflected as an
accrued expense at December 31, 1996.
F-18
(Continued)
<PAGE>
GALACTICOMM TECHNOLOGIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(E) OTHER
In July 1997, the Company became aware of the existence of a
third party which may claim a prior right in the trademark name
"Worldgroup" (the name of a product of the Company). The Company
and the third party are presently discussing a coexistence
agreement whereby the Company would have the right, without
payment of a royalty, to continue to use the trademark
"Worldgroup" on its present products and services. Management
believes that the Company will be able to come to such an
agreement with the third party.
In July 1997, the Company became aware that several other third
parties filed applications for registration of "WebCast" (the
name of a product of the Company), before the Company filed its
application. If "WebCast" is not determined to be generic and
one of the third party applications matures into registration,
then such third party will have superior rights to the Company.
If a third party has superior rights to any of the Company's
trademarks and such third party decides to enforce its trademark
rights through an infringement action, management believes that
the Company has valid defenses with respect to any such action.
The Company is subject to certain legal matters arising in the
ordinary course of business which, in the opinion of management,
based on the advice of its legal counsel, will not have a
material effect on the financial position and results of
operations of the Company.
(11) VALUATION ACCOUNTS
The following summarizes the changes in the Company's valuation
accounts for the year ended December 31, 1996:
<TABLE>
<CAPTION>
BALANCE AT BALANCE AT
BEGINNING OF END OF
DESCRIPTION PERIOD ADDITIONS DEDUCTIONS PERIOD
----------- ------------ --------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Allowance for doubtful accounts and
sales returns $ - 90,363 - 90,363
Inventory reserve $ - 18,191 - 18,191
</TABLE>
(12) SUBSEQUENT EVENTS
(A) PLANNED PUBLIC OFFERING
In April 1997, the Company signed a nonbinding letter of intent
with an investment banking firm to underwrite, on a
firm-commitment basis, an initial public offering of the
Company's securities. Pursuant to the terms of the letter of
intent, the Company in October 1997 completed a bridge loan
financing of 42 bridge units, each of which consists of a
$50,000 promissory note and a three year warrant to purchase
19,000 shares of the Company's common stock at an exercise price
of $3.75 per share. The total principal amount of the promissory
notes of $2,100,000 bears interest of 10 percent per year.
Accrued interest is due semi-annually and the note will mature
upon the earlier of January 4, 1999 or the completion of an
initial public offering. After deducting fees and expenses paid
to the investment banking firm of $283,000, and $190,000 for
other expenses related to the bridge loan financing, net
proceeds of the
F-19
(Continued)
<PAGE>
GALACTICOMM TECHNOLOGIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
bridge financing were approximately $1,627,000. Additionally, in
connection with the bridge financing, the Company issued 159,600
warrants to the investment banking firm with terms similar to
the aforementioned bridge warrants. The fair value of the bridge
warrants issued was determined to be $.22 per share or $210,672
using the Black-Scholes pricing model and will be recorded as a
discount on the bridge financing and amortized over the life of
the notes. A portion of the proceeds of the bridge loan were
used to repay all amounts outstanding under the Company's line
of credit.
(B) SALE OF COMMON STOCK
In June 1997, the Company sold an aggregate of 259,802 shares of
its common stock at 3.74 per share in a private placement. Net
proceeds to the Company after deducting a $126,209 fee paid to a
shareholder of the Company were $844,553. In connection with
such sale of common stock, the Company issued, to a shareholder
of the Company, a three year warrant to purchase 33,774 shares
of the Company's common stock at an exercise price of $3.74 per
share. The fair value of such warrants was immaterial to such
sale of common stock.
(C) WARRANTS
On March 14, 1997, two principal shareholders of the Company
issued warrants for 615,496 shares of the Company's common stock
to another shareholder of the Company at an exercise price of
$3.25 per share. This warrant is automatically exercisable upon
completion of an IPO. The Company recognized a related expense
of $113,760 representing the fair value of the warrants issued.
Additionally, on September 8, 1997, in consideration of the
payment of $50,000, the Company permitted the common stock
underlying such warrants to have certain registration rights. On
October 17, 1997, the warrants were amended to extend the
expiration date to March 31, 1998. As a result of this
amendment, related incremental expense of approximately $30,000
was recognized in October 1997.
(D) STOCK OPTION PLAN
On September 4, 1997 the Company adopted the 1997 Stock Option
Plan (the "Plan"). Pursuant to the Plan, the Company's board of
directors may grant incentive or non-qualified stock options to
employees or service providers. Under the Plan, 370,000 shares
of the Company's common stock are reserved for issuance and
options granted shall vest 25 percent 180 days after issuance
and then 50 percent, 75 percent and 100 percent over the first,
second and third anniversaries of the grant date, respectively.
The Plan has a ten year term and no options granted under the
Plan shall have a life greater than ten years. In addition to
the stock option grants under the Plan discussed in notes 10(b)
and 10(c), during September 1997, the Company granted 164,337
options under the Plan to various employees with an exercise
price of $6.50 per option.
F-20
(Continued)
<PAGE>
GALACTICOMM TECHNOLOGIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(E) LEGAL MATTER
A suit was filed against the Company on December 16, 1997 by a
reseller of the Company's products alleging price fixing, price
discrimination, resale price maintenance, predatory practices,
breach of contract and economic coercion by the Company. The
reseller seeks treble the amount of its actual damages alleged
to be in excess of $1,500,000. The Company will file a response
denying that it has engaged in any of the alleged conduct and
will defend the action vigorously. Although no assurance can be
given, the Company believes, based upon special antitrust
counsel's preliminary investigation and advice that the ultimate
outcome of the suit will not have a material adverse effect on
the Company's business or financial position.
(13) NEW ACCOUNTING PRONOUNCEMENTS
In June 1997 the FASB issued Statement of Financial Accounting
Standards No. 130 "Reporting Comprehensive Income" ("SFAS No. 130").
SFAS No. 130 is effective for fiscal years beginning after December 15,
1997 and establishes standards for reporting and display of
comprehensive income and its components in a full set of general
purpose financial statements. SFAS No. 130 requires all items to be
recognized under accounting standards as components of comprehensive
income to be reported in a separate financial statement. The Company
does not believe that the adoption of SFAS No. 130 will have a
significant impact on the Company's financial reporting.
In June 1997, the FASB issued Statement of Financial Accounting
Standards No. 131 "DISCLOSURES ABOUT SEGMENTS OF AN ENTERPRISE AND
RELATED INFORMATION" ("SFAS No. 131"). SFAS No. 131 is effective for
financial statements for periods beginning after December 15, 1997.
SFAS No. 131 establishes standards for the way that public business
enterprises report information about operating segments in annual
financial statements and requires those enterprises to report selected
information about operating segments in interim financial reports
issued to shareholders. The Company does not believe that the adoption
of SFAS No. 131 will have a significant impact on the Company's
financial reporting.
In February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 128 (SFAS 128),
EARNINGS PER SHARE. SFAS 128 specifies new standards designed to
improve the earnings per share ("EPS") information provided in
financial statements by simplifying the existing computational
guidelines, revising the disclosure requirements and increasing the
comparability of EPS data on an international basis. Some of the
changes made to simplify the EPS computations include (i) eliminating
the presentation of primary EPS and replacing it with basic EPS, (ii)
eliminating the modified treasury stock method and the three percent
materiality provision and (iii) revising the contingent share
provisions and the supplemental EPS data requirements. SFAS 128 also
makes a number of changes to existing disclosure requirements. SFAS 128
is effective for financial statements issued for periods ending after
December 15, 1997, including interim periods. The Company does not
believe that the adoption of SFAS 128 in 1997 will have a significant
impact on the Company's reported EPS.
F-21
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
Galacticomm, Inc.
Fort Lauderdale, Florida:
We have audited the accompanying statements of operations and cash flows of
Galacticomm, Inc. for the year ended December 31, 1995 and the ten months ended
October 31, 1996. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion of these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the results of Galacticomm, Inc.'s operations and cash
flows for the year ended December 31, 1995 and the ten months ended October 31,
1996 in conformity with generally accepted accounting principles.
August 22, 1997
/s/ KPMG Peat Marwick, LLP
--------------------------
KPMG Peat Marwick, LLP
F-22
<PAGE>
GALACTICOMM, INC.
STATEMENTS OF OPERATIONS
TEN MONTHS
YEAR ENDED ENDED
DECEMBER 31, OCTOBER 31,
1995 1996
------------ -----------
Revenue $7,487,983 3,293,876
Operating costs and expenses:
Cost of revenue 1,737,170 1,005,595
Selling, general and administrative 3,602,809 2,382,613
Depreciation and amortization 131,713 150,185
Compensation expense related to phantom units -- 529,139
Compensation expense on option exercise 443,242 --
Research and development 1,034,174 638,200
Customer support 425,924 387,797
---------- ----------
Total operating costs and expenses 7,375,032 5,093,529
---------- ----------
Operating profit (loss) 112,951 (1,799,653)
Other income (expense):
Lease termination -- (380,040)
Interest income 33,042 10,760
Realized loss on short-term investments (225,818) --
Other expense, net (5,249) (98,873)
---------- ----------
Total other expense (198,025) (468,153)
---------- ----------
Net loss $ (85,074) (2,267,806)
========== ==========
See accompanying notes to financial statements.
F-23
<PAGE>
<TABLE>
<CAPTION>
GALACTICOMM, INC.
STATEMENTS OF CASH FLOWS
TEN MONTHS
YEAR ENDED ENDED
DECEMBER 31, OCTOBER 31,
1995 1996
------------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (85,074) (2,267,806)
Adjustments to reconcile net loss to net cash
provided by (used in) perating activities:
Depreciation and amortization 131,713 150,185
Loss on disposal of equipment 10,000 24,582
Bad debt and product return provisions 16,786 80,065
Compensation expense related to phantom units -- 529,139
Compensation expense on stock option exercise 443,242 --
Realized loss on short-term investments 225,818 --
Interest income on subscription notes receivable (1,393) (1,874)
Changes in assets and liabilities:
Accounts receivable (51,108) 270,956
Inventories (77,593) 195,869
Prepaid expenses and other assets (171,711) 230,264
Accounts payable 111,153 (69,701)
Deferred revenue 105,034 150,031
Accrued expenses 142,028 227,860
---------- ----------
Net cash provided by (used in) operating
activities 798,895 (480,430)
---------- ----------
Cash flows used in investing activities:
Capital expenditures (164,129) (19,815)
---------- ----------
Cash flows from financing activities:
Net proceeds from notes payable -- 298,575
Payments on capital lease obligations (23,952) (24,515)
Dividends to stockholders (775,261) (28,295)
Net proceeds from the exercise of stock options
and sale of common stock 23,277 --
---------- ----------
Net cash (used in) provided by financing
activities (775,936) 245,765
---------- ----------
Net decrease in cash and cash equivalents (141,170) (254,480)
Cash and cash equivalents-beginning of period 504,347 363,177
---------- ----------
Cash and cash equivalents-end of period $ 363,177 108,697
========== ==========
</TABLE>
See accompanying notes to financial statements.
F-24
<PAGE>
GALACTICOMM, INC.
NOTES TO FINANCIAL STATEMENTS
December 31, 1995 and October 31, 1996
(1) THE COMPANY AND BASIS OF PRESENTATION
Galacticomm, Inc. (the "Company") develops and sells network-centric
software applications and tools. The Company's primary product,
Worldgroup, a client/server software, is a platform that merges
Bulletin Board Systems, E-mail, and workgroup functions and enables
enterprises to provide client/server applications over the Internet and
intranets and secure external data exchanges with customers, field
agents, suppliers, and others.
Substantially all of the Company's revenue is derived from sales of the
Worldgroup software product and related hardware, documentation and
training manuals, and royalties. The Company operates in a highly
competitive industry characterized by rapidly changing technology which
could adversely affect the Company's revenues and the related results
of operations.
On November 21, 1996, 8,037,203 of the issued and outstanding common
shares of the Company, representing a 96 percent ownership of the
Company, were purchased by Galacticomm Technologies, Inc., (formerly
Iview Software, Inc.) in exchange for $.094 in cash and .0644 shares of
Galacticomm Technologies, Inc. for each share of the Company's common
stock.
The accompanying financial statements were prepared for inclusion in a
registration statement of Galacticomm Technologies, Inc. The separate
audited balance sheets of the Company are not presented at December 31,
1995 and October 31, 1996 as the fair value of the acquired assets and
assumed liabilities has been included in the December 31, 1996
consolidated balance sheet of Galacticomm Technologies, Inc.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(A) ACCOUNTS RECEIVABLE
Accounts receivable are principally from distributors and
end-users of the Company's products. The Company performs
periodic credit evaluations of its customers and has recorded an
allowance for potential credit losses and product returns of
$85,680 and $110,428 at December 31, 1995 and October 31, 1996,
respectively. The Company is subject to rapid changes in
technology and shifts in consumer demand which could result in
credit losses and product returns in excess of the Company's
reserves.
(B) INVENTORIES
Inventory is stated at the lower of cost or market. Cost is
determined using the first-in, first-out ("FIFO") method.
The Company's inventories consist primarily of software media,
manuals and related packaging materials and hardware and
hardware components which are subject to rapid technological
obsolescence or reduction in value as a result of new products
developed by competitors or as a result of normal competitive
pressures. The Company periodically estimates an allowance for
obsolete inventory based on current market conditions. Changes
in the marketplace may significantly affect management's
estimates.
F-25
<PAGE>
(C) LONG-LIVED ASSETS
The Company presents its property and equipment at cost less
accumulated depreciation. Property and equipment are depreciated
using the straight-line method over the estimated useful lives
of the assets. Maintenance and repairs are charged to expense
when incurred; betterments are capitalized. Upon the sale or
retirement of assets, the cost and accumulated depreciation are
removed from the account and any gain or loss is recognized.
The Company implemented the provisions of Statement of Financial
Accounting Standards No. 121, "ACCOUNTING FOR THE IMPAIRMENT OF
LONG-LIVED ASSETS AND FOR LONG-LIVED ASSETS TO BE DISPOSED OF,"
effective January 1, 1996. The Company reviews its long-lived
assets for impairment whenever events or circumstances indicate
that the carrying amount of an asset may not be recoverable. If
the sum of the expected cash flows, undiscounted and without
interest, is less than the carrying amount of the asset, an
impairment loss is recognized as the amount by which the
carrying amount of the asset exceeds its fair value. The
adoption of Statement No. 121 had no impact on the Company's
results of operations.
(D) REVENUE RECOGNITION
Sales are recognized at the time the product is shipped, in
accordance with the provisions of American Institute of
Certified Public Accountants Statement of Position 91-1,
"Software Revenue Recognition". While the Company has no
obligations to perform future services subsequent to shipment,
the Company provides telephone customer support as an
accommodation to purchasers of its products. Costs associated
with this effort are not significant and are expensed as
incurred. Sales to distributors are subject to agreements
allowing limited rights of return and price protection. The
Company provides reserves for estimated future returns,
exchanges and price protection. The Company offers distributors
co-op funds that are used to promote the Company's products.
These funds are generally paid as a credit against outstanding
invoices and are included in marketing expense during the period
in which the revenue is recognized.
The Company has various contracts which require the Company to
provide consulting services, custom systems integration and
training at specified contractual rates. Such contracts are
short-term in nature. The Company records as deferred revenue,
all payments received on each contract until the contract is
completed.
Deferred revenues are recorded for short-term contracts and
customer subscriptions paid in advance.
(E) ROYALTIES
The Company licenses software used to develop components of
Worldgroup. Royalties are payable to developers of the software
at various rates and amounts, generally based on unit sales.
Royalty expense was approximately $7,000 and $46,000 for the
year ended December 31, 1995 and the ten months ended October
31, 1996, respectively. Such costs are included as a component
of cost of revenues in the accompanying statements of
operations.
F-26
<PAGE>
GALACTICOMM, INC.
NOTES TO FINANCIAL STATEMENTS
(F) SOFTWARE DEVELOPMENT COSTS
The Company accounts for software development costs under
Statement of Financial Accounting Standards No. 86, "Accounting
for Costs of Computer Software to Be Sold, Leased or Otherwise
Marketed" ("FAS 86"). Under FAS 86, the costs associated with
software development are required to be capitalized after
technological feasibility has been established. Costs incurred
by the Company subsequent to the establishment of technological
feasibility have been insignificant and, as a result, the
Company has not capitalized any research and development
expenses.
(G) INCOME TAXES
Prior to the sale to Galacticomm Technologies, Inc. (see note 1)
the Company was an S corporation for federal income tax
purposes. As such, the income tax effects of the results of
operations of the Company accrued directly to its stockholders.
Accordingly, the accompanying financial statements do not
include a provision for income taxes.
(H) USE OF ESTIMATES
Management of the Company has made a number of estimates and
assumptions relating to the reporting of assets and liabilities
and the disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of
revenues and expenses during the reporting period to prepare
these financial statements in conformity with generally accepted
accounting principles. Significant estimates are primarily
related to provisions for sales returns, bad debt and obsolete
inventory. Actual results could materially differ from these
estimates.
(3) INVESTMENT ACTIVITY
The Company's short-term investments consisted of various call options
which were indexed to interest rates on thirty-year U.S. treasury
instruments and expired between January and December 1995. In December
1995, the final call option expired and had a zero fair value,
resulting in the Company realizing an investment loss of $225,818 for
the year ended December 31, 1995. The Company has no other short-term
investments at December 31, 1995 or October 31, 1996.
(4) LINE OF CREDIT
The Company had a line of credit with a bank for $300,000 which bears
interest at prime plus 1 percent and is collateralized by the Company's
accounts receivable, inventory and property and equipment. This line of
credit expired January 9, 1997. As of October 31, 1996, the Company had
borrowed $298,575 under the line of credit agreement.
F-27
<PAGE>
GALACTICOMM, INC.
NOTES TO FINANCIAL STATEMENTS
(5) INCENTIVE STOCK OPTION PLAN
The Company has reserved 3,000,000 shares of its common stock for
issuance under its 1987 Incentive Stock Option Plan (the "Plan"). Under
the Plan, options may be granted to purchase common stock at exercise
prices not less than fair market value at the date of grant, as
determined by the Board of Directors. During August 1996, the Board of
Directors approved the conversion of all stock options outstanding, on
a one-for-one basis, into phantom units under the Company's phantom
stock plan, and changed the number of shares of common stock reserved
for issuance under the Plan to 500,000. All options expire on the date
specified in the option agreement and in no event later than the tenth
anniversary of the date on which the option was granted. A summary of
incentive stock option activity is as follows:
<TABLE>
<CAPTION>
NUMBER OF EXERCISE
OPTIONS PRICE
---------- ------------
<S> <C> <C>
Options outstanding, December 31, 1994 1,220,050 $ .30 - 2.85
Options granted 50,000 3.18
Options canceled (65,000) 1.46 - 3.18
Options exercised (283,765) 1.23 - 1.85
----------
Options outstanding, December 31, 1995 921,285 .30-3.18
Converted to phantom units (921,285) .30-3.18
---------- -----------
Options outstanding, October 31, 1996 - $ -
========== ===========
</TABLE>
On November 21, 1996 the Plan was canceled.
In 1994, the Company exchanged 83,620 shares of common stock for
$122,492 in promissory notes issued by two directors. Also in 1994, a
director of the Company exercised 187,760 options and issued a
promissory note of $56,328 as consideration thereof.
The promissory notes referred to above bear interest at rates ranging
from 4.00 -5.86 percent and mature in September 1996 through January
1997 and are collateralized by common stock of the Company held by the
two directors. During 1996, such notes were repaid with 563,536 shares
of the Company's common stock.
The non-cash option transactions described above have been excluded
from the accompanying statements of cash flows.
F-28
<PAGE>
GALACTICOMM, INC.
NOTES TO FINANCIAL STATEMENTS
During 1995, a former employee of the Company exercised 279,000 options
to acquire shares of common stock. The exercise price for the first
1,864 options exercised was funded by an exchange of 1,000 shares of
common stock held by the former employee. Such common shares exchanged
had been held by the former employee greater than six months.
Subsequent to the initial exercise, the former employee immediately
used the shares of common stock acquired under option to satisfy the
exercise price for additional shares under the same option (the
"Pyramiding Exercise"), until the former employee's remaining 277,136
options were exercised.
The shares of common stock used in the Pyramiding Exercise were
considered "immature" as they were held less than six months by the
former employee. Accordingly, the Company recognized $443,242 in
compensation expense in 1995.
(6) PHANTOM STOCK PLAN
In July 1994, the Company's Board of Directors authorized the
Galacticomm, Inc. Phantom Stock Plan. The purpose of the plan is to
provide equity-based compensation to certain employees and directors
through the awarding of rights or "units" associated with the common
stock of the Company. These units entitle the holder to receive bonus
compensation and an election may be made by the holder to receive the
common stock of the Company based on the occurrence of certain events.
A summary of the Phantom Stock Plan's activity is as follows:
Units outstanding, December 31, 1994 98,296
Units granted 89,675
Units canceled (15,361)
---------
Units outstanding, December 31, 1995 172,590
Units granted 4,009,947
Units canceled (64,729)
Units converted to common stock (3,625,429)
---------
Units outstanding, October 31, 1996 492,379
=========
During August 1996, the Board of Directors approved the increase of
phantom units that may be issued under the Phantom Stock Plan to
4,500,000. As a result of the purchase by Galacticomm Technologies,
Inc. (see note 1) of 8,037,203 of the issued and outstanding common
shares of the Company, certain provisions in the Phantom Stock Plan
were met and triggered the conversion into common stock feature of all
currently outstanding phantom units. As such, all phantom unit holders
at October 31, 1996 had the option to convert each phantom unit held
into a common share of the Company. Accordingly, $529,139 of
compensation expense was recorded, representing the fair value of the
Company's common stock underlying all phantom units outstanding on
October 31, 1996. On November 21, 1996 the Phantom Stock Plan was
canceled.
F-29
<PAGE>
GALACTICOMM, INC.
NOTES TO FINANCIAL STATEMENTS
(7) LEASE TERMINATION
On June 8, 1996, the Company entered into a third amendment to a
certain 10-year office space lease agreement, under which the Company
stipulated that the Company did not desire to take occupancy of the
subject property. As of October 31, 1996 the Company has recorded a
lease termination expense of $380,040 representing lost security
deposits and future lease payments.
(8) COMMITMENTS
The Company leases its main office and warehouse premises under an
operating lease which expires on May 13, 1997. The Company also leases
office equipment under operating leases. The following summarizes
future minimum leases under non-cancelable operating leases as of
October 31, 1996:
1997 $ 76,192
1998 4,531
-------
$ 80,723
=======
Rent expense under operating leases for the year ended December 31,
1995 and the ten months ended October 31, 1996 amounted to $78,857 and
$96,671, respectively.
The Company also leases certain computer equipment under capital
leases. The annual maturities of these capital lease obligations are as
follows:
OCTOBER 31,
-----------
1997 $ 33,092
1998 23,361
1999 5,488
-------
$ 61,941
=======
F-30
<PAGE>
GALACTICOMM TECHNOLOGIES, INC.
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
The following unaudited pro forma consolidated statement of operations of
Galacticomm Technologies Inc. for the year ended December 31, 1996 gives
effect to the following pro forma events, as if such events had occurred on
January 1, 1996: (i) the inclusion of the results of operations of Galacticomm,
Inc. and Tessier Technologies, Inc. for the year ended December 31, 1996 as if
such acquisitions were consummated on January 1, 1996; (ii) the elimination of
intercompany transactions between Galacticomm Technologies, Inc., Galacticomm,
Inc. and Tessier Technologies, Inc. for the year ended December 31, 1996
assuming these entities reported on a consolidated basis; (iii) an increase of
amortization of goodwill as a result of the acquisitions of Galacticomm, Inc.
and Tessier Technologies, Inc. assuming such acquisitions were consummated on
January 1, 1996; and (iv) an increase of interest expense due to the financings
obtained to fund the acquisitions of Galacticomm, Inc. and Tessier Technologies,
Inc. assuming such acquisitions were consummated on January 1, 1996.
These unaudited pro forma consolidated statements of operations should be
read in conjunction with the audited consolidated financial statements of
Galacticomm Technologies, Inc. The unaudited pro forma data are not necessarily
indicative of the results of oeprations ofd Galacticomm Technologies, Inc. that
would have occurred if the pro forma events had been in effect at the beginning
of the periods presented, nor are they necessarily indicative of future results
of operations.
<TABLE>
<CAPTION>
PRO FORMA
GTI TESSIER GALACTICOMM(7) COMBINED ADJUSTMENTS PRO FORMA
--- ------- -------------- -------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
Revenues $1,692,743 $1,350,204 $3,293,876 $ 6,336,823 $ (147,318) (1,2) $ 6,189,505
Cost of revenues 758,050 865715 1005595 2,629,360 -113898 (1,2) 2515462
--------------------------------------------------------------------- --------------
Gross profit 934,693 484489 2288281 3707463 -33420 3674043
Selling, general and admistrative 1531130 472729 2196421 4200280 180972 (3,4) 4381252
Depreciation 47,533 31542 336377 415452 415452
Amortization of intangibles 38,665 - - 38665 551846 (5) 590511
Compensation expense on warr - - 529139 529139 529139
Customer support 72,772 - 387797 460569 460569
Research and development 225,549 - 638200 863749 863749
--------------------------------------------------------------------- --------------
Total operating expenses 1915649 504271 4087934 6507854 732818 7240672
--------------------------------------------------------------------- --------------
Income (loss) from operations -980956 -19782 -1799653 -2800391 -766238 -3566629
Other income (expense) -60312 - -468153 -528465 -126856 (6) -655321
--------------------------------------------------------------------- --------------
Loss before income taxes -1041268 -19782 -2267806 -3328856 -893094 -4221950
Income taxes - - - - - -
Net loss $(1,041,268) $ (19,782) $(2,267,806) $(3,328,856) $ (893,094) $ (4,221,950)
Net loss per share $ (1.31)
Shares used in computing net
loss per share 3,229,101
</TABLE>
(1) Adjustment reflects elimination of intercompany sales from Galacticomm,
Inc. to Tessier Technologies, Inc.
(2) Adjustment reflects the remaining portion of the elimination of
intercompany sales.
(3) Adjustment reflects additional officers salaries as if officers employment
agreements were effective January 1, 1996.
(4) Adjustment reflects additional consulting fees to a stockholder of the
company as if the related consulting agreement had been entered into on
January 1, 1996.
(5) Adjustment reflects an additional ten months goodwill amortization related
to the Galacticomm, Inc. and Tessier Technologies, Inc. acquisitions.
(6) Adjustment reflects additional interest expense on debt incurred to
finance the acquisition of Galacticomm and Tessier as if the acquisitions
were consummated on January 1, 1996.
F-31
<PAGE>
No person is authorized in connection with any offering made hereby to give
any information or to make any representation not contained in this Prospectus
and, if given or made, such information or representation must not be relied
upon as having been authorized by the Company or by an Underwriter. This
Prospectus does not constitute an offer to sell or the solicitation of an offer
to buy any security other than the Shares offered by this Prospectus, nor does
it constitute an offer to sell or a solicitation to such person. Neither the
delivery of this Prospectus nor any sale made hereunder shall under any
circumstance create any implication that information contained herein is correct
as of any date subsequent to its date.
TABLE OF CONTENTS
PAGE
----
Prospectus Summary...............................................
Risk Factors.....................................................
Use of Proceeds .................................................
Capitalization ..................................................
Dividend Policy .................................................
Dilution.........................................................
Recent Financings ...............................................
Selected Historical Financial Data ..............................
Selected Pro Forma Financial Data................................
Management's Discussion and
Analysis of Financial Condition
and Results of Operations .....................................
Business ........................................................
Management ......................................................
Certain Transactions.............................................
Principal Shareholders ..........................................
Description of Securities .....................................
Underwriting ....................................................
Legal Matters ...................................................
Experts .........................................................
Additional Information ..........................................
Index to Financial Statements ................................F-1
Until , 1998 (25 days after the date of this Prospectus), all
dealers effecting transactions in the registered securities, whether or not
participating in this distribution, may be required to deliver a Prospectus.
This is in addition to the obligation of dealers to deliver a Prospectus when
acting as underwriters and with respect to their unsold allotments or
subscriptions.
GALACTICOMM TECHNOLOGIES, INC.
UNITS, EACH UNIT
CONSISTING OF ONE SHARE OF
COMMON STOCK AND ONE REDEEMABLE
COMMON STOCK PURCHASE WARRANT
--------
PROSPECTUS
--------
FIRST EQUITY CORPORATION
_____________, 1998
<PAGE>
ALTERNATE
PROSPECTUS
GALACTICOMM TECHNOLOGIES, INC.
957,600 SHARES OF COMMON STOCK
This Prospectus relates to 957,600 shares of the common stock, par
value $.0001 per share (the "Common Stock") of Galacticomm Technologies, Inc.
(the "Company"). The Common Stock offered by this Prospectus has been or may be
acquired by certain selling shareholders (the "Selling Shareholders") of the
Company upon the exercise of warrants (the "Bridge Warrants") issued by the
Company in connection with a bridge financing in October 1997. See "Recent
Financings." The Bridge Warrants are exercisable at a price of $3.75 per share
until October 27, 2000. The shares of Common Stock underlying the Bridge
Warrants may be sold from time to time by the Selling Shareholders, or by their
transferees, upon exercise of the Bridge Warrants, commencing six months from
the date of this Prospectus, or earlier with the consent of First Equity
Corporation of Florida, the underwriter of a concurrent public offering of the
Company's securities.
No underwriting arrangements have been entered into by the Selling
Shareholders. The distribution of the Common Stock by the Selling Shareholders
may be effected in one or more transactions that may take place on the
over-the-counter market, including ordinary broker's transactions,
privately-negotiated transactions or through sales to one or more dealers for
resale of such shares as principals, at market prices prevailing at the time of
sale, at prices related to such prevailing market prices or at negotiated
prices. Usual and customary or specifically negotiated brokerage fees or
commissions may be paid by the Selling Shareholders in connection with sales of
such Common Stock.
The Selling Shareholders and intermediaries through whom such
securities are sold may be deemed "underwriters" within the meaning of the
Securities Act of 1933, (the "Securities Act"), with respect to the securities
offered, and any profits realized or commissions received may be deemed
underwriting compensation. The Company has agreed to indemnify the Selling
Shareholders against certain liabilities, including liabilities under the
Securities Act.
The Company will not receive any of the proceeds from the sale of
securities by the Selling Shareholders although it will receive approximately
$3,591,000 upon exercise of the Bridge Warrants in full. Expenses of this
offering, estimated at approximately $15,000, are payable by the Company.
Application has been made to list the Common Stock on the NASDAQ
SmallCap Market under the symbol GCOM.
On the date of this Prospectus a registration statement under the
Securities Act with respect to an underwritten public offering of Units by the
Company was declared effective by the Securities and Exchange Commission. The
Units are comprised of a total of Common Stock and Warrants to purchase a total
of 600,000 Common Stock (without giving effect to the over-allotment option
granted to the underwriter of the offering). Sales pursuant to the offering of
Units by the Company and of Common Stock by security holders of the Company
other than the Selling Shareholders or even the potential of such sales may have
an adverse effect on the market price of the Common Shares.
THIS OFFERING INVOLVES A HIGH DEGREE OF RISK AND IMMEDIATE SUBSTANTIAL
DILUTION AND SHOULD BE CONSIDERED ONLY BY INVESTORS WHO CAN AFFORD THE LOSS OF
THEIR ENTIRE INVESTMENT. SEE "RISK FACTORS" BEGINNING ON PAGE 7.
----------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this Prospectus is , 1998
-------------------
Alt.1
<PAGE>
ALTERNATE
SELLING SHAREHOLDERS
The table below sets forth certain information with respect to the
Selling Shareholders. The 957,600 shares of Common Stock registered for the
account of the Selling Shareholders may be acquired upon the exercise of the
Bridge Warrants. See "Recent Financings." Except as set forth below with respect
to the Wallenberg Trust, Union Atlantic Partners I Limited and First Equity
Corporation, none of the Selling Shareholders has ever held any position with
the Company or had any other material relationship with the Company. The Company
will not receive any proceeds from sales of Common Stock by the Selling
Stockholders, although the Company will receive approximately $3,591,000 upon
exercise of the Bridge Warrants in full. Expenses of this offering, estimated at
approximately $ , are payable by the Company.
<TABLE>
<CAPTION>
SHARES OWNED BENEFICIALLY SHARES OWNED BENEFICIALLY
BEFORE OFFERING(1) SHARES BEING AFTER OFFERING(1)
SELLING SECURITY HOLDER NUMBER PERCENT(2) OFFERED NUMBER PERCENT
- ----------------------- ------ --------- ------------
<S> <C> <C> <C>
Steven Adelman............ 19,000 * 19,000 0 *
Ronald Alsheimer.......... 38,000 * 38,000 0 *
Richard A. Belgard and
Debra O. Belgard........ 9,500 * 9,500 0 *
Jerry Bengis.............. 9,500 * 9,500 0 *
Caledonian Securities
Ltd. ................... 95,000 * 95,000 0 *
The Cascade Trust......... 22,880 * 9,500 13,380 *
The Coach Trust........... 111,854 38,000 73,854 %
William C. Cook, Jr....... 9,500 * 9,500 0 *
Gilbert Drozdow and
Linda Drozdow........... 9,500 * 9,500 0 *
Dynamic Value Partners,
Ltd. ................... 19,000 * 19,000 0 *
First Equity
Corporation(3).......... 159,600
Charles Flaxman........... 9,500 * 9,500 0 *
Scott Goldberg and
Lisa Goldberg........... 9,500 * 9,500 0 *
Allan F. Greenberg and
Rita H. Greenberg....... 9,500 * 9,500 0 *
The Hive Trust............ 122,478 % 57,000 65,478 %
Joseph Kerman............. 4,750 * 4,750 0 *
Lewis H. Kerman........... 1,900 * 1,900 0 *
Max Kerman................ 4,750 * 4,750 0 *
David Levine.............. 7,600 * 7,600 0 *
Levine Family
Partnership............. 19,000 * 19,000 0 *
John McClure.............. 9,500 * 9,500 0 *
Pacifica Capital Group.... 19,000 * 19,000 0 *
L. Grant Peeples Defined
Benefit Plan............ 9,500 * 9,500 0 *
Longman Investments
Limited................. 9,500 * 9,500 0 *
Perycom Management B.V. 24,215 * 9,500 14,715 *
Joanne S. Roberts......... 4,750 * 4,750 0 *
Selma Roberts............. 14,250 * 14.250 0 *
Oleg Selawry and
Helena Selawry.......... 9,500 * 9,500 0 *
Seventh Investment
Bancing Corp. .......... 9,500 * 9,500 0 *
Steven Sheinman........... 9,500 * 9,500 0 *
Alt.2
<PAGE>
Ellen Dee Silvers......... 9,500 * 9,500 0 *
Isaac Sklar and
Rebeca Sklar............ 4,750 * 4,750 0 *
Ruben Sklar............... 4,750 * 4,750 0 *
Paul U. Skoric, IRA....... 19,000 * 19,000 0 *
Harry B. Smith............ 19,000 * 19,000 0 *
Samuel S. Smith and
Susan E. Smith.......... 9,500 * 9,500 0 *
Eric Stein................ 9,500 * 9,500 0 *
Shirley Suskind........... 9,500 * 9,500 0 *
Union Atlantic Partners
I Limited(4)............ 152,932 % 38,000 114,932 %
The Wallenberg Trust(5)... 1,978,640 % 190,000 1,788,640 %
========= ---- ------- ========= ===
TOTAL............... 957,600
=======
</TABLE>
- ---------
(1) Percentage of ownership is based on shares of Common Stock outstanding
immediately prior to this offering (which amount includes shares of Common
Stock underlying the Units) and shares of Common Stock outstanding
immediately after this offering (which amount assumes the exercise in full
of the Bridge Warrants). An asterisk in the foregoing table indicates
beneficial ownership of less than one percent.
(2) Calculated pursuant to Rule 13d-3(d)1 of the Exchange Act. Shares not
outstanding that are subject to options or other rights exercisable by the
holder thereof within 60 days of the date of this Prospectus are deemed
outstanding for the purposes of calculating the number and percentage owned
by such shareholder and all directors and officers as a group, but not
deemed outstanding for the purpose of calculating the percentage owned by
each other shareholder listed.
(3) Represents: (i) 159,600 shares of Common Stock underlying warrants issued
to the Representative for serving as the Placement Agent of the Bridge
Financing; and (ii) shares of Common Stock underlying the Representative
Unit Purchase Option. For additional information regarding such person, see
"Underwriting."
(4) Represents 48,849 shares of Common Stock issuable to Union Atlantic
Partners I, Limited ("UA Partners") upon conversion of the UA Partners
Note; (iv) 58,697 shares of Common Stock owned by UA Partners; (v) 7,386
shares issued to UA Partners to cancel certain ratchet and other rights;
and (vi) 38,000 shares of Common Stock underlying Bridge Warrants. For
additional information with respect to UA Partners, see "Certain
Transactions."
(5) For information with respect to the Wallenberg Trust and its beneficial
ownership of shares of Common Stock, see "Principal Shareholders" and
"Certain Transactions."
Alt.3
<PAGE>
USE OF PROCEEDS
The Company will receive no proceeds from the sale of securities by the
Selling Shareholders. If all of the Bridge Warrants are exercised, of which
there is no assurance, the Company will receive gross proceeds of $3,591,000.
After deducting $15,000 of estimated expenses of this offering, net proceeds to
the Company would be $3,576,000. The Company intends to use such proceeds, if
any, for working capital purposes and the implementation of the Company's
business plan.
PLAN OF DISTRIBUTION
No underwriting arrangements have been entered into by the Selling
Shareholders. The distribution of the Common Stock by the Selling Shareholders
may be effected in one or more transactions that may take place on the
over-the-counter market, including ordinary broker's transactions,
privately-negotiated transactions or through sales to one or more dealers for
resale of such shares as principals, at market prices prevailing at the time of
sale, at prices related to such prevailing market prices or at negotiated
prices. Usual and customary or specifically negotiated brokerage fees or
commissions may be paid by the Selling Shareholders in connection with sales of
such Common Stock.
The Selling Shareholders and intermediaries through whom such
securities are sold may be deemed "underwriters" within the meaning of the
Securities Act, with respect to the securities offered, and any profits realized
or commissions received may be deemed underwriting compensation. The Company has
agreed to indemnify the Selling Shareholders against certain liabilities,
including liabilities under the Securities Act.
Alt.4
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. INDEMNIFICATION OF OFFICERS AND DIRECTORS.
Pursuant to the provisions of Section 607.0850(1) of the Florida
Business Corporation Act, the Company has the power to indemnify any person who
is or was a party to any proceeding (other than an action by, or in the right
of, the Company), because such person is or was a director, officer, employee,
or agent of the Company (or is or was serving at the request of the Company
under specified capacities) against liability incurred in connection with such
proceeding provided such person acted in good faith and in a manner such person
reasonably believed to be in, or not opposed to, the best interest of the
Company (and with respect to any criminal action or proceeding, such person had
no reasonable cause to believe such person's conduct was unlawful).
With respect to a proceeding by or in the right of the Company to
procure a judgment in its favor, Section 607.085(2) of the Florida Business
Corporation Act provides that the Company shall have the power to indemnify any
person who is or was a director, officer, employee, or agent of the Company (or
is or was serving at the request of the Company under specified capacities)
against expenses and amounts paid in settlement not exceeding, in the judgment
of the Board of Directors, the estimated expense of litigating the proceeding to
conclusion, actually and reasonably incurred in connection with the defense or
settlement of such proceeding provided such person acted in good faith and in a
manner such person reasonably believed to be in, or not opposed to, the best
interest of the Company, except that no indemnification shall be made in a case
in which such person shall have been adjudged to be liable to the Company unless
and only to the extent that the court in which the proceeding was brought, shall
determine upon application that, despite the adjudication of liability but in
view of all circumstances of the case, such person is fairly and reasonably
entitled to indemnity for such expenses.
Indemnification as described above shall only be granted in a specific
case upon a determination that indemnification is proper under the circumstances
using the applicable standard of conduct which is made by (a) a majority of a
quorum of directors who were not parties to such proceeding, (b) if such a
quorum is not attainable or by majority vote of a committee designated by the
Board of Directors consisting of two or more directors not parties to the
proceeding, (c) by independent legal counsel selected by the Board of Directors
described in the foregoing parts (a) and (b), or if a quorum cannot be obtained,
then selected by a majority vote of the full Board of Directors, or (d) by the
shareholders by a majority vote of a quorum consisting of shareholders who are
not parties to such proceeding.
Section 607.0850(12) of the Florida Business Corporation Act permits
the Company to purchase and maintain insurance on behalf of any director,
officer, employee or agent of the Company (or is or was serving at the request
of the Company in specified capacities) against any liability asserted against
such person or incurred by such person in any such capacity whether or not the
Company has the power to indemnify such person against such liability.
ARTICLES OF INCORPORATION
The Articles of Incorporation of the Company (the "Articles") provide
for the indemnification of directors and officers of the Company to the fullest
extent permitted by Section 607.0850 of the Florida Business Corporation Act.
The Articles of Incorporation further provide that the indemnification provided
for therein shall not be exclusive of any rights to which those indemnified may
be entitled under any bylaw, agreement, vote of shareholders or disinterested
directors, or otherwise.
The Articles also contain a provision that eliminates the personal
liability of the Company's directors for monetary damages unless the director
has breached his or her fiduciary duty and such breach constitutes or includes
certain violations of criminal law, a transaction from which the director
derived an improper personal benefit, certain unlawful distributions or certain
other reckless, wanton or wilful acts or misconduct. This provision does not
alter a director's liability under the federal securities laws. In addition,
this provisions does not affect the availability of equitable remedies, such as
an injunction or rescission, for breach of fiduciary duty.
II-1
<PAGE>
SECURITIES AND EXCHANGE COMMISSION POLICY
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers or persons controlling the Company,
the Company has been informed that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act and is therefore unenforceable.
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The estimated expenses in connection with the issuance of the
securities being registered are as follows:
SEC Registration Fee* .................................... $6,597.26
NASD Filing Fee* ......................................... $2,677.10
NASDAQ Listing Fee* ...................................... $10,000
3% Non-Accountable Expenses ..............................$252,000
Printing Expenses ........................................ $55,726
Accounting Fees and Expenses .............................$100,000
Legal Fees and Expenses ..................................$125,000
Blue Sky Fees and Expenses ............................... $50,000
Transfer and Warrant Agent Fees and Expenses ............. $15,000
Miscellaneous ............................................ $10,000
------------
Total ................................................ $627,000.36
============
*Actual amount.
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES.
Set forth below is certain information regarding sales of securities by
the Company without registration under the Securities Act. Such information
gives retroactive effect to the Company's November 1996 1 for 2 forward stock
split of the Common Stock and the Company's September 1997 4.061771824 for 1
reverse stock split of the Common Stock.
On December 4, 1995, the Company issued an aggregate of 1,375,192
shares of Common Stock to Peter Berg, Lorraine Gouger and Mitch Segal for an
aggregate consideration of $20,000. The offer and sale of such securities was
made in reliance on Section 4(2) of the Securities Act for transactions not
involving a public offering. In reliance upon such exemption from registration,
the Company determined that each of the foregoing persons had such knowledge and
experience in financial and business matters so as to be able to evaluate the
merits and risks of an investment in the Company and each person had access to
the type of information that would have been included in a registration
statement filed with the Commission.
On November 20, 1996, the Company issued an aggregate of 66,434 shares
of Common Stock to Walter Muharsky and Vincent Toscano in connection with
the merger of TTI with and into the Company. The recorded value of such shares
of Common Stock was $145,714. The Company, on November 20, 1996, also issued
1,215,749 shares of Common Stock to Yannick Tessier, pursuant to the Stock
Issuance Agreement, dated August 26, 1996. The recorded value of such shares of
Common Stock was $49,381. The offer and sale of such securities was made in
reliance on Section 4(2) of the Securities Act for transactions not involving a
public offering. In reliance upon such exemption from registration, the Company
determined that each of the foregoing persons had such knowledge and experience
in financial and business matters so as to be able to evaluate the merits and
risks of an investment in the Company and each person had access to the type of
information that would have been included in a registration statement filed with
the Commission.
On November 21, 1996, the Company issued to the Wallenberg Trust and UA
Partners: (i) an aggregate of 537,377 shares of Common Stock in exchange for
aggregate consideration of $1,375,000 or $2.56 per share; and (ii)
convertible promissory notes in the principal aggregate amount of $1,375,000,
which are convertible into shares of Common Stock at a rate of $2.56 per share.
On December 31, 1997, the Company issued 543,895 shares of Common Stock to the
Wallenberg Trust upon conversion of their convertible note in the aggregate
amount of $1,391,781. As consideration for its services in connection with
November 1996 transaction, the Company granted Union Atlantic a three-year
warrant to purchase 139,708
II-2
<PAGE>
shares of common Stock at an exercise price of $2.56 per share and issued 78,133
shares of Common Stock which shares were valued at $200,020. The offer and
sale of such securities to the Wallenberg Trust was made in an offshore offering
in reliance on Regulation S of the Securities Act. The offer and sale of such
securities to Union Atlantic and UA Partners was made in reliance on Section
4(2) for transactions not involving a public offering. In reliance upon such
exemption from registration, the Company determined that each of the foregoing
persons had such knowledge and experience in financial and business matters to
be able to evaluate the merits and risks of an investment in the Company and
each person had access to the type of information that would have been included
in a registration statement filed with the Commission.
On November 21, 1996, the Company acquired from eight shareholders
of Galacticomm, Inc. an aggregate of 8,037,203 shares of the common stock of
Galacticomm, Inc. (representing approximately 96 percent of the then issued and
outstanding shares of the common stock of Galacticomm, Inc.) in exchange for the
issuance of an aggregate of 150,263 shares of Common Stock and the aggregate
cash payment of $611,476. The offer and sale of such securities was made in
reliance on Rule 504 of Regulation D promulgated under the Securities Act.
On January 14, 1997, the Company granted Claus Stenbaek a three-year
option to purchase 6,155 shares of Common Stock at an exercise price of $2.56
per share as consideration for serving on the Company's board of directors
and granted Robert O'Brien a three-year option to purchase 2,462 shares of
Common Stock at an exercise price of $2.56 per share in exchange for sales and
marketing consulting services rendered to the Company. The offer and sale of
such securities was made in reliance on Rule 701 of the Securities Act.
In February 1997, the Company acquired from 34 persons an additional
848,404 shares of the common stock of Galacticomm, Inc. in exchange for the
issuance of an aggregate of 42,895 shares of Common Stock and the aggregate cash
payment of $56,937. The recorded value of such shares of Common Stock was
$139,408. The offer and sale of such securities was made in reliance on Rule 504
of Regulation D promulgated under the Securities Act.
In June 1997, the Company issued 259,802 shares of Common Stock to nine
persons (3 accredited and 6 non-accredited) for aggregate consideration of
$970,762. As consideration for its services in connection with such transaction,
the Company granted Union Atlantic three-year warrants to purchase 33,774 shares
of Common Stock at an exercise price of $3.74 per share. The offer and sale of
such securities was made in reliance on Rule 506 of Regulation D promulgated
under the Securities Act. Each of the non-accredited investors represented to
the Company, among other things, that such investor had such experience in
financial and business matters so as to be able to evaluate the merits and risks
of the investment.
On June 30, 1997, the Company granted options to purchase an aggregate
of 354,526 shares of Common Stock at an exercise price of $3.74 per share to
Messrs. Berg and Tessier pursuant to the terms of their respective employment
agreements with the Company. The offer and sale of such securities was made in
reliance on Section 4(2) of the Securities Act for transactions not involving a
public offering. In reliance upon such exemption from registration, the Company
determined that each of the foregoing persons had such knowledge and experience
in financial and business matters so as to be able to evaluate the merits and
risks of an investment in the Company and each person had access to the type of
information that would have been included in a registration statement filed with
the Commission.
In August 1997, the Company issued an aggregate of 22,857 shares of
Common Stock to five persons, pursuant to the terms of five Agreements to
Distribute Proceeds entered into between December 1995 and February 1997. The
offer and sale of such securities was made in reliance on Section 4(2) of the
Securities Act for transactions not involving a public offering. In reliance
upon such exemption from registration, the Company determined that each of the
foregoing persons had such knowledge and experience in financial and business
matters so as to be able to evaluate the merits and risks of an investment in
the Company and each person had access to the type of information that would
have been included in a registration statement filed with the Commission.
In September 1997, the Company granted options to purchase an aggregate
of 194,496 shares of Common Stock (of which 164,337 are outstanding at September
30, 1997) at an exercise price of $6.50 per share to 36 employees of the Company
pursuant to the Company's 1997 Stock Option Plan. The offer and sale of such
securities was made in reliance on Rule 701 of the Securities Act.
On September 8, 1997, the Company issued an aggregate of 81,245 shares
of Common Stock to the Wallenberg Trust and UA Partners as consideration for
relinquishing the following rights that were originally set forth in the
Stock Purchase Agreements, dated November 21, 1997, between the Company and each
of the Wallenberg Trust and UA Partners: (i) ratchet rights that required the
Company to issue additional shares of Common Stock to such persons based on the
II-3
<PAGE>
Company's 1997 after tax earnings as follows: (x) 0.2529 shares for each share
then owned if after tax earnings were less than $1,000,000; (y) 0.12645 shares
for each share then owned if after tax earnings were between $1,000,000 and
$1,500,000; and (z) no additional shares if after tax earnings exceeded
$1,500,000; (ii) certain preemptive rights; and (iii) certain anti-dilutive
rights. The foregoing transaction was recorded as a reclassification of the par
value of such shares of Common Stock from additional paid in capital to common
stock.
On October 28, 1997, the Company issued to 39 persons (26 accredited
investors and 13 non-accredited investors) 42 units, each unit consisting of a
promissory note in the principal amount of $50,000 and three year warrants to
purchase 19,000 shares of Common Stock at an exercise price of $3.75 per share.
Such offering was made in reliance on Rule 506 of Regulation D promulgated under
the Securities Act. Each of the non-accredited investors represented to the
Company, among other things, that such investors had such experience in
financial and business matters to be able to evaluate the merits and risks of
the investment. As consideration for serving as the placement agent for such
offering, the Company paid the Representative a placement fee equal to: (i) cash
compensation of $210,000; (ii) a non-accountable expense allowance of $63,000
and accountable expenses totaling $10,000; and (iii) warrants to purchase
159,600 shares on terms substantially the same as the Bridge Warrants.
On December 15, 1997, the Company granted David Manovich a three year
option to purchase 30,000 shares of Common Stock at an exercise price of $3.75
per share as consideration for serving on the board of directors of the Company.
The offer and sale of such securities was made in reliance on Rule 701 of the
Securities Act.
ITEM 27. EXHIBITS
(A) EXHIBITS.
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
1. Form of Underwriting Agreement between the Company and the
Underwriters.*
3.1 Articles of Incorporation of the Company as filed with the Secretary
of State on December 4, 1995.*
3.2 Articles of Amendment to Articles of Incorporation of the Company as
filed with the Florida Secretary of State on November 19, 1996.*
=
3.3 Articles of Amendment to Articles of Incorporation of the Company as
filed with the Florida Secretary of State on May 1, 1997.*
3.4 Articles of Amendment to Articles of Incorporation of the Company as
filed with the Florida Secretary of State on September 9, 1997.*
3.5 Articles of Amendment to Articles of Incorporation of the Company as
filed with the Florida Secretary of State on dated September 30, 1997.*
3.6 Articles of Merger of the Company as filed with the Florida Secretary
of State on November 21, 1996.*
3.7 Bylaws of the Company.*
3.8 Amendment to the Bylaws of the Company dated as of November 19, 1996.*
4.1 Form of Common Stock Certificate.**
4.2 Form of Warrant Agreement.*
4.3 Form of Warrant Certificate.**
4.4 Form of Representative Unit Purchase Option.*
4.5 Form of Representative Common Stock Purchase Warrant.*
II-4
<PAGE>
4.6 Form of Representative Purchase Option Certificate.*
5 Opinion of Lucio, Mandler, Croland, Bronstein, Garbett, Stiphany &
Martinez, P.A.**
10.1 Stock Purchase Agreement, dated November 21, 1996, among the Company,
Peter Berg ("Berg"), Yannick Tessier ("Tessier") and Hemmingfold
Investments Ltd. ("Hemmingfold").*
10.2 Letter Agreement, dated September 8, 1997, by and among the Company,
Berg, Tessier and Hemmingfold amending the Stock Purchase Agreement
dated November 21, 1996.*
10.3 Secured Convertible Promissory Note, dated November 21, 1996, from the
Company in favor of Hemmingfold.*
10.4 Letter Agreement, dated September 8, 1997, by and between the Company
and Hemmingfold amending the Secured Convertible Promissory Note, dated
November 21, 1996.*
10.5 Stock Purchase Agreement, dated November 21, 1996, among the Company,
Berg, Tessier and Union Atlantic Partners I Limited ("UA Partners").*
10.6 Letter Agreement, dated September 8, 1997, by and among the Company,
Berg, Tessier and UA Partners amending the Stock Purchase Agreement,
dated November 21, 1996.*
10.7 Secured Convertible Promissory Note, dated November 21, 1996, from the
Company in favor of UA Partners.*
10.8 Letter Agreement, dated September 8, 1997, by and between the Company
and Union Atlantic Partners amending the Secured Convertible Promissory
Note, dated November 21, 1996.*
10.9 Warrant dated November 21, 1996, between Company and Union Atlantic,
L.C. ("Union Atlantic").*
10.10 1997 Stock Option Plan.*
10.11 Form of Bridge Note.*
10.12 Form of Bridge Warrant.*
10.13 Form of Bridge Registration Rights Agreement.*
10.14 Agreement and Plan of Merger between Company and Tessier Technologies,
Inc. dated November 20, 1996.
10.15 Lease Agreement to lease office space between Galacticomm, Inc. and New
Town Commerce Center, Ltd., dated July 21, 1997.
10.16 Agreement to lease T-3 Fiber Optic Digital Equipment between AT&T and
the Company, dated December 26, 1996.
10.17 Letter Agreement to acquire Galacticomm, Inc. between Company and
Galacticomm, Inc. dated October 29, 1996.*
10.18 Amended and Restated Consulting Agreement, dated July 1, 1997, between
the Company and Union Atlantic.*
10.19 Consulting Agreement, dated January 15, 1997, by and among the Company,
Union Atlantic and Robert J. O'Brien.*
10.20 Amended and Restated Employment Agreement, dated June 30, 1997, between
the Company and Berg.
10.21 Amended and Restated Employment Agreement, dated June 30, 1997, between
the Company and Tessier.
10.22 Employment Agreement, dated August 25, 1997, between the Company and
T. Michael Love.*
10.23 Stock Option and Agreement between the Company and Berg.*
II-5
<PAGE>
10.24 Stock Option and Agreement between the Company and Tessier.*
10.25 Stock Issuance Agreement among the Company, Berg and Tessier
dated August 26, 1996.*
10.26 Promissory Note from Galacticomm, Inc. in favor of Capital Bank.
10.27 Promissory Note, dated April 2, 1996, from the Company in favor
of Skyline, Inc.*
10.28 Promissory Note, dated August 3, 1996, from Tessier Technologies,
Inc. in favor of Yannick Tessier.*
10.29 Promissory Note Extension, dated December 31, 1996 in favor of Yannick
Tessier by the Company.*
10.30 Bundling Agreement with Authorization to Replicate Products
between Eastman Kodak Company and Galacticomm, Inc. dated May 29,
1997.*
10.31 Agreement between Majorware Inc., and Galacticomm, Inc. dated April
30, 1997.*
10.32 Sale of High Society BBS to Galacticomm, Inc. Agreement dated June 10,
1997.*
10.33 Galacticomm Agreement between the Company and Specom Technologies
Corp., dated May 8, 1997.*
10.34 Letter of Permission to Distribute Software between Galacticomm, Inc.
and Aztech New Media Corp., dated May 21, 1997.
10.35 Software Distribution License between Galacticomm, Inc. and Digital
Vision, Inc. dated May 30, 1997.*
10.36 Software Distribution License between Best Data Products and
Galacticomm, Inc. dated May 30, 1997.*
10.37 Letter Agreement between Galacticomm, Inc. and DataSafe Publications,
Inc. dated October 28, 1997.*
10.38 Restated Software License Agreement between Galacticomm, Inc. and LEAD
Technologies, Inc. dated September 29, 1995.*
10.39 Annual Source Support and Maintenance Agreement between Galacticomm,
Inc. and Pacific Software, Inc. dated September 14, 1995.*
10.40 Software Source Code and Software Binary Distribution License
Agreement between Galacticomm, Inc. and Pacific Software, Inc. dated
April 14, 1995.
10.41 License Agreement between Crown Communications, Inc. and the Company
dated November 18, 1996.
10.42 Renewal and Modification Agreement to Distribution Agreement between
Tech Data Corporation and Galacticomm, Inc. dated October 8, 1995.*
10.43 Start-Up Agreement between Galacticomm, Inc. and Ingram Micro, Inc.
dated April 9, 1997.*
10.44 Reseller Agreement between Galacticomm, Inc. and World Commerce Online,
Inc. dated March 27, 1997.*
10.45 Distribution Agreement between Galacticomm, Inc. and DistribuPro dated
February 10, 1994.
10.46 Web Hosting Agreement between Galacticomm, Inc. and Horst
Entertainment, Inc. dated September 9, 1997.*
10.47 Software License Agreement, dated August 12, 1997 between the Company
and Boca Research, Inc.***
10.48 Reseller Agreement, dated December 12, 1997, between the Company
and Microland Trading, Inc.***
10.49 Reseller Agreement, dated January 12, 1998, between the Company
and Simon & Schuster, Inc.***
II-6
<PAGE>
10.50 Joint Venture Agreement, dated January ___, 1998, by and between the
Company and Express Web, Inc.**
10.51 Form of Voting Agreement between the Company and Messrs. Berg and
Tessier.
10.52 Form of Lock-Up Agreement.
10.53 Promissory Note Extension, dated December 31, 1997 in favor of
Yannick Tessier.
11. Statement re: Computation of per share loss.
21. Subsidiaries of the Company: Galacticomm, Inc., a corporation organized
under the laws of the State of Florida.
23. Consent of KPMG Peat Marwick LLP.
24. Power of Attorney (included in the Signature Page of initial filing of
the Registration Statement).
27. Financial Data Schedule (for SEC purposes only).
- -----------------------------
* Previously filed with this Registration Statement
** To be filed by amendment
*** Portions of such exhibit have been omitted pursuant to a request for
confidential treatment
ITEM 28. UNDERTAKINGS.
(a) The undersigned small business issuer hereby undertakes to provide to
the underwriters at the closing specified in the underwriting agreement,
certificates in such denominations and registered in such names as required by
the underwriters to permit prompt delivery to each purchaser.
(b) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling persons
of the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer of controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.
(c) The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities
Act, the information omitted from the form of Prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form of
Prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed to be part of this Registration
Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of Prospectus shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(d) The undersigned small business issuer hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a(3) of the
Securities Act;
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<PAGE>
(ii) To reflect in the Prospectus any facts or events arising
after the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or together, represent a
fundamental change in the information in the registration statement; and
notwithstanding the foregoing, any increase or decrease in volume of securities
offered (if the total dollar value of securities offered would not exceed that
which was registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form of Prospectus
filed with the Securities and Exchange Commission pursuant to Rule 424(b) if, in
the aggregate, the changes in the volume and price represent no more than a 20%
change in the maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement.
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination of
the offering.
(e) The undersigned registrant hereby undertakes that it will: (i) file a
post-effective amendment to this Registration Statement if the lock-up
arrangement with the Selling Shareholders is waived for ten percent or more of
the shares of Common Stock offered by the Selling Shareholders; or (ii) add a
supplement to the prospectus of which this Registration Statement forms a part
if such lock-up arrangement is waived for between five and ten percent of the
shares of Common Stock offered by the Selling Shareholders.
II-8
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant has duly caused Amendment No. 1 to this Registration Statement to be
signed on its behalf by the undersigned, thereunto duly authorized, in the City
of Fort Lauderdale, State of Florida, on the 22nd day of January 1998.
GALACTICOMM TECHNOLOGIES, INC.
By: /S/ PETER BERG
-------------------------------------
Peter Berg, Chairman of the Board and
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, Amendment No.
1 to this Registration Statement has been signed below by the following persons
in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C>
/S/ PETER BERG Chairman of the Board and Chief January 22, 1998
- -------------------------------------- Executive Officer (Principal Executive
Peter Berg Officer)
/S/ YANNICK TESSIER President and Director January 22, 1998
- ------------------------------------
Yannick Tessier
/S/ T. MICHAEL LOVE Chief Financial Officer (Principal January 22, 1998
- ------------------------------------ Financial and Accounting Officer)
T. Michael Love
*/S/ PETER BERG Director January 22, 1998
- ------------------------------------
Timothy Mahoney
- ------------------------------------ Director January __, 1998
David Manovich
*/S/ PETER BERG Director January 22, 1998
- ------------------------------------
Claus Stenbaek
*/S/ PETER BERG
-----------------------------
Peter Berg, Attorney-in-Fact
</TABLE>
II-9
<PAGE>
EXHIBIT INDEX
EXHIBIT DESCRIPTION
- ------- -----------
10.14 Agreement and Plan of Merger between Company and Tessier Technologies,
Inc. dated November 20, 1996.
10.15 Lease Agreement to lease office space between Galacticomm, Inc. and New
Town Commerce Center, Ltd., dated July 21, 1997.
10.16 Agreement to lease T-3 Fiber Optic Digital Equipment between AT&T and
the Company, dated December 26, 1996.
10.26 Promissory Note from Galacticomm, Inc. in favor of Capital Bank.
10.34 Letter of Permission to Distribute Software between Galacticomm, Inc.
and Aztech New Media Corp., dated May 21, 1997.
10.40 Software Source Code and Software Binary Distribution License
Agreement between Galacticomm, Inc. and Pacific Software, Inc. dated
April 14, 1995.
10.41 License Agreement between Crown Communications, Inc. and the Company
dated November 18, 1996.
10.45 Distribution Agreement between Galacticomm, Inc. and DistribuPro dated
February 10, 1994.
10.47 Software License Agreement, dated August 12, 1997 between the Company
and Boca Research, Inc.***
10.48 Reseller Agreement, dated December 12, 1997, between the Company
and Microland Trading, Inc.***
10.49 Reseller Agreement, dated January 12, 1998, between the Company
and Simon & Schuster, Inc.***
10.51 Form of Voting Agreement between the Company and Messrs. Berg and
Tessier.
10.52 Form of Lock-Up Agreement.
10.53 Promissory Note Extension, dated December 31, 1997 in favor of
Yannick Tessier.
11. Statement re: Computation of per share loss.
23. Consent of KPMG Peat Marwick LLP.
27. Financial Data Schedule (for SEC purposes only).
*** PORTIONS OF SUCH EXHIBIT HAVE BEEN OMITTED PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT.
EXHIBIT 10.14
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (the "Agreement") dated as of November 20,
1996, by and between I-View Software, Inc., a Florida corporation (hereinafter
referred to as "I-View" or "Surviving Corporation") and Tessier Technologies,
Inc., a Florida corporation (hereinafter referred to as "Tessier" or "Merging
Corporation"), (the Surviving and Merging Corporations being sometimes referred
to as the "Constituent Corporations").
WITNESSETH:
WHEREAS, the Board of Directors of each of I-View and Tessier deem it
advisable for the general welfare of the Constituent Corporations and their
shareholders that the Constituent Corporations merge into a single corporation
pursuant to this Agreement and the applicable laws of the State of Florida; and
NOW THEREFORE, for and in consideration of the premises and the mutual
agreements hereinafter set forth, the Constituent Corporations agree that
Tessier shall be merged with and into I-View (the "Merger") in accordance with
the applicable laws of Florida and that the name of the surviving corporation
shall continue to be I-View Software, Inc. and that the terms and conditions of
the Merger and the mode of carrying same into effect shall be as follows:
SECTION 1. THE MERGER
1.1 CLOSING. At a closing to take place on or before November 20, 1996,
at the offices of I-View, 300 South Pine Island Road, Suite 261, Plantation,
Florida 33324, or at such other time or place mutually agreeable to the parties
(the "Closing", the date thereof being referred to herein as the "Closing
Date"), the parties shall carry out the transaction described hereinbelow.
1.2 CONSUMMATION OF THE TRANSACTION. At or prior to the Closing,
Articles of Merger prepared in accordance with Florida law and consistent with
this Agreement (the "Articles of Merger") shall be executed and acknowledged by
the duly authorized officers of each of I-View and Tessier in accordance with
the applicable provisions of the Florida Business Corporation Act. After the
Closing, a copy of the Articles of Merger shall be delivered by I-View to and
filed with the Secretary of State of Florida, in the manner prescribed by
Section 607.1105 of the Florida Business Corporation Act. At the time of the
filing of the respective Tessier and I-View Articles of Merger with the Florida
Secretary of State (the "Effective Time"), the Merger will become effective,
Tessier shall be merged with and into I-View and the separate corporate
existence of Tessier shall cease. Any and all filings required pursuant to the
laws of Florida shall be completed prior to the Effective Time. After the
Effective Time, I-View shall be referred to as the Surviving Corporation. It is
the intention of the
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<PAGE>
parties hereto that the transactions described herein qualify as a tax-free
reorganization under Section 368(a)(2)(e) of the Internal Revenue Code of 1986,
as amended and related sections thereunder.
1.3 ARTICLES OF INCORPORATION AND BY-LAWS OF THE SURVIVING CORPORATION. At the
Effective Time, the Articles of Incorporation, as amended, of I-View as in
effect immediately prior thereto shall become the Articles of Incorporation, as
amended, of the surviving Corporation. At the Effective Time, the By-Laws of
I-View as in effect immediately prior thereto shall be the By-Laws of the
Surviving Corporation.
1.4 CONVERSION OF SHARES. The mode of carrying the Merger into effect
and the manner and basis of converting the shares of the Merging Corporation
into shares of the Surviving Corporation are as follows:
(a) Upon the Effective Time, each share of common stock, $.001 par
value, of Tessier ("Tessier Common Stock") which is issued and outstanding at
the Effective Time other than shares owned by shareholders who have objected to
the Merger and demanded purchase of their shares in accordance with the
provisions of Section 607.1302 of the laws of the State of Florida and with
respect to which such demand shall not have been withdrawn with the consent of
the Constituent Corporations ("Dissenting Shares") shall, by virtue of the
Merger and without any action on the part of the holder thereof, be converted
into 1.0415873 shares of Common Stock, $.0001 par value, of I-View ("I-View
Common Stock").
(b) Each certificate evidencing ownership of shares of Tessier Common
Stock issued and outstanding at the Effective Time shall by virtue of the Merger
and without any action on the part of Tessier be retired and canceled.
(c) Each certificate evidencing ownership of shares of I-View Common
Stock issued and outstanding at the Effective Time or held by I-View in its
treasury shall continue to evidence ownership of the same number of shares of
I-View Common Stock.
1.5 EXCHANGE OF CERTIFICATES. At the Closing hereof, each holder of an
outstanding certificate or certificates representing shares of Tessier Common
Stock (other than certificates representing Dissenting Shares) shall surrender
them to I-View. Upon receipt, I-View shall thereupon issue and each shareholder
shall receive in exchange, a certificate or certificates representing the full
number of shares of I-View Common Stock into which the shares of Tessier Common
Stock represented by the certificate or certificates so surrendered shall have
been converted. Each Tessier shareholder exchanging shares of Tessier for shares
of I-View Common Stock shall execute a letter of investment intent in a form as
attached hereto as Exhibit "A", and in accordance with the terms thereof, I-View
shall imprint a restrictive legend on the
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<PAGE>
back of each of the I-View share certificates so issued. The I-View shareholders
prior to the Merger shall also have the same restrictive legend appear on their
respective I-View share certificates.
1.6 UNEXCHANGED CERTIFICATES. Until surrendered, each outstanding
certificate which, prior to the Effective Time, represented Tessier Common Stock
(other than certificates representing Dissenting shares) shall be deemed for
all purposes, other than the payment of dividends or other distributions, to
evidence ownership of the whole number of shares of I-View Common Stock into
which it was converted, and no dividend or other distribution payable to the
holders of I-View Common Stock after any date subsequent to the Effective Time,
shall be paid to the holders of outstanding certificates representing shares of
Tessier Common Stock; provided, however, that upon surrender and exchange of the
outstanding certificates (other than certificates representing Dissenting
Shares), there shall be paid to the record holders of the certificates issued in
exchange therefore the amount, without interest thereon, of dividends and other
distributions which would have been payable with respect to the shares of
Tessier Common Stock represented thereby.
1.7 BOARD OF DIRECTORS AND OFFICERS. Upon the Effective Time of the
Merger, the current officers and directors of I-View shall continue in their
respective positions and shall be:
Peter Berg Chief Executive Officer, Chairman of the
Board of Directors and Director
The Company shall use its best efforts to ensure that at the Effective
Time of the Merger, Yannick Tessier shall be elected as a Director of the
Company and be appointed the Company's President and Treasurer. In addition,
each of Peter Berg and Yannick Tessier shall each appoint two nominees to the
Board of Directors for an aggregate of six directors.
1.8 FURTHER ASSURANCES. At the Effective Time, Tessier shall be merged
with and into the Surviving Corporation and the separate corporate existence of
Tessier shall cease (except insofar as continued by statute). All the property,
real, personal and mixed property of each of the Constituent Corporations, and
all debts due to either of them, shall be transferred to and vested in the
Surviving Corporation, (except for Tessier's High Society on-line service to
which Yannick Tessier, individually, shall be granted all right, title and
interest and be obligated for all debts, obligations, and liabilities relating
thereto), and all obligations, including liabilities to holders of Dissenting
Shares, of each of the Constituent Corporations, and any claim or judgment
against either of the Constituent Corporations, may be enforced against the
Surviving Corporation. I-View will repay to Yannick Tessier his prior
shareholder loan to Tessier in the aggregate amount of $50,000, without
interest, from time to time and in any
3 of 16
<PAGE>
event, within twelve (12) months of the Closing Date. The Constituent
Corporations agree that if at any time after the Effective Time, any deeds or
assignments shall be deemed by the Surviving Corporation to be reasonably
necessary or desirable to vest, perfect or confirm in the Surviving Corporation
title to any property or rights of Tessier, the Surviving Corporation and its
duly authorized officers and directors may execute and deliver in the name of
Tessier all such deeds and assignments deemed necessary to vest, perfect or
confirm in the Surviving corporation title to and possession of all property,
rights, privileges, immunities, powers, purposes and franchises belonging to
Tessier and otherwise to carry out the purpose of this Agreement.
1.9 APPROVAL OF SHAREHOLDERS. This Agreement shall be submitted to the
shareholders of the Constituent Corporations as provided by the applicable law
of the State of Florida. There shall be required for the adoption of this
Agreement the affirmative vote of the holders of all the shares of Common Stock
and/or other securities issued and outstanding and entitled to vote of each of
Tessier and I-View, respectively.
SECTION 2. REPRESENTATIONS, WARRANTIES
AND COVENANTS OF TESSIER
Tessier hereby makes the following representations, warranties and covenants:
2.1 ORGANIZATION AND STANDING. Tessier is a corporation duly organized,
validly existing and in good standing under the laws of the State of Florida
with full corporate power to own or lease its properties and conduct its
business in the manner and in the places where such properties are owned or
leased or such business is conducted by it.
2.2 FINANCIAL STATEMENTS. The compiled financial statements of Tessier
as of November 14, 1996 (the "Financial Statements") which have previously been
delivered to I-View, are true and complete statements of the financial condition
of Tessier as of that date; there are no material liabilities, either fixed or
contingent, not reflected in such Financial Statements for Tessier or otherwise,
except as disclosed therein, other than contracts or obligations entered into in
the usual course of business, or liens or other liabilities which would not
materially alter the financial condition of Tessier as reflected in such
Financial Statements.
2.3 AUTHORITY. Tessier and all of its securityholders entitled to vote
have approved this Agreement and the transactions contemplated hereby, and has
authorized the execution and delivery hereof. Tessier has full corporate
authority to execute this Agreement and to carry out the transactions
contemplated hereby. This Agreement and the transactions contemplated hereby
will not violate (i) any of the terms and provisions of Tessier's Articles of
Incorporation, as amended, or By-Laws, as
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amended; (ii) any provision of, or result in a default under any mortgage, lien,
lease, agreement, contract, instrument, order, arbitration award, judgment or
decision to which such corporation is a party or by which it or any of its
property is bound; or (iii) any federal, state or local laws or ordinances.
2.4 CAPITALIZATION. The authorized capital stock of Tessier consists of
(i) 5,000,000 shares of Common Stock, $.001 par value, of which there are and
will be at the Closing Date, 5,000,000 issued and outstanding shares, duly and
validly authorized and issued, fully paid and nonassessable with no preemptive
or anti-dilution rights. The Common Stock has full voting, dividend and
liquidation rights. There are no outstanding options or warrants or any other
securities convertible or exchangeable into any shares of capital stock or other
securities of Tessier. No restrictions exist on the transfer of any shares of
Tessier capital stock except for those arising under applicable state and
federal securities laws.
2.5 ARTICLES OF INCORPORATION; BY-LAWS; MINUTE BOOKS. The copies of the
Articles of Incorporation, as amended to date, and of the By-Laws, as amended to
date, of Tessier which have previously been delivered to I-View, are correct and
complete as of the date hereof.
2.6 PAYMENT OF TAXES. Tessier has filed all federal, state and local tax
returns, including all franchise tax returns, required to be filed, and has paid
any and all taxes owing by it pursuant to such returns or pursuant to any
assessment, or as otherwise have become due and payable. There is no known tax
deficiency proposed or threatened against Tessier except as disclosed in
Schedule 2.6 attached hereto.
2.7 ABSENCE OF UNDISCLOSED LIABILITIES. Except as disclosed in the
balance sheet dated as of November 14, 1996 (the "Balance Sheet") included in
the Financial Statements of Tessier and except as have been incurred since the
date of the Balance Sheet in the ordinary course of business or previously
disclosed in writing to I-View, Tessier has no liabilities or obligations of any
nature, whether absolute, accrued, contingent or otherwise (whether or not
required to be reflected in the Financial Statements in accordance with
generally accepted accounting principles) and whether matured or unmatured,
known or unknown.
2.8 ABSENCE OF CERTAIN CHANGES. Since the date of the Balance Sheet
Tessier has not, except as disclosed in Schedule 2.8 attached hereto (i) issued
or sold any corporate securities (other than as previously disclosed in writing
to I-View); (ii) incurred any obligations or liabilities (fixed or contingent),
other than obligations or liabilities incurred in the ordinary course of
business, and obligations or liabilities under contracts and other documents, if
any, except as disclosed herein; (iii) discharged or satisfied any lien or
encumbrance or paid any obligation or liability (fixed or contingent), other
than current liabilities included in the Balance Sheet, current
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liabilities incurred since such date in the ordinary course of business, and
obligations and liabilities under contracts or other documents if any, except as
disclosed herein; (iv) declared or made any dividend payment or like
distribution to its shareholders or purchased or redeemed any shares of its
capital stock; (v) paid or contracted to pay for any shares of its capital
stock; (vi) paid or contracted to pay any general wage or salary increase or
entered into any employment contract with any officer or salaried employee not
previously disclosed in writing to I-View other than in the ordinary course of
business and approved by Tessier's Board of Directors as reflected in its
corporate minutes as previously provided to I-View; (vii) mortgaged, pledged or
subjected to any lien or other encumbrance any of its assets, tangible or
intangible; (viii) sold or transferred any of its tangible assets or canceled
any debts or claims, except, in each case, in the ordinary course of business;
(ix) sold, assigned, transferred or granted rights under any patents,
trademarks, trade names, copyrights, licenses or other intangible assets; (x)
waived any rights of material value; (xi) entered into any transactions other
than in the ordinary course of business, except those contracts or other
documents, if any, disclosed herein; or (xii) suffered any material adverse
change in its business or financial condition or any damage, destruction or loss
(whether or not covered by insurance), adversely affecting the business or
prospects of any of the properties of Tessier.
2.9 TITLE TO REAL PROPERTY; INTELLECTUAL PROPERTY. Annexed hereto as
Schedule 2.9 is a description of all real properties owned by or leased to
Tessier and except as disclosed on Schedule 2.9, Tessier is not in default in
any respect thereunder. I-View has previously been provided by Tessier with true
and correct copies of all leases. The offices located on the premises covered by
said leases are not known to be in violation of any building and zoning laws.
Tessier further represents and warrants that it owns the patents, patent
applications, trademarks, trademark registrations, trademark applications,
copyrights, trade secrets and technology, if any, listed on Schedule 2.9
attached hereto (collectively the "intellectual property rights") and that it
has not previously assigned, licensed, and/or pledged the intellectual property
rights, and further represents and warrants that the intellectual property
rights are not subject to any lien or claim of security by a third party, and
additionally represents and warrants that it has not otherwise assigned or
transferred any rights to or in the intellectual property rights.
Further, Tessier represents and warrants that the patents, if any, are
valid and enforceable, and that it knows of no challenge to the validity of the
patents. Tessier additionally represents and warrants that there is no challenge
to its right to use the trademarks, if any, listed on Schedule 2.9 by any third
party.
Tessier further represents and warrants that it has no knowledge of any
challenge by a third party to Tessier's right to use the technology and
know-how embodied in the intellectual property rights, including, but not
limited to, allegations
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of patent, trademark and copyright infringement and allegations of
misappropriation and/or theft of trade secrets regarding the use of the
intellectual property rights by Tessier.
2.10 CONTRACTS AND COMMITMENTS. Except only as to those contracts and
agreements disclosed herein in Schedule 2.10 attached hereto, Tessier is not a
party to or bound by any written or oral (i) contract not made in the ordinary
course of business; (ii) contract with any labor union or association; (iii)
bonus, pension, profit-sharing, retirement, stock purchase, hospitalization,
insurance or other plan providing employee benefits: (iv) lease with respect to
any property, real or personal, whether as lessor or lessee; (v) continuing
contract for the future purchase of materials, supplies or equipment in excess
of the requirements of its business now booked or for normal operating
inventories; (vi) contracts or commitments for capital expenditures; or (vii)
contracts continuing over a period of more than one year from their respective
dates. Tessier has, in all material respects, performed all obligations required
to be performed by it to date and is not in default in any material respect
under any agreements, leases or other documents to which it is a party or by
which it is bound.
2.11 FIXED ASSETS. Tessier's fixed assets as reflected on the Balance
Sheet and on the books of Tessier on the Closing Date are, and will be, in good
condition and in operating order.
2.12 COMPLIANCE WITH THE LAWS. As of the date hereof, Tessier is, and on
the Closing Date will be, in compliance with any and all applicable laws of any
federal, state, municipal or other governmental body relating to the operation
and -conduct of its property and business, There are no actions, suits or
proceedings pending, or known to be threatened against or affecting Tessier,
either at law or in equity, either private, governmental or quasi-governmental,
or before any federal, state, municipal or other governmental body which have
not previously been disclosed in writing by Tessier to I-View.
2.13 DISCLOSURE. No representation, warranty or covenant of Tessier
contained herein, and no statement made in any certificate, exhibit or schedule
furnished in connection with the transactions contemplated hereby, contains or
will contain any known untrue statement of material fact, and nothing herein or
in such certificate or schedule omits or fails to state a material fact.
2.14 DISPOSITION OF I-VIEW COMMON STOCK; INVESTMENT REPRESENTATION. Each
shareholder of Tessier represents and warrants to I-View that he is acquiring
(and his designees and assignees, if any shall acquire) shares of I-View Common
Stock (the "Restricted Shares") to be issued and delivered to him on the Closing
Date for his own account for investment and not with a view to any distribution
thereof. Each of the shareholders expressly represents and agrees that for
purposes of the requirements of Rule 144 promulgated under the Securities Act of
1933, as amended (the "Securities
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Act"), the holding period for the Restricted Shares received pursuant to this
Agreement shall be deemed to commence upon the Closing hereof. Each shareholder
acknowledges that he has been informed by I-View that the Restricted Shares
issued pursuant to this Agreement have not been registered under the Securities
Act and that the Restricted Shares must be held indefinitely unless subsequently
registered under the Securities Act or an exemption from such registration is
available. Each shareholder also acknowledges that he is fully aware of the
restrictions on resale of the Restricted Shares under the Securities Act and the
General Rules and Regulations thereunder (including, without limitation, Rule
144), and that I-View is under no obligation to register any of the Restricted
Shares. Each certificate representing Restricted Shares to be issued to the
shareholders on the Closing Date shall bear the following legend or one
comparable thereto, unless, in the opinion of I-View's counsel, such legend is
no longer necessary to assure compliance with the Securities Act:
"These securities have not been registered under the
Securities Act of 1933, as amended, and may be offered and
sold (transferred, hypothecated or otherwise assigned) only
if registered pursuant to the provisions of such Act or if
counsel to the Company renders an opinion that an exemption
from registration therefrom is available."
2.15 SURVIVAL OF REPRESENTATIONS WARRANTIES AND COVENANTS. The
representations, warranties and covenants of Tessier contained in this Section 2
shall survive the Closing Date.
SECTION 3. REPRESENTATIONS, WARRANTIES
AND COVENANTS OF I-VIEW
I-View hereby makes the following representations, warranties and covenants:
3.1 ORGANIZATION AND STANDING. I-View is a corporation duly organized,
validly existing and in good standing under the laws of the State of Florida
with full corporate power to own or lease its property and conduct business.
3.2 FINANCIAL STATEMENTS. The compiled financial statements of I-View as
of September 30, 1996 (the "I-View Financial Statements"), which have previously
been delivered to Tessier, are true and complete statements of the financial
condition of I-View as of that date; there are no material liabilities, either
fixed or contingent, not reflected in such I-View Financial Statements or
otherwise, except as disclosed therein, other than contracts or obligations
entered into in the usual course of business, or liens or other liabilities
which would not materially alter the financial condition of I-View as reflected
in such I-View Financial Statements.
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3.3 AUTHORITY. I-View and all of its securityholders entitled to vote
have approved this Agreement and the transactions contemplated hereby and have
authorized the execution and delivery hereof. I-View has full corporate
authority to execute this Agreement and to carry out the transactions
contemplated hereby. This Agreement and the transactions contemplated hereby
will not violate (i) any of the terms and provisions of I-View's Articles of
Incorporation, as amended, or By-Laws; (ii) any provision of, or result in a
default under any mortgage, lien, lease, agreement, contract, instrument, order,
arbitration, award, judgment or decision to which such corporation is a party or
by which it or any of its property is bound; or (iii) any federal, state or
local laws or ordinances.
3.4 CAPITALIZATION. The authorized capital stock of I-View consists of
20,000,000 shares of Common Stock, $.0001 par value, of which there are and will
be at the Closing Date, 10,793,651 issued and outstanding shares, duly and
validly authorized and issued, fully paid and non-assessable with no pre-emptive
or anti-dilution rights. The Common Stock has full voting, dividend and
liquidation rights. There are no outstanding options or warrants or any other
securities convertible or exchangeable into any shares of capital stock or other
securities of I-View. No restrictions exist on the transfer of any shares of
I-View capital stock except for those arising under applicable state and federal
securities laws.
3.5 ARTICLES OF INCORPORATION AND BY-LAWS. The copies of the Articles
of Incorporation, as amended to date and By-Laws of I-View, which have
previously been delivered to Tessier, are correct and complete as of the date
hereof.
3.6 PAYMENT OF TAXES. I-View has filed all federal, state and local tax
returns, including all franchise tax returns, required to be filed, and has paid
any and all taxes owing by it pursuant to such returns or pursuant to any
assessment, or as otherwise have become due and payable. There is no known tax
deficiency proposed or threatened against I-View except as disclosed herein in
Schedule 3.6 attached hereto.
3.7 ABSENCE OF UNDISCLOSED LIABILITIES. Except as disclosed in the
balance sheet dated as of September 30, 1996 (the "I-View Balance Sheet")
included in the I-View Financial Statements and except as have been incurred
since the date of the I-View Balance Sheet in the ordinary course of business or
previously disclosed in writing to Tessier, I-View has no liabilities or
obligations of any nature, whether absolute, accrued, contingent or otherwise
(whether or not required to be reflected in the I-View Financial Statements in
accordance with generally accepted accounting principles) and whether matured or
unmnatured, known or unknown.
3.8 ABSENCE OF CERTAIN CHANGES. Since the date of the I-View Balance
Sheet I-View has not, except as disclosed in Schedule 3.8 attached hereto (i)
issued or sold any corporate securities (other than as previously disclosed in
writing to Tessier);
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(ii) incurred any obligation or liabilities (fixed or contingent), other than
obligations or liabilities incurred in the ordinary course of business, and
obligations or liabilities under contracts and other documents, if any except as
disclosed herein; (iii) discharged or satisfied any lien or encumbrance or paid
any obligation or liability (fixed or contingent), other than current
liabilities included in the I-View Balance Sheet, current liabilities incurred
since such date in the ordinary course of business, and obligations and
liabilities under contracts or other documents, if any, except as disclosed
herein; (iv) declared or made any dividend payment or like distribution to its
shareholders or purchased or redeemed any shares of its capital stock; (v) paid
or contracted to pay for any shares of its capital stock; (vi) paid or
contracted to pay any general wage or salary increase or entered into any
employment contract with any officer or salaried employee not previously
disclosed in writing to Tessier other than in the ordinary course of business
and approved by I-View's Board of Directors; (vii) mortgaged, pledged or
subjected to any lien or other encumbrance any of its assets, tangible or
intangible; (viii) sold or transferred any of its tangible assets or canceled
any debts or claims, except, in each case, in the ordinary course of business;
(ix) sold, assigned, transferred or granted rights under any patents,
trademarks, trade names, copyrights, licenses or other intangible assets; (x)
waived any rights or material value; (xi) entered into any transactions other
than in the ordinary course of business, except those contracts or other
documents, if any, disclosed herein; or (xii) suffered any material adverse
change in its business or financial condition or any damage, destruction or loss
(whether or not covered by insurance), adversely affecting the business or
prospects of any of the properties of I-View.
3.9 TITLE TO REAL PROPERTY; Intellectual Property. Annexed here to as
Schedule 3.9 is a description of all real properties owned by or leased to
I-View and except as disclosed on Schedule 3.9, I-View is not in default in any
respect thereunder. Tessier has previously been provided by I-View with true and
correct copies of all leases. The offices located on the premises covered by
said leases are not known to be in violation of any building and zoning laws.
I-View further represents and warrants that it owns the patents, patent
applications, trademarks, trademark registrations, trademark applications,
copyrights, trade secrets and technology, if any, listed on Schedule 3.9
attached hereto (collectively the "intellectual property rights") and that it
has not previously assigned, licensed, and/or pledged the intellectual property
rights, and further represents and warrants that the intellectual property
rights are not subject to any lien or claim of security by a third party, and
additionally represents and warrants that it has not otherwise assigned or
transferred any rights to or in the intellectual property rights.
Further, I-View represents and warrants that the patents, if any, are
valid and enforceable, and that it knows of no challenge to the validity of the
patents. I-View additionally represents and warrants that there is no challenge
to its right to use the trademarks, if any, listed on Schedule 3.9 by any third
party.
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I-View further represents and warrants that it has no knowledge of any
challenge by any third party to I-View's right to sue the technology and
know-how embodied in the intellectual property rights, including, but not
limited to, allegations of patent, trademark and copyright infringement and
allegations of misappropriation and/or theft of trade secrets regarding the use
of the intellectual property rights by I-View.
3.10 CONTRACTS AND COMMITMENTS. Except only as to those contracts and
agreements disclosed herein in Schedule 3.10 attached hereto, I-View is not a
party to or bound by any written or oral (i) contract not made in the ordinary
course of business; (ii) contract with any labor union or association; (iii)
bonus, pension, profit-sharing, retirement, stock purchase, hospitalization,
insurance or other plan providing employee benefits; (iv) lease with respect to
any property, real or personal, whether as lessor or lessee; (v) continuing
contract for the future purchase of materials, supplies or equipment in excess
of the requirements of its business now booked or for normal operating
inventories; (vi) contracts or commitments for capital expenditures; or (vii)
contracts continuing over a period of more than one year from their respective
dates. I-View has, in all material respects, performed all obligations required
to be performed by it to date and is not in default, in any material respect
under any agreements, leases or other documents to which it is a party or by
which it is bound.
3.11 FIXED ASSETS. I-View's fixed assets as reflected on the I-View
Balance Sheet and on the books of I-View on the Closing Date are, and will be,
in good condition and in operating order.
3.12 COMPLIANCE WITH THE LAWS. As of the date hereof, I-View is, and on
the Closing Date will be in material compliance with any and all applicable laws
of any federal, state, municipal or other governmental body relating to the
operation and conduct of its property and business. There are no actions, suits,
or proceedings pending, or known to be threatened against or affecting I-View,
either at law or in equity, either private, governmental or quasi-governmental,
or before any federal, state, municipal or other governmental body which have
not previously been disclosed in writing by I-View to Tessier.
3.13 DISCLOSURE. No representation, warranty or covenant of I-View
contained herein, and no statement made in any certificate, exhibit or schedule
furnished in connection with the transactions contemplated hereby, contains or
will contain any known untrue statement of material fact, and nothing herein or
in such certificate or schedule omits or fails to state a material fact.
3.14 SURVIVAL OF REPRESENTATIONS WARRANTIES AND COVENANTS. The
representations, warranties and covenants of I-View contained in this Section 3
shall survive the Closing Date.
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SECTION 4. CONDITIONS PRECEDENT TO
OBLIGATIONS OF I-VIEW
The obligation of I-View to consummate this Agreement and the
transactions contemplated hereby are subject to the conditions that prior to the
Closing Date:
4.1 REPRESENTATIONS, WARRANTIES AND COVENANTS. The representations,
warranties and covenants of Tessier contained in Section 2 hereof, or in any
certificate or document delivered pursuant to the provisions hereof, or in
connection with the transactions contemplated hereby, shall be true and correct
in all material respects as though made on and at the Closing Date. Tessier
shall have fully performed and complied with all of the covenants, duties,
obligations and conditions required by this Agreement to be performed or
complied with by it, at or before the Closing Date.
4.2 NO MATERIAL ADVERSE AFFECT. The business of Tessier shall not have
been adversely affected in any material respect as the result of any pending or
threatened litigation, legislation or regulatory action by any federal, state or
municipal instrumentality, or as the result of any fire, accident, or other
casualty or any labor disturbance or act of God or the public enemy. There shall
have been no changes in the business of Tessier since the date of the Balance
Sheet which would have a material adverse effect on the value of such business
except as disclosed herein in Schedule 2.8.
4.3 DELIVERY OF SHARES. All issued and outstanding shares of Tessier
shall be delivered to I-View in accordance with Section 1.5 herein, such
certificates being duly endorsed with signatures notarized making I-View the
sole owner thereof, free and clear of any liens, claims and encumbrances and all
owners thereof shall be bound by the terms of this Agreement.
4.4 APPROVAL AND ADOPTION. Holders of all of the voting securities of
Tessier shall have authorized and approved this Agreement and the consummation
of the transactions contemplated hereby.
SECTION 5. CONDITIONS PRECEDENT TO
OBLIGATIONS OF TESSIER
The obligation of Tessier to consummate this Agreement and the
transactions contemplated hereby are subject to the conditions that prior to the
Closing Date:
5.1 REPRESENTATIONS WARRANTIES AND COVENANTS. The representations,
warranties and covenants of I-View contained in Section 3 hereof, or in any
certificate or document delivered pursuant to the provisions hereof or in
connection with the transactions contemplated hereby, shall be true and correct
in all material respects as though made on and at the Closing Date. I-View shall
have fully performed and
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complied with all of the covenants, duties, obligations and conditions required
by this Agreement to be performed or complied with by it at or before the
Closing Date.
5.2 NO MATERIAL ADVERSE AFFECT. The business of I-View shall not have
been adversely affected in any material respect as the result of any pending or
threatened litigation, legislation or regulatory action by any federal, state or
municipal instrumentality, or as the result of any fire, accident, or other
casualty or any labor disturbance or act of God or the public enemy. There shall
have been no changes in the business of I-View since the date of the I-View
Balance Sheet which would have a material adverse effect on the value of such
business except as disclosed herein in Schedule 3.8.
5.3 APPROVAL AND ADOPTION. Holders of all of the outstanding voting
securities of I-View shall have authorized and approved this Agreement and the
consummation of the transactions contemplated hereby.
SECTION 6. TERMINATION OF AGREEMENT
Anything herein or elsewhere to the contrary notwithstanding this
Agreement may be terminated (notwithstanding approval by the shareholders of the
Constituent Corporations) and the transaction abandoned, subject to the
provisions stated below, at any time prior to the Closing, as follows:
6.1 MUTUAL CONSENT. By mutual consent in writing of the Boards of
Directors of Tessier and I-View.
6.2 BREACH BY I-VIEW. By Tessier if (i) I-View shall fail to timely
comply in any material respect with any of its agreements contained herein; or
(ii) there has been a material misrepresentation or material breach of any of
the warranties or covenants of I-View; or (iii) the conditions stated in Section
4 herein have not been satisfied at or prior to the Closing Date.
6.3 BREACH BY TESSIER. By I-View if (i) Tessier shall fail to timely
comply in any material respect with any of its agreements contained herein; or
(ii) there has been a material misrepresentation or material breach of any of
the warranties or covenants of Tessier; or (ii) the conditions stated in Section
3 have not been satisfied at or prior to the Closing Date.
6.4 EFFECT OF TERMINATION. In the event that this Agreement shall be
terminated as herein provided, this Agreement shall become wholly void and of no
effect and there shall be no liability on the part of any of the parties hereto
or their Boards of Directors, officers or shareholders. Each party will return
all papers, documents, financial statements and other data furnished to it by,
or with respect to each other party.
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6.5 WAIVER. Any one or more of the conditions precedent to the
obligations of either Tessier or I-View to effect the transactions described
herein, may be waived in writing by the party to whom such obligation is owed.
6.6 AMENDMENTS. Any amendments or changes to this Agreement must be in
writing and signed by all parties.
SECTION 7. MISCELLANEOUS
7.1 FEES AND EXPENSES. All fees and expenses incurred by or on behalf of
each of Tessier and I-View in connection with the authorization, preparation,
execution and consummation of this Agreement, and all of the transactions
contemplated thereby, including, without limitation, all fees and expenses of
agents, representatives, counsel and accountants employed by any thereof, and
taxes including documentary stamp taxes, if any, shall be borne by Tessier and
I-View, respectively. All filing fees are to be paid by I-View.
7.2 ACCESS. From the date hereof to the Closing Date, Tessier and I-View
shall provide each other with such information and permit each other's officers
and representatives such access to its properties and books and records as the
other may from time to time reasonably request.
7.3 NO FINDER. Each party acknowledges that there is no finder to this
transaction and that no one is entitled to any fee in that regard.
7.4 NOTICES. Any notice, instruction or other document to be given
hereunder to any of the parties by any other party shall be in writing and
delivered personally or sent by certified or registered mail, postage prepaid,
as follows:
If to Tessier:
10931 N.W. 3rd Street
Plantation, Florida 33324
Attention: Yannick Tessier, President
If to I-View:
I-View Software, Inc.
300 South Pine Island Road, Suite 261
Plantation, Florida 33324
Attention: Peter Berg, Chief Executive Officer
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With a copy to:
Kipnis Lescher Lippman Valinsky & Kian
One Financial Plaza, Suite 2308
Fort Lauderdale, Florida 33394
Attention: Jay Valinsky, Esq.
7.5 ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
between the parties and supersedes and cancels any other agreement,
representation, communication, writing between the parties hereto relating to
the transactions contemplated herein or the subject matter hereof.
7.6 GOVERNING LAW; VENUE: JURISDICTION. This Agreement, and the legal
relations between the parties hereto shall be governed by and construed in
accordance with the laws of the State of Florida. Fach of the parties hereto
expressly submit themselves to and agree that all actions and proceedings
arising out of or relating to this Agreement shall occur solely in the venue and
jurisdiction of the state and federal courts located in Broward County, Florida.
7.7 LITIGATION: ATTORNEY'S FEES AND COSTS. In connection with any
litigation, including appellate proceedings, arising out of or relating to this
Agreement, the prevailing party shall be entitled to recover reasonable
attorney's fees and costs. Such fees and costs include those incurred in any and
all judicial, bankruptcy, reorganization, administration or other proceedings,
including appellate proceedings, whether such proceedings arise before or after
the entry of a final judgment.
7.8 REMEDIES. In the event any party shall fail to perform any of its
obligations under this Agreement or be found in breach of this Agreement by a
court of competent jurisdiction, the aggrieved party shall be entitled to
specific performance and to any additional remedy which the arbitration panel
and/or the court deems appropriate.
7.9 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which together shall constitute one and the same
instrument.
7.10 PUBLICITY AND DISCLOSURE. No press releases or public disclosures,
either written or oral, of the transactions contemplated hereby, shall be made
without the prior knowledge and written consent of the parties hereto.
7.11 TIME IS OF THE ESSENCE. Time is of the essence with respect to
performance of the terms and conditions of this Agreement.
7.12 ASSIGNMENT. This Agreement shall inure to the benefit of the
parties hereto and to their respective successors and assigns; provided however,
that this
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Agreement shall not be assignable by either party without the express written
consent of the other party.
7.13 HEADINGS. The section and subsection headings in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
IN WITNESS WHEREOF, Tessier and I-View have caused this Agreement to be
executed as of the date first above written.
I-VIEW SOFTWARE, INC., a Florida corporation
Attest: ILLEGIBLE By:/s/ PETER BERG
----------------------------
Peter Berg, Chief Executive Officer
TESSIER TECHNOLOGIES, INC., a Florida corporation
Attest: ILLEGIBLE By: /s/ YANNICK TESSIER
------------- ---------------------------------
Yannick Tessier, President
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EXHIBIT A/Investment Representation Letter
<PAGE>
November 20, 1996
I-View Software, Inc.
300 S. Pine Island Road, Suite 261
Plantation, Florida 33324
Gentlemen:
In connection with the restricted shares (the "Shares") of Common Stock
of I-View Software, Inc. ("Company") to be received by the undersigned in
connection with the merger of the Company with Tessier Technologies, Inc. (the
"Merger"), the undersigned is acquiring such shares of Company Common Stock with
investment intent and not with a view to the distribution thereof.
The undersigned represents that he/she is an "accredited" investor, as
that term is defined in Regulation D under the Securities Act of 1933, as
amended (the "Securities Act"), that the Shares are "restricted securities"
within the meaning of the Securities Act, and that for purposes of Rule 144
thereunder, the holding period for the Shares shall be deemed to commence upon
the closing of the Merger.
The undersigned further acknowledges that he has been informed by the
Company that the Shares have not been registered under the Securities Act and
that the Shares must be held indefinitely unless such can be registered under
the Securities Act or an exemption from such registration is available.
The undersigned acknowledges that he/she is fully aware of the
restrictions on resale of the Shares under the Securities Act and the general
rules and regulations thereunder (including, without limitation, Rule 144) and
that the Company is under no obligation to register any of the Shares for
resale.
The undersigned further acknowledges that the share certificates
representh1g the Shares shall bear a restrictive legend to the effect of the
foregoing.
The undersigned represents that he/she has such knowledge and experience
in financial, investment, and business matters that he/she is capable of
evaluating the merits and risks in the prospective investment in the Shares
being offered on the terms and conditions set forth in the Agreement and Plan of
Merger by and between the Company and Tessier Technologies, Inc., which the
undersigned has read and understands.
<PAGE>
The undersigned represents that he/she has adequate means of providing
for his/her current financial needs and possible personal contingencies, has no
need for liquidity in his/her investment in the Company, can afford to hold
unregistered securities for an indefinite period of time and has sufficient
liquid assets to sustain a complete loss of the entire amount of the investment,
has not made an overall commitment to investments which are not really
marketable which is disproportionate so as to cause such overall commitment to
become excessive and confirms that there has been no material adverse change in
the information, financial and other, previously given to the Company in order
to induce the Company to send this form of investment representation letter to
the undersigned.
The undersigned has been afforded the opportunity to ask questions of
and receive answers from the officers and/or directors of the Company acting on
its behalf concerning the terms and conditions of the Merger and to obtain any
additional information, to the extent that the Company possesses such
information or can acquire it without unreasonable effort or expense, necessary
to verify the accuracy of the information furnished; and has availed
himself/herself of such opportunity to the extent he/she considers appropriate
in order to permit him/her to evaluate the merits and risks of an investment in
the Company.
It is understood that all documents, records and books pertaining to
this investment have been made available for inspection by the undersigned's
attorney and their other advisors and the undersigned, and that the books and
records of the Company will be available upon reasonable notice for inspection
by investors during reasonable business hours at the Company's principle place
of business.
Sincerely,
<PAGE>
Tessier Technologics, Inc.
Schedule 2.6 Tax Obligations
N/A
<PAGE>
Tessier Technologies, Inc.
Schedule 2.8 Absence of Certain Changes
N/A
<PAGE>
Tessier Technologies, Inc.
Scheclule 2.9 Title to Property, Intellectual Property
/bullet/ WorldLink Sottware
/bullet/ 900 Service Software
/bullet/ Professional Backgammon Software
/bullet/ Tournament Chess Software Tournament
/bullet/ Checkers Software
/bullet/ Tournament Othello Software
/bullet/ BBS Listing Software
/bullet/ BBSopoly Software
/bullet/ Card Sharks Software
/bullet/ Charge Card Manager Software
/bullet/ Cross-Wordz Software
/bullet/ Global Actions Software
/bullet/ Hearts Software
/bullet/ Horse Track Software
/bullet/ Instant Lotto Software
/bullet/ Jumble Madness Software
/bullet/ Liar Software
/bullet/ Log Master Software
/bullet/ MicroMind Software
/bullet/ Mouse Trap Software
/bullet/ Oltima 2000 Software
/bullet/ Pig Software
/bullet/ Roulette Software
/bullet/ Tic-tac-toe Software
/bullet/ Trivia Forum Software
/bullet/ Video Blackjack Software
/bullet/ Video Poker Software
/bullet/ Worldlink Cross-wordz
/bullet/ Worldlink Jumble
/bullet/ Yahtzee Software
/bullet/ iView Video Conferencing Software
/bullet/ Customer Service Software
/bullet/ Service Bureau Accounting Software
/bullet/ DNIS/ANI Capture Software
/bullet/ WorldLink Mail Processing Software
<PAGE>
Schedule 2.9
Computer Equipment
/bullet/ 9 Computer Systems 386,486 & Pentiums
/bullet/ 8 Monitors SVGA & Monochrome
/bullet/ 5 Printers
/bullet/ 8 UPS Backups
/bullet/ 3 Routers
/bullet/ 3 DSUs
/bullet/ 1 Copy Machine
/bullet/ 1 Fax Machine
Office Furniture
/bullet/ 8 Desks
/bullet/ 3 Bookshelves
/bullet/ 2 Tables
/bullet/ 11 Chairs
/bullet/ 1 Cabinet
/bullet/ 1 Credenza
/bullet/ 6 File Cabinets
/bullet/ 1 Mini-refrigerator
/bullet/ 1 Water dispensor
<PAGE>
Schedule 2.10 Contracts and Commitments
(Tessier)
<PAGE>
Schedule 3.6 Tax Obligations
(I-View)
<PAGE>
Schedule 3.8 Absence of Certain Changes
(I-View)
<PAGE>
Schedule 3.9 REAL PROPERTY
Item No. of Units
Compaq p133 1
Princeton 17" Monitor 1
HP P90 Computer 1
Monitor for HP P90 1
Sharp 20" tv 1
Symphonic VCR 1
AIWA Stereo 1
Xerox Workcenter 250 fax 1
Deskjet 682c printer 1
Deskjet 866c Printer 1
GE Refrigertator 1
Office Furniture - Set 2
Custom Computer: 586/166/32mb RAM 1
Custom Computer: 586/166/16mb RAM 1
Custom Computer: 586/133/96mb RAM 1
Custom Computer: 486DX4/100/4mb RAM 2
Equinox Cables 64
U.S. Robotics Modems - Courier v.Everything 24
Motorola Modems - Power 28.8 7
Linksys Hub - 16 Port 1
Linksys Hub - 8 Port 2
OmniView Port 8 switch 1
Masterview 4 Port Switch 1
Vanguard Router 1
Paradyne X.25 PAD 1
Dianate1 C024 3
Motorola CSU/D8U 1
TrippLits UP8 Systems 5
Equinox 16 Port Expansion Module 4
<PAGE>
Schedule 3.10 Contracts and Commitments
(I-View)
<PAGE>
ARTICLE IX
Miscellaneous Provisions
9.1 GOVERNING LAW. This Agreement shall be governed by, and shall be
construed and interpreted in accordance, with the laws of the State of Florida.
9.2 NOTICES. Any and all notices and other communications required or
permitted to be given pursuant to this Agreement shall be in writing and shall
be deemed to have been duly given when delivered by hand, or when delivered by
United States mail, by registered or certfied mail, postage prepaid, return
receipt requested, to the respective parties at the following respective
addresses:
If to the Company: I-View Software, Inc.
4101 S.W. 47 Avenue
Suite 101
Ft. Lauderdale, Florida 33314
If to the Executive, Yannick Tessier
10931 N.W. 3rd Street
Plantation, Florida 33324
or to such other address as either party may from time to time give written
notice of to the other in accordance with the provisions of this Section 9.2.
9.3 ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
between the Company and the Executive with respect to the subject matter hereof
and supersedes all prior agreements, understandings, negotiations and
arrangements, both oral and written, between the Company and the Executive with
respect to such subject matter.
9.4 AMENDMENTS. This Agreement may not be amended or modified in any
manner, except by a written instrument executed by each of the Company and the
Executive.
9.5 BENEFITS: BINDING EFFECT. This Agreement shall be for the benefit
of, and shall be binding upon, each of the Company and the Executive and their
respective heirs, personal representatives, executors, legal representatives,
successors and assigns.
9.6 SEVERABILITY. The invalidity of any one or more of the words,
phrases, sentences, clauses or sections contained in this Agreement shall not
affect the enforceability of the remaining portions of this Agreement or any
part hereof, all of which are inserted conditionally on their being valid in
law. Except as otherwise provided in Section 6.3 above, if any one or more of
the words, phrases, sentences, clauses or sections contained in this Agreement
shall be declared invalid by any court of competent jurisdiction, then, in any
such event, this Agreement shall be construed as if such invalid word or words,
phrase or phrases, sentence or sentences, clause or clauses, or section or
sections had not been inserted.
9.7 NO WAIVERS. The waiver by either party of a breach or violation of
any provision of this Agreement by the other party shall not operate nor be
construed as a waiver of any
<PAGE>
subsequent breach or violation. The waiver by either party to exercise any right
or remedy it or he may possess shall not operate nor be construed as a bar to
the exercise of such right or remedy by such party upon the occurrence of any
subsequent breach or violation.
9.8 JURISDICTION AND VENUE; SERVICE OF PROCESS. Any claim or dispute
arising out of, connected with, or in any way related to this Agreement which
results in litigation shall be instituted by the complaining party and
adjudicated either in the federal or state courts located in Broward County,
Florida and each of the parties to this Agreement consent to the personal
jurisdiction of and venue in such courts. In no event shall either party to this
Agreement contest the jurisdiction or venue of such courts with respect to any
such litigation. Each of the Company and the Executive agrees that service of
any process, summons, notice or document, by United States registered or
certified mail, to its or his address set forth in or as provided in Section 9.2
above shall be effective service of such process, summons, notice or document
for any action, suit or proceeding brought against it or him by the other party
in the federal or state courts located in Broward County, Florida.
9.9 HEADINGS. The headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
any or all of the provisions hereof.
9.10 COUNTERPARTS. This Agreement may be executed in any number
by counterparts and by the separate parties in separate countetparts' each of
which shall be deemed to constitute an original and all of which shall be
deemed to constitute the one and the same instrument.
IN WITNESS WHEREOF, each of the parties hereto has executed and
delivered this Agreement as of the date first written above.
I-VIEW SOFTWARE, INC.
By: Peter Berg
----------------------------------
Yannick Tessier
--------------------------------------
YANNICK TESSIER
EXHIBIT 10.15
LEASE
1. BASIC LEASE PROVISIONS.
1.1 PARTIES. This Lease (the "Lease"), dated as of this 21 day of July,
1997, is made by and between New Town Commerce Center, Ltd., a Florida
Limited Partnership (hereinafter referred to as "Landlord"), and Galacticomm,
Inc., a Florida Corporation (hereinafter referred to as "Tenant").
1.2 PREMISES. Landlord hereby leases to Tenant and Tenant hereby leases
from Landlord a portion of real property commonly known as Suites 101, 102, 103
and 104 at 4101 S.W. 47th Avenue, Fort Lauderdale, Florida 33314, located at New
Town Commerce Center (hereinafter referred to as the "Center"), consisting of
approximately 11,129 square feet (the "Leased Premises"). The location of the
Leased Premises is generally de1inated on EXHIBIT "A" which is attached hereto
and made a part hereof. All of the real property underlying the Center and
adjacent thereto, with all improvements thereon, including the Center and the
Common Areas (as defined below), and used in connection with the operation of
the Center, shall hereinafter be referred to as the "Project".
1.2.1 Notwithstanding the description of the Leased Premises in
paragraph 1.2, for the first month of this Lease, Landlord leases to Tenant and
Tenant leases from landlord only Suites 101, 102 and 103 at 4101 S.W 47th
Avenue, Fort Lauderdale, Florida 33314.
1.3 USE OF ADDITIONAL AREAS. The use and occupation by the Tenant of
the Leased Premises shall include the non-exclusive use, in common with others
entitled thereto, of the common areas, employees' parking areas, service roads,
malls, loading facilities, sidewalks and customer car parking areas as such
common areas now exist or as such common areas may hereafter be constructed, and
other facilities as may be designated from time to time by the Landlord, subject
to the terms and conditions of this Lease and to reasonable rules and
regulations for the use thereof as prescribed from time to time by the Landlord.
1.4 USE OF LEASED PREMISES. Tenant will use and occupy the Leased
Premises only for the purposes of general office and warehouse use and for no
other use and purpose. In the event that Tenant uses the Leased Premises for
purposes not expressly permitted herein, Landlord may seek damages without
terminating Lease, in addition to all other remedies available to it, terminate
this Lease or restrain said improper use by injunction. Tenant shall not perform
any acts or carry on any practices which may damage the Project, building or
improvements or be a nuisance or menace to other tenants in the Project or their
customers, employees or invitees or which will result in the increase of
casualty insurance premiums. Tenant agrees to conduct its business in the Leased
Premises under the name or trade name as set forth in the Lease Agreement and
under no other name or trade name except such as may be first approved by
Landlord in writing. Tenant shall be solely responsible to determine if the
intended use complies with all governmental regulations. Landlord, by execution
of this Lease or otherwise, makes no representations that the intended use
complies with governmental regulations.
1.5 TERM. The Lease term shall commence on August 17, 1997 (hereinafter
referred to as the "Commencement Date") and shall terminate on October 31, 2001
unless earlier terminated pursuant to the terms hereof (hereinafter referred to
as the "Term"). The "Lease Year"
<PAGE>
hereunder shall be defined as a period of twelve (12) consecutive months, with
first Lease Year commencing on the Commencement Date and each subsequent Lease
Year commencing on the expiration of the immediately preceeding Lease Year,
provided, however, the first Lease Year shall include that period of time from
the Commencement Date through October 31, 1997 and the twelve (12) month period
commencing on November 1, 1997. The expiration of every, Lease Year shall be
referred to as the "Anniversary".
1.6 FAILURE OF TENANT TO TAKE POSSESSION. In the event that Tenant
fails to take possession or, if applicable, to occupy the Leased Premises and to
commence to do business on the Commencement Date, then Tenant shall be in
default hereafter and Landlord shall have the right, at its option to cancel
this Lease by giving Tenant written notice of intent to cancel thereof and this
Lease will terminate ten (10) days after the giving of such notice and Landlord
will retain all prepaid rentals and security deposits as liquidated and agreed
damages.
1.7 OBLIGATIONS OF TENANT BEFORE RENT COMMENCEMENT DATE. In the event
the Commencement Dates precedes the time for payment of rent, Tenant shall
observe and perform all of its obligations under this Lease (except its
obligations to pay Base Rent) beginning on the Commencement Date.
1.8 OBLIGATIONS OF LANDLORD BEFORE LEASED PREMISES BECOME VACANT. If
this Lease is executed before the Leased Premises become vacant, or if any
present Tenant or occupant of the Leased Premises holds over, and Landlord
cannot acquire possession of the Leased Premises prior to the Commencement Date
of this Lease, Landlord shall not be deemed to be in default hereunder, and
Tenant agrees to accept possession of the Leased Premises and rent shall
commence at such time as Landlord is able to deliver the same; provided,
however, Tenant shall not be obligated hereunder unless Landlord is able to
deliver the Leased Premises within ninety (90) days of the Commencement Date.
1.9 CONTROL OF COMMON AREAS BY LANDLORD. All areas within the exterior
boundaries of the Project which are not now or hereafter held for lease or
occupation by the Landlord, or used by other persons entitled to occupy floor
space in the Project, including, without limitation, all automobile parking
areas, driveways, entrance and exists thereto, and other facilities furnished by
Landlord in or near the Project, including employee parking areas, the through
way or ways, loading docks, pedestrian sidewalks and ramps, landscaped areas,
exterior stairways and other areas and improvements provided by Landlord for the
general use, in common, of tenants, their officers, agents, employees and
customers ("Common Areas") shall at all times be subject to the exclusive
control and management of Landlord, and Landlord shall have the right, but not
the obligation, to construct, maintain and operate lighting facilities on all
said areas and improvements, to patrol the same, from time to time to change the
area, level, location and arrangement of parking areas and other facilities
herein above referred to; to restrict parking by tenants, their officers, agents
and employees to employee parking areas.
Landlord shall have the right to close all or any portion of said areas or
facilities to such extent as may, in the opinion of Landlord's counsel, be
legally sufficient to prevent a dedication thereof or the accrual of any rights
of any person or the public therein to close temporarily all or any portion of
the parking areas or facilities, to discourage non-customer parking; and to do
and perform such other acts in and to said areas and improvements as, in the use
of good business judgment, the Landlord shall determine to be advisable with a
view to the improvement of the convenience and use thereof by tenants, their
officers, agents, employees and customers. Landlord shall keep said Common Areas
-2-
<PAGE>
clean and in good repair and available for the purposes for which they are
intended. Landlord shall have the full right and authority to employ all
personnel and to make al1 rules and regulations pertaining to and necessary for
the proper operation and maintenance of the Common Areas and facilities.
Notwithstanding any language contained herein to the contrary, Landlord shall
not perform any acts or improvements in or to the common areas which would
materially or permanently prohibit ingress or egress to Tenant's Leased Premises
or Tenant's use of parking.
1.10 LICENSE. All Common Areas and facilities not within the Leased
Premises, which Tenant may be permitted to use and occupy, are hereby
authorized to be used and occupied under a revocable license, and if any such
license be revoked, or if the amount of such areas be diminished, Landlord shall
not be subject to any liability nor shall Tenant be entitled to any compensation
or diminution or abatement of rent, nor shall such revocation or diminution of
such areas be deemed constructive or actual eviction.
2. PAYMENT OF RENT AND OTHER CHARGES.
2.1 BASE RENT. Tenant agrees to pay to Landlord throughout the Term of
this Lease, monthly payments of base rent ("Base Rent") as set forth below,
which amounts shall be paid to Landlord in advance in United States currency on
or before the first day of each month, without any offset or deduction
whatsoever, plus applicable Florida sales and use tax for each of said monthly
payments:
ANNUAL RENT PER TOTAL ANNUAL MONTHLY
PERIOD RENTABLE SQUARE FOOT BASE RENT BASE RENT
------ -------------------- ------------ ---------
8-1-1997 to 10-31-1977 N/A N/A $6,959.25
11-1-1997 to 10-31-1998 $9.00 $100,161.00 $8,346.75
11-1-1998 to 10-31-1999 $9.36 $104,167.44 $8,680.62
1l-1-1999 to 10-31-2000 $9.73 $108,285.17 $9,023.76
11-1-2000 to 10-31-2001 $10.12 $112,625.48 $9,385.46
Tenant will promptly pay all rentals and other charges and render all
statements herein prescribed. Any rental payment not received by Landlord within
five (5) business days of its due date shall incur a "late charge" equal to five
percent (5%) of such payment to compensate Landlord for its administrative
expenses in connection with such late payment. When rental payments are
delivered by Tenant through the mails, Tenant shall mail such payments
sufficiently in advance so that the Landlord will receive the payments on or
before the first day of the calendar month or on or before the due date in the
event the due date is other than the first day of a calendar month. If Landlord
shall pay any moneys, or incur any expenses in correction of any violation of
any covenant or of any other obligation of Tenant herein set forth or implied
herein, the amounts so paid or incurred shall, at Landlord's option and on
notice to Tenant, be considered additional rentals payable by Tenant, with the
first installment of rental thereafter to become due and payable, and may be
collected or enforced as by law provided in respect to rentals.
-3-
<PAGE>
2.1.1 Services Provided. The following services at minimum are
provided with the Base Rent for the Initial Term:
2.1.1.1 gardening, landscaping and irrigation, exterior repairs and
painting:
2.1.1.2 sanitary control, removal of trash, rubbish, garbage and
other refuse from the Common Areas but not from any Leased Premises;
2.1.1.3 utilities for Common Areas;
2.1.1.4 maintenance and repair of air conditioning; and
2.1 1.5 a dumpster(s) will be provided for refuse collection.
Dumpsters are for office and incidental waste only. Those tenants determined by
Landlord to produce excessive and/or refuse that we do not allow to be disposed
of in our dumpster(s) will be required to provide their own dumpster at their
expense.
In the event any payment of Rent, whether Base rent or Additional Rent,
is made by check and the check is returned to Landlord due to insufficient funds
Landlord shall have the right, upon written notice to Tenant, to require al1
future rent payments to be made by cashier's check. If this right is exercised
by Landlord, attempted payment by means other than cashier's check shall not be
deemed a payment pursuant to this Lease, unless the Landlord, in writing,
revokes the requirement of a cashiers check.
2.2 SALES OR USE TAX OR EXCISE TAX. Tenant shall also pay, as
Additional Rent, all sales or use or excise tax imposed, levied or assessed
against the rent or any other charge or payment required herein by any
governmental authority having jurisdiction there over, even though the taxing
statute or ordinance may purport to impose such sales tax against the Landlord.
The payment of sales tax shall be made by Tenant on a monthly basis,
concurrently with payment of the Base Rent.
2.3 PRO RATA SHARE OF PROJECT AREA EXPENSES. For each Lease Year or
partial Lease Year if Project Area Expenses are calculated by calendar year of
any option period only, Tenant will pay to Landlord, in addition to the Base
Rent specified above, as further additional rent, "Tenant's proportionate share"
of "Project Area Operating Expenses", less the "Base Amount". This paragraph 2.3
shall not apply to the initial Term set out in paragraph 1-5. For each Lease
Year after the first Lease Year of the first option period, any increase in pro
rata share of project area expenses shall be capped at four (4%) percent over
that of the prior Lease Year
2.3.1 "Tenant's proportionate share" shall mean a proportion of the
Project Area Operating Expenses, calculated by multiplying the total Project
Area Operating Expenses by a fraction, the numerator of which shall be the
number of square feet contained in the Leased Premises and the denominator of
which shall be the aggregate number of square feet of leasable building space in
the Project, which Tenant's proportionate share is hereby agreed to be .0381
(3.81%).
-4-
<PAGE>
2.3.2 "Base Amount" shall mean a sum equal to the aggregate Project
Area Operating Expenses estimated by Landlord for the Base Year.
2.3.3 "Project Area Operating Expenses" as used herein means the total
cost and expense incurred in operating and repairing the Project buildings and
improvements and common facilities, hereinafter defined, excluding only items of
expense commonly known and designated as debt service, plus an administrative
fee of fifteen percent (15%) of actual expenses. Project Area Operating Expenses
shall specifically include, without limitation:
2.3.3.1 gardening, landscaping and irrigation, repairs, painting;
2.3.3.2 management fees;
2.3.3.3 sanitary control, removal of trash, rubbish, garbage and
other refuse from the Common Areas but not from any Leased Premises;
2.3.3.4 depreciation of machinery and equipment,
2.3.3.5 the cost of maintenance and support personnel, including but
not limited to payroll and applicable payroll taxes, worker's compensation
insurance and fringe benefits;
2.3.3.6 utilities charges for the common areas;
2.3.3.7 water and sanitary sewer charged not billed directly to
tenants;
2.3.3.8 Association fees or dues; and
2 3 3 9 any and all other charges, costs or expenses which may be
associated with Landlord's operation of the Project (excluding Real Estate Taxes
and Insurance).
2.3.4 "Common Facilities" means all areas, space, equipment and special
services provided by Landlord for the common or joint use and benefit of the
occupants or operations of the Project, their employees, agents, servants,
customers and other invitees, including without limitation, parking areas,
access roads, driveways, retaining walls, landscaped areas, pedestrian malls,
courts, stairs, ramps and sidewalks, public rest rooms, washrooms, community
hall or auditorium (if any) and signs, wherever located, identifying the
Project, or providing instructions thereto.
2.3.5 Landlord may estimate the Project Area Operating Expenses and
Tenant shall pay one-twelfth (l/l2) of Tenant's proportionate share of said
estimated amount monthly in advance, together with the next due payment of Base
Rent. After the end of each Lease Year, Landlord shall furnish Tenant a
statement of the actual Project Area Operating Expenses. Within thirty (30) days
after receipt by Tenant of said statement, Tenant shall have the right in person
to inspect Landlord's books and records as pertain to said Project Area
Operating Expenses, at Landlord's office, during normal business hours, upon
four (4) days prior written notice. The
-5-
<PAGE>
statement shall become final and conclusive between the parties unless Landlord
receives written detailed objections with respect thereto within said thirty,
(30) day period. Any balance shown to be due pursuant to said statement shall be
paid by Tenant to Landlord within thirty (30) days following Tenant's receipt
thereof and any overpayment shall be immediately credited against Tenant's
obligation to pay Additional Rent in connection with anticipated Project Area
Operating Expenses for the next year, or, if by reason of any termination of
this Lease no such future obligation exists, refunded to Tenant. Anything herein
to the contrary notwithstanding, Tenant shall not delay or withhold payment of
any balance shown be due pursuant to a statement rendered by Landlord to Tenant
because of any objection which Tenant may raise with respect thereto and
Landlord shall immediately credit or refund any overpayment found to be owing to
Tenant as aforesaid upon the resolution of said objection.
Additional Rent due by reason of this section for the final months of this Lease
is due and payable even though it may not be calculated until subsequent to the
termination date of the Lease and shall be prorated according to that portion
of said calendar year that this Lease was actually in effect. Tenant expressly
agrees that Landlord, at Landlord's sole discretion, may apply the Security
Deposit, in full or partial satisfaction of any Additional Rent due for the
final months of this Lease, but nothing herein contained shall be construed to
relieve Tenant of the obligation to pay any Additional Rent due for the final
months of this Lease, nor shall Landlord be required to first apply said
Security Deposit to such Additional Rent if there are any other sums or amounts
owed Landlord by Tenant by reason of any other terms or provisions of this
Lease.
2.4 ADDITIONAL RENT. In order to give Landlord a lien of equal priority
with Landlord's lien of rent, and for no other purpose, including tax
determination any and all sums of money or charges required to be paid by Tenant
under this Lease, whether or not the same be so designated, shall be considered
"Additional Rent". If such amounts or charges are not paid at the time provided
in this Lease they shall nevertheless, if not paid when due, be collectible as
Additional Rent with the next installment of rent thereafter falling due
hereunder, but nothing herein contained shall be deemed to suspend or delay the
payment of any amount of money or charges as the same becomes due and payable
hereunder, or limit any other remedy of Landlord.
2.5 SPECIAL ASSESSMENTS. For each Lease Year in any option period,
Tenant will pay to Landlord, in addition to Base Rent as further Additional
Rent, Tenant's proportionate share of any special assessments assessed against
the Project, with applicable tax, if any. The payment of any such special
assessments shall be made by Tenant on a monthly basis, concurrently with Base
Rent. Tenant's proportionate share of any such special assessment shall be the
percentage share stated in Section 2.3.1. This paragraph shall not apply to the
initial Term set out in paragraph 1.5.
2.6 REAL ESTATE TAXES. For each Lease Year or partial Lease Year, if
real estate taxes are computed for a calendar year of any option period only,
Tenant will pay to Landlord, in addition to Base Rent as further Additional
Rent, a proportionate share of all ad valorem and real estate taxes levied by
any lawful authority against the Project less a proportionate share of said ad
valorem and real estate taxes of the Project for the base year. Tenant's
proportionate share shall be .1357 (13.57%). Landlord may estimate the amount in
the manner set out in Section 2.3.4. This paragraph 2.6 shall not apply to the
initial Term set out in paragraph 1.5.
2.7 INSURANCE. For each Lease Year or partial Lease Year, if insurance
is paid per calendar year of any option period only, Tenant will pay to
Landlord, in addition to Base Rent as further Additional Rent, Tenant's
proportionate share of Landlord's insurance premiums on or in
-6-
<PAGE>
respect of the Project, including but not limited to public liability,
property damage, all risk perils, rent and flood insurance, if carried by
Landlord less Tenant's proportionate share of said insurance premiums for the
base year. Tenant's proportionate share shall be the proportionate share stated
in Section 2.3.1. Landlord may estimate the amount in the manner set out in
Section 2.3.4. This paragraph 2.7 shall not apply to the initial Term set out in
paragraph 1 5.
2.8 The base year for computation of proportionate share applicable to
option periods only is 2001.
2.9 GUARD/PATROL SERVICES. Landlord, in its sole discretion,
determination and option may, but is not required to enter into a contract or
contracts or otherwise provide or make arrangement for the providing of guard,
patrol and/or security, separate from the association, which may include
security guards and/or electronic devices and/or a guard gate and/or gate house.
For option years only, Tenant shall pay its proportionate share for the expense
of the services. Landlord shall in no way be responsible for the performance or
non-performance of the obligations of guard/patrol/security personnel or
service, including but not limited to negligent or intentional acts, and Tenant
hereby releases Landlord from any claims of any nature whatsoever in connection
therewith. Any increase in this expense over the first applicable Lease Year
shall be capped at four (4%) percent over that charged for the prior year.
3. DELIVERY OF LEASED PREMISES.
3.1 CONSTRUCTION OF PREMISES BY LANDLORD.
3.1.1 Landlord has constructed the Leased Premises prior to the
execution of this Lease. Tenant certifies that it has inspected the Leased
Premises and accepts the Leased Premises existing "as is" condition.
3.2 TENANT'S WORK. Tenant agrees, at its own cost and expense, to
perform all work and comply with all conditions, more particularly described in
EXHIBIT "D" annexed hereto, which is necessary to make the Leased Premises
conform with Tenant's plans to be approved by Landlord. No later than thirty,
(30) days a after the execution of this Lease, Tenant shall furnish Landlord, in
advance of Tenant's commencement of work, for Landlord's written approval, plans
and specifications showing a layout, interior finish, and any work or equipment
to be done or installed by Tenant affecting any structural, mechanical or
electrical part of the Leased Premises or the building containing same. Landlord
agrees it will not unreasonably withhold such approval, it being the only
purpose of this requirement that Tenant's work shall not be detrimental to the
other tenants in the Project or to Landlord's building. To the extent not
inconsistent with this section, Section 6 of this Lease shall apply to this
Section 3.2. Tenant shall be responsible for all costs and expenses for
architectural fees, plans and Tenant improvements.
3.3 CHANGES AND ADDITIONS TO BUILDING. Landlord hereby reserves the
right at any time to perform maintenance operations and to make repairs,
alterations or additions, and to build additional stories on the building in
which the Leased Premises are contained and to build adjoining the same.
Landlord also reserves the right to construct other buildings or improvements,
including, but not limited to, structures for motor vehicle parking and the
enclosing and air conditioning of sidewalks in the Project from time to time and
to make alterations thereof or additions thereto. Any changes or additions to
the building shall not affect Tenant's business or use of the Leased Premises.
Tenant agrees to cooperate with Landlord permitting Landlord to accomplish any
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such maintenance, repairs, alterations, additions or construction. Partial
temporary obstruction of access to Tenant's premises caused by such construction
shall not be a default of Landlord. Any changes shall be at Landlords sole cost
and expense unless (a) Tenant agrees to the contrary or (b) the change is caused
by or results from the use of the Tenant.
4. CONDUCT OF BUSINESS BY TENANT.
4.1 TAKING POSSESSION OF PREMISES. Tenant shall occupy the Leased
Premises without delay upon the Commencement Date, and shall conduct his
business continuously in the Leased Premises.
4.2 OBJECTIONABLE USE OF PREMISES. Without limiting application of any
other provision in this Lease, the following actions and activities shall not be
allowed in on or upon the Leased Premises, the Common Areas or the Project
without the prior written consent of Landlord.
4.2.1 Employment of any mechanical apparatus causing noises or
vibration which may be transmitted beyond the Leased Premises.
4.2.2 objectionable odors emanating or dispelled from the leased
premises.
4.2.3 conducting any auction, fire, bankruptcy selling out or
similar sales of any kind on or about the Leased Premises; display merchandise
on the exterior of the Leased Premises either for sale or for promotion
purposes.
4.2.4 use or operate any machinery, which in Landlord's reasonable
opinion, may harm the building of which the Leased Premises is a part.
4.2.5 Store, keep or permit the storage of any merchandise
equipment, machinery or any other item on the walkways, loading docks, parking
areas, roof or grounds surrounding the Leased Premises or Common Areas not
specifically referenced herein.
4.2.6 Store or dump on or about the Demised Premises trash, rubbish,
pallets, chemicals, hazardous, toxic or other such substances or dispose or
attempt to dispose of such items in the sewers or stone drains of the Demised
Premises.
4.2.7 Wash and/or wax and/or repair vehicles. Store or keep any
boats, recreational vehicles, trailers or inoperable or unregistered vehicles
outside Demised Premises or in parking areas, leave vehicles in any parking
areas on the property for an extended period of time.
4.2.8 residing in the Leased Premises, the Common Area or the
Project.
4.2.9 abandon or dispose of personal property by leaving same in the
Leased Premises, Common Areas or Project.
4.2.10 Allowing animals or pets on the Leased Premises, Common Areas
or Project.
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4.3 REMEDIES IN CASE OF VIOLATION. In the event Tenant vio1ates any
provision of Section 4.2, Landlord shal1 provide Tenant written notice of the
violation. Tenant shall have three (3) days from date of delivery of notice to
cease and/or cure the objectionable use, providing, however, in the event Tenant
violates the terms of this Section more than twice during the Term, Landlord
shall not be required to provide written notice or a cure period to invoke the
remedies authorized herein.
4.4 In the event Tenant fails to cure and/or cease objectionable
activities Landlord may (1) declare the lease materially breached; (2) cure the
violation as the Landlord in its sole discretion deems appropriate with costs
and fees for doing so charged to the Tenant as Additional Rent; (3) take such
legal or equitable action as is appropriate, including but not limited to
seeking injunctive relief; (4) take such other action as is authorized by law.
These remedies shall be deemed cumulative. Nothing herein shall prohibit
Landlord from taking emergency action in the event any violation threatens the
life, health and/or safety of any person or threatens property on or of the
project.
5. SECURITY DEPOSIT.
5.1 AMOUNT OF DEPOSIT. Landlord and Tenant acknowledge transfer of a
prior security deposit in the sum of -0- to be security deposit for this Lease.
Said deposit shall be held by Landlord, without liabi1ity for interest, and may
be commingled with other funds of Landlord as security for the faithful
performance by Tenant of all the terms, covenants, and conditions of this Lease
by Tenant to be kept and performed during the term hereof.
5.2 USE AND RETURN OF DEPOSIT. If at any time during the term of this
Lease any of the rent herein reserved shall be overdue and unpaid, or any other
sum payable by Tenant to Landlord hereunder shall be overdue and unpaid or in
the event of the failure of Tenant to keep and perform any of the terms,
covenants and conditions of this Lease to be kept and performed by Tenant, then
Landlord may after five (5) days written notice to tenant of the reason and
Tenant failing to cure same, at its option (but Landlord shall not be required
to) appropriate and apply all or any portion of said deposit to the payment of
any such overdue rent or other sum or so much thereof as shall be necessary to
compensate the Landlord for all loss or damage sustained or suffered by Landlord
due to the breach of Tenant. Should the entire deposit, or any portion thereof,
be appropriated and applied by Landlord for the payment of overdue rent or other
sums due and payable by Tenant hereunder, then Tenant shall, upon the written
demand of Landlord forthwith remit to Landlord a sufficient amount in cash to
restore said security to the original sum deposited, and Tenant's failure to do
so within five (5) days after receipt of such demand shall constitute a breach
of this Lease. If Tenant shall fully and faithfully perform every provision of
this Lease to be performed by it, the Security Deposit or any balance thereof
shall be returned to Tenant at the expiration of the term of this Lease. The
security deposit shall not be deemed last month's rent.
5.3 TRANSFER OF DEPOSIT. Landlord may deliver the funds deposited
hereunder by Tenant to the purchaser or transferee of Landlord's interest in the
Leased Premises, in the event that such interest be sold or transferred, and
thereupon Landlord shall be discharged from any further liability with respect
to such deposit, providing purchaser or transferee assumes the obligations
regarding Tenant's security deposit.
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6. FIXTURES AND ALTERATIONS.
6.1 INSTALLATION BY TENANT.
6.1.1 All improvements installed by Tenant shall be new or in good
working order. Tenant shall not make or cause to be made any alterations,
additions or improvements or install or cause to be installed any exterior
signs, exterior lighting, plumbing fixtures, fences, gates, shades or awnings or
make any changes to the common areas or the exterior of the building in which
the Leased Premises are located without first obtaining Landlord's written
approva1 and consent which approval or consent shall not be unreasonably
withheld. Tenant shall present to the Landlord plans and specifications for such
work at the time approval is sought, and simultaneously demonstrate to Landlord
that the proposed alterations comply with local zoning and building codes.
Tenant may perform minor alterations to the interior of the Leased Premises not
requiring a building permit without the consent of the Landlord. Upon Tenant's
breach of this provision, Landlord may take such action as is necessary to
remove the unauthorized installation with all cost and expense to be charged to
Tenant as additional rent. In addition, Landlord may take such legal action at
law or equity as a result of the breach, including but not limited to injunctive
relief.
6.1.2 All construction work done by Tenant within the Leased
Premises and otherwise shall be performed in a good and workmanlike manner, in
compliance with all governmental requirements, and in such manner as to cause a
minimum of interference with other construction in progress (if any) and with
the transaction of business in the Project. Without limitation on the generality
of the foregoing, Landlord shall have the right to require that such work be
performed outside of general business hours, and in accordance with other rules
and regulations which Landlord may, from time to time prescribe. Tenant agrees
to indemnify Landlord and hold it harmless against any loss, liability or
damage, resulting from such work excluding that caused by the gross negligence,
intentional acts or willful misconduct of the Landlord, its officers, directors,
agents or employees. Tenant shall be liable to Landlord for any damages
resulting from labor disputes, strikes or demonstrations resulting from Tenant's
construction or alteration work with the employment of non-union workers.
6.2 RESPONSIBILITY OF TENANT. All alterations, decorations, additions
and improvements made by the Tenant, or made by the Landlord on the Tenant's
behalf by agreement under this Lease, shall remain the property of the Tenant
for the term of this Lease, or any extension of renewal thereof. Such
alterations, decorations, additions and improvements shall not be removed from
the premises without prior consent in writing from the Landlord. Upon expiration
of this Lease, or any renewal term thereof, the Landlord shall have the option
of requiring the Tenant to remove all such alterations, decorations, additions
and improvements, and restore the Leased Premises as provided in Section 7.2
hereof. If the Tenant fails to remove such alterations, decorations, additions
and improvements and restore the Leased Premises, then such alterations,
decorations, additions and improvements shall become the property of the
Landlord and in such event, should Landlord so elect, Landlord may restore the
premises to its original condition for which cost, with allowance for ordinary
wear and tear, Tenant shall be responsible and shall pay promptly upon demand.
6.3 TENANT SHALL DISCHARGE ALL LIENS. Nothing contained in this Lease
shall be construed as a consent on the part of the Landlord to subject the
estate of the Landlord to liability under the Mechanic's Lien Law of the State
of Florida, it being expressly understood that Landlord's estate shall not be
subject to liens for improvements made by the Tenant. Tenant shall strictly
comply with the Mechanic's Lien Law of the State of Florida as set forth in
Florida Statutes Section 713. In
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the event that a mechanic's claim of lien is filed against the property in
connection with any work performed by or on behalf of the Tenant, the Tenant
shall satisfy such claim or shall transfer same to security, within twenty (20)
days from the date of filing. In the event that the Tenant fails to satisfy or
transfer such claim within said twenty (20) day period, the Landlord may do so
and thereafter charge the Tenant, as additional rent, all costs incurred by the
Landlord in connection with satisfaction or transfer of such claim, including
attorneys' fees. Further, the Tenant agrees to indemnify, defend and save the
Landlord harmless from and against any damage or loss incurred by the Landlord
as a result of such mechanics' claim of lien. If so requested by the Landlord,
the Tenant shall execute a short form or memorandum of this Lease, which may, in
the Landlord's discretion be recorded in the Public Records for the purpose of
protecting the Landlord's estate from mechanics' claims of lien, as provided in
Florida Statutes Section 713.10. In the event such short form or memorandum of
lease is executed, the Tenant shall simultaneously execute and deliver to the
Landlord an instrument terminating the Tenant's interest in the real property
upon which the Leased Premises are located, which instrument may be recorded by
the Landlord only at the expiration of the term of this Lease, or such earlier
termination hereof. Landlord only has the right to record the memorandum without
execution by Tenant in the event Tenant fails to execute the memorandum within
seven (7) days of request. The security deposit paid by the Tenant may be used
by the Landlord for the satisfaction or transfer of any mechanics' claim of
lien, as provided in this Section. This Section shall survive the termination of
the Lease.
6.4 SIGNS. Tenant shall not exhibit, inscribe, paint or affix any sign,
advertisement, notice or other lettering on any part of the outside of the
Demised Premises or of the building of which the Demised Premises are a part,
or inside the Demised Premises if visible from the outside, without the written
consent of Landlord. If consent is given, Tenant further agrees to maintain such
sign, lettering, etc. as may be approved in accordance with all city, county,
and state laws, ordinance or requirements and in good condition and repair at
all times.
7. REPAIRS AND MAINTENANCE OF LEASED PREMISES.
7.1 RESPONSIBILITY OF LANDLORD. Provided Tenant is not in default
according to the terms of this Lease and subject to interruption caused by
repairs, renewals, improvements, changes of service and alterations to the
Leased Premises, and further, subject to interruption caused by strikes,
lockouts, labor controversies, inability to obtain fuel or power, accidents,
breakdowns, catastrophes, national or local emergencies, "Acts of God," and
conditions and causes beyond the control of Landlord, Landlord will furnish the
following services to Tenant:
7.1.1 Landlord agrees to repair and maintain in good order and
condition the roof, roof drains, outside walls, foundations and structural
portions, both interior and exterior, of the Leased Premises. Landlord shall
initiate repairs of applicable problems within a reasonable period of time after
receipt of written notice of needed repairs or maintenance with completion as
soon as reasonably possible. Unless caused by the gross negligence, intentional
acts or willful misconduct of the Landlord, its officers, directors, agents or
employees, there is excepted from this provision, however:
7.1.1.1 repair or replacement of broken plate or window glass
(except in case of damage by fire or other casualty covered by Landlord's fire
and extended coverage policy);
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7.1.1.2 interior and exterior doors, door closure devices, window
and door frames, moldings, locks and hardware;
7.1.1.3 repair of damage caused directly or indirectly by the
negligence or intentional acts of Tenant, its employees, agents, contractors,
customers, invitees; and
7.1.1.4 interior repainting and redecoration.
7.1.2 Landlord shall not be liable for any injury or damage to
persons or property resulting from fire, explosion, falling plaster, steam, gas,
electricity, water, rain, or leaks from any part of the Leased Premises or from
the pipes, appliances or plumbing works or from the roof, street or subsurface
or from any other place or by dampness or by any other cause of whatever nature,
excluding that caused by the gross negligence, intentional acts or willful
misconduct of the Landlord, its officers, directors, agents or employees.
Landlord shall not be liable for any such damage caused by other tenants or
persons in the Leased Premises, occupants of adjacent property, of the Project,
or the public, or caused by operations in construction of any private, public or
quasi-public work. Landlord shall not be liable in damages or otherwise for any
latent defect in the Leased Premises or in the building of which they form a
part.
7.1.3 In no event, however, shall Landlord be liable for incidental
or consequential damages arising from (i) the failure to make said repairs, or
(ii) making repairs in a untimely manner, nor shall Landlord be liable for
incidental or consequential damages arising from defective workmanship or
materials in making any such repairs.
7.1.4 Except as hereinabove provided in Subparagraphs (a) and (b),
Landlord shall not be obligated or required to make any other repairs, and all
other portions of the Leased Premises shall be kept in good repair and condition
by Tenant.
7.2 RESPONSIBILITIES OF TENANT.
7.2.1 Tenant agrees to maintain the Leased Premises in good order
and condition.
7.2.2 Tenant will not install any equipment which exceeds the
capacity of the utility lines leading into the Leased Premises or the building
of which the Leased Premises constitute a portion.
7.2.3 Tenant covenants and agrees to keep and maintain in good
order, condition and repair (which repair shall mean replace if necessary) the
Leased Premises and every part thereof, except as hereinbefore provided,
including but without limitation to the exterior and interior portions of all
doors, equipment, security gates, windows, glass utility facilities, plumbing
and sewage facilities within the Leased Premises or under the floor slab
including free flow up to the main sewage line fixtures, heating equipment,
exterior utility facilities and exterior electrical equipment serving the Leased
Premises and interior walls, floors and ceilings, including compliance with all
applicable building codes including but not limited to those relative to fire
extinguishers, excluding that caused by the gross negligence, intentional acts
or willful misconduct of the Landlord, its officers, directors, agents or
employees. Tenant will use at Tenants cost a pest exterminating
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contractor at such intervals as may be necessary to keep the Leased Premises
free of rodents and vermin. If Tenant refuses or neglects to commence or
complete repairs promptly and adequately Landlord may, but shall not be required
to do so, make or complete said repairs and Tenant shall pay the cost thereof to
Landlord upon demand.
7.2.4 Tenant, its employees, or agents, shall not deface any walls,
ceilings, partitions, floors, wood, stone or ironwork without Landlord's written
consent.
7.2.5 Tenant shall comply with the requirements of all laws, orders,
ordinances and regulations of all governmental authorities and will not permit
any waste of property or same to be done and will take good care of the Lease
Premises.
7.2.6 If Tenant refuses or neglects to maintain the Leased Premises
properly as required and does not correct an identified problem(s) to the
reasonable satisfaction of Landlord as soon as reasonably possible after written
demand, Landlord may take such remedial action as Landlord may reasonably
determine, without liability to Tenant, for any loss or damage that may accrue
to Tenant's equipment, fixtures, or other property, or to Tenant's business by
reason thereof and upon completion thereof Tenant shall pay Landlord's cost for
the taking of such action, plus ten (10%) percent for overhead, upon
presentation of bill therefor, as additional rent. Said bill shall include
interest at ten (10%) percent of said cost from the date of completion by
Landlord. In the event the Landlord shall undertake any maintenance or repair in
the course of which it shall be determined that such maintenance or repair work
was made necessary by the negligence or willful act of Tenant or any of its
employees or agents or that the maintenance or repair is, under the terms of
this Lease, the responsibility of Tenant, Tenant shall pay Landlord's costs
therefore plus overhead and interest as above provided in this Section.
7.2.7 Unless requested in writing by the Landlord to the contrary,
at the expiration of the tenancy hereby created, Tenant shall surrender the
Leased Premises in the same condition as the Leased Premises were in upon the
Commencement Date or following completion of Tenant's Work, whichever is later,
reasonable wear and tear excepted, and damage by unavoidable casualty excepted,
and shall surrender all keys for the Leased Premises to Landlord. Tenant shall
remove all its trade fixtures, leased equipment and such part of the said
Tenant's Work and any subsequent alterations or improvements which Landlord
requests to be removed before surrender of the Leased Premises as aforesaid and
shall repair any damage to the Leased Premises caused thereby. Tenant's
obligation and liability under this covenant shall survive the expiration or
other termination of this Lease. In the event that Tenant shall vacate the
Leased Premises in unsatisfactory condition, in addition to the cost of repairs,
Tenant shall:
7.2.7.1 pay to Landlord a sum equal to 110% of the Base Rent and
Additiona1 Rent for the time period required to effect such repairs;
7.2.7.2 pay all damages that Landlord may suffer on account of
Tenant's vacating the Leased Premises in unsatisfactory condition; and
7.2.7.3 indemnify and save Landlord harmless from and against any
and all claims made by succeeding tenant of the Leased Premises against Landlord
on account of delay of Landlord in delivering possession of the Leased Premises
to said succeeding tenant to the extent that such delay is occasioned by
Tenant's vacating the Leased Premises in unsatisfactory condition.
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7.2.8 Tenant shall at its own expense perform all janitorial and
cleaning services within the Leased Premises in order to keep same in a neat,
clean and orderly condition.
7.2.9 Tenant shall give Landlord prompt written notice (and
telephonic notice in the case of an emergency) of any fire or damage occurring
on or to the Leased Premises, any defects in the Leased Premises, and any
defects in any fixtures or equipment for which Landlord is responsible under the
Lease.
8. UTILITIES. Tenant shall be solely responsible for and shall promptly pay
all charges for gas, electricity, telephone or any other separately metered
utility used or consumed in the Leased Premises. Landlord shall not be liable
for an interruption or failure in the supply of any such utilities to the Leased
Premises unless caused by the gross negligence or intentional act of the
Landlord.
9. INSURANCE AND INDEMNITY.
9.1 Tenant shall carry and maintain, at its sole cost and expense, the
following types of insurance, in the amounts specified and in the form
hereinafter provided for:
9.1.1 Public liability and property damage. Tenant shall, during the
Term, maintain insurance against public liability, including that from personal
injury or property damage in or about the Premises resulting from the
occupation, use, or operation of the Premises, insuring both Landlord,
Landlord's managing agent and Tenant and naming the Landlord and Landlord's
managing agent as an additional insured therein, in amounts of not less than One
Million Dollars ($1,000,000.00) against liability for bodily injury including
death and personal injury for any one (1) occurrence and not less than One
Million Dollars ($1,000,000.00) for property damage; or combined single limit
insurance in the amount of not less than One Million Dollars ($1,000,000.00).
9.1.2 Plate glass insurance providing full coverage for replacement
of damaged or destroyed glass in or upon the Premises;
9.1.3 Workman's compensation insurance for the benefit of all
employees entering upon the Premises as a result of or in connection with their
employment by Tenant;
9.1.4 All other insurance required of Tenant, as an employer,
pursuant to any law, rule, or ordinance of any governmental authority having
jurisdiction;
9.1.5 Fire, casualty, and extended coverage insurance on Lessee's
fixtures, improvements and finishings, which policies of insurance shall be in
amounts, in such forms and issued by such companies are as approved by Landlord
and shall name Landlord and Tenant as their interests may appear; and
9.1.6 Such other forms of insurance which are not available as of
the date hereof, but which may become available in the future and are typically
required by landlords of properties similar in character to the Center, if in
the Landlord's sole discretion, the same is
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necessary to adequately insure the Premises and underlying property and such
other forms of insurance which may become necessary as the result of any changes
in applicable laws.
9.2 The original of each policy of insurance, certified duplicates
thereof, and certificates of insurance issued by the insurance or insuring
organization shall be delivered to Landlord on or before the Commencement Date
and proof of renewal shall be provided to Landlord not less than thirty (30)
calendar days prior to the expiration of any policy. In addition to and together
with Tenant's pro rata share of operating costs, Tenant shall pay to Landlord
within ten (10) calendar days of its receipt of Landlord's written request, the
entire amount of any extraordinary or additional premium for insurance upon or
for the Premises and/or Center occasioned by or resulting from Tenant's use of
the Premises.
9.3 The aforementioned insurance shall be in companies authorized to
engage in the business of insurance in the State of Florida with a minimum
rating of "A" by A.M. BEST, and shall be in form, substance, and amount (where
not stated above) satisfactory to Landlord. The insurance shall not be subject
to cancellation except after at least thirty (30) calendar days prior written
notice to Landlord. If any of the aforementioned insurance shall not be procured
or maintained by Tenant, Landlord may, at its option, procure such insurance or
any portion thereof, and Tenant shall pay to Landlord any sums expended by
Landlord therefore upon demand; or, Landlord may, at its option terminate this
Lease.
9.4 Increase in Fire Insurance Premium. Tenant agrees that it will not
keep, use, sell or offer for sale in or upon the Leased Premises any article
which may be prohibited by the standard form of fire and extended risk insurance
policy. Tenant agrees to pay any increase in premiums for fire and extended
coverage insurance that may be charged during the term of this Lease on the
amount of such insurance which may be carried by Landlord on said premises or
the building of which they are a part, resulting from the type of merchandise
used or sold by Tenant in the Leased Premises, whether or not Landlord has
consented to the same.
9.5 INDEMNIFICATION OF LANDLORD. Tenant shall indemnify Landlord and
save it harmless from and against any and all claims, actions, damages,
liability and expense in connection with loss of life, personal injury and/or
damage to property (a) arising from or out of any occurrence in, upon or at the
Leased Premises (b) arising from or out of the occupancy or use by Tenant or
concessionaires of the Leased Premises, whether occurring in or about the Leased
Premises, excluding that caused by the gross negligence, intentional acts or
willful misconduct of the Landlord, its officers, directors, agents or
employees. In the event Landlord shall be made a party to any litigation
commenced by or against Tenant, then the Tenant shall protect and hold the
Landlord harmless and shall pay all reasonable costs, expenses and reasonable
attorney's fees incurred or paid by the Landlord in connection with such
litigation.
9.6 WAIVER OF SUBROGATION. Tenant waives (unless said waiver should
invalidate any such insurance) its right to recover damages against Landlord for
any reason whatsoever to the extent Tenant recovers indemnity from its insurance
carrier. Any insurance policy procured by Tenant which does not name Landlord
as a named insured shall, if obtainable, contain an express waiver of any right
of subrogation by the insurance company against the Landlord. All public
liability and property damage policies shall contain an endorsement that
Landlord, although named as an insured, shall nevertheless be entitled to
recover damages caused by the negligence of Tenant.
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10. ATTORNMENT AND SUBORDINATION.
10.1 ATTORNMENT. In the event any proceedings are brought for the
foreclosure of, or in the event of exercise of the power of sale under any
mortgage made by the Landlord covering the Leased Premises or in the event a
deed is given in lieu of foreclosure of any such mortgage, if requested to do
so, Tenant shall attorn to the purchaser or grantee in lieu of foreclosure upon
any such foreclosure or sale and recognize such purchaser or grantee in lieu of
foreclosure as the Landlord under this Lease
10.2 SUBORDINATION. Tenant agrees that this Lease and the interest of
Tenant therein shall be, and the same hereby is made subject and subordinate at
al1 times to all covenants, restrictions, easements and other encumbrances now
or hereafter affecting the fee title of the Project and to all ground and
underlying leases and to any mortgage of any amounts and all advances made and
to be made thereon, which may now or hereafter be placed against or affect any
or all of the land and/or any or all of the buildings and improvements,
including the Leased Premises, now or at any time hereafter constituting a part
of the Project, and/or any ground or underlying leases covering the same, and to
al1 renewals, modifications, consolidations, participations, replacements and
extensions thereof. The term "Mortgages" as used herein shall be deemed to
include trust indentures and deeds of trust. The aforesaid provisions shall be
self-operative and no further instrument of subordination shall be necessary
unless required by any such ground or underlying lessors or mortgages. Should
the Landlord, any ground or underlying lessors or mortgagees desire confirmation
of such subordination, Tenant, within ten (l0) days following written request
therefor, shall execute and deliver, without charge, any and all documents (in
form acceptable to Landlord and such ground or underlying lessors or mortgagees)
subordinating the Lease and the Tenant's rights hereunder. However, should any
such ground or underlying lessors or any mortgagees request that Lease be made
superior, rather than subordinate, to any such ground or underlying lease
and/or mortgage, then Tenant, within ten (10) days following Landlord's written
request therefor, agrees to execute and deliver, without charge, any and all
documents (in form acceptable to Landlord and such ground or underlying lessors
or mortgagees) effectuating such priority.
11 ASSIGNMENT AND SUBLETTING.
11.1 Consent Required.
11.1.1 Tenant may not assign or in any manner transfer, or grant or
suffer any encumbrance of Tenant's interest in this Lease in whole or in part,
nor sublet all or any portion of the Leased Premises, or grant a license,
concession or other right of occupancy of any portion of the Leased Premises,
without the prior written consent of Landlord in each instance. Tenant may
assign the Lease to an affiliate providing it can be demonstrated to the
reasonable satisfaction of the Landlord that the affiliate has financial
strength equal to or greater than that of the Tenant. The consent by Landlord to
any assignment or subletting shall not constitute a waive of the necessity for
such consent to any subsequent assignment or subletting. Consent shall not be
unreasonably withheld. If this Lease be assigned, or if the Leased Premises or
any part thereof be underlet or occupied by any party other than Tenant,
Landlord may collect rent from the assignee, subtenant or occupant, and apply
the net amount collected to the rent herein reserved, but no such assignment,
underletting, occupancy or collection shall be deemed a waiver of this covenant,
or the acceptance of the assignee, subtenant or occupant as Tenant, or a release
of Tenant from the further performance by Tenant of the covenants on the part of
Tenant herein contained. This prohibition against assignment or subletting
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shall be construed to include prohibition against any assignment or subleasing
by operation of law, legal process, receivership, bankruptcy or otherwise,
whether voluntary or involuntary. Notwithstanding any assignment or sublease,
Tenant shall remain fully liable on this Lease and shall not be released from
performing any of the terms, covenants and conditions of this Lease.
An attempt by Tenant to sublease the Leased Premises, in whole or in part, a
renta1 rate greater than that charged under this Lease shall be deemed a valid
reason for withholding consent for the sublease.
11.1.2 The Tenant shall pay an administrative fee of $350 in
connection with any assignment or sublease.
11.2 SIGNIFICANT CHANGE OF OWNERSHIP. If the Tenant is a corporation
(other than one whose shares are regularly and publicly traded either on a
recognized stock exchange or the over-the-counter market), Tenant represents
that the Ownership and power to vote its entire outstanding capital stock
belongs to and is vested in the officer or officers executing this Lease or
members of his or their immediate family. If there shall occur any change in the
ownership of and/or power to vote the majority of the outstanding capital stock
of Tenant, whether such change of ownership is by sale, assignment, request,
inheritance, operation, of law or otherwise, without the prior written consent
of Landlord, then Landlord shall have the option to terminate this Lease upon
thirty (30) days notice to Tenant. If Tenant is a partnership, Tenant
represents that the general partner executing this Lease is duly authorized to
execute the same on behalf of said partnership. If there shall occur any change
in the ownership of the Interest of the general partners of the partnership,
whether such change results from a sale, assignment, request, inheritance,
operation of law or otherwise, or if the partnership is dissolved, without the
prior written consent of Landlord, then Landlord shall have the option to
terminate this Lease upon thirty (30) days notice to Tenant.
11.3 ASSIGNMENT BY LANDLORD. In the event of the transfer and
assignment by Landlord of its interest in this Lease and/or in the building
containing the Leased Premises to a person expressly assuming Landlord's
obligations under this Lease, Landlord shall thereby be released from any
further obligations thereunder, and Tenant agrees to look solely to such
successor in interest of the Landlord for performance of such obligations. Any
security given by Tenant to secure performance of Tenant's obligations hereunder
may be assigned and transferred by Landlord to such successor in interest, and
Landlord shall thereby be discharged of any further obligation relating thereto.
12. WASTE, GOVERNMENTAL REGULATIONS.
12.1 WASTE OR NUISANCE. Tenant shall not commit or suffer to be
committed any waste upon the Leased Premises or any nuisance or other act or
thing which may disturb the quiet enjoyment of any other tenant in the Project,
or which may adversely affect Landlord's interest in the Leased Premises or the
Project.
12.2 GOVERNMENT REGULATIONS. Tenant shall, at Tenant's sole cost and
expense, comply with all county, municipal, state, federal laws, orders,
ordinances and other applicable requirements of all governmental authorities,
now in force, or which may hereafter be in force, pertaining, or affecting the
condition, use or occupancy of the Leased Premises, and shall faithfully observe
in the use and occupancy of the Leased Premises all municipal and county
ordinances and state and federal statutes now in force or which may hereafter be
in force. Tenant shall indemnify,
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defend and save Landlord harmless from all costs, losses, expenses or damages
resulting from Tenant's failure to perform its obligations under this Section.
13. RULES AND REGULATIONS. Tenant agrees to comply with all reasonable
rules and regulations Landlord may adopt from time to time for operation of the
Project, and protection and welfare of Project, its tenants, visitors, and
occupants. The present rules and regulations, which Tenant hereby agrees to
comply with, entitled "Rules and Regulations" are attached hereto as EXHIBIT
"B". Landlord may amend the rules from time to time and any future rules and
regulations shall become a part of this Lease, and Tenant hereby agrees to
comply with the same upon delivery of a copy thereof to Tenant, providing the
same do not materially deprive Tenant of its rights established under this
Lease.
14. ADVERTISING, ETC.
14.1 SOLICITATION OF BUSINESS. Tenant and Tenant's employees and agents
shall not solicit business in the parking or other common areas, nor shall
Tenant distribute any handbills or other advertising matter on automobiles
parked in the parking area or in other common areas.
14.2 ADVERTISED NAME AND ADDRESS. Tenant may use as its advertised
business address the name of the Project. Tenant shall not use the name of the
Project for any purpose other than as the address of the business to be
conducted by Tenant in the Leased Premises, and Tenant shall not acquire any
property right in or to any name which contains the name of the Project as a
part thereof. Any permitted use by Tenant of the name of the Project during the
term of the Lease shall not permit Tenant to use, and Tenant shall not use, such
name of the Project either after the termination of this Lease or at any other
location. Tenant shall not use the name of the Landlord in any advertisement, or
otherwise.
15. DESTRUCTION OF LEASED PREMISES.
15.1 TOTAL OR PARTIAL DESTRUCTION. If the Leased Premises shall be
damaged by fire, the elements, unavoidable accident or other casualty, without
the fault of Tenant, but are not thereby rendered untenantable in whole or in
part, Landlord shall at its own expense cause such damage, except to Tenant's
equipment and trade fixtures, to be repaired, and the rent and other charges
shall not be abated. Repairs shall commence within a reasonable period of time.
If by reason of such occurrence, the Leased Premises shall be rendered
untenantable only in part, Landlord shall at its own expense cause the damage,
except to Tenant's equipment and trade fixtures, to be repaired within a
reasonable period of time, but only to the condition in which the Leased
Premises were originally delivered to Tenant, and the Base Rent meanwhile shall
be abated proportionately as to the portion of the Leased Premises rendered
untenantable. If such damage shall occur during the last two (2) years of the
term of this Lease (or of any renewal term), Landlord shall have the right, to
be exercised by notice to Tenant within sixty (60) days after said occurrence,
to elect not to repair such damage and to cancel and terminate this Lease
effective as of a date stipulated in Landlord's notice, which shall not be
earlier than thirty (30) days nor later than sixty (60) days after the giving of
such notice. If the Leased Premises shall be rendered wholly untenantable by
reason of such occurrence, the Landlord shall at its own expense cause such
damage, except to Tenant's equipment and trade fixtures, to be repaired, but
only to the condition in which the Leased Premises were originally delivered to
Tenant, and the Base Rent meanwhile shall be abated in whole except that
Landlord shall have the right, to be exercised by notice to Tenant within sixty
(60) days after said occurrence, to
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elect not to reconstruct the destroyed Leased Premises, and in such event this
Lease and the tenancy hereby created shall cease as of the date of the said
occurrence. There shall be no abatement of the Base Rent if such damage is
caused by the fault of Tenant. Whenever the Base Rent shall be abated pursuant
to this Section l5.1, such abatement shall continue until the date which shall
be the sooner to occur of; (i) fifteen (15) days after notice by Landlord to
Tenant that the Leased Premises have been substantially repaired and restored;
or (ii) the date Tenant's business operations are restored in the entire Leased
Premises.
15.2 PARTIAL DESTRUCTION OF BUILDING. In the event that fifty (50%)
percent or more of the rentable area of the building in which the Leased
Premises are located shall be damaged or destroyed by fire or other cause,
notwithstanding any other provisions contained herein and that the Leased
Premises may be unaffected by such fire or other cause, Landlord shall have the
right, to be exercised by notice in writing delivered to Tenant within sixty
(60) days after said occurrence, to elect to cancel and terminate this Lease.
Upon the giving of such notice to Tenant, the term of this Lease shall expire by
lapse of time upon the thirtieth day after such notice is given, and Tenant
shall vacate the Leased Premises and surrender the same to Landlord; provided,
however, in the event the building is deemed to be a hazard or danger by any
governmental agency, the Lease shall expire upon the third day after notice is
given.
15.3 RECONSTRUCTION OF IMPROVEMENT. In the event of any reconstruction
of the Leased Premises under this Section, said reconstruction shall be in
substantial conformity of the Leased Premises on the Commencement Date. Tenant,
at its sole cost and expense, shall be responsible for the repair and
restoration of all items that was Tenant's Work, and the replacement of its
stock in trade fixtures, furniture, finishings and equipment. Tenant shall
commence the installation of fixtures, equipment, and merchandise hereof
promptly upon delivery to it of possession of the Leased Premises and shall
diligently prosecute such installation to completion.
15.4 Under no circumstances shall Landlord be responsible or liable to
Tenant for lost income, revenue or profits.
16. EMINENT DOMAIN.
16.1 TOTAL CONDEMNATION. If the whole of the Leased Premises shall be
acquired or condemned by eminent domain for any public or quasi-public use or
purpose, then the term of this Lease shall cease and terminate as of the date of
title vesting in such proceeding and all rentals and other charges shall be paid
up to that date and Tenant shall have no claim against Landlord for the value of
any unexpired term of this Lease.
16.2 PARTIAL CONDEMNATION.
16.2.1 If any part of the Leased Premises shall be acquired or
condemned by eminent domain for any public or quasi-public use or purpose, and
in the event that such partial taking or condemnation shall, in the opinion of
Landlord and Tenant, render the Leased Premises unsuitable for the business of
the Tenant, then Landlord and Tenant shall each have the right to terminate this
Lease by notice given to the other within sixty (60) days after the date of
title vesting in such proceeding and Tenant shall have no claim against Landlord
for the value of any unexpired term of this Lease. A taking or condemnation in
excess of 50% of the square footage of the Leased Premises shall be presumed to
render the Leased Premises unsuitable for the business of the tenant.
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16.2.2 If more than fifty (50%) percent of the floor area of the
buildings in the Project shall be taken as aforesaid (whether or not the Leased
Premises shall be affected by the taking), Landlord shall have the right to
terminate this Lease by notice to Tenant given within sixty (60) days after the
date of title vesting in such proceeding and Tenant shall have no claim against
Landlord for the value of the unexpired term of this Lease.
16.3 LANDLORD'S DAMAGES. In the event of any condemnation or taking as
hereinabove provided, whether whole or partial, the Tenant shall not be entitled
to any part of the award, as damages or otherwise, for such condemnation and
Landlord is to receive the full amount of such award, the Tenant hereby
expressly waiving any right or claim to any part thereof.
16.4 TENANT'S DAMAGES. Although all damages in the event of any
condemnation are to belong to the Landlord, whether such damages are awarded as
compensation for diminution in value of the Leasehold or the fee of the Leased
Premises, Tenant shall have the right to claim and recover from the condemning
authority, but not from Landlord, such compensation as may be separately awarded
or recoverable by Tenant in Tenant's own right on account of any damage to
Tenant's business by reason of the condemnation and for or on account of any
cost or loss to which Tenant might be put in removing Tenant's merchandise,
furniture, fixtures, leasehold improvements and equipment, provided no such
claim shall diminish or otherwise adversely affect Landlord's award. Each party
agrees to execute and deliver to the other all instruments that may be required
to effectuate the provisions of Section 16.3 and this Section 16.4.
16.5 SALE UNDER THREAT OF CONDEMNATION. A sale by Landlord to any
authority having the power of eminent domain, either under threat of
condemnation or while condemnation proceedings are pending, shall be deemed a
taking under the power of eminent domain for all purposes under this Section.
17. DEFAULT OF TENANT.
17.1 EVENTS OF DEFAULT. Upon the happening of one or more of the events
as expressed below, inclusive (individually and collectively, "Events of
Default"), the Landlord shall have any and all rights and remedies hereinafter
set forth:
17.1.1 In the event Tenant should fail to pay any monthly
installment of rent or any other sums required to be paid hereunder, within ten
(10) days from when same become due.
17.1.2 To the extent not contrary to Bankruptcy Law, in the event a
petition in bankruptcy (including Chapter 11 bankruptcy proceeding or any other
reorganization proceedings under Bankruptcy Law) is filed by the Tenant, or is
filed against Tenant, and such petition is not dismissed within ninety (90) days
from the filing thereof, or in the event Tenant is adjudicated a bankrupt.
17.1.3 In the event an assignment for the benefit of creditors is
made by Tenant.
17.1.4 In the event of an appointment by any court of a receiver or
other court officer of Tenant's property and such receivership is not dismissed
within sixty (60) days from such appointment.
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17.1.5 In the event Tenant removes, attempts to remove, or permits
to be removed from the Leased Premises, except in the usual course of trade, the
equipment, furniture, effects or other property of the Tenant brought thereon.
17.1.6 In the event Tenant, before the expiration of the term hereof
and without the written consent of the Landlord, vacates the Leased Premises or
abandons the possession thereof, or uses the Leased Premises or property of the
Project for a purpose other than identified in the Lease.
17 1.7 In the event an execution or other legal process is levied
upon the equipment, furniture, effects or other property of Tenant brought on
the Leased Premises, or upon the interest of Tenant in this Lease, and the same
is not satisfied or dismissed within thirty (30) days from the levy, providing
that during the thirty day period, rent is paid when due, excluding any grace
period otherwise granted in other provisions of this Lease.
17.1.8 In the event Tenant fails to keep, observe or perform any of
the other terms, conditions or covenants on the part of Tenant herein to be
kept, observed and performed for more than ten (10) days after written notice
thereof is given by Landlord to Tenant specifying the nature of such default, or
if the default so specified shall be of such a nature that the same cannot
reasonably be cured or remedied within said ten (10) day period, if Tenant shall
not in good faith have commenced the curing or remedying of such default within
such ten (10) day period and shall not thereafter continuously and diligently
proceed therewith to completion; provided, however, nothing herein shall
prohibit Landlord from taking immediate legal action, with or without notice, to
protect the health, safety or welfare of the Landlord, the Project, tenants of
the Project, other persons or entities in or about the Project or the general
public.
17.1.9 Notwithstanding anything contained herein to the contrary, in
the event of a monetary default on the part of Tenant, Landlord shall give and
shall only be required to give Tenant five (5) days written notice within which
Tenant must cure the monetary default.
17.2 REMEDIES OF LANDLORD.
17.2.1 In the event of any such default or breach, Landlord shall
have the immediate right to re-enter the Leased Premises, either by summary
proceedings, by force or otherwise, and to dispossess Tenant and all other
occupants therefrom and remove and dispose of all property therein in the manner
provided in subdivision (c) of this Section, all without service of any notice
of intention to re-enter and with or without resort to legal process and
without Landlord being deemed guilty of trespass or becoming liable for any
loss or damage which may be occasioned thereby. In the event of any such default
or breach, Landlord shall have the right, at its option, from time to time,
without terminating this Lease, to re-enter and re-let the premises, or any part
thereof, as the agent and for the account of Tenant upon such terms and
conditions as Landlord may deem advisable or satisfactory, in which event the
rents received on such re-letting shall be applied first to the expenses of such
re-letting and collection including but not limited to, necessary renovation and
alterations of the Leased Premises, reasonable attorney's fees, any real estate
commissions paid, and thereafter toward payment of all sums due or which become
due Landlord hereunder, and if a sufficient sum shall not be thus realized or
secured to pay such sums and other charges, (i) at Landlord's option, Tenant
shall pay Landlord any deficiency monthly, notwithstanding Landlord may
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have received rental in excess of the rental stipulated in this Lease in
previous or subsequent months, and Landlord may bring an action therefor as such
monthly deficiency shall arise or (ii) at Landlord's option, the entire
deficiency, which is subject to ascertainment for the remaining term of this
Lease, shall be immediately due and payable by Tenant. Nothing herein, however,
shall be construed to require Landlord to re-enter in any event. The Landlord
shall not, in any event, be required to pay Tenant any surplus of any sums
received by Landlord on a re-letting of said premises in excess of the rent
provided in this Lease.
17.2 2 In the event of any such default or breach, the Landlord
shall have the right, at its option, to declare the rents for the entire
remaining term and other indebtedness, if any, immediately due and payable
without regard to whether or not possession shall have been surrendered to or
taken by Landlord, and may commence action immediately thereupon and recover
judgment therefor.
17.2.3 The Landlord in addition to other rights and remedies it may
have, shall have the right to remove all or any part of the Tenant's property
from said premises and any property removed may be stored in any public
warehouse or elsewhere at the cost of, and for the account of Tenant and the
Landlord shall not be responsible for the care or safekeeping thereof, and the
Tenant hereby waives any and all loss, destruction and/or damage or injury which
may be occasioned by any of the aforesaid acts unless removal was done
illegally.
17.2.4 No such re-entry or taking possession of said Leased Premises
by Landlord shall be construed as an election on Landlord's part to terminate
this Lease unless a written notice of such intention is given to Tenant.
Notwithstanding any such re-letting without termination, Landlord may at all
times hereafter, elect to terminate this Lease for such previous default or
breach. Any such re-entry shall be allowed by Tenant without hindrance, and
Landlord shall not be liable in damages for any such re-entry, or guilty of
trespass or forcible entry.
17.2.5 Any and all rights, remedies and options given in this Lease
to Landlord shall be cumulative and in addition to and without waiver of or in
derogation of any right or remedy given to it under any law now or hereafter in
effect.
17.3 WAIVER. The waiver by Landlord of any breach of any term,
condition or covenant herein contained shall not be waiver of such term,
condition or covenant, or any subsequent breach of the same or any other term,
condition or covenant herein contained. The consent or approval by Landlord to
or of any act by Tenant requiring Landlord's consent or approval shall not be
deemed to waive or render unnecessary Landlord's consent to or approval of any
subsequent similar act by Tenant. No re-entry hereunder shall bar the recovery
of rents or damages for the breach of any of the terms, conditions or covenants
on the part of Tenant herein continued. The receipt of rent after breach or
condition broken, or delay, on the part of Landlord to enforce any right
hereunder, shall not be deemed a waiver or forfeiture, or a waiver of the right
of Landlord to terminate this Lease or to re-enter said Leased Premises or to
re-let same.
17.4 EXPENSES OF ENFORCEMENT. In the event any payment due Landlord
under this Lease shall not be paid on the due date, Tenant agrees to pay
interest on the amount which is delinquent at the highest rate permitted under
the laws of the state in which the Project is located, for such delinquent
payment until made. In the event any check, bank draft, order for payment or
negotiable instrument given to Landlord for any payment under this Lease shall
be dishonored for any reason whatsoever not attributable to Landlord, Landlord
shall be entitled to make an administrative
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charge to Tenant of One Hundred ($100.00) Dollars. Tenant recognizes and agrees
that the charges which Landlord is entitled to make upon the conditions stated
in this Section 17.4 represents, at the time this Lease is made, a fair and
reasonable estimate and liquidation of the costs of Landlord in the
administration of the Project resulting to landlord from the events described
which costs are not contemplated or included in any other rental or charges
provided to be paid by Tenant to Landlord in this Lease. Any charges becoming
due under this Section of this Lease shall be added and become due with the next
ensuing monthly payment of Base Rent and shall be collectible as a part thereof.
17.5 LEGAL EXPENSES. In the event that it shall become necessary for
Landlord to employ the services of an attorney to enforce any of its rights or
to protect its interest under this Lease or to collect any sums due to it under
this Lease or to remedy the breach of any covenant of this Lease on the part of
this Tenant to be kept or performed, regardless of whether suit be brought,
Tenant shall pay to Landlord such fee as shall be charged by Landlord's attorney
for such services. Should suit be brought for the recovery of possession of the
Leased Premises, or for rent or any other sum due Landlord under this Lease, or
because of the breach of any of Tenant's covenants under this Lease, or to
protect any interest or right under the lease, the prevailing party shall be
entitled to received from the non-prevailing party all expenses of such suit and
any appeal thereof, including reasonable attorney's fee.
18. ACCESS BY LANDLORD.
18.1 RIGHT OF ENTRY. Landlord and Landlord's agents shall have the
right to enter the Leased Premises at all reasonable times upon twenty-four (24)
hours notice, to examine the same, and to show them to prospective purchasers or
lessees of the building, and to make such repairs, or alterations, improvements
or additions as Landlord may deem necessary or desirable, and Landlord shall be
allowed to take all materials into and upon said premises that may be required
therefor without the same constituting an eviction of Tenant in whole or in part
and the rent reserved shall in no way abate while said repairs, alterations,
improvements or additions are being made unless Tenant is prevented from
operating in the Leased Premises in whole or in part, in which event rent shall
be proportionately abated during said period. During the six (6) months prior to
the expiration of the term of this Lease or any renewal term, Landlord may
exhibit the premises to prospective tenants or purchasers. If tenant shall not
be personally present to open and permit an entry into said premises, at any
time, when for any reason an entry therein shall be necessary or permissible,
Landlord or Landlord's agents may enter the same without in any manner affecting
the obligations and covenants of this Lease. Nothing herein contained, however,
shall be deemed or construed to impose upon Landlord any obligation,
responsibility or liability whatsoever, for the care, maintenance or repair of
the building or any part thereof, except as otherwise herein specifically
provided.
18.2 ROOF. Use of the roof and air space above the Leased Premises is
reserved exclusively to the Landlord.
l9. TENANT'S PROPERTY.
19.1 TAXES ON LEASEHOLD OR PERSONALTY. Tenant shall be responsible for
and shall pay before delinquent all municipal, county or state taxes assessed
during the term of this Lease against any leasehold interest or personal
property or any kind, owned by or placed in, upon or about the Leased Premises
by the Tenant.
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19.2 LOSS AND DAMAGE. Landlord shall not be responsible for any damage
to property of Tenant or of others located on the Leased Premises nor for the
loss of or damage to any property of Tenant or of others by theft or otherwise.
All property of Tenant kept or stored on the Leased Premises shall be so kept or
stored at the risk of Tenant only and Tenant shall hold Landlord harmless from
any and all claims arising out of damage to same, including subrogation claims
by Tenant's insurance carriers.
20. HOLDING 0VER, SUCCESSORS.
20.1 HOLDING OVER. On the last day of the term of this Lease, or upon
any earlier termination of this Lease, or upon re-entry by Landlord upon the
Leased Premises, Tenant shall peaceably and without notice of any sort, quit
and surrender the Leased Premises to Landlord in accordance with the
requirements of this Lease. Tenant specifically agrees that in the event Tenant
retains possession and does not so quit and surrender the Leased Premises to
Landlord, then Tenant shall pay to Landlord:
20.1.1 all damages that Landlord may suffer on account of Tenant's
failure to so surrender and quit the Leased Premises, and Tenant will indemnify
and save Landlord harmless from and against any and all claims made by
succeeding tenant of the Leased Premises against Landlord on account of delay of
Landlord in delivering possession of the Leased Premises to said succeeding
tenant to the extent that such delay is occasioned by the failure of tenant to
so quit and surrender said Leased Premises.
20.1.2 rent for each month or any applicable portion of a month of
such holding over at one and one-half the amount payable for the month
immediately preceding the termination of this Lease, during the time Tenant
thus remains in possession. The additional one-half of rent may be applied as a
setoff against any damages incurred under paragraph 20.1.1.
The provisions of this paragraph do not waive any of Landlord's rights of
re-entry or any other right under the terms of this Lease, If Tenant shall fail
to surrender the Leased Premises as herein provided, no new tenancy shall be
created and Tenant shall be guilty of unlawful detainer.
20.2 SUCCESSORS. All rights and liabilities herein given to, or imposed
upon, the respective parties hereto shall extend to and bind the several
respective heirs, executors, administrators, successors, and permitted assigns
of the said parties; and if there shall be more than one Tenant, they shall be
bound jointly and severally by the terms, covenants and agreements herein. No
rights, however, shall inure to the benefits of any assignee of Tenant unless
the assignment to such assignee has been approved by Landlord in writing.
Nothing contained in this Lease shall in any manner restrict Landlord's right to
assign or encumber this Lease and, in the event Landlord sells or transfers its
Interest in the Project and the purchaser or transferee assumes Landlord's
obligation and covenants, Landlord shall thereupon be relieved of all further
obligations hereunder.
21. ENVIRONMENTAL ACTIONS AND INDEMNIFICATION.
21.1 Tenant agrees not to store in, on or outside of the Leased
Premises any hazardous materials of any type, as defined by any local, state or
federal agency or any other toxic,
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corrosive, reactive or ignitable material without first obtaining in each case
all governmental approvals and permits required for such storage.
21.2 Tenant shall indemnify and hold Landlord harmless for any and all
damages, potential damages, losses, liabilities, costs and expenses of
corrective work, obligations, penalties, fines, impositions, fees, levies, lien
removal or bonding costs, claims litigator, demands, defenses, judgments,
disbursements, or expenses (including without limitation attorneys fees and
expert's fees) related to, concerning or arising out of Tenant causing or
permitting, knowingly or unknowingly, directly or indirectly, hazardous material
to pollute or contaminate the Leased Premises, the Project or any part thereof,
or any person or property in, on, under, above or outside of the Project,
excluding that caused by the gross negligence, intentional acts or willful
misconduct of the Landlord, its officers, directors, agents or employees. The
terms of this paragraph shall survive the expiration or earlier termination of
the term of this Lease.
22. QUIET ENJOYMENT. Upon payment by the Tenant of the rents herein
provided, and upon the observance and performance of all the covenants, terms
and conditions on Tenant's part to be observed and performed, Tenant shall
peaceably and quietly hold and enjoy the Leased Premises for the term hereby
demised without hindrance or interruption by Landlord or any other person or
persons lawfully or equitably claiming by, through or under the Landlord,
subject, nevertheless, to the terms and conditions of this Lease.
23. MISCELLANEOUS.
23.1 ACCORD AND SATISFACTION. No payment by Tenant or receipt by
Landlord of a lesser amount than the monthly rent herein stipulated shall be
deemed to be other than on account of the earliest stipulated rent, nor shall
any endorsement or statement on any check or any letter accompanying the check
or payment as rent be deemed an accord and satisfaction, and Landlord may
accept such check or payment without prejudice to Landlord's right to recover
the balance of such rent or pursue any other remedy provided in the Lease or by
law.
23.2 NO PARTNERSHIP. Landlord does not, in any way or for any purpose,
become a partner of Tenant in the conduct of its business, or otherwise, or
Joint venturer or a member of a joint enterprise with Tenant.
23.3 FORCE MAJEURE. In the event that either party hereto shall be
delayed or hindered in or prevented from the performance of any act required
hereunder by reason of strikes, lock-outs, labor troubles, inability to procure
materials, failure of power, restrictive governmental laws or regulations,
riots, insurrection, war or other reason of a like nature not the fault of the
party delayed in performing work or doing acts required under the terms of this
Lease, then performance of such act shall be excused for the period of the
delay and the period for the performance of any such act shall be extended for
a period of such delay. The provisions of this Section 23.3 shall not operate to
excuse Tenant from the prompt payment of rent, additional rent or any other
payments required by the terms of this Lease.
23.4 NOTICES. Except as otherwise required by statute, any notice,
demand, request or other communication required or permitted be given under this
Lease shall be in writing, signed by the party giving it and conclusively deemed
to have been properly given to and received and to be effective (a) if sent by
tested telex or cable, or hand-delivered against receipt therefor, or by
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<PAGE>
telecopy or other facsimile transmission, or by express mail service, on the
day on which delivered, as the case may be, at the respective addresses
hereafter set forth, or if such day of delivery is not a business day, on the
first business day thereafter, or (b) if sent by registered or certified mail,
return receipt requested, postage prepaid, on the third business day after the
day on which deposited in any post office station or letter box, addressed at
the respective addresses hereafter set forth:
If to Landlord: New Town Commerce Center, Ltd.
1400 N.W. 107th Avenue
Miami, Florida 33172
With a copy to: Attorney, New Town Commerce Center, Ltd.
1400 N.W. 107th Avenue
Miami, Florida 33172
If to Tenant: Yannick Tessier, President
Galacticomm, Inc.
4101 S.W. 47 Avenue
Ft. Lauderdale, Florida 33134
With a copy to: Peter Bronstein, Esq.
701 Brickell Avenue
Suite 2000
Miami, Florida 33131
Any party hereto may, by giving five (5) days written notice to the other party
hereto, designate any other address in substitution of the foregoing address to
which notice shall be given.
23.5 CAPTIONS AND SECTION NUMBERS. The captions, section numbers,
article numbers and index appearing in this Lease are inserted only as a matter
of convenience and in no way define, limit, construe, or described the scope or
intent of such sections or articles of this Lease nor in any way affect this
Lease.
23.6 TENANT DEFINED, USE OF PRONOUN. The word "Tenant" shall be deemed
and taken to mean each and every person mentioned as a Tenant herein be the
same, one or more and if there shall be more than one Tenant. Any notice
required or permitted by the terms of this Lease may be given by or to any one
thereof, and shall have the same force and effect as if given or to all thereof.
The use of the neuter singular pronoun to refer to Landlord or Tenant shall be
deemed a proper reference even though Landlord or Tenant may be an individual, a
partnership, a corporation, or a group of two or more individuals or
corporations. The necessary grammatical changes required to make the provisions
of this Lease apply in the plural sense where there is more than one Landlord
or Tenant and to either corporations, associations, partnerships, or
individuals, males or females, shall in all instances be assumed as though in
each case fully expressed.
23.7 BROKER'S COMMISSION. Each of the parties represents and warrants
that it has dealt with no broker or brokers in connection with the execution of
this Lease, except Colliers Lehrer Adler, and each of the parties agrees to
indemnify the other against, and hold it harmless from, all liabilities arising
from any claim for brokerage commissions or finder's fee resulting from the
indemnitor's acts (including, without limitation, the cost of counsel fees in
connection therewith) except for the persons or entities set forth above.
Landlord shall pay any fees or commissions due Colliers, Lehrer, Adler as a
result of this Lease.
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<PAGE>
23.8 PARTIAL INVALIDITY. In any term, covenant or condition of this
Lease or the application thereof to any person or circumstances shall, to any
extent, be invalid or unenforceable, the remainder of this Lease, or the
application of such term, covenant or condition to persons or circumstances
other than those as to which it is held invalid or unenforceable shall not be
affected thereby and each term, covenant or condition of this Lease shall be
valid and be enforced to the fullest extent permitted by law.
23.9 EFFECTIVENESS OF LEASE. The submission of this Lease for
examination does not constitute a reservation of or option for the Leased
Premises and this Lease becomes effective as a lease only upon execution and
delivery thereof by Landlord to Tenant, and the receipt of the full security
deposit, and if paid by check, subject to clearance.
23.10 RECORDING. Tenant shall not record this Lease or any memorandum
thereof without the written consent and joinder of Landlord.
23.11 LIABILITY OF LANDLORD. Anything contained in this Lease, at law
or in equity to the contrary notwithstanding, Tenant expressly acknowledges and
agrees that there shall at no time be or be construed as being any personal
liability by or on the part of Landlord under or in respect of this Lease or in
any way related hereto or the Leased Premises; it being further acknowledged and
agreed that Tenant is accepting this Lease and the estate created hereby upon
and subject to the understanding that it shall not enforce or seek to enforce
any claim or judgment or any other matter, for money or otherwise, personally or
directly against any officer, director, stockholder, partner, principal
(disclosed or undisclosed), representative or agent of Landlord, but will look
solely to the Landlord's interest in the Project for the satisfaction of any and
all claims, remedies or judgements (or other judicial process) in favor of
Tenant requiring the payment of money by Landlord in the event of any breach by
Landlord of any of the terms, covenants or agreements to be performed by
Landlord under this Lease or otherwise, subject, however, to the prior rights of
any ground or underlying lessors or the holders of the mortgages covering the
Project, and no other assets of Landlord or owners of Landlord shall be subject
to levy, execution or other judicial process for the satisfaction of Tenant's
claims; such exculpation of personal liability as herein set forth to be
absolute, unconditional and without exception of any kind.
23.12 TIME OF THE ESSENCE. Time is of the essence of this Lease and
each and all of its provisions in which performance is a factor.
23.13 ESTOPPEL INFORMATION. When the commencement date is determined,
Tenant agrees, upon request of Landlord, to execute and deliver to Landlord,
without charge and within ten (10) days following request therefor, a written
declaration in form satisfactory to Landlord: (i) ratifying this Lease; (ii)
confirming the commencement and expiration dates of the term of this Lease;
(iii) certifying that Tenant is in occupancy of the Leased Premises, the date
Tenant commenced operating Tenant's business therein and that this Lease is in
full force and effect and has not been assigned, modified, supplemented or
amended, except by such writings as shall be stated; (iv) that all conditions
under this Lease to be performed by Landlord have been satisfied; except such
as shall be stated; (v) that there are no defenses or offsets against the
enforcement of this Lease by Landlord, or stating those claimed by Tenant; (vi)
reciting the amount of advance rental, if any, paid by Tenant and the date to
which rental has been paid; (vii) reciting the amount of security deposited with
Landlord, if any, and (viii) certifying the status of any other matter
reasonably requested by Landlord or its lender. Tenant agrees to execute and
deliver similar declarations at any time and from time to time and within ten
(10) days following request therefor by Landlord or by any mortgage holder or
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<PAGE>
ground or underlying lessor and or purchaser of the Project, and each of such
parties shall be entitled to rely upon such written declaration made by Tenant.
Tenant's failure or refusal to execute the declaration required hereunder within
ten (10) days following the request therefor will constitute a default hereunder
and Landlord shall have such rights and remedies against Tenant as is available
to Landlord for Tenant's default.
Landlord agrees to provide Tenant with an estoppel letter of similar form and
substance within ten (10) days of written request.
23.14 CUMULATIVE REMEDIES. No remedy or election hereunder shall be
deemed exclusive but shall, wherever possible, be cumulative with all other
remedies at law or in equity.
23.15 CHOICE OF LAW. This Lease shall be governed by the laws of the
State of Florida. The venue for any action filed in connection herewith by
either party shall be the county in which the Leased Premises are located.
23.16 WAIVER OF TRIAL BY JURY. THE PARTIES HERETO SHALL AND THEY HEREBY
DO WAIVE TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM BROUGHT BY
EITHER OF THE PARTIES HERETO AGAINST THE OTHER ON ANY MATTERS WHATSOEVER ARISING
OUT OF OR IN ANY WAY CONNECTED WITH THIS LEASE, THE RELATIONSHIP OF LANDLORD
AND TENANT, TENANT'S USE OR OCCUPANCY OF THE LEASED PREMISES, AND/OR ANY CLAIM
OF INJURY OR DAMAGE.
23.17 COUNTERPARTS. This Lease may be executed in multiple copies, each
of which shall be deemed an original, and all of such copies shall together
constitute one and the same instrument.
23.18 ACCEPTANCE OF FUNDS BY LANDLORD. No receipt of money by the
Landlord from the Tenant after the termination of this Lease or after the
service of any notice or after the commencement of any suit, or after final
judgment for possession of the Leased Premises shall reinstate, continue or
extend the term of this Lease or affect any such notice, demand or suit.
23.19 RADON GAS. Radon is a naturally occurring radioactive gas that,
when it has accumulated in a building in sufficient quantities, may present a
health risk to persons who are
[ENTIRE TWO LINES ARE ILLEGIBLE]
from your county public health unit.
23.20 ATTACHMENTS. Any Exhibits as well as any Amendments which are
attached to this Lease are a part of this Lease and are incorporated herein as
if fully set forth herein.
23.21 INSERTIONS. No insertion, whether handwritten or otherwise, which
attempts or purports to change or modify the standard type written provisions of
this Lease and/or attachments or amendments thereto shall be effective or
binding unless and until each party to this Lease initials the change(s) or
modification(s) in the margin immediately adjacent thereto. A general initialing
by the parties of a page, at the top or bottom thereof, shall not be deemed
compliance with the above-referenced requirement and shall not bind either party
to the terms or conditions of the insertion.
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<PAGE>
23.22 RENEWAL OPTIONS. The terms of options to renew, if any, are
subject to the following conditions:
23.22.1 Any right to renew is conditioned upon Tenant not being in
default under any terms of the Lease at the time of election to exercise the
option and at the time the extended period is to begin.
23.12.2 If Tenant shal1 elect to exercise any option, it shall do
so by giving Landlord written notice at least one hundred eighty (180) days
prior to the expiration of the primary term of the Lease, or the then current
extension thereof. Failure to provide proper notice within the time required
shall terminate the pending or remaining option rights of the Tenant.
23.22.3 Option Terms: Tenant shall have two (2) options for
additional three (3) year terms. For each year of any option period exercised,
the base rent shall increase four percent (4%) over the prior year. Base year
for the option periods shall be 2001.
23.23 RIGHT OF FIRST OFFER. Tenant shall have the right of first offer
on suites 105 and 106 at 4101 S.W. 47th Avenue, Fort Lauderdale, Florida. This
right of first offer is conditioned on the space offered being contiguous with
space currently occupied by Tenant; it being the intent that the offer for suite
106 is not available unless suite 105 is leased by Tenant pursuant to this
paragraph or otherwise. Further, no right of first offer may be exercised by
Tenant unless at least two years remain in the initial Term or exercised option
period. When availability of each suite is determined by Landlord, Landlord
shall notice Tenant in writing of that fact. Such notice shall occur at least
ninety (90) days before the space is available. Tenant shall have five (5)
business days after receiving notice to exercise its right to lease the space.
If accepted, the base rental rate shall be the then applicable rate charged per
square foot for suites 101-104, with a term to run consecutively with suites
101-104, including options and the proportionate share in paragraph 2.3.1 shall
be adjusted accordingly. Suites 105 and 106 shall be delivered "as is" and
Tenant shall be responsible for cost and expense of all fees, plans and tenant
improvements. In that regard the concept of paragraph 3.2 of the Lease shall
apply.
23.24 REMOVAL OF EXISTING TENANT. Suite 104 is currently occupied by
Equipment and Parts. Tenant shall pay Landlord the sum of twenty-two thousand
dollars ($22,000) for the expense of removing Equipment and Parts from Suite
104, $10,000 to be paid upon execution of this Lease and the remaining $12,000
on the date Suite 104 is vacated by Equipment and Parts. The anticipated date
for Equipment and Parts vacating Suite 104 is on or before September l, 1997.
In the event Equipment and Parts has not vacated Suite 104 by September 1, l997,
the following times shall be extended and/or adjusted by adding the period of
time between September l, 1997 and date Suite 104 is vacated:
23.24.1 the one (1) month period in paragraph 1.2.l
23.24.2 the Term of the Lease in paragraph 1.5
23.24.3 each "Period" set out in the schedule of paragraph 2.1; the
additional time shall be added to the first Period referenced and the remaining
Periods to be adjusted accordingly to reflect one year increments thereafter.
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23.25 ENTIRE AGREEMENT. This Lease and the Exhibits, and Amendments,
if any, attached hereto and forming a part hereof, set forth all covenants,
promises, agreements, conditions and understandings between Landlord and Tenant
concerning the Leased Premises and there are no covenants, promises, conditions
or understandings, either oral or written, between them other than are herein
set forth. No provision of this Lease may be amended or added to except by an
agreement in writing signed by the parties hereto or their respective successors
in interest.
IN WITNESS WHEREOF, Landlord and Tenant have signed and sealed this
Lease of the day and year first above written.
WITNESSES: LANDLORD: NEW TOWN COMMERCE CENTER, LTD.
BY: Colliers Lehrer Adler, as Manager
/s/ Paula C. Harrell /s/ Brett Harris
- -------------------------------- ---------------------------------------
Brett Harris,
Managing Director of Asset Services
[ILLEGIBLE]
- --------------------------------
TENANT: Galacticomm, Inc.
/s/ Yannick Tessier
---------------------------------------
/s/ Paula C. Harrell
- -------------------------------- Yannick Tessier,
President
[ILLEGIBLE]
- --------------------------------
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EXHIBIT 10.16
CONTRACT NO. CUSTOM/FS
AGREEMENT BETWEEN AT&T CORP.
AND
IVIEW SOFTWARE
FOR
AT&T WORLDNET (SERVICEMARK) SERVICES
AUGUST 9, 1996
PLEASE RETURN ALL ORIGINALS OF THIS DOCUMENT TO:
AT&T
AT&T WORLDNET (SERVICEMARK) SERVICES
CONTRACTS GROUP, ROOM24C55
55 CORPORATE DRIVE
BRIDGEWATER, NJ 08807
AT&T - PROPRIETARY
<PAGE>
AT&T WORLDNET (SERVICE MARK) SERVICES AGREEMENT
This Agreement ("Agreement") is between AT&T Corp., a New York corporation with
an office at 55 Corporate Drive, Bridgewater, NJ 08807 ("AT&T"), and iView
Software, with offices at 300 S. Pine Island Road, Suite 261, Plantation, FL,
33324 ("Customer").
AT&T and Customer agree that the following terms and conditions apply to the
provision and use, within the United States, of the AT&T WorldNet (Service mark)
Services and related products ("Services") referenced in any Attachments to this
Agreement signed by Customer and accepted in writing by AT&T. Such Attachments
are an integral part of this Agreement.
1. CONTRACT PERIOD
This Agreement is effective when signed by Customer and accepted in writing by
AT&T ("Effective Date"). The Contract Period commences on the Effective Date
and, unless terminated in accordance with the provisions herein, will continue
in effect for as long as any Service is provided pursuant to any Attachment to
this Agreement.
2. BILLING AND PAYMENT
A. Customer shall pay AT&T all charges due under this Agreement, without
deduction or setoff. All payments shall be mailed to the address stated on the
bill. Bills will be issued monthly and are payable within thirty (30) days from
the date shown on the invoice.
B. Customer agrees to pay any taxes due on the Services, however designated
(excluding taxes on AT&T's net income), unless Customer provides a valid tax
exemption certificate.
3. TERMINATION
A. If Customer fails to pay any outstanding charges within ten (10) days after
receipt of written notice from AT&T of delinquency, or if Customer fails to
perform or observe any other material term or condition of this Agreement within
thirty (30) days after receipt of written notice from AT&T of such failure, AT&T
may terminate this Agreement. Customer shall then be liable for all charges
incurred as of the date of termination and, if applicable, any termination
charges associated with termination of the Attachments. All such charges that
are not previously due and payable shall be payable within thirty (30) days
from the date shown on AT&T's invoice.
B. If AT&T fails to perform or observe any material term or condition of this
Agreement within thirty (30) days after receipt of written notice from Customer
of such failure, Customer may terminate the Attachments materially affected by
the breach. Except for charges incurred as of the date of termination, Customer
shall have no further financial obligations to AT&T for such terminated
Attachments.
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AT&T - PROPRIETARY
<PAGE>
4. CUSTOMER RESPONSIBILITIES
A. Customer shall ensure that all Customer-provided equipment on its premises
that connects to the Services will perform according to published technical
specifications for such equipment and AT&T's interface specifications and
otherwise complies with AT&T's specifications for the Services.
B. In cases in which Customer and AT&T agree to have AT&T act as Customer's
authorized agent for ordering and coordinating local access circuits for a
Service outside of this Agreement, a separate Agency Agreement will be executed.
C. Customer is solely responsible for the content of any transmissions using
the Services, or any other use of the Services, by Customer or by any person or
entity Customer permits to access the Services (a "User"). Customer agrees that
it and any User will not use the Services for illegal purposes, or to interfere
with or disrupt other network users, network services or network equipment.
Violations of the foregoing by Customer or any User may result in removal of
violative communications and early termination of the Service. Disruptions
include, but are not limited to, distribution of unsolicited advertising or
chain letters, propagation of computer worms and viruses, and using the network
to make unauthorized entry to any other machine accessible via the network.
Customer shall defend, indemnify, and hold harmless AT&T (as defined in
Paragraph 7.A.) from and against all liabilities and costs (including reasonable
attorneys' fees) arising from any and all claims by any person based upon the
content of any transmissions by Customer or any User using the Services or any
other use of the Services by Customer or any User.
D. Customer shall limit access to and use of the Services to its employees,
agents, and contractors (and, in the case of a Customer that is a nonprofit
educational institution, to employees and students), shall not authorize any
person to use the Services other than for Customer's business purposes, and
shall not resell or otherwise generate income by providing access to the
Services to any User. If Customer permits Users to access the Services, Customer
shall defend, indemnify, and hold harmless AT&T (as defined in Paragraph 7.A.)
from and against all liabilities and costs (including reasonable attorneys'
fees) arising from any and all claims by any such Users in connection with the
Services, regardless of the form of action, whether in contract, tort, warranty,
or strict liability. However, Customer shall have no obligation to indemnify and
defend AT&T against claims for direct damages to real or tangible personal
property, or for bodily injury or death, proximately caused by AT&T's
negligence.
E. To the extent deemed necessary by Customer, Customer shall implement security
procedures necessary to limit access to the Services to Customer's authorized
users and shall maintain a procedure external to the Services for reconstruction
of lost or altered files, data or programs.
F. Customer is responsible for establishing designated points of contract to
interface with AT&T.
G. Customer agrees to comply, and to use best efforts to cause all Users to
comply, with United States law with regard to the transmission of technical data
which is exported from the United States using the Services.
H. Customer understands that Services provided under this Agreement (including
Internet use) may require registrations and related administrative reports that
are public in nature. In addition, Customer agrees that AT&T may include its
name: IP (Internet Protocol), electronic mail, street, and other addresses; and,
telephone information in directories.
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AT&T - PROPRIETARY
<PAGE>
5. AT&T RESPONSIBILITIES
AT&T will provide the Services as described in the Attachments. However, AT&T's
policy is to continually improve its products and services, and so may from time
to time change the Services as provided to Customer under this Agreement. In the
event that AT&T changes the Services in any way that materially decreases the
level of the Services available to Customer, Customer shall have a one time
right to terminate this Agreement within the thirty (30) day period following
receipt of notice of such change by giving AT&T seven (7) days' written notice
of termination and payment of all charges incurred as of the termination date,
but without any termination liability to AT&T.
6. LICENSES
AT&T hereby grants to Customer a personal, nonexclusive, nontransferable license
during the term of this Agreement to use, in object code form, all software and
documentation ("Licensed Material") which may be furnished to Customer under
this Agreement. Customer agrees to use its best efforts to ensure that its
employees and users of all Licensed Material hereunder comply with the terms and
conditions set out in this Agreement. Customer also agrees to refrain from
taking any steps, such as reverse assembly or reverse compilation, to derive a
source code equivalent to the software. All Licensed Material furnished to
Customer under this Agreement shall be used by Customer only to support
Customer's use of the Services, shall not be reproduced or copied in whole or in
part, shall not be removed from the United States, and shall be returned to AT&T
at the conclusion of the term of this Agreement. In addition, to the extent
Licensed Material includes software or documentation provided by any third party
pursuant to a sublicense from AT&T ("Third Party Material"), Customer agrees, as
a condition to the right to use such Third Party Material, to abide by the terms
and conditions of such sublicense (including such additional end user terms and
conditions as shall be required by such sublicense), and Customer shall be bound
by such terms and conditions by virtue of its use of such Third Party Material
following notice of such terms and conditions.
7. WARRANTY AND LIMITATION OF LIABILITY
A. FOR PURPOSES OF THIS PARAGRAPH 7, "AT&T" INCLUDES AT&T, ANY AFFILIATED AND
SUBSIDIARY COMPANIES OF AT&T, ANY SUBCONTRACTORS AND SUPPLIERS OF THE FOREGOING,
AND THE DIRECTORS, EMPLOYEES, OFFICERS, AGENTS, SUBCONTRACTORS AND SUPPLIERS OF
ALL OF THEM.
B. NO TARIFFED SERVICES ARE PROVIDED UNDER THIS AGREEMENT, PRODUCTS OR SERVICES
SOLD OR PROVIDED UNDER ANOTHER CONTRACT OR UNDER TARIFF ARE GOVERNED SOLELY BY
THE TERMS OF THAT CONTRACT OR TARIFF, INCLUDING ANY WARRANTIES, GUARANTEES, OR
OTHER OBLIGATIONS OF AT&T UNDER THAT CONTRACT OR TARIFF. AT&T MAKES NO WARRANTY
OR GUARANTEE, EXPRESS OR IMPLIED, WITH RESPECT TO ANY SERVICES OR PRODUCTS
PROVIDED UNDER THIS AGREEMENT, AND AT&T EXPRESSLY DISCLAIMS ANY IMPLIED
WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE.
C. AT&T'S LIABILITY TO CUSTOMER ON ACCOUNT OF ANY ACTS OR OMISSIONS RELATING TO
THIS AGREEMENT SHALL BE LIMITED TO PROVEN DIRECT DAMAGES IN AN AGGREGATE AMOUNT
NOT TO EXCEED THE GREATER OF: (A) $25,000 FOR EACH SITE PROVISIONED FOR SERVICES
UNDER THIS AGREEMENT OR (B) THE AMOUNTS PAID BY CUSTOMER FOR SERVICES DURING THE
TWELVE (12) MONTH PERIOD PRECEDING THE INCIDENT GIVING RISE TO THE CLAIM FOR
DAMAGES, IN NO EVENT TO EXCEED AN AGGREGATE OF $50,000 IN THE CASE OF
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AT&T - PROPRIETARY
<PAGE>
(A) OR (B). HOWEVER, NOTHING IN THIS SUBPARAGRAPH 7.C., LIMITS AT&T'S LIABILITY
FOR DIRECT DAMAGES TO REAL OR TANGIBLE PERSONAL PROPERTY, OR FOR BODILY INJURY
OR DEATH, PROXIMATELY CAUSED BY AT&T'S NEGLIGENCE.
D. AT&T SHALL NOT BE LIABLE FOR INDIRECT, INCIDENTAL, CONSEQUENTIAL, RELIANCE
OR SPECIAL DAMAGES, INCLUDING WITHOUT LIMITATION DAMAGES FOR HARM TO BUSINESS,
LOST PROFITS, LOST SAVINGS OR LOST REVENUES, WHETHER OR NOT AT&T HAS BEEN
ADVISED OF THE POSSIBILITY OF SUCH DAMAGES. AT&T SHALL NOT BE LIABLE FOR ANY
DAMAGE THAT CUSTOMER MAY SUFFER ARISING OUT OF USE OF, OR INABILITY TO USE, THE
SERVICES OR PRODUCTS PROVIDED HEREUNDER UNLESS SUCH DAMAGE IS CAUSED BY AN
INTENTIONAL ACT OF AT&T. AT&T SHALL NOT BE LIABLE FOR UNAUTHORIZED ACCESS BY
THIRD PARTIES TO CUSTOMER'S TRANSMISSION FACILITIES OR PREMISE EQUIPMENT OR FOR
UNAUTHORIZED ACCESS TO OR ALTERATION, THEFT, LOSS OR DESTRUCTION OF CUSTOMER'S
NETWORK, SYSTEMS, APPLICATIONS, DATA FILES, PROGRAMS, PROCEDURES OR INFORMATION
THROUGH ACCIDENT, FRAUDULENT MEANS OR DEVICES, OR ANY OTHER METHOD. EXCEPT AS
EXPRESSLY SET FORTH IN OR CONTEMPLATED BY THIS AGREEMENT, IN ANY INSTANCE
INVOLVING PERFORMANCE OR NONPERFORMANCE BY AT&T WITH RESPECT TO SERVICES OR
PRODUCTS PROVIDED HEREUNDER, CUSTOMER'S SOLE REMEDY SHALL BE: (A) IN THE CASE OF
SERVICES, REFUND OF A PRO RATA PORTION OF THE PRICE PAID FOR SERVICES WHICH WERE
NOT PROVIDED; OR, (B) IN THE CASE OF PRODUCTS, REPAIR OR RETURN OF THE
DEFECTIVE PRODUCT TO AT&T FOR REFUND, AT THE OPTION OF AT&T, EXCEPT AS EXPRESSLY
SET FORTH IN OR CONTEMPLATED BY THIS AGREEMENT, IN THE CASE OF REFUND FOR LOST
SERVICES, CREDIT WILL BE ISSUED ONLY FOR PERIODS OF LOST SERVICE GREATER THAN
TWENTY-FOUR (24) HOURS.
E. THESE LIMITATIONS OF LIABILITY SHALL APPLY REGARDLESS OF THE FORM OF ACTION,
WHETHER IN CONTRACT, WARRANTY, STRICT LIABILITY OR TORT, AND SHALL SURVIVE
FAILURE OF AN EXCLUSIVE REMEDY.
F. AT&T SHALL NOT BE RESPONSIBLE FOR: (1) SERVICE IMPAIRMENTS CAUSED BY ACTS
WITHIN THE CONTROL OF CUSTOMER, ITS EMPLOYEES, AGENTS, SUBCONTRACTS, SUPPLIERS
OR LICENSEES; (2) INTEROPERABILITY OF SPECIFIC CUSTOMER APPLICATIONS; (3)
INABILITY OF CUSTOMER TO ACCESS OR INTERACT WITH ANY OTHER SERVICE PROVIDER
THROUGH THE INTERNET, OTHER NETWORKS OR USERS THAT COMPRISE THE INTERNET OR
THE INFORMATIONAL OR COMPUTING RESOURCES AVAILABLE THROUGH THE INTERNET; (4)
INTERACTION WITH OTHER SERVICE PROVIDERS, NETWORKS, USERS OR INFORMATIONAL OR
COMPUTING RESOURCES THROUGH THE INTERNET; (5) SERVICES PROVIDED BY OTHER SERVICE
PROVIDERS; OR, (6) PERFORMANCE IMPAIRMENTS CAUSED ELSEWHERE ON THE INTERNET.
8. CONFIDENTIALITY
A. All tangible technical or business information disclosed by one party to the
other party and marked as proprietary shall be deemed the property of the
disclosing party and shall be returned upon request. The receiving party shall:
(1) hold such information in confidence for three (3) years after any
termination of this Agreement; (2) restrict disclosure of such information
solely to its employees and employees of its affiliated companies with a need
to know; (3) and use a reasonable degree of care (in no event less than the
same degree of care as it uses for its own proprietary information) to prevent
the unauthorized disclosure, use or publication of such proprietary information.
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AT&T - PROPRIETARY
<PAGE>
B. The receiving party shall have no obligation to preserve the confidentiality
of any information which; (1) was previously known to the receiving party or any
of its affiliated companies free of any confidentiality obligation; (2) is
disclosed to third parties by the disclosing party without restrictions; (3)
becomes publicly available by other than unauthorized disclosure; (4) was not
identified as confidential or proprietary; or, (5) is independently developed
by the receiving party.
C. The pricing, terms and conditions of this Agreement are proprietary
information and shall be treated in confidence.
9. GENERAL
A. IF A DISPUTE ARISES WITH RESPECT TO THIS AGREEMENT, OR ANY SERVICES PROVIDED
OR WORK PERFORMED HEREUNDER. EITHER PARTY MAY SUBMIT THE DISPUTE TO A SOLE
MEDIATOR SELECTED BY THE PARTIES OR, AT ANY TIME, TO MEDIATION BY THE AMERICAN
ARBITRATION ASSOCIATION ("AAA"). IF NOT THUS RESOLVED, IT MAY BE REFERRED BY
EITHER PARTY TO A SOLE ARBITRATOR SELECTED BY THE PARTIES OR TO AAA ARBITRATION.
THE ARBITRATION SHALL BE GOVERNED BY THE UNITED STATES ARBITRATION ACT AND
JUDGMENT ON THE AWARD MAY BE ENTERED BY ANY COURT HAVING JURISDICTION. THE
PARTIES SHALL AGREE ON WHAT, IF ANY, DISCOVERY SHALL BE MADE AVAILABLE; IF THE
PARTIES FAIL TO AGREE ON THE FORM OF DISCOVERY WITHIN 30 DAYS AFTER THE
APPOINTMENT OF THE ARBITRATOR, THERE SHALL BE NO DISCOVERY OR ISSUANCE OF ANY
SUBPOENAS. THE ARBITRATOR SHALL NOT LIMIT, EXPAND, OR MODIFY THE TERMS OF THIS
AGREEMENT NOR AWARD DAMAGES IN EXCESS OF COMPENSATORY DAMAGES PERMITTED UNDER
THIS AGREEMENT, AND EACH PARTY WAIVES ANY CLAIM TO SUCH EXCESS DAMAGES. THE
ARBITRATOR SHALL NOT HAVE ANY ABILITY TO AWARD ANY EQUITABLE REMEDIES, AND SHALL
BE LIMITED TO REMEDIES AVAILABLE AT LAW. THE ARBITRATOR SHALL NOT HAVE THE
RIGHT TO AWARD ANY DAMAGES IN EXCESS OF DAMAGES THAT COULD LAWFULLY BE AWARDED
BY A COURT OF COMPETENT JURISDICTION. THE ARBITRATOR SHALL ISSUE A WRITTEN
DECISION CONTAINING FINDINGS AND CONCLUSIONS ON ALL SIGNIFICANT ISSUES. A
REQUEST BY A PARTY TO A COURT FOR INTERIM PROTECTION SHALL NOT AFFECT EITHER
PARTY'S OBLIGATION HEREUNDER TO MEDIATE AND ARBITRATE. EACH PARTY SHALL BEAR ITS
OWN EXPENSES AND AN EQUAL SHARE OF ALL COSTS AND FEES OF THE MEDIATION AND/OR
ARBITRATION. ANY MEDIATOR OR ARBITRATOR SELECTED SHALL BE COMPETENT IN THE LEGAL
AND TECHNICAL ASPECTS OF THE SUBJECT MATTER OF THIS AGREEMENT. THE CONTENT AND
RESULT OF MEDIATION AND/OR ARBITRATION SHALL BE HELD IN CONFIDENCE BY ALL
PARTICIPANTS, EACH OF WHOM WILL BE BOUND BY AN APPROPRIATE CONFIDENTIALITY
AGREEMENT.
B. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED UNDER THE LAWS OF THE STATE
OF NEW YORK, WITHOUT GIVING EFFECT TO ITS CONFLICTS OF LAW PRINCIPLES, EXCEPT
THAT PARAGRAPH 9.A., SHALL BE INTERPRETED AND ENFORCED IN ACCORDANCE WITH THE
UNITED STATES ARBITRATION ACT.
C. Any legal action arising from or in connection with this Agreement, or any
Services provided or work performed hereunder, must be brought within two (2)
years after the cause of action arises, except to the extent that such action
arises from claims which are subject to an indemnification obligation.
D. Neither party shall publish or use any advertising, sales promotions, press
releases or other publicity which use the other party's name, logo, trademarks
or service marks without the prior written approval of the other party.
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AT&T - PROPRIETARY
<PAGE>
E. Nothing in this Agreement shall create or vest in Customer any right, title,
or interest in the Services, other than the right to use the Services under the
terms and conditions of this Agreement.
F. Except for IP addresses expressly registered in Customer's name, all IP
addresses (classes A, B, and C) shall remain at all times the property of AT&T
and shall be nontransferable. Upon request by Customer at least seven (7) days
prior to termination of this Agreement, AT&T shall grant a single transition
period to facilitate Customer's transition from IP addresses assigned to
Customer under this Agreement and in use as of the termination date of this
Agreement. Such transition period shall begin immediately following the
termination date of this Agreement and shall extend for thirty (30) days, during
which time Customer may continue its use of IP addresses assigned to Customer
under this Agreement and in use as of the termination date of this Agreement.
G. If any portion of this Agreement is found to be invalid or unenforceable,
the remaining portions shall remain in effect and the parties will begin
negotiations for a replacement of the invalid or unenforceable portion.
H. Except as expressly provided herein, neither party may assign this Agreement
without the prior written consent of the other party. Such consent shall be in
the sole discretion of the party requested to give consent. Any attempt to
sublicense, assign or transfer (except as expressly provided herein) any of the
rights, duties or obligations under this Agreement in derogation hereof shall be
null and void. By the provision of notice in accordance with this Agreement,
AT&T shall have the right to assign this Agreement and to assign its rights and
delegate its obligations and liabilities under this Agreement, either in whole
or in part (an "Assignment") to any entity that is, or that was immediately
preceding such Assignment; (i) a current or former subsidiary, business unit, or
division of AT&T; or, (ii) an entity in which AT&T had an ownership interest.
The notice of Assignment shall state the effective date thereof. Upon the
effective date and to the extent of the Assignment, AT&T shall be released and
discharged from all obligations and liabilities under this Agreement. Such
Assignment, release and discharge shall be complete and shall not be altered by
the termination of the affiliation between AT&T and the entity assigned rights
or delegated obligations and liabilities under this Agreement.
I. AT&T's performance obligations under this Agreement shall be solely to
Customer and not to any third party. Other than as expressly set forth herein,
this Agreement shall not be deemed to provide third parties with any remedy,
claim, right of action, other right.
J. AT&T SHALL NOT HAVE ANY LIABILITY FOR DAMAGES OR DELAYS DUE TO FIRE,
EXPLOSION, LIGHTNING, POWER SURGES OR FAILURES, STRIKES OR LABOR DISPUTES,
WATER, ACTS OF GOD, THE ELEMENTS, WAR, CIVIL DISTURBANCES, ACTS OF CIVIL OR
MILITARY AUTHORITIES OR THE PUBLIC ENEMY, INABILITY TO SECURE PRODUCTS OR
TRANSPORTATION FACILITIES, FUEL OR ENERGY SHORTAGES, ACTS OR OMISSIONS OF
COMMUNICATIONS CARRIERS OR SUPPLIERS, OR OTHER CAUSES BEYOND ITS CONTROL
WHETHER OR NOT SIMILAR TO THE FOREGOING.
K. All formal notices, requests, demands and other communications required or
permitted under this Agreement shall be in writing unless otherwise specified in
this Agreement and shall be deemed to have been duly made and received when
personally served, or when mailed by first class mail, postage prepaid, to the
addresses indicated on Page 1 of this Agreement. The parties may change the
addresses on ten (10) days' prior written notice. In addition, the parties may
provide other notices in connection with
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AT&T - PROPRIETARY
<PAGE>
the provision of the Services under this Agreement (such as notices relating to
service outages and maintenance) by other means, including by telephone,
facsimile or electronic mail.
L. Each party will comply with all applicable federal, state, local and other
laws, regulations, rules, and ordinances applicable to the provision and use of
the Services under this Agreement.
M. THIS IS THE ENTIRE AGREEMENT BETWEEN THE PARTIES WITH RESPECT TO THE SERVICES
PROVIDED HEREUNDER AND IT SUPERSEDES ALL PRIOR AGREEMENTS, PROPOSALS,
REPRESENTATIONS, STATEMENTS, OR UNDERSTANDINGS, WHETHER WRITTEN OR ORAL,
CONCERNING SUCH SERVICES. No change, modification, or waiver of any of the terms
of this Agreement shall be binding unless included in a written agreement and
signed by both parties.
- -------------------------------------------------------------------------------
CUSTOMER'S SIGNATURE BELOW ACKNOWLEDGES THAT CUSTOMER HAS READ AND UNDERSTANDS
EACH OF THE TERMS AND CONDITIONS OF THIS AGREEMENT AND AGREES TO BE BOUND BY
THEM.
- -------------------------------------------------------------------------------
iVIEW SOFTWARE AT&T CORP.
By: /s/ Peter Berg By: /s/ Florence C. Sylvester
----------------------------------- -------------------------------
(Authorized Signature) (Authorized Signature)
Peter Berg Florence C. Sylvester
- --------------------------------------- -------------------------------
(Typed or Printed Name) (Typed or Printed Name)
President Contract Manager
- --------------------------------------- -------------------------------
(Title) (Title)
8/13/96 8/15/96
- --------------------------------------- -------------------------------
(Date) (Date)
Page 7
AT&T - PROPRIETARY
<PAGE>
AT&T WORLDNET/Service mark/ MANAGED INTERNET SERVICE (PLUS) ATTACHMENT
COVER SHEET
PAGE 1
This Attachment to the AT&T WorldNet/Service mark/ Services Agreement between
Customer and AT&T Corp. ("Agreement") covers AT&T WorldNet/Service mark/ Managed
Internet Service (Plus) ("MIS Plus") and is an integral part of the Agreement.
This Attachment consists of:
/bullet/ Cover Sheet
/bullet/ Appendix 1
MIS Plus Service Description
/bullet/ Appendix 2
MIS Plus Pricing
/bullet/ Appendix 3
MIS Plus Additional Terms and Conditions
/bullet/ Appendix 4 (If Applicable)
Agency Agreement authorizing AT&T to act as Customer's agent to order
access circuits for connection to MIS Plus
SERVICE PERIOD
This Attachment is effective when signed by Customer and accepted in writing by
AT&T ("Attachment Effective Date"). The Service Period will commence on the ANAD
(as defined in Appendix 3) and, unless terminated in accordance with the
provisions in the Agreement, will continue in effect for a period of Thirty-six
(36) months. At the end of the Service Period, this Attachment will continue in
effect on a month-to-month basis until terminated by either party giving the
other party at least thirty (30) days prior written notice.
TYPE OF CONTRACT NEW
TYPE OF ACCESS PRIVATE LINE
TAX EXEMPT NO
CHECK ALL OPTIONS THAT APPLY TO THIS ATTACHMENT
[ ] Customer elects OPTION A - PREMISES EQUIPMENT PACKAGE
[ ] Customer elects OPTION B - PRIMARY DOMAIN NAME SERVICE ADMINISTRATION (UP TO
15 ZONES/150 KBYTES)
[ ] Customer elects OPTION C - NETWORK NEWS FEED SERVICE
[ ] Customer elects OPTION D - PACKET FILTERING
[ ] Customer elects OPTION E - USAGE REPORTS
[ ] Customer elects OPTION F - ADDITIONAL SECONDARY DNS (UP TO 30 ZONES/300
KBYTES)
CUSTOMER'S SIGNATURE BELOW ACKNOWLEDGES THAT CUSTOMER HAS READ AND UNDERSTANDS
EACH OF THE TERMS AND CONDITIONS IN THIS ATTACHMENT AND AGREES TO BE BOUND BY
THEM.
IVIEW SOFTWARE AT&T
BY: /s/ PETER BERG ACCEPTED: /s/ FLORENCE C. SYLVESTER
----------------------------------- --------------------------
(Authorized Signature) (Authorized Signature)
PETER BERG FLORENCE C. SYLVESTER
----------------------------------- -------------------------------
(Typed or Printed Name) (Typed or Printed Name)
PRESIDENT CONTRACT MANAGER
----------------------------------- -------------------------------
(Title) (Title)
8/15/96 8/15/96
----------------------------------- -------------------------------
(Date) (Date)
AT&T - PROPRIETARY
<PAGE>
AT&T WORLDNET/Service mark/ MANAGED INTERNET SERVICE (PLUS) ATTACHMENT
APPENDIX 1
MIS PLUS SERVICE DESCRIPTION
PAGE 1-1
1. SERVICE DESCRIPTION
AT&T WorldNet/Service mark/ Managed Internet Service (Plus) ("MIS Plus") is a
value-added service providing managed connectivity to the Internet and other
value-added features. MIS Plus is provided in conjunction with BBN Planet.
MIS Plus provides managed Internet access, along with the following optional
advanced services:
/bullet/ Premises Equipment Package
/bullet/ Primary Domain Name Service ("DNS") Administration (up to 15 zones/150
Kbytes)
/bullet/ Network News Feed
/bullet/ Packet Filtering
/bullet/ Usage Reports
/bullet/ Additional Secondary DNS (up to 30 zones/300 Kybtes)
The Service Description includes Implementation Support, Network Operations and
Services, Technical Services and Support, and Advanced Services.
1.1 SERVICE DELIVERY
MIS Plus is available at access bandwidth sizes ranging from 56 Kps to 45 Mbps,
and will be provisioned to ensure adequate throughput for MIS Plus on a
shared-facilities basis consistent with the selected access bandwidth size. AT&T
reserves the right to aggregate network facilities based on AT&T network
engineering design criteria. Access options include Digital Private Line
(ACCUNET/Registered trademark/ Digital Services). Frame Relay (AT&T
InterSpan/Registered trademark/ Frame Relay Service) and Static Integrated
Network Access ("SINA").
When Customer elects to employ Digital Private Line (ACCUNET/Registered
trademark/ Digital Services) access, a 10 Mbps access bandwidth is available.
Customers purchasing 10 Mbps access bandwidth in connection with Digital Private
Line access must provide: (1) a Digital Link 3100 CSU/DSU; and, (2) and a 45
Mbps access circuit exclusively for use in connection with MIS Plus. No portion
of the Customer-provided 45 Mbps MIS Plus Service access circuit may be used for
any application other than the 10 Mbps (including but not limited to M28
functionality, channel separation arrangements, or other shared uses).
Where Customer elects to employ AT&T InterSpan/Registered trademark/ Frame Relay
access, Customer must make available exclusively for use in connection with the
MIS Plus Service: (1) one Permanent Virtual Circuit (PVC) equal to the MIS Plus
access bandwidth specified in MIS Pricing Appendix 2, Schedule II attached
hereto; (2) one AT&T InterSpan/Registered trademark/ Frame Relay ingress access
port equal in size or larger than the PVC identified above: and, (3) a POTS line
for diagnostic purposes. The PVC, ingress access port and POTS line may not
under any circumstances be shared among MIS Plus Service and any Frame Relay or
other devices.
Where Customer elects to employ SINA, Customer must make available, exclusively
for use in connection with the MIS Plus Service: (1) bandwidth equal or greater
in size than the MIS Plus access bandwidth specified in MIS Pricing Appendix 2,
Schedule II attached hereto; and, (2) a POTS line.
1.2 INTERNET CONNECTIVITY OPTIONS
As consideration for the provision of Services hereunder, Customer irrevocably
waives any and all rights it may have under service agreement(s) with AT&T
(predating this Agreement) to purchase Internet connectivity in connection with
AT&T InterSpan Frame Relay Services.
Under this Attachment, MIS Plus is available only within the 48 contiguous
states of the United States.
2. IMPLEMENTATION SUPPORT
MIS Plus is a complete set of Internet access services and support. MIS Plus
includes everything necessary to assure that a business customer will establish
and maintain a successful connection to the Internet. MIS Plus includes expert
implementation support, pro-active monitoring of service levels, and problem
diagnosis and resolution.
Implementation support, including Option "A" for customer premises equipment, is
described below.
2.1 SITE PLANNING AND PREPARATION
AT&T will provide site planning information to Customer's designated point of
contact in order to assist Customer in preparing for installation of MIS Plus.
Customer will be responsible for providing space and power for a dedicated
router and other premises equipment, an attachment to Customer's internal
network, and at least one computer with TCP/IP support.
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<PAGE>
AT&T WORLDNET/Service mark/ MANAGED INTERNET SERVICE (PLUS) ATTACHMENT
APPENDIX 1
MIS PLUS SERVICE DESCRIPTION
PAGE 1-2
MIS Plus includes the registration and propagation of network numbers, domain
names, and routing information as required for Customer's environment.
2.2 COMMUNICATIONS CIRCUIT ORDERING
AT&T will (on behalf of Customer) order and arrange for installation of the
Digital Private Line or other circuit necessary to connect Customer's locations
as specified in the initial Sales Order form, to the designated AT&T Point of
Presence ("Access Facilities"). AT&T arranges for termination of the circuit in
proximity to the planned location of the premises equipment. Any inside wiring
charges shall be the responsibility of Customer. AT&T shall use reasonable
efforts to work with suppliers of Access Facilities to resolve problems with
Access Facilities, but AT&T shall not be responsible for interruptions to MIS
Basic caused by Access Facilities or installation delays caused by suppliers of
Access Facilities. Arrangements shall be made for AT&T to be given adequate and
necessary control over Access Facilities as required in connection with AT&T's
provision of MIS Basic.
2.3 EQUIPMENT PROVISIONING AND STAGING
Customer may purchase and own premises equipment as required by AT&T to use in
connection with MIS Plus, but shall assign full management and operational
control of that equipment, including passwords, to AT&T. MIS Plus customers must
maintain the premises equipment to current hardware and software revision levels
to make sure that AT&T continues to be able to exercise operational control. An
MIS Implementation Engineer will work with Customer's Implementation coordinator
to assure that the proper equipment is used and configured correctly.
Customer is able to lease or purchase CPE equipment under option "A". With or
without Option "A," customers may, for additional charges as specified in the
Pricing Schedule (Appendix 2), select either remote installation, referred to as
Tele-Install (via telephone), of premises equipment, or on-site installation.
Tele-Install entails having MIS technicians remotely assist Customer's technical
liaison in the configuration of the premises equipment as necessary to ensure
that the premises equipment is configured properly to work with MIS Plus and
validate the integration of Customer's existing internal network with MIS Plus.
In the case of the on-site implementation option, an MIS technician is
dispatched to Customer's premises to perform the installation.
2.4 ACCEPTANCE TESTING
The MIS Network Operations Center ("NOC") conducts tests to Customer's locations
as specified in the initial Sales Order form to ensure that the on-site router
can successfully communicate over MIS Plus. The acceptance test verifies the
proper operation of the on-site equipment package, the local access facility,
and the AT&T access infrastructure.
2.5 INITIAL INTEGRATION SERVICE
MIS Plus includes Internet Integration support. This includes consultation and
assistance towards performance of the following initial configuration and
orientation tasks on Customer's fully-installed internet host:
/bullet/ TCP/IP software configuration
/bullet/ SMTP mail host configuration
Such activities will be undertaken on AT&T-approved computing systems with
suitable TCP/IP software.
The integration phase of implementation is considered complete when the criteria
defined in Section 2.6 are met.
2.6 ACCEPTANCE CRITERIA
Project implementation for Customer shall be considered complete and service
billing will be initiated when the following criteria have been met:
1. The access router and associated premises equipment is correctly configured
and installed at Customer locations specified in the initial Sales Order form,
and IP connectivity to the Internet (including routing outside the MIS network)
exists. MIS technical staff verifies IP connectivity through a test which sends
repeated pings through the Internet to Customer site and verifies that the pings
were received. In cases when the premises equipment configuration supports it,
technical staff verifies IP routing through a traceroute test.
AT&T - PROPRIETARY
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AT&T WORLDNET/Service mark/ MANAGED INTERNET SERVICE (PLUS) ATTACHMENT
APPENDIX 1
MIS PLUS SERVICE DESCRIPTION
PAGE 1-3
2. If Customer has its own domain, Customer's domain is registered with InterNIC
(a process which is managed by AT&T) and any AT&T-supplied primary and secondary
DNS servers are operational for Customer's domain.
3. Any required packet filtering, if Option "D" is selected, has been installed
in the MIS router.
After completion of the acceptance criteria specified above, Customer may
request that MIS Plus be re-installed and tested at locations different from
that specified in the initial Sales Order form ("New Location") for the duration
of the Service Period, provided that the total number of Customer locations does
not exceed that specified in the initial Sales Order form. AT&T shall re-install
and re-test MIS Plus at New Locations for an additional installation fee as
specified in Appendix 2. Following satisfaction of the above-specified
acceptance criteria for the locations specified in the initial Sales Order form,
service billing will continue throughout the Service Period regardless of
re-installation and testing activities at any New Location.
2.7 NEW CUSTOMER TRAINING
Installation includes classroom training on networking topics such as
establishing domain name servers, configuring gateways, implementing subnetting
schemes and processing electronic mail addresses. The two days of training for
two people will be offered at a designated MIS Training Facility.
3. NETWORK OPERATIONS AND SERVICE
MIS network operations and technical support staff is dedicated to providing
high network availability and performance. MIS is monitored 24 hours per day,
365 days a year by experienced operators and technicians.
The NOC will coordinate operations with Customer's designated points of contact,
hardware vendors and operators of other networks.
The NOC will perform proactive operations support and troubleshooting of network
and service infrastructure and provide pro-active monitoring of service levels
and problem diagnosis and resolution. In addition, AT&T will regularly generate
and store premises router performance information in the NOC for Customer's
retrieval and use.
3.1 NETWORK MONITORING
The NOC uses SNMP-based (Simple Network Management Protocol) software to monitor
the network. This software is coupled with additional tools to monitor non-SNMP
equipment, domain name servers, NNTP (Network News Transfer Protocol) news
feeds, and other network services. The monitoring software reports the status of
the network to a display that is monitored throughout the day. Changes in the
network status are logged to provide the NOC with the ability to evaluate staff
responsiveness and network availability.
3.2 COMMUNICATION LINK MAINTENANCE
The NOC is responsible for maintaining the communications link between Customer
and the MIS network. This includes problem diagnosis, and any necessary vendor
interaction for dispatch and repair.
3.3 PREMISES EQUIPMENT MAINTENANCE
MIS Plus includes maintenance for dedicated premises equipment for MIS Plus
customers who purchase CPE option "A". The MIS operations staff shall diagnose
failures with the assistance of Customer's designated point of contact
designated by Customer at the site, and determine whether equipment replacement
is required. Customer's designated point of contact shall perform the actual
replacement with telephone assistance (as necessary) from the NOC.
If Customer has selected Option "A" (Premises Equipment Package), Customer shall
receive replacement equipment via next-business-day courier.
4. TECHNICAL SERVICES AND SUPPORT
4.1. SOFTWARE AND CONFIGURATION SUPPORT
MIS technical staff will coordinate software updates and configuration changes
as required for the router and CSU/DSU. AT&T will notify the Customer's
designated point of contact of software changes, and will seek where feasible to
perform maintenance during off-hours.
AT&T - PROPRIETARY
<PAGE>
AT&T WORLDNET/Service mark/ MANAGED INTERNET SERVICE (PLUS) ATTACHMENT
APPENDIX 1
MIS PLUS SERVICE DESCRIPTION
PAGE 1-4
4.2 24-HOUR HOTLINE
All hotline calls will be answered by a touch-tone menu system. The hotline will
be staffed on a 24-hour basis.
4.3 TROUBLE TICKET SYSTEM
The Network Operations Trouble Ticket System allows the NCC to track problems
from initial report through satisfactory resolution. As the MIS staff works to
resolve problems, the current status is always entered in the Trouble Ticket
System. The system's electronic mail and fax interfaces allow these entries to
be provided automatically to interested customer technical contacts.
4.4 FAULT ISOLATION AND PROBLEM RESOLUTION
Fault isolation involves coordination among network operators and technicians,
staff at the affected site and other vendors. Depending on the specific
technologies used, the process may involve testing equipment, reconfiguring
routers, or diagnosing communications linkproblems. The MIS operations staff
will also seek to keep AT&T customer informed of any widespread outages on
connecting networks.
4.5 SECURITY PROCEDURES
MIS security procedures include keeping customers informed of known and
suspected security breaches. Information about security problems will be
reviewed and may be distributed to customer sites by the MIS operations staff.
Fax, phone calls and e-mail will be employed, based on the urgency and nature of
the problem. MIS Plus customers may designate a list of up to 5 contacts who
will be authorized to request site disconnection or reconnection as necessary.
The security procedures employed with MIS Plus constitute only part of a
comprehensive security plan for any user of Internet services, and do not
guarantee network security or prevent security incidents. Customer is
responsible for implementing security measures to protect its network, systems,
applications, data files, programs, procedures and information from unauthorized
access, alteration, theft, loss or destruction.
4.6 SECONDARY DOMAIN NAME SERVICE (DNS)
AT&T provides MIS Plus customers with secondary domain name service as necessary
for successful presence on the network (up to 10 zones and 100 Kbytes of zone
file data). Secondary DNS service is maintained on multiple servers which are
physically diverse and connected to the MIS network at different points. DNS
administration is performed during normal business hours and changes are limited
to an average of one per week.
5. OPTIONAL SERVICES
MIS Plus customers may subscribe to the following optional advanced services.
OPTION "A" - PREMISES EQUIPMENT PACKAGE
MIS Plus customers may choose to obtain pre-configured customer premises
equipment from AT&T as part of the service for an additional monthly fee, or on
a purchase basis at a one-time cost. AT&T will replace equipment in need of
repair under this Option as provided in Section 3.3 of Appendix 1, Service
Description. Customers are able to lease or purchase, for an additional fee, a
redundant CPE configuration for use as a replacement spare.
Customers who are using Digital Private Line (ACCUNET/Registered trademark/
Digital Services) access may choose one of three premises equipment packages.
Package one: a TCP/IP router, CSU/DSU, loopback connector, transceiver, and
associated cables.
Package two: a TCP/IP router, loopback connector, transceiver, and associated
cables.
Package three: a CSU/DSU only.
These configurations are provided and managed by AT&T.
For Customers who use Frame Relay (AT&T InterSpan/Registered trademark/ Frame
Relay Service) or SINA access, only premise equipment Package two is available.
The premises equipment package (Package two) for Frame Relay and SINA Customers
consists of a TCP/IP router, a 14.4 Kbps diagnostic modem, loopback connector,
transceiver, and associated cables. This configuration is provided and managed
by
AT&T - PROPRIETARY
<PAGE>
AT&T WORLDNET/Service mark/ MANAGED INTERNET SERVICE (PLUS) ATTACHMENT
APPENDIX 1
MIS PLUS SERVICE DESCRIPTION
PAGE 1-5
AT&T. Customer must provide and manage a multiplexor or a CSU/DSU with drop and
insert capability and a POTS line.
Customers may choose between Token Ring, AUI or 10BASE-T and 10BASE-2
transceiver types. Where a different type of transceiver is required, Customer
is responsible for providing it. The package of service equipment utilized by
each customer is pre-assembled and subjected to a hardware quality acceptance
test by MIS technical staff before delivery to Customer site. To ease
installation, equipment is either pre-configured before delivery to Customer or
remotely configured by MIS technical staff after it is connected to the network.
OPTIONS "B" - PRIMARY DOMAIN NAME SERVICE (DNS) ADMINISTRATION (up to 15
zones/150 Kbytes)
The translation of domain names (e.g., xxx.com) to underlying Internet addresses
is performed by primary domain name servers. Therefore, establishment of a
primary DNS is a prerequisite for each Internet presence. Secondary DNS backup
is part of MIS Plus (up to 10 zones and 100 Kbytes of associated zone file
data). By purchasing Option "B," Customers may have MIS provide primary DNS
service rather than incurring the cost of setting up and managing a primary DNS
system in-house. This option provides primary DNS for up to 15 zones and 150
Kybtes of associated zone file data. Customers may purchase multiple instances
of primary DNS to satisfy their primary DNS requirements.
MIS engineers work with Customer to develop and implement a DNS strategy. This
includes working with InterNIC to register Customer's domain name. Customer is
responsible for all InterNIC fees related to provisioning and use of domain
names. Once in place, changes to the DNS data base are performed during normal
business hours and limited to an average of one request per week.
OPTION "C" - NETWORK NEWS FEED SERVICE
Network News is a forum of groups that conduct national and international
dialogues on thousands of topics. Hundreds of thousands of people throughout the
world participate in this "bulletin board." The forum allows people to post and
read about new findings, products, services, or commentary within a special
interest group or a wider audience. Under Option "C", MIS Plus offers
comprehensive or selective access to these news groups, as chosen by the
Customer. AT&T IS NOT RESPONSIBLE IN ANY WAY FOR THE CONTENT OF ANY NEWS GROUPS
THAT MAY BE ACCESSED BY CUSTOMER THROUGH THIS FEATURE.
As a prerequisite to Network News Feed Service, Customer must install a news
server provided by Customer. Once the server is in place and the service is
established, MIS Plus feeds selected news information from the MIS central news
server to Customer's server via NNTP making it available to all authorized users
on Customer's private network. MIS staff will track evolving use of news feed
service and make recommendations on upgrading access line speed to keep pace
with news feed requirements.
Customers may request changes to the list of news groups fed from the MIS server
during normal business hours at a frequency averaging up to one change request
per week.
OPTION "D" - PACKET FILTERING
Packet Filtering is a useful component of a comprehensive security plan. Under
Option "D," AT&T oversees implementation and ongoing management of packet
filtering tables resident in the premises router. These filters help control
which outside addresses can enter a customer's internal network and help screen
internal users from connecting with predesignated outside destinations via the
Internet.
The MIS engineering staff works with Customer to develop a customized packet
filtering plan. Once this design phase is complete, AT&T builds the filtering
tables in the router and maintains the filtering tables as Customer's
environment evolves. Routine changes to filters are limited to an average of one
request per week.
OPTION "E" - USAGE REPORTS
Network Usage Reports are a traffic summary that allow customers to track access
line utilization and peak activity periods. With this information, customers can
proactively plan access line bandwidth upgrades as overall utilization grows.
The usage report is provided weekly and details utilization as a percentage of
available bandwidth across the week. This information is collected from Customer
premises equipment using SNMP tools.
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AT&T WORLDNET/Service mark/ MANAGED INTERNET SERVICE (PLUS) ATTACHMENT
APPENDIX 1
MIS PLUS SERVICE DESCRIPTION
PAGE 1-6
OPTION "F" - ADDITIONAL SECONDARY DNS (up to 30 zones/300 Kybtes)
Secondary DNS, as back-up to the Primary DNS, is included as part of MIS Basic
for up to 10 zones and 100 Kbytes of associated zone file data. By selecting
this option, Customer can choose to increase that coverage to up to 30 zones and
300 Kbytes of associated zone file data. Customers may purchase multiple
instances of secondary DNS to satisfy their secondary DNS requirements.
<PAGE>
AT&T WORLDNET/Service mark/ MANAGED INTERNET SERVICE (PLUS) ATTACHMENT
APPENDIX 2
MIS PLUS PRICING
PAGE 2-1
PRICING
The prices specified in this Appendix 2 apply to each location specified in the
initial Sales Order from and provisioned for MIS Plus and, other than Access
Facilities Changes under Schedule IV, are guaranteed for the Service Period only
and only for services initially purchased under this Attachment. At the end of
the Service Period, all discounts and discount plans will cease, and AT&T may
amend the prices from time-to-time provided that AT&T gives Customer at least
sixty (60) days prior written notice. Different prices may also apply to
services, features, options and locations selected after the Attachment
Effective Date.
Schedule I: Implementation Support Fees
SERVICE LEVEL
TELE-INSTALL WAIVED
Notes:
(1) Implementation support fees are a one-time charge due within 30 days
of the service commencement.
(2) Travel expenses also apply to on-site installations more than 125 miles
from any MIS service center: Dallas, Chicago, Atlanta, Cambridge, New
York City, Palo Alto and Washington, DC.
(**) 45 Mbps Installation costs will be provided to the customer on a case
by case basis.
Schedule II: AT&T Worldnet/Service mark/ Managed Internet Service (Plus)
ACCESS BANDWITH RATES AND MONTHLY SERVICE FEE
45 MBPS
QTY
- ---
1 $17,500 each
Notes:
(**) 45 Mbps Service costs will be quoted on a case by case basis.
Additional charges may apply for services or features not specified herein,
including location changes and professional services.
Schedule III: Options Services
OPTIONS
Option "A"
Premises Equipment Package
A-1. MIS Token Ring Router CPE
CISCO 2502 (1 Token Ring Port and 2 Serial Ports) and
CSU/DSU
-N/A-
CISCO 2513 (1 Token Ring Port, 1 Ethernet Port and 2 Serial
Ports) and CSU/DSU
-N/A-
MIS 2 Ethernet Port CPE
CISCO 2514 (2 Ethernet Ports and 1 Serial Port) and CSU/DSU
-N/A-
A-2. Routers
AT&T PROPRIETARY
<PAGE>
AT&T WORLDNET/Service mark/ MANAGED INTERNET SERVICE (PLUS) ATTACHMENT
APPENDIX 2
MIS PLUS PRICING
PAGE 2-2
-N/A-
A-3. CSU/DSU
-N/A-
(**) 45 Mbps prices will be quoted on a case by case basis.
INSTALLATION
MONTHLY (ONE TIME)
------- ------------
Option "B"
Primary DNS Administration
(Up to 15 Zones/150 Kbytes) -NA- -NA-
Notes:
(1) Secondary DNS Administration included in MIS Plus includes up to 10
zones and 100 Kbytes of associated zone file data. Primary DNS
Administration includes up to 15 zones and 150 Kbytes of associated
zone file data.
INSTALLATION
MONTHLY (ONE TIME)
------- ------------
Option "C"
Network News Feed
Service -NA- -NA-
Option "D"
Packet Filtering -NA- -NA-
Option "E"
Usage Reports -NA- -NA-
Option "F"
Additional Secondary DNS
(up to 30 Zones/300 Kbytes) -NA- -NA-
Schedule IV: Access Facilities Charges
Access Facilities will be priced on an individual case basis by your AT&T
Representative from Customer location to the point where service availability
has been defined. The following access types will be supported:
Digital Private Line (ACCUNET/registered/ Digital Services)
Frame Relay (AT&T InterSpan/registered/ Fram Relay Service)
Static Integrated Network Access (SINA)
Others as approved by AT&T on a case-by-case basis
Service will be available at all AT&T InterSpan and ACCUNET Points of Presence
within the 48 contiguous states of the United States.
AT&T PROPRIETARY
<PAGE>
AT&T WORLDNET/Service mark/ MANAGED INTERNET SERVICE (PLUS) ATTACHMENT
APPENDIX 2
MIS PLUS PRICING
PAGE 2-3
Schedule V: Special Options
Redundant Configuration Option
-NA-
Special Options include Redundant Configurations. With this Special Option,
available to MIS Plus customers that select Option "A" Premises Equipment
Package, dual premises equipment is provided to the customer, and each router
and CSU/DSU pair is homed into a different AT&T POP. This Special Option does
not include loadsharing of outbound traffic across the Access Facilities (which
is the responsibility of the customer's host) or inbound traffic balancing
across the Access Facilities (which cannot be assured in this configuration).
Special Options also include the following services offered by BBN Planet: Web
Advantage /Service mark/ Service and Site Patrol /Service mark/ Service. See
your AT&T Representative for descriptions and terms and conditions relating to
these services.
Special Options will be priced out on an individual basis by your AT&T
Representative.
THE TOTAL MONTHLY PRICE IS THE SUM OF APPLICABLE PORTIONS OF SCHEDULES II, III,
IV AND V.
Schedule VI: Moving Fees
Re-installation of MIS Service at a New Location $1,000 per location
Re-installation services performed outside of standard operating hours
(8:00 a.m. to 5:00 p.m. Monday through Friday) $500 per location
AT&T PROPRIETARY
<PAGE>
AT&T WORLDNET/Service mark/ MANAGED INTERNET SERVICE (PLUS) ATTACHMENT
APPENDIX 3
MIS PLUS ADDITIONAL TERMS AND CONDITIONS
PAGE 3-1
1. IMPLEMENTATION
Customer and AT&T will mutually agree upon a Scheduled Network
Activation Date ("SNAD") for each location site specified in the
initial Sales Order form. AT&T will use all reasonable efforts to
ensure that service is provided by that date.
2. BILLING
Billing for each location specified in the initial Sales Order form
shall begin on the earlier of (i) the Actual Network Activation Date
("ANAD") for that location; or, (ii) if implementation is postponed
beyond the SNAD at the request of Customer, due to Customer's failure
to meet its obligations under this agreement, or otherwise due to
circumstances within Customer's control, the SNAD as set forth in
Section 1, Implementation.
The ANAD for a Customer location is when Customer is notified by AT&T
that MIS Plus is being provided to that location.
3. TERMINATION
IF A 12-MONTH SERVICE PERIOD IS SELECTED, THE FOLLOWING APPLIES:
Customer may terminate this Attachment by thirty (30) days' prior
written notice to AT&T and payment of all charges incurred as of the
termination date and a Termination Charge. The Termination Charge will
consist of: (1) 100% of the scheduled payments for each of the months
remaining through month 12 of the Service Period; (2) all discounts (if
any) received by Customer; and, (3) any Access Facilities cancellation
charges or other charges incurred by AT&T as a result of such
termination.
IF A 24-MONTH SERVICE PERIOD IS SELECTED, THE FOLLOWING APPLIES:
Customer may terminate this Attachment by thirty (30) days' prior
written notice to AT&T and payment of all charges incurred as of the
termination date and a Termination Charge. The Termination Charge will
consist of: (1) 100% of the scheduled payments for each of the months
remaining through month 12; (2) 50% of the scheduled payments for each
of the months remaining through month 24; (3) all discounts (if any)
received by Customer; and, (4) any Access Facilities cancellation
charges or other charges incurred by AT&T as a result of such
termination.
IF A 36-MONTH SERVICE PERIOD IS SELECTED, THE FOLLOWING APPLIES:
Customer may terminate this Attachment by thirty (30) days' prior
written notice to AT&T and payment of all charges incurred as of the
termination date and a Termination Charge. The Termination Charge will
consist of (1) 100% of the scheduled payments for each of the months
remaining through month 12; (2) 50% of the scheduled payments for each
of the months remaining through month 24; (3) 25% of the scheduled
payments for each of the months remaining through month 36; (4) all
discounts (if any) received by Customer; and, (5) any Access Facilities
cancellation charges or other charges incurred by AT&T as a result of
such termination.
For both the 12-month, 24-month, and 36-month terms, thirty (30) days
after the ANAD of the first location, Customer shall have a one time
right to terminate this Attachment within the ten (10) day period
thereafter by giving AT&T seven (7) days' written notice of termination
and payment of all charges incurred as of the termination date, but
without payment of any Termination Charges other than as provided under
item (3) in the preceding paragraph.
Customer may terminate this Attachment at any time during the Service
Period without liability (other than for any Access Facilities
cancellation charges or other charges incurred by AT&T as a result of
such termination) provided that Customer replaces this Attachment with
a new Attachment or Agreement with AT&T for MIS of term and revenue
commitments at the same locations equal to or greater than the
aggregate term and revenue commitments contained in this Attachment.
AT&T PROPRIETARY
<PAGE>
AT&T WORLDNET/service mark/ MANAGED INTERNET SERVICE (PLUS) ATTACHMENT
APPENDIX 3
MIS PLUS ADDITIONAL TERMS AND CONDITIONS
PAGE 3-2
4. AT&T-PROVIDED EQUIPMENT ON CUSTOMER'S PREMISES
The following applies to any AT&T provided equipment located on
Customer's premises:
AT&T will deliver, install, and maintain the equipment, as more
specifically described in Appendix 1, Service Description.
Customer, at its own expense, will provide: (i) an equipment room
environmentally compliant with local laws of each country and other
environmental conditions as specified by AT&T; (ii) reasonable access
to the equipment at times specified by AT&T; and, (iii) adequate work
space, heat, light, ventilation and electrical outlets.
Customer is responsible for removal of any hazardous material (e.g.,
asbestos) or correction of any hazardous condition on Customer's
premises that affects AT&T's performance.
The equipment shall not be removed, relocated, modified, or attached to
non-AT&T equipment by Customer without prior written authorization from
AT&T, which shall not be unreasonably withheld.
Except for equipment subject to the Purchase Option under Option "A"
(Premises Equipment Package), title to the equipment will remain with
AT&T. Customer will, however, be liable for repair charges or the
replacement cost of the equipment if it is damaged or lost due to
theft, negligence, intentional acts, unauthorized acts or other causes
within the reasonable control of Customer, its agents or employees,
Customer will bear all risk of loss to equipment subject to the
Purchase Option under Option "A" (Premises Equipment Package).
Except for equipment subject to the Purchase Option under Option "A"
(Premises Equipment Package), upon termination of this Agreement, or
earlier termination of the applicable AT&T provided equipment option,
Customer will make the equipment available for removal or return it in
the same condition as originally installed, ordinary wear and tear
excepted or Customer will pay for restoration of the equipment to such
condition. AT&T shall not be obligated to restore the premises to its
original condition. If Customer does not return the equipment or make
it available for removal by AT&T, then Customer shall be liable for its
then-current market value.
EQUIPMENT PROVIDED TO CUSTOMER SUBJECT TO THE PURCHASE OPTION UNDER
OPTION "A" IS PROVIDED BY AT&T "AS IS," WITH NO EXPRESS OR IMPLIED
REPRESENTATIONS OR WARRANTIES OF ANY KIND (SUCH AS MERCHANTABILITY OR
FITNESS FOR A PARTICULAR PURPOSE). AT&T'S SOLE OBLIGATION WITH RESPECT
TO SUCH EQUIPMENT SHALL BE AS PROVIDED UNDER SECTION 3.3 OF APPENDIX 1,
SERVICE DESCRIPTION.
<PAGE>
AT&T WORLDNET/Service mark/ MANAGED INTERNET SERVICE (PLUS) ATTACHMENT
APPENDIX 4
AGENCY AGREEMENT
PAGE 4-1
This Agency Agreement is between AT&T Corp. ("AT&T") and Customer.
1. EFFECTIVE DATE
This Agreement is effective upon execution of the AT&T
Worldnet/Service mark/ Managed Internet Service (Plus) Attachment and
shall continue in effect as long as the MIS Attachment is in effect.
2. SERVICES
Customer authorizes AT&T to arrange for and coordinate installations
and disconnection of tariffed and other communications services as
required by Customer for its MIS Plus configuration.
3. PAYMENT OF CHARGES
All recurring and non-recurring charges made by vendors for service
ordered on Customer's behalf shall be paid by Customer directly and are
not the responsibility of AT&T.
4. LIMITATION OF LIABILITY
Customer's sole and exclusive remedies shall be: (a) in the event of
breach of this Agency Agreement by AT&T, Customer's right to terminate
this Agency Agreement; (b) Customer's right to direct damages for
damage to real or tangible personal property or damages for bodily
injury or death, proximately caused by AT&T's negligence; and, (c)
Customer's right to receive a credit for charges billed to Customer by
vendors solely as a result of negligence by AT&T. Except as provided in
subparagraphs (b) and (c) above, AT&T shall have no liability for
either direct, indirect, incidental or consequential damages (including
lost profits) resulting from or arising in connection with this Agency
Agreement. AT&T shall not be responsible for non-performance by any
vendor from which AT&T orders service or equipment on Customer's
behalf.
5. COVERAGE
This Agency Agreement is in effect for all of Customer's MIS Plus
locations unless otherwise specified by Customer in writing.
THIS IS THE ENTIRE AGENCY AGREEMENT BETWEEN CUSTOMER AND AT&T WITH RESPECT TO
MIS PLUS. ANY AMENDMENTS, MODIFICATIONS OR CHANGES MUST BE IN WRITING AND SIGNED
BY CUSTOMER AND AT&T.
IVIEW SOFTWARE AT&T
By: /s/ Peter Berg By: /s/ Florence C. Sylvester
----------------------------- --------------------------------
(Authorized Signature) (Authorized Signature)
Peter Berg Florence C. Sylvester
----------------------------- --------------------------------
(Typed or Printed Name) (Typed or Printed Name)
President Contract Manager
----------------------------- --------------------------------
(Title) (Title)
8/13/96 8/15/96
----------------------------- --------------------------------
(Date) (Date)
AT&T PROPRIETARY
EXHIBIT 10.26
[LOGO]
PROMISSORY NOTE
Customer No. 5500003334
$200,000.00 Date: NOVEMBER 5, 1997
Maturity Date: DEMAND, 19__
[X] IF CHECKED, THIS NOTE IS A MASTER [ ] IF CHECKED, THIS NOTE IS A
NOTE (See Section 5) RENEWAL
FOR VALUE RECEIVED, the undersigned ("Borrower") promise(s) to pay to the
order of CAPITAL BANK, a Florida banking corporation ("Bank"), at the office of
Bank at 1221 Brickell Avenue, Miami, Florida 33131, or at such other place or
places as the holder of this Note from time to time may designate in writing,
the principal sum of TWO HUNDRED THOUSAND AND 00/100 DOLLARS ($200,000.00) in
lawful money of the United States (the "Loan"), together with interest in like
lawful money from the date funds are advanced under this Note at the applicable
annual rate set forth below, to be computed on the basis of the actual number
of days elapsed and a year of 360 days. Borrower and all endorsers, sureties,
guarantors and any other persons liable or to become liable with respect to the
Loan are each included in the term "Obligor" as used in this Note.
1. PAYMENTS. Borrower shall pay the interest and principal of this Note as
follows:
(A) PRINCIPAL: DUE AND PAYABLE ON DEMAND
(B) INTEREST: DUE AND PAYABLE MONTHLY COMMENCING DECEMBER 5, 1997
Borrower shall pay all amounts owing under this Note in full when due
without set-off, counterclaim, deduction or withholding for any reason
whatsoever. If any payment falls due on a day other than a day on which Bank is
open for business (a "Business Day"), then such payment shall instead be made on
the next succeeding Business Day, and interest shall accrue accordingly. Any
payment received by bank after 2:00 p.m. shall not be credited against the
indebtedness under this Note until at least the next succeeding Business Day.
2. INTEREST RATE. the unpaid principal balance of the Loan shall bear
interest at:
[X] A floating rate of interest equal to ONE AND 50/100 percent (1.50%)
over the Wall Street Journal Prime Rate per annum, subject to provisions of
Section 4 of this Note, with the floating interest rate under this Note to be
adjusted on the first day of each month. (Prime Rate shall mean, at any time,
the rate of interest quoted in the Wall Street Journal, Money Rates Section as
the "Prime Rate" (currently defined as the base rate on corporate loans posted
by at least 75% of the nation's thirty (30) largest banks), with the Prime Rate
in effect on the first day of a month being applicable to the entire month. In
the event that the Wall Street Journal quotes more than one rate, or a range of
rates as the Prime Rate, then the Prime Rate shall mean the average of the
quoted rates. In the event that the Wall Street Journal ceases to publish a
Prime Rate, then the Prime Rate shall be the average of the three largest U.S.
money center commercial banks, as determined by Bank); or
[ ] A fixed interest rate of ____________________________ percent
(____________%) per annum.
3. SECURITY INTERST. As security for the payment of this Note, and any
renewals, extensions or modifications hereof, and any other liablilities,
indebtedness or obligations of Borrower to Bank, however or whenever created,
Borrower hereby grants to Bank a security interest in any and all collateral
pledged to the Bank as set forth below and any and all other collateral now or
hereafter pledged to the Bank pursuant to a security agreement which provides
for such security interest: ALL INVENTORY, ACCOUNTS, CONTRACT RIGHTS, GENERAL
INTANGIBLES, FURNITURE, FIXTURES, LEASEHOLD IMPROVEMENTS AND EQUIPMENT, WHEREVER
SITUATED, NOW OWNED BY THE BORROWER OR HEREAFTER ACQUIRED, TOGETHER WITH THE
PROCEEDS OF THE ABOVE DESCRIBED COLLATERAL AS SECURITY FOR PRESENT AND FUTURE
ADVANCES.
including all proceeds and products thereof and rights in connection therewith.
Whether or not specific property is described above, as additional security
for the payment of this Note, any renewals, extensions or modifications thereof,
and any other liabilities of Borrower to Bank, however or whenever created,
Borrower hereby pledges, assigns and grants to Bank, a security interest in and
lien on any and all property of Borrower of every kind (whether tangible or
intangible) now or hereafter delivered to or left in or coming into the actual
or constructive possession, control or custody of Bank, whether expressly as
collateral security or for any other purpose (including cash, deposits,
accounts, bills, checks, drafts, collections, balances, notes, stocks, dividends
and all rights to subscribe for securities incident to, declared, or granted in
connection with such property), and property described in collateral receipts or
other documents signed or furnished by Borrower, and any and all replacements of
any of the foregoing, whether or not in the possession of Bank. All such
property and all other property securing Borrower's liabilities to Bank will
hereinafter be referred to as the "Collateral". The Collateral shall also serve
as security for all other liablities (primary, secondary, direct, contingent,
sole, joint or several), due or to become due or which may be hereafter
contracted or acquired, of each Obligor (as defined above) to Bank, whether such
liablities arise in the ordinary course of business or not. It is expressly
agreed that if the Collateral or a portion thereof is real estate, all
covenants, conditions and agreements contained in the mortgage are hereby made a
part of this Note and a default thereunder is a default under this Note. It is
further agreed that if a separate security agreement is executed by any Obligor,
all covenants, conditions and agreements contained in the security agreement are
made a part of this Note to the extent that the terms of the security agreement
are consistent with the terms of this Note and a default thereunder is a default
under this Note. Bank may continue to hold any Collateral after the payment of
this Note, if at the time of the payment and discharge hereof, Borrower or any
Obligor shall be then directly or contingently liable to Bank, as borrower,
endorser, surety or guarantor of any other note, draft, bill of exchange, or
other instrument, or otherwise, and Bank may thereafter exercise the rights with
respect to the Collateral granted herein even though this Note shall have been
surrendered to Borrower. Any married person who signs this Note hereby expressly
agrees that recourse may be had against his or her separate property for any
obligation secured by the Collateral under this Note.
(a) Additions to, releases, reductions or exchanges of, or
substitutions for the Collateral, payments on account of the Loan or increases
of the same, or other loans made partially or wholly upon the Collateral, may
from time to time be made without affecting the provisions of this Note or
liabilities of any Obligor hereto. Bank shall have no responsibility for
ascertaining any maturities, calls, conversions, exchanges, offers, tenders or
similar matters relating to any of the Collateral, nor for informing the
undersigned with respect to any thereof. Bank shall not be bound to take any
steps necessary to preserve any rights in the Collateral against prior parties,
and Borrower shall take all necessary steps for such purposes. Bank or its
nominee need not collect dividends or interest on or principal of any Collateral
or give any notice with respect to it.
(b) Bank shall have, without limitation, the following rights, each of
which may be exercised at Bank's sole discretion at any time whether or not this
Note is due: (i) to pledge, assign, sell, transfer or otherwise dispose of this
Note and the Collateral, whereupon Bank shall be relieved of all duties and
responsibilities and relieved from any and all liability with respect to any
Collateral so pledged or transferred, and any pledgee or transferee shall for
all purposes stand in the place of Bank hereunder and have all the rights of
Bank hereunder; (ii) to transfer the whole or any part of the Collateral into
the name of itself or its nominee; (iii) to notify the Obligors on any
Collateral to make payment to Bank of any amounts due or to become due on any
Collateral and hold same as additional Collateral and upon an occurrence of an
Event of Default (as defined in Section 6 of this Note) apply it to the
principal or interest hereon or to any liabilities secured hereby; (iv) to
demand, sue for, collect, or make any compromise or settlement it deems
desirable with respect to the Collateral; and (v) to take possession or control
of any proceeds of the Collateral.
4. MAXIMUM INTEREST RATE. In no event shall any agreed or actual exaction
charged, reserved or taken as an advance or forbearance by Bank as consideration
for the Loan exceed the limits (if any) imposed or provided by the law
applicable from time to time to the Loan for the use or detention of money or
for forbearance in seeking its collection, and Bank hereby waives any right to
demand such excess. If the floating rate of
<PAGE>
interest based on the Prime Rate (as set forth in Section 2 of this Note) should
increase such maximum interest rate permitted by applicable law (if any), then
notwithstanding any contrary provision in this Note or any other Loan Document
(as defined in Section 6 of this Note) and without necessity of further
agreement or notice by Bank or any Obligor, the unpaid pricipal balance of the
Loan, shall thereupon bear interest at such maximum lawful rate. If the floating
interest rate should thereafter decrease below such maximum lawful rate, the
Loan shall neverthless continue to bear interest at such maximum lawful rate
until Bank receives the full amount of interest delayed by application of such
maximum lawful rate under this paragraph, at which time the Loan shall once
again bear interest at the then applicable floating interest rate under Section
2. In the event that the interest provisions of this Note or any exactions
provided for in this Note or any other Loan Document (as defined in Section 6 of
this Note) shall result at any time or for any reason in an effective rate of
interest that transcends the maximum interest rate permitted by applicable law
(if any), then without further agreement or notice the obligation to be
fulfilled shall be automatically reduced to such limit and all sums received by
Bank in excess of those lawfully collectible as interest shall be applied
against the principal of the Loan immediately upon Bank's receipt thereof, with
the same force and effect as though the payor had specifically designated such
extra sums to be so applied to principal and Bank had agreed to accept such
extra payments(s) as a premium-free prepayment or prepayments. During any time
that the Loan bears interest at the maximum lawful rate (whether by application
of this paragraph, the Default Rate provisions of this Note or otherwise),
interest shall be computed on the basis of the actual number of days elapsed and
the actual number of days in the respective calendar year. Pursuant to Florida
Statutes, Section 687.12, the interest rate charged is authorized by Florida
Statutes, Chapter 665.
5. MASTER NOTE. If this Note is a Master Note, Borrower is extended a
non-binding, discretionary line of credit up to but not to exceed the amount
shown herein. Bank, in its sole descretion, may make advances pursuant to this
Note from time to time and it is therefore contemplated that the outstanding
balance may fluctuate accordingly. Nothing herein shall be construed as a
warranty or representation by Bank that it will at any time make advances to
Borrower. Any request for an advance under this Note shall be subject to review
and approval by Bank. Borrower hereby agrees to pay any additional fees imposed
by the State of Florida including additional documentary stamp tax or intangible
tax when advances are made under the line of credit or upon any renewals
thereof.
6. EVENTS OF DEFAULT. The entire unpaid principle balance of the Loan,
together with all unpaid interest accrued thereon and all other sums owing under
this Note or any other instrument or document executed by any Obligor in
connection with the Loan (this Note and all such instruments and documents,
including, without limitation, any guaranties, agreements, undertakings,
contracts, mortgages, security agreements, assignments and other documents
executed to secure the Loan being referred to in this Note as the "Loan
Documents"), shall at the option of Bank become immediately due and payable
without notice or demand upon the occurrance of any one or more of the following
events ("Events of Default"), regardless of the cause thereof and whether within
or beyond the control of any Obligor: (a) the failure of any Obligor to pay any
sum when due under this Note, or the failure of any Obligor to pay any other sum
when due under any other Loan Document (and the expiration of any applicable
grace period provided in such Loan Document for that payment); (b) the failure
of any Obligor to observe or perform any covenant or agreement in any Loan
Document, or the occurrence of any other default (whether concerned with the
payment of money or otherwise) under any Loan Document, and the expiration of
any applicable grace period provided in such Loan Document for the cure of that
failure or default; (c) if any representative, warranty, affidavit, certificate
or statement made or delivered to Bank by any Obligor or on any Obligor's behalf
from time to time in connection with the Loan shall be deemed by Bank to be
false, incorrect or misleading; (d) the death or mental or physical incapacity
of any Obligor who is a natural person, or the dissolution or merger or
consolidation or termination of existence of any other Obligor, or the failure
or cessation or liquidation of the business of any Obligor, or a material change
in the business of any Obligor, or if the person(s) controlling any Obligor
which is a business entity shall take any action authorizing or leading to the
same; (e) if any Obligor shall default in the payment of any indebtedness for
borrowed money (whether direct or contingent or whether matured or accelarated)
to Bank or to any person whomsoever, including, without limitation, any
affiliate or subsidiary of Bank, or if any Obligor shall become insolvent or
unable to pay such Obligor's debts as they become due; (f) the anticipatory
repudiation by any Obligor of that Obligor's obligations under the Loan
Documents, or any declaration by any Obligor of intention not to perform any
such obligations as and when the same become due; (g) the disposition, sale,
transfer or exchange of all or a substantial part of any Obligor's assets, or
the entry of any judgement against any Obligor, or the issuance of any levy,
attachment, charging order, garnishment or other process against any property of
any Obligor or the filing of any lien against any such property (and the
expiration of any grace period provided in any Loan Document for the discharge
of such lien); (h) if any Obligor shall make an assignment for the benefit of
creditors, file a petition in bankruptcy, apply to or petition any tribunal for
the appointment of a custodian, receiver, intervenor or trustee for such Obligor
or a substantial part of such Obligor's assets, or if any Obligor shall commence
any proceeding under any bankruptcy, arrangement, readjustment or debt,
dissolution or liquidation under any law or statute of any jurisdiction, whether
now or hereinafter in effect, or if any such petition or application shall have
been filed or proceeding commenced against any Obligor, or if any such
custodian, receiver, intervenor or trustee shall have been appointed; (i) if any
Obligor shall have concealed, transferred, removed or permitted to be concealed
or transferred or removed, any part of such Obligor's property with intent to
hinder, delay or defraud any such Obligor's creditors, or if any Obligor shall
have made or suffered a transfer of any such obligor's properties which may be
invalid under any bankruptcy, fraudulent conveyance, preference or similiar law,
or if any Obligor shall have made any transfer of such Obligor's properties to
or for the benefit of any creditor at a time when other creditors similarly
situated have not been paid; (j) the failure to obtain any permit, license,
approval or consent from, or to make any filing with, any federal, state or
municipal governmental authority (or the lapse or revocation of rescission
thereof once obtained or made) which is necessary in connection with the
execution or delivery of any Loan Document, the making of the Loan, the
performance of any Obligor's obligations under any Loan Document, or the
enforcement of any Loan Document; (k) if it shall become unlawful for Bank to
extend credit to Borrower, or to maintain any credit so extended, or for any
Obligor the performance of any of such Obligor's obligations under any Loan
Document: (l) if any governmental authority (or any person acting or purporting
to act under government authority) shall take any action to condemn, assume
custody or control of, seize or appropriate all or any part of Obligor's
property in which the value taken is equal to or greater than ten percent (10%)
of the fair market value of the property, or displace the management of such
Obligor's business; (m) in the case of any Obligor then residing or located in
any jurisdiction outside the United States, if such jurisdiction shall impose
any moratorium or suspension on the repayment of its foreign indebtedness or any
substantial portion thereof, or if such jurisdiction shall declare that it is
not liable or responsible for or will not honor of its foreign indebtedness or
any substantial portion thereof; (n) the failure of any Obligor, after request
by Bank, to furnish financial information or additional financial information or
to permit examination and inspection of the Collateral and/or of Obligor's books
and records; (o) in the case of any Obligor that is a corporation, the payment
of any dividends, or the distribution of earnings, by such Obligor to its
stockholders without the prior written consent of Bank; (p) the further granting
by any Obligor of a security interest in any of the Collateral without the prior
written consent of Bank; (q) the failure to do all things necessary to preserve
and maintain the value and collectibility of the Collateral, including, but not
limited to, the payment of taxes and premiums on policies of insurance on the
due date without benefit of the grace period; or (r) if at any time Bank deems
itself insecure for any reason whatsoever (notwithstanding any grace period in
any Loan Document), or if any change or event shall occur which in Bank's
exclusive judgment impairs any security for the Loan, increases Bank's risk in
connection with the Loan, or indicates that any Obligor may be unable to perform
such Obligor's obligations under any Loan Document.
7. LATE PENALTY AND DEFAULT RATE OF INTEREST. Borrower shall pay Bank a
late charge of five percent (5%) of any payment not received by Bank within
fifteen (15) days of its due date; provided, however, if said fifteen (15) day
period ends on a day other than a Business Day, then the aforedescribed late
charge shall be payable if the payment is not received by the last Business Day
within said fifteen (15) day period. At Bank's sole option the entire unpaid
principal balance of the Loan and any other sums owing under any Loan Document
shall bear interest until paid at an augmented annual rate (the "Default Rate")
from and after the occurrence and during the continuation of any Event of
Default, regardless of whether Bank also elects accelerate the maturity of the
Loan; provided, however, that after judgment all such sums shall bear interest
at the greater of the Default Rate or the rate prescribed by applicable law for
judgments. At Bank's sole option, all interest which accrues at the Default Rate
shall be due and payable on Bank's demand from time to time, but absent such
demand shall be due and payable on the regularly scheduled dates for interest
payments under this Note. The Default Rate shall equal the lesser of (i)
twenty-five percent (25%) per annum or (ii) the maximum interest rate permitted
by applicable law, if any.
8. RIGHTS AND REMEDIES OF BANK. Bank shall be entitled to pursue any and
all rights and remedies provided by applicable law and/or under the terms of
this Note or any other Loan Document, all of which shall be cumulative and may
be exercised successively or concurrently. Upon the occurrence and during the
continuation of any Event of Default, Bank, at its option, may at any time
declare any or all other liablilities of any Obligor to Bank immediately due and
payable (notwithstanding any contrary provisions thereof) without demand or
notice of any kind. In addition,
-2-
<PAGE>
Bank shall have the right to set off any and all sums owed to any Obligor by
Bank in any capacity (whether or not then due) against the Loan and/or against
any other liabilities of any Obligor to Bank. Bank's delay in exercising or
failure to exercise any rights or remedies to which Bank may be entitled if any
Event of Default occurs shall not constitute a waiver of any rightrs or remedies
of Bank with respect to that or any subsequent Event of Default, whether of the
same or a different nature, nor shall any single or partial exercise of any
right or remedy by Bank preclude any other or future exercise of that or any
other right or remedy. No waiver of any right or remedy by Bank shall be
effective unless made in writing and signed by Bank nor shall any waiver on one
occasion apply to any future occasion, but shall be effective only with respect
to the specific occasion addressed in that signed writing.
9. WAIVER AND CONSENT. The Obligors hereby severally: (a) waive demand,
presentment, protest, notice of dishonor, suit against or joinder of any other
person, and all other requirements necessary to charge or hold any Obligor
liable with respect to the Loan; (b) waive any right to immunity from any such
action or proceeding and waive any immunity or exemption or any property,
wherever located, from garnishment, levy, execution, siezure or attachment prior
to or in execution of judgment, or sale under execution of other process for the
collection of debts; (c) waive any right to interpose any set-off or
non-compulsory counterclaim or to plead laches or any statute of limitations as
a defense in any such action or proceeding, and waive (to the extent lawfully
waivable) all provisions and requirements of law for the benefit of any Obligor
now or hereafter in force; (d)submit to the jurisdiction of the state and
federal courts in the State of Florida for purposes of any such action or
proceeding (e) agree that the venue of any such action or proceeding may be laid
in Dade County (in addition to any county in which any collateral for the Loan
is located) and waive any claim that the same is an inconvenient forum; and (f)
stipulate that service of process in any such action or proceeding shall be
properly made if mailed by any form of registered or certified mail (airmail if
international), postage prepaid, to the address then registered in Bank's
records for the Obligor(s) so served and that any process so served shall be
effective ten (10) days after mailing. No provision of this Note shall limit
Bank's right to serve legal process in any other manner permitted by law or to
bring any such action or proceeding in any other competent jurisdiction. The
Obligors hereby severally consent and agree that, at any time and from time to
time without notice, (i) Bank and the owner(s) of any Collateral then securing
the Loan may agree to release, increase, change, substitute or exchange all or
any part of such Collateral, and (ii) Bank and any person(s) then primarily
liable for the Loan may agree to renew, extent or compromise the Loan in whole
or in part or to modify the terms of the Loan in any respect whatsoever, no such
release, increase, change, substitution, exchange, renewal extension, compromise
or modification shall release or affect in any way the liability of any Obligor,
and the Obligors hereby severally waive any and all defenses and claims
whatsoever based thereon. Until Bank receives all sums due under this Note and
all other Loan Documents in immediately available funds, no Obligor shall be
released from liability with respect to the Loan unless Bank expressly releases
such Obligor in a writing signed by Bank, and Bank's release of any Obligor(s)
shall not release any other person liable with respect to the Loan.
10. COSTS, INDEMNITIES AND EXPENSES. The Obligors jointly and severally
agree to pay all filing fees and similar charges and all costs incurred by Bank
in collecting or securing or attempting to collect or secure the Loan and such
right shall extend beyond the entry of a Final Judgment including attorneys'
fees, whether or not involving litigation and/or appellate, administrative or
bankruptcy proceedings. Such entitlement or attorneys' fees shall not merge with
the entry of a Final Judgment and shall constitute post-judgment unless and/or
until any and all indebtedness due Bank is fully satisfied. The Obligors jointly
and severally agree to pay any documentary stamp taxes, intangible taxes or
other taxes (except for federal or Florida franchise or income taxes based on
Bank's net income) which may now or hereafter apply to this Note or the Loan or
any security therefor, and the Obligors jointly and severally agree to indemnify
and hold Bank harmless from and against any liability, costs, attorneys' fees,
penalties, interest or expenses relating to any such taxes, as and when the same
may be incurred. The Obligors jointly and severally agree to pay on demand, and
to indemnify and hold Bank harmless from and against, any and all present or
future taxes, levies, imposts, deductions, charges and withholdings imposed in
connection with the Loan by the laws or government authorities of any
jurisdiction other than the State of Florida or the United States of America,
and all payments to Bank under this Note shall be made free and clear thereof
and without deduction therefor. Notwithstanding the existence of Florida Statute
57.105(2) or any statute of a like or similar nature, each Borrower and/or
Obligor hereby waives any right to any attorneys' fees thereunder and each
Borrower and/or Obligor agrees that the Bank exclusively shall be entitled to
indemnification and recovery of any and all attorneys' fees in respect of any
litigation based hereon, or arising out of, or related hereto whether, under or
in connection with this Note and/or any agreement contemplated to be executed in
conjunction herewith, or any course of conduct, course of dealing, statements
(whether verbal or written) or actions of any party.
11. GOVERNING LAW. This Note shall be governed by, and construed and
enforced in accordance with the laws of the State of Florida, except that
federal law shall govern to the extent that it may permit Bank to charge, from
time to time, interest on the Loan at a rate higher than may be permissible
under applicable Florida law.
12. INVALIDITY. Any provision of this Note which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction only, be
ineffective only to the extent of such prohibition or unenforceablity without
invalidating the remaining provisions hereof or affecting the validity or
enforceablity of such provision in any other jurisdiction. To the extent that
the Obligors may lawfully waive any law that would otherwise invalidate any
provision of this Note, each of them hereby waives the same, to the end that
this Note shall be valid and binding and enforceable against each of them in
accordance with all of its terms.
13. INTERPRETATION. If this Note is signed by more than one person, then
the term "Borrower" as used in this Note shall refer to all such persons jointly
and severally, and all promises, agreements, covenants, waivers, consents,
representations, warranties and other provisions in this Note are made by and
shall be binding upon each and every undersigned person, jointly and severally.
The term "Bank" shall be deemed to include any subsequent holder(s) of this
Note. As used in Section 3 and 8 of this Note, the term "Bank" shall also be
deemed to include under each affiliate and subsidiary of Bank. Each affiliate
and subsidiary of Bank shall have the same rights and remedies granted to Bank
under Section 3 and 8 of this Note. Whenever used in this Note, the term
"person" means any individual, firm, corporation, trust or other organization or
association or other enterprise or any governmental or political subdivision,
agency, department or instrumentality thereof. Whenever used in this Note, words
in the singular include the plural, words in the plural include the singular,
and pronouns of any gender include the other genders, all as may be appropriate.
Captions and paragraph headings in this Note are for convenience only and shall
not affect its interpretation. The "Prime Rate" is a base reference rate of
interest adopted by Bank as a general benchmark from which Bank determines the
floating interest rates chargeable on various loans to borrowers with varying
degrees of creditworthiness, and Borrower acknowledges and agrees that Bank has
made no representations whatsoever that the "Prime Rate" is the interest rate
actually offered by Bank to borrowers of any particular creditworthiness.
14. MISCELLANEOUS. Time shall be of the essence with respect to the terms
of this Note. This Note cannot be changed or modified orally. Bank shall have
the right unilaterally to correct patent errors or omissions in this Note or any
other Loan Document. This Note may be prepaid in whole or in part at any time
without penalty. Except as otherwise required by law or by the provisions of
this Note or any other Loan Document, payments received by Bank hereunder shall
be applied first against expenses and indemnities, next against interest accrued
on the Loan, and next in reduction of the outstanding principal balance of the
Loan, except that during the continuance of any Event of Default. Bank may apply
such payments in any order of priority determined by Bank in its exclusive
judgment. Borrower shall receive immediate credit on payments only if made in
the form of either a federal wire transfer or cleared funds or a check drawn on
an account maintained with Bank containing sufficient available funds.
Otherwise, Borrower shall receive credit on payments after clearance, which
shall be no sooner than the first Business Day after receipt of payment by Bank.
For purposes of determining interest accruing under this Note, principal shall
be deemed outstanding on the date payment is credited by Bank. If any payment
required to be made pursuant to the Note is not received on the due date, Bank
shall have the right, at its election, to charge any of Borrower's accounts at
Bank with the amount of such payment. Except as otherwise required by the
provisions of this Note or any other Loan Document, any notice required to be
given to any Obligor shall be deemed sufficient if made personally or if mailed,
postage prepaid, to such Obligor's address as it appears in this Note (or, if
none appears, to any address for such Obligor then registered in Bank's
records). Bank may grant participations in all or any portion of, and may assign
all or any part of Bank's rights under this Note. Bank may disclose to any such
participant or assignee any and all information held by or known to Bank at any
time with respect to any Obligor. Borrower shall furnish Bank such financial
information of Borrower as Bank may from time to time request and shall permit
Bank to inspect its books and records. All of the terms of this Note shall inure
to the benefit of Bank and its successors and assigns and shall be binding upon
each and every of the Obligors and their respective heirs, executors,
administrators, personal representatives, successors and assigns, jointly and
severally.
-3-
<PAGE>
15. WAIVER OF JURY TRIAL. BANK AND BORROWER HEREBY KNOWINGLY, VOLUNTARILY
AND INTENTIONALLY WAIVE THE RIGHT EITHER MAY HAVE TO TRIAL BY JURY IN RESPECT TO
ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS
NOTE AND ANY AGREEMENT CONTEMPLATED TO BE EXECUTED IN CONJUNCTION HEREWITH, OR
ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS, (WHETHER VERBAL OR
WRITTEN) OR ACTIONS OF EITHER PARTY. BORROWER ACKNOWLEDGES THAT THIS WAIVER OF
JURY TRIAL IS A MATERIAL INDUCEMENT TO THE BANK IN EXTENDING CREDIT TO THE
BORROWER, THAT THE BANK WOULD NOT HAVE EXTENDED SUCH CREDIT WITHOUT THIS JURY
TRIAL WAIVER, AND THAT BORROWER HAS BEEN REPRESENTED BY AN ATTORNEY OR HAS HAD
AN OPPORTUNITY TO CONSULT WITH AN ATTORNEY IN CONNECTION WITH THIS JURY TRIAL
WAIVER AND UNDERSTANDS THE LEGAL EFFECT OF THIS WAIVER.
The Obligors have subscribed their names to the respective Loans Documents
(as defined in Section 6 of this Note) without condition that anyone else should
sign the same or become bound thereunder, and without any other condition
whatsoever. The failure of any witness to sign as witness or the failure of
this Note to be notarized shall not affect the validity of this Note. This
Note is signed, sealed and delivered as of the date first written above.
WITNESS: BORROWER: GALACTICOMM TECHNOLOGIES, INC.
A FLORIDA CORPORATION
/s/ ILLEGIBLE BY: /s/ PETER BERG
- -------------------- ---------------------------------
PETER BERG, C.E.O./SECRETARY
- -------------------- ---------------------------------
ADDRESS: 4101 SW 47TH AVENUE, SUITE 101
FORT LAUDERDALE, FL 33314
BROWARD COUNTY )
- ---------------
)SS:
FLORIDA
- --------------- )
The foregoing instrument was acknowledged before me this 9th day of
JANUARY, 1998 by PETER BERG as C.E.O/SECRETARY of GALACTICOMM TECH., a Florida
corporation, on behalf of the corporation. He [X] is personally known to me or
[ ] produced ________________________________, as identification.
/s/ MICHAEL JOSEPH HUNT
--------------------------------
Notary Public
Print Name: MICHAEL JOSEPH HUNT
---------------------
Commission Number: cc 55 75 71
--------------
My Commission Expires: MAY 27, 2000 [NOTARIAL SEAL]
-4-
EXHIBIT 10.34
LETTER OF PERMISSION TO DISTRIBUTE SOFTWARE
In reference to free, light, demo, timed-out, shareware and/or feature
restricted software product(s) and their associated logo(s) (collectively
"Software" by Aztech New Media Corp.) the undersigned, who is a representative
of the below stated company (Company), authorizes and represents and warrants
that they are empowered to authorize Aztech New Media (Aztech New Media shall
mean Aztech New Media Corp., Aztech New Media International Corp. and their
subsidiaries, affiliates, parents, clients, customers and designees) to have the
unrestricted right to use, copy in any form, record or have recorded onto
CD-ROMS, place in compilations in a manner of Aztech New Media's choosing
(including electronic distribution), and to publish and distribute throughout
the world the Company's below listed Software, which is warranted to and
represented to be authored and owned by the Company, and to be free of all
claims of others including without limitation, liens or encumbrances, moral
rights and copyright claims - without payment of money, royalties or any other
fees, and without obligations of any kind to Aztech New Media Corp.
Peter Berg /s/ PETER BERG
- ------------------------ ---------------------------
Printed Name Authorized Signature
CEO 5/21/97
- ------------------------ ---------------------------
Title Date
Company Name: Galacticomm, Inc.
------------------------------------------
Software Title: WebCast Lite Trial Version:
--------------------------- -------
Software Title: Version:
--------------------------- -------
Street Address: 4101 SW 47th Avenue Suite 101
------------------------------------------
City: Ft. Lauderdale
------------------------------------------
Province/State: Florida
------------------------------------------
Country: USA Postal / Zip: 33314
--------------------- --------
Telephone: 954-583-5990
------------------------------------------
Fax: 954-583-7846
------------------------------------------
This authorization shall extend for a term of one year from date of acceptance
by the Company above.
<PAGE>
AGREEMENT
THIS AGREEMENT entered into this 21 day of May, 1997 by Galacticomm, Inc., a
Florida Corporation located at 4101 SW 47th Avenue Suite 101, Ft. Lauderdale, FL
33314 (hereinafter "SUPPLIER") and
AZTECH NEW MEDIA CORP., located at 1 Scarsdale Road, Don Mills, Ontario, Canada,
M3B 2R2 (hereinafter called "AZTECH").
WHEREAS SUPPLIER has product(s) Called WebCast Lite Trial in time and/or feature
limited versions ("DEMO") as described in appendix "A" that Aztech would like to
distribute:
WHEREAS AZTECH would like to distribute the Demo with its product;
IT IS THEREFORE AGREED as follows:
LICENSE
1. For good and valuable consideration, SUPPLIER grants and AZTECH accepts
a worldwide non-exclusive license to distribute the Demo versions to
end users for the term and consideration set out below. AZTECH may not
sublicense or otherwise transfer this license to any other party than
as agreed.
COMMISSION
2. (i) Should any customer receiving AZTECH'S CD or Demo offer, decide to
upgrade any of the Demo's to full versions of the software, or purchase
other software of the SUPPLIER as referred to in Appendix A, SUPPLIER
agrees to pay AZTECH a percentage of the purchase price of the software
as provided by SUPPLIER, or as outlined in Appendix A.
This Purchase price is calculated prior to any Aztech offered incentive
discount or amount offered to the customer. SUPPLIER will pay
commission to AZTECH within thirty (30) days from the end of the month
in which commission is earned. SUPPLIER will provide reports each
month, covering the previous month, which sets out the following
information:
a) the amount of registration numbers requested by end
users:
b) the number of purchases of the SUPPLIER's software
attributable to AZTECH's distribution:
c) the amount of commission due to AZTECH; and
d) the purchaser name, address, phone number, fax
number, email address, etc.
e) the information in a, b, c, and d categorized by
Aztech's separate identification number for each of
it's clients or product sku's.
<PAGE>
(ii) AZTECH shall have the right, at it's own cost, to audit the
relevant records of SUPPLIER to verify the reports by giving ten (10)
business days notice to SUPPLIER of the intent to audit such records at
a reasonably convenient time during business hours.
METHOD OF DISTRIBUTION
3. SUPPLIER will provide AZTECH one (1) copy of the selected Demos listed
in Appendix A.
SUPPLIER will also provide download, installation, and purchasing
instructions as required for use by the consumer. Technical support
will be provided by the Supplier.
SUPPLIER will provide AZTECH purchasers the ability to purchase the
full commercial versions of the Demo's as well as other software
commercially offered by the Supplier. The consumer can order by
electronic or direct telephone sales means, with the Supplier noting
electronically or by direct request the Aztech Specific Reference
number appearing in the software or on Aztech's CD or assigned to
Aztech - in order to credit the AZTECH account. AZTECH will provide
SUPPLIER with an estimation of the distribution volume of the Demo.
SUPPLIER will fulfill the order for software and/or software upgrade
within ten (10) business days of the receipt of the consumer sales
information.
PROPRIETARY MARKS
4. All intellectual property, including, but not limited to, trademarks,
tradenames, copyrights, company designs and logos, and software, and
patents shall remain the property of the respective owner. AZTECH shall
not modify, reverse engineer or decompile the licensed software. AZTECH
may use SUPPLIER trademarks solely for advertising in relation to this
Agreement. Supplier represents and warrants that to the best of its
knowledge, (i) it has all necessary right, title and interest in and to
the Demo and commercial versions of software it offers for sale to
grant the license(s) and other rights granted under this Agreement; and
(ii) the Demo and commercial versions of software it offers for sale
does not infringe any United States or international patent or
copyright of any third party. Supplier will save harmless and
indemnifies Aztech and it clients for any claims against infringement
by the intellectual property provided by the Supplier. This clause
survives termination.
MISCELLANEOUS
5. This agreement is performable in and venue lies in Ft. Lauderdale, FL.
Both parties agree to be bound by Ontario law.
6. Should a court declare any portion of this Agreement invalid the
remaining portions shall continue to bind the parties.
<PAGE>
7. The Agreement can only be amended in writing executed by both parties.
All notices shall be sent to the parties at the addresses listed above
unless a later appropriate address is provided. All notices sent by
first class mail shall be deemed delivered within three (3) days of
placing in the U.S. Mail or on the same day if delivered via facsimile,
or the next day if sent by a nationally recognized courier.
8. This Agreement constitutes the entire Agreement between the parties and
supersedes any previous written or oral Agreements. Appendix A forms
part of this Agreement and Demo's and titles may be added from time to
time upon mutual agreement.
9. Each party is acting as an independent contractor and not as an
agent, partner, or joint venturer with the other party for any purpose.
Except as provided in this Agreement, neither party shall have any
right, power or authority to act or create any obligation, expressed or
implied, on behalf of the other.
10. The term of this Agreement is for one (1) year, commencing on the date
hereof, and shall be automatically renewed for subsequent one (1) year
term(s) commencing on each anniversary date, unless terminated at any
term, with a minimum 30 days notice prior to the end of a term. Upon
termination of this Agreement for any reason, the parties agree to
continue their cooperation in order to affect an orderly termination of
their relationship. Any specific completion of commitments to Aztech
clients will be continued to proceed until a convenient time for
removing the Supplier's content from distribution. The following
sections of this Agreement will survive termination of the Agreement
for a period of two (2) years: 2 and 3.
Agreed to by the parties herein:
Galacticomm, Inc. AZTECH NEW MEDIA CORP.
- ----------------------------
SUPPLIER NAME
/s/ PETER BERG
- ---------------------------- ----------------------------
SIGNATURE RENE PARDO
Peter Berg
- ----------------------------
PRINTED NAME EXECUTIVE VICE PRESIDENT
CEO
- ----------------------------
TITLE
5/21/97
- ---------------------------- ----------------------------
DATE DATE
<PAGE>
<TABLE>
PLEASE VERIFY AND/OR COMPLETE FAX BACK: OEM ADMINISTRATION 416 449 1058 PAGE __ OF __
<S> <C> <C> <C> <C>
Company Name Galacticomm 954-583-5990 954-583-7846 http:// www.gcomm.com
----------- ------------ ------------ --------------------------
(phone) (fax) web site
Contacts: Sales Lois Messner 954-583-5990 954-583-7846 email: [email protected]
----------- ------------ ------------ --------------------
Technical Bill Posner 954-583-5990 954-583-7846 [email protected]
----------- ------------ ------------ --------------------
Other Bobby O'Brien 954-583-5990 954-583-7846 [email protected]
----------- ------------ ------------ --------------------
Initial Product Information:
PRODUCT NAME PLATFORM VERSION DATE LIMITATION ON PRODUCT SOFTWARE TO
OF NEXT (DEMO, TIMED-OUT BE PROVIDED
REVISION FEATURE RESTRICTED) WEB SITE OR CD
WebCast
Lite Trial Win 95/NT Feature restricted diskette
WebCast
Lite Trial Win 95/NT Feature restricted diskette
WebCast
Lite Trial Win NT/95 Feature restricted diskette
PRODUCT NAME OEM/AZTECH ID SERIAL #'S UPSELLING OR SALES TO FULL SELLING PRICE DISTRIBUTION %
TO BE EMBEDDED ON CD COMMERCIAL PRODUCT - DISCOUNT TO
OR TO BE MADE UP JOINTLY. NAME AND/OR VERSION # AZTECH
WebCast
Lite Trial WebCast Personal $ 49.95 40%
WebCast
Lite Trial WebCast ProServer $995 40%
WebCast WebCast Video
Lite Trial Broadcaster Add-on $495 40%
METHOD OF ORDER TAKING:
(yes/no) (yes/no)
a) Link to web site yes e) Custom home page or order
taking work required ___
b) Publisher's 1 800 yes f) Minimum order size - one yes
c) Faxed orders from printed g) Publisher capable of reading ID ___
form from offer ___ h) Demo software solicits upsell yes
d) Publisher equipped to i) Both demo & full version on CD no
accept Aztech discount j) Both demo & full version from
incentive offer to consumer yes Aztech/OEM site no
PRODUCT DELIVERY - BY PUBLISHER POSSIBLE-AZTECH OR OEM
(yes/no) (yes/no)
a) Unlocking-emailing key No No
b) Electronic download
of full commercial version Yes No
c) Software to be shipped
in a box Yes No
d) Other _________________
__________________________ ____________
PREPARED BY: /s/ PETER BERG Peter Berg CEO Galacticomm, Inc. 5-21-97
------------------ --------------- -------------- ------------------------ --------------
(Signature) (printed name) (title) (Publisher/Company) (date: m/d/yr)
</TABLE>
EXHIBIT 10.40
Agreement No. 95-1208-349
Licensee: Galacticomm Inc.
PACIFIC SOFTWORKS INC.
SOFTWARE SOURCE CODE & SOFTWARE BINARY DISTRIBUTION
LICENSE AGREEMENT
This Software Source Code License Agreement is entered into as of the date of
last signature on this Agreement, by and between Pacific Softworks Inc.
("Pacific Softworks Inc."), a California corporation, with offices at 4000 Via
Pescador, Camarillo, California 93012-5049 USA, and Galacticomm
Inc. ("Licensee"), a Florida Corporation with its offices at 4101 SW 47 Ave.
Suite 101, Ft. Lauderdale, Florida 33314.
WHEREAS, Pacific Softworks Inc. has rights in certain TCP/IP networking software
known as FUSION TCP/IP Developer's Kit ("Software") and related documentation
in which licensee desires to acquire certain rights to incorporate ("Port") the
Licensed Software into the Licensee's computer system, operating system, or
other networked system ("System") to provide TCP/IP-based networking for the
System.
NOW, THEREFORE, in consideration of the mutual promises and conditions contained
in this agreement, Pacific Softworks Inc. and Licensee agrees as follows:
1. DEFINITIONS
Terms used in this Agreement have the following, meanings:
1.1 SOFTWARE means the FUSION TCP/IP networking software and related software
provided to Licensee as the FUSION Developer's Kit which is used by the
Licensee to port to Licensee's System in order to provide TCP/IP
networking applications. See Appendix A.1 for a description of the
FUSION Developer's Kit.
1.2 SOURCE CODE means the software code, the majority in the C software
language, which is included in the FUSION Developer's Kit in the
configuration of Licensee's System defined in Appendix A.2.
1.3 BINARY DISTRIBUTION means a copy of the Licensee's ported Binary (Object
Code) version of the Software Source Code which is used at the time of
execution on the Licensee's System. Binary Distributions are authorized
by the use of Binary Incorporation Stickers provided by Pacific Softworks
Inc.. These stickers are affixed to the software media or to the System
which contains the Binary Distribution.
1.4 DOCUMENTATION means user manuals, porting guides, reference manuals,
programmer's manuals, and installation manuals included with the FUSION
Developer's Kit or other documentation provided to the Licensee relating
to the Software.
1.5 SYSTEM means the Licensee's computer hardware, circuit board, or other
hardware/firmware component, computer operating software, or other
software component which, together with FUSION TCP/IP Networking Software
comprises a fully functioning product.
1.6 END-USER means a sub-licensee of Licensee authorized to use the Software
Binary Distribution under terms furnished by and governed by the
Licensee.
1.7 DISTRIBUTOR means an agent authorized by Licensee to market, sell, and
distribute Software Binary Distributions directly to End-users.
1.8 DEVELOPER COMPANIES are End-users who are either independent software
vendors wishing to make add-on products for sale to other End-users (for
use with the Licensee's Binary Distribution products), or customers
wishing to customize the Licensee's Binary Distribution products.
2. GRANT OF LICENSE
Subject to the terms and conditions of this Agreement, Pacific Softworks Inc.
grants to Licensee, and Licensee hereby accepts from Pacific Softworks Inc., a
non-exclusive, non-transferable right and license to:
2.1 Use, edit, merge, translate, enhance or otherwise modify the Software
Source Code as needed in order to port the Software to Licensee's
System,
2.2 Make up to two (2) copies of the Software Source Code for archival
purposes only,
Page 1
<PAGE>
Agreement No. 95-1208-349
Licensee: Galacticomm Inc.
2.3 Create internal use Binary Distributions of the ported software for
execution on the Licensee's System for the purpose of testing, debugging,
supporting and marketing of the binary version of the ported software.
Create binary Distributions of the Software and copies of the derived
Documentation to the extent necessary to fully utilize the rights granted
herein,
Distribute and sub-license the Software Binary Distribution and derived
Documentation as part of Licensee's product world-wide directly to
End-user for the purpose of and to effect the End-user's utilization of
Licensee's product.
Distribute Binary copies of the software (executables) occasionally to
members of the media or other influential people, without binary stickers
required if solely for review purposes.
Authorize Distributors to distribute and sub-license the Software Binary
Distribution and derived Documentation directly to End-users.
Create Binary Distribution of the Software and copies of the derived
Documentation for updating End-users, without incurring additional
cost/or Binary Stickers.
Pacific Softworks will issue credit for destroyed labels returned by
Licensee.
Pacific Softworks Inc. Grants permission to distribute a subset of the
header files (".H" files) that are included in the software, or
derivative thereof, to Developer companies as part of special development
kits: (a) only those required by Galacticomm's Developer companies and
(b) All such files should contain the original Pacific Softworks
copyright notice, and due credit will be given in the documentation of
those development kits: "Portions of the accompanying software Copyright
Pacific Softworks Inc., used by permission."
2.4 Use the Source Code at the following designated site of Licensee:
Licensee: GALACTICOMM INC.
Address: 4101 SW 47 AVE. SUITE 101, FT. LAUDERDALE, FL 33314
User Contact: BOB STEIN
2.5 Limitation on Use: Notwithstanding Section 2.1 above, any restrictions
on the use of the Software by Licensee identified in Appendix D and
attached as part of this Agreement are included and are binding as part
of this Agreement.
3. DELIVERY AND PAYMENT
3.1 In consideration of the rights and licenses, granted in this Agreement,
Licensee agrees to pay Pacific Softworks Inc. the fees for the Software
as specified in Appendix A.1 and per-copy binary distribution fee or a
one time buy-out fee. Licensee will execute a company Purchase Order for
the amount of the fees.
3.2 Pacific Softworks Inc. will deliver to Licensee one master set of the
Documentation and one master copy of the 3.2 Software Source Code
Documentation shall be in hard copy form; Documentation in electronic
form must be previously arranged and agreed upon by Pacific Softworks
Inc.. Delivery media for Software Source Code shall be in the form
specified in the configuration defined in on page 9.
3.3 The fees are due and payable within 30 days of receipt by Licensee of the
Software Source Code and Documentation. Licensee shall pay Pacific
Softworks Inc. a 2% per month (or highest rate allowed by law) on all
amounts which are due but unpaid under this Agreement. From the date such
amounts are overdue until they are paid, such charge shall accure and be
due payable on a daily basis.
4. OWNERSHIP RIGHTS AND PROTECTION OF COPYRIGHT
4.1 Title to and ownership of the Software and Source Code and all related
technical know-how, including any modifications, revisions, bug fixes,
enhancements, improvements and derivative versions of the Software
thereof, developed by either Licensee or Pacific Softworks Inc. and all
rights therein, including all rights in patents, copyrights and trade
secrets applicable thereto, shall remain vested in Pacific Softworks Inc.
during and after the term of this Agreement.
4.2 Licensee shall deliver to Pacific Softworks Inc. any modifications,
revisions, bug fixes, enhancements, improvements, and derivative versions
of the Documentation, the Software, and Source Code upon completion and
Page 2
<PAGE>
Agreement No. 95-1208-349
Licensee: Galacticomm Inc.
within 30 days of Port of code to target configuration specified in
Appendix A.2, to Pacific Softworks Inc. for archival purposes and to
better support Licensees completed code.
4.3 Licensee shall faithfully reproduce and conspicuously display in and on
all copies made and the media, documentation, and packages in which such
copies are contained the following notices:
(a) The Binary Incorporation Sticker supplied with the Developer's Kit is
to be affixed to all internal use binary copies made of the Software.
(b) Notice for copies of any portion of the Documentation relating to the
Software or any modifications thereof:
COPYRIGHT(copyright sign) 1983 to 1994 PACIFIC SOFTWORKS INC. ALL RIGHTS
RESERVED.
(c) Notice for all whole or partial copies of the Software Source Code,
made by Licensee:
COPYRIGHT(copyright sign) 1983 to 1994, AN UNPUBLISHED WORK BY PACIFIC
SOFTWORKS INC.. ALL RIGHTS RESERVED. THIS PROGRAM IS AN UNPUBLISHED WORK
PROTECTED BY THE UNITED STATES COPYRIGHT LAWS (TITLE 17 UNITED STATES
CODE) AND CONTAINS TRADE SECRETS OF PACIFIC SOFTWORKS INC. WHICH MUST BE
HELD IN STRICT CONFIDENCE.
(d) Pacific Softworks will have available at all times, and ready to ship
on the same day if required Binary Incorporated Stickers to Licensee.
Pacific Softworks Inc. will notify Licensee 90 days in advance of any
required changes to copyright notices.
An End-user may be authorized to use the Software only pursuant to a
sub-license agreement between Licensee or a Distributor, as the case may
be, and an End-user. The sub-license shall be either in the form of (i) a
written, executed sub-license containing substantially the same terms
included herein governing the End-users use of, or the Distributors' use
or marketing of the Software; or (ii) a so-called "Shrink-wrap License
Agreement" as shown in Appendix C of this agreement, which contains
substantially the same terms included in the Appendix to govern the
End-user's use of the Software or (iii) as set forth in Appendix B
Configuration, License Fees.
5. NON-DISCLOSURE OF CONFIDENTIAL INFORMATION
5.1 Pacific Softworks Inc. and Licensee acknowledge that certain information
may be disclosed to one another in order to carry out this Agreement,
including but not limited to financial, statistical, personnel or
technical information relating to each other's business which may be
deemed proprietary and confidential. In the event either party receives
such information, that party agrees to keep such information confidential
by using the same care and discretion that it uses with its own
information which it considers confidential.
5.2 Licensee hereby acknowledges that the Software and all related materials
and technical know-how contains Pacific Softworks Inc.'s trade secrets
and is confidential and proprietary to Pacific Softworks Inc.. Licensee
agrees to hold all such information in confidence, and agrees not to
disclose such information to anyone other than Licensee's employees with
a bona fide need to know. Licensee's employees having access to the
Software and all related materials and technical know-how are also
enjoined by this non-disclosure agreement. Additionally, Licensee agrees
to use at least that degree of care which it uses to protect its own
information of a similar proprietary nature.
5.3 The obligations described in Section 5.1 and 5.2 shall terminate five
(5) years from the date of disclosure or termination of this Agreement,
whichever occurs later, and shall not be applicable with respect to any
portion of the received information which:
(a) is rightfully known by either party at the time of its receipt,
(b) is publicly known by either party,
(c) is rightfully provided by either party without any restriction on
disclosure by a third party not bound in a confidential relationship,
(d) is provided by either party to third parties without restriction on
disclosure, or
(e) is independently developed by either party.
Page 3
<PAGE>
Agreement No. 95-1208-349
Licensee: Galacticomm Inc.
6. WARRANTY
6.1 Pacific Softworks Inc. hereby warrants for a period of thirty (3O) days
from receipt by Licensee of the Software that the Software meets the
specifications stated in Appendix A.2. During this thirty day period, if
Licensee notifies Pacific Softworks Inc. in writing that the Software
does not meet such specifications, Pacific Softworks Inc.'s sole
obligation will be to correct such deficiencies or errors within two
weeks of the written notice by Licensee to Pacific Softworks Inc.. If
such deficiency or error cannot be corrected within the two week time
period, Pacific Softworks Inc. will provide a plan for bringing the
software into conformance with the specifications using its best efforts
in accordance with usual commercial practices. Notwithstanding the
foregoing, Pacific Softworks Inc. makes warrants that operation of the
Software wil1 be uninterrupted, error free, or conform to any reliability
or performance standards not stated in Appendix A.2.
6.2 THE ABOVE WARRANTY IS THE SOLE AND EXCLUSIVE WARRANTY PROVIDED BY PACIFIC
SOFTWORKS INC.. PACIFIC SOFTWORKS INC. EXPRESSLY EXCLUDES ANY AND OTHER
WARRANTIES, WHETHER EXPRESSED, IMPLIED OR STATUTORY, INCLUDING IMPLIED
WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE. ANY
STATEMENTS MADE BY ANY OFFICERS, DIRECTORS, AGENTS OR EMPLOYEES OF
PACIFIC SOFTWORKS INC. ABOUT THE DESIGN, SUITABILITY, QUALITY,
PERFORMANCE OR RESULTS OF USING THE SOFTWARE IN VARIANCE WITH, OR IN
ADDITION TO, THE SPECIFICATIONS STATED IN APPENDIX A.2 SHALL NOT BE
DEEMED TO BE A WARRANTY OR REPRESENTATION BY PACIFIC SOFTWORKS INC. FOR
ANY PURPOSE OR GIVE RISE TO ANY LIABILITY OF PACIFIC SOFTWORKS INC.
6.3 The warranties made by Pacific Softworks Inc. herein are not
transferable, and are made solely for the benefit of Licensee and shall
not extend to any third party. Licensee agrees that the Binary
Distribution copies provided by Licensee to its End-users are warranted
by Licensee only; no warranty from Pacific Softworks Inc. is provided.
7. TRAINING, SUPPORT AND MAINTENANCE
7.1 Upon execution of this agreement Pacific Softworks will provide Licensee
with 90 days of software support, including porting support and
maintenance. Additional training and support, including porting support,
for the Software, is provided by Pacific Softworks Inc. upon execution by
Licensee of the Annual Source Support and Maintenance Agreement provided
separately from this Agreement. However if this source code agreement
remains in effect but both the initial 90 days support and Annual Source
Support and Maintenance Agreement terminates, Licensee shall be able to
obtain technical telephone, fax and e-mail support from Pacific Softworks
Inc. at S100. per hour, and/or releases or revision of the Software for a
$2000.00 fee per release. Alternatively, the Annual Source Support and
Maintenance Agreement shall be renewable by Licensee for a $4000. per
year. However, each year during the lapse period, requires a $2000. fee
to bring Licensee current.
7.2 No other continued maintenance and support of the Software, except that
provided separately from this Agreement, and obtained at the discretion
of the Licensee, is provided under this Agreement.
7.3 Licensee will provide to its End-users and Distributors all support and
maintenance functions necessary for the proper and continued use of the
Software Binary Distribution. No support is provided directly by Pacific
Softworks Inc. to Licensee's End-users or Distributors for the Software
Binary Distribution.
8. TERM AND TERMINATION
8.1 The initial term of this Agreement shall begin on the day Licensee's
purchase order is issued and automatically renewed annually on the
anniversary of that date, unless terminated by either party subject to
the terms and conditions of this Agreement.
8.2 If Licensee fails to perform any of its obligations under this Agreement,
including non-payment of fees, and such failure continues for a period of
thirty (30) days after written notice from Pacific Softworks Inc.,
Pacific Softworks Inc. may terminate this Agreement and license granted
herein to Licensee. Licensee may terminate this Agreement at any time by
giving sixty (60) days advance written notice to Pacific Softworks Inc.
Notwithstanding anything to the contrary contained herein, Pacific
Softworks Inc. may terminate this Agreement immediately upon notice to
Licensee if Licensee ceases to do business for any reason, becomes
bankrupt or insolvent, makes a general assignment for the benefit of
creditors, reorganizes, suffers or permits the appointment of a receiver
for its business or assets or files any application or petition seeking
relief under federal or state law generally affecting the rights of
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<PAGE>
Agreement No. 95-1208-349
Licensee: Galacticomm Inc.
creditors. Pacific Softworks Inc. agrees that the primary purpose of
section 8.2 is to protect its interest under this Agreement, and that it
will not unreasonably terminate this Agreement in the event that Licensee
is acquired, goes public, or undergoes a similar transformation that does
not substantially impair Licensee's creditworthiness, or its ability to
meet the terms of this Agreement.
8.3 If Licensee elects to terminate this Agreement on account of a default by
Pacific Softworks Inc. in performing any of its obligations under this
Agreement, then, so long as Licensee is not in default of any
obligations, Licensee may continue to use the Software and Source Code to
the extent necessary to support and maintain its port of the Source Code,
provided that Licensee not make any additional full or partial copies of
the Software except as necessary for such maintenance and support.
8.4 Within thirty (30) days after termination of this Agreement, Licensee
shall deliver to Pacific Softworks Inc. or destroy the Software and all
copies made of the Software (except for two (2) copies for Licensee's
archival purposes), all copies of internal use Binary Distributions of
the ported software, and the Documentation. Licensee shall furnish to
Pacific Softworks Inc. an affidavit certifying that, through Licensee's
best efforts and to the best of its knowledge, complete delivery or
destruction has been effected. Notwithstanding the foregoing, Licensee
may continue to use and retain copies of the Software to the extent
necessary to support and maintain the Software, in which case the
provisions of the following Sections of this Agreement survive the
termination: Section 3. DELIVERY AND PAYMENT, Section 4. OWNERSHIP RIGHTS
AND PROTECTION OF COPYRIGHT, Section 5. NON-DISCLOSURE OF CONFIDENTIAL
INFORMATION, and Section 9 LIMITATION OF LIABILITY.
8.5 Following any termination or cancellation of this Agreement or the
licenses granted herein (i) Licensee and its Distributors may use and
distribute the Binary Distribution of the Software only to maintain,
service, and support its then current licensees, but may not use or
distribute any version of the Software for any other purpose; (ii)
Licensee's rights to continue to distribute or market the Software shall
immediately cease, and the rights of all Distributors to continue to
distribute or market the Software shall cease as provided in Licensee's
Distributor agreements regarding discontinuance of products, and (iii)
all of Pacific Softworks Inc. obligations thereunder shall cease. So long
as Licensee has any copy of the Software in its possession, Licensee
shall continue to be bound by the terms of this Agreement.
Notwithstanding anything to the contrary, no cancellation or termination
of this Agreement or any of the licenses granted herein will have any
effect on the rights of an End-user to continue to use any copy of the
Software previously licensed in accordance with the terms thereof.
9. LIMITATION OF LIABILITY
9.1 Neither party shall be liable to the other for any direct, indirect,
incidental, or consequential damages, whether foreseeable or not,
including without Limitation damages for loss of business profits or
business interruption, resulting from or arising out of the use or
inability to use the Software, even if either party has been advised of
the possibility of such. Pacific Softworks Inc. shall in no event be
liable to License for damages on account of any claims against Licensee
by any third party.
9.2 Pacific Softworks Inc. cumulative Liability to Licensee for any breaches
of this Agreement and Pacific Softworks Inc. obligations under this
Agreement shall be limited to the fees paid to Pacific Softworks Inc. by
the Licensee for the Software.
10. INDEMNITY
10.1 Pacific Softworks Inc. agrees that it will defend, at its expense,
any suit or proceeding brought against Licensee and will pay all damages
and costs finally awarded against Licensee in such suit or proceeding,
insofar as such suit or proceeding is based on a claim that the Software
and/or Binary Distributions made thereof when used within the scope of
the License granted within the United States, infringes any U.S. patent,
U.S. copyright, U.S. trademark or other proprietary right, provided
Pacific Softworks Inc. is promptly notified in writing of any such claim
and is given reasonable assistance by Licensee for such defense of such
claim
10.2 In the event that the Software and/or Binary Distributions made thereof,
when so used, is held in such suit or proceeding to infringe any such
patent, copyright, trademark or other proprietary right and its use is
enjoined by a court of competent jurisdiction, Pacific Softworks Inc., at
its own expense, shall either: (i) procure for Licensee the right to
continue using the Software; or (ii) modify or replace the Software so
that it becomes non-infringing while giving equivalent performance If
Pacific Softworks Inc. provides License with such a non-infringing
replacement version of the Software, Licensee shall within fifteen (15)
days thereafter (i) cease to use, modify, copy or sub-license the
replaced, infringing Software and/or Binary Distributions, (ii) use its
reasonable efforts to cause all
Page 5
<PAGE>
Agreement No. 95-1208-349
Licensee: Galacticomm Inc.
Distributors to cease to use, copy, or sub-license the replaced,
infringing Software Binary Distributions and (iii) use its reasonable
efforts to notify Distributors and End-users of the availability of the
non-infringing replacement version of the Software Binary Distributions
10.3 Pacific Softworks Inc. is not liable for any claim based upon Licensee's
modification or use of the Software or use of the Binary Distribution
thereof, or Pacific Softworks Inc.'s following any instruction or
direction of Licensee in regard to the Software.
10.4 THIS SECTION STATES PACIFIC SOFTWORKS INC.'S ENTIRE LIABILITY FOR ANY
INFRINGEMENT OR VIOLATION OF ANY OTHER PARTY'S INTELLECTUAL PROPERTY
RIGHTS.
10.5 This section survives the termination of this Agreement.
11. NOTICE
Any notice to be given thereunder shall be in writing and shall be effective
upon receipt, if personally delivered, or on the fifth business day following
mailing by first class United States Registered or Certified mail (or the
equivalent thereof), postage prepaid, addressed tO the parties, as shown below
For Pacific Softworks Inc: For Licensee:
Pacific Softworks Inc. Galacticomm Inc.
4101 SW 47 Ave., Suite 101
4000 Via Pescador Ft. Lauderdale, FL 33314
Camari11o, CA 93012-5049 Attention: Bob Stein
Attention: Contracts Administrator
12. MISCELLANEOUS
12.1 Choice of Law
The parties hereto agree that all actions or proceedings arising directly
or indirectly from this Agreement shall be litigated in courts having a
suits within Ventura County, California, and hereby consent to the
jurisdiction of any court in which such an action is commenced that is
located in Ventura County, California, and agree not to disturb such
choice of forum, waive the personal service of any and all process upon
them, and consent that all such service of process may be made by an
overnight delivery service.
ATTORNEYS' FEES. If any legal action is brought for the violation or
breach of this Agreement, the successful or prevailing party shall be
entitled to recover reasonable attorneys' fees and other costs in
connection therewith, including any attorneys' fees incurred after a
judgment has been rendered by a court of competent jurisdiction. (Any
judgment shall include an attorneys' fees clause which shall entitle the
judgment creditor to recover attorneys' fees incurred to enforce a
judgment hereon, which attorneys' fees shall be an element of
post-judgment costs; the parties agree that this post-judgment attorneys'
fee provision shall (a) not merge into any judgment, (b) be severable
from all other provisions hereof, and (c) survive any judgment.)
12.2 Waiver
No delay, omission, or failure to exercise any right or remedy
thereunder by either party shall be deemed to be a waiver thereof; nor
shall any exercise of any right or remedy thereunder preclude any other
or further exercise thereof or the exercise of any other right or remedy
granted hereby or by Law.
12.3 Entire Agreement
Licensee and Pacific Softworks Inc. acknowledge that they have read this
entire Agreement and that this Agreement and the Appendices attached
hereto constitute the entire understanding and contract between the
parties with respect to the Software and supporting Documentation and
supersede any and all prior or contemporaneous oral or written
communications with respect to the subject matter hereof
12.4 Amendment to Agreement
This Agreement shall not be modified, amended or in any way altered
except by an instrument in writing signed by both parties.
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Agreement No. 95-1208-349
Licensee:Galacticomm Inc.
12.5 Assignment
This Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and permitted assigns.
Licensee may not assign this Agreement or any of Licensee's rights or
obligations hereunder without the prior written permission of Pacific
Softworks Inc.. Any purported assignment in violation of the foregoing
shall be void.
12.6 Export
Licensee agrees that neither Licensee nor its Distributors wil1 export or
re-export the Licensed Software and/or Documentation in contravention of
the Export Administration Act of 1979 of the United States of America.
Licensee will obtain all export licenses required by law prior to export
of the Licensed Software and/or Documentation and cooperate fully with
Pacific Softworks Inc. to ensure compliance with the law. Licensee will
provide Pacific Softworks Inc. with a Letter of Assurance (included in
Appendix D).
IN WITNESS WHEREOF, the parties hereto have caused this Software Source Code
License Agreement to be executed by their authorized representatives.
For Pacific Softworks, Inc. For Licensee:
Name: /s/ GLENN RUPPELL /s/ ROBERT N. STEIN
------------------------------ ---------------------------------
(signature) (signature)
Name: Glenn Ruppell Robert N. Stein
------------------------------ ---------------------------------
(signature) (signature)
Title: Executive Vice President Writer/Developer
------------------------------ ---------------------------------
Date: 14 April 95 10 Apr 95
------------------------------ ---------------------------------
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<PAGE>
Agreement No. 95-1208-349
Licensee:Galacticomm Inc.
APPENDIX A.1
SOFTWARE SOURCE CODE CONFIGURATION
1. PART NUMBERS AND LICENSE FEES
<TABLE>
<CAPTION>
DESCRIPTION PART NUMBER FEE
<S> <C> <C>
FUSION Lower Layer Source Code FNS-SRC-EMB $15,000.00
to include: *TCP, UDP, IP, ICMP, ARP, and RARP
*FUSION Socket Libraries and socket manager
*Ethernet interface layer
*Processor interface,
and network controller interface NDIS driver.
*Two (2) binary license stickers
FUSION Serial Line Internet Protocol
FUSION Point to Point Protocol FNS-SRC-PPP $2,000.00
FUSION Binary Royalty Licensing for quantity of FNS-SRC-PPP $5,000.00
10% of annual royalties totaling 500 at $1.00/each FNS-SRC-BIN $ 500.00
(subsequent royalty binary license stickers are subject to
standard royalty scheduling pricing, as listed on page 10
and 11 of this agreement)
FUSION Basic Porting Assistance, for 5 days
At Pacific Softworks Inc. facility. FNS-SRC-BPA $4,000.00
</TABLE>
In the event that within the initial 30 days, Galacticomm determines the porting
effort requires significant development effort, it may terminate this Agreement
and receive a full refund, of the fees in this Appendix, except the fees for the
Porting Visit, shall be nonrefundable.
*Price for Porting Assistance by one of the Pacific Softworks Engineers is at
$800.00 per day.*
* Price for Customized Porting by one of Pacific Softworks Engineers is at
$1,500.00 per day.*
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<PAGE>
Agreement No. 95-1208-349
Licensee:Galacticomm Inc.
APPENDIX A.2
2. TARGET SYSTEM CONFIGURATION
Host Processor 386, 486, P5, ...
Host OS and Kernel WORLDGROUP (DOS) WINDOWS)
Host System Bus ___________________________________
LAN Controller Chip SEVERAL
(embedded system)
LAN Controller Board SEVERAL
Intelligent Node Processor LAN Chip __________________________
Processor__________________________
OS_________________________________
3. DEVELOPMENT ENVIRONMENT
Development System: Host Processor 386, 486, P5, ...
Host OS DOS, WINDOWS
Compiler Used BORLAND
Other Development Tools PUAR LAP 286/DOS EXTENDER
PUAR LAP TNT
Software Source Code Distribution
Medium:
Specify software distribution medium by marketing ("X"):
____ 1600 bpi 9-track tape in UNIX tar format
____ DC300 cartridge in Sun tar format
____ 1.2 MByte 5-1/4 in. floppy in Xenix tar format
____ 1.2 MByte 5-1/4 in. floppy in DOS format
____ 1.44 MByte 3-1/2 floppy in DOS format
_X__ CD Rom
____ Other (must be approved prior to Agreement):
SPECIAL CONDITION FOR EMBEDDED SYSTEMS
The following restriction on the use of the Software for Embedded Systems is
part of this agreement and is as follows:
* The use of the FUSION Software for Embedded Systems is per this
agreement solely for the Worldgroup product family.
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<PAGE>
Agreement No. 95-1208-349
Licensee:Galacticomm Inc.
APPENDIX B.1
CONFIGURATION, LICENSE FEES
1. Configuration by Machine Type
The Binary Software Distribution is to be merged with or embedded with
Licensee's Machine Type indicated by marking ("X"):
SYSTEM TYPE SYSTEM DESCRIPTION
----------- ------------------
X J Embedded system FNS-BIN-TCP-J
Royalty pricing for FUSION Complete Source Code.
Fees Based on Cumulative Copies
Select the estimated annual quantity to determine your fee per copy price. An
order for 10% of annual quantity is required at time of purchase of source.
NUMBER OF CUMULATIVE COPIES FEE PER COPY
--------------------------- ------------
1 to 3 70.00
4 to 9 60.00
10 to 24 53.00
25 to 49 46.00
50 to 99 19.00
100 to 249 16.00
250 to 999 11.00
1,000 to 1,999 7.00
2,000 to 4,999 4.00
5,000 to 9,999 3.00
Buy-Out (unlimited right to copy) consult factory
PRODUCT BUYOUT DEFINITION: Unlimited right to copy. The right being limited to
the product specified in Appendix A.2 of this agreement. No Stickers, No Wrap
and tear License required. In addition, you will receive a generous savings for
the first 3 years and 100% savings thereafter.
OR
TECHNOLOGY BUYOUT DEFINITION: Unlimited right to copy license on unlimited
products. Corporate wide rights to use and distribute as binary. No stickers, No
Wrap License required.
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<PAGE>
Agreement No. 95-1208-349
Licensee:Galacticomm Inc.
APPENDIX B.2
2. Fees Based on Annual Quantity Commitment
From the date of execution of this agreement to the first anniversary of this
Agreement, and from each anniversary date to each succeeding anniversary date of
this Agreement, until amended or terminated, Licensee will order the following
cumulative minimum quantity of Binary License Stickers according to the Machine
Type and corresponding part number indicated above and pay the following
per-copy fee. Additional copies beyond that number shall be priced at even the
lower per-copy price of the category until the cumulative number falls into the
next higher quantity category, etc.
Number of copies 5000 Fee per copy $3.00
For the initial term of this Agreement, Licensee will purchase 10% of the
minimum annual commitment to be ordered upon the execution of this agreement.
The initial 10% is equal to 500 copies. This initial 500 may be purchased at a
discounted price of $1.00 for updating.
In the event that Licensee fails to meet its annual purchased commitment as
computed upon the anniversary date of the Agreement for the prior year, Pacific
Softworks and Licensee will agree at the time to one of the following methods of
recourse: (i) Licensee will order a quantity of Binary Incorporated Stickers to
make up the shortfall, or (ii) Licensee will place an adjustment order whose
dollar quantity corrects for the difference in fees over the prior year, and
begin paying fees for the new annual term corresponding to the actual ordering
level reached for the prior year. Conversely, at any time throughout the year,
Licensee may retroactively qualify for a lower fee per copy by ordering
sufficient Binary Incorporated Stickers that the cumulative order quantity for
the year reached or exceeds the corresponding minimum quantity, per section B.1.
The intention is to correct both underestimates and overestimates so that the
net fee per copy reflects actual annual order quantity, as if it had been
estimated correctly at the beginning of the year.
Lastly, once royalties have accumulated to $30,000.00, the software is
considered a "product buy-out", and no further royalties for the product
mentioned in Appendix A.2, are required.
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<PAGE>
Agreement No. 95-1208-349
Licensee:Galacticomm Inc.
APPENDIX C
GALACTICOMM SOFTWARE LICENSE AGREEMENT
ADD-ON OPTIONS FOR THE MAJOR BBS/Registered Mark/
YOU SHOULD CAREFULLY READ THE FOLLOWING TERMS AND CONDITIONS BEFORE OPENING THIS
DISKETTE ENVELOPE. OPENING THIS DISKETTE ENVELOPE INDICATES YOUR ACCEPTANCE OF
THESE TERMS AND CONDITIONS. IF YOU DO NOT AGREE WITH THEM, YOU SHOULD RETURN
THIS ENVELOPE UNOPENED WITHIN 30 DAYS OF THE ORIGINAL DATE OF PURCHASE AND PRICE
OF THE PRODUCT WILL BE REFUNDED.
GALACTICOMM, Inc. provides this Software and licenses its use throughout the
world. You assume responsibility for the selection of the Software to achieve
your intended results, and for the installation, use, and results obtained from
the Software.
DEFINITIONS
"You" and "Your" shall be taken as referring to the person or business entity
who purchased this liscense to use this Software and for whom such license was
purchased.
"Software" shall be taken as referring to the files supplied on the diskette(s)
inside this envelope, and to any and all copies, updates, modifications,
functionally-equivalent derivatives, or any parts or portions thereof.
"Run-Time Access" shall be taken as referring to a single computer connected
with communication hardware providing run-time access to this Software.
"Live Computer" shall be taken as referring to a single computer connected with
communication hardware providing run-time access to this Software.
"Development Computer" shall be taken as referring to a computer upon which a
copy of this Software may be installed for configuration and development
purposes, not providing run-time access to this Software.
LICENSE
You may:
1. install and use one copy of this Software on a single Live Computer; you may
also install and use one copy of this Software on a single Development
Computer;
2. copy this Software into machine readable or printed form, for backup or
archival purposes in support of your use of this Software;
3. transfer this Software and license to another party if the other party
agrees to accept the terms and conditions of this Agreement. If the enclosed
Software is an update, any transfer must include the update and all prior
versions. If you transfer the Software, you must at the same time either
transfer all copies, whether in machine-readable or printed form, to the same
party, or destroy any copies not transferred.
If this Software package contains both 3.5" and 5.25" disks, only a single
Software License is created hereby. All enclosed diskettes are covered under,
and restricted by, the terms of this single Software License Agreement.
YOU MAY NOT USE, COPY, MODIFY, OR TRANSFER THIS SOFTWARE, OR ANY COPY,
MODIFICATION, OR MERGED PORTION, IN WHOLE OR IN PART, EXCEPT AS EXPRESSLY
PROVIDED FOR IN THIS LICENSE, OR IN AMENDMENTS SIGNED BY AN OFFICER OF
GALACTICOMM. IF YOU TRANSFER POSSESSION OF ANY COPY OF THIS SOFTWARE, OR ANY
FUNCTIONALLY-EQUIVALENT DERIVATIVE, OR ANY PORTION OR MODIFICATION THEREOF, TO
ANOTHER PARTY, YOUR LICENSE IS AUTOMATICALLY TERMINATED.
TERM
This license is effective until terminated. You may terminate it at any time by
destroying all copies of the Software covered by this Agreement. It will also
terminate upon conditions set forth elsewhere in this Agreement, or if you fail
to comply with any term or condition of this Agreement. You agree upon such
termination to destroy this Software, including all copies,
functionally-equivalent derivatives, and all portions and modifications thereof
in any form.
(continued)
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Agreement No. 95-1208-349
Licensee:Galacticomm Inc.
LIMITED WARRANTY
THIS SOFTWARE IS PROVIDED "AS IS", WITHOUT WARRANTY OF ANY KIND, EITHER
EXPRESSED OR IMPLIED, INCLUDING, BUT NOT LIMITED TO, THE IMPLIED WARRANTIES OF
MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE. THE ENTIRE RISK AS TO THE
QUALITY AND PERFORMANCE OF THE SOFTWARE IS WITH YOU. SHOULD THE SOFTWARE PROVE
DEFECTIVE, YOU (NOT GALACTICOMM) ASSUME THE ENTIRE COST OF ALL NECESSARY
SERVICING, REPAIR, OR CORRECTION.
SOME STATES DO NOT ALLOW THE EXCLUSION OF IMPLIED WARRANTIES. SO THE ABOVE
EXCLUSION MAY NOT APPLY TO YOU. THIS WARRANTY GIVES YOU SPECIFIC LEGAL RIGHTS
AND YOU MAY ALSO HAVE OTHER RIGHTS WHICH VARY FROM STATE TO STATE.
GALACTICOMM does not warrant that the functions contained in this Software will
meet you requirements or that the operation of this Software will be
uninterrupted or error-free. However, GALACTICOMM does warrant the diskette on
which the software is furnished to be free from defects in materials and
workmanship under normal use for a period of ninety (90) days from the date of
delivery to you.
LIMITATIONS OF REMEDIES
GALACTICOMM'S entire liability and your exclusive remedy shall be:
a. the replacement of any diskette not meeting GALACTICOMM'S "Limited
Warranty" and which is returned to GALACTICOMM or
b. if GALACTICOMM is unable to deliver a replacement diskette which is free of
defects in materials or workmanship, you may terminate this Agreement by
returning this Software and your money will be refunded.
IN NO EVENT WILL GALACTICOMM BE LIABLE TO YOU FOR ANY DAMAGES, INCLUDING ANY
LOST PROFITS, LOST SAVINGS OR OTHER INCIDENTAL OR CONSEQUENTIAL DAMAGES ARISING
OUT OF THE USE OR INABILITY TO USE THIS SOFTWARE EVEN IF GALACTICOMM OR ITS
AUTHORIZED REPRESENTATIVE HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES,
OR FOR ANY CLAIM BY ANY OTHER PARTY.
SOME STATES DO NOT ALLOW THE LIMITATION OR EXCLUSION OF LIABILITY FOR INCIDENTAL
OR CONSEQUENTIAL DAMAGES SO THE ABOVE LIMITATIONS OR EXCLUSIONS MAY NOT APPLY TO
YOU.
GENERAL
You may not license, assign or otherwise transfer this Software or Software
License except as expressly provided in this Agreement. Any attempt to otherwise
sublicense, assign, or transfer any of the rights, duties or obligations
hereunder is expressly prohibited and will terminate this License Agreement.
This Agreement will be governed by the laws of the State of Florida.
All Agreements covering this Software (including but not limited to any and all
updates, upgrades, and enhancements to this Software or any portion thereof)
shall be deemed to be counterparts of one and the same License Agreement
instrument.
BY OPENING THIS DISKETTE ENVELOPE, YOU ACKNOWLEDGE THAT YOU HAVE READ THIS
AGREEMENT, UNDERSTAND IT, AND AGREE TO BE BOUND BY ITS TERMS AND CONDITIONS. YOU
FURTHER AGREE THAT IT IS THE COMPLETE AND EXCLUSIVE STATEMENT OF THE AGREEMENT
BETWEEN US, WHICH SUPERCEDES ANY PROPOSAL OR PRIOR AGREEMENT, ORAL OR WRITTEN,
AND ANY OTHER COMMUNICATIONS BETWEEN US RELATING TO THE SUBJECT MATTER OF THIS
AGREEMENT.
Page 13
<PAGE>
Agreement No. 95-1208-349
Licensee:Galacticomm Inc.
APPENDIX D
LETTER OF ASSURANCE
To: GALACTICOMM INC.,
(U.S. Re-Exporter)
SUBJECT: Restricted Technical Data Received from Galacticomm (U.S. Re-Exporter)
REFERENCE: U.S. Export Administration Regulations (Section 779.4(f)(1))
We, Galacticomm Inc. hereby certify that source code is not intended to be
shipped, either directly or indirectly, to:
Haiti, Iran, Iraq, People's Republic of China, Syria, Yugoslavia
(Serbia and Montenegro)
Q Romania
S Libya
W Poland
Y Albania, Bulgaria, Cambodia, Estonia, Laos, Latvia, Lithnania,
Mongolian People's Republic, Geographic area of the former Union of
Soviet Socialist Republics (includes Armenia, Azerbaijan, Belorussia,
Georgia, Kazakhstan, Maldovia, Russia, Tajikistan, Turkmanistan,
Ukraine, Uzbekistan)
Z Cuba, North Korea, Vietnam
Further, no technical data may be re exported to the Republic of South Africa
where we know or have reason to know that the data or the direct product of the
data is for delivery, directly or indirectly, to or for use by or for military
or police entities in these destinations or for use in servicing equipment
owned, controlled or used by or for such entities.
Respectfully, Michael F. Hunt, E.V.P.
-------------------------------------
(Signature of U.S. Re-Exporter)
Page 14
EXHIBIT 10.41
LICENSE AGREEMENT
between
I-VIEW SOFTWARE, INC.
a Florida corporatIon
and
CROWN COMMUNICATIONS, INC.
a Florida corporation
Date: Nov. 18th, 1996
<PAGE>
LICENSE AGREEMENT
This license agreement (the "License") is entered into as of the 18th day
of November, 1996 between I-View Software, Inc., a Florida corporation, whose
principal office is located at 300 S. Pine Island Road, Suite 261, Plantation,
Florida 33124, United States of America ("Licensor") and Crown Communications,
Inc., a Florida corporation, whose office is located at 1334 N. State Rd. 7,
Margate, 33063 ("Licensee").
RECITALS:
A. Licensor is the owner of a service mark, as well as certain copyrights,
trade secrets, proprietary technical and business information, engineering data
and specifications and designed equipment used in connection with the operation
of a video conferencing software and hardware package which allows video
broadcasting and video point to point operation over Galacticomm Worldgroup
Software, including all accounting, point of sale components and integration
with Galacticomm Software.
B. Licensee wishes to acquire a license to use such service marks,
copyrights, trade secrets, proprietary technical and business information,
engineering data and specifications and designed equipment in connection with
the operation an Adult Entertainment video conferencing and video point to point
service in North America.
NOW THEREFORE, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
1.1 "Adult Entertainment" means sexually explicit entertainment that is
not obscene under applicable law.
1.2 "Copyrights" shal1 have the meaning set forth in Sechon 2.2(a)
1.3 "Licensed Rights" shall have the meaning set forth in Section 5.1(a).
1.4 "Mark" shall have the meaning set forth in Section 2.1(a).
1.5 "Royalty" shall have the meaning set forth in Section 4.1(a).
1.6 "Services" shall have the meaning set forth in Section 2.1(a).
1.7 "Term" shall have the meaning set forth in Section 3.1.
1.8 "Territory" shall have the meaning set forth in Section 3.4.
1.9 "Trade Secrets" shall have the meaning set forth in Section 2.3(a).
<PAGE>
ARTICLE II
GRANT OF LICENSE
2.1 SERVICE MARK LICENSE.
(a) GRANT. Licensor grants to Licensee for the Term and Territory, an
exclusive, nontransferable license to use the service mark "I-View" (the "Mark")
in advertisements that promote Licensee's Adult Entertainment video conferencing
services (the "Services") in the Territory. Licensee may only use the mark in
such advertisements in the following manner (or its Dutch equivalent): "We use
I-View software" or "Download free I-View software".
(b) QUALITY STANDARDS. Licensee understands that in order to maintain
valid and enforceable rights in the Mark, Licensor must maintain certain quality
standards relating to the nature of the services rendered in connection with
Mark. Accordingly, Licensee agrees that the nature and quality of the services
rendered by the Licensee in connection with the Mark and all related
advertising, promotional and other related uses of the Mark shall conform to
such commercially reasonable standards of use that may exist within the
Territory, from time to time, consistent in all material respects with the
requirements of the laws and regulations of the Netherlands and the European
Community.
2.2 COPYRIGHT LICENSE.
(a) GRANT. Licensor grants to Licensee for the Term and Territory an
exclusive, nontransferable license to use the copyrighted works identified in
SCHEDULE 2.2 attached hereto (the "Copyrights") for use solely in connection
with the operation of the Services in the Territory.
(b) ALTERATION.
(i) Licensee shall not, and acknowledges that it is not entitled to,
make any alterations, additions, changes in or revisions of the Copyrights,
without the prior written consent of Licensor. Licensee shal1 not create any
new works, compilations or derivative works based entirely or in substantial
part on the Copyrights without the prior written consent of the Licensor.
(ii) If Licensor authorizes any changes, alterations, revisions,
new works, compilations or derivative works based entirely or in substantial
part on the Copyrights, all right, title and interest in such alterations,
additions, changes, revisions, new works, compilations or derivative works shall
belong to Licensor, and Licensee shall take whatever steps are reasonably
necessary to assign, transfer or perfect title in such works solely in the name
of the Licensor.
(iii) Nothing herein shall be construed to permit or authorize
Licensee to make any changes, alterations, additions, revisions, new works,
compilations or derivative works based in whole or in any part on the Copyrights
licensed hereunder.
(c) DISTRIBUTION AND PUBLICATION. Licensee shall not distribute,
publish, lease, rent or display to the public any Copyrights without the prior
written consent of the Licensor. However, during the term of this license,
Licensee may freely distribute I-View Software to its customers so long as such
customers agree to the terms of the license agreement attached hereto as Exhibit
2.2(c)
<PAGE>
2.3 TRADE SECRETS PROPRIETARV INFORMATION.
(a) GRANT Licensor grants to Licensee for the Term and Territory, an
exclusive, nontransferable license, to use all trade secrets, proprietary
technical and business information, engineering data and specifications provided
to Licensee by Licensor (the "Trade Secrets"), including without limitation
those Trade Secrets identified in Schedule 2.3, for use solely in connection
with the operation of the Services in the Territory.
(b) COPIES. Licensee shall make no copies of the Trade Secrets without
the prior written consent of Licensor. However, Licensee may make one copy of
the Trade Secrets for archival purposes only. Such archival copy shall be kept
among the confidential papers of the Licensee at its offices and shall not be
disclosed to any third parties.
(c) DISCLOSURE TO EMPLOYEES.
(i) Licensee may disclose the Trade Secrets only to those employees
of Licensee who, by virtue of their duties and responsibilities, have a need to
know the Trade Secrets. Prior to any disclosure of any of the Trade Secrets to
any employee, such employee shal1 execute a non-disclosure, non-competition
agreement under which such employee agrees, subject to applicable law, to
maintain the secrecy of the Trade Secrets for as long as the Trade Secrets
remain secret and proprietary to Licensor and to refrain from using any Trade
Secrets in any future employment by third parties. Furthermore, such employee
shall agree, in writing, to assign to Licensee (who in turn shall assign to
Licensor) all right, title and interest to any trade secret or proprietary
information, invention, discovery or computer software program created or made
by the employee during the course of his employment and which relates to the
Trade Secrets.
(ii) For the purposes of this Section, the term "employee" includes
all officers, directors and employees of Licensee.
(iii) All employees to whom Trade Secrets may be disclosed shall be
timely identified to Licensor.
(d) MARKINGS. Licensee shall maintain the Trade Secrets in confidence
and shall mark each document or thing bearing or containing a Trade Secret with
the legend:
CONFIDENTIAL BUSINESS INFORMATION - TRADE SECRET
I-VIEW SOFTWARE, INC.
or:
TRADE SECRET - I-VIEW
(e) REVERSE ENGINEERING. Licensee shall not reverse engineer or
otherwise decompile any softcware licensed hereunder, including, but not limited
to the reverse engineering or decompilation of any object or source codes of the
software licensed hereunder.
<PAGE>
ARTICLE III
TERM, TER1MINATION AND TERRITORY
3.1 TERM. This exclusive license is for a term of three (3) years
commencing on the date hereof, unless terminated earlier in accordance with
Section 2.2 (the "Term").
3.2 TERMINATION.
(f) Licensor may immediately terminate this License if:
(i) Licensee commits a material breach of this License;
(ii) Licensee fails to make any payment required hereunder, in a
timely manner, to Licensor;
(iii) Licensee uses the Licensed Rights in any way that contravenes
applicable criminal or obscenity Laws; or
(iv) Licensee becomes bankrupt, insolvent or is otherwise unable
to pay its creditors in a timely manner.
(g) Licensee may immediately terminate this License if:
(i) Licensor commits a material breach of this License; or
(ii) Licensor becomes bankrupt, insolvent or is otherwise unable to
pay its creditors in a timely manner.
3.3 EFFECT OF TERMINATION.
(a) Upon the expiration or termination of the License, Licensee shall
immediately cease all use of the Mark, the Copyrights and the Trade Secrets.
(b) Within thirty (30) days of the expiration or termination of this
License, Licensee shall return, at its sole expense, to Licensor all original
and copies of all materials in its possession, custody or control bearing
Licensor's service marks; all copyrighted materials in its possession, custody
or control containing any copyrighted materials owned or licensed hereunder by
Licensor and all materials containing any licensed trade secrets, proprietary
technical or business information, engineering data and specifications. Licensee
shal1 make no further use of any of these materials and equipment or any
improvements, additions or modifications thereto made by Licensee during the
term of this License.
(c) Within thirty (30) days of the expiration or termination of this
License, Licensee shall deliver to Licensor a final accounting of its revenues,
together with all licensing fees and expenses owed to Licensor.
<PAGE>
(d) Licensor, at its sole expense, may conduct a final audit of
Licensee's books and records in accordance with the provisions above within one
(l) year ofthe termination or expiration of this License.
3.4 TERRITORY. This exclusive license is solely for the territory of North
America (the "Territory"). The Territory shall not include any dependencies,
colonies or territories of the Netherlands outside the boundaries of the
Netherlands.
ARTICLE IV
LICENSING FEES AND EXPENSES
4.1 ROYALTIES.
(a) Licensee shall pay to Licensor a royalty (the "Royalty") equal to
twelve percent (12%) of Licensee's gross revenues calculated on a weekly basis
for the previous week ending on a Friday. For each week, Licensee shall pay the
Royalty for such week to Licensor in U.S. dollars by the Friday of the following
week.
4.2 ACCOUNTINC AND RECORD KEEPING.
(a) Licensee shall keep and maintain, at its principal office, records
of its revenues with respect to sales covered by this License. Licensor and its
authorized representatives shall have access to Licensee's premises during
normal business hours to examine such records upon not less than two (2) days
written notice to Licensee. Furthermore, Licensee shall grant remote system
operator access to all of Licensee's computers that are used in the provision
of the Services.
(b) No later than fifteen (15) days after the last day of March, June,
September and December during the term of this License, Licensee shall deliver
to Licensor financial information with respect to sales subject to this License
for the immediately preceding calendar quarter including gross revenues derived
from the Services.
(c) Licensor may, at its expense and not more than once in a twelve
(12) month period, audit the books and records of Licensee after reasonable
notice of not less than five (5) days.
4.3 EXPENSES. Licensee shall not be responsible to pay for additional
software upgrades. In the event that Licensor requires additional custom
software not herein defined then such software will be provided by Licensor at
a fee agreed to in advance by Licensor. All amounts invoiced by Licensor
hereunder shall be due and payable by Licensee within thirty (30) days of
Licensor's delivery of invoices to Licensee.
<PAGE>
ARTICLE V
OWNERSHIP AND INFRINGEMENT OF LICENSED RIGHTS
5.1 OWNERSHIP
(a) Licensee acknowledges that Licensor is the sole and exclusive owner
of al1 right, title and interest in the Mark, the Copyrights and the Trade
Secrets (collectively, the "Licensed Rights"). Licensee agrees that it wil1 do
nothing inconsistent with such ownership rights and that all uses of the
Licensed Rights by Licensee shall inure to the benefit of the Licensor. Licensee
shall assist Licensor, at Licensor's sole expense, in the execution and filing
of any documents necessary to perfect such rights in the Territory and to record
this License as may be necessary.
(i) Licensee agrees that nothing in this License shall give Licensee
any right, title or interest in the Licensed Rights other than the right to use
and exploit the License Rights under the terms of this License.
(ii) Licensee acknowledges the validity of the Licensed Rights. In
doing so, Licensee shal1 not attack Licensor's title to the Licensed Rights, nor
the validity of the Licensed Rights or this License
5.2 INFRINGEMENTS
(a) Licensee has no affirmative obligation to investigate or police
infringements or unauthorized uses of the Licensed Rights. However, Licensee
shall provide Licensor with written notice of any infringements or unauthorized
uses of the Licensed Rights of which any employee of the Licensee shall become
aware, within five (5) business days of learning of the same. Licensor shall
have the sole and exclusive right and discretion to bring any action or
proceeding for service mark copyright or trade secret infringement or theft,
unfair competition, passing off or any other action available to Licensor
during the first thirty (30) days after receiving notice of such infringement.
(b) If Licensor takes any legal action or proceeding against a third
party for infringement of the Licensed Rights in the Territory, Licensee shall
cooperate with Licensor in the prosecution and defense of such action or
proceeding, including but not limited to discovery, document production,
pretrial and trial testimony and the like. Any award of damages (including
reimbursements of costs and expenses) in favor of Licensor shall be for the
exclusive benefit of Licensor.
5.3 USE OF LICENSED RIGHTS IN ACCORDANCE WITH LAW. Licensee shall use the
Licensed Rights in accordance with all applicable laws. Without limiting the
generality of the foregoing, Licensee shall not use the Licensed Rights in any
way that contravenes any applicable criminal or obscenity laws.
<PAGE>
ARTICLE VI
INDEMNIFICATION BY LICENSEE
Licensee shall indemnify Licensor against any claims or damages arising
from or related to Licensee's breach of this License, including but not limited
to actual damages, punitive, compensatory, increased or treble damages, costs
and reasonable attorneys' fees (both at the trial and appeal level). Any
indemnification payment required by this Article shal1 be made by Licensee to
Licensor within ten days of Licensor's providing Licensee with reasonable proof
of Licensor's payment or incurrence of the costs or damages that are subject to
reimbursement hereunder.
ARTICLE VII
REPRESENTATIONS AND WARRANTIES
7.1 REPRESENTATIONS AND WARRANTIES OF LICENSOR. Licensor represents and
warrants to Licensee, as follows:
(a) ORGANIZATION. QUALIFICATION. ETC.. Licensor is a duly organized
and validly existing corporation in good standing under the laws of the State of
Florida.
(b) ENFORCEABILITY. Licensor has full right, power and authority to
enter into this License and to consummate the transactions contemplated herein.
This License has been duly and validly executed and delivered by Licensor, and
is a valid and binding agreement of Licensor, enforceable in accordance with its
terms, except as such enforceability may be subject to: (a) bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium or other similar
laws now or hereafter in effect relating to creditors' rights; or (b) the remedy
of specific performance and injunction and other forms of equitable relief may
be subject to equitable defenses and to the discretion of the court before which
any proceeding therefor may be brought.
(c) CORPORATE AUTHORITY. The execution, delivery and performance of
this License by Licensor have been duly authorized by all necessary corporate
action of Licensor (and constitutes the legal, valid and legally binding
obligation of Licensor enforceable against Licensor in accordance with its
terms) and do not and will not conflict with or violate any provision of law or
regulation, or any writ, order or decree of any court, governmental regulatory
authority or agency or any applicable license, franchise, certificate, permit,
authorization, approval or consent, which would have a material adverse effect
on Licensor, or any provision of Licensor's Articles of Incorporation or Bylaws
and do not and will not result in a breach of, or constitute a default under or
require any consent pursuant to any agreement, contract, arrangement or
understanding to which Licensor is a party, which would have a material adverse
effect on Licensor. The execution and delivery of this License and the
performance of all the transactions contemplated to be performed by Licensor:
(i) requires no consent, approval or authorization from any court, governmental
regulatory authority or agency or any other person; and (ii) does not result in
the execution or imposition of any lien, charge or encumbrance upon any property
of Licensor under any indenture or instrument to which Licensor is a party, or
by which any of Licensor's property or business may be bound that, in any such
case, would have a material adverse effect on Licensor.
<PAGE>
7.2 REPRESENTATIONS AND WARRANTIES OF LICENSEE. Licensee represents and
warrants to Licensor, as follows:
(a) ORGANIZATION. QUALIFICATION. ETC.. Licensee is a duly organized and
validly existing corporation in good standing under the laws of the Netherlands.
(b) ENFORCEABILITY. Licensee has full right, power and authority to
enter into this License and to consummate the transactions contemplated herein.
This License has been duly and validly executed and delivered by Licensee, and
is a valid and binding agreement of Licensee, enforceable in accordance with
its terms, except as such enforceability may be subject to: (a) bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium or other similar
laws now or hereafter in effect relating to creditors' rights; or (b) the remedy
of specific performance and injunction and other forms of equitable relief may
be subject to equitable defenses and to the discretion of the court before which
any proceeding therefor may be brought.
(c) CORPORATE AUTHORITY. The execution, delivery and performance of
this License by Licensee have been duly authorized by all necessary corporate
action of Licensee (and constitutes the legal, valid and legally binding
obligation of Licensee enforceable against Licensee in accordance with its
terms) and do not and will not conflict with or violate any provision of law or
regulation, or any writ, order or decree of any court, governmental regulatory
authority or agency or any applicable license, franchise, certificate, permit,
authorization, approval or consent, which would have a material adverse effect
on Licensee, or any provision of Licensee's Articles of Incorporation or Bylaws
(or equivalent orgaruzational documents) and do not and will not result in a
breach of, or constitute a default under or require any consent pursuant to any
agreement, contract, arrangement or understanding to which Licensee is a party,
which would have a material adverse effect on Licensee. The execution and
delivery of this License and the performance of all the transactions
contemplated to be performed by Licensee: (i) requires no consent, approval or
authorization from any court, governmental regulatory authority or agency or
any other person; and (ii) does not result in the execution or imposition of any
lien, charge or encumbrance upon any property of Licensee under any indenture or
instrument to which Licensee is a party, or by which any of Licensee's property
or business may be bound that, in any such case, would have a material adverse
effect on Licensee.
ARTICLE VIII
MISCELLANEOUS PROVISIONS
8.1 TRANSFERABILITY. Licensee shall not assign, by means of sublicensing
or otherwise, its rights or obligation under this License to any third party,
without the prior written approval of Licensor. Licensor may assign its rights
and obligations hereunder to any third party.
8.2 NOTICES. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given or made (and
shall be deemed to have been duly given or made) upon the earliest to occur of
(a) receipt, if made by personal service, (b) two days after dispatch, if made
by reputable overnight courier service, (c) upon the delivering Partys receipt
of a written confirmation of a transmission made by cable, by telecopy, by
telegram, or by telex, or (d) three days after being mailed by registered or
certified mail (postage prepaid, return receipt requested) to the respective
Parties at the following addresses (or at such other address for a Party as
shall be specified in a notice given in accordance with this Section:
<PAGE>
To: I-View Software, Inc.
300 S. Pine Island Road
Suite 261
Plantation, Florida 33324
Tel: (954)474-1500
Fax: (954) 474-1931
Attn: Peter Berg, President
To: Crown Communications, Inc.
Tel: 954-968-4887
Fax: 954-968-4243
Attn: Larry Levinson
8.3 PRONOUNS AND HEADINGS. As used herein, all pronouns shall include the
masculine, feminine, neuter, singular and plural wherever the context and facts
require such construction. The descriptive headings in the sections of this
License are inserted for convenience of reference only and shall not control or
affect the meaning or construction of any of the provisions hereof.
8.4 SEVERABILITY. If any provision of this License is held by a court or
regulatory body of competent jurisdiction to be invalid, illegal or
unenforceable, such provision shall be severed and the remaining provisions
hereof shall be enforced to the extent possible or modified in such a way as to
make it enforceable, and the invalidity, illegality or unenforceability thereof
shall not affect the validity, legality or enforceability of the remaining
provisions of this License.
8.5 MODIFICATION: AMENDMENT. No modification or amendment of this License
shall be valid unless the same shall be in writing executed by the Licensor and
the Licensee.
8.6 GOVERNING LAW AND FORUM SELECTION. This License shall be governed by
and construed in accordance with the laws of the State of Florida, U.S.A.,
without regard to the conflict of laws provisions thereof. Each party hereby
irrevocably and unconditionally submits to the exclusive jurisdiction of the
state courts of the State of Florida, sitting in Broward County, and the Federal
courts of the Southern District of Florida. Each party irrevocably and
unconditionally waives: (a) any objection which it may now or hereafter have to
venue in any such court; and (b) any claim that any action or proceeding brought
in such court has been brought in an inconvenient or improper forum.
8.7 BINDING EFFECT: COMPLETE AGREEMENT. This License shall be binding upon
and shall inure to the benefit of the parties hereto and their respective heirs,
personal representatives, successors and permitted assigns. This License
constitutes the entire agreement among the parties hereto and supersede all
prior agreements and understandings, oral or written, among the parties hereto
with respect to the subject matter hereof.
8.8 COUNTERPARTS. This License may be executed in one or more counterparts,
each of which shall be deemed an original and all of which together shall
constitute one and the same instrument.
<PAGE>
8.9 ATTORNEYS' FEES. If any legal or equitable action, including an action
for declaratory relief, is brought to enforce any provision of this License,
the prevailing party shall be entitled to recover its reasonable attorneys'
fees from the non-prevailing party. These fees, which may be set by the court
in the same action or in a separate action brought for that purpose, are in
addition to any other relief to which any prevailing party may be entitled.
8.10 WAIVER. Except as otherwise expressly set forth herein, the failure
of any party hereto to enforce any provision or provisions of this License shall
not be construed as a waiver of any such provision or provisions as to any
future violations thereof, nor prevent that party thereafter from enforcing each
and every other provision of this License. The waiver of any single remedy shall
not constitute a waiver of such partys rights to assert all other legal remedies
available to such party under the circumstances.
8.11 CONFIDENTIALITY. The parties acknowledge that the terms and conditions
of this License are confidential business information and shall not be disclosed
by either party without the prior written approval of the other party unless
required by law or as otherwise permitted by the terms hereof.
IN WITNESS WHEREOF, the undersigned parties have executed this License as
of the day and year first above written.
I-VIEW SOFTWARE, INC. CROWN COMMUNICAI;IONS, INC.
By: /s/ Peter Berg By: /s/ Larry Levinson
----------------------------------- ---------------------------
Name: PETER BERG Name: LARRY LEVINSON
----------------------------------- ---------------------------
Title: President Title: V.P.
----------------------------------- ---------------------------
EXHIBIT 10.45
DISTRIBUTION AGREEMENT
THIS AGREEMENT (THE "AGREEMENT") IS MADE AND ENTERED INTO AS OF, FEBRUARY 10,
1994 BY AND BETWEEN DISTRIBUPRO, INC., A CALIFORNIA CORPORATION, WITH OFFICES AT
1288 MCKAY DRIVE, SAN JOSE, CALIFORNIA 95131 ("DISTRIBUPRO") AND GALACTICOMM,
INC., A CORPORATION, WITH OFFICES AT 4101 SW 47TH AVENUE, SUITE 101, FORT
LAUDERDALE, FL 33314 ("VENDOR").
WITNESSETH
WHEREAS, Vendor desires to grant to DistribuPro, DistribuPro desires to
obtain, the right to sell and distribute computer products marketed by Vendor
pursuant to the terms and conditions of this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and agreements set
forth herein, and for other good and valuable consideration the sufficiency of
which is hereby acknowledged, the parties hereto agree as follows:
1. GRANT OF DISTRIBUTION RIGHTS
1.1 Vendor hereby grants to DistribuPro, and DistribuPro hereby accepts, the
nonexclusive worldwide right to distribute all computer products marketed by
Vendor during the term of this Agreement, including those products listed on
Exhibit A hereto (the "Products").
1.2 Each purchase of Products hereunder shall include a transferable license of
the software contained in such Products.
1.3 Vendor acknowledges that DistribuPro has the right to distribute any other
products, including computer products which competes with the Products.
2. TERM
2.l The Term of this Agreement shall be for a period of one (l) year
commencing on the Effective Date, and continuing thereafter from year to year
until terminated by either party as set forth in this Agreement (the "Term").
2.1 The Term of this Agreement shall be automatically renewed for successive
one year periods following expiration of the initial or any subsequent term of
this Agreement, unless either party gives written notice to the contrary to the
other party not less than 30 days prior to the expiration of the then current
term, in which event this Agreement shall expire at the end of the then current
term.
<PAGE>
3. SHIPMENT AND DELIVERY OF PRODUCTS
3.1 Vendor shall deliver all Products ordered by DistribuPro within 10 days
after receipt of a DistribuPro Product order with respect to such Products. If,
in the event that said Products are not received in 15 days, Vendor must, at
DistribuPro's request, provide overnight delivery of these Products at no charge
to DistribuPro. Delivery of the Products shall be F.O.B. DistribuPro or the
destination specified in the related Product order. Title and risk of loss or
damage with respect to any of the Products to be delivered shall pass from
Vendor to DistribuPro after receipt of such Products.
3.2 If necessary, Vendor agrees to deliver Products to a third party location
("drop skip") if requested by DistribuPro. Delivery of the Products shall be
F.O.B. the destination specified in the related Product order.
3.3 Vendor agrees to use its reasonable best efforts to maintain sufficient
inventory to permit it to fill DistribuPro's orders on a timely basis. If a
shortage of any Products in Vendor's inventory exists in spite of Vendor's
efforts, Vendor shall allocate to DistribuPro at least as many units of the
Products which are made available by Vendor to any other customer.
3.4 After each shipment to DistribuPro an invoice shall be sent to DistribuPro
that includes DistribuPro's order number, a description of the Products shipped,
and their price and applicable discount. Vendor shall also provide to
DistribuPro, on a monthly basis, a current statement of account, listing all
invoices outstanding and any payments made and credits given since the date of
the previous month's statement.
3.5 DistribuPro shall not be required to purchase any minimum amount or quantity
of the Products.
3.6 All Units of Products being ordered and delivered to DistribuPro for resale
must be coded with the ABCD bar code standard, UPC Version A bar code.
4. PURCHASE PRICE
4.1 The purchase price and applicable discount for units of the Products ordered
by DistribuPro pursuant to this Agreement is set forth on Exhibit A hereto,
which is incorporated in this Agreement by reference. The purchase price
includes any license fee with respect to the software contained in such units
and is exclusive of taxes. The current suggested retail list price for each
Product currently manufactured or marketed by Vendor is set forth on EXHIBIT A.
4.2 The suggested retail list price of any Product may be changed only upon 60
days' prior written notice given by Vendor to DistribuPro. In the event that
Vendor shall reduce the price of a Product, or offer the Product at a lower
price to any other party, including
<PAGE>
by raising the discount offered, Vendor shall credit DistribuPro for the
difference between the invoice price charged to DistribuPro and the reduced
price for each unit of Product remaining in inventory by DistribuPro as of the
effective date of such price reduction.
4.3 Vendor will also credit DistribuPro for the difference between the invoice
price charged to DistribuPro and the reduced price for each unit of Products
held in inventory by DistribuPro's customers as of the effective date of such
price reduction if DistribuPro's customers shall request such credit. In
addition, price protection shall be extended to DistribuPro for one hundred
twenty (120) days from the effective date of any suggested retail price decrease
for any unit of Products to cover Products returned to DistribuPro through the
dealers' stock balancing programs.
4.4 Vendor represents and warrants that the Product prices herein offered to
DistribuPro are the best prices available to any distributor of the Products,
and covenants that all prices for Products made available to DistribuPro during
the term of this Agreement shall be the best prices available to any distributor
of the Products.
5. PAYMENT
5.1 Vendor agrees that the initial order will be invoiced on a net 90 day basis
from date of receipt of the Products. Vendor agrees the initial Product
order will be subject to a 90 day return period for unsold merchandise. All
subsequent invoices shall be paid on a net 45 day basis from date of
DistribuPro's receipt of the Products.
6. PRODUCT SUPPORT
6.1 Vendor agrees to promptly report to DistribuPro all suspected or reported
Product problems or defects.
6.2 At the request of DistribuPro, Vendor shall provide to DistribuPro a
reasonable number (but no less than two) demonstration units of each of the
Products to aid DistribuPro and its staff in the support and promotion of
Product. All units provided will be maintained by DistribuPro in good condition,
reasonable wear and tear excepted.
7. STOCK BALANCING AND PRODUCT UPGRADES
7.1 DistribuPro may balance its stock at no cost per Product on any unopened
Product for product credit or cash refund at the election of DistribuPro.
Shipping costs will be borne by DistribuPro.
7.2 DistribuPro will, before returning any Product for stock balancing,
upgrading or any other purpose, receive from Vendor, a return merchandise
authorization number before Product is shipped and Vendor shall not
unreasonably withhold or delay the issuance of such number to DistribuPro. In
the event that, notwithstanding the foregoing, Vendor's issuance of a return
merchandise authorization number is unreasonably withheld
<PAGE>
or delayed, DistribuPro may in such case return Product to Vendor without a
return merchandise authorization number.
7.3 Vendor agrees to provide DistribuPro with 30 days prior written notice of
any Product version changes, packaging changes or any other changes which may
render current Products unsalable. In the event of any of the above changes
which renders the old version unsalable or obsolete, Vendor will replace all
unsold Products on a dollar for dollar basis. All freight charges incurred by
DistribuPro in returning the Product and all freight charges incurred for the
purpose of shipping replacement Product shall be borne by Vendor.
7.4 In the event that a Product is found to be defective by DistribuPro's
technical staff, Vendor agrees to replace the defective Product at no cost to
DistribuPro. All freight charges incurred by DistribuPro in returning the
Product and all freight charges incurred for the purpose of shipping replacement
Products shall be borne by Vendor.
7.5 In the event that there are Product problems or defects, DistribuPro shall
have the right to return all Products for a full refund. All freight charges
incurred by DistribuPro in returning the Products shall be borne by Vendor.
7.6 In the event Vendor recalls any or all of the Products due to defects,
revisions, or upgrades, Vendor shall pay all of DistribuPro's expenses in
connection with such recall.
7.7 In the event Vendor shall discontinue any Product, or declare any Product to
be obsolete, Vendor shall notify DistribuPro sixty (60) days in advance of such
discontinuation or declaration of obsolescence. DistribuPro shall have the right
to return all units of such Product then in DistribuPro's inventory to Vendor,
for credit in the amount of the price paid for the aggregate number of units of
such Product so returned, less any previously applied credits. Such credit shall
be applied to any uncontested, outstanding amounts due to Vendor by DistribuPro
with respect to the Products. In the event (i) no uncontested amounts are due to
Vendor by DistribuPro; or (ii) the amount of such uncontested amount due to
Vendor is not equal to the amount of such credit, Vendor shall pay DistribuPro
the full amount or remaining balance of such credit promptly upon written
request by DistribuPro. Vendor agrees to pay all freight charges on shipments of
discontinued Product.
7 8 Vendor shall have the option to review DistribuPro's inventory level and
sell through rates of Vendor's Products but, no more often than once per month.
8. PRODUCT WARRANTIES; INDEMNITY
8.1 Vendor represents and warrants that the Products will perform in conformance
with their published specifications.
<PAGE>
8.2 Vendor is solely responsible for the design, development, supply, production
and performance of the Products. Vendor agrees to defend, indemnify and hold
DistribuPro harmless from any third party claim, loss, damage, expense or
liability (including attorneys' fees and costs) arising out of distribution or
use of the Products, or arising out of, in whole or in part, infringement, or
any claim of infringement, of any patent, trademark, copyright, trade secret or
other proprietary right with respect to the Products.
9. TERMINATION
9.1 Either party may terminate this Agreement upon not less than 30 days' prior
written notice in the event of a material breach by the other party of this
Agreement and the failure of such other party to cure such breach within said 30
day period.
9.2 Either party may terminate this Agreement at any time if (a) a receiver is
appointed for the other party or its property, (b) the other party makes, or
attempts to make, an assignment for the benefit of its creditors, (c) any
proceedings are commenced by or for the other party under any bankruptcy,
insolvency, or debtor's relief law, (d) the other party liquidates or dissolves
or attempts to liquidate or dissolve.
9.3 Upon expiration or termination of this Agreement for any reason, DistribuPro
shall, for a period of 60 days, have the right to return to Vendor all or a
portion of the Products remaining in DistribuPro's inventory and Vendor agrees
to repurchase each such Product at the Purchase Price, which amount, shall be
credited to DistribuPro's account. In the event that no outstanding balance
exists, DistribuPro will be issued a refund. Shipping charges shall be borne by
DistribuPro for returns under this section.
9.4 DistribuPro shall have the right to use Vendor's trade names, trademarks and
service marks to promote DistribuPro's inventory of Products after the
expiration or termination of this Agreement, which right shall survive
expiration or termination hereof.
10. ADVERTISING
10.1 DistribuPro shall have the right to utilize Vendor's trade name and any
trademarks and service marks associated with advertising and promotional
materials. Vendor shall use diligent efforts in accordance with industry
standards to advertise and promote each Product, any unit of which is in
DistribuPro's inventory and shall cooperate with DistribuPro in advertising and
promoting each Product. Such advertising and promotion may take the form of
direct mailing, catalog production, tradeshow displays, product promotions or
product pricing promotions.
10.2. Vendor shall provide DistribuPro product launch funds in the amount of
$TBD to be utilized by DistribuPro, in accordance with the launch plan developed
by DistribuPro and vendor, to launch and otherwise conduct initial marketing
activities for the Products of Vendor to Dealers and has been pre-approved by
Vendor. DistribuPro shall provide to Vendor an accounting of all costs and
expenditures actually incurred by DistribuPro in
<PAGE>
performing the activities set forth on the product launch plan and shall render
invoices to Vendor for such initial marketing activities. Invoices rendered
hereunder shall be paid by Vendor within thirty (30) days after receipt. The
cost of this product launch shall not be deducted from the marketing development
fund defined in paragraph 10.4, and must be preapproved by Vendor.
10.3 Vendor agrees to provide DistribuPro with promotional materials at no cost
to DistribuPro.
10.4 Vendor grants DistribuPro a marketing development fund for Products
purchased by DistribuPro from Vendor to the extent that DistribuPro or its
dealers use the allowance for any advertising and promoting which features the
Products and has been pre-approved by Vendor. Upon receipt of reasonable
evidence of advertising expenditures, Vendor agrees to credit the amount of any
such expenditures against future purchases by DistribuPro, or if requested by
DistribuPro pay such amount to DistribuPro within 30 days of Vendor's receipt of
an invoice therefor.
10.5 Dealer marketing development funds provided by Vendor to DistribuPro may be
passed by DistribuPro to its Dealers to promote Vendor's products. Such
passthrough Dealer marketing development funds will have no bearing on
DistribuPro's marketing development fund accrual pursuant to this Agreement.
11. MISCELLANEOUS
11.1 Except as otherwise provided herein, no remedy made available to either
party hereto by any of the provisions of this Agreement is intended to be
exclusive of any other remedy, and each and every shall be cumulative and shall
be in addition to every other remedy given hereunder now or hereafter existing
at law or in equity.
11.2 The failure of either party to exercise any of its rights under this
Agreement or to require the performance of any term or provision of this
Agreement, or the waiver by either party of such breach of this Agreement, shall
not prevent a subsequent exercise or enforcement of such rights or be deemed a
waiver of any subsequent breach of the same or any other term or provision of
this Agreement. Any waiver of the performance of any of the terms or conditions
of this Agreement shall be effective only if in writing and signed by the party
against which such waiver is to be enforced.
11.3 All notices and other communications herein provided for shall be sent by
postage prepaid, registered or certified mail, return receipt requested, or
delivered personally to the parties at their respective addresses as set forth
on the first page of this Agreement or to such other address as either party
shall give to the other party in the manner provided herein for giving notice.
Notice by mail shall be considered given on the date received. Notice delivered
personally shall be considered given at the time it is delivered.
<PAGE>
11.4 This Agreement shall be construed and enforced in accordance with the laws
of the State of California which are applicable to the construction and
enforcement of contracts between parties resident in California which are
entered into and fully performed in California. Any action or proceeding brought
by either party hereto against the other arising out of or related to this
Agreement shall be brought in a state or federal court of competent jurisdiction
located in the county of Santa Clara, California, and both parties hereby
consent to the jurisdiction of such courts for that purpose.
11.5 This Agreement may be executed in two counterparts, each of which shall be
deemed an original and both of which shall constitute one and the same
instrument.
11.6 In the event that any provision hereof is found invalid or unenforceable
pursuant to judicial decree or decision, the remainder of this Agreement shall
remain valid and enforceable according to its terms.
11.7 Any reference herein to a section shall constitute a reference to all
subsections thereof.
11.8 This Agreement constitutes the entire understanding and agreement between
DistribuPro and Vendor with respect to the transactions contemplated herein, and
supersedes any and all prior or contemporaneous oral or written communications
with respect to the subject matter hereof, all of which are merged herein. This
Agreement shall not be modified, amended or in any way altered except by an
instrument in writing signed by the parties.
In Witness Whereof, the parties hereto have executed this Agreement by
their duly authorized representatives as of the respective dates indicated
below.
DISTRIBUPRO, INC. VENDOR:
By: /s/ F.S. WYSOCKI By:/s/ SCOTT J. BRINKER
----------------------- -----------------------
Name: F.S. Wysocki Name: Scott J. Brinker
--------------------- ---------------------
Title: Title: President
--------------------- ---------------------
Date: 2/2/94 Date: 2/4/94
--------------------- ---------------------
<PAGE>
EXHIBIT A
Payment Terms
Payments to Supplier with respect to all Products received by DistribuPro shall
be as set forth:
PRODUCT/VER MEDIA PART# WT MSRP COST
- ------------------------------------------------------------------------------
<PAGE>
EXHIBIT A
PAYMENT TERMS
LICENSED PRODUCTS AND DISTRIBUTOR PRICE LIST
PRODUCT RETAIL PRICE DIST. PRICE
- ------------------------------------------------------------------------------
The Major BBS Version 6.1, 2-user $259.00 $116.55
CONNECTIVITY OPTIONS
User Six-Pack* $249.00 $749.40
Advanced LAN Option* $645.00 $451.50
X.25 Software Option* $935.00 $654.50
ADD-ON OPTIONS
RIP____ Add-on Option $249.00 $174.30
German Language Add-on Option $249.00 $174.30
Spanish Language Add-on Option $249.00 $174.30
The Major Database Add-on Option $495.00 $346.50
Shopping Mail Add-on Option $249.00 $149.40
Fax/Online Add-on Option $249.00 $149.40
Search and Retrieve Add-on Option $199.00 $119.40
Dial-Out Add-on Option $199.00 $119.40
Major Gateway/Internet Add-on Option $249.00 $149.40
Entertainment Collection Add-on Option $249.00 $149.40
Kyrandia Add-on Option $199.00 $119.40
Major QWK-mail Add-on Option $199.00 $119.40
Sysop Flash Pack* $199.00 $119.40
C SOURCE CODE
Developer's C Source Kit $385.00 $269.50
Extended C Source Suite $560.00 $392.00
Fax/Online Developer's Kit $ 99.00 $ 59.40
The Major Database C Source Code $735.00 $514.50
Shopping Mall C Source Code $370.00 $259.00
Search and Retrieve C Source Code $295.00 $206.50
Dial-Out C Source Code $295.00 $206.50
Entertainment Collection C Source Code $370.00 $259.00
Kyrandia C Source Option $295.00 $206.50
Major QWK-mail C Source Code $295.00 $206.50
MULTI-USER HARDWARE
GalactiBoard $575.00 $460.00
GalactiBox (unpopulated) $1695.00 $1356.00
PC XNet Card $1295.00 $1036.00
These prices do not include shipping
Updates and ASUP _____(ILLEGIBLE)
*These items _________(ILLEGIBLE)
EXHIBIT 10.47
A PORTION OF EXHIBIT HAS BEEN OMITTED PURSUANT TO A
REQUEST FOR CONFIDENTIAL TREATMENT, AND HAS BEEN FILED
SEPARATELY WITH THE COMMISSION.
SOFTWARE LICENSE AGREEMENT
This Software Licensing Agreement (the "Agreement") is made and entered
into this 12th day of August, 1997, by and between Galacticomm Technologies,
Inc., a Florida company with its principal place of business located at 4101
S.W. 47th Avenue, Suite 101, Ft. Lauderdale, FL 33314 ("Licenser"), and Boca
Research, Inc., a Florida corporation, whose principal place of business is
located at 1377 Clint Moore Road, Boca Raton FL 33487 ("Licensee").
W I T N E S S E T H:
WHEREAS, Licenser has developed the proprietary software products
described in Exhibit A and commonly known as Licenser's Webcast (the
"Software"); and
WHEREAS, Licensee desires to acquire certain rights to the Software so
that Licensee may sub-license the Software to end-users for use in combination
with Licenser's Product Line; and
WHEREAS, Licenser agrees to grant the licenses contained herein in
consideration for Licensee's payment of royalties to Licenser based on Exhibit A
for sub-licenses of the Software with additional specifications in Exhibit C.
NOW THEREFORE, in consideration of the premises and the mutual promises
and covenants contained herein, the parties agree to the foregoing and as
follows:
1. GRANT OF LICENSE
1.1. Subject to the terms and conditions of this Agreement, Licenser
hereby grants to Licensee, and Licensee accepts, for the term of this Agreement
a limited, world-wide, non-exclusive, right and license to (a) use, copy,
distribute and sub-license the Software in object code form configured solely
for use in combination with Product, and (b) use the Software in combination
with Product to maintain, market, display, perform, distribute and license
Product. Any sub-license granted pursuant to this Agreement may be no longer in
term nor any less restrictive in scope than any corresponding Product license
granted to such sub-license.
1.2. Nothing herein shall be read to provide or permit Licensee access
to source code for the Software at any time or for any reason. Licensee shall
not modify the Software or decompile, disassemble or otherwise reverse engineer
the Software or any part thereof and/or endeavor to recreate the Source Code
from other information made available under this Agreement. Any sub-licenses
granted pursuant to this Agreement shall include the restrictions contained in
this Exhibit A.
1.3 Licensed Software Support, Testing and Server Support. Licenser
shall (a) provide support and assistance to Licensee's staff in developing
familiarity with the Licensed Software, (b) cooperate with Licensee in
developing manufacturing and testing plans and processes with respect to the
Licensed Software, (c) maintain the necessary hardware, software and personnel
to maintain an independent Listing Server. Licenser agrees to make every
reasonable mean to
<PAGE>
immediately correct any malfunctions or downtime for this server and build a
backup plan in conjunction with the Licensee in case of a total Listing Server
shutdown or if the Licensee needs to move the Server Listing to a third party
site. Licenser also agrees to provide statistical data on the Listing Server to
determine growth, expansion and a hand-off point for the Listing Server. If the
Listing Server goes beyond 10,000 users with current equipment see Exhibit C,
then both parties agree to re-negotiate the Listing Server hosting agreement and
placement.
2. FEES AND PAYMENTS
2.1. Licensee shall pay to Licenser the royalties and fees set forth on
Exhibit A for each sub-license of the Software granted by Licensee to pursuant
to this Agreement. Royalties shall be remitted to Licenser thirty (30) days
after Licensee's grant of such sub-license for all product shipped with in that
30 day period. Other fees shall be remitted to Licenser as set forth on Exhibit
A, by the end of the first week of every month, for the previous month's
shipments.
2.2. Each party shall bear all of its respective costs and expenses
incurred by each in connection with each party's obligations under this
Agreement
2.3. At Licenser's request, at any time during this Agreement but no
more than twice per year, Licensee will permit an independent firm of
accountants and auditors selected by Licenser to audit the books and records of
Licensee and/or any distributors of Product to verify that Licensee has paid
Licenser the proper amount of fees and royalties pursuant to Exhibit A. Licenser
shall bear the costs associated with such an audit; provided, however, that if
such an audit reveals an underpayment of royalties to Licenser in an amount
greater than 5% of the amount due to Licenser, Licensee shall bear all costs
and expenses associated with such an audit and shall pay Licenser an amount
equal to one hundred and fifty (150%) of the total underpayment thus revealed.
3. IMPROVEMENTS
Except as otherwise provided in this Agreement, Licenser shall have the
exclusive right to create or develop any improvement, customization,
enhancement, extension, alteration, modification, upgrade or derivative work;
(collectively, an "Improvement") of the Software. Any such Improvements may be
made a part of the Software and subject to the terms of this Agreement upon
mutual agreement of the parties including any additional fees, royalties, or
restrictions applicable thereto.
4. CONFIDENTIALITY; OWNERSHIP
4.1. "Confidential Information" means the Software, specifications and
any other information and material marked by either party as confidential that
is delivered or disclosed by the disclosing party or, if such additional
information and material are orally disclosed, are described by written
memorandum that designates them as confidential and is delivered within thirty
(30) days of the oral disclosure. Notwithstanding the foregoing, Confidential
Information
-2-
<PAGE>
but in no event less than a reasonable level of care. The parties shall be
permitted to disclose to the appropriate authorities information that is
required to be disclosed pursuant to a court order or other due process of law
as a matter of public record; provided, however, the disclosing party shall be
provided the opportunity to contest such court order prior to the Confidential
Information being disclosed to such court order.
4.3. Except as otherwise provided herein, no title to ownership of the
Software in any form or any of its parts is hereby transferred to Licensee and
Licensee's rights shall at all times be subject to Licenser's world-wide
intellectual property rights, the world-wide intellectual property rights of any
third parties licensing technology to Licenser, and the restrictions set forth
in this Agreement.
4.4. Except as otherwise provided in this Agreement, upon termination
of this Agreement, Licensee shall promptly return to Licenser all materials that
were delivered to Licensee by Licenser hereunder including all Confidential
Information, and any copies thereof. Licensee will cause an officer to certify
to Licenser in writing that Licensee has complied with this section. Likewise,
upon termination of this Agreement, Licenser shall promptly return to Licensee
all of Licensee's Confidential Information and any copies thereof, and will
cause an officer to certify to Licensee in writing that Licenser has complied
with this section.
5. PROPRIETARY RIGHTS
5.1. "Trademarks" shall mean the trade name "Licenser" and any other
trade name, trademark or service mark owned by or licensed by Licenser for use
on or with the Software regardless of whether or not such marks are registered
with the U.S. Patent and Trademark Office or any other domestic or foreign
registrar of trademarks. "Copyrights" shall mean any of the copyrights owned by
or licensed to Licenser for use on, in, or with the Software regardless of
whether or not such copyrights are registered with the U.S. Register of
Copyrights or any other domestic or foreign registrar of copyrights.
"Proprietary Rights" shall mean the Trademarks, Copyrights, and all trade
secrets and other proprietary rights of Licenser, collectively.
-3-
<PAGE>
Software to become inoperable or otherwise incapable of being used in the full
manner for which it was designed and created (a "Software Limitation").
Additionally, there is no Software Limitation that would be triggered by: (a)
the Software being used or copied a certain number of times, or after the lapse
of a certain period of time; or (b) the occurrence or lapse of any similar
triggering factor or event. Licenser further agrees that it shall correct any
Software Limitation promptly upon its discovery and at no cost to Licensee. The
Software delivered by Licenser will be free from physical defects in the media
that tangibly embodies such copy. Licenser shall replace any copy of the
Software provided by Licenser that fails to comply with this warranty at
Licenser's expense.
6.3. Except as otherwise set forth above, the Software is provided "AS
IS" and Licenser does not warrant that: (a) the Software will meet the needs of
Licensee or its Licensees,
-4-
<PAGE>
(b) the Software will be error-free; or (c) the Software will function properly
on all hardware, operating systems, or software platforms.
6.4. EXCEPT AS OTHERWISE SPECIFICALLY SET FORTH IN THIS AGREEMENT,
Licenser DOES NOT MAKE ANY REPRESENTATIONS OR WARRANTIES OF ANY KIND, AND
SPECIFICALLY DISCLAIMS ANY EXPRESS OR IMPLIED WARRANTIES, INCLUDING, BUT NOT
LIMITED TO, THE IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A
PARTICULAR PURPOSE.
6.5. REGARDLESS OF WHETHER ANY REMEDY SET FORTH HEREIN FAILS OF ITS
ESSENTIAL PURPOSE, IN NO EVENT SHALL LICENSER BE LIABLE TO LICENSEE, ANY
LICENSEE OR SUB LICENSEE, OR ANY OTHER THIRD PARTY FOR ANY LOST DATA, LOST
PROFITS, LOST SAVINGS, BUSINESS INTERRUPTION, DOWNTIME, CONSEQUENTIAL,
EXEMPLARY, INDIRECT, PUNITIVE, INCIDENTAL, COVER, OR SPECIAL DAMAGES OR COSTS
(INCLUDING ATTORNEYS' FEES) OR LOSS OF GOODWILL RESULTING FROM ANY CLAIM
(INCLUDING BUT NOT LIMITED TO ANY CAUSE OF ACTION SOUNDING IN CONTRACT, TORT,
NEGLIGENCE, STRICT LIABILITY, OR PRODUCTS LIABLITY) REGARDING THIS AGREEMENT OR
RESULTING FROM OR IN CONNECTION WITH THE USE OF OR INABILITY TO USE THE SOFTWARE
OR ANY PRODUCT OF LICENSEE INCORPORATING ALL OR ANY PORTION OF THE SOFTWARE,
EVEN IF LICENSER HAS BEEN ADVISED OF THE POSSIBLITY OF SUCH DAMAGES. IN NO EVENT
SHALL THE TOTAL LIABILITY OF LICENSER UNDER THIS AGREEMENT FOR ALL CAUSES OF
ACTION (EXCEPT COPYRIGHT, PATENT AND TRADEMARK INFRINGEMENTS) ON A CUMULATIVE
BASIS EXCEED THE LESSER OF $50,000.00 OR THE FEES PAID TO LICENSER UNDER THIS
AGREEMENT. Licensee acknowledges and agrees that the fees charged by Licenser in
this Agreement reflect the allocation of risks, including, without limitation,
the foregoing limitation of damages and the limited warranty set forth in this
section. A modification of the allocation of risks set forth in this Agreement
would affect the fees charged by Licenser, and in consideration of such fees,
Licensee agrees to such allocation of risks.
7. MARKETING AND PROMOTION OBLIGATIONS
Licensee shall, on all Products that includes the Software, be
co-branded using the Licenser name and logo in a prominent position on all
product, packaging, promotional and advertising materials for Products that
include the Software other than products shipped to OEMs, unless otherwise
approved by OEM. Licenser shall also be accorded credit: (a) if there is an
initial "splash" screen, on such "splash" screen in second position to Licensee;
and (b) in an "About Box" in Product. For purposes of this section, "second
position" for Licenser means that Licensee's logo may be larger than Licenser's
logo.
8. INDEMNIFICATION
8.1. Licenser agrees to defend, indemnify, and hold Licensee, its
Licensees, sub Licensees, officers, directors, employees and agents harmless
from any loss, cost, expense,
-5-
<PAGE>
(c) Licensee modify the Software to render it non-infringing, while remaining
like capability.
8.2 Licensee agrees to defend, indemnify, and hold Licenser, its
officers, directors, employees and agents harmless from any loss, cost, expense,
damage, or liability (including reasonable attorneys' fees), arising out of: (a)
any claim that Product infringes or violates any third party's trademark,
patent, copyright, trade secret or other proprietary rights; or (b) the use by
Licensee, its Licensees or sub-Licensees of the Software or information or data
retrieved from or produced by the Software. Licenser shall promptly notify
Licensee in writing of such action and give Licensee authority, information, and
assistance for the defense of such suit or proceeding.
9. TERMINATION
9.1. The term of this Agreement shall be one (1) year from the date set
forth above and shall be automatically renewed for subsequent one (1) year
periods. After the initial period either party may terminate this agreement upon
one hundred and eighty (180) days written notice to the other party.
9.2. Licenser shall have the right to terminate this Agreement
immediately upon written notice to Licensee if: (a) commits a material breach or
default with respect to any of its duties and obligations under this Agreement
and such default has not been cured within (30) days after delivery to Licensee
of notice thereof; (b) ceases to do business as a going concern, makes an
assignment of its assets for the benefit of its creditors, is unable or admits
in writing its inability to pay its debts as they become due, or becomes
insolvent, suspends or abandons its business; (c) authorizes, applies for or
consents to the appointment of a trustee or receiver of all or a substantial
part of its assets; (d) files a voluntary petition under any bankruptcy or
insolvency law or files a voluntary petition under the reorganization provisions
of the laws of the United States; or (e) a court assumes jurisdiction over
Licensee's assets.
9.3. Licensee may, at its sole option, terminate this Agreement
immediately upon written notice to Licenser if: (a) Licenser commits a breach or
default with respect to any of its duties and obligations under this Agreement
and such default has not been cured within thirty days after delivery to
Licenser of notice thereof; (b) Licenser ceases to do business as a going
concern, makes an assignment of its assets for the benefit of its creditors, is
unable or admits in writing its inability to pay its debts as they become due,
or becomes insolvent, suspends or abandons its business; (c) Licenser
authorizes, applies for or consents to the appointment of a trustee or receiver
of all or a substantial part of its assets; (d) Licenser files a voluntary
petition under any bankruptcy or insolvency law or files a voluntary petition
under the reorganization
-6-
<PAGE>
10.4. Any notice or communication required or permitted under this
Agreement shall be in writing and deemed received by a party when personally
delivered to it or, if addressed to the party at the address of such party
specified herein or at such other address as specified by such party in a notice
delivered to the other party in accordance with this Section: When sent by fax
with proof of receipt; when received by overnight courier service (provided it
shall be deemed
-7-
<PAGE>
received no more than two (2) business days after delivery to such courier's
drop-off site); or when received by certified or registered mail (provided it
shall be deemed received no more than five (5) business days after posting).
10.5. Every provision of this Agreement is intended to be severable; if
any term or provision is determined to be illegal or invalid for any reason
whatsoever, such illegality or invalidity shall not affect the validity of the
remainder of this Agreement. Without limiting the generality of the preceding
sentence, if any remedy set forth in this Agreement is determined to have failed
its essential purpose, then all other provisions of this Agreement, including
without limitation the limitation of liability and exclusion of damages, shall
remain in full force and effect. The titles of sections are for convenience of
reference only.
IN WITNESS WHEREOF, the parties, by their duly authorized
representatives, have executed this Agreement as of the date first written
above.
LICENSER: LICENSEE:
GALACTICOMM TECHNOLOGIES, INC. BOCA RESEARCH, INC.
/s/ YANNICK TESSIER /s/ JACQUELINE N. MILLER
- -------------------------------- -----------------------------------
By: Yannick Tessier By:
Title: President Title: Director of Purchasing
& Product Marketing
-8-
<PAGE>
EXHIBIT A
<TABLE>
<CAPTION>
ROYALTY PER UNIT - DISTRIBUTION SCHEDULE
Boca Research Boca Research Boca Research Boca Research Boca Research
33.6K Modems 56K Modems Camera Kits Cameras Capture Cards
<S> <C> <C> <C> <C> <C>
Volume 35,000 per month 18,000 per month 1,250 per month 2,500 per month 1,250 per month
Licensed * WSC WSC WPER & WSC WPER & WSC WPER & WSC
Exclusivity YES WSC/1 YR YES WSC/1 YR YES WSC/1 YR YES WSC/1 YR YES WSC/1 YR
Royalty (*)
at 75-100% ***** ***** ***** ***** *****
Volume
Volume
Scale
0-95% ***** ***** ***** ***** *****
06-50% ***** ***** ***** ***** *****
51 -74% ***** ***** ***** ***** *****
</TABLE>
On all sales of the full version of Webcast Personal, Galacticomm Technologies
will receive a $***** per unit license fee. The list server for all Webcast
products shall be provided and hosted exclusively by Galacticomm Technologies,
Inc. Royalty Schedule will be reviewed quarterly to address current market
conditions.
Licenser will have the right to revoke exclusivity or re-negotiate this
Agreement if Licensee pays royalties of less then $100,000 per quarter or if
royalties are less then $120,000.00 for two (2) consecutive quarters.
* See Exhibit B
*****Confidential Portion. This portion of the exhibit has been omitted pursuant
to a request for confidential treatment, and has been filed separately with the
Commission.
<PAGE>
<TABLE>
<CAPTION>
PRODUCT DEFINITIONS
EXHIBIT B
CODE
<S> <C> <C>
WEBCAST SCREEN CAPTURE No Camera needed to capture images or any part of the desktop and WSC
display live on an html page.
WEBCAST PERSONAL Broadcast streaming Live Audio and video to 4 viewers. WPER
WEBCAST PROSERVER NT Server and Broadcast Machine needed for up to 250 viewers. WPRO
Supports Live Camera's and Capturing of desktop images for one broadcaster.
WEBCAST PROSERVER ADD-ONS Additional 5 broadcasters allowed on ProServer. WPRA
LITE A 30 Day demo of the full product LITE
RETAIL A package of the full product RETL
</TABLE>
<PAGE>
EXHIBIT C
SPECIAL MODIFICATION REQUIREMENTS
1. Licensee will be allowed to rename the product for its use as long as
Licenser is still listed as the copyright holder and developer with
appropriate co-branding as described in section 7 of this agreement.
2. Licenser will setup, maintain and host a new Listing Server provided by
Licensee for the Licenser products sold by Licensee. This new Listing
Server will only mention Licensee as the seller of Licenser's products. The
looks of this site will be designed by Licensee and implemented by
Licenser.
3. The Listing Server consists of a Pentium Pro 200-Class Machine with 128
Megs of Ram, a 2 Gigabyte hard drive and network card. For software, we
require Windows NT Server 4.0 and IIS. The estimate cost to Licensee for
the Listing Server hardware and software is $ 2,800.00.
4. Licenser agrees to enhance the Software product by adding a log file of
viewers for the broadcaster to view at any time which viewers came to the
site. This enhancement is estimated at a development cost of $1,000.00 and
will be paid for by Licensee.
S. Licenser agrees to also enhance the Listing Server for licensee to report
hits of total viewers to the participating broadcasters at an estimated
development cost of $750.00 to be paid for by Licensee.
6. All other cosmetic and functional changes to the Software contracted by
Licensee will be billed on an hourly rate of $100.00 per hour once approved
by Licenser.
EXHIBIT 10.48
A PORTION OF THE EXHIBIT HAS BEEN OMITTED PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT, AND HAS BEEN FILED SEPARATELY WITH THE
COMMISSION.
RESELLER AGREEMENT
AGREEMENT made this 12th day of December, 1997 by and between Microland Trading
Inc. ("RESELLER") with its principal place of business at 2153 NW 79 Avenue,
Miami, FL 33126 and GALACTICOMM TECHNOLOGES, INC.(GALACTICOMM) with its
principal offices at 4101 SW 47th Avenue Suite 101, Fort Lauderdale, Florida
33314.
1. WHEREAS, GALACTICOMM has developed some computer programs and products which
it desires to sell to RESELLER for purposes of distribution and marketing, and
WHEREAS; RESELLER DESIRES TO MARKET THE COMPUTER PROGRAMS DEVELOPED BY
GALACTICOMM; NOW THEREFORE, in consideration of the mutual promises contained
herein it is hereby agreed as follows:
1.1 DISTRIBUTION RIGHTS
During the term hereof, GALACTICOMM grants to RESELLER the non-exclusive right
and license to market and distribute the computer PROGRAMS described in Schedule
"A" (hereinafter referred to as the "PROGRAMS"), as such computer PROGRAMS may
be upgraded or modified from time to time by GALACTICOMM. Unless otherwise
specified, the term PROGRAMS as hereinafter defined, shall refer to the binary
or object code of the PROGRAMS and not the source code. Nothing herein shall be
interpreted to include, and GALACTICOMM does not hereby grant to RESELLER, any
right or license to enter into a VAR., OEM or other redistribution agreement or
license.
1.2 LICENSE TO USE TRADEMARK AND TRADE NAME
Any and all trademarks and trade names which GALACTICOMM uses in connection with
the license granted hereunder are and shall remain the exclusive property of
GALACTICOMM. This Agreement gives RESELLER no rights therein except for a
limited license to reproduce trademarks and trade names as necessary for, and
for the sole purpose of allowing RESELLER to fully promote and sell the PROGRAMS
pursuant to the terms of this Agreement.
1.3 LICENSED SOFTWARE SUPPORT AND SERVER SUPPORT.
Licenser shall (a) provide Licensee with a "master diskette" for duplication
purposes and activation codes for the number of copies purchased, (b) provide
support and assistance to Licensee's staff in developing familiarity with the
Licensed Software, (c) provide the necessary software to maintain an independent
Listing Server. Licenser agrees to make every reasonable mean to immediately
correct any malfunctions or downtime for this server.
1.4 TERM
This Agreement shall continue in full force and effect from the date this
Agreement was entered into, as specified above, until June 30, 1998, and will
thereafter automatically be renewed for additional periods of one (1) year.
Prior to the end of the initial term (or of any successive renewal terms) of the
Agreement, this Agreement maybe canceled by thirty (30) days' prior written
notice by either party to the other.
<PAGE>
2. PRICE AND PAYMENT
2.1 PRICE
Purchase price to RESELLER and RESELLER's payment obligations for the PROGRAMS
will beset forth in Schedule "A".
2.2 SHIPMENT
RESELLER agrees to supply GALACTICOMM with a minimal initial order of $30,000
USD of the software PROGRAMS as an initial stocking order by December 1, 1997.
Following the initial stocking order, a minimum quantity of $18,000 USD per
quarter will be shipped starting June 1998 and thereafter for the term of this
agreement. RESELLER agrees to notify GALACTICOMM in a timely matter if
RESELLER's inventory of software PROGRAMS becomes insufficient to fill orders,
GALACTICOMM agrees to ship the software PROGRAMS to RESELLER in a timely fashion
via carrier of RESELLER's choice. Shipping charges are F.O.B. Fort Lauderdale
for shipment of software PROGRAMS to RESELLER.
2.3 TERMS OF PAYMENT
RESELLER agrees to pay GALACTICOMM within 30 days of receipt of invoices.
2.4 TAXES
RESELLER's payment obligation includes any federal, state, county, local or
other governmental taxes, duties or excise taxes, now or hereafter due and
payable in connection which is applied on the production, storage, sale,
transportation, import, export, licensing or use of the PROGRAMS including sale
tax, value added tax or similar tax. Any taxes imposed by federal, state or any
municipal government or any amount in lieu thereof, including interest and
penalties thereon paid or payable at any time by GALACTICOMM in connection with
GALACTICOMM'S sale to RESELLER, exclusive of taxes based on net income, shall be
borne by RESELLER.
3. OWNERSHIP AND PROPERTY RIGHTS
3.1 OWNERSHIP
GALACTICOMM represents and warrants that it has all necessary rights in and to
all copyrights, patents and other proprietary rights associated with the
PROGRAMS that are necessary to market, distribute and license the PROGRAMS.
GALACTICOMM has the unrestricted right and authority to enter into this
Agreement and to grant the rights and licenses hereunder with respect to the
PROGRAMS.
3.2 PROPERTY RIGHTS
RESELLER acknowledges and agrees that the PROGRAMS and all other items licensed
hereunder and all copies thereof constitute valuable trade secrets or
proprietary and confidential information of GALACTICOMM; that title thereto is
and shall remain in GALACTICOMM; and that all applicable copyrights, trade
secrets, patents and other intellectual and property rights in the PROGRAMS and
all other items licensed hereunder are and shall remain in GALACTICOMM. All
other aspects of the PROGRAMS and all other items licensed hereunder, including
without limitation, PROGRAMS, methods of processing, the specific design and
structure of individual PROGRAMS and their interaction and the unique
programming techniques employed therein, as well as screen formats are and shall
remain the sole and exclusive property of GALACTICOMM and shall not be sold,
revealed, disclosed or otherwise
<PAGE>
communicated, directly or indirectly, by RESELLER to any person, company or
institution whatsoever, other than for the purposes set forth herein.
It is expressly understood and agreed that no title to, or ownership of, the
PROGRAMS, or any part thereof, is hereby transferred to RESELLER. The copyright
notice set forth in schedule "B " shall appear on all diskettes or other
tangible media distributed by RESELLER. RESELLER acknowledges and agrees that
all persons who use the PROGRAMS must be licensed by the current GALACTICOMM
License Agreement set forth in Schedule "E". All use of any GALACTICOMM
trademark in any marketing and promotion, including but not limited to,
advertisements and packaging, shall contain notification that such trademark is
a trademark which was developed and is owned by GALACTICOMM as set forth in
Schedule "E" hereof.
3.3 UNAUTHORIZED COPYING
RESELLER agrees that it will not copy, modify or reproduce the PROGRAMS in any
way, except as otherwise provided herein. However, RESELLER is not responsible
for the disclosure, use, modification or copying of the PROGRAMS by its
customers or any other third party so long as RESELLER had no prior knowledge
that its customers or any other third party intended to disclose, use, modify,
or copy the PROGRAMS. RESELLER agrees to notify GALACTICOMM within 3 business
days of any circumstances RESELLER has knowledge relating to any unauthorized
use or copying of the PROGRAMS by any person or entity not authorized to do so.
4. WARRANTY
4.1 CUSTOMER WARRANTY
GALACTICOMM will enclose, as part of the PROGRAMS package, a warranty with
respect to the physical media enclosed therein which is identical to the
warranty contained in the then current GALACTICOMM License Agreement (a copy of
which is set forth in Schedule "B"). GALACTICOMM agrees to fulfill its
responsibilities under the warranty delivered with the PROGRAMS, as the same
shall be modified from time to time. RESELLER acknowledges and agrees that the
warranty furnished by GALACTICOMM with copies of the PROGRAMS is the only
warranty made (or to be made) with respect thereto. RESELLER agrees to include
the current GALACTICOMM License Agreement with every copy of the PROGRAMS it
distributes and not to make any other representations or warranties with respect
to the PROGRAMS.
4.2 DISCLAIMER OF ADDITIONAL WARRANTIES
OTHER THAN THOSE WARRANTIES SET FORTH IN PARAGRAPH 3.1 and 4.1, GALACTICOMM DOES
NOT WARRANT, REPRESENT, OR GUARANTEE THAT ALL PROBLEMS WILL BE CORRECTED OR THAT
ANY UPDATES WILL BE COMPATIBLE WITH PREVIOUS VERSIONS OF THE PRODUCTS. EXCEPT AS
EXPRESSED ABOVE, GALACTICOMM DISCLAIMS ALL WARRANTIES, EXPRESSED AND IMPLIED, TO
THE PRODUCT, INCLUDING ALL IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR
A PARTICULAR PURPOSE, AND GALACTICOMM DISCLAIMS ALL OBLIGATIONS AND LIABILITY ON
GALACTICOMM'S PART FOR DAMAGES, INCLUDING BUT NOT LIMITED TO SPECIAL, INDIRECT
OR CONSEQUENTIAL DAMAGES IN CONNECTION WITH USE OF THE PRODUCT, WHETHER OR NOT
GALACTICOMM HAS BEEN ADVISED OF THE POSSIBILITY THEREOF.
<PAGE>
5. TERMINATION
5.1 EVENTS CAUSING TERMINATION
This agreement may be terminated by GALACTICOMM under any of the following
conditions:
(a) GALACTICOMM may terminate this agreement if RESELLER fails to meet it's
purchase requirements outlined in paragraph 2.2 herein upon thirty (30)
days written notice to RESELLER.
(b) if one of the parties shall be declared insolvent or bankrupt.
(c) if a petition is filed in any court and not dismissed in ninety (90)
days to declare one of the parties bankrupt or for a reorganization
under the Bankruptcy Law or any other similar statute.
(d) if a Trustee in Bankruptcy or a Receiver or similar entity is appointed
for one of the parties.
(e) if RESELLER does not pay GALACTICOMM with in sixty (60) days from
receipt of GALACTICOMM'S invoices or otherwise materially breaches this
Agreement.
5.2 DUTIES UPON TERMINATION
Upon termination of this Agreement for any reason, the parties agree to continue
their cooperation in order to effect an orderly termination of their
relationship. RESELLER shall immediately cease representing itself as a RESELLER
of the PROGRAMS for GALACTICOMM. The following paragraphs of this Agreement
shall survive its termination for a period of five (5) years: 3.2, 7.1, 7.6, 7.7
and 7.10.
6. PRODUCT PROMOTION AND SUPPORT
6.1 RESELLER'S OBLIGATION
During the term hereof, RESELLER, as part of its activities to promote the
distribution of the PROGRAMS, agrees to confer periodically with GALACTICOMM, at
GALACTICOMM'S request, on matters relating to market conditions, sales
forecasting, product planning and update, promotional and marketing strategies
and programming. GALACTICOMM may, at its sole option, prior to and/or after its
use, review all of RESELLER's promotion and advertising materials which utilize
any of GALACTICOMM'S trademarks or trade names. RESELLER agrees not to use or to
withdraw and retract any promotion or advertising, which utilizes any of
GALACTICOMM'S trademarks or trade names, which GALACTICOMM finds unsuitable.
GALACTICOMM agrees not to unreasonably withhold its approval of any promotion or
advertising which utilizes any of GALACTICOMM'S trademarks or trade names.
6.2 TRAINING AND TECHNICAL SUPPORT BY GALACTICOMM
All training provided by GALACTICOMM to RESELLER will be at GALACTICOMM'S
customary rates and subject to the availability of GALACTICOMM'S personnel. If
RESELLER's support staff calls GALACTICOMM with questions, GALACTICOMM shall
make reasonable efforts to advise and support RESELLER's personnel and will
respond to RESELLER within a reasonable time period.
<PAGE>
7. GENERAL
7.1 CONFIDENTIAL INFORMATION
GALACTICOMM and RESELLER acknowledge that, in the course of dealings between the
parties, each party will acquire information about the other party, its business
activities and operations, its technical information and trade secrets, of a
highly confidential and proprietary nature. Each party shall hold such
information in strict confidence and shall not reveal the same, except for any
information which is: generally available to or known to the public; known to
such party prior to the negotiations leading to this Agreement; independently
developed by such party outside the scope of this Agreement; or lawfully
disclosed by or to a third part or tribunal. The confidential information of
each party shall be safeguarded by the other to the same extent that it
safeguards its own confidential materials or dates relating to its own business.
7.2 CURE PERIOD
Neither party may terminate this Agreement for breach or default of the other
party unless and until the party seeking to terminate has specified the breach
or default in writing to the other party and such breach or default has not been
cured by the defaulting party within thirty (30) days after receipt of written
notice of default.
7.3 FORCE MAJEURE
Neither party shall be liable or deemed to be in default for any delay or
failure in performance under this Agreement or interruption of service
resulting, directly or indirectly, from acts of God, civil or military
authority, acts of the public enemy, war, riots, civil disturbances,
insurrections, accidents, fire, explosions, earthquakes, floods, the elements,
strikes, labor disputes, shortages of suitable parts, materials, labor or
transportation or any causes beyond the reasonable control of such party.
7.4 JURISDICTION AND VENUE
This Agreement shall be governed by and construed in accordance with the laws of
the State of Florida. Exclusive jurisdiction for litigation of any dispute,
controversy or claim arising out of, in connection with, or in relation to this
Agreement, or the breach thereof, shall be only in the United States Federal
District Court in Florida or in the Florida State Court having competent
jurisdiction and located within Fort Lauderdale.
7.5 ENTIRE AGREEMENT
This Agreement, including the schedules attached hereto, constitutes the entire
agreement between the parties with respect to the subject matter hereof and
supersedes all previous proposals, negotiations, representations, commitments,
writings and all other communications between the parties, both oral and
written.
This Agreement may not be released, discharged, changed or modified except by an
instrument in writing signed by a duly authorized representative of each of
these parties.
The terms of this Agreement shall prevail in the event that there shall be any
variance with the terms and conditions of any invoice or other such document
submitted by GALACTICOMM or any purchase order or any other such document
submitted by RESELLER.
<PAGE>
This Agreement shall not be valid until signed and accepted by both parties and
no change, termination or attempted waiver of any of the provisions hereof shall
be binding unless in writing and signed by both parties against whom the same is
sought to be enforced.
7.6 INDEPENDENT CONTRACTORS
It is expressly agreed that GALACTICOMM and RESELLER are acting hereunder as
independent contractors and under no circumstances shall any of the employees of
one party be deemed the employees of the other for any purpose. This Agreement
shall not be construed as authority for either party to act for the other party
in any agency or other capacity or to make commitments of any kind for the
account of, or on behalf of, the other party, except to the extent, and for the
purposes, expressly provided for and set forth herein.
7.7 ATTORNEY'S FEES
In any action between the parties to enforce any of the terms of this Agreement,
the prevailing party shall be entitled to recover expenses, including reasonable
attorneys' fees.
7.8 NOTICE
Any notice required to be given by either party to the other shall be deemed
given if in writing and actually delivered or deposited in the United States
mail in registered or certified form, return receipt requested, postage prepaid,
addressed to the party to whom notice is being given at the address of such
party set forth above or to such other address to which the sending party has
been directed to send notices by the addressee.
7.9 ASSIGNMENT
This Agreement is not assignable by either party hereto without the consent of
the other, except that this Agreement shall be assignable upon the sale of all
rights to license and sublicense the PROGRAMS to the purchaser of said rights.
This Agreement shall be binding upon the parties and their respective successor.
7.10 SEVERABILITY
If any provision of this Agreement is determined by a court of competent
jurisdiction to be invalid or unenforceable, such determination shall not affect
the validity or enforceability of any other part or provision of this Agreement.
7.11 WAIVER
No waiver by any party of any breach of any provision hereof shall constitute a
waiver of any other breach of that or any other provision hereof
<PAGE>
SCHEDULE A: CURRENT PROGRAMS PRICES
PRODUCT QUANTITY UNIT PRICE* COST
WEBCAST PERSONAL 5,000 ***** *****
PRODUCT QUANTITY UNIT PRICE COST
LISTING SERVER 2 ***** *****
Payment Terms:
Galacticomm is offering terms. A payment of $***** up-front is required, the
remaining payment is to be split into two $***** Purchase Orders. One is Net-30
and the other is Net-60.
*****CONFIDENTIAL PORTION. THIS PORTION OF THE EXHIBIT HAS BEEN OMITTED PURSUANT
TO A REQUEST FOR CONFIDENTIAL TREATMENT, AND HAS BEEN FILED SEPARATELY WITH THE
COMMISSION.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement by a duly
authorized representative as of the date set forth above.
GALACTICOMM - GALACTICOMM TECHNOLOGIES, INC.,
By: /s/ ILLEGIBLE Date: DEC 2 - 97
----------------------------------------- ----------------------
Print Name: ILLEGIBLE
---------------------------------
Title: ILLEGIBLE
--------------------------------------
RESELLER - MICROLAND TRADING, INC.
By: /s/ ALEX SASTRE Date: DEC 2 1997
----------------------------------------- ----------------------
Print Name: Alex Sastre
---------------------------------
Title: President
--------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
SCHEDULE B: SOFTWARE LICENSE AGREEMENT
GALACTICOMM SOFTWARE LICENSE AGREEMENT
WEBCAST/Registered trademark/
YOU SHOULD CAREFULLY READ THE FOLLOWING TERMS AND CONDITIONS BEFORE OPENING THIS
ENVELOPE. OPENING THIS ENVELOPE INDICATES YOUR ACCEPTANCE OF THESE TERMS AND
CONDITIONS. IF YOU DO NOT AGREE WITH THEM. YOU SHOULD RETURN THIS ENVELOPE
UNOPENED WITHIN 30 DAYS OF THE ORIGINAL DATE OF PURCHASE. AND THE PRICE OF THE
PRODUCT WILL BE REFUNDED TO YOU.
Galacticomm, Inc. provides this Software and licenses its use throughout the
world. You assume responsibility for the selection of the Software to achieve
your intended results, and for the installation, use, and results obtained from
the Software.
DEFINITIONS
"You" and "your" shall be taken as referring to the person or business entity
who purchased this License to use this Software or for whom such License was
purchased.
"Software" shall he taken as referring to the files supplied on the media inside
this envelope, and to any and all copies, updates, modifications,
functionally-equivalent derivatives, or any parts or portions then of.
"Run-Time Access" shall be taken as referring to a connection that allows the
exchange of data between two or more computers.
"Live Computer" shall be taken as referring to a single computer connected with
communications hardware providing Run-Time Access to this Software.
"Development Computer" shall be taken as referring to a single computer upon
which a copy of this Software may be installed for configuration and development
purposes, not providing Run-Time Access to this Software.
"Client Software" shall be taken as referring to the program(s) that can he
generated with this Software to give other computers Run-Time Access to your
live Computer in a Windows client/server mode.
LICENSE
You may:
1. install and use one copy of this Software on a single Live Computer.
2. copy this Software into machine-readable or printed form, for backup or
archival purposes in support of your use of this Software.
3. transfer this Software and license to another party if the other party
agrees to accept the terms and conditions of this Agreement. If the
enclosed Software is an update, any transfer must include the update
and all prior versions. If you transfer the Software, you must at the
same time either transfer all copies, whether in machine-readable form,
to the same party, or destroy any copies not transferred.
THE VIDEO STREAM(S) PRODUCED BY THIS SOFTWARE CANNOT BE RESOLD TO ANY THIRD
PARTIES OR SOLD ON A PAY-PER-VIEW BASIS. THE RESALE OF VIDEO STREAMS IS SUBJECT
TO AN ADDITIONAL LICENSE AGREEMENT ATTAINABLE FROM GALACTICOMM. FAILURE TO
COMPLY WITH THIS PROVISION WILL RESULT IN THE DE-ACTIVATION OF THE WEBCAST
SOFTWARE. NO REFUNDS WILL BE GIVEN TO REGISTERED USERS WHOSE SOFTWARE IS
DEACTIVATED UNDER THIS PROVISION.
YOU MAY NOT USE, COPY, MODIFY, OR TRANSFER THIS SOFTWARE, OR ANY COPY,
MODIFICATION, OR MERGED PORTION, IN WHOLE OR IN PART, EXCEPT AS EXPRESSLY
PROVIDED FOR IN THIS LICENSE, OR IN AMENDMENTS SIGNED 8Y AN OFFICER OF
GALACTICOMM. IF YOU TRANSFER POSSESSION OF ANY COPY OF THIS SOFTWARE, OR ANY
FUNCTIONALLY-EQUIVALENT DERIVATIVE, OR ANY-PORTION OR MODIFICATION THEREOF, TO
ANOTHER PARTY, YOUR LICENSE IS AUTOMATICALLY TERMINATED.
TERM
This license is effective until terminated. You may terminate it at any time by
destroying all copies of the Software covered by this Agreement. It will also
terminate upon conditions set forth elsewhere in this Agreement or if you fail
to comply with any term or condition of this Agreement. You agree upon such
termination to destroy this Software, including all copies,
functionally-equivalent derivatives, and all portions and modifications thereof
in any form.
(continued on other side)
<PAGE>
- --------------------------------------------------------------------------------
SCHEDULE B: SOFTWARE LICENSE AGREEMENT
LIMITED WARRANTY
THIS SOFTWARE, INCLUDING CLIENT SOFTWARE, IS PROVIDED "AS IS", WITHOUT WARRANTY
OF ANY KIND, EITHER EXPRESSED OR IMPLIED, INCLUDING, BUT NOT LIMITED TO, THE
IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE. THE
ENTIRE RISK AS TO THE QUALITY AND PERFORMANCE OF THE SOFTWARE IS WITH YOU.
SHOULD THE SOFTWARE PROVE DEFECTIVE, YOU (NOT GALACTICOMM) ASSUME THE ENTIRE
COST OF ALL NECESSARY SERVICING REPAIR OR CORRECTION.
SOME STATES DO NOT ALLOW THE EXCLUSION OF IMPLIED WARRANTIES, SO THE ABOVE
EXCLUSION MAY NOT APPLY TO YOU. THIS WARRANTY GIVES YOU SPECIFIC LEGAL RIGHTS
AND YOU MAY ALSO HAVE OTHER RIGHTS WHICH VARY FROM STATE TO STATE.
Galacticomm does not warrant that the functions contained in this Software will
meet your requirements or that the operation of this Software will be
uninterrupted or error-free. However, Galacticomm does warrant the media on
which the Software is furnished to be free from defects in materials and
workmanship under normal use for a period of ninety (90) days from the date of
delivery to you.
LIMITATIONS OF REMEDIES
Galacticomm's entire liability and your exclusive remedy shall be:
a. the replacement of any media not meeting Galacticommn's "Limited
Warranty" and which is return to Galacticomm, or
b. if Galacticomm is unable to deliver replacement media which is free of
defects in materials or workmanship, you may terminate this Agreement
by returning this Software and your money will be refunded.
IN NO EVENT WILL GALACTICOMM BE LIABLE TO YOU FOR ANY DAMAGES, INCLUDING ANY
LOST PROFITS, LOST SAVINGS OR OTHER INCIDENTAL OR CONSEQUENTIAL DAMAGES ARISING
OUT OF THE USE OR INABILITY TO USE THIS SOFTWARE EVEN IF GALACTICOMM OR ITS
AUTHORIZED REPRESENTATIVE HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES,
OR FOR ANY CLAIM BY ANY OTHER PARTY.
SOME STATES DO NOT ALLOW THE LIMITATION OR EXCLUSION OF LIABILITY FOR INCIDENTAL
OR CONSEQUENTIAL DAMAGES SO THAT ABOVE LIMITATION OR EXCLUSION MAY NOT APPLY TO
YOU.
GENERAL
You may not sublicense, assign, or otherwise transfer this License or Software
except as expressly provided in this Agreement. Any attempt to otherwise
sublicense, assign, or transfer any of the rights, duties or obligations
hereunder is expressly prohibited and will terminate this Agreement.
This Agreement will be governed by the laws of the State of Florida.
All Agreements covering this Software (including but not limited to any and all
updates, upgrades, and enhancements to this Software or any portion thereof,
bearing the same registration number) shall be deemed to be counterparts of one
and the same License Agreement instrument.
BY OPENING THIS ENVELOPE. YOU ACKNOWLEDGE THAT YOU HAVE READ THIS AGREEMENT,
UNDERSTAND IT, AND AGREE T0 BE BOUND BY ITS TERMS AND CONDITIONS. YOU FURTHER
AGREE THAT IT IS THE COMPLETE AND EXCLUSIVE STATEMENT OF THE AGREEMENT BETWEEN
US. WHICH SUPERSEDES ANY PROPOSAL OR PRIOR AGREEMENT, ORAL OR WRITTEN, AND ANY
OTHER COMMUNICATIONS BETWEEN US RELATING TO THE SUBJECT MATTER OF THIS
AGREEMENT.
EXHIBIT 10.49
A PORTION OF THE EXHIBIT HAS BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL
TREATMENT, AND HAS BEEN FILED SEPARATELY WITH THE COMMISSION
RESELLER AGREEMENT
AGREEMENT made as of this twelfth day of January, 1998 by and between Simon &
Schuster, Inc. ("RESELLER") with a place of business at One Lake Street, Upper
Saddle River, New Jersey 07458 and GALACTICOMM TECHNOLOGIES, INC.
("GALACTICOMM") with principal offices at 4101 SW 47 Avenue Suite 101, Fort
Lauderdale, Florida 33314.
WHEREAS, GALACTICOMM has developed some computer PROGRAMS which it desires to
license to RESELLER for purposes of distribution and marketing, and WHEREAS;
RESELLER DESIRES TO MARKET THE COMPUTER PROGRAMS DEVELOPED BY GALACTICOMM; NOW
THEREFORE, in consideration of the mutual promises contained herein it is hereby
agreed as follows:
1. LICENSE
1.1 Distribution Rights
During the term hereof, GALACTICOMM grants to RESELLER and its affiliates the
non-exclusive right and license to market and distribute through any and all
channels and media the computer PROGRAMS described in Schedule "A" (hereinafter
referred to as the "PROGRAMS"), as such computer PROGRAMS may be upgraded or
modified from time to time by GALACTICOMM. The geographical limitation of this
right and license is North America. Unless otherwise specified, the term
PROGRAMS as hereinafter defined, shall refer to the binary or object code of the
PROGRAMS and not the source code. Nothing herein shall be interpreted to
include, and GALACTICOMM does not hereby grant to RESELLER, any right or license
to enter into a VAR, OEM or other redistribution agreement or license. RESELLER
may sell the PROGRAMS as stand-alone products or bundled together with other
products.
1.2 License to Use Trademark and Trade Name
Any and all trademarks and trade names which GALACTICOMM uses in connection with
the license granted hereunder are and shall remain the exclusive property of
GALACTICOMM. This Agreement gives RESELLER no rights therein except for a
limited license to reproduce trademarks and trade names as necessary for, and
for the sole purpose of allowing RESELLER to fully promote and sell the PROGRAMS
pursuant to the terms of this Agreement. RESELLER may Co-Brand Product with
GALACTICOMM. RESELLER may submit to GALACTICOMM trademarks, designs and other
materials as needed to produce a Co-Branded product.
1.3 Term
This Agreement shall continue in full force and effect from the date this
Agreement was entered into, as specified above, until December 31, 2000 and will
thereafter automatically be renewed for additional periods of one (1) year.
Prior to the end of the initial term (or of any successive renewal terms) of the
Agreement, this Agreement maybe canceled by ninety (90) days' prior written
notice by either party to the other.
2. PRICE AND PAYMENT
2.1 Price
Purchase price to RESELLER, and RESELLER's payment obligations for the PROGRAMS
& SERVICES, are set forth in Schedule "A". Unless expressly provided to the
contrary in this Agreement, RESELLER is under no obligation to buy any of the
products or services set forth on Exhibit A; in the event it elects to do so,
however, the prices set forth on Exhibit A shall govern. The prices in Schedule
A are guaranteed until December 31st, 1998. After that time they may increase by
not more than 10% in each subsequent year.
2.2 Shipment
GALACTICOMM agrees to supply RESELLER with a minimal quantity of twenty five
(25) units of the software PROGRAMS as an initial stocking order in December
1997. RESELLER will have a period of six (6) months from initial delivery to
sell the PROGRAMS. At such time, RESELLER will be allowed to return all unsold
PROGRAMS for a credit. Galacticomm shall maintain sufficient inventory to satify
any and all future orders (if any) from RESELLER. GALACTICOMM agrees to ship the
software PROGRAMS to RESELLER within 48 hours of receiving an order via carrier
of
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GALACTICOMM's choice, with risk of loss to be borne by GALACTICOMM until
delivery to RESELLER'S site at which time the risk of loss shall shift to
RESELLER. RESELLER is under no obligation to buy any minimum number of PROGRAMS.
2.3 Terms of Payment
RESELLER agrees to pay GALACTICOMM within 45 days of receipt of invoices with
the exception of the initial stocking order where RESELLER will pay GALACTICOMM
within 30 days of the actual resale of its PROGRAMS. In the event that the
initial stocking order is depleted prior to June 30th, 1998, payment to
GALACTICOMM will be made within 30 days of receipt of invoices. GALACTICOMM
offers a discount of two percent (2.0%) for early payment within ten (10) days
of SELLERS receipt of each invoice.
2.4 Taxes
RESELLER's payment obligation includes any federal, state, county, local or
other governmental taxes, duties or excise taxes, now or hereafter due and
payable in connection which is applied on the production, storage, sale,
transportation, import, export, licensing or use of the PROGRAMS including sale
tax, value added tax or similar tax. Any taxes imposed by federal, state or any
municipal government or any amount in lieu thereof, including interest and
penalties thereon paid or payable at any time by GALACTICOMM in connection with
GALACTICOMM'S sale to RESELLER, exclusive of taxes based on net income, shall be
borne by RESELLER.
3. OWNERSHIP AND PROPERTY RIGHTS
3.1 Ownership
GALACTICOMM represents and warrants that it has all necessary rights in and to
all copyrights, patents and other proprietary rights associated with the
PROGRAMS that are necessary to market, distribute and license the PROGRAMS
exclusive of any RESELLER trademarks that are provided in connection with
co-branding or RESELLER's marketing and sales of the PROGRAMS (which trademarks
shall at all times remain RESELLER's property). GALACTICOMM has the unrestricted
right and authority to enter into this Agreement and to grant the rights and
licenses hereunder with respect to the PROGRAMS.
3.2 Property Rights
RESELLER acknowledges and agrees that it obtains no ownership or title in and to
the PROGRAMS by virtue of this Agreement. RESELLER's sole rights are the
distribution and other rights set forth in Section 1 above.
It is expressly understood and agreed that no title to, or ownership of, the
PROGRAMS, or any part thereof, is hereby transferred to RESELLER. RESELLER will
not remove or modify any copyright notice included with the Programs and
diskettes or other tangible media delivered by GALACTICOMM. RESELLER
acknowledges and agrees that all persons who use the PROGRAMS must be licensed
by the current GALACTICOMM License Agreement set forth in Schedule "B" or sign a
RESELLER license agreement that is materially similar. All use of any
GALACTICOMM trademark in any marketing and promotion, including but not limited
to, advertisements and packaging, shall contain notification that such trademark
is a trademark which was developed and is owned by GALACTICOMM.
3.3 Unauthorized Copying
RESELLER agrees that it will not copy, modify or reproduce the PROGRAMS in any
way, except as otherwise provided herein. However, RESELLER is not responsible
for the disclosure, use, modification or copying of the PROGRAMS by its
customers or any other third party so long as RESELLER did not authorize or
participate in any such activity. RESELLER agrees to promptly notify GALACTICOMM
of any circumstances of which RESELLER has knowledge relating to any
unauthorized use or copying of the PROGRAMS by any person or entity not
authorized to do so. Fine
4. WARRANTY
4.1 Customer Warranty
GALACTICOMM will enclose, as part of the PROGRAMS package, a warranty with
respect to the physical media enclosed therein which is identical to the
warranty contained in the then current GALACTICOMM License Agreement (a copy of
which
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is set forth in Schedule "B"), and that the PROGRAMS shall operate in all
material respects in conformance with their published specifications and/or user
documentation. GALACTICOMM agrees to fulfill its responsibilities under the
warranty delivered with the PROGRAMS, as the same shall be modified from time to
time. RESELLER acknowledges and agrees that the warranty furnished by
GALACTICOMM with copies of the PROGRAMS is the only warranty made (or to be
made) with respect thereto. RESELLER agrees to include the current GALACTICOMM
License Agreement (or a materially similar license agreeemnt used by RESELLER)
with every copy of the PROGRAMS it distributes and not to make any other
representations or warranties with respect to the PROGRAMS.
4.2 Disclaimer of Additional Warranties
OTHER THAN THOSE WARRANTIES SET FORTH IN PARAGRAPH 3.1 and 4.1, GALACTICOMM DOES
NOT WARRANT, REPRESENT, OR GUARANTEE THAT ALL PROBLEMS WILL BE CORRECTED OR THAT
ANY UPDATES WILL BE COMPATIBLE WITH PREVIOUS VERSIONS OF THE PRODUCTS. EXCEPT AS
EXPRESSED ABOVE, GALACTICOMM DISCLAIMS ALL WARRANTIES, EXPRESSED AND IMPLIED, TO
THE PRODUCT, INCLUDING ALL IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR
A PARTICULAR PURPOSE, AND GALACTICOMM DISCLAIMS ALL OBLIGATIONS AND LIABILITY ON
GALACTICOMM'S PART FOR SPECIAL, INDIRECT OR CONSEQUENTIAL DAMAGES IN CONNECTION
WITH USE OF THE PRODUCT, WHETHER OR NOT SUCH PARTY HAS BEEN ADVISED OF THE
POSSIBILITY THEREOF.
5. TERMINATION
5.1 Events Causing Termination
This agreement may be terminated by GALACTICOMM under any of the following
conditions:
(a) GALACTICOMM may terminate this agreement if RESELLER fails to meet it's
payment requirements outlined in paragraph 2.3 herein upon ninety (30) days
written notice to RESELLER.
(b) if one of the parties shall be declared insolvent or bankrupt.
(c) if a petition is filed in any court and not dismissed in ninety (90) days to
declare one of the parties bankrupt or for a reorganization under the Bankruptcy
Law or any other similar statute.
(d) if a Trustee in Bankruptcy or a Receiver or similar entity is appointed for
one of the parties.
(e) if RESELLER materially breaches this Agreement and has not cured this breach
within 30 days of notice from GALACTICOMM.
This Agreement may be terminated by RESELLER at any time and for any reason (or
no reason) upon 90 days notice.
5.2 Duties Upon Termination
Upon termination of this Agreement for any reason, the parties agree to continue
their cooperation in order to effect an orderly termination of their
relationship. RESELLER shall immediately cease representing itself as a RESELLER
of the PROGRAMS for GALACTICOMM. The following paragraphs of this Agreement
shall survive its termination for a period of five (5) years: 3.2, 7.1, 7.6, 7.7
and 7.10.
Termination of this Agreement shall not terminate or in any way affect any End
User License Agreement between RESELLER and its customers.
6. PRODUCT PROMOTION AND SUPPORT
6.1 RESELLER's Obligation
During the term hereof, RESELLER, as part of its activities to promote the
distribution of the PROGRAMS, agrees to confer periodically with GALACTICOMM, at
GALACTICOMM'S request, on matters relating to market conditions, sales
forecasting, product planning and update, promotional and marketing strategies
and programming. GALACTICOMM may, at its sole option, prior to and/or after its
use, review all of RESELLER's promotion and advertising materials which utilize
any of GALACTICOMM'S trademarks or trade names. RESELLER agrees not to use or to
withdraw and retract any promotion or
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advertising, which utilizes any of GALACTICOMM'S trademarks or trade names,
which GALACTICOMM has not approved pursuant to this Section 6.1. GALACTICOMM
agrees not to unreasonably withhold its approval of any promotion or advertising
which utilizes any of GALACTICOMM'S trademarks or trade names.
6.2 Training and Technical Support by GALACTICOMM
All training provided by GALACTICOMM to RESELLER will be at GALACTICOMM'S
customary rates ( see Schedule "A") and subject to mutually agreeable dates and
times. GALACTICOMM will provide fifteen incidences of technical support to
RESELLER for each PROGRAM purchased from 9:00 AM until 6:00 PM EST, Monday to
Friday. Any technical support beyond fifteen incidences will be charges at the
customary rate found in Schedule "A".
7. GENERAL
7.1 Confidential Information
GALACTICOMM and RESELLER acknowledge that, in the course of dealings between the
parties, each party will acquire information about the other party, its business
activities and operations, its technical information and trade secrets, of a
highly confidential and proprietary nature. Each party shall hold such
information in strict confidence and shall not reveal the same, except for any
information which is: generally available to or known to the public; known to
such party prior to the negotiations leading to this Agreement; independently
developed by such party outside the scope of this Agreement; or lawfully
disclosed by or to a third party or tribunal. The confidential information of
each party shall be safeguarded by the other to the same extent that it
safeguards its own confidential materials or dates relating to its own business.
7.2 Force Majeure
Neither party shall be liable or deemed to be in default for any delay or
failure in performance under this Agreement or interruption of service
resulting, directly or indirectly, from acts of God, civil or military
authority, acts of the public enemy, war, riots, civil disturbances,
insurrections, accidents, fire, explosions, earthquakes, floods, the elements,
strikes, labor disputes, shortages of suitable parts, materials, 'labor or
transportation or any causes beyond the reasonable control of such party.
7.3 Jurisdiction and Venue
THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF
THE STATE OF NEW YORK APPLICABLE TO AGREEMENTS TO BER MADE AND FULLY PERFOEMRED
IN THEAT STATE. ANY ACTION OR PROCEEDING BROUGHT BY RESELLER TO ENFORCE ITS
RIGHTS UNDER THIS AGREEMENT WILL BE BROUGHT ONLY IN THE UNITED STATES DISTRICT
COURT FOR THE DISTRICT OF FLORIDA OR, IF FEDERAL JURISDICTION IS LACKING, IN THE
STATE TRIAL COURT LOCATED IN FT. LAUDERDALE, AND ANY ACTION OR PROCEEDING
BROUGHT BY GALACTICOMM TO ENFORCE ITS RIGHTS UNDER THIS AGREEMENT WILL BE
BROUGHT ONLY IN THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF
NEW YORK OR, IF FEDERAL JURISDICTION IS LACKING, IN THE SUPREME COURT OF THE
STATE OF NEW YORK FOR NEW YORK COUNTY. EACH PARTY CONSENTS TO THE EXCLUSIVE
JURISDICTION AND VENUE OF THESE COURTS FOR ANY DISPUTE ALLEGING A BREACH OF THIS
AGREEMENT AND NEITHER WILL MAINTAIN THAT ANY SUCH FORUM IS AN INCONVENIENT FORUM
FOR RESOLVING ANY SUCH DISPUTE.
7.4 Entire Agreement
This Agreement, including the schedules attached hereto, constitutes the entire
agreement between the parties with respect to the subject matter hereof and
supersedes all previous proposals, negotiations, representations, commitments,
writings and all
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other communications between the parties, both oral and written.
This Agreement may not be released, discharged, changed or modified except by an
instrument in writing signed by a duly authorized representative of each of
these parties.
The terms of this Agreement shall prevail in the event that there shall be any
variance with the terms and conditions of any invoice or other such document
submitted by GALACTICOMM or any purchase order or any other such document
submitted by RESELLER.
This Agreement shall not be valid until signed and accepted by both parties and
no change, termination or attempted waiver of any of the provisions hereof shall
be binding unless in writing and signed by both parties against whom the same is
sought to be enforced.
7.5 Independent Contractors
It is expressly agreed that GALACTICOMM and RESELLER are acting hereunder as
independent contractors and under no circumstances shall any of the employees of
one party be deemed the employees of the other for any purpose. This Agreement
shall not be construed as authority for either party to act for the other party
in any agency or other capacity or to make commitments of any kind for the
account of, or on behalf of, the other party, except to the extent, and for the
purposes, expressly provided for and set forth herein.
7.6 Notice
Any notice required to be given by either party to the other shall be deemed
given if in writing and actually delivered or deposited in the United States
mail in registered or certified form, return receipt requested, postage prepaid,
addressed to the party to whom notice is being given at the address of such
party set forth above or to such other address to which the sending party has
been directed to send notices by the addressee.
7.7 Assignment
This Agreement is not assignable by either party hereto without the consent of
the other, except that this Agreement shall be assignable upon the sale of all
rights to license and sublicense the PROGRAMS to the purchaser of said rights.
This Agreement shall be binding upon the parties and their respective
successors. Notwithstanding the foregoing, RESELLER shall at all times be free
to assign this Agreement in connection with a sale of all or substantially all
of its assets or in connection with a change in control.
7.8 Severability
If any provision of this Agreement is determined by a court of competent
jurisdiction to be invalid or unenforceable, such determination shall not affect
the validity or enforceability of any other part or provision of this Agreement.
7.9 Waiver
No waiver by any party of any breach of any provision hereof shall constitute a
waiver of any other breach of that or any other provision hereof.
7.10 Indemnity
GALACTICOMM agrees to indemnify RESELLER and hold RESELLER harmless from and
against any and all damages, costs, claims, interests, expenses, obligations,
losses or liabilities of any kind and charator ( including without limitation
any attorney's fees and costs) RESELLER incurs in connection with any claim or
cause of action that the PROGRAMS infringe or violate any copyright, patent,
trademark, or other proprietary right of any kind of any third party.
GALACTICOMM shall have the sole right to assume and control the defense of any
such claim and RESELLER (at GALACTICOMM's expense) shall provide reasonable
assistance and cooperation to GALCATICOMM in connection with any such defense.
GALACTICOMM shall not, without the RESELLER'S prior written consent, enter into
any settlement of any claim as to which the RESELLER is a party unless such
settlement includes an unconditional release of RESELLER from all liability from
claims that are the subject matter of such proceedings and the subject of such
indemnification, unless GALACTICOMM is responsible for all monetary provisions
and other consequences of the settlement. GALACTICOMM shall apprise the RESELLER
of all court proceedings, filings and/or settlement offers and will consider in
good faith suggestions made by the RESELLER.
7.11 Escrow
At RESELLER'S option, and provided that RESELLER is not in breach of its
obligations hereunder, the parties shall enter into a source code escrow
agreement pursuant to which GALACTICOMM (at its cost) shall deposit with its
ordinary source code escrow agent copies of the then-current source code for the
PROGRAMS, together with all related technical and design
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documentation, which materials shall promptly be updated if there are revisions
to the PROGRAMS (collectively the "Escrowed Materials"). The Escrowed Materials
shall be released to RESELLER solely for the purpose of allowing RESELLER
(directly or through a third party, so long as such third party agrees to
protect the confidentiality of such Escrowed Materials) to maintain and support
the PROGRAMS in the event GALACTICOMM is unwilling or unable to do so consistent
with this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement by a duly
authorized representative as of the date set forth above.
GALACTICOMM - GALACTICOMM TECHNOLOGIES, INC.,
By: /s/ PETER BERG Date: 1/17/98
Print Name: Peter Berg
Title: CEO
RESELLER - SIMON & SCHUSTER, INC.
By: /s/ STEVEN R. CONREY Date: 1/17/98
Print Name: Steven R. Conrey
Title: Senior Vice President
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SCHEDULE A
I. SIMON & SCHUSTER PRICE LIST *****
PRODUCTS
SKU NUMBER DESCRIPTION PRICE
- ------------------------------------------------------------------
SSEDU256 Worldgroup v3.1 Education Server $ *****
256 user license incl.
Worldgroup Manager unlimited user incl.
Webcast Proserver v2.0 add-on incl.
- ------------------------------------------------------------------
SSACTI Actibase 256 user add-on $ *****
- ------------------------------------------------------------------
SSNETP Netpartners Internet Screen System /yr *****
- ------------------------------------------------------------------
SSCOMP Computone Terminal Server $ *****
32 ports with Radius software
- ------------------------------------------------------------------
SSROCK Rocketport Intelligent Sertial Kit $ *****
32 port controller PCI
- ------------------------------------------------------------------
SUPPORT CENTER SERVICES
SKU NUMBER DESCRIPTION PRICE
- ------------------------------------------------------------------
SSSER Per Server Annual Service Contract $ *****
includes 15 incidents/year plus
all software upgrades
- ------------------------------------------------------------------
SSSERADD Per Incident Charge $ *****
- ------------------------------------------------------------------
SSENG Custom Programming per/hr $ *****
- ------------------------------------------------------------------
SSWEB Webmaster Design per/hr $ *****
- ------------------------------------------------------------------
TRAINING CLASSES/INSTALLATION
SKU NUMBER DESCRIPTION PRICE
- ------------------------------------------------------------------
SSTRT Train the Trainer *****
- ------------------------------------------------------------------
SSADDM Administrator Workshop *****
- ------------------------------------------------------------------
SSINST Onsite Installation *****
- ------------------------------------------------------------------
***** Confidential Portion. This portion of the exhibit has been omitted
pursuant to a request for confidential treatment, and has been filed
separately with the Commission.
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III. SIMON & SCHUSTER (S & S) EDUCATIONAL SOFTWARE
DESCRIPTION OF SERVICES
TRAINING CLASSES
TRAIN THE TRAINER ***** PER DAY PLUS TRAVEL & EXPENSES
Designed specifically for the S & S installers. This course includes
comprehensive in-depth training on the Worldgroup system, the basis for the
Educational Software. Students will learn the basics of the system and work
their way up to a complete understanding of all the Administration functions
available from the base Worldgroup system. This course will involve extensive
lab time.
Course will include, but is not limited to:
/bullet/ Client/Server Technology
/bullet/ Basic Worldgroup Concepts
/bullet/ Educational Software Server Installation
/bullet/ Worldgroup Server installation
/bullet/ Client installation
/bullet/ Configuring a client workstation
/bullet/ Security and Accounting
/bullet/ Menu tree
/bullet/ Hypermedia Page editing
/bullet/ Forums
/bullet/ Libraries
/bullet/ Student/Teacher Polls and Questionnaires
/bullet/ Adding Modules.
/bullet/ Administrative access rights (co-sysops and staff)
/bullet/ Backing up and restoring a server
/bullet/ System monitoring
/bullet/ Computone Terminal Server Installations
/bullet/ Serial Modem installation
/bullet/ Basic Troubleshooting
/bullet/ Conducting a site survey for the Educational Software
* TRAINING WILL BE CONDUCTED AT THE S & S OFFICES. S & S WILL BE RESPONSIBLE FOR
SUPPLYING ALL NECESSARY HARDWARE FOR THE CLASS. (COMPUTERS, OVERHEAD PROJECTOR
ETC.)
*GALACTICOMM WILL PROVIDE ALL SOFTWARE AND DOCUMENTATION TO CONDUCT THE CLASS.
*A GALACTICOMM INSTRUCTOR WILL CONTACT S & S TO MAKE ALL THE NECESSARY
ARRANGEMENTS.
***** Confidential Portion. This portion of the exhibit has been omitted
pursuant to a request for confidential treatment, and has been filed
separately with the Commission.
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ADMINISTRATOR WORKSHOP ***** PER DAY PLUS TRAVEL & EXPENSES
This is a 3-4 hour workshop offered to all schools that purchase an Educational
Software system. This will prepare the Administrators and/or teachers for what
they are about to be using.
These workshops are scheduled during or immediately following an Educational
Software installation. These workshops will not be held for less than 5 people.
Two classes per day can be held to accommodate large amount of attendees.
WORKSHOP CONTENT
TERMS AND PHRASES
CONCEPTS AND HISTORY
EDUCATIONAL SOFTWARE OVERVIEW
INTRODUCTION TO ADMINISTRATION MENU
INTRODUCTION TO FORUMS
INTRODUCTION TO LIBRARIES
INTRODUCTION USER-ID'S
INTRODUCTION TO HPS
BASIC TROUBLESHOOTING
SUPPORT POLICIES AND ACCESS
HYPERMEDIA DESIGN & CONCEPTS ***** PER DAY PLUS TRAVEL & EXPENSES
EDUCATIONAL SOFTWARE HPS DESIGN AND CONCEPTS
RECOMMENDED FOR ALL EDUCATIONAL SOFTWARE SYSTEM ADMINISTRATORS
AND THOSE THAT WILL BE WORKING WITH THE MAINTENANCE AND CHANGE
OF EDUCATIONAL SOFTWARE SYSTEM MENU AND GRAPHICS.
***** Confidential Portion. This portion of the exhibit has been omitted
pursuant to a request for confidential treatment, and has been filed
separately with the Commission.
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SERVICES
ONSITE INSTALLATION ***** PER DAY PLUS TRAVEL & EXPENSES
ONSITE INCLUDES:
TRAVEL TO SCHOOL'S SITE;
INSTALLATION OF WINDOWS NT;
(PROVIDED BY SCHOOL)
INSTALLATION OF EDUCATIONAL SOFTWARE;
INSTALLATION OF THE FOLLOWING INSTALLATION HARDWARE:
MODEMS;
TERMINAL SERVER;
CABLES.
BUILD AND INSTALL ONE CLIENT ON THE SERVER;
MODIFICATION OF MENU TREE IF NEEDED.
ONSITE DOES NOT INCLUDE:
LAN WIRING AND CABLING;
LAN SERVER INSTALLATION AND OR CONFIGURATION NOT DIRECTLY RELATED TO
EDUCATIONAL SOFTWARE INSTALLATION.
MODIFICATIONS
All modifications to Menu Tree Structure and/or HPS pages that is not
included in the initial contract will be billed at ***** per hour. All
program functionality modifications that are not included in the
initial contract will be billed at ***** per hour.
SUPPORT/ANNUAL MAINTENANCE FEE
For each server purchased, S & Swill pay Galacticomm an annual
maintenance fee of *****. This fee will include all software updates as
described below and fifteen (15) incidents of technical support. An
incident is defined as the resolution of a technical problem made from
S & S to the technical support center regardless of the amount of time
required for resolution. Additional incidents above fifteen will be
billed at a rate of ***** per incident.
AUTOMATIC SOFTWARE UPDATE PROGRAM (ASUP)
UPDATES AND PATCHES
Each Educational Software has a built in ASUP which is included with
the Annual Support Fee. All Educational Software ASUP updates are sent
to S & S to distribute. All patches to the Educational Software will be
distributed to the S & S demo system in a special library. It is up to
S & S to distribute these patches and make them available to
Educational Software Administrators.
***** Confidential Portion. This portion of the exhibit has been omitted
pursuant to a request for confidential treatment, and has been filed
separately with the Commission.
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SCHEDULE B
GALACTICOMM SOFTWARE LICENSE AGREEMENT
WORLDGROUP/Trademark/
YOU SHOULD CAREFULLY READ THE FOLLOWING TERMS AND CONDITIONS BEFORE OPENING THIS
ENVELOPE. OPENING THIS ENVELOPE INDICATES YOUR ACCEPTANCE OF THESE TERMS AND
CONDITIONS. IF YOU DO NOT AGREE WITH THEM, YOU SHOULD RETURN THIS ENVELOPE
UNOPENED WITHIN 30 DAYS OF THE ORIGINAL DATE OF PURCHASE, AND THE PRICE OF THE
PRODUCT WILL BE REFUNDED TO YOU.
Galacticomm, Inc. provides this Software and licenses its use throughout the
world. You assume responsibility for the selection of the Software to achieve
your intended results, and for the installation, use, and results obtained from
the Software.
DEFINITIONS
"You" and "your" shall be taken as referring to the person or business entity
who purchased this License to use this Software or for whom such License was
purchased.
"Software" shall be taken as referring to the files supplied on the media inside
this envelope, and to any and all copies, updates, modifications,
functionally-equivalent derivatives, or any parts or portions thereof.
"Run-Time Access" shall be taken as referring to a connection that allows the
exchange of data between two or more computers.
"Live Computer" shall be taken as referring to a single computer connected with
communications hardware providing Run-Time Access to this Software.
"Development Computer" shall be taken as referring to a single computer upon
which a copy of this Software may be installed for configuration and development
purposes, not providing Run-Time Access to this Software.
"Client Software" shall be taken as referring to the program(s) that can be
generated with this Software to give other computers Run-Time Access to your
Live Computer in a Windows client/server mode.
LICENSE
You may:
1. install and use one copy of this Software on a single Live Computer;
you may also install and use one copy of this Software on a single
Development Computer.
2. copy this Software into machine-readable or printed form, for backup or
archival purposes in support of your use of this Software.
3. provide Run-Time Access to this Software on your single Live Computer
to up to 2 other machines at a time; said other machines need not, and
must not, be provided with copies of this Software in order to obtain
said Run-Time Access.
4. freely distribute the Client Software either electronically or on
diskette(s), CD-ROM(s) or tape(s).
5. transfer this Software and license to another party if the other party
agrees to accept the terms and conditions of this Agreement. If the
enclosed Software is an update, any transfer must include the update
and all prior versions. If you transfer the Software, you must at the
same time either transfer all copies, whether in machine-readable form,
to the same party, or destroy any copies not transferred.
YOU MAY NOT USE, COPY, MODIFY, OR TRANSFER THIS SOFTWARE, OR ANY COPY,
MODIFICATION, OR MERGED PORTION, IN WHOLE OR IN PART, EXCEPT AS EXPRESSLY
PROVIDED FOR IN THIS LICENSE, OR IN AMENDMENTS SIGNED BY AN OFFICER OF
GALACTICOMM. IF YOU TRANSFER POSSESSION OF ANY COPY OF THIS SOFTWARE, OR ANY
FUNCTIONALLY-EQUIVALENT DERIVATIVE, OR ANY PORTION OR MODIFICATION THEREOF, TO
ANOTHER PARTY, YOUR LICENSE IS AUTOMATICALLY TERMINATED.
TERM
This license is effective until terminated. You may terminate it at any time by
destroying all copies of the Software covered by this Agreement. It will also
terminate upon conditions set forth elsewhere in this Agreement or if you fail
to comply with any term or condition of this Agreement. You agree upon such
termination to destroy this Software, including all copies,
functionally-equivalent derivatives, and all portions and modifications thereof
in any form.
LIMITED WARRANTY
13
<PAGE>
GALLACTICOMM WARRANTS THAT THIS SOFTWARE, INCLUDING CLIENT SOFTWARE, SHALL
OPERATE IN ALL MATERIAL RESPECTS IN CONFORMANCE WITH THEIR PUBLISHED
SPECIFICATIONS AND/OR USER DOCUMENTATION. GALACTICOMM DISCLAIMS ALL OTHER
WARRANTIES OF ANY KIND, EITHER EXPRESSED OR IMPLIED, INCLUDING, BUT NOT LIMITED
TO, THE IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR
PURPOSE. GALLACTICOMM'S SOLE OBLIGATION SHALL BE TO USE GOOD FAITH EFFORTS TO
FIX ANY REPRODUCIBLE BUGS, ERRORS, OR DEFECTS IN THE SOFTWARE.
SOME STATES DO NOT ALLOW THE EXCLUSION OF IMPLIED WARRANTIES, SO THE ABOVE
EXCLUSION MAY NOT APPLY TO YOU. THIS WARRANTY GIVES YOU SPECIFIC LEGAL RIGHTS
AND YOU MAY ALSO HAVE OTHER RIGHTS WHICH VARY FROM STATE TO STATE.
Galacticomm does not warrant that the functions contained in this Software will
meet your requirements or that the operation of this Software will be
uninterrupted or error-free. However, Galacticomm does warrant the media on
which the Software is furnished to be free from defects in materials and
workmanship under normal use for a period of ninety (90) days from the date of
delivery to you.
Galaticomm also agrees to indemnify You and hold You harmless from and against
any and all damages, costs, claims, interests, expenses, obligations, losses or
liabilities of any kind and character (including without limitation any
attorney's fees and costs) You incur in connection with any claim or cause of
action that the Software or Client Software infringe or violate any copyright,
patent, trademark, or other proprietary right of any kind of any third party.
Galacticomm shall have the sole right to assume and control the defense of any
such claim and You (at Galacticomm's expense) shall provide reasonable
assistance and cooperation to Galacticomm in connection with any such defense.
LIMITATIONS OF REMEDIES
Galacticomm's entire liability and your exclusive remedy shall be:
a. the replacement of any media not meeting Galacticomm's "Limited Warranty" and
which is return to Galacticomm, or
b. if Galacticomm is unable to deliver replacement media which is free of
defects in materials or workmanship, you may terminate this Agreement by
returning this Software and your money will be refunded.
IN NO EVENT WILL GALACTICOMM BE LIABLE TO YOU FOR ANY DAMAGES, INCLUDING ANY
LOST PROFITS, LOST SAVINGS OR OTHER INCIDENTAL OR CONSEQUENTIAL DAMAGES ARISING
OUT OF THE USE OR INABILITY TO USE THIS SOFTWARE EVEN IF GALACTICOMM OR ITS
AUTHORIZED REPRESENTATIVE HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES,
OR FOR ANY CLAIM BY ANY OTHER PARTY. SOME STATES DO NOT ALLOW THE LIMITATION OR
EXCLUSION OF LIABILITY FOR INCIDENTAL OR CONSEQUENTIAL DAMAGES SO THAT ABOVE
LIMITATION OR EXCLUSION MAY NOT APPLY TO YOU.
GENERAL
You may not sublicense, assign, or otherwise transfer this License or Software
except as expressly provided in this Agreement. Any attempt to otherwise
sublicense, assign, or transfer any of the rights, duties or obligations
hereunder is expressly prohibited and will terminate this Agreement.
This Agreement will be governed by the laws of the State of the licensee.
All Agreements covering this Software (including but not limited to any and all
updates, upgrades, and enhancements to this Software or any portion thereof,
bearing the same registration number) shall be deemed to be counterparts of one
and the same License Agreement instrument.
BY OPENING THIS ENVELOPE, YOU ACKNOWLEDGE THAT YOU HAVE READ THIS AGREEMENT,
UNDERSTAND IT, AND AGREE TO BE BOUND BY ITS TERMS AND CONDITIONS. YOU FURTHER
AGREE THAT IT IS THE COMPLETE AND EXCLUSIVE STATEMENT OF THE AGREEMENT BETWEEN
US, WHICH SUPERSEDES ANY PROPOSAL OR PRIOR AGREEMENT, ORAL OR WRITTEN, AND ANY
OTHER COMMUNICATIONS BETWEEN US RELATING TO THE SUBJECT MATTER OF THIS
AGREEMENT.
14
<PAGE>
STATEMENT OF WORK
This Statement of Work ("SOW") dated as of January 12, 1998 is
incorporated in and made part of the Independent Contractor Master Services
Agreement made and entered into as of January 8, 1998 (the "Agreement") by and
between SIMON & SCHUSTER, INC., a New York corporation with offices in the State
of New York and at One Lake Street, Upper Saddle River, NJ 07458 ("S&S"), and
Galacticomm Technologies, Inc., a Florida corporation with a place of business
at 4101 SW Avenue Suite 101, Ft. Lauderdale, FL 33314 ("Independent
Contractor").
1. Terms used in this SOW and not otherwise defined shall have the meanings
specified in the Agreement.
2. Pursuant to the terms and conditions of the Agreement and this SOW, the
parties hereby agree that Independent Contractor shall provide Company with the
following Services and/or Materials:
CONTRACT TYPE (check as applicable):
[X] Fixed price of *****, to be paid in installments as follows: see attached
[ ] Time & materials at the following rate(s):
Total hourly charges shall not exceed $***** without Company's prior
written approval.
DESCRIPTION OF SERVICES AND ANY WORK INDEPENDENT CONTRACTOR IS TO PROVIDE (AS
APPLICABLE):
see attached
SCHEDULE FOR DELIVERABLES (IF ANY):
see attached
INDEPENDENT CONTRACTOR PROJECT MANAGER (IF APPLICABLE):
COMPANY PROJECT MANAGER (IF APPLICABLE):
***** Confidential Portion. This portion of the exhibit has been omitted
pursuant to a request for confidential treatment, and has been filed
separately with the Commission.
1
<PAGE>
INDEPENDENT CONTRACTOR KEY EMPLOYEES (IF APPLICABLE):
TERM: see attached
ADDITIONAL TERMS:
none
3. This SOW and the Agreement to which it becomes a part contains the entire
agreement of the parties with respect to the subject matter of this SOW, and
supersedes any prior agreement, understanding, or letter or intent, whether oral
or written, between the parties. No waiver, modification, or amendment of this
SOW shall be valid unless in a writing signed by the party to be charged.
4. This SOW shall have no force and effect unless and until it is signed by a
representative of both the applicable Company business unit and a representative
of the S&S Legal Department.
IN WITNESS WHEREOF, the parties have caused this SOW to be executed and
delivered as of the date first set forth above.
SIMON & SCHUSTER, INC. INDEPENDENT CONTRACTOR
/s/ STEVEN R. CONREY /s/ PETER BERG
- ----------------------------- -----------------------------
By: Steven R. Conrey By: Peter Berg
Title: Senior Vice President Title: CEO
Taxpayer ID #:
S&S Legal Department:
/s/ ROBERT C. GORDIE, JR.
By: Robert C. Gordie, Jr.
Title: VP & Ass't. Gen'l Counsel
2
<PAGE>
THE SIMON AND SCHUSTER ONLINE CLASSROOM
Implementation Proposal
3
<PAGE>
<TABLE>
<S> <C>
TABLE OF CONTENTS
1. PROPRIETARY STATEMENT...............................................................................5
2. COORDINATING ORGANIZATIONS..........................................................................5
3. STATEMENT OF WORK...................................................................................5
4. REQUIREMENTS........................................................................................6
5. SPECIFICATIONS......................................................................................6
5.1. FOCUS..........................................................................................6
5.2. FEATURES AND APPLICATIONS......................................................................7
5.2.1. STANDARD FEATURES (REQUIRE DEVELOPMENT AND CONFIGURATION).................................7
6. SCOPE INCREASES.....................................................................................9
7. PROPOSAL............................................................................................9
7.1. PHASE IMPLEMENTATION (CALCULATED IN MANHOURS OF BILLABLE TIME, NOT ACTUAL TIME FRAMES.).......10
7.1.1. MILESTONE I..............................................................................10
7.1.2. MILESTONE II.............................................................................10
7.1.3. MILESTONE III............................................................................11
8. MILESTONES AND COMMITMENTS.........................................................................12
9. BILLING............................................................................................12
9.1. DEVELOPMENT PHASES............................................................................12
10. EXPENSES........................................................................................13
10.1. TRAVEL.....................................................................................13
10.2. SHIPPING...................................................................................13
</TABLE>
4
<PAGE>
1. PROPRIETARY STATEMENT
Both parties may disclose to each other certain information which may
be considered by the disclosing party to be proprietary and trade
secret information. Each party recognizes the other's claim to the
value and importance of the protection of the other's proprietary
information. When such material is in illustrated or written form,
marked as confidential or proprietary, or when it is disclosed orally,
identified at the time as confidential or proprietary and identified as
such in writing to the receiving party within (30) days after
disclosure, then the material will not be used by the receiving party
other than for the purpose for which it was disclosed and will be
protected against disclosure to their parties and will be held as
confidential by the receiving party using the same degree of care as
that party uses to protect its own confidential or proprietary
material, but as least reasonable care.
2. COORDINATING ORGANIZATIONS
The organizations involved in the coordination and execution under this
Agreement are Galacticomm, Inc. and The Simon and Schuster Online
Classroom. Additional resources will be made available as required from
the engineering, marketing communications, service, and training
organizations of either or both of the parties.
The primary contacts of each party for purposes of performance under
this Agreement shall be:
<TABLE>
<S> <C> <C>
Galacticomm: Paul Roub Director of Engineering
4101 SW 47th Ave Ste. 101 Bill Posner Director of Customer Operations
Ft. Lauderdale Florida 33314 TBA Onsite Engineer
954-583-5990
Simon and Schuster: _____________ _________________
</TABLE>
3. STATEMENT OF WORK
Design, configure and install a closed system, named "Online Classroom"
for the purpose of this appendix, using Galacticomm's current version
of Worldgroup for NT. The system will be designed to operate on Pentium
class computers using Windows NT Server version 4.0 operating system.
The system will support 200+ simultaneous Web based sessions. The
system will have the ability to provide external Internet e-mail
transfers as well as Internal mail between Students, Teachers and other
users of the system. This system is designed to encourage and improve
communications electronically. Dissemination of files and documents,
teleconferencing, user registries, special private and public
discussion areas, Telnet, FTP, and a World Wide Web server will be
supported.
The system will be accessible via TCP/IP only and will provide the
internal network and users of the system access via the Internet.
5
4. REQUIREMENTS
The Simon and Schuster Online Classroom system must meet a minimum
level of features and functionalities. Services should be intuitive,
ergonomic, and uniform. The Simon and Schuster Online Classroom online
system needs to have the following features and functions:
/bullet/ Internet e-mail and internal Online Classroom e-mail
/bullet/ Internet Connectivity and services
/bullet/ File Libraries
/bullet/ Polls and Questionnaires
/bullet/ Chat Rooms
/bullet/ Discussion Forums
Each Simon and Schuster Online Classroom Server will:
/bullet/ Support 200+ active user license
/bullet/ Operate Galacticomm's Worldgroup platform.
/bullet/ Operate 24 hours a day, seven days a week, except for
daily backup/cleanup routines done nightly at a specified
time.
/bullet/ Be accessible by any authorized user with a PC, and an
Internet connection.
/bullet/ Allow World Wide Web access to all Student functions.
/bullet/ Run as a "closed" system where accounts are initiated by
Administrators of the system.
5. SPECIFICATIONS
5.1. FOCUS
The Simon and Schuster Online Classroom will offer a
communication system for interaction among students, teachers,
parents and administrators for the purpose of sharing
information, learning and using applications via the World
Wide Web. The system foundation will be designed to support an
array of content and applications that will lend value to the
system, while providing access to The Simon and Schuster
Online Classroom, and their online services. This appendix
addresses the design, development and configuration of the
model that will be used for other systems that are installed.
6
<PAGE>
5.2. FEATURES AND APPLICATIONS
5.2.1. STANDARD FEATURES (REQUIRE DEVELOPMENT AND
CONFIGURATION)
/bullet/ GENERAL FEATURES
Many of the modules will include the
"Dock/Float" option that will allow the
module to be locked within the browser, or
float on the desk top. All module and
features will be Year 2000 compliant where
applicable
/bullet/ E-MAIL
For all users of the system, with support
for file attachments, carbon copies, mail
forwarding, distribution lists, new mail
notification, return receipts, and security
controls to authorize individual users or
groups of users to use this service. An SMTP
gateway for Internet E-mail is included, all
features can be restricted on a user-by-user
basis as well. Allows users to search for
local WG Users by partial id Implements File
Attachments (Upload and Download) Allows
user to access all mail on Server (Post
Office mode) or just new mail (inbox mode).
/bullet/ REGISTRY OF USERS
Can be used as a "white pages" directory of
users, along with a configurable template
for information asked and displayed.
Security access restrictions identify which
users can insert entries and which can only
read them.
/bullet/ FILELIBRARIES (file dissemination, searching
and browsing) Can be used to manage more
than 10,000 categories of files. Each
category can have its own description and
security access restrictions to determine
which users can view the library, download
files, upload files for approval, and
approve uploaded files. Features include
keyword searching, listing by popularity,
chronological listings and wildcard file
searches, as well as the ability to queue up
multiple files for background download.
/bullet/ GROUP MESSAGING
For one-to-many or many-to-many threaded
discussions with support for up to 10,000
unique discussion "forums", or "SIGs"
(Special Interest Groups). Each of these
forums will include security with
user-by-user access control features
governing read, write, download, upload and
administration privileges. Features will
include, file attachments, keyword
searching, hierarchical threading of topics,
message quoting, configurable profanity
filter, embedded URL recognition. Implements
easy-to-use TreeGrid (tree-control like)
interface for navigation, toolbar w/
tooltips, will implements sysop functions
such as Approval, Exemption, Forwarding etc.
Will implements File Attachments (Upload and
Download) Message Listing by threads or
chronological order Online Help
/bullet/ CHAT ROOMS
Used for real-time data conferencing between
the concurrent users on the same server.
Features include private whispers,
one-to-one chat,
7
<PAGE>
squelching of annoying users, unlimited
number of rooms each of which can have its
own moderator, shared "White Board" that
users can share as well as a "chat registry"
allowing users to provide brief synopsis of
interests. Separate Visibility and Join keys
Each channel can be configured to not allow
profanity. Each user has his own "private"
channel. Will include Teleconference
"Actions", or mini macros that will be able
to have an unlimited number of lists,
unlimited number of words per list, each
channel will have TWO action lists. User
configurable ON/OFF settings. Lists have
keys to be able to see the actions, and to
use them. Individual actions can also be
keyed. Will include a feature called
Teleconference "Pals" which will record the
last logon times of a (sysop configurable)
number of friends you want to keep track of,
your Pal's typing go to a separate window.
Administrator ability to squelch any user in
the teleconference, which is Keyable. Users
will be able to "forget" a number
(Administrator configurable) of other users,
so they won't see what they type, a Key
required to forget users. Administrators
can't be forgotten, as can't users who
posses a certain, configurable key. Will
include the ability to send whispers to
other users in the same channel, as well as
the ability to direct messages to other
users in the same channel (others still see)
/bullet/ POLLS AND QUESTIONNAIRES
For student/parent surveys, electronic
voting for student events, samples tests,
data collection, mock social studies polls,
etc. Features will include multiple answer
and open response questions, automated
polling with up-to-the-minute statistics,
voting restrictions (e.g., one vote per
users), and optional "rewards" for
participants (e.g., increased security
access or delivery of an specified file).
Full user-by-suer security access control
will be implemented throughout. "Ticker
/bullet/ ACCOUNT MANAGEMENT
This option will give each Online Classroom
administrator the ability to create or
delete user accounts, assign security access
levels to "grades" or "classes" of users,(or
individual users), an audit trail of every
log-on, log-off, and file transfer event,
and comprehensive statistics and reporting
capabilities to measure usage based on user
class, time of day, and connection channel.
/bullet/ MULTIMEDIA (CUSTOMIZED GRAPHIC CONTENT)
Galacticomm will provide initial design and
setup of the "look and feel" of the Online
Classroom system. Working with Simon and
Schuster, Galacticomm will help coordinate
and configure all supplied graphic content
from Simon and Schuster.
/bullet/ SECURITY
Using Galacticomm standard Locks and Keys
architecture, Galacticomm technicians in
cooperation with Simon and Schuster will
design, configure and implement a security
structure to meet the needs of The Online
Classroom environment.
/bullet/ CUSTOMIZED MENUS
Galacticomm technicians in cooperation with
Simon and Schuster will design, configure
and implement a full menu structure that
will take advantage of the security
mentioned above. This will include a full
menu level system that will provide
different access for different access
levels. For example access levels can be
designed to reflect grade level, teacher,
parent, administrator, etc.
8
<PAGE>
/bullet/ CUSTOMIZED AREAS
Galacticomm technicians in cooperation with
Simon and Schuster will design, configure
and implement customization to the following
areas:
File Libraries;
Forums;
Polls and Questionnaires;
Chat Rooms;
Administration accounts;
/bullet/ EXPANDED CHAT ROOM DEVELOPMENT
As part of this development process,
Galacticomm will develop the ability for
schools, at their discretion, to connect to
a main "hub" where multiple schools can
connect for chat sessions. With this ability
students, parent and teachers alike can
carry on real-time teleconferencing with
other schools using The Online Classroom
system. This system will include a "White
Board" feature that will be accessible to
all users in the same expanded chat rooms.
Each user will be able to have a "chat
registry" that will provide a brief synopsis
of the user's interests. Will allow e-mail
between linked systems. Will include special
shared forums that can be access between
systems. The creator can modify or delete
the forum and set access of other systems.
Users can delete or modify messages they
wrote and have the changes take effect
across the network. Will provide options to:
Limit the size of attachments, automatically
approve attachments for download, Disable
network deletion of messages disable network
modification of messages. These options will
be able to be configured globally and on a
per-forum basis
6. SCOPE INCREASES
The biggest threat to the successful completion of any project is the
tendency to add or change system features. Established change control
procedures are important to ensure that changes are only implemented
after their impact on cost and schedule has been adequately considered.
The following change control procedures will be used for this project:
1. All change requests will be submitted to Simon and
Schuster for review.
2. Simon and Schuster will submit written change
requests to Galacticomm. (Change order form included
with this document.)
3. Galacticomm will respond to the request in writing
within five days indicating the impact of the change
on the cost and schedule of the project.
4. Simon and Schuster will approve or deny the request
within five days of receiving a response from
Galacticomm.
5. NO CHANGES will be made to the system prior to
receiving written approval from Simon and Schuster or
his assigned representative.
7. PROPOSAL
Galacticomm will need to dedicate a staff member to The Simon and
Schuster Online Classroom This staff member is a Galacticomm employee
and has dedicated responsibility to the development of The Online
Classroom system. The hours billed are not actual time frames but hours
of billable time.
9
<PAGE>
7.1. PHASE IMPLEMENTATION (CALCULATED IN MAN-HOURS OF BILLABLE TIME,
NOT ACTUAL TIME FRAMES.)
7.1.1. MILESTONE I
7.1.1.1. PHASE I (58 HOURS) Galacticomm will provide
analysis, designing, and planning. During
this phase design, development strategies,
tools needed and project timelines will be
determined. The primary goal is to establish
a model system that will support all defined
functions and features. This model system
will be used as the template for all future
Online Classroom Systems that Simon and
Schuster market. This phase will include at
least 3 trips to Simon and Schusters offices
for discussion and design meetings. Each
trip will include not more than 2
Galacticomm technicians and include at least
one full business day each.
Galacticomm will:
/bullet/ review all specifications with
Simon and Schuster.
/bullet/ review all hardware & software
configurations.
/bullet/ evaluate requirements to
implement Worldgroup security.
/bullet/ review and provide effective
solutions per specifications
and needs.
/bullet/ Provide complete model
flowchart and system diagram
and description for acceptance
by Simon and Schuster.
After Galacticomm has completed Phase I and this
phase has been accepted by Simon and Schuster then
development and configurations will begin.
7.1.2. MILESTONE II
7.1.2.1. PHASE II (104 HOURS, DEVELOPMENT
Galacticomm will develop the Online
Classroom system as a results agreed upon in
Phase I. This phase will require constant
communication be Galacticomm assigned
technicians and Simon and Schuster to
review, analyze and "sign-off" on the
developed modules.
7.1.2.2. PHASE III (82 HOURS)
Developed applications will be integrated
and configured into the model Online
Classroom server. This will expand the
system to include the following
deliverables:
/bullet/ TCP/IP connectivity
/bullet/ Basic menus and web pages
/bullet/ Module setup and testing
/bullet/ File Libraries (initially 5 as
templates)
/bullet/ Chat Rooms (initially 5 as
templates)
/bullet/ Forums (initially 5 as
templates)
/bullet/ Special E-mail accounts for
Information, Support,
Administrators etc. (initially
5)
10
<PAGE>
7.1.2.3. PHASE IV (115 HOURS)
Galacticomm, will install, test and
configure The Online Classroom model.
Galacticomm will provide initial
customization of the look and feel of this
server, customizing all web pages, with
extensive HTML document statements to
provide easy instructions for future
customers who wish to personalize their
Online Classroom server. This design and
implementation of custom web pages and the
look and feel is determined from the results
of Phase I. After this phase is completed
and accepted, any additional modifications
or enhancements will either be done by The
Simon and Schuster Online Classroom or
contracted with Galacticomm, Inc. under a
separate contract. During this phase
database structure and design flow will be
tested and evaluated.
THIS PHASE WILL BRING THE SYSTEM ONLINE AND
MEET MILESTONE II At this time The Simon and
Schuster Online Classroom will be notified
to connect to the system remotely and review
the setup and configuration. Approval of
this phase by The Simon and Schuster Online
Classroom will be required before moving to
the next phase.
7.1.3. MILESTONE III
7.1.3.1. PHASE V (ON-SITE 3 DAY TRAINING)
This phase will include one Galacticomm
Onsite Engineer to be sent to Simon and
Schuster's site to install the model Online
Classroom and provide the "Master copy".
After the server is up and the system is
online, Galacticomm will conduct an informal
training session with up to 3 The Simon and
Schuster representatives.
AT THIS TIME, THE SYSTEM WILL BE READY FOR
SALE.
7.1.3.2. PHASE VI (INSTALLATION ASSISTANCE, 3 DAYS)
This phase will include up to 3 days
installation assistance at a Simon and
Schuster customers site. Galacticomm will
provide a experienced and trained Support
Engineer to provide full assistance during
the initial installations that Simon and
Schuster obtain.
11
<PAGE>
8. MILESTONES AND COMMITMENTS
MILESTONE I - The completion of Phase I in Level I meets the first
milestone. COMMITMENT - Upon the completion of Milestone I, The Simon
and Schuster Online Classroom will commit to continuation of Phase II
to meet the second milestone. MILESTONE II - The completion of Phase
II, III, and IV meets the second milestone. COMMITMENT - At this time
The Simon and Schuster Online Classroom will commit to continuation of
Phase V to meet the third Milestone.MILESTONE III - The completion of
Phase V and VI meets the third milestone.COMMITMENT - Upon the
completion of Milestone III, The Simon and Schuster Online Classroom
will discuss continued development solely with Galacticomm, Inc. for
additional programs, services, and support needed for The Simon and
Schuster Online Classroom at Galacticomm's current development rates.
9. BILLING
Galacticomm development and consulting rates are billed at ***** per
hour for development and ***** per hour for Web Based design and
content. The hours billed are not actual time frames but hours of
billable time.
9.1. DEVELOPMENT PHASES
<TABLE>
<S> <C>
Milestone I
PHASE I - planning and design (58 hrs.) *****
(includes 2 days onsite at Simon and Schuster site)
Milestone II
PHASE II - Software Development (104 hrs.) *****
PHASE III - Integration and Configuration (82 hrs.) *****
PHASE IV - Web Page development (115 hrs.) *****
(ESTIMATED)
Milestone III
PHASE V - Onsite Installation/ Training (3 days*) *****
PHASE VI - Installation assistance (3 days) *****
*A "DAY" IS DEFINED AS BEING BETWEEN THE HOURS OF 9:00AM AND
6:00PM, MONDAY THROUGH FRIDAY. THIS PRICE INCLUDES UP TO 3
STUDENTS. FOR EACH ADDITIONAL STUDENT A SURCHARGE OF $*****
PER DAY WILL BE ADDED.
DEVELOPMENT TOTAL *****
</TABLE>
***** Confidential Portion. This portion of the exhibit has been omitted
pursuant to a request for confidential treatment, and has been filed
separately with the Commission.
12
<PAGE>
10. EXPENSES
10.1. TRAVEL
All expenses occurred for travel will be the responsibility of
Simon and Schuster. This includes but is not limited to:
/bullet/ Travel to Simon and Schuster.
/bullet/ Travel to Simon and Schuster Customer sites.
/bullet/ Travel to Galacticomm, Inc. by Simon and
Schuster's staff.
ALL TRAVEL EXPENSES INCURRED BY GALACTICOMM IN REGARDS TO THIS
PROPOSAL MUST BE APPROVED BY SIMON AND SCHUSTER BEFORE ANY
EXPENSES ARE OCCURRED.
10.2. SHIPPING
All expenses required for shipping of products to and from
Simon and Schuster will be the responsibility of Simon and
Schuster.
13
<PAGE>
[LOGO] INDEPENDENT CONTRACTOR MASTER SERVICES AGREEMENT
S I M O N & S C H U S T E R
- --------------------------------------------------------------------------------
INDEPENDENT CONTRACTOR MASTER SERVICES AGREEMENT (the "Agreement") made and
entered into as of Janauary 12, 1998 by and between Simon & Schuster, Inc., a
New York corporation with offices in New York and at One Lake Street, Upper
Saddle River, NJ 07458 ("S&S"), and Galacticomm Technologies, Inc., a Florida
corporation whose principal address is 4101 SW 47 Avenue, Suite 101, Ft.
Lauderdale, FL 33314 ("Independent Contractor").
IN CONSIDERATION OF THE MUTUAL COVENANTS CONTAINED HEREIN AND OTHER GOOD AND
VALUABLE CONSIDERATION, THE RECEIPT AND SUFFICIENCY OF WHICH ARE HEREBY
ACKNOWLEDGED, THE PARTIES AGREE AS FOLLOWS:
1. ENGAGEMENT. S&S, its subsidiaries, or affiliates may from time to time engage
Independent Contractor (with the entity engaging Independent Contractor referred
to hereafter as the "Company") to perform certain services and create certain
deliverables (collectively, the "Services," with any deliverable that
Independent Contractor creates pursuant to this Agreement referred to as a
"Work"). Any such engagement shall be subject to execution of a Statement of
Work substantially in the form annexed as Exhibit A to this Agreement (each an
"SOW"). Once executed, an SOW shall become part of and be governed by this
Agreement. In the event of any conflict between this Agreement and an SOW, the
SOW shall control. Key Employees identified in an SOW shall not be removed from
a particular project without the Company's prior consent.
2. DELIVERY AND ACCEPTANCE OF ANY SOFTWARE DELIVERABLE.
2.1 DELIVERY OF A BETA VERSION. If the Services include any software
deliverable, Independent Contractor shall prepare and deliver to Company a Beta
Version of any such Work in accordance with the schedule and criteria set forth
in the applicable SOW. Independent Contractor shall have each Beta Version
internally tested prior to delivery to Company to ensure that, in Independent
Contractor's good-faith belief, it meets the applicable SOW. A "Beta Version"
shall mean a completed and fully operable version of the Work delivered to
Company for testing and review pursuant to Section 2.2 below.
2.2 TESTING OF THE BETA VERSION. Company shall test and review each Beta Version
to determine in its reasonable discretion whether such Beta Version meets the
applicable SOW and is otherwise suitable for use. Upon completion of its review,
Company shall notify Independent Contractor whether it accepts or rejects such
Beta Version. Any deadline specified in the SOW for delivery of the Master(s)
shall be extended by one (1) day for each day beyond fifteen (15) business days
following delivery of the Beta Version it takes Company to provide Independent
Contractor notice of acceptance or rejection of the Beta Version. "Master" shall
mean a final version of the Work constituting an exact duplicate of the accepted
Beta Version.
2.2.1 For each Beta Version Company accepts, Independent Contractor shall
deliver to Company in accordance with the schedule and criteria set forth in the
applicable SOW a Master for Company's use, together with all computer code for
the Work (including all source code and object code) and Documentation.
"Documentation" means all technical, functional, design, and other documentation
Independent Contractor creates in connection with creating, maintaining, and/or
revising the Work.
2.2.2 If Company rejects any Beta Version, Independent Contractor shall
submit a revised version for Company's review if a mutually acceptable schedule
for submission of such revisions can be reached, which revisions shall then be
subject to the review and acceptance procedures outlined in this Section 2.2.
This process shall continue until Company, at its option, either accepts the
version of the Work in question or terminates this Agreement with respect to
such version.
2.3 COMPANY DELAYS. Independent Contractor shall not be liable for any delays or
extensions of deadlines to the extent caused by Company's failure to meet any
obligation to timely deliver materials or information necessary for Independent
Contractor to complete the Services.
3. TITLE AND OWNERSHIP. The parties agree that, as between Independent
Contractor and Company:
(i) The Independent Contractor has no right to or interest in any Work,
Documentation, or any other materials created in connection with the Services
(collectively the "Materials"), nor any right to or interest in any copyright
therein. The Independent Contractor acknowledges that the Services and the
Materials have been specially commissioned or ordered by the Company as "works
made-for-hire" as that term is used in the Copyright Law of the United States,
and that the Company is therefore to be deemed the author of and is the owner of
all copyrights in and to such Materials.
(ii) In the event that such Materials or any portion thereof are for any
reason deemed not to have been works made-for-hire, the Independent Contractor
hereby assigns to the Company any and all right, title, and interest Independent
Contractor may have in and to such Materials, including all copyrights, all
publishing rights, and all rights to use, reproduce, and otherwise exploit the
Materials in any and all languages, channels, and formats or media, whether now
known or hereafter created. The Independent Contractor agrees to execute such
instruments as the Company may from time to time deem necessary or desirable to
evidence, establish, maintain, and protect the Company's ownership of such
Materials, and all other rights, title, and interest therein. Independent
Contractor hereby waives any and all claims that it has now or hereafter in any
jurisdiction throughout the world to so-called moral rights or DROIT MORAL with
respect to any Materials.
(iii) Notwithstanding the foregoing, the Company acknowledges that the
Independent Contractor's ability to carry out the Services may be dependent upon
Independent Contractor's past experience in the industry and in providing
similar service to others and that Independent Contractor expects to continue
such work in the future. Subject to the confidentiality provisions of Section 8
below, information Independent Contractor communicates to Company in the course
of presentations, or in documents, that report general industry knowledge is not
subject to the terms of (i) and (ii) above.
4. PAYMENT. In consideration of the Services Independent Contractor provides
pursuant to a particular SOW, Company shall pay Independent Contractor the
amounts, and according to the schedule, specified in the applicable SOW.
Independent Contractor shall not be entitled to any compensation, benefits, or
expenses other than as specifically provided for in the applicable SOW.
5. WARRANTIES AND INDEMNIFICATION.
5.1 REPRESENTATIONS AND WARRANTIES. Independent Contractor represents and
warrants that:
(i) Independent Contractor has all rights and authority necessary to enter
into this Agreement and carry out its terms and conditions;
(ii) the Services and Work will materially conform to the applicable SOW
and any Work that is a software deliverable will operate in accordance with
commonly accepted standards for computer software;
(iii) Independent Contractor (at its cost) has secured all rights and/or
licenses to any third-party computer code or other third-party content included
in or used in creating the Work or any other deliverable that permits the
creation, licensing, and other exploitation of the Work and any other
deliverable throughout the world, in any and all languages, formats, and media
now known or hereafter created;
(iv) the Services, Work, and any other deliverable the Independent
Contractor creates shall not contain any libelous, tortious, or otherwise
unlawful material or violate or infringe any patent, copyright, trademark, or
other proprietary rights of any kind of any third party anywhere in the world;
(v) Independent Contractor shall not include or authorize any Trojan
Horse, back door, time bomb, drop dead device, worm, virus, or other code of any
kind that may disable, erase, display any unauthorized message, or otherwise
impair any Work that is a software deliverable or any hardware on which such
Work operates;
(vi) Independent Contractor shall not subcontract any work to be performed
pursuant to this Agreement without Company's prior written consent, which
consent shall not be unreasonably withheld. Any subcontracting shall be at
Independent Contractor's cost and Company shall have no liability to any such
subcontractors;
(vii) the Services and Work and any other deliverable will comply with all
applicable federal, state, and local law, rules, and regulations, and
Independent Contractor is in compliance and will continue to comply with all
applicable worker's compensation laws and occupational safety requirements;
(viii) Independent Contractor shall comply with all of Company's standards
and procedures when working on-site at Company, including without limitation
standards relating to security. Any of Independent Contractor's employees or
consultants may be denied access to Company's facilities if they fail to comply
with the above;
(ix) for a period of ninety (90) days following Company's acceptance of
any software or computer code that comprises all or part of any Work,
Independent Contractor (at its cost) will correct any and all reproducible bugs,
errors, or defects in such software or computer code; and
(x) to the extent any software or computer code comprising all or part of
any Work must sort, process, present, or otherwise accommodate same century and
multicentury formulae and date values, it shall do so and shall not otherwise
experience or cause any software or hardware abnormality or incorrect or invalid
results attributable to date values prior to, during, or after the year 2000 as
a result of the passage of time.
5.2 INDEMNITY. Independent Contractor agrees to indemnify and hold harmless S&S,
its subsidiaries, and affiliates (each an "Indemnified Party") from and against
any and all damages, costs, claims, interest, expenses, obligations, losses, or
liabilities of any kind and character (including without limitation any
attorneys' fees and costs) any Indemnified Party incurs in connection with any
breach or alleged breach of Independent Contractor's representations and
warranties set forth in Section 5.1 above. The Indemnified Party shall have the
sole right to assume and control the defense of any such claim and, until such
claim has been settled or otherwise resolved, may withhold any sums due
Independent Contractor under this Agreement or otherwise. Independent Contractor
shall provide reasonable assistance and cooperation to the Indemnified Party in
connection with any such
1
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defense. This indemnity right shall be in addition to any other right that any
Indemnified Party may have in law or equity.
6. INDEPENDENT CONTRACTOR.
6.1 RELATIONSHIP. Independent Contractor agrees to perform the Services
hereunder solely as an Independent Contractor. The parties recognize that this
Agreement does not create any actual or apparent agency, partnership, franchise,
or relationship of employer and employee between the parties. Without limiting
the generality of the foregoing, Independent Contractor shall not be entitled to
participate in any of Company's benefits, including without limitation any
health or retirement plans. Independent Contractor is not authorized to enter
into or commit Company to any agreements, and Independent Contractor shall not
represent itself as the agent or legal representative of Company. Company shall
not be liable for injury or death occurring to Independent Contractor or any of
its employees or subcontractors during the course of this Agreement.
6.2 TAXES. Company shall not be liable for taxes, worker's compensation,
unemployment insurance, employers' liability, employer's FICA, social security,
withholding tax, or other taxes or withholding for or on behalf of the
Independent Contractor or any other person Independent Contractor consults or
employs in performing Services under this Agreement. All such costs shall be
Independent Contractor's sole responsibility.
7. TERM AND TERMINATION.
7.1 TERM. This Agreement shall remain in full force and effect unless and until
terminated in writing by either party. In addition to the termination rights
specified in Section 7.2 below, either party may terminate this Agreement for
any reason (or no reason) upon ten (10) days written notice to the other;
PROVIDED, HOWEVER, in the event Independent Contractor exercises its right to
terminate pursuant to this clause, it shall be obligated to complete the
Services specified in any then-outstanding SOW unless Independent Contractor may
terminate such SOW for cause pursuant to Section 7.2 (ii) below.
7.2 TERMINATION. This Agreement or any SOW may be terminated:
(i) immediately by Company with respect to any Work Company rejects
pursuant to Section 2 above or that is not delivered in accordance with the
delivery schedule or requirements set forth in the applicable SOW; and
(ii) by either party upon the other's breach of any material term or
condition of this Agreement if such breach is not cured within fifteen (15) days
of receipt of notice thereof from the non-breaching party.
Upon termination for any reason, Independent Contractor shall deliver to Company
a copy of any Work as it then exists and all tangible information or materials
Company delivered to Independent Contractor. Company shall have no obligation to
return computer code (including source code and object code) related to any
Work, any Documentation, and/or any materials Independent Contractor delivers.
7.3 PAYMENT/REFUND UPON TERMINATION. In addition to any other rights at law or
equity either party may have in the event of termination, the following
payment/refund obligations shall apply:
(i) In the event of termination pursuant to Section 7.1 and provided that
Independent Contractor is not in material breach of its obligations hereunder,
the Independent Contractor shall be entitled to any amounts paid or owed for
Services already acceptably performed and Work already accepted. In addition,
and to the extent such termination occurs after Independent Contractor has
commenced work on the next installment of the Services (e.g., has delivered an
acceptable Beta Version and has begun work finalizing the Master) on a fixed fee
basis, Independent Contractor shall be entitled to payment of the next
installment of any such fee on a PRO RATA basis (calculated by multiplying the
next payment due by a fraction, the numerator of which shall be the total number
of days prior to termination that Independent Contractor has worked on the next
deliverable and the denominator of which shall be the total number of days
allotted in the schedule set forth in the applicable SOW for completion of that
deliverable).
(ii) If Company terminates this Agreement in whole or in part pursuant to
Section 7.2 prior to the time Company accepts the first deliverable (whether
that be a Beta Version of the Work, an interim report, or the Work itself if
there are no preliminary deliverables), then Independent Contractor shall refund
to Company all amounts paid (if any) to Independent Contractor for the Services
that are the subject of the termination. If Company terminates this Agreement in
whole or in part pursuant to Section 7.2 at any time after Company accepts the
first deliverable, then Independent Contractor shall be entitled to any amounts
paid or owed for any deliverable that has been accepted but it shall have no
right to further payments of any kind, and it shall refund to Company any
payments made beyond those for any deliverable already accepted.
8. CONFIDENTIALITY. Company confidential and proprietary information to which
Independent Contractor is exposed shall be subject to the non-disclosure
requirements annexed as Exhibit B.
9. DISCLAIMER. EXCEPT AS EXPRESSLY STATED IN THIS AGREEMENT AND ANY SOW
(INCLUDING ALL EXHIBITS AND ATTACHMENTS), INDEPENDENT CONTRACTOR MAKES NO OTHER
REPRESENTATIONS OR WARRANTIES, EITHER EXPRESS OR IMPLIED, REGARDING THE
MERCHANTABILITY OR FITNESS FOR USE OF THE WORK.
10. GENERAL PROVISIONS.
10.1 ANTI-ASSIGNMENT. Independent Contractor may not assign this Agreement or
any of the rights and obligations hereunder (except the right to receive
payments) without the prior written consent of Company. Any purported assignment
by Independent Contractor in violation of this Agreement shall be null and void.
This Agreement shall be binding upon and inure to the benefit of the parties'
successors, Company's assignees, and Independent Contractor's permitted
assignees.
10.2 WAIVER. No waiver of any term or condition of this Agreement, or any breach
of this Agreement, shall or shall be deemed to be a waiver of any other term or
condition of the Agreement or of any later breach of the Agreement.
10.3 SURVIVAL. The terms and conditions of Sections 3, 5, 6, 7, 8, and 9, as
well as any provision necessary for the interpretation of this Agreement, shall
survive the termination or expiration of this Agreement or completion of the
Services.
10.4 HEADINGS. The headings appearing in this Agreement are inserted only as a
matter of convenience and in no way define, limit, constrict, or describe the
scope or intent of any particular section, nor in any way affect interpretation
of this Agreement.
10.5 FORCE MAJEURE. Any delivery or other obligation set forth in this Agreement
shall be extended by one (1) day for each day that performance is interfered
with by reason of fire or other casualty or accident, strikes or labor disputes,
war or other violence, any law, order, proclamation, regulation, ordinance,
demand, or requirement of any governmental agency, or any other act or condition
beyond the reasonable control of the party whose performance is so affected.
Company shall have the right to immediately and at any time terminate any SOW
under which Independent Contractor's performance is delayed by reason of any
force majeure for a period of fifteen (15) days or more.
10.6 GOVERNING LAW, JURISDICTION, AND VENUE. THIS AGREEMENT SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO
CONTRACTS MADE AND TO BE PERFORMED ENTIRELY WITHIN THAT STATE. INDEPENDENT
CONTRACTOR CONSENTS TO THE EXCLUSIVE JURISDICTION AND VENUE OF THE UNITED STATES
DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK OR, IF FEDERAL JURISDICTION
IS LACKING, TO THE SUPREME COURT OF THE STATE OF NEW YORK FOR NEW YORK COUNTY
FOR ANY DISPUTE ALLEGING A BREACH OF THIS AGREEMENT AND WILL NOT MAINTAIN THAT
EITHER FORUM LACKS PERSONAL JURISDICTION OVER INDEPENDENT CONTRACTOR OR IS AN
INCONVENIENT FORUM FOR RESOLVING ANY SUCH DISPUTE.
10.7 COMPANY NAME. The Independent Contractor shall not use the Company's name
without the Company's prior written consent; PROVIDED, HOWEVER, that
notwithstanding the foregoing, Independent Contractor shall have the limited
right, in connection with promoting itself to prospective clients, to advise
such prospective clients in promotional literature or otherwise that Independent
Contractor has provided services to the Company.
10.8 ENTIRE AGREEMENT. This Agreement and its annexed exhibits contain the
entire agreement of the parties with respect to the subject matter hereof, and
supersedes any prior agreement or understanding, whether oral or written,
between the parties. No waiver, modification, or amendment of this Agreement or
any SOW shall be valid unless in a writing signed by the party to be charged and
Company's legal counsel.
10.9 COUNTERPARTS. This Agreement may be executed in counterparts, each of which
when so executed shall be an original and all of which, when taken together,
shall constitute one and the same agreement.
10.10 NO IMPLIED AGREEMENT. Nothing contained in this Agreement or in any SOW
shall be construed to impose any obligation on either party to enter into any
SOW and each party retains the exclusive right to decline to enter into any SOW
for any reason. The parties intend to be bound only upon execution of a written
agreement or a written SOW and no negotiation, exchange of draft, or partial
performance shall be deemed to imply an agreement. Neither the continuation of
performance nor any other conduct shall be deemed to imply a continuing
agreement upon the expiration of this Agreement or the full performance of any
SOW.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed and
delivered as of the date first set forth above.
SIMON & SCHUSTER, INC.
/s/ STEVEN R. CONREY
- ---------------------------------------
By: Steven R. Conrey
Title: Senior Vice President
INDEPENDENT CONTRACTOR
/s/ PETER BERG
- ---------------------------------------
By: Peter Berg
Title: CEO
Taxpayer I.D. No.:
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<PAGE>
EXHIBIT A
FORM STATEMENT OF WORK
This Statement of Work ("SOW") dated as of ___________, 199_ is
incorporated in and made part of the Independent Contractor Master Services
Agreement made and entered into as of _____________, 199__ (the "Agreement") by
and between SIMON & SCHUSTER, INC., a New York corporation with offices in the
State of New York and at One Lake Street, Upper Saddle River, NJ 07458 ("S&S"),
and _____________________________, a _______________ corporation with a place of
business at ___________________________________________________________________
("Independent Contractor").
1. Terms used in this SOW and not otherwise defined shall have the meanings
specified in the Agreement.
2. Pursuant to the terms and conditions of the Agreement and this SOW, the
parties hereby agree that Independent Contractor shall provide Company with the
following Services and/or Materials:
CONTRACT TYPE (check as applicable):
[ ] Fixed price of $____________, to be paid in installments as follows:
[ ] Time & materials at the following rate(s):
Total hourly charges shall not exceed $__________ without Company's prior
written approval.
DESCRIPTION OF SERVICES AND ANY WORK INDEPENDENT CONTRACTOR IS TO PROVIDE (AS
APPLICABLE):
SCHEDULE FOR DELIVERABLES (IF ANY):
INDEPENDENT CONTRACTOR PROJECT MANAGER (IF APPLICABLE):
COMPANY PROJECT MANAGER (IF APPLICABLE):
INDEPENDENT CONTRACTOR KEY EMPLOYEES (IF APPLICABLE):
TERM:
ADDITIONAL TERMS:
3. This SOW and the Agreement to which it becomes a part contains the entire
agreement of the parties with respect to the subject matter of this SOW, and
supersedes any prior agreement, understanding, or letter or intent, whether oral
or written, between the parties. No waiver, modification, or amendment of this
SOW shall be valid unless in a writing signed by the party to be charged.
4. This SOW shall have no force and effect unless and until it is signed by a
representative of both the applicable Company business unit and a representative
of the S&S Legal Department.
IN WITNESS WHEREOF, the parties have caused this SOW to be executed and
delivered as of the date first set forth above.
SIMON & SCHUSTER, INC. INDEPENDENT CONTRACTOR
[or applicable subsidiary or affiliate]
/s/ STEVEN R. CONREY /s/ PETER BERG
- --------------------------------------- -----------------------------------
By: Steven R. Conrey By: Peter Berg
Title: Senior Vice President Title: CEO
Taxpayer ID #: ____________________
S&S Legal Department:
________________________________________
By: ____________________________________
Title: _________________________________
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<PAGE>
EXHIBIT B
NON-DISCLOSURE REQUIREMENTS
Pursuant to the Agreement to which this Exhibit B is annexed, Company may be
disclosing to Independent Contractor certain confidential business plans,
development plans, reports, financial information, design documents,
specifications, programmer notes, software (its own and/or third party), and/or
other information, whether or not so identified (together with any notes,
analyses, compilations, studies, or other documents that are based upon,
contain, or otherwise reflect such information, the "Confidential Information,"
which shall include this Agreement). The parties agree as follows with respect
to treatment of the Confidential Information:
1. Independent Contractor shall use the Confidential Information solely
for the purpose of performing the Services specified in the applicable SOW and
not for any other purpose. Except to the extent permitted by Section 3 below,
Independent Contractor will not disclose the Confidential Information, in whole
or in part, to any other party. In fulfilling its obligations under this
Agreement, Independent Contractor shall use at least the same standard of care
it uses to protect its own information of similar kind, but not less than a
reasonable standard of care.
2. The term "Confidential Information" shall be deemed not to include
information which (i) is or becomes generally available to the public other than
(a) as a result of a disclosure by Independent Contractor or any other person
who directly or indirectly receives such information from the Independent
Contractor or (b) in violation of a confidentiality obligation to the Company
known to Independent Contractor or (ii) is or becomes available to Independent
Contractor on a non-confidential basis from a source which is entitled to
disclose it to Independent Contractor or (iii) is independently developed by
Independent Contractor without benefit of the Confidential Information.
3. In the event that Independent Contractor is required by law or by
interrogatories, requests for information or documents, subpoena, Civil
Investigative Demand, or similar process to disclose any information supplied to
Independent Contractor pursuant to the Agreement, including without limitation
the Confidential Information or any other information the disclosure of which is
restricted by the terms of this Exhibit B, Independent Contractor will provide
the Company with prompt prior written notice of such request or requirement so
that the Company may seek an appropriate protective order. If, in the absence of
a protective order, Independent Contractor is nonetheless, in the written
opinion of its counsel (which shall be forwarded to the Company upon request),
compelled to disclose Confidential Information or any other information the
disclosure of which is restricted by the terms of this Exhibit B to any tribunal
or else stand liable for contempt or suffer other material censure or penalty,
Independent Contractor may disclose only that portion of the Confidential
Information or other information which it is advised in writing by its counsel
(which shall be forwarded to the Company upon request) is so legally compelled
and Independent Contractor will exercise its best efforts to obtain assurance
that confidential treatment will be accorded such Confidential Information.
4. All Confidential Information disclosed by the Company to Independent
Contractor shall be and shall remain the Company's property. Upon termination of
the Agreement, Independent Contractor shall redeliver all tangible Confidential
Information furnished by the Company. Except to the extent Independent
Contractor is advised in writing by counsel that such action is prohibited by
law, Independent Contractor will also destroy all written material, memoranda,
notes, and other writings or recordings whatsoever prepared by it based upon,
containing, or otherwise reflecting any Confidential Information. Any
Confidential Information that is not returned or destroyed, including without
limitation any oral Confidential Information, shall remain subject to the
confidentiality obligations set forth in this Exhibit B.
5. Independent Contractor acknowledges and agrees that money damages would
not be a sufficient remedy for any breach of this Exhibit B by Independent
Contractor and that the Company shall be entitled to specific performance,
including without limitation injunctive relief, as a remedy for any such breach.
Such remedy shall not be deemed to be the exclusive remedy for breach of this
Exhibit B but shall be in addition to all other remedies available at law or
equity. Independent Contractor agrees to reimburse the Company for costs and
expenses (including without limitation attorneys' fees) incurred by the Company
in connection with the enforcement of this Exhibit B.
6. If any provision of this Exhibit B is not enforceable in whole or in
part, the remaining provisions of this Exhibit B shall not be affected thereby.
No failure or delay in exercising any right, power, or privilege hereunder shall
operate as a waiver thereof, nor shall any single or partial exercise thereof
preclude any other or further exercise thereof or the exercise of any other
right, power, or privilege hereunder.
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EXHIBIT 10.51
VOTING AGREEMENT
This Voting Agreement is entered into as of ____________________ ___ ,
199_ (the "Agreement"), by and among Galacticomm Technologies, Inc., a Florida
corporation ("Galacticomm"), and the Company Shareholders (as defined below).
RECITALS
Galacticomm and First Equity Corporation of Florida, Inc. and _________
(the "Representatives"), are entering into an underwriting agreement, (the
"Underwriting Agreement"), dated _________________ ___, 1998. As an
inducement to the Representatives to enter into the Underwriting Agreement, the
Company Shareholders have agreed to enter into this Agreement.
AGREEMENT
For good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties agree as follows:
1. CERTAIN DEFINITIONS
(a) Capitalized terms that are used but not otherwise defined
in this Agreement will have the meanings given to them in the Underwriting
Agreement.
(b) For the purposes of this Agreement, the following terms
will have the meanings set forth below:
(i) An "Affiliate" of Galacticomm is a person that
directly or indirectly through one or more intermediaries, controls, or is
controlled by, or is under common control with Galacticomm.
(ii) A Person will be deemed the "Beneficial Owner," and
to have "Beneficial Ownership" of, and to "Beneficially Own," any securities as
to which such Person is or may be deemed to be the beneficial owner pursuant to
Rule 13d-3 and 13d-5 under the Exchange Act, as such rules are in effect on the
date of this Agreement, as well as any securities as to which such Person has
the right to become a Beneficial Owner (whether such right is exercisable
immediately or only after the passage of time or the occurrence of conditions)
pursuant to any agreement, arrangement or understanding or upon the exercise of
conversion rights, exchange rights, warrants, options or other acquisition
rights or otherwise.
(iii) "Bankruptcy and Equity Exception" means an
exception to enforceability of an obligation because of the application of (A)
bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and
similar laws of general applicability relating to or affecting creditors'
rights; and (B) general equity principles.
(iv) "Company Shareholders" means the Persons named on
SCHEDULE 1 to this Agreement.
(v) "Control" (including the terms "controlling,"
"controlled by" and "under common control with", with respect to the
relationship between or among two or more Persons, means the possession,
directly or indirectly or as trustee or executor, of the power to direct or
cause the direction of the affairs or management of a Person, whether through
the ownership of voting
<PAGE>
securities, as trustee or executor, by contract or otherwise, including, without
limitation, the ownership, directly or indirectly, of securities having the
power to elect a majority of the board of directors or similar body governing
the affairs of such Person.
(vi) "Closing Date" means the Closing Date for the sale
of the Firm Securities pursuant to the Underwriter Agreement.
(vii) "Legal Requirement" means any statute, ordinance,
code, law, rule, regulation, order or other requirement, standard or procedure
enacted, adopted or applied by any governmental entity, including judicial
decisions applying common law or interpreting any other Legal Requirement or any
agreement entered into with a governmental entity in resolution of a dispute or
otherwise.
(viii) "Lien" means any lien, security interest, pledge,
charge, claim, option, right to acquire, restriction on transfer, voting
restriction or encumbrance of any nature.
(ix) "Person" when used with reference to a person for
whose account securities are to be sold in reliance upon this rule includes, in
addition to such persons, all of the following persons:
(A) any relative or spouse of such person, or
any relative of such spouse, any one of whom
has the same home as such person;
(B) any trust or estate in which such person or
any of the persons specified in paragraph
1(b)(ix)(A) of this Section collectively own
ten percent or more of the total beneficial
interest as of which any of such persons
serve as trustee, executor or in any similar
capacity; and
(C) any corporation or other organization (other
than Galacticomm) in which such persons or
any of the persons specified in paragraph
1(b)(ix)(A) of this Section are the
beneficial owners of collectively ten
percent or more of any class of equity
securities or ten percent or more of the
equity interest.
(x) "Shares" means shares of voting capital stock of
Galacticomm.
2. REPRESENTATIONS AND WARRANTIES OF GALACTICOMM. Galacticomm
represents and warrants to each of the Company Shareholders that:
(a) Galacticomm has all requisite corporate power and
authority and has taken all corporate action necessary in order to execute and
deliver, and to perform its obligations under, this Agreement; and
(b) this Agreement has been duly executed and delivered by
Galacticomm and is a valid and binding agreement of Galacticomm enforceable
against Galacticomm in accordance with its terms, subject to the Bankruptcy and
Equity Exception.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY SHAREHOLDERS. Each of
the Company Shareholders severally represents and warrants to Galacticomm that:
2
<PAGE>
(a) such Company Shareholder Beneficially Owns the number of Shares
set forth on SCHEDULE 1;
(b) each record holder of any Shares Beneficially Owned by such
Company Shareholder is identified on SCHEDULE 1;
(c) such Company Shareholder, either alone or with one or more other
Company Shareholders, has (i) the right to vote, or to direct the voting of, the
Shares Beneficially Owned by such Company Shareholder and (ii) the right to
dispose, or to direct the disposition of, the Shares Beneficially Owned by such
Company Shareholder;
(d) such Company Shareholder has all requisite power and authority
(corporate or otherwise) and has taken all action (corporate or otherwise)
necessary in order to execute and deliver, and to perform its obligations under,
this Agreement;
(e) this Agreement has been duly executed and delivered by such
Company Shareholder and is a valid and binding agreement of such Company
Shareholder enforceable against such Company Shareholder in accordance with its
terms, subject to the Bankruptcy and Equity Exception;
(f) no notices, reports or other filings are required to be made by
such Company Shareholder with, and no consents, registrations, approvals,
permits or authorizations are required to be obtained by such Company
Shareholder from, any Governmental Entity or any other Person, in connection
with the execution, delivery and performance of this Agreement by such Company
Shareholder, except those that the failure to make or obtain is not,
individually or in the aggregate, reasonably likely to prevent, delay or impair
the ability of such Company Shareholder to perform such Company Shareholder's
obligations under this Agreement; and
(g) the execution, delivery and performance of this Agreement by such
Company Shareholder do not, and the consummation by such Company Shareholder of
the transactions contemplated hereby will not, constitute or result in (i) a
breach or violation of, or a default under (in the case of any Company
Shareholder that is not a human being), the articles or certificate of
incorporation or the bylaws of such Company Shareholder or any comparable
governing instruments or (ii) a breach or violation of, or a default under, or
the acceleration of any obligations of or the creation of a Lien on the assets
of such Company Shareholder (with or without notice, lapse of time or both)
pursuant to, any instrument or agreement binding on such Company Shareholder or
to which such Company Shareholder is subject or any Legal Requirement to which
such Company Shareholder is subject, except, in the case of clause (ii) above,
for any breach, violation, default, acceleration, creation or change that,
individually or in the aggregate, is not reasonably likely to prevent, delay or
impair the ability of such Company Shareholder to perform such Company
Shareholder's obligations under this Agreement.
4. AGREEMENT TO VOTE SHARES. In the event that a vote of shareholders
of Galacticomm shall be taken upon (a) any liquidation of Galacticomm, or (b)
any business combination in which Galacticomm is not the surviving corporation
or any sale of all or substantially all of its assets (which combination or sale
occurs during the two year period immediately following the Closing Date), the
Company Shareholders shall, during the two year period immediately following the
Closing Date, vote all Shares Beneficially Owned by them in the same proportion
as the votes cast by non-Affiliates voting shares of the same class or series
with respect to the matters indicated in paragraphs 4(a) and 4(b) hereof on
which a vote of the shareholders is taken.
3
<PAGE>
5. NO VOTING TRUSTS OR TRANSFERS. Each Company Shareholder will not,
and will not permit any record holder of Shares to, (a) deposit any shares
Beneficially Owned by such Company Shareholder in a voting trust or subject any
Shares to any arrangement with respect to the voting of such Shares other than
this Agreement or any other agreement entered into in connection with the
Underwriting Agreement; or (b) except with respect to options or other rights to
purchase Shares that have been granted by a Company Shareholder to the third
parties identified in the Principal Shareholders section of the Company's
prospectus dated ____________ ___, 1998, sell, assign, pledge, grant a Lien on
or otherwise transfer any of its interest in any Shares to any Person unless
such transferee agrees in writing to be bound by this Agreement to the same
extent as such Company Shareholder.
6. MISCELLANEOUS.
(a) GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE
PARTIES UNDER THIS AGREEMENT WILL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH AND SUBJECT TO THE LAWS OF THE STATE OF FLORIDA, WITHOUT REFERENCE TO
CONFLICTS OF LAWS PRINCIPLES.
(b) VENUE; WAIVER OF JURY TRIAL. The parties hereby irrevocably submit
to the jurisdiction of the courts of the State of Florida and the federal court
of the United States of America located in the State of Florida solely in
respect of the interpretation and enforcement of the provisions of this
Agreement and of the documents referred to in this Agreement and in respect of
the transactions contemplated hereby, and hereby waive, and agree not to assert,
as a defense in any action, suit or proceeding for the interpretation or
enforcement hereof or of any such document, that it is not subject thereto or
that such action, suit or proceeding may not be brought or is not maintainable
in such courts or that the venue thereof may not be appropriate or that this
Agreement or any such document may not be enforced in or by such courts, and the
parties irrevocably agree that all claims with respect to such action or
proceeding will be heard and determined in such a Florida state or federal
court. Each party consents to and grants any such court jurisdiction over the
person of such party and over the subject matter of such dispute and agrees that
mailing of process or other papers in connection with any such action or
proceeding in the manner provided in paragraph (c) of this Section or in such
other manner as may be permitted by law will be valid and sufficient service
thereof.
EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY THAT MAY ARISE
UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND
THEREFORE EACH SUCH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY
RIGHT SUCH PARTY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION
DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT, OR THE
TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT. EACH PARTY CERTIFIES AND
ACKNOWLEDGES THAT (i) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY
HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE
EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER, (ii) EACH PARTY
UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF THIS WAIVER, (iii) EACH PARTY
MAKES THIS WAIVER VOLUNTARILY, AND (iv) EACH PARTY HAS BEEN INDUCED TO ENTER
INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND
CERTIFICATIONS IN THIS PARAGRAPH (b).
(c) NOTICES. All notices, requests, claims, demands and other
communications required or permitted to be given or made pursuant to this
Agreement will be in writing and will be deemed given
4
<PAGE>
(i) on the first business day following the date received, if delivered
personally or by telecopy (with telephonic confirmation of receipt by the
addressee), (ii) on the business day following timely deposit with an overnight
courier service, if sent by overnight courier specifying next day delivery and
(iii) on the first business day that is at least five days following deposit in
the mails, if sent by first class mail, to the parties at the following
addresses (or at such other address for a party as will be specified by like
notice):
<TABLE>
<S> <C>
if to the Company
Shareholders: As set forth on SCHEDULE 1
if to Galacticomm: Galacticomm Technologies, Inc.
4101 S.W. 47 Avenue
Suite 101
Ft. Lauderdale, Florida 33314
Attn: Peter Berg, Chairman
Fax No.: (954) 587-1417
with a copy to: Lucio, Mandler, Croland, Bronstein, Garbett, Stiphany
& Martinez, P.A.
701 Brickell Avenue
Suite 2000
Miami, Florida 33131
Attn: Leslie J. Croland, Esq.
Fax No.: (305) 375-8075
with a further copy
to the Represesntatives
as follows: First Equity Corporation of Florida
201 South Biscayne Boulevard
Suite 1400
Miami, Florida 33131
Attn: William R. Fusselmann
Fax No.: (305) 372-0861
------------------------
------------------------
------------------------
------------------------
------------------------
</TABLE>
or to such other Persons or addresses as may be designated in writing by the
party to receive such notice as provided above.
(d) SEVERABILITY. The provisions of this Agreement will be deemed
severable and the invalidity or unenforceability of any provision will not
affect the validity or enforceability of the other provisions hereof. If any
provision of this Agreement, or its application to any Person or any
circumstance, is invalid or unenforceable, (i) a suitable and equitable
provision will be substituted therefor in order to carry out, so far as may be
valid and enforceable, the intent and purpose of such invalid or unenforceable
provision and (ii) the remainder of this Agreement and the application of such
provision to other Persons or circumstances will not be affected by such
invalidity or unenforceability, nor will
5
<PAGE>
such invalidity or unenforceability affect the validity or enforceability of
such provision, or the application thereof, in any other jurisdiction.
(e) COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which will be deemed to be an original and all of which
will together constitute the same agreement.
(f) TERMINATION. This Agreement will terminate (i) upon the mutual
written consent of all parties or (ii) five years after the Closing Date.
(g) CAPTIONS. All captions in this Agreement are for convenience of
reference only and are not part of this Agreement, and no construction or
reference will be derived therefrom.
(h) SPECIFIC PERFORMANCE. Each party acknowledges that it will be
impossible to measure in money the damage to the other party if such party fails
to comply with any of the obligations imposed by this Agreement, that each such
obligation is material and that, in the event of any such failure, the other
party will not have an adequate remedy at law or damages. Accordingly, each
party agrees that injunctive relief or any other equitable remedy, in addition
to remedies at law or damages, is the appropriate remedy for any such failure
and will not oppose the granting of such relief on the basis that the other
party has an adequate remedy at law or in the form of damages. Each party agrees
that it will not seek and agrees to waive any requirement for, the securing or
posting of a bond in connection with any other party's seeking or obtaining such
equitable relief.
(i) SUCCESSORS AND ASSIGNS. This Agreement will be binding upon and
inure to the benefit of the parties and their respective successors and
permitted assigns and will not be assignable without the written consent of all
other parties hereto.
(j) ENTIRE AGREEMENT; AMENDMENT; WAIVER. This Agreement (including
any schedules hereto) supersedes all prior agreements, written or oral, among
the parties with respect to the subject matter hereof and contain the entire
agreement among the parties with respect to the subject matter hereof. This
Agreement may not be amended, supplemented or modified, and no provision hereof
may be modified or waived, except by an instrument in writing signed by all the
parties or, in the case of a waiver, each party granting such waiver. No waiver
of any provision hereof by any party will be deemed a waiver of any other
provision hereof by any such party, nor will any such waiver be deemed a
continuing waiver of any provision hereof by such party.
(k) FURTHER ASSURANCES. The parties will execute and deliver such
additional instruments and other documents and will take such further actions as
may be necessary or appropriate to effectuate, carry out and comply with all of
the terms of this Agreement and the transactions contemplated hereby.
(l) THIRD PARTY BENEFICIARIES. Nothing in this Agreement, express or
implied, is intended to confer upon any third party any rights or remedies of
any nature whatsoever under or by reason of this Agreement, except the
Representatives, including without limitation, as to Section 6(h) hereof.
IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement as of the date first written above.
GALACTICOMM TECHNOLOGIES, INC.
6
<PAGE>
By:
----------------------------------
Name:
----------------------------------
Title:
----------------------------------
----------------------------------
Peter Berg
----------------------------------
Yannick Tessier
SCHEDULE 1
COMPANY SHAREHOLDERS
SHARES
SHAREHOLDER BENEFICIALLY OWNED
- ----------- ------------------
Peter Berg 1,215,749
15050 S.W. 10 Street
Sunrise, Florida 33326
Yannick Tessier 1,215,749
10931 N.W. 3 Street
Plantation, Florida 33324
EXHIBIT 10.52
First Equity Corporation of Florida
201 South Biscayne Blvd., Suite 1400
Miami, Florida 33131
Re: Galacticomm Technologies, Inc.
Dear Sir or Madam:
In order to induce First Equity Corporation of Florida (the
"Underwriter") to enter into an underwriting agreement with Galacticomm
Technologies, Inc., a Florida corporation (the "Company"), and the Company to
enter into such agreement with the Underwriter, in connection with the proposed
initial public offering (the "Offering") of Common Stock and Warrants of the
Company contemplated by that certain letter of intent between the Company and
the Underwriter and as shall be described in a registration statement to be
filed with the Securities and Exchange Commission (the "SEC") (such registration
statement, including as it may subsequently be amended, is referred to herein as
the "Registration Statement"), and as consideration for the Underwriter
participating in the Offering, the undersigned officer, director and/or
securityholder, hereby agrees with the Company, the Underwriter and with each
other officer, director and/or securityholder executing similar agreements that:
1. Until 12 months after the date that the Registration Statement is
declared effective by the SEC (the "Effective Date"), the undersigned will not,
without the prior written consent of the Underwriter, directly or indirectly,
sell, offer for sale, transfer, hypothecate, pledge or otherwise dispose of,
pursuant to Rule 144 promulgated under the Securities Act of 1933, as amended
(the "Act"), or otherwise (any of the foregoing, a "Transfer"), any securities
(including options, warrants and convertible securities) of the Company directly
or indirectly or beneficially owned by the undersigned and acquired by the
undersigned prior to the Effective Date (the "Securities") (other than
securities of the Company acquired by the undersigned in the Offering for the
IPO Price and securities purchased in the marketplace after the Effective Date).
Notwithstanding the foregoing, (i) the undersigned may sell or
otherwise dispose of the Securities in a privately negotiated transaction,
provided that (a) the purchaser agrees in advance in writing with the
Underwriter to the restrictions on transfer of Securities as set forth herein
and to vote the Securities as set forth below and (b) the disposition is
otherwise in accordance with the federal securities and other laws, and (ii) the
undersigned, if a present shareholder, may make gifts and transfers of Common
Stock to the undersigned's immediate family (as such term is defined in rules
promulgated under the Securities Exchange Act of 1934, as amended).
2. For a period of three years following the Effective Date, the
undersigned securityholder will vote all of the voting securities of the Company
owned by the undersigned securityholder in favor of the election of a designee,
if any, of the Underwriter (which designee
<PAGE>
may change from time to time) to the Company's Board of Directors.
3. The undersigned consents to the placement of an appropriate legend
upon any certificates evidencing his/her/its stock or right to acquire stock in
the Company and the Company agrees to so legend such certificates, or to direct
its transfer agent to do so. Upon request by the Company, the undersigned will
submit his/her/its securities of the Company for legending in accordance with
this Agreement. To the extent that there are other underwriters participating in
the offering, they shall be third party beneficiaries of this Agreement.
Very truly yours,
-----------------------------
-----------------------------
Address:
---------------------
-----------------------------
-----------------------------
Date:
-----------------------
GALACTICOMM TECHNOLOGIES, INC.
By:
--------------------------------------
Peter Berg, Chief Executive Officer
Date:
-----------------------------------
EXHIBIT 10.53
PROMISSORY NOTE EXTENSION
$50,000 10% Interest Per Annum
December 31, 1997
As set forth, for value received, the undersigned, Galacticomm
Technologies, Inc., a Florida corporation, promises to pay to Yannick Tessier
the sum of Fifty-five Thousand ($55,000) dollars, together with interest from
the date above on the unpaid principal balance due at the rate of ten percent
(10%) per annum. $5,000 shall be due and payable upon the signing of this note
extension. The remaining balance plus interest will be due in one lump sum
payment at the earlier of: (i) December 31, 1998; or (ii) upon a successful
Initial Public Offering by Galacticomm Technologies, Inc.
All payments shall be made in lawful currency of the United States of
America. Galacticomm Technologies, Inc. agrees to pay all costs of collection,
including reasonable attorneys fees.
This Note Extension may be prepaid at any time or from time to time in
whole or in part without penalty, premium or permission. Any partial payment
under this Note Extension shall be first applied to outstanding interest then,
in the amount remaining, against the principal balance outstanding.
Galacticomm Technologies, Inc.
By: /S/ PETER BERG
----------------------
Peter Berg, CEO
EXHIBIT 11
GALACTICOMM TECHNOLOGIES, INC.
COMPUTATION OF PER SHARE LOSS
Year Ended December 31, 1996
PRIMARY
Weighted average common shares outstanding, exclusive
of issuances within twelve months prior to the IPO 1,621,838
Common shares and equivalents issued within 12 months
prior to the IPO assumed to be outstanding for the entire
period 1,607,263
---------
Weighted average common shares outstanding at end of year 3,229,101
=========
Net loss $ (1,041,268)
=========
Net loss per share $ (0.32)
====
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors
Galacticomm Technologies, Inc.:
We consent to the use of our reports included herein and to the reference to our
firm under the heading "Experts" in the Prospectus.
/s/ KPMG Peat Marwick LLP
Miami, Florida
January 22, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> 9-MOS YEAR
<FISCAL-YEAR-END> DEC-31-1996 DEC-31-1996
<PERIOD-START> JAN-01-1997 JAN-01-1996
<PERIOD-END> SEP-30-1997 DEC-31-1996
<CASH> 64,486 1,466,392
<SECURITIES> 0 0
<RECEIVABLES> 546,094 122,125
<ALLOWANCES> 164,000 90,363
<INVENTORY> 92,694 83,730
<CURRENT-ASSETS> 617,550 1,614,875
<PP&E> 696,952 583,362
<DEPRECIATION> (133,502) (38,793)
<TOTAL-ASSETS> 3,745,275 4,434,020
<CURRENT-LIABILITIES> 2,142,014 2,090,455
<BONDS> 0 0
0 0
0 0
<COMMON> 383 342
<OTHER-SE> 220,979 949,224
<TOTAL-LIABILITY-AND-EQUITY> 3,745,275 4,434,020
<SALES> 2,688,421 1,692,743
<TOTAL-REVENUES> 2,688,421 1,692,743
<CGS> 682,738 758,050
<TOTAL-COSTS> 4,456,174 2,673,699
<OTHER-EXPENSES> (27,135) (30,905)
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 171,508 91,217
<INCOME-PRETAX> (1,912,126) (1,041,268)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (1,912,126) 0
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (1,912,126) (1,041,268)
<EPS-PRIMARY> 3,829,907 3,423,108
<EPS-DILUTED> 5,030,371 3,229,101
</TABLE>
