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As filed with the Securities and Exchange Commission on October 24, 1997
Registration No. 333-
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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MAXXIS GROUP, INC.
(Exact Name of Registrant as Specified in its Charter)
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Georgia 4813 58-2278241
(State or Other Jurisdiction of (Primary Standard Industrial (I.R.S. Employer Identification Number)
Incorporation or Organization) Classification Code Number)
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1901 Montreal Road, Suite 108
Tucker, Georgia 30084
(770) 552-4766
(Address, Including Zip Code, and Telephone Number, Including
Area Code, of Registrant's Principal Executive Offices)
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Thomas O. Cordy
Chief Executive Officer and President
Maxxis Group, Inc.
1901 Montreal Road, Suite 108
Tucker, Georgia 30084
(770) 552-4766
(770) 552-8471 (Fax)
(Name, Address, Including Zip Code, and Telephone Number, Including Area Code,
of Agent for Service)
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Copies of all correspondence to:
Glenn W. Sturm, Esq.
James Walker IV, Esq.
Nelson Mullins Riley & Scarborough, L.L.P.
999 Peachtree Street, N.E.
Atlanta, Georgia 30309
(404) 817-6000
(404) 817-6050 (Fax)
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box.[X]
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)
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.[ ]
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If delivery of the prospectus is expected to be made pursuant to Rule 434,
check the following box.[ ]
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CALCULATION OF REGISTRATION FEE
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Proposed Maximum Proposed Maximum
Title of Each Class of Securities to be Amount to be Offering Price Aggregate Offering Amount of
Registered Registered Per Share (1) Price(1) Registration Fee
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Class B Common Stock, no par value..... 5,000,000 $0.50 $2,500,000 $757.58
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(1) Estimated solely for the purpose of calculating the amount of the
registration fee pursuant to Rule 457(a) under the Securities Act of 1933.
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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 COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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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.
SUBJECT TO COMPLETION, DATED OCTOBER 24, 1997
PROSPECTUS
5,000,000 SHARES
[MAXXIS LOGO]
CLASS B COMMON STOCK
This Prospectus relates to the offering (the "Offering") of 5,000,000 shares
of Class B Common Stock, no par value per share (the "Class B Common Stock" or
the "Shares"), of MAXXIS GROUP, INC., a Georgia corporation (the "Company"). All
of the Shares offered hereby are being sold by the Company. The Class B Common
Stock entitles holders to one vote per share, whereas the Class A Common Stock,
no par value per share (the "Class A Common Stock"), entitles holders to ten
votes per share. The Class A Common Stock and Class B Common Stock vote as a
single class with respect to substantially all matters submitted to a vote of
the shareholders. Following the Offering, assuming the sale of 5,000,000 Shares
offered hereby, the directors and executive officers and relatives and
affiliates of directors and executive officers of the Company and its
subsidiaries, acting as a group and by reason of their ownership of Class A
Common Stock, will hold approximately 74.9% of the combined voting power (on a
fully diluted basis) of the Company with respect to substantially all matters
submitted to a vote of the shareholders. See "Risk Factors-Concentration of
Ownership; Voting Rights of Class A and Class B Common Stock" and "Description
of Capital Stock."
Prior to this Offering, there has been no public market for the Shares, and
it is currently anticipated that there will be no active trading market for the
Shares. The price of the Shares has been arbitrarily established by the Company
and does not necessarily bear any relationship to the Company's asset value, net
worth or other established criteria of value. See "Risk Factors - Determination
of Offering Price."
SEE "RISK FACTORS" BEGINNING ON PAGE 8 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE SHARES OFFERED
HEREBY.
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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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PRICE TO UNDERWRITING DISCOUNTS PROCEEDS TO
PUBLIC(1) AND COMMISSIONS(2) COMPANY(3)
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Per Share.................. $0.50 $ - $0.50
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Total...................... $2,500,000 $ - $2,500,000
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(1) The offering price has been arbitrarily established by the Company. See
"Risk Factors - Determination of Offering Price."
(2) This Offering is expected to be made on behalf of the Company solely by
certain of its directors and executive officers, to whom no commission or
other compensation will be paid on account of such activity, although they
will be reimbursed for reasonable expenses incurred in connection with such
activity. The Company believes such participating officers and directors
shall not be deemed brokers under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), based on reliance on Rule 3a4-1 of the
Exchange Act.
(3) Before deducting estimated expenses of $400,000 related to the Offering.
See "Use of Proceeds."
Sales of the Shares are expected to commence on or about November 30, 1997.
This is a "best efforts" offering by the Company, and it will expire on December
31, 1998, unless terminated earlier or extended by the Company for additional
90-day periods ending no later than December 31, 2000. The Company reserves the
right to terminate the Offering at any time.
PROSPECTIVE PURCHASERS MUST EXECUTE A SUBSCRIPTION AGREEMENT (A
"SUBSCRIPTION AGREEMENT") IN ORDER TO OFFER TO PURCHASE SHARES. ANY SUBSCRIPTION
AGREEMENT MAY BE REJECTED BY THE COMPANY FOR ANY REASON OR NO REASON WHATSOEVER.
ACCEPTANCE OF ANY PARTICULAR SUBSCRIPTION AGREEMENT BY THE COMPANY SHALL IN NO
CASE REQUIRE THE COMPANY TO ACCEPT ANY OTHER SUBSCRIPTION AGREEMENT. PROSPECTIVE
PURCHASERS MUST WARRANT IN THE SUBSCRIPTION AGREEMENT THAT THEY HAVE RECEIVED A
COPY OF THIS PROSPECTUS, AS AMENDED OR SUPPLEMENTED. SEE "THE OFFERING - HOW TO
SUBSCRIBE." UPON ACCEPTANCE OF A SUBSCRIPTION BY THE COMPANY, SUBSCRIPTION
PROCEEDS WILL BE AVAILABLE FOR IMMEDIATE USE BY THE COMPANY. SEE "USE OF
PROCEEDS."
THE Company intends to offer the Shares primarily to individuals who are
regional and executive directors of the Company. The Company has established a
minimum subscription of 200 Shares and maximum subscriptions of 200 Shares and
2,000 Shares, respectively, for each person who qualifies as a regional or
executive director in the Company's marketing system; provided, that the
aggregate number of Shares sold in this Offering shall not exceed 5,000,000.
However, the Company reserves the right to waive these limits or to allocate
additional Shares to regional and executive directors or to sell Shares to other
purchasers, including members of the general public, without notifying any
purchaser or prospective purchaser. See "The Offering."
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The date of this Prospectus is _____, 1997
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ADDITIONAL INFORMATION
The Company has not previously been subject to the reporting
requirements of the Exchange Act. The Company has filed with the Securities and
Exchange Commission (the "Commission") a Registration Statement (which term
shall include any amendments thereto) on Form S-1 under the Securities Act of
1933, as amended (the "Securities Act"), with respect to the Shares to be
offered pursuant hereto. This Prospectus, which constitutes a part of the
Registration Statement, does not contain all of the information set forth in the
Registration Statement, certain portions of which have been omitted as permitted
by the rules and regulations of the Commission. For further information with
respect to the Company and the Shares, reference is made to the Registration
Statement, including the exhibits and schedules thereto, copies of which may be
examined without charge at the Commission's principal office at 450 Fifth
Street, N.W., Washington, D.C. 20549 and the regional offices of the Commission
located at 7 World Trade Center, 13th Floor, New York, New York 10048 and
Citicorp Center, 500 West Madison Street, 14th Floor, Chicago, Illinois
60661-2511. Copies of such materials may be obtained from the Public Reference
Section of the Commission, Judiciary Plaza, 450 Fifth Street, N.W., Washington,
D.C. 20549 and at its public reference facilities in New York, New York, and
Chicago, Illinois, at prescribed rates. The Commission maintains a World Wide
Web site that contains reports, proxy and information statements and other
information regarding registrants that file electronically with the Commission.
The address of the Commission's web site is http:\\www.sec.gov. Statements
contained in this Prospectus as to the contents of any contract or other
document are not necessarily complete, and in each instance reference is made to
the copy of such contract or other document filed as an exhibit to the
Registration Statement, each such statement being qualified in all respects by
such reference.
The Company is not a reporting company as defined by the Commission.
The Company intends to furnish holders of the Shares with annual reports
containing financial statements audited by an independent public accounting firm
and quarterly reports containing unaudited financial information for the first
three quarters of each fiscal year.
The Company has applied for federal registration for the mark "MAXXIS."
This Prospectus includes product names and other trade names and trademarks of
the Company and of other companies.
2
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PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and financial statements, including "Risk Factors" and the
consolidated financial statements and related notes thereto, appearing elsewhere
in this Prospectus. Currently, Maxxis Group, Inc. conducts all of its business
and operations through its wholly owned subsidiaries Maxxis 2000, Inc. ("Maxxis
2000") and Maxxis Telecom, Inc. ("Maxxis Telecom"). Unless the context indicates
otherwise, all references to the "Company" or "Maxxis" refer to Maxxis Group,
Inc. and its subsidiaries. The Class A Common Stock and Class B Common Stock are
sometimes collectively referred to herein as the "Common Stock." On October 8,
1997, the Company effected a five for one reverse stock split for all
outstanding shares of Common Stock. All share and per share data have been
adjusted to reflect the five for one reverse stock split.
THE COMPANY
Maxxis markets telecommunications services in the United States through
its multi-level network marketing system of "independent associates," or "IAs."
The Company currently operates through its subsidiaries: Maxxis 2000, which
conducts network marketing operations; and Maxxis Telecom, which provides long
distance services. The Company currently markets both 1-Plus long distance
service and value-added telecommunications services, such as travel cards,
prepaid phone cards, 800 service and international telecommunications service.
The Company was incorporated in January 1997 and began recruiting IAs and
marketing telecommunications services in March 1997. As of June 30, 1997, the
Company had generated aggregate gross revenues of approximately $2,691,000.
The Company initially intends to build a customer base without having
to commit capital or management resources to construct its own
telecommunications network and transmission facilities. In February 1997, Maxxis
Telecom contracted with Colorado River Communications, Corp. ("CRC") to obtain
switching and network services and to allow CRC's telecommunications services to
be sold by the Company's IAs. In the future, the Company may contract with other
providers of long distance services and intends to analyze the feasibility of
developing its own long distance network.
The Company conducts its marketing activities exclusively through its
network of IAs. The Company believes that IAs are generally attracted to the
Company's network marketing system because of the potential for supplemental
income and because the IAs are not required to purchase any inventory, have no
monthly sales quotas or account collection issues, have minimal required
paperwork and have a flexible work schedule. The Company's network marketing
system and the Company's reliance upon IAs are intended to reduce net marketing
costs, subscriber acquisition costs and subscriber attrition. The Company
believes that its network marketing system will build a base of potential
customers for additional services and products. Accordingly, the Company is
currently considering the possibility of marketing a line of nutritional
products.
The Company's goal is to develop a national distribution system through
which large volumes of telecommunications services and other products and
services may be sold. The Company intends to increase its revenues by: (i)
expanding its marketing network; (ii) increasing the number of customers who
purchase products and services offered by the Company; and (iii) providing
additional products and services for sale through its IAs.
The Company intends to achieve its goal by:
- Growing and Developing its Network of IAs by enhancing the
recruiting and training services offered to IAs, continuing to
support the marketing efforts of IAs and introducing new
income opportunities for IAs.
- Maintaining and Expanding the Number of Customers by offering
high quality, competitively-priced products and services
through a highly motivated network of IAs.
- Offering Additional Telecommunications Products by entering
into agreements for the marketing of additional products that
meet the needs of subscribers, which may include, among
others, paging, conference calling, wireless cable, cellular
and local phone service.
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- Improving and Expanding its Product Lines by continuing to
evaluate and offer products that are attractive to its IAs and
customers. In addition to telecommunications products, the
Company is currently considering the possibility of marketing
a line of private-labeled nutritional products which the
Company would distribute through its IAs.
- Obtaining Competitive Prices on products and services through
the purchasing power of the Company's nationwide network.
Currently, the Company has five IA positions in its marketing system:
associate; senior associate; director; regional director; and executive
director. A director increases the size of the director's sales organization by
sponsoring additional persons to become senior associates. These senior
associates, and all senior associates that they, in turn, sponsor, become part
of the sales organization of the director who sponsored them. Senior associates,
through the growth of their sales organizations, may become directors, regional
directors or executive directors and thereby increase the size of the sales
organization of the person who was their original sponsor. The organization that
grows below each director through this process is called a "downline."
All IA commissions are paid directly by the Company and are a specified
percentage or a designated amount of the gross proceeds received by the Company
on the sale of services and products. The Company designates a portion of its
gross commissions as "commission value," or "CV," and allocates the CV among
eligible participants in its marketing system. Currently, 20% of the CV earned
with respect to a long distance subscriber is paid weekly to the IA who
sponsored such subscriber, 75% of the CV is paid monthly to eligible directors
who have the IA who sponsored the subscriber in their downline and the remaining
5% is retained by the Company to be paid out to directors, regional directors
and executive directors in the Company's incentive bonus programs. All
directors, executive directors and regional directors who (i) have an aggregate
of at least 200 active long distance customers personally and in the first seven
levels of their downline as of the last Friday of a quarter, (ii) have sponsored
at least two new senior associates during the quarter and (iii) are certified as
marketing directors ("MDs") are eligible to receive an additional "Leadership
Bonus." The Leadership Bonus is payable quarterly and equals, in the aggregate,
1% of the total sales of Maxxis 2000 during the quarter. The Leadership Bonus is
divided equally among all directors, regional directors and executive directors
who qualify for a Leadership Bonus. In order to encourage the growth of the
Company's marketing system, the Company also pays eligible directors a weekly
bonus amount, which is designated as "bonus value," or "BV," for each sale of
bonus-eligible products. Currently, the Company only designates retail priced
phone cards as bonus-eligible products.
To become an associate, individuals (other than individuals in North
Dakota) must complete an application and purchase a distributor kit for $30. The
Company provides training to all IAs which includes a detailed explanation of
the Company's products, the IA compensation plan and the use of the various
marketing tools available to the IA. MDs provide personal training to IAs. The
Company encourages directors and regional directors to become MDs. To become a
MD, a director or regional director must attend a Company approved training
school. The fee to become a MD is generally $99 (with an annual renewal fee of
$99). MDs are paid a fee by the Company for training IAs.
The Company believes that maintaining sophisticated and reliable
transaction processing systems is essential for multi-level network marketing
companies. Accordingly, the Company invests in maintaining and enhancing its
computer systems. The Company's systems are designed to process detailed and
customized IA commission payments, monitor and analyze financial and operating
trends and track each IA's personal organization.
As of June 30, 1997, the Company employed approximately 25 people, not
including IAs who are classified by the Company as independent contractors. The
Company's employees are not unionized, and the Company believes its relationship
with its employees is good.
The Company's principal executive office is located at 1901 Montreal
Road, Suite 108, Tucker, Georgia 30084, and its telephone number is (770)
552-4766.
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THE OFFERING
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Class A Common Stock outstanding.................. 14,300,000 shares
Class B Common Stock outstanding.................. 3,000,000 shares
Class B Common Stock to be
offered hereby.................................. 5,000,000 shares
Common Stock to be Outstanding after
the Offering.................................... 22,300,000 shares
Use of Proceeds................................... Development of additional product lines, development and/or
acquisition of information systems, payment of organizational
and offering expenses and for working capital and general
corporate purposes. See "Use of Proceeds."
Terms of the Offering............................. Prospective purchasers must deliver to the Company a
completed and executed Subscription Agreement, the form of
which is attached hereto as Appendix A. An executed
Subscription Agreement will constitute a prospective
purchaser's offer to purchase shares of Class B Common
Stock as set forth in this Prospectus. Prospective purchasers
submitting completed and executed Subscription Agreements
may not revoke or withdraw such Subscription Agreements
except with the consent of the Company. Upon acceptance
of a subscription by the Company, subscription proceeds will
be available for immediate use by the Company. See "The
Offering - General."
Transfer Restrictions............................. Pursuant to the Subscription Agreement, each purchaser of the
Shares offered hereby agrees not to sell or otherwise transfer
the Shares or any securities issued on account of such Shares
during the Lock-up Period (as defined herein). The
Company may impose transfer restrictions during the Lock-
up Period by giving notice to the holders of record of the
Shares. The certificates evidencing the Shares will bear a
legend referencing these potential restrictions on transfer.
See "Risk Factors - Absence of Trading Market; Transfer
Restrictions" and "The Offering - Transfer Restrictions."
Plan of Distribution.............................. Offers and sales of the Class B Common Stock will be made
on behalf of the Company by certain of its officers and
directors. The officers and directors will receive no
commissions or other remuneration in connection with such
activities, but they will be reimbursed for reasonable
expenses incurred in connection with the Offering. See "The
Offering - Plan of Distribution."
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Voting Rights of Class A Common
and Class B Common Stock........................ On all matters with respect to which the Company's
shareholders have a right to vote, including the election of
directors, each share of Class A Common Stock is entitled to
ten votes, while each share of Class B Common Stock is
entitled to one vote. Except as otherwise required by law or
expressly provided in the Amended and Restated Articles of
Incorporation of the Company, as amended (the "Articles"),
the Class A Common Stock and Class B Common Stock vote
together as a single class with respect to substantially all
matters submitted to a vote of the shareholders. See "Risk
Factors - Concentration of Ownership; Voting Rights of
Class A and Class B Common Stock" and "Description of
Capital Stock."
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RISK FACTORS
Prospective purchasers of the Class B Common Stock should carefully
consider the matters set forth herein under "Risk Factors," as well as the other
information set forth in this Prospectus.
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SUMMARY CONSOLIDATED FINANCIAL DATA
The Company was incorporated on January 24, 1997 and began operations
in March 1997. The following summary consolidated financial data for the period
from January 24, 1997 to June 30, 1997 (the "Inception Period") is derived from
the audited consolidated financial statements and other data of the Company. The
consolidated financial statements for the Inception Period were audited by
Arthur Andersen LLP, independent public accountants. The results of operations
for the Inception Period are not necessarily indicative of the results to be
expected for a full fiscal year. The following summary consolidated financial
data should be read in conjunction with "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and the consolidated financial
statements and the related notes thereto appearing elsewhere in this Prospectus.
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JANUARY 24, 1997
(INCEPTION)
TO JUNE 30, 1997
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STATEMENT OF OPERATIONS DATA:
Revenues:
Communication services.......................................... $ 2,666,000
Subscriber services............................................. 25,000
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Total revenues............................................... 2,691,000
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Cost of Services.................................................. 1,016,000
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Gross margin.................................................... 1,675,000
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Operating Expenses:
Selling and marketing........................................... 1,089,000
General and administrative...................................... 636,000
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Total operating expenses..................................... 1,725,000
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Loss before income tax benefit.................................... (50,000)
Income tax benefit................................................ 0
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Net loss.......................................................... $ (50,000)
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PER SHARE DATA:
Net loss per share................................................ $ (0.003)
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Weighted average number of shares outstanding..................... 17,300,000
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AS OF JUNE 30, 1997
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ACTUAL AS ADJUSTED(1)(2)
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BALANCE SHEET DATA:
Working capital............................. $ (13,000) $2,177,000
Property and equipment, net................. 92,000 92,000
Total assets................................ 620,000 2,810,000
Long-term obligations....................... 0 0
Shareholders' equity........................ 317,000 2,507,000
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(1) Adjusted for the sale of 5,000,000 shares of Class B Common Stock of
the Company offered hereby at a public offering price of $0.50 per
share and the application of the estimated net proceeds therefrom.
See "Use of Proceeds."
(2) Adjusted for the receipt of $90,000 in additional stock subscriptions
for the Company's Class B Common Stock subsequent to June 30, 1997.
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RISK FACTORS
Before purchasing any Shares offered by this Prospectus, prospective
purchasers should carefully consider the following factors relating to the
Company and the Offering, together with the other information and financial data
appearing elsewhere in this Prospectus.
NEW ENTERPRISE
The Company currently is in the organizational stage and has a limited
operating history. As a consequence, prospective purchasers of the Shares have
limited information upon which to base an investment decision. The Company's
operations are subject to the risks inherent in the establishment of any new
business. The Company expects that it will incur substantial initial expenses,
and there can be no assurance that the Company will achieve or maintain
profitability. There can be no assurance that the products or services offered
by the Company will receive market acceptance or that the Company's prices and
demand for products and services offered by the Company will be at a level
sufficient to provide profitable operations. The Company has entered into an
agreement with CRC, a provider of switching and network transmission services;
however, there can be no assurance that the Company will be able to maintain
this relationship or enter into new contracts with other providers on terms
acceptable to the Company or at all. See "- Relationship with Carrier,"
"Business - Competition," "- Strategy" and "- Products and Services."
The Company will use the proceeds of the Offering in part to pay
organizational and offering expenses in connection with the start-up of the
Company's business and, in particular, the establishment of the Company's
network marketing system. The Company believes that the proceeds of the
Offering, together with the cash generated through operations, will be
sufficient to enable the Company to pay organizational and offering expenses and
to fund continued operations, including the development of additional product
lines. However, there can be no assurance that the Company will generate
sufficient proceeds from this Offering and its ongoing operations to establish
its network marketing system or to maintain its operations, or that the
Company's business will be successful. See "Use of Proceeds."
DEPENDENCE ON IAS
The Company's success will depend heavily upon its ability to attract,
maintain and motivate a large base of IAs who, in turn, sponsor subscribers,
customers and other IAs. The Company anticipates a significant turnover among
IAs, which the Company believes is typical of businesses involved in direct
selling. The Company requires the sponsoring of new IAs by existing IAs in order
to maintain or increase the overall IA force. Activities of the IAs in obtaining
new subscribers will particularly be influenced by changes in the level of IA
motivation, which in turn can be positively or negatively affected by general
economic conditions, modifications in commission and training fees and in the
Company's marketing plan, the prices and competitive positions of the products
and services offered by the Company and a number of other intangible factors.
The Company's ability to attract IAs could be negatively affected by adverse
publicity relating to the Company or its services or its operations, including
its network marketing system. Administrative or technological problems of the
type that may be encountered by both early stage and mature companies, such as
malfunctions in accounting systems or computer information systems, may lead to
the immediate and dramatic attrition of IAs and subscribers. The Company has
begun establishing its network of IAs. However, there can be no assurance that
the Company will be successful in establishing a viable network of IAs. Because
of the number of factors that affect the Company's ability to attract and retain
IAs, the Company cannot predict when or to what extent increases or decreases in
the level of IA retention or attrition will occur. In addition, the number of
IAs as a percentage of the population could reach levels that become difficult
to exceed due to the finite number of persons inclined to pursue an independent
direct selling business opportunity. There can be no assurance that the number
or productivity of IAs will be sufficient to support the Company's proposed
products and services in the future or to allow the Company to achieve its
objectives.
The Company is subject to competition in the recruiting of IAs from
other network marketing organizations, including those that market long distance
services, health products, cosmetics and dietary supplements, such as EXCEL
Communications, Inc. ("EXCEL"), American Communications Network ("ACN"), Amway
Corporation ("Amway"), TDG Communications ("TDG"), BeautiControl Cosmetics,
Inc., Herbalife
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International, Inc. and Mary Kay, Inc. EXCEL representatives sell a variety of
long distance telecommunications services, ACN representatives sell long
distance services for LCI International, Inc. ("LCI") and other long-distance
carriers, Amway distributors sell 1-Plus long distance service for MCI
Communications Corporation ("MCI") and TDG sells MCI Paging Services and the MCI
VNet Calling Cards. See "Business - Strategy," "- Marketing" and "- Regulation."
RELATIONSHIP WITH IAS
Because IAs are classified as independent contractors, the Company is
unable to provide them the same level of direction and oversight as Company
employees. While the Company has policies and rules in place governing the
conduct of the IAs and intends to review periodically the sales tactics of the
IAs, it may be difficult to enforce such policies and rules. Violations of these
policies and rules might reflect negatively on the Company and may lead to
complaints to or by various federal and state regulatory authorities. Violation
of the Company's policies and rules could subject the Company and its long
distance provider to complaints regarding the unauthorized switching of
subscribers' long distance carriers (also known in the industry as "slamming").
Such complaints could have a material adverse effect on the Company's business,
financial condition and results of operations. See "Business - Relationship with
IAs."
REGULATION OF NETWORK MARKETING; EFFECT OF STATE LAWS
The Company's network marketing system is subject to or affected by
extensive government regulation including, without limitation, federal and state
regulations governing the offer and sale of business franchises, business
opportunities and securities. Various governmental agencies monitor direct
selling activities, and the Company could be required to supply information
regarding its marketing plan to such agencies. Although the Company believes
that its network marketing system is in material compliance with the laws and
regulations relating to direct selling activities, there can be no assurance
that legislation and regulations adopted in particular jurisdictions in the
future will not adversely affect the Company's business, financial condition and
results of operations. The Company also could be found to be in non-compliance
with existing statutes or regulations as a result of, among other things,
misconduct by IAs, who are considered independent contractors over whom the
Company has limited control, the ambiguous nature of certain of the regulations
and the considerable interpretive and enforcement discretion given to
regulators. Any assertion or determination that the Company or the IAs are not
in compliance with existing statutes or regulations could have a material
adverse effect on the Company's business, financial condition and results of
operations. An adverse determination by any one state on any regulatory matter
could influence the decisions of regulatory authorities in other jurisdictions.
The primary goal of the Offering is to increase the motivation of
regional and executive directors by allowing them to purchase an interest in the
Company. Accordingly, because the Company desires the ability to offer its Class
B Common Stock to regional and executive directors in certain states, the
Company will attempt to register or qualify the Offering in such states. Due to
the varying nature of state securities regulations and the considerable
discretion given to state securities regulators, the Company may be unable to
register or qualify the Offering in certain states. The inability of the Company
to offer and sell the Shares to residents of certain states may limit the
ability of the Company to attract IAs in such states, or lead to increased
attrition of IAs in such states, and may have a material adverse effect on the
Company's business, prospects, financial condition and results of operations. An
adverse determination by any one state regulator on a securities regulatory
matter could influence the decisions of state regulatory authorities in other
jurisdictions. See "Business - Marketing" and "- Regulation."
INTENSE COMPETITION
The Company faces competition in the United States for both the
products and services it sells and for the sponsoring and retaining of
independent salespeople. The United States long distance telecommunications
industry is intensely competitive, rapidly evolving and subject to rapid
technological change. In addition, the industry is significantly influenced by
the marketing and pricing practices of the major industry participants. AT&T
Corp. ("AT&T"), MCI, Sprint Corporation ("Sprint") and WorldCom, Inc.
("WorldCom") are the dominant competitors in the domestic long distance
telecommunications industry. All of these companies are
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significantly larger than the Company and have substantially greater resources.
According to a 1995 report by the Federal Communications Commission (the "FCC"),
AT&T, MCI, Sprint and WorldCom accounted for approximately 56%, 17%, 10% and 5%,
respectively, of total domestic long distance revenue for calendar year 1994.
Many of the Company's current and potential competitors have longer operating
histories, greater name recognition, larger customer bases and substantially
greater financial, personnel, marketing, technical and other resources than the
Company. These competitors employ various means to attract new subscribers,
including television and other advertising campaigns, telemarketing programs,
network marketing and cash payments and other incentives. The Company's ability
to compete effectively depends upon, among other factors, its ability to offer
high quality products and services at competitive prices. There can be no
assurance that the Company will be able to compete successfully. See "Business -
Competition."
On February 8, 1996, President Clinton signed into law the
Telecommunications Act of 1996, as amended (the "1996 Telecommunications Act"),
that will allow local exchange carriers ("LECs"), including the Bell Operating
Companies ("BOCs"), to provide long distance telephone service inter-LATA (a
"LATA" is a Local Access and Transport Area), which will likely significantly
increase competition for long distance services. The new legislation also grants
the FCC the authority to deregulate other aspects of the telecommunications
industry. Such increased competition could have a material adverse effect on the
Company's business, financial condition and results of operations.
Telecommunications companies compete for subscribers based on price,
among other things, with major long distance carriers conducting extensive
advertising campaigns to capture market share. There can be no assurance that a
decrease in the rates charged for communications services by the major long
distance carriers or other competitors, whether caused by general competitive
pressures or the entry of the BOCs and other LECs into the long distance market,
would not have a material adverse effect on the Company's business, financial
condition and results of operations.
The Company expects that the telecommunications services markets will
continue to attract new competitors and new technologies, possibly including
alternative technologies that are more sophisticated and cost effective than the
technologies included in the products and services offered by the Company. The
Company does not have the contractual right to prevent subscribers from changing
to a competing service, and the subscribers may terminate their service at will.
The Company also competes for IAs with other direct selling
organizations, some of which have longer operating histories and greater
visibility, name recognition and financial resources. The leading network
marketing companies in the Company's markets are EXCEL, ACN and Amway. The
Company competes for IAs on the basis of the Company's reputation, perceived
opportunity for financial success and quality and range of products offered for
sale. Management envisions the entry of many more direct selling organizations
into the marketplace. There can be no assurance that the Company will be able to
successfully meet the challenges posed by this increased competition. The
Company competes for the time, attention and commitment of its IAs. Given that
the pool of individuals interested in the business opportunities presented by
direct selling is limited in each market, the potential pool of IAs for the
Company's products and services is reduced to the extent other network marketing
companies successfully recruit these individuals. Although management believes
that the Company offers an attractive business opportunity, there can be no
assurance that other network marketing companies will not be able to recruit the
Company's existing IAs or deplete the pool of potential IAs in a given market,
and in such event, the Company's business, financial condition and results of
operations could be materially adversely affected. See "Business - Competition."
RELATIONSHIP WITH CARRIER
The Company does not own a long distance network. As a result, Maxxis
Telecom has entered into an agreement (the "1-Plus Agreement") with CRC to
obtain switching and network services. The Company now depends exclusively on
CRC for the transmission of subscriber phone calls and the activation of prepaid
phone cards. The 1-Plus Agreement, which expires on February 20, 2000, provides
that the Company will have rights to the subscriber base developed under the
agreement only upon achieving certain minimum levels of monthly revenues on
CRC's network. There can be no assurance that the Company will achieve the
minimum level of
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monthly revenues on CRC's network necessary to obtain rights to the subscriber
base. In addition, minimum monthly revenues may be more difficult to maintain if
the Company utilizes additional carriers, and the Company could be subject to
additional minimum commitments including, but not limited to, minimum monthly
revenues or minimum monthly minutes of usage, with such new carriers. The
accurate and prompt billing of the subscribers originated by the IAs is also
dependent upon CRC. The failure of CRC to accurately and promptly bill
subscribers could lead to a loss of subscribers and could have a material
adverse effect on the Company's business, financial condition and results of
operations. The Company would be required to use another carrier if the 1-Plus
Agreement is terminated, the usage or number of subscribers originated by the
Company's IAs exceeds the capacity of CRC or CRC fails to provide quality
services. In such event, or in the event the Company otherwise elects to use
other carriers, the cost paid by the Company for such long distance services may
exceed that paid under the 1-Plus Agreement. If the 1-Plus Agreement is
terminated, there can be no assurance that the Company could enter into new
contracts with other providers on terms favorable to the Company or at all, and
the termination of the 1-Plus Agreement or the failure of CRC to provide quality
services, quality customer support or accurate and timely billing could have a
material adverse effect on the Company's business, financial condition and
results of operations. See "Business - Supplier" and "Management's Discussion
and Analysis of Financial Condition and Results of Operations."
CONCENTRATION OF OWNERSHIP; VOTING RIGHTS OF CLASS A AND CLASS B COMMON STOCK
Following the Offering, assuming the sale of 5,000,000 Shares offered
hereby, the directors and executive officers and relatives and affiliates of
directors and executive officers of the Company and its subsidiaries will own,
in the aggregate, 11,300,000 shares of Class A Common Stock and 110,000 shares
of Class B Common Stock which collectively represents approximately 51.2% of the
total outstanding shares of Common Stock. The Class A Common Stock and Class B
Common Stock vote as a single class with respect to substantially all matters,
including the election of directors, submitted to a vote of the shareholders,
with each share of Class A Common Stock entitled to ten votes and each share of
Class B Common Stock entitled to one vote. Accordingly, assuming the sale of
5,000,000 Shares offered hereby, the directors and executive officers and
relatives and affiliates of directors and executive officers of the Company and
its subsidiaries, acting as a group, will hold approximately 74.9% of the
combined voting power (on a fully diluted basis) of the Company and will have
the ability to elect all of the directors of the Company and control the
Company's management, operations and affairs for the foreseeable future. See
"Principal Shareholders" and "Description of Capital Stock."
ABILITY TO MANAGE GROWTH
The Company's goal is to develop a nationwide network of IAs and to
offer long distance telecommunications and other products and services
throughout the United States. The Company's strategy of growth and expansion
will place substantial demands upon the Company's current management and other
resources and may require a substantial amount of working capital, as well as
management, operational and other financial resources. The success of the
Company will depend on various factors, including, among others, federal and
state regulation of the telecommunications industry, competition and the
capability and capacity of the Company's long distance carriers. Not all of the
foregoing factors are within the control of the Company. The Company's ability
to manage growth successfully will require the Company to develop strong
operational, management, financial and information systems and controls. No
assurance can be given that the Company will experience growth or that, if it
does, that management will be able to manage growth effectively. In such event,
the Company's business, financial condition and results of operations could be
materially adversely affected. See "Business - Strategy," "- Marketing," "-
Information Systems," "- Supplier," "- Employees" and "Management."
DEPENDENCE ON KEY PERSONNEL
The Company believes that its success will depend to a significant
extent upon the abilities and efforts of its senior management, particularly
Ivey J. Stokes, its Chairman of the Board, and Thomas O. Cordy, its Chief
Executive Officer and President. The Company does not maintain key man life
insurance on Mr. Stokes, Mr. Cordy or any other person. Many of the Company's
executive officers and other key employees have only
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recently joined the Company. The loss of the services of any of such individuals
could have a material adverse effect on the Company's business, financial
condition and results of operations. The success of the Company will also
depend, in part, upon the Company's ability to find, hire and retain additional
key management personnel. The inability to find, hire and retain such personnel
could have a material adverse effect upon the Company's business, financial
condition and results of operations. See "Management - Executive Officers and
Directors."
SUBSCRIBER ATTRITION
The Company believes that a high level of subscriber attrition is a
characteristic of the domestic residential long distance industry. Attrition is
attributable to a variety of factors, including the termination of subscribers
for non-payment and the initiatives of existing and new competitors as they
engage in, among other things, national advertising campaigns, telemarketing
programs and the issuance of cash or other forms of incentives. Such attrition
could have a material adverse effect upon the Company's business, financial
condition and results of operations. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations."
REGULATION OF LONG DISTANCE TELEPHONE SERVICES
Various regulatory factors may have an impact on the Company's ability
to compete and on its financial performance. CRC is subject to regulation by the
FCC and by various state public service and public utility commissions. Federal
and state regulations and regulatory trends have had, and may have in the
future, both positive and negative effects on the Company and on the
telecommunications service industry as a whole. FCC policy currently requires
interexchange carriers to provide resale of the use of their transmission
facilities. The FCC also requires LECs to provide all interexchange carriers
with equal access to the origination and termination of calls. If either or both
of these requirements were removed, CRC and, therefore, the Company could be
adversely affected. CRC may experience disruptions in service due to factors
outside CRC's and the Company's control, which may cause CRC to lose the ability
to complete its subscribers' long distance calls. The Company believes that CRC
has made all filings with the FCC necessary to allow CRC to provide interstate
and international long distance service. In order to provide intrastate long
distance service, CRC is required to obtain certification to provide
telecommunications services from the public service or public utility
commissions of each state, or to register or be found exempt from registration
by such commissions. While the Company believes that CRC is in compliance with
the applicable state and federal regulations governing telecommunications
service, and the Company believes that it is not required to obtain
certification or to be registered with public utility commissions, there can be
no assurance that the FCC or any state regulatory authority in one or more
states will not raise material issues with regard to CRC's or the Company's
compliance with applicable regulations, or that regulatory activities with
respect to CRC or the Company, will not have a material adverse effect on the
Company's business, financial condition and results of operations. See "Business
- - Regulation."
In February 1996, the enactment of the 1996 Telecommunications Act
served to increase competition in the long distance and local telecommunications
markets. The 1996 Telecommunications Act opens competition in the local services
market and, at the same time, contains provisions intended to protect consumers
and businesses from unfair competition by incumbent LECs, including the BOCs.
The 1996 Telecommunications Act allows BOCs to provide long distance service
outside of their local service territories but bars them from immediately
offering in-region inter-LATA long distance services until certain conditions
are satisfied. A BOC must apply to the FCC to provide in-region inter-LATA long
distance services and must satisfy a set of pro-competitive criteria intended
to ensure that BOCs open their own local markets to competition before the FCC
will approve such application. The Company is unable to determine how the FCC
will rule on any such application. The new legislation may result in increased
competition to the Company from others, including the BOCs, and increased
transmission costs in the future. See "- Intense Competition." If the federal
and state regulations requiring the LECs to provide equal access for the
origination and termination of calls by long distance subscribers change or if
the regulations governing the fees to be charged for such access services
change, particularly if such regulations are changed to allow variable pricing
of such access fees based upon
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volume, such changes could have a material adverse effect upon the Company's
business, financial condition and results of operations. See "Business -
Competition" and "- Regulation."
OFFERING ADDITIONAL PRODUCTS AND SERVICES
The Company's strategy includes offering additional products and
services in the future, which may include, among others, paging, wireless cable,
conference calling, cellular phone service, local phone service and other
non-communications related consumer products, such as nutritional products.
Entry into new markets entails risks associated with the state of development of
the market, intense competition from companies already operating in those
markets, potential competition from companies that may have greater financial
resources and experience than the Company, increased selling and marketing
expenses and regulatory issues. There can be no assurance that the Company's
additional products or services, if any, will receive market acceptance in a
timely manner, or at all, or that prices and demand in new markets will be at a
level sufficient to provide profitable operations. See "Business - Competition,"
"- Strategy" and "- Products and Services."
POSSIBLE CLAIMS RELATING TO OWNERSHIP OF PROPRIETARY RIGHTS
The Company has applied for a federal registration for the mark
"MAXXIS." In addition, the Company relies upon common law rights to establish
and protect its intellectual property. There can be no assurance that the
Company's measures to protect its intellectual property will prevent or deter
the unauthorized use of the Company's intellectual property. The Company's
inability to protect its intellectual property rights could have a material
adverse effect upon the Company's business, financial condition and results of
operations. From time to time, companies may assert other trademark and service
mark rights relevant to the Company's business, and future products of the
Company may need to be marketed under different names if the mark "MAXXIS" is
being used by other companies. The Company could also incur substantial costs to
defend any legal action taken against the Company. If, in any legal action that
might arise, the Company's asserted trademarks or service marks should be found
to infringe upon other intellectual property rights, the Company could be
enjoined from further infringement and required to pay damages. In the event a
third party were to sustain a valid claim against the Company, and in the event
any required license were not available on commercially reasonable terms, the
Company's business, financial condition and results of operations could be
materially adversely affected. Litigation, which could result in substantial
cost to and diversion of resources of the Company, may also be necessary to
enforce intellectual property rights of the Company or to defend the Company
against claimed infringement of the rights of others. See "Business -
Proprietary Rights."
BROAD DISCRETION IN APPLICATION OF PROCEEDS
The Company intends to use the net proceeds from the Offering for the
development of additional product lines, development and/or acquisition of
information systems, payment of organizational and offering expenses and for
working capital and general corporate purposes. Accordingly, the specific uses
for much of the net proceeds will be at the complete discretion of the Board of
Directors of the Company and may be allocated based upon circumstances arising
from time to time in the future. See "Use of Proceeds."
TRANSACTIONS WITH RELATED PARTIES
The Company has in the past entered into agreements and arrangements
with certain officers, directors and principal shareholders of the Company.
Certain of these transactions may have been made on terms more favorable to
officers, directors and principal shareholders than could have been obtained
from an affiliated third party. The Company intends to adopt a policy requiring
that all material transactions between the Company and its officers, directors
or other affiliates must: (i) be approved by a majority of the disinterested
members of the Board of Directors of the Company; and (ii) be on terms no less
favorable to the Company than could be obtained from unaffiliated third parties.
See "Certain Transactions."
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DETERMINATION OF OFFERING PRICE
The purchase price of the Class B Common Stock was arbitrarily
determined by the Company and does not necessarily bear any relationship to the
Company's asset value, net worth or other established criteria of value. Each
prospective investor should make an independent evaluation of the fairness of
such price. No assurance is or can be given that any of the shares will be able
to be resold for the offering price or for any other amount. See
"Capitalization" and "Dilution."
ABSENCE OF TRADING MARKET; TRANSFER RESTRICTIONS
There is currently no market for the Shares. Although the Company has
filed a Registration Statement with the Commission to register the issuance of
the Shares in the Offering under the Securities Act, it is unlikely that any
trading market will develop for the shares in the future. There are no present
plans for the Shares to be traded on any stock exchange or in the
over-the-counter market. As a result, investors who may need or wish to dispose
of all or part of their Shares may be unable to do so. In addition, sales of
substantial amounts of the Shares after the Offering could adversely affect
prevailing market prices, if any. See "Shares Eligible for Future Sale."
Pursuant to the Subscription Agreement, each purchaser of the Shares
offered hereby agrees not to sell or otherwise transfer the Shares or any
securities issued on account of such Shares during the Lock-up Period (as
defined herein). The Company may impose transfer restrictions during the Lock-up
Period by giving notice to the holders of record of the Shares. A purchaser of
the Shares offered hereby will not be able to transfer such Shares during the
Lock-up Period and may have substantial difficulty transferring such Shares
after the expiration of the Lock-up Period. The certificates evidencing the
Shares will bear a legend referencing these potential restrictions on transfer.
See "The Offering - Transfer Restrictions."
ANTI-TAKEOVER CONSIDERATIONS
The Board of Directors has authority to issue up to 10,000,000 shares
of preferred stock and to fix the rights, preferences, privileges and
restrictions, including voting rights, of the preferred stock without further
vote or action by the Company's shareholders. The rights of the holders of Class
B Common Stock will be subject to, and may be adversely affected by, the rights
of the holders of any preferred stock that may be issued in the future. While
the Company has no present intention to issue shares of preferred stock, such
issuance could have the effect of making it more difficult for a third party to
acquire a majority of the outstanding voting stock of the Company. See
"Description of Capital Stock - Preferred Stock."
The Company's Amended and Restated Bylaws (the "Bylaws") provide for
the Company's Board of Directors to be divided into three classes, as nearly
equal in size as possible, with staggered three-year terms, and with one class
being elected each year. This classification of the Board of Directors could
make it more difficult for a third party to acquire control of the Company. The
Articles, Bylaws and the Georgia Business Corporation Code, as amended (the
"Georgia Law"), contain certain additional provisions that could have the effect
of making it more difficult for a party to acquire, or of discouraging a party
from attempting to acquire, control of the Company without approval of the
Company's Board of Directors. See "Description of Capital Stock - Certain
Provisions of the Articles, Bylaws and Georgia Law."
SHARES ELIGIBLE FOR FUTURE SALE
Sales of shares of Class B Common Stock following the Offering could
adversely affect the price of the Company's Class B Common Stock. Upon
completion of the Offering, assuming 5,000,000 Shares offered hereby are sold,
the Company will have outstanding 8,000,000 shares of Class B Common Stock. Of
these shares, the 5,000,000 Shares 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
("Rule 144") under the Securities Act. The remaining 3,000,000 shares of Class B
Common Stock and all shares of Class A Common Stock outstanding upon completion
of the Offering are "restricted securities," as that
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term is defined in Rule 144. All of such restricted shares will be eligible for
sale in the open market under, and subject to the restrictions contained in,
Rule 144.
The Company and all of the holders of the Class A Common Stock have
entered into a shareholders agreement (the "Shareholders' Agreement") whereby
the shareholders agreed to certain restrictions on the transfer or other
disposition of the shares of Class A Common Stock held by each holder. In the
event a shareholder intends to transfer his or her Class A Common Stock to a
non-permitted transferee, the Company and the remaining shareholders have a
right of first refusal to purchase the transferring shareholder's Class A Common
Stock at fair market value. In addition, if the Company terminates a
shareholder's employment or engagement as a sales representative or consultant
for cause (or the employment or engagement of certain persons associated with a
shareholder), the Company shall have the right to repurchase, at fair market
value, an amount of the shareholder's Class A Common Stock which begins at 100%
and declines 20% per year for each completed year of service with the Company.
If either the right of first refusal or the Company's right to purchase is
exercised, either provision could have the effect of further concentrating the
stock ownership and voting power of the Company. See "Description of Capital
Stock - Shareholders' Agreement" and "Shares Eligible for Future Sale."
DILUTION TO NEW INVESTORS
Investors purchasing shares of Class B Common Stock in the Offering
will experience immediate and substantial dilution in net tangible book value.
In addition, the Board of Directors of the Company has the authority to issue up
to 700,000 additional shares of Class A Common Stock and up to 177,000,000
additional shares of Class B Common Stock, and such amounts may be increased and
new securities may be authorized in the future upon the determination of the
Board of Directors with the consent of the shareholders. See "- Concentration of
Ownership; Voting Rights of the Class A and Class B Common Stock" and
"Dilution."
NO MINIMUM OFFERING AMOUNT; IRREVOCABILITY OF SUBSCRIPTIONS; NO ESCROW
There is no minimum number of Shares which must be sold in this
Offering, and there can be no assurance that any or all of the Shares offered
hereby will be sold. Once a Subscription Agreement is received by the Company, a
prospective purchaser may not revoke or withdraw such Subscription Agreement
except with the consent of the Company. In addition, the Company reserves the
right to reject in whole or in part and in its sole discretion any subscription.
In addition, no escrow account has been established, and all subscription funds
will be paid directly to the Company. Upon acceptance of a subscription by the
Company, subscription proceeds will be available for immediate use by the
Company. See "The Offering - No Escrow."
LACK OF DIVIDENDS
The Company does not intend to pay any cash dividends with respect to
its Class B Common Stock in the foreseeable future. See "Dividend Policy."
APPLICATION OF THE PENNY STOCK RULES
The Commission has adopted rules that regulate broker-dealer practices
in connection with transactions in "penny stocks." Penny stocks generally are
equity securities which a price of less than $5.00 (other than securities
registered on certain national securities exchanges or quoted on the NASDAQ
Stock Market's National Market, provided that current price and volume
information with respect to transactions in such securities is provided by the
exchange or system). The penny stock rules require a broker-dealer, prior to a
transaction in a penny stock not otherwise exempt from the rules, to deliver a
standardized risk disclosure document prepared by the Commission that provides
information about penny stocks and the nature and level of risks in the penny
stock market. The broker-dealer also must provide the customer with bid and
offer quotations for the penny stock, the compensation of the broker-dealer and
its salesperson in the transaction and monthly account statements showing the
market value of each penny stock held in the customer's account. In addition,
the penny stock rules require that prior to a transaction in a penny stock not
otherwise exempt from such rules the broker-dealer must make a special written
determination that the penny stock is a suitable investment for the purchaser
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and receive the purchaser's written agreement to the transaction. These
disclosure requirements may have the effect of reducing the level of trading
activity in the secondary market for a stock that becomes subject to the penny
stock rules. Thus, even if a market for the Company's Class B Common Stock ever
develops, if the Class B Common Stock becomes subject to the penny stock rules,
shareholders may find it difficult to sell their shares.
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THE OFFERING
GENERAL
The Company intends to offer for sale pursuant to this Prospectus up to
5,000,000 shares of its Class B Common Stock. The Company intends to offer the
Shares primarily to individuals who are regional and executive directors of the
Company. The Company has established a minimum subscription of 200 Shares and
maximum subscriptions of 200 Shares and 2,000 Shares, respectively, for each
person who qualifies as a regional or executive director in the Company's
marketing system; provided, that the aggregate number of Shares sold in this
Offering shall not exceed 5,000,000. However, the Company reserves the right to
waive these limits or to allocate additional Shares to regional and executive
directors or to sell Shares to other purchasers, including members of the
general public, without notifying any purchaser or prospective purchaser.
Subscriptions to purchase Shares may be delivered to the Company until
12:00 p.m., E.S.T., on December 31, 1998, unless all of the Shares are earlier
sold or the Offering is earlier terminated or extended by the Company. The
Company reserves the right to terminate the Offering at any time or to extend
the expiration date for additional 90-day periods not to extend beyond December
31, 2000. The date the Offering terminates is referred to herein as the
"Expiration Date." No notice of an extension of the offering period need be
given prior to any extension, and any such extension will not alter the binding
nature of subscriptions already received by the Company. The Company intends to
provide quarterly communications to all purchasers which will include
information concerning any extensions of the Offering. Extension of the
Expiration Date might cause an increase in the Company's organizational and
pre-opening expenses and in the expenses incurred in connection with this
Offering. The Company may find it necessary to utilize the services of brokers
or dealers in order to effect sales of these securities in certain
jurisdictions. The Company will supplement this Prospectus or, if appropriate,
will file a post-effective amendment to the Registration Statement setting forth
the terms of any agreement with brokers or dealers.
Prospective purchasers must deliver to the Company a completed and
executed Subscription Agreement, the form of which is attached hereto as
Appendix A. An executed Subscription Agreement will constitute a prospective
purchaser's offer to purchase shares of Class B Common Stock as set forth in
this Prospectus. Prospective purchasers must warrant in the Subscription
Agreement that they have received a copy of this Prospectus, as amended or
supplemented. Once a Subscription Agreement is received by the Company, a
prospective purchaser may not revoke or withdraw such Subscription Agreement
except with the consent of the Company. In addition, the Company reserves the
right to reject, in whole or in part and in its sole discretion, any
subscription for any reason or no reason whatsoever. Acceptance of any
particular Subscription Agreement by the Company shall in no case require the
Company to accept any other Subscription Agreement. The Company may, in its sole
discretion, allocate shares among prospective purchasers in the event of an
oversubscription for the Shares. In determining which subscriptions to accept,
in whole or in part, the Company may take into account any factors it considers
relevant, including the order in which subscriptions are received, and a
prospective purchaser's perceived potential to do business with, or to direct
long distance subscribers or IAs to, the Company.
Certificates representing Shares duly subscribed and paid for will be
issued by the Company promptly after the Company accepts a subscription.
NO ESCROW
There is no minimum number of Shares which must be sold in this
Offering, and no escrow account has been established. All subscription funds
will be paid directly to the Company. Upon acceptance of a subscription by the
Company, subscription proceeds will be available for immediate use by the
Company. In the event the Company rejects all, or accepts less than all, of any
subscription, the Company will refund promptly an amount remitted equal to the
purchase price for such Shares multiplied by the number of Shares as to which
the subscription is not accepted. See "Risk Factors - No Minimum Offering
Amount; Irrevocability of Subscriptions; No Escrow."
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TRANSFER RESTRICTIONS
Pursuant to the Subscription Agreement, each purchaser of the Shares
offered hereby: (i) agrees during the Lock-up Period (as defined below) not to
(x) offer, pledge, sell, contract to sell, sell any option or contract to
purchase, purchase any option or contract to sell, grant any option, right or
warrant to purchase, or otherwise transfer or dispose of, directly or
indirectly, any of the Shares or any securities issued on account of such Shares
(whether by stock split, stock dividend or otherwise) or (y) enter into any swap
or other arrangement that transfers all or a portion of the economic
consequences associated with the ownership of any Shares (regardless of whether
any of the transactions described in clause (x) or (y) is to be settled by the
delivery of Shares, or such other securities, in cash or otherwise); (ii)
authorizes the Company to cause the transfer agent during the Lock-up Period to
decline to transfer any Shares and/or to note stop transfer restrictions on the
transfer books and records of the Company with respect to any Shares; and (iii)
agrees that a legend in substantially the following form will be placed on
certificates representing the Shares:
"THE SHARES REPRESENTED BY THIS CERTIFICATE (THE "SHARES") ARE
SUBJECT TO CONDITIONS THAT MAY LIMIT THEIR TRANSFERABILITY. SUCH
CONDITIONS ARE SET FORTH IN A SUBSCRIPTION AGREEMENT (THE
"SUBSCRIPTION AGREEMENT") BY AND BETWEEN THE ISSUER AND THE
ORIGINAL HOLDER OF THESE SHARES. ANY TRANSFEREE OF THESE SHARES
TAKES SUCH SHARES SUBJECT TO THE CONDITIONS SET FORTH IN THE
SUBSCRIPTION AGREEMENT.
IN SUMMARY, THESE CONDITIONS PROVIDE THAT THE ISSUER MAY ELECT TO
IMPOSE A PROHIBITION ON THE SALE OR TRANSFER OF THESE SHARES IN
THE EVENT THE ISSUER DETERMINES TO FILE A REGISTRATION STATEMENT
WITH THE U.S. SECURITIES AND EXCHANGE COMMISSION THAT SEEKS TO
REGISTER SECURITIES OF THE ISSUER IN AN INITIAL PUBLIC OFFERING
THAT IS FIRMLY UNDERWRITTEN. SUCH RESTRICTION MAY REMAIN IN
EFFECT FOR A PERIOD ENDING 180 DAYS FOLLOWING THE EFFECTIVENESS
OF SUCH REGISTRATION STATEMENT. THE ISSUER MAY IMPOSE THESE
CONDITIONS BY GIVING WRITTEN NOTICE TO THE HOLDER OF RECORD OF
THESE SHARES. THE FOREGOING SUMMARY IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO THE SUBSCRIPTION AGREEMENT, A COPY OF WHICH WILL
BE PROVIDED FREE OF CHARGE BY THE ISSUER TO ANY HOLDER,
PROSPECTIVE PURCHASER OR TRANSFEREE OF THESE SHARES UPON THEIR
REQUEST."
The transfer restrictions may be imposed by the Company by giving
notice of the imposition of such restriction (the "Lock-up Notice") to holders
of record of the Shares by first class mail, postage prepaid (or, at the
Company's option, certified mail, return receipt requested), at the address of
the holders of record of the Shares on a date chosen by the Company that is at
least one but no more than fifteen days prior to such mailing. The restrictions
shall be effective upon receipt of such notice, which date of receipt shall be
deemed to be three days following such mailing. Such notice may be given by the
Company such that it is received on any date beginning fifteen days prior to the
filing by the Company of a registration statement with the Commission whereby
the Company first seeks to register its securities for sale to the public in a
firmly underwritten public offering (the "IPO Registration Statement"), and
ending upon the date that the IPO Registration Statement is declared effective
by the Commission (the "Effective Date"). The transfer restrictions shall be
effective on the date of receipt of the Lock-up Notice and shall remain in force
and effect until 180 days following the Effective Date (such period being
referred to as the "Lock-up Period"). The Lock-up Period shall terminate if the
Company files an IPO Registration Statement but such registration statement is
subsequently withdrawn or is not declared effective within 120 days of filing
with the SEC, or if the Company transmits a Lock-up Notice prior to the filing
of an IPO Registration Statement but the IPO Registration Statement is not filed
within 15 days of receipt of such notice; provided, however, that in any such
event the restrictions described herein shall survive and shall be applicable to
each subsequent filing of an IPO Registration Statement by the Company until an
IPO Registration Statement is first declared effective by the SEC. See "Risk
Factors - Absence of Trading Market; Transfer Restrictions."
18
<PAGE> 20
PLAN OF DISTRIBUTION
Offers and sales of the Class B Common Stock will be made on behalf of
the Company by certain of its officers and directors. The officers and directors
will receive no commissions or other remuneration in connection with such
activities, but they will be reimbursed for reasonable expenses incurred in
connection with the Offering. The Company reserves the right to use brokers or
dealers to effect sales of the Shares in the Offering.
HOW TO SUBSCRIBE
A Subscription Agreement, a form of which is attached hereto as
Appendix A, must be completed, executed and delivered to the Company on or prior
to the Expiration Date. Prospective purchasers should retain a copy of the
completed Subscription Agreement for their records. The subscription price is
due and payable when the Subscription Agreement is delivered. Payment must be
made in United States dollars by cash or by check, bank draft or money order
drawn to the order of Maxxis Group, Inc., in the amount of $0.50 multiplied by
the number of Shares subscribed for.
19
<PAGE> 21
USE OF PROCEEDS
The net proceeds to the Company from the sale of 5,000,000 Shares
offered hereby (after deducting estimated offering expenses, all of which are
payable by the Company) are estimated to be approximately $2,100,000 if all the
Shares offered hereby are sold. Of the net proceeds received by the Company, the
Company intends to use: (i) approximately $400,000 for the development of
additional product lines; (ii) approximately $200,000 for the development and/or
acquisition of information systems; and (iii) approximately $1.5 million for
payment of organizational and offering expenses and for working capital and
general corporate purposes. However, the specific uses for the net proceeds will
be at the complete discretion of the Board of Directors of the Company and may
be allocated based upon circumstances arising from time to time in the future.
See "Risk Factors - Broad Discretion in Application of Proceeds." Pending
application of the net proceeds as described above, the Company will invest such
proceeds in short-term, interest-bearing instruments and investment grade
securities.
DIVIDEND POLICY
The Company anticipates that for the foreseeable future its earnings
will be retained for the operation and expansion of its business and that it
will not pay cash dividends. The Company's Board of Directors will determine the
Company's dividend policy in the future based upon, among other things, the
Company's results of operations, financial condition, business opportunities,
capital requirements, contractual restrictions and other factors deemed relevant
at the time.
CAPITALIZATION
The following table sets forth the capitalization of the Company: (i)
as of June 30, 1997; and (ii) as adjusted to give effect to the sale by the
Company of 3,000,000 shares of Class B Common Stock for $0.15 per share in a
private placement commenced by the Company in February 1997 and 5,000,000 shares
of Class B Common Stock being offered hereby at a public offering price of $0.50
per share and the anticipated receipt and application of the estimated net
proceeds therefrom. See "Use of Proceeds," "Management's Discussion and Analysis
of Financial Condition and Results of Operations" and "Certain Transactions."
<TABLE>
<CAPTION>
JUNE 30, 1997
---------------------------
ACTUAL AS ADJUSTED
---------- ------------
<S> <C> <C>
Stock subscription deposits..................................................... $ 360,000 $ 0
Class A Common Stock, 15,000,000 shares authorized;
14,300,000 shares issued and outstanding, and
14,300,000 shares issued and outstanding, as adjusted......................... 0 0
Class B Common Stock, 185,000,000 shares authorized;
0 shares issued and outstanding, and 8,000,000
shares issued and outstanding, as adjusted.................................... 0 0
Subscription receivable......................................................... (120,000) (120,000)
Additional paid-in capital...................................................... 127,000 2,677,000
Accumulated deficit............................................................. (50,000) (50,000)
---------- ------------
Total shareholders' equity................................................. $ 317,000 $ 2,507,000
========== ============
</TABLE>
20
<PAGE> 22
DILUTION
The net tangible book value of the Company as of June 30, 1997, was
$199,000, or $0.01 per share of Common Stock outstanding. Net tangible book
value per share represents the amount of the Company's total assets less total
liabilities, divided by the total number of outstanding shares of Common Stock.
After giving effect to the sale of 5,000,000 Shares offered hereby and the
receipt and application of the estimated proceeds therefrom (at a public
offering price of $0.50 per share and after deducting estimated expenses of the
Offering), the pro forma net tangible book value of the Company at June 30, 1997
would have been $2.4 million, or $0.11 per share of Common Stock. This
represents an immediate increase in the net tangible book value of $0.10 per
share to existing shareholders and an immediate dilution to new investors
purchasing shares of Class B Common Stock in the Offering of $0.39 per share.
The following table illustrates the per share dilution to new investors at June
30, 1997, assuming the Offering was made at that time:
<TABLE>
<S> <C> <C>
Initial offering price per share of Class B Common Stock ... $0.50
Net tangible book value per share of
Common Stock before the Offering ....................... 0.01
Increase per share attributable to new investors ......... 0.10
----
Pro forma net tangible book value per share of Common
Stock after the Offering ................................. 0.11
-----
Dilution per share to new investors ........................ $0.39
=====
</TABLE>
The following table sets forth as of June 30, 1997, after giving effect
to the Offering, the difference between existing shareholders and the new
investors purchasing shares of Class B Common Stock in the Offering with respect
to the number of shares of Common Stock purchased from the Company, the total
consideration paid therefor and the average price per share paid to the Company
on an as adjusted basis:
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE
------------------------ ------------------------ PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
------------ -------- ------------ -------- ----------
<S> <C> <C> <C> <C> <C>
Existing shareholders.................. 17,300,000(1) 77.6% $ 576,750(2) 18.7% $ 0.03
New investors.......................... 5,000,000 22.4 2,500,000 81.3 0.50
------------ ----- ------------ -----
Total............................... 22,300,000 100.0% $ 3,076,750 100.0%
============ ===== ============ =====
</TABLE>
(1) Adjusted for 600,000 shares of additional stock subscriptions for the
Company's Class B Common Stock received subsequent to June 30, 1997.
(2) Adjusted for the receipt of $90,000 in additional stock subscriptions
for the Company's Class B Common Stock subsequent to June 30, 1997.
21
<PAGE> 23
SELECTED CONSOLIDATED FINANCIAL DATA
The Company was incorporated on January 24, 1997 and began operations
in March 1997. The following selected consolidated financial data for the
Inception Period is derived from the audited consolidated financial statements
of the Company. The consolidated financial statements for the Inception Period
were audited by Arthur Andersen LLP, independent public accountants. The results
of operations for the Inception Period are not necessarily indicative of the
results to be expected for a full fiscal year. The selected consolidated
financial data should be read in conjunction with "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and the consolidated
financial statements and the related notes thereto appearing elsewhere in this
Prospectus.
<TABLE>
<CAPTION>
JANUARY 24, 1997
(INCEPTION)
TO JUNE 30, 1997
-----------------
<S> <C>
STATEMENT OF OPERATIONS DATA:
Revenues:
Communication services............................................................... $ 2,666,000
Subscriber services.................................................................. 25,000
-----------------
Total revenues.................................................................... 2,691,000
-----------------
Cost of Services....................................................................... 1,016,000
-----------------
Gross margin......................................................................... 1,675,000
-----------------
Operating Expenses:
Selling and marketing................................................................ 1,089,000
General and administrative........................................................... 636,000
-----------------
Total operating expenses.......................................................... 1,725,000
-----------------
Loss before income tax benefit......................................................... (50,000)
Income tax benefit..................................................................... 0
-----------------
Net loss............................................................................... $ (50,000)
=================
PER SHARE DATA:
Net loss per share..................................................................... $ (0.003)
=================
Weighted average number of shares outstanding.......................................... 17,300,000
</TABLE>
<TABLE>
<CAPTION>
AS OF JUNE 30, 1997
------------------------------
ACTUAL AS ADJUSTED(1)(2)
---------- -----------------
<S> <C> <C>
BALANCE SHEET DATA:
Working capital.............................................................. $ (13,000) $2,177,000
Property and equipment, net.................................................. 92,000 92,000
Total assets................................................................. 620,000 2,810,000
Long-term obligations........................................................ 0 0
Shareholders' equity......................................................... 317,000 2,507,000
</TABLE>
- ----------------------------
(1) Adjusted for the sale of 5,000,000 shares of Class B Common Stock of the
Company offered hereby at a public offering price of $0.50 per share and
the application of the estimated net proceeds therefrom. See "Use of
Proceeds."
(2) Adjusted for the receipt of $90,000 in additional stock subscriptions for
the Company's Class B Common Stock subsequent to June 30, 1997.
22
<PAGE> 24
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction
with the "Selected Consolidated Financial Data" and the consolidated financial
statements and notes thereto included elsewhere in this Prospectus. This
Prospectus contains forward-looking statements that involve risks and
uncertainties. The Company's actual results may differ materially from the
results discussed in the forward-looking statements. Factors that might cause
such a difference include, among other things, those discussed in "Risk
Factors."
GENERAL
Maxxis was incorporated on January 24, 1997 and began recruiting IAs
and marketing telecommunications services in March 1997. Currently, the Company
conducts all of its business and operations through its wholly-owned
subsidiaries Maxxis 2000 and Maxxis Telecom.
Maxxis 2000 is a network marketing company that currently markets
1-Plus long distance services, travel cards, prepaid phone cards, 800 service
and international telecommunications services. In the future, the Company
intends to market additional products and is currently considering the
possibility of marketing a line of nutritional products. The Company believes
that its network marketing system allows it to obtain customers for its products
in a cost effective manner and to enhance customer retention because of the
relationships between the Company's IAs and customers. The Company also believes
the telecommunications customer base developed by its IAs will provide a
potential customer base for future products. Maxxis Telecom obtains
telecommunications services through its contract with CRC. Maxxis Telecom also
purchases telecommunications time for its prepaid 5 hour, 1 hour, 30 minute and
10 minute phone cards from CRC.
The Company derives revenues from communication services and subscriber
services. Communication services revenues are primarily comprised of sales of
prepaid phone cards to the Company's IAs. Communication services revenues also
include application fees from IAs and purchases of sales aids by IAs, including
distributor kits which consist of forms, promotional brochures, marketing
materials and presentation materials. Subscriber services revenues are generated
from the Company's agreement with CRC whereby the Company receives a percentage
of the long distance billings received by CRC from the customers originated by
the Company's IAs, net of allowances for bad debts and billing adjustments. The
Company's aggregate revenues from 1-Plus services were $25,000 or only 0.93% of
the Company's total revenues, for the Inception Period. Because of the
administrative procedures that must be complied with in order to establish
1-Plus customers, there is generally a delay of between three to four months
from the time a prospective customer indicates a desire to become a 1-Plus
customer and the time that the Company begins to receive commissions from such
customer's usage. The Company did not commence operations until March 1997, and
accordingly, subscriber services revenues were minimal for the Inception Period.
In the future, the Company believes that commissions generated on the sales of
1-Plus long distance services will constitute a significant percentage of its
subscriber services revenues.
Cost of services includes the costs of purchasing prepaid phone cards
and IA distributor kits. Operating expenses consist of selling and marketing
expenses, which include commissions paid to IAs based on usage of long distance
services by subscribers and the sponsoring of new IAs and customers, and general
and administrative expenses, which include costs for IA support services,
information systems services and administrative personnel to support the
Company's operations and growth.
The Company has a limited operating history, and its operations are
subject to the risks inherent in the establishment of any new business. The
Company expects that it will incur substantial initial expenses, and there can
be no assurance that the Company will achieve or maintain profitability. If the
Company continues to grow rapidly, the Company will be required to continually
expand and modify its operational and financial systems, recruit additional IAs
and customers, and train and manage both current and new employees and IAs. Such
rapid growth would place a significant strain on the Company's operational
resources and systems, and the failure to effectively manage this projected
growth could have a material adverse effect on the Company's
23
<PAGE> 25
business, financial condition and results of operations. See "Risk Factors - New
Enterprise" and "- Ability to Manage Growth."
RESULT OF OPERATIONS
The following table sets forth historical revenues and cost of revenues
by category and the percentage of total revenues attributable to each category.
<TABLE>
<CAPTION>
JANUARY 24, 1997
(INCEPTION)
TO JUNE 30, 1997
----------------
<S> <C>
Revenues:
Communication services........................................................ 99.07%
Subscriber services........................................................... 0.93
------
Total revenues............................................................. 100.00%
======
Cost of Services................................................................ 37.76%
------
Operating Expenses:
Selling and marketing......................................................... 40.47
General and administrative.................................................... 23.63
------
Total operating expenses................................................... 64.10%
======
</TABLE>
The Company was incorporated in January 1997 and commenced operations
in March 1997. Because the Company was in the organizational stage during the
quarterly period ended March 31, 1997, no quarterly comparisons are presented
because management does not believe they would be meaningful. In addition, the
results of operations for the Inception Period are not necessarily indicative of
the results to be expected for a full fiscal year.
Revenues
Total revenues consist of communication services and subscriber
services revenues. For the Inception Period, communication services revenues
were $2,666,000, or 99.07% of total revenues, and subscriber services revenues
were $25,000, or 0.93% of total revenues. Communication services revenues
primarily consist of sales of prepaid phone cards to the Company's IAs and also
include application fees from IAs and purchases of sales aids by IAs. Subscriber
services revenues principally consist of commissions generated from long
distance usage of customers generated by the Company's IAs. This amount was
minimal for the Inception Period because no customers were utilizing long
distance services until May 1997. In the future, the Company believes that
commissions generated on sales of 1-Plus long distance services will constitute
a more significant percentage of subscriber services revenues.
Cost of Services
Cost of services was $1,016,000, or 37.76% of total revenues, for the
Inception Period. Cost of services principally consists of the costs of
purchasing prepaid phone cards and long distance services for these cards. The
Company purchases non-activated phone cards from a third party and purchases
telecommunications time for such phone cards from CRC. The Company then sells
the activated phone cards to its IAs. Cost of services also includes the cost of
the IA distributor kits.
Operating Expenses
Selling and marketing expenses principally consist of commissions paid
to IAs based on usage of long distance services, sales of IA distributor kits
and the recruitment of additional IAs and customers. Selling and marketing
expenses were $1,089,000, or 40.47% of total revenues, for the Inception Period.
24
<PAGE> 26
General and administrative expenses were $636,000, or 23.63% of total
revenues, for the Inception Period. General and administrative expenses consist
primarily of salary expense for the Company's customer service personnel, office
staff and executive personnel. Such expenses also include costs for IA support
services and informational systems services.
LIQUIDITY AND CAPITAL RESOURCES
Since inception, the Company has primarily financed all of its
operations through the sale of its securities in private placements. During the
Inception Period, cash flows from financing activities totaled approximately
$367,000 related to the sales of equity securities. To date, the Company has not
established lines of credit or other credit facilities as management has not
considered them to be necessary to the Company's operations. However, management
may consider it necessary or appropriate to incur debt in the future to finance
the Company's operations.
As of June 30, 1997, the Company had cash and cash equivalents of
$35,000 and working capital of $(13,000). Cash provided by operating activities
through June 30, 1997 was $18,000.
The Company's investing activities principally consisted of the
purchase of equipment for $99,000 and software development and organizational
costs of $241,000 from inception through June 30, 1997.
The Company believes that the current operations as well as the
proceeds to be received from the sale of Class B Common Stock offered hereby
will be sufficient to fund the Company's anticipated operations through the next
12 months. The Company's cash and financing needs for 1998 and beyond will be
dependent on the Company's level of IA and customer growth and the related
capital expenditures, advertising costs and working capital needs necessary to
support such growth. The Company believes that major capital expenditures may be
necessary over the next few years to develop additional product lines to sell
through its IAs and to develop and/or acquire information systems to monitor and
analyze the Company's growing network marketing system. The Company has not
identified financing sources to fund such cash needs in 1998 and beyond. In
addition, any increases in the Company's growth rate, shortfalls in anticipated
revenues, increases in expenses or significant acquisition opportunities could
have a material adverse effect on the Company's liquidity and capital resources
and could require the Company to raise additional capital from public or private
equity or debt sources in order to finance its anticipated growth and
contemplated capital expenditures. In addition, the Company may need to raise
additional funds in order to take advantage of unanticipated opportunities, such
as acquisitions of complementary businesses or the development of new products,
or otherwise respond to unanticipated competitive pressures. There can be no
assurance that the Company will be able to raise any such capital on terms
acceptable to the Company or at all. See "Risk Factors - New Enterprise" and "-
Ability to Manage Growth."
25
<PAGE> 27
BUSINESS
Maxxis markets telecommunications services in the United States through
its multi-level network marketing system of "independent associates," or "IAs."
The Company operates through its subsidiaries: Maxxis 2000, which conducts
network marketing operations; and Maxxis Telecom, which provides long distance
services. The Company currently markets both 1-Plus long distance service and
value-added telecommunications services, such as travel cards, prepaid phone
cards, 800 service and international telecommunications service. The Company was
incorporated in January 1997 and began recruiting IAs and marketing
telecommunications services in March 1997. As of June 30, 1997, the Company had
generated aggregate gross revenues of approximately $2,691,000.
The Company initially intends to build a customer base without having
to commit capital or management resources to construct its own
telecommunications network and transmission facilities. In February 1997, Maxxis
Telecom contracted with CRC to obtain switching and network services and to
allow CRC's telecommunications services to be sold by the Company's IAs. In the
future, the Company may contract with other providers of long distance services
and intends to analyze the feasibility of developing its own long distance
network (including the acquisition or leasing of its own telecommunications call
switching equipment and dedicated transmission lines) in order to: (i) reduce
its dependence upon providers of telecommunications services; (ii) provide
additional services to its subscribers; and (iii) reduce expenses associated
with the transmission of long distance calls.
The Company conducts its marketing activities exclusively through its
network of IAs. The Company believes that IAs are generally attracted to the
Company's network marketing system because of the potential for supplemental
income and because the IAs are not required to purchase any inventory, have no
monthly sales quotas or account collection issues, have minimal required
paperwork and have a flexible work schedule. The Company encourages IAs to
enroll subscribers with whom the IAs have an ongoing relationship, such as
family members, friends, business associates and neighbors. The Company's
network marketing system and the Company's reliance upon IAs are intended to
reduce net marketing costs, subscriber acquisition costs and subscriber
attrition. The Company believes that its network marketing system will continue
to build a base of potential customers for additional services and products.
Accordingly, the Company is currently considering the possibility of marketing a
line of nutritional products.
The Company offers its IAs a number of support services. The Company
currently provides to each IA without charge one printed report describing such
IA's organization and provides additional reports for a fee. In addition, the
Company offers training, information and motivational support to the IA network
through: (i) its training organization; (ii) monthly newsletters; and (iii)
regional rallies.
STRATEGY
The Company's goal is to develop a national distribution system through
which large volumes of telecommunications services and other products and
services may be sold. The Company intends to increase its revenues by: (i)
expanding its marketing network; (ii) increasing the number of customers who
purchase products and services offered by the Company; and (iii) providing
additional products and services for sale through its IAs. The Company intends
to achieve its goal by:
- Growing and Developing its Network of IAs by enhancing the
recruiting and training services offered to IAs, continuing to
support the marketing efforts of IAs and introducing new
income opportunities for IAs.
- Maintaining and Expanding the Number of Customers by offering
high quality, competitively-priced products and services
through a highly motivated network of IAs.
26
<PAGE> 28
- Offering Additional Telecommunications Products by entering
into agreements for the marketing of additional products that
meet the needs of subscribers, which may include, among
others, paging, conference calling, wireless cable, cellular
and local phone service.
- Improving and Expanding its Product Lines by continuing to
evaluate and offer products that are attractive to its IAs and
customers. In addition to telecommunications products, the
Company is currently considering the possibility of marketing
a line of private-labeled nutritional products which the
Company would distribute through its IAs.
- Obtaining Competitive Prices on products and services through
the purchasing power of the Company's nationwide network.
MARKETING
The Company markets products and services exclusively through its
network of IAs. Currently, the Company has five IA positions in its marketing
system: associate; senior associate; director; regional director; and executive
director. All IA commissions are paid directly by the Company and are a
specified percentage or a designated amount of the gross proceeds received by
the Company on the sale of services and products. The Company designates a
portion of its gross commissions as "commission value," or "CV," and allocates
the CV among eligible participants in its marketing system. Currently, 20% of
the CV earned with respect to a long distance subscriber is paid weekly to the
IA who sponsored such subscriber, 75% of the CV is paid monthly to eligible
directors who have the IA who sponsored the subscriber in their downline and the
remaining 5% is retained by the Company to be paid out to directors, regional
directors and executive directors in the Company's incentive bonus programs. All
directors, executive directors and regional directors who (i) have an aggregate
of at least 200 active long distance customers personally and in the first seven
levels of their downline as of the last Friday of a quarter, (ii) have sponsored
at least two new senior associates during the quarter and (iii) are certified as
MDs are eligible to receive an additional Leadership Bonus. The Leadership Bonus
is payable quarterly and equals, in the aggregate, 1% of the total sales of
Maxxis 2000 during the quarter. The Leadership Bonus is divided equally among
all directors, regional directors and executive directors who qualify for a
Leadership Bonus.
To become an associate, individuals (other than individuals in North
Dakota) must complete an application and purchase a distributor kit for $30. The
distributor kit is a package of basic materials which assists an associate in
beginning his or her business. Associates may gather long distance customers and
receive 20% of the CV generated by such customers. Associates are also entitled
to purchase products from the Company at discounted prices for retail sales. An
associate becomes a senior associate when the associate sells $100 of
bonus-eligible products. Senior associates continue to receive a percentage of
CV with regard to all subscribers personally gathered by them and are also
entitled to purchase products from the Company at discounted prices for retail
sales.
To become a director, a senior associate must sponsor two additional
senior associate positions. A director increases the size of the director's
sales organization by sponsoring additional persons to become senior associates.
These senior associates, and all senior associates that they, in turn, sponsor,
become part of the sales organization of the director who sponsored them. Senior
associates, through the growth of their sales organizations, may become
directors, regional directors or executive directors and thereby increase the
size of the sales organization of the person who was their original sponsor. The
organization that grows below each director through this process is called a
"downline." Directors are eligible to receive the same commissions as senior
associates and, if they directly gather and maintain a minimum of four active
1-Plus long distance customers, are eligible to receive a percentage of the CV
produced by each IA that is within 15 levels below them in their downline. In
order to encourage the growth of the Company's marketing system, the Company
also pays eligible directors a bonus amount, which is designated as "bonus
value," or "BV," for each sale of bonus-eligible products. Currently, the
Company only designates retail priced phone cards as bonus-eligible products.
Directors become regional directors and executive directors upon the achievement
of certain IA sales goals. Regional directors and executive directors are
eligible to receive the same commissions as directors and,
27
<PAGE> 29
if they qualify, share in the CV Bonus Pool. Regional directors and executive
directors are eligible to serve on the Maxxis 2000 Advisory Board, which advises
management on issues regarding field leadership.
The maximum aggregate long distance usage commissions the Company may
be required to pay with respect to a single subscriber's long distance usage are
approximately 40% of the gross commissions payable to the Company with respect
to such usage, but the Company anticipates that the actual amounts paid will be
less than 40% as the usage increases. The difference between actual commission
payments and the maximum payment is expected to occur because certain IAs fail
to maintain active status necessary to receive commissions from sales made by
persons in their downline.
RELATIONSHIP WITH IAS
The Company seeks to contractually limit the statements that IAs make
about the Company's business. Each IA also must agree to policies and procedures
to be followed in order to maintain the IA's status in the organization. IAs are
expressly forbidden from making any representation as to the possible earnings
of any IA from the Company. IAs are also prohibited from creating any marketing
literature that has not been pre-approved by the Company. While the Company has
these policies and procedures in place governing the conduct of the IAs, it is
difficult to enforce such policies and procedures. Because the IAs are
classified as independent contractors, the Company is unable to provide them the
same level of direction and oversight as Company employees. Violations of the
Company's policies and procedures may reflect negatively on the Company and
could have a material adverse effect on the Company's business, financial
condition and results of operations. See "Risk Factors - Dependence on IAs" and
"- Relationship with IAs."
TRAINING AND MARKETING SUPPORT
The Company provides all IAs with the opportunity to receive training
through the Company's training program. The training is conducted by the
Company's MDs and includes a detailed explanation of the Company's products, the
IA compensation plan and the use of the various marketing tools available to the
IA. The Company intends to publish a newsletter for the IAs containing
informative and motivational articles and recognizing IA achievements. The
Company's first annual convention was held in August 1997, and the Company
intends to continue to hold annual conventions for IAs. This event provides
recognition to the top performers, direct access to senior management and a
chance for IAs to share experiences and develop support systems. The Company
intends to organize additional conventions throughout the country that current
IAs and potential new IAs can attend to learn more about the Company.
The Company encourages directors and regional directors to become
certified as MDs. A person must attend a Company approved training school in
order to be certified as a MD. The fee to become a MD is generally $99 (with an
annual renewal fee of $99). MDs are paid a fee by the Company for training IAs.
The Company operates a call center to answer IA questions and provide
IA support. This system includes a current database of all IAs, their personal
organizations and their subscribers. In addition, the Company has licensed a
commission processing software system to process the high volume of data
necessary to calculate commissions. This system prepares weekly commission
payments.
PRODUCTS AND SERVICES
The Company markets a variety of long distance and value-added
telecommunications services and products to customers in equal access areas,
which currently include 1-Plus long distance service, travel cards and prepaid
phone cards, 800 service and international telecommunications service.
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<PAGE> 30
Following is a summary of the various long distance and value-added
services and products the Company currently provides to subscribers.
1-Plus Long Distance. The Company's 1-Plus long distance service serves
as a replacement for a customer's former long distance service (such as the long
distance services provided by AT&T, MCI and Sprint). The 1-Plus services
marketed by the Company are billed on a flat rate basis, where the cost of a
call does not vary depending upon the distance of a call or the time of day or
day of week when the call is originated or terminated. Residential 1-Plus
services marketed by the Company are billed based on one minute increments, and
business 1-Plus service is billed based on 6-second increments with a 30-second
minimum.
Travel Cards. The Company offers a calling card to 1-Plus subscribers.
The calling card offers subscribers no first minute surcharge, conference
calling, fax storage and LEC billing. There is no monthly fee for calling cards.
Prepaid Phone Cards. The Company offers prepaid phone cards in domestic
time increments of 5 hours, 1 hour, 30 minutes and 10 minutes. These cards may
be used for domestic and international calls. If used for international calls, a
greater number of minutes will be deducted from the call in proportion to the
differential between the domestic and applicable international rate.
800 Service. The Company markets toll-free inbound service. The service
is billed based on a flat rate regardless of the time the call is originated or
terminated or (within the continental United States) the distance of the call.
Small business and residential customers are charged a $1.00 per month service
fee, and their calls are billed in 1-minute increments. Large businesses are
billed a $5.00 per month service fee, and their calls are billed in 6-second
increments with a 30-second minimum.
International Telecommunications Service. The Company offers two
international calling programs for both residential and business customers. The
standard residential program, which is available to all residential customers
without the payment of an additional fee, provides customers with international
telecommunications services that are billed based on a flat rate to each country
in 1-minute increments. The standard business program, which is available to
business customers without the payment of an additional fee, provides customers
with international telecommunications services that are billed in 6-second
increments with a 30-second minimum. Business and residential customers may join
the "V.I.P." international calling program upon the payment of a $5.00 or $3.00
monthly fee, respectively, and receive a 20% discount off of the international
rates charged to persons who are not members of the "V.I.P." program plus an
additional 5% discount for any particular designated country.
INFORMATION SYSTEMS
The Company believes that maintaining sophisticated and reliable
transaction processing systems is essential for multi-level network marketing
companies. Accordingly, the Company invests in maintaining and enhancing its
computer systems. The Company's systems are designed to process detailed and
customized IA commission payments, monitor and analyze financial and operating
trends and track each IA's personal organization.
IA SUPPORT
The Company operates a call center where advisors answer IA questions
and provide information to IAs. This system includes a current database of all
IAs, their personal organizations and their subscribers. The Company has
licensed a commission processing software system that incorporates the
provisions of the Company's marketing program for purposes of calculating
commissions. The Company also maintains transaction processing systems that
facilitate the shipment of IA training and marketing materials. In addition, the
Company's order processing system tracks the receiving, storage, shipment and
purchasing of sales aid products.
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SUPPLIER
The Company does not own a long distance network. As a result, Maxxis
Telecom has contracted with CRC to obtain switching and network services. The
Company now depends exclusively on CRC for the transmission of subscriber phone
calls and the activation of prepaid phone cards. The Company's 1-Plus Agreement
with CRC, which expires on February 20, 2000, provides that the Company will
have rights to the subscriber base developed under the agreement upon achieving
certain minimum levels of monthly revenues on CRC's network. There can be no
assurance that the Company will achieve the minimum level of monthly revenues on
CRC's network necessary to have rights to the subscriber base. In addition,
minimum monthly revenues may be more difficult to maintain if the Company
utilizes additional carriers, and the Company could be subject to additional
minimum commitments including, but not limited to, minimum monthly revenues or
minimum monthly minutes of usage, with such new carriers. The accurate and
prompt billing of subscribers originated by the IAs is also dependent upon CRC.
The failure of CRC to accurately and promptly bill subscribers could lead to a
loss of subscribers and could have a material adverse effect on the Company's
business, financial condition and results of operations. The Company would be
required to use another carrier if the 1-Plus Agreement is terminated, the usage
or number of subscribers originated by the Company's IAs exceeds the capacity of
CRC or CRC fails to provide quality services. In such event, or in the event the
Company otherwise elects to use other carriers, the cost paid by the Company for
such long distance services may exceed that paid under the 1-Plus Agreement. If
the 1-Plus Agreement is terminated, there can be no assurance that the Company
could enter into new contracts with other providers on terms favorable to the
Company or at all. The termination of the 1-Plus Agreement could have a material
adverse effect on the Company's business, financial condition and results of
operations. See "Risk Factors - Relationship with Carrier."
SUBSCRIBER SUPPORT
CRC's is responsible for the billing of long distance customers and for
providing customer service. Services are provided under CRC's state, national
and international tariffs. The Company has been informed that CRC possesses all
tariffs necessary to offer such services.
COMPETITION
The Company faces competition in the United States for both the
products and services it sells and for the sponsoring and retaining of
independent salespeople. The United States long distance telecommunications
industry is intensely competitive, rapidly evolving and subject to rapid
technological change. In addition, the industry is significantly influenced by
the marketing and pricing practices of the major industry participants. AT&T,
MCI, Sprint and WorldCom are the dominant competitors in the domestic long
distance telecommunications industry. All of these companies are significantly
larger than the Company and have substantially greater resources. According to a
1995 FCC report, AT&T, MCI, Sprint and WorldCom accounted for approximately 56%,
17%, 10% and 5%, respectively, of total domestic long distance revenue for
calendar year 1994. Many of the Company's current and potential competitors have
longer operating histories, greater name recognition, larger customer bases and
substantially greater financial, personnel, marketing, technical and other
resources than the Company. These competitors employ various means to attract
new subscribers, including television and other advertising campaigns,
telemarketing programs, network marketing and cash payments and other incentives
to new subscribers. The Company's ability to compete effectively depends upon,
among other factors, its ability to offer high quality products and services at
competitive prices. There can be no assurance that the Company will be able to
compete successfully. See "Risk Factors - Intense Competition."
The evolving regulatory environment of the United States
telecommunications industry significantly influences the Company's ability to
compete. On February 8, 1996, President Clinton signed into law the 1996
Telecommunications Act that will allow LECs, including the BOCs, to provide long
distance telephone service inter-LATA, which will likely significantly increase
competition for long distance services. The new legislation also grants the FCC
the authority to deregulate other aspects of the telecommunications industry.
Such increased
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<PAGE> 32
competition could have a material adverse effect on the Company's business,
financial condition and results of operations.
Telecommunications companies compete for subscribers based on price,
among other things, with major long distance carriers conducting extensive
advertising campaigns to capture market share. There can be no assurance that a
decrease in the rates charged for communications services by the major long
distance carriers or other competitors, whether caused by general competitive
pressures or the entry of the BOCs and other LECs into the long distance market,
would not have a material adverse effect on the Company's business, financial
condition and results of operations.
The Company expects that the telecommunications services markets will
continue to attract new competitors and new technologies, possibly including
alternative technologies that are more sophisticated and cost effective than the
technologies included in the products and services offered by the Company. The
Company does not have the contractual right to prevent subscribers from changing
to a competing service, and the subscribers may terminate their service at will.
The Company also competes for IAs with other direct selling
organizations, some of which have longer operating histories and greater
visibility, name recognition and financial resources. The leading network
marketing companies in the Company's markets are EXCEL, ACN and Amway. The
Company competes for new IAs on the basis of the Company's reputation, perceived
opportunity for financial success and quality and range of products offered for
sale. Management envisions the entry of many more direct selling organizations
into the marketplace. There can be no assurance that the Company will be able to
successfully meet the challenges posed by this increased competition. The
Company competes for the time, attention and commitment of its IAs. Given that
the pool of individuals interested in the business opportunities presented by
direct selling is limited in each market, the potential pool of IAs for the
Company's products and services is reduced to the extent other network marketing
companies successfully recruit these individuals. Although management believes
that the Company offers an attractive business opportunity, there can be no
assurance that other network marketing companies will not be able to recruit the
Company's existing IAs or deplete the pool of potential IAs in a given market
and, in such event, the Company's business, financial condition and results of
operations could be materially adversely affected. See "Risk Factors - Intense
Competition."
PROPRIETARY RIGHTS
The Company has applied for a federal registration for the mark
"MAXXIS." In addition, the Company relies upon common law rights to establish
and protect its intellectual property. There can be no assurance that the
Company's measures to protect its intellectual property will prevent or deter
the unauthorized use of the Company's intellectual property. The Company's
inability to protect its intellectual property rights could have a material
adverse effect upon the Company's business, financial condition and results of
operations. From time to time, companies may assert other trademark and service
mark rights relevant to the Company's business, and future products of the
Company may need to be marketed under different names if the mark "MAXXIS" is
being used by other companies. The Company could also incur substantial costs to
defend any legal action taken against the Company. If, in any legal action that
might arise, the Company's asserted trademarks or service marks should be found
to infringe upon other intellectual property rights, the Company could be
enjoined from further infringement and required to pay damages. In the event a
third party were to sustain a valid claim against the Company, and in the event
any required license were not available on commercially reasonable terms, the
Company's business, financial condition and results of operations could be
materially adversely affected. Litigation, which could result in substantial
cost to and diversion of resources of the Company, may also be necessary to
enforce intellectual property rights of the Company or to defend the Company
against claimed infringement of the rights of others. See "Risk Factors -
Possible Claims Relating to Ownership of Proprietary Rights."
REGULATION
Various regulatory factors may have an impact on the Company's ability
to compete and on its financial performance. The Company's carrier, CRC, is
subject to regulation by the FCC and by various state public
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<PAGE> 33
service and public utility commissions. Federal and state regulations and
regulatory trends have had, and may have in the future, both positive and
negative effects on the Company and on the telecommunications service industry
as a whole. FCC policy currently requires interexchange carriers to provide
resale of the use of their transmission facilities. The FCC also requires LECs
to provide all interexchange carriers with equal access to the origination and
termination of calls. If either or both of these requirements were removed, CRC
and, therefore, the Company could be adversely affected. CRC may experience
disruptions in service due to factors outside CRC's and the Company's control,
which may cause CRC to lose the ability to complete its subscribers' long
distance calls. The Company believes that CRC has made all filings with the FCC
necessary to allow CRC to provide interstate and international long distance
service. In order to provide intrastate long distance service, CRC is required
to obtain certification to provide telecommunications services from the public
service or public utility commissions of each state, or to register or be found
exempt from registration by such commissions. While the Company believes that
CRC is in compliance with the applicable state and federal regulations governing
telecommunications service, there can be no assurance that the FCC or any state
regulatory authority in one or more states will not raise material issues with
regard to CRC's compliance with applicable regulations, or that regulatory
activities with respect to CRC will not have a material adverse effect on the
Company's business, financial condition and results of operations. See "Risk
Factors - Regulation of Long Distance Telephone Services."
In February 1996, the enactment of the 1996 Telecommunications Act
served to increase competition in the long distance and local telecommunications
markets. The 1996 Telecommunications Act opens competition in the local services
market and, at the same time, contains provisions intended to protect consumers
and businesses from unfair competition by incumbent LECs, including the BOCs.
The 1996 Telecommunications Act allows BOCs to provide long distance service
outside of their local service territories but bars them from immediately
offering in-region inter-LATA long distance services until certain conditions
are satisfied. A BOC must apply to the FCC to provide in-region inter-LATA long
distance services and must satisfy a set of pro-competitive criteria intended to
ensure that BOCs open their own local markets to competition before the FCC will
approve such application. The Company is unable to determine how the FCC will
rule on any such application. The new legislation may result in increased
competition to the Company from others, including the BOCs, and increased
transmission costs in the future. See "Risk Factors - Intense Competition." If
the federal and state regulations requiring the LECs to provide equal access for
the origination and termination of calls by long distance subscribers change or
if the regulations governing the fees to be charged for such access services
change, particularly if such regulations are changed to allow variable pricing
of such access fees based upon volume, such changes could have a material
adverse effect upon the Company's business, financial condition and results of
operations. See "- Competition" and "Risk Factors - Regulation of Long Distance
Telephone Services."
The Company's network marketing system is subject to or affected by
extensive government regulation including, without limitation, federal and state
regulations governing the offer and sale of business franchises, business
opportunities and securities. Various governmental agencies monitor direct
selling activities, and the Company could be required to supply information
regarding its marketing plan to such agencies. Although the Company believes
that its network marketing system is in material compliance with the laws and
regulations relating to direct selling activities, there can be no assurance
that legislation and regulations adopted in particular jurisdictions in the
future will not adversely affect the Company's business, financial condition and
results of operations. The Company also could be found to be in non-compliance
with existing statutes or regulations as a result of, among other things,
misconduct by IAs, who are considered independent contractors over whom the
Company has limited control, the ambiguous nature of certain of the regulations
and the considerable interpretive and enforcement discretion given to
regulators. Any assertion or determination that the Company or the IAs are not
in compliance with existing statutes or regulations could have a material
adverse effect on the Company's business, financial condition and results of
operations. An adverse determination by any one state on any regulatory matter
could influence the decisions of regulatory authorities in other jurisdictions.
See "Risk Factors - Regulation of Network Marketing; Effect of State Laws."
Furthermore, the primary goal of the Offering is to increase the
motivation of regional directors by allowing them to purchase an interest in the
Company. Accordingly, because the Company desires the ability to offer its Class
B Common Stock to regional directors in certain states, the Company will attempt
to register
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or qualify the Offering in such states. Due to the varying nature of state
securities regulations and the considerable discretion given to state securities
regulators, the Company may be unable to register or qualify the Offering in
certain states. The inability of the Company to offer the Shares to residents of
certain states may limit the ability of the Company to attract IAs in such
states, or lead to increased attrition of IAs in such states, and may have a
material adverse effect on the Company's business, prospects, financial
condition and results of operations. An adverse determination by any one state
regulator on a securities regulatory matter could influence the decisions of
securities regulatory authorities in other jurisdictions. See "Risk Factors
Regulation of Network Marketing; Effect of State Laws."
FACILITIES
The Company operates out of offices in Atlanta, Georgia consisting of
approximately 7,200 square feet of general and administrative office space and
approximately 5,500 square feet of training space. The Company believes that it
will be required to lease or build additional facilities, including at least one
additional call center and new corporate headquarters, in order to meet
adequately its needs in the future. The Company believes that suitable
additional or alternative space will be available in the future on commercially
reasonable terms as needed.
EMPLOYEES
As of June 30, 1997, the Company employed approximately 25 people. The
Company's IAs are classified by the Company as independent contractors; however,
two of the Company's employees are also IAs. The Company's employees are not
unionized, and the Company believes its relationship with its employees is good.
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MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The directors and executive officers of the Company are set forth
below. The Company's Board of Directors consists of nine directors divided into
three classes of directors, serving staggered three-year terms. Directors and
executive officers of the Company are elected to serve until they resign or are
removed, or are otherwise disqualified to serve, or until their successors are
elected and qualified. Directors of the Company are elected at the annual
meeting of shareholders. Officers of the Company are appointed at the Board's
first meeting after each annual meeting of shareholders. The ages of the persons
set forth below are as of October 1, 1997.
<TABLE>
<CAPTION>
TERM AS
DIRECTOR
NAME AGE POSITIONS WITH THE COMPANY EXPIRES
- ---- --- -------------------------- -------
<S> <C> <C> <C>
Ivey J. Stokes............... 38 Chairman of the Board of Directors 1998
Thomas O. Cordy.............. 56 Chief Executive Officer, President and
Director 1998
Shawn J. Dinwiddie........... 31 Chief Financial Officer, Vice President of
Operations and Treasurer -
James W. Brown............... 62 Executive Vice President, Secretary and
Director 1999
Larry W. Gates, II........... 34 Vice President - Human Resources and
Director 1999
Charles P. Bernstein......... 47 Director 2000
Alvin Curry.................. 40 Director 1998
Robert J. Glover, Jr......... 36 Director 1999
Terry Harris................. 43 Director 2000
Philip E. Lundquist.......... 61 Director 2000
</TABLE>
The Company intends to adopt a policy requiring that any material
transactions between the Company and persons or entities affiliated with
officers, directors or principal shareholders of the Company be on terms no less
favorable to the Company than reasonably could have been obtained in arm's
length transactions with independent third parties. Any other matters involving
potential conflicts of interests are to be resolved on a case-by-case basis. See
"Certain Transactions."
IVEY J. STOKES has served as Chairman of the Board of Directors of the
Company since its inception. From 1986 to 1997, Mr. Stokes owned and operated an
independent marketing group as a sole proprietorship.
THOMAS O. CORDY has served as Chief Executive Officer, President and a
Director of the Company since May 1997. Prior to that time, he served as
President and Chief Executive Officer of CI Cascade Corp. Mr. Cordy currently
serves as Vice Chairman of the Board of Trustees for Clark Atlanta University,
Chairman of the Board of Renaissance Capital Corporation and a Director of Cox
Enterprises.
SHAWN J. DINWIDDIE has served as Chief Financial Officer, Vice
President of Operations and Treasurer of the Company since its inception. Since
1993, Mr. Dinwiddie was employed as a Budget Analyst with Atlantic Steel, Inc.
From 1987 to 1993, Mr. Dinwiddie was an officer in the United States Army in the
area of logistics management.
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JAMES W. BROWN currently serves as Executive Vice President and
Secretary of the Company and has been a Director of the Company since May 1997.
He served as President and Chief Executive Officer of the Company from inception
to April 1997. He has also served as Chief Executive Officer, President and a
Director of Maxxis 2000 since its inception. From 1995 to 1997, Mr. Brown has
served as a manager of NetWorld Communications, L.L.C. Since 1979, Mr. Brown has
also served as President and Chief Executive Officer of Marketing Ideas, Ltd.
LARRY W. GATES, II has served as Vice President of Human Resources
since the Company's inception and a Director of the Company since May 1997.
Since 1993, Mr. Gates has owned and operated an independent marketing group as a
sole proprietorship.
CHARLES P. BERNSTEIN has served as a Director of the Company since May
1997. Since 1992, Mr. Bernstein has also served as President of Harvest Mortgage
Co.
ALVIN CURRY has served as a Director of the Company since its
inception. He also serves as Executive Vice President and Chief Operating
Officer of Maxxis 2000. Since 1987, Mr. Curry has owned and operated an
independent marketing group as a sole proprietorship.
ROBERT JAMES GLOVER, JR. has served as a Director of the Company since
its inception. Since 1987, Mr. Glover has owned and operated an independent
marketing group as a sole proprietorship.
TERRY HARRIS has served as a Director of the Company since May 1997.
Since 1982, Mr. Harris has served as Pastor and President of Tacoma Christian
Center Inc.
PHILIP E. LUNDQUIST has served as a Director of the Company since May
1997. He also serves as Chairman of Christopher Partners Inc. Since 1988, Mr.
Lundquist has owned and operated an investment banking consulting company as a
sole proprietorship.
COMMITTEES OF THE BOARD
Subsequent to the Offering, the Board of Directors will establish an
audit committee (the "Audit Committee"). The Audit Committee will be comprised
solely of independent directors and will be charged with reviewing the Company's
annual audit and meeting with the Company's independent accountants to review
the Company's internal controls and financial management practices.
Also, subsequent to the Offering, the Board of Directors will establish
a compensation committee (the "Compensation Committee"). The Compensation
Committee will be comprised solely of "disinterested persons" within the meaning
of Rule 16b-3(c)(2)(i) promulgated under the Exchange Act and "outside
directors" as contemplated by Section 162(m)(4)(C)(i) of the Internal Revenue
Code of 1986, as amended. The Compensation Committee will be responsible for
establishing salaries, bonuses and other compensation for the Company's
executive officers.
DIRECTOR COMPENSATION
Members of the Board of Directors are reimbursed for their
out-of-pocket expenses for each meeting attended, but otherwise serve without
compensation.
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EXECUTIVE COMPENSATION
The following Summary Compensation Table sets forth the compensation
earned by the Company's current Chief Executive Officer and its former chief
executive officer for the Inception Period. No executive officers of the Company
received a combined salary and bonus in excess of $100,000 during the Inception
Period.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
INCEPTION PERIOD
COMPENSATION
----------------
SALARY BONUS
NAME AND PRINCIPAL POSITION ($) ($)
- --------------------------- ------ -----
<S> <C> <C>
Thomas O. Cordy(1) .................... $5,250 $ --
Chief Executive Officer and President
James W. Brown(1) ..................... 7,950 --
Executive Vice President
</TABLE>
- --------------
(1) Mr. Brown served as the Chief Executive Officer and President of the
Company from inception to April 30, 1997, and Mr. Cordy has served as
Chief Executive Officer of the Company since May 1, 1997.
OPTION GRANTS DURING 1997
As of June 30, 1997, no options had been granted to the Chief Executive
Officer of the Company, and no executive officer of the company received a
combined salary and bonus in excess of $100,000 during the Inception Period.
EMPLOYMENT AGREEMENTS
In May 1997, the Company entered into an employment agreement with Mr.
Cordy, and in September 1997, the Company entered into employment agreements
with each of Messrs. Brown, Curry and Dinwiddie (collectively, the "Employment
Agreements"). Generally, the Employment Agreements provide for a minimum weekly
salary. In addition, the employee may participate in a bonus program and shall
be eligible to receive quarterly or annual payments of a performance bonus based
upon the achievement of targeted levels of performance and such other criteria
as the Board of Directors shall establish from time to time. Mr. Cordy's
employment agreement provides for an additional bonus payment on July 1, 1998
and the purchase of Class A Common Stock. Each employee may participate in
insurance and other benefit plans of similarly situated employees, including any
stock option plans of the Company.
Each of the Employment Agreements has a term of one year, and the term
renews daily until either party fixes the remaining term at one year by giving
written notice. The Company can terminate each employee upon death or disability
(as defined in the Employment Agreements) or with or without cause upon delivery
to the employee of a notice of termination. If the employee is terminated
because of death, disability or cause, the employee will receive any accrued
compensation through the termination date and any accrued performance bonus,
unless the employee is terminated for cause. If the employee is terminated
without cause, the Company shall pay the employee severance payments equal to
his minimum base salary for each week during the six-month period following the
termination date. If the employee is a director or officer of the Company or any
of its affiliates, the employee shall tender his resignation to such positions
effective as of the termination date.
Under the Employment Agreements, each employee agrees to maintain the
confidentiality of the Company's trade secrets and confidential business
information. The employee also agrees for a period of one year following the
termination date, if he is terminated or resigns for any reason, not to compete
with or solicit
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employees or customers of the Company or any of its affiliates within a 30-mile
radius of the Company's corporate offices; provided, that if the employee is
terminated without cause, the non-compete period shall be six months.
SALES REPRESENTATIVE AGREEMENTS
In September 1997, the Company entered into independent sales
representative agreements (collectively, the "Sales Representative Agreements")
with ten independent sales representatives, including Messrs. Stokes, Gates and
Glover. The Sales Representative Agreements provide for a minimum weekly salary,
and each sales representative shall be eligible to receive quarterly payments of
a performance bonus based upon the achievement of targeted levels of
performance. Each sales representative is an independent contractor, and the
Company does not exercise control over the activities of the sales
representatives other than as set forth in the Sales Representative Agreements.
Each of the Sales Representative Agreements has a term of one year, and
the term renews daily until either party fixes the remaining term at one year by
giving written notice. The Company can terminate each sales representative upon
death or disability (as defined in the Sales Representative Agreements) or with
or without cause upon delivery to the sales representative of a notice of
termination. If a sales representative is terminated, the sales representative
will receive any accrued fees through the termination date and any accrued
performance bonus, unless the sales representative is terminated for cause. If
the sales representative is a director or officer of the Company or any of its
affiliates, the sales representative shall tender his resignation to such
positions effective as of the termination date. Under the Sales Representative
Agreements, each sales representative agrees to maintain the confidentiality of
the Company's trade secrets and confidential business information.
CONSULTING AGREEMENT
In September 1997, the Company entered into a consulting agreement with
Mr. Robert P. Kelly. The consulting agreement provides for a minimum weekly
salary, and the consultant may participate in a bonus program and shall be
eligible to receive quarterly or annual payments of a performance bonus based
upon the achievement of targeted levels of performance and such other criteria
as the Board of Directors shall establish from time to time. The consultant is
an independent contractor, and the Company does not exercise control over the
activities of the consultant other than as set forth in the consulting
agreement.
The consulting agreement has a term of one year, and the term renews
daily until either party fixes the remaining term at one year by giving written
notice. The Company can terminate the consultant upon death or disability (as
defined in the consulting agreement) or with or without cause upon delivery to
the consultant of a notice of termination. If the consultant is terminated
because of death, disability or cause, the consultant will receive any accrued
fees through the termination date and any accrued performance bonus, unless the
consultant is terminated for cause. If the consultant is terminated without
cause, the Company shall pay the consultant severance payments equal to his
minimum base salary for each week during the six-month period following the
termination date.
Under the consulting agreement, the consultant agrees to maintain the
confidentiality of the Company's trade secrets and confidential business
information. The consultant also agrees for a period of one year following the
termination date, if he is terminated or resigns for any reason, not to compete
with or solicit employees or customers of the Company or any of its affiliates
within a 30-mile radius of the Company's corporate offices; provided, that if
the consultant is terminated without cause, the non-compete period shall be six
months.
INDEMNIFICATION OF DIRECTORS AND OFFICERS
Pursuant to the Articles, the Company is obligated to indemnify each of
its directors and officers to the fullest extent permitted by Georgia Law with
respect to all liability and loss suffered and reasonable expenses incurred by
such person in any action, suit or proceeding in which such person was or is
made or threatened
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to be made a party or is otherwise involved by reason of the fact that such
person is or was a director or officer of the Company. The Company is obligated
to pay the reasonable expenses of the directors or officers incurred in
defending such proceedings if the indemnified party agrees to repay all amounts
advanced by the Company if it is ultimately determined that such indemnified
party is not entitled to indemnification. See "Description of Capital Stock -
Limitations on Liability of Officers and Directors."
CERTAIN TRANSACTIONS
On February 16, 1997, Glover Enterprises, Inc., an affiliate of Robert
J. Glover, a director of the Company, loaned the Company $50,000 to fund initial
start-up costs of the Company. The Company has repaid this loan.
During the Inception Period, the Company paid a fee of $184,000 to IS
14, Inc. ("IS 14"), a former Delaware corporation which was controlled by
certain of the directors and officers of the Company. The IS 14 fee was
comprised of compensation to certain of the Company's officers and sales
representatives prior to the establishment of the Company's payroll. IS 14 has
been dissolved, and the Company will not make any additional payments to IS 14.
Pursuant to Mr. Cordy's employment agreement, The Anchora Company, an
affiliate of Mr. Cordy, purchased 800,000 shares of Class A Common Stock, at a
price of $0.15 per share. In exchange, The Anchora Company gave the Company a
$120,000 full recourse promissory note which bears interest at annual rate of
8.75%. Mr. Cordy guaranteed the promissory note. The principal and interest on
the promissory note are due and payable on the earlier of May 1, 2002 or the
closing of an underwritten public offering where the Company receives aggregate
net proceeds of at least $5,000,000.
Certain of the transactions described above may be on terms more
favorable to officers, directors and principal shareholders than they could
obtain in a transaction with an unaffiliated third party. The Company intends to
adopt a policy requiring that all material transactions between the Company and
its officers, directors or other affiliates must: (i) be approved by a majority
of the disinterested members of the Board of Directors of the Company; and (ii)
be on terms no less favorable to the Company than could be obtained from
unaffiliated third parties. See "Risk Factors - Transactions with Related
Parties."
38
<PAGE> 40
PRINCIPAL SHAREHOLDERS
The following table sets forth certain information regarding the
beneficial ownership of the Common Stock, as of October 10, 1997, and as
adjusted to reflect the sale of 5,000,000 Shares of Class B Common Stock offered
hereby, by: (i) each person known by the Company beneficially to own more than
5% of the outstanding shares of the Common Stock; (ii) each director of the
Company; and (iii) all directors and executive officers of the Company as a
group. Shares of both Class A Common Stock and Class B Common Stock are
currently outstanding. The Shares to be issued in the Offering are Class B
Common Stock. See "Description of Capital Stock." Except as otherwise indicated,
all persons listed have sole voting and investment power with respect to their
shares.
<TABLE>
<CAPTION>
CLASS A CLASS B
COMMON STOCK COMMON STOCK TOTAL AFTER THE OFFERING
---------------------- -------------------- ------------------------
PERCENT OF PERCENT OF
PERCENT OF PERCENT OF VOTING SHARES
NAME AND ADDRESS(a) OF BENEFICIAL OWNER SHARES CLASS(b) SHARES CLASS(b) POWER OUTSTANDING
- --------------------------------------- ---------- ---------- ------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
Alvin Curry(c) ................................ 7,000,000 49.0% -- --% 46.4% 31.4%
King David Trust(d) ........................... 5,000,000 35.0 -- -- 33.1 22.4
Cynthia Glover, trustee(e) .................... 2,000,000 14.0 -- -- 13.2 9.0
The Anchora Company(f) ........................ 800,000 5.6 -- -- 5.3 3.6
Charles P. Bernstein .......................... -- -- -- -- -- --
James W. Brown ................................ 500,000 3.5 20,000 * 3.3 2.3
Thomas O. Cordy(g) ............................ -- -- -- -- -- --
Larry W. Gates, II ............................ 500,000 3.5 -- -- 3.3 2.2
Robert J. Glover(h) ........................... -- -- -- -- -- --
Terry Harris .................................. -- -- 40,000 1.3 * *
Philip E. Lundquist ........................... -- -- -- -- -- --
Ivey J. Stokes(i) ............................. -- -- -- -- -- --
All directors and executive officers as a group
(10 persons) (c) - (i) ...................... 11,300,000 79.0 110,000 3.7 74.9 51.2
</TABLE>
- -------------------
* Less than one percent
(a) The address of the King David Trust and Alvin Curry is c/o Maxxis
Group, Inc., 1901 Montreal Drive, Suite 108, Tucker, Georgia 30084. The
address of Cynthia Glover, trustee, U/A Louise Glover dated January 10,
1997 is 7839 Taylor Cir., Riverdale, Georgia 30274. The address of
the Anchora Company is c/o Salem Management Company, Ltd., Design
House, Leeward Highway, P.O. Box 150, Providenciales Turks & Caicos
Island, B.W.I.
(b) In accordance with Rule 13d-3 under the Exchange Act, a person is
deemed to be the beneficial owner, for purposes of this table, of any
shares of Common Stock if such person has or shares voting power or
investment power with respect to such security, or has the right to
acquire beneficial ownership at any time within 60 days from October
10, 1997. As used herein, "voting power" is the power to vote or direct
the voting of shares and "investment power" is the power to dispose or
direct the disposition of shares.
(c) Includes 5,000,000 shares owned by the King David Trust of which Mr.
Curry, a director of the Company, is the trustee. Mr. Curry disclaims
beneficial ownership of such shares.
(d) All such shares are owned by the King David Trust of which Mr. Curry, a
director of the Company, is the trustee and Mr. Stokes' minor children
are the beneficiaries. Mr. Stokes, the Chairman of the Board, and Mr.
Curry disclaim beneficial ownership of such shares.
(e) All such shares are owned by Cynthia Glover, trustee, U/A Louise Glover
dated January 10, 1997. Ms. Glover is the wife of Robert J. Glover, a
director of the Company. Mr. Glover is the sole beneficiary and
disclaims beneficial ownership of such shares. In addition, Ms. Glover
disclaims beneficial ownership of such shares.
(f) All such shares are owned by The Anchora Company of which Mr. Cordy the
Chief Executive Officer and President of the Company is the protector.
Mr. Cordy disclaims beneficial ownership of such shares.
(g) Excludes 800,000 shares owned by The Anchora Company, of which Mr.
Cordy is the protector. Mr. Cordy disclaims beneficial ownership of
such shares.
(h) Excludes 2,000,000 shares owned by Cynthia Glover, trustee, U/A Louise
Glover dated January 10, 1997 of which Mr. Glover is the sole
beneficiary. Mr. Glover disclaims beneficial ownership of such shares.
(i) Excludes 5,000,000 shares owned by the King David Trust of which Mr.
Stokes' minor children are the beneficiaries. Mr. Stokes disclaims
beneficial ownership of such shares.
39
<PAGE> 41
DESCRIPTION OF CAPITAL STOCK
The following description of the capital stock is only a summary and is
subject to the provisions of the Articles and Bylaws, which are included as
exhibits to the Registration Statement of which this Prospectus forms a part,
and the applicable provisions of Georgia Law.
GENERAL
The Articles authorize the Company to issue up to 15,000,000 shares of
Class A Common Stock and 185,000,000 shares of Class B Common Stock. As of the
date hereof, 14,300,000 shares of Class A Common Stock are issued and
outstanding and are held of record by 15 shareholders, and 3,000,000 shares of
Class B Common Stock are issued and outstanding and are held of record by 42
shareholders. In addition, the Articles authorize the Company to issue up to
10,000,000 shares of preferred stock, no par value per share, with such rights
and preferences as the Board of Directors shall determine; however, no preferred
stock has been issued.
COMMON STOCK
The rights of the holders of the Class A Common Stock and the Class B
Common Stock are identical in all respects except for voting rights and
conversion rights.
Voting Rights. Except as otherwise provided by Georgia Law or the
Articles, holders of Class A Common Stock and Class B Common Stock vote as a
single class on all matters submitted to a vote of the shareholders, with each
share of Class A Common Stock entitled to ten votes and each share of Class B
Common Stock entitled to one vote. See "Risk Factors - Concentration of
Ownership; Voting Rights of Class A and Class B Common Stock." Under Georgia
Law, the affirmative vote of the holders of a majority of the outstanding shares
of any class of stock, voting as a single class, is required to approve, among
other things, a change in the designations, rights, preferences or limitations
of all or part of the shares of such class of stock.
Conversion Rights. Upon the closing of an Initial Public Offering, each
share of Class A Common Stock then outstanding shall automatically be converted
into one fully paid and nonassessable share of Class B Common Stock. An "Initial
Public Offering" means a public offering of the Company's capital stock for cash
which is offered and sold in a transaction that is registered under the
Securities Act through one or more underwriters, pursuant to an underwriting
agreement between the Company and such underwriters, resulting in aggregate net
proceeds of $5,000,000 to the Company.
Other Provisions. Subject to the rights of the holders of any class of
preferred stock, holders of record of shares of Common Stock on the record date
fixed by the Board of Directors are entitled to receive such dividends as may be
declared by the Board of Directors out of funds legally available for such
purpose. No dividends may be declared or paid in cash or property on any share
of any class of Common Stock unless simultaneously the same dividend is declared
or paid on each share of the other class of Common Stock. In the case of any
stock dividend, holders of Class A Common Stock are entitled to receive the same
percentage dividend (payable in shares of Class A Common Stock) as the holders
of Class B Common Stock receive (payable in shares of Class B Common Stock).
Upon liquidation, dissolution or winding-up of the Company, the holders of the
Common Stock are entitled to share ratably in all assets available for
distribution after payment in full of creditors and payment in full to any
holders of preferred stock then outstanding on any amount required to be paid
under the terms of such preferred stock.
PREFERRED STOCK
The Articles provide that the Board of Directors shall be authorized,
without further action by the holders of the Common Stock, to provide for the
issuance of shares of the preferred stock in one or more classes or series and
to fix the designations, powers, preferences and relative, participating,
optional and other rights, qualifications, limitations and restrictions thereof,
including the dividend rate, conversion rights, voting rights, redemption price
and liquidation preference; and to fix the number of shares to be included in
any such classes
40
<PAGE> 42
or series. Any preferred stock so issued may rank senior to the Common Stock
with respect to the payment of dividends or amounts upon liquidation,
dissolution or winding-up, or both. In addition, any such shares of preferred
stock may have class or series voting rights. Upon completion of the Offering,
the Company will not have any shares of preferred stock outstanding. Issuances
of preferred stock, while providing the Company with flexibility in connection
with general corporate purposes, may, among other things, have an adverse effect
on the rights of holders of Common Stock and, in certain circumstances, could
have the effect of making it more difficult for a third party to acquire a
majority of the outstanding voting stock of the Company or the effect of
decreasing the market price of the Common Stock. The Company has no present plan
to issue any shares of preferred stock.
CERTAIN PROVISIONS OF THE ARTICLES, BYLAWS AND GEORGIA LAW
Certain provisions of the Articles and Bylaws and the Georgia Law,
summarized in the following paragraphs, may be considered to have antitakeover
effects and may hinder, delay, deter or prevent a tender offer, proxy contest or
other attempted takeover that a shareholder may deem to be in such shareholder's
best interest, including such an attempted transaction as might result in
payment of a premium over the market price for shares held by such shareholder.
Classified Board of Directors. The Articles of Incorporation divide the
Board of Directors into three classes of directors serving staggered three-year
terms. As a result, approximately one-third of the Board of Directors are
elected at each annual meeting of shareholders. The classification of directors,
together with other provisions in the Articles of Incorporation and Bylaws that
limit the ability of shareholders to remove directors and that permit the
remaining directors to fill any vacancies on the Board of Directors, have the
effect of making it more difficult for shareholders to change the composition of
the Board of Directors. As a result, at least two annual meetings of
shareholders may be required for the shareholders to change a majority of the
directors, whether or not such a change in the Board of Directors would be
beneficial to the Company and its shareholders and whether or not a majority of
the Company's shareholders believes that such a change would be desirable.
Currently, the terms of Class I directors expire in 1998, the terms of Class II
directors expire in 1999 and the terms of Class III directors expire in 2000.
Advance Notice Provisions for Shareholder Nominations and Shareholder
Proposals; Actions by Written Consent of Shareholders. The Bylaws establish an
advance notice procedure for shareholders to make nominations of candidates for
election as directors or to bring other business before any meeting of
shareholders of the Company. Any shareholder nomination or proposal for action
at an upcoming shareholder meeting must be delivered to the Company no later
than the deadline for submitting shareholder proposals pursuant to Rule 14a-8
under the Exchange Act. The presiding officer at any shareholder meeting is not
required to recognize any proposal or nomination which did not comply with such
deadline.
The purpose of requiring shareholders to give the Company advance
notice of nominations and other business is to afford the Board of Directors a
meaningful opportunity to consider the qualifications of the proposed nominees
or the advisability of the other proposed business and, to the extent deemed
necessary or desirable by the Board of Directors, to inform shareholders and
make recommendations about such qualifications or business, as well as to
provide a more orderly procedure for conducting meetings of shareholders.
Although the Bylaws do not give the Board of Directors any power to disapprove
timely shareholder nominations for the election of directors or proposals for
action, they may have the effect of precluding a contest for the election of
directors or the consideration of shareholder proposals if the proper procedures
are not followed and of discouraging or deterring a third party from conducting
a solicitation of proxies to elect its own slate of directors or to approve its
own proposal.
Actions required to be taken at a shareholder meeting may be taken
without a meeting only if the unanimous written consent of the shareholders
entitled to vote at such meeting is obtained and delivered to the Company for
inclusion in its minute book or other corporate records.
Georgia Business Combination Statute. Pursuant to its Bylaws, the
Company is subject to the provisions of the Georgia Law, including provisions
prohibiting various "business combinations" involving "interested shareholders"
for a period of five years after the shareholder becomes an interested
shareholder of the Company.
41
<PAGE> 43
Such provisions prohibit any business combination with an interested shareholder
unless either (i) prior to such time, the Board of Directors approves either the
business combination or the transaction by which such shareholder became an
interested shareholder; (ii) in the transaction that resulted in the shareholder
becoming an interested shareholder, the interested shareholder became the
beneficial owner of at least 90% of the outstanding voting stock of the Company
which was not held by directors, officers, affiliates thereof, subsidiaries or
certain employee option plans of the Company, or (iii) subsequent to becoming an
interested shareholder, such shareholder acquired additional shares resulting in
such shareholder owning at least 90% of the outstanding voting stock of the
Company and the business combination is approved by a majority of the
disinterested shareholders' shares not held by directors, officers, affiliates
thereof, subsidiaries or certain employee stock option plans of the Company.
Under the relevant provisions of the Georgia Law, a "business combination" is
defined to include, among other things, (i) any merger, consolidation, share
exchange or any sale, transfer or other disposition (or series of related sales
or transfers) of assets of the Company having an aggregate book value of 10% or
more of the Company's net assets (measured as of the end of the most recent
fiscal quarter), with an interested shareholder of the Company or any other
corporation which is or, after giving effect to such business combination,
becomes an affiliate of any such interested shareholder, (ii) the liquidation or
dissolution of the Company, (iii) the receipt by an interested shareholder of
any benefit from any loan, advance, guarantee, pledge, tax credit or other
financial benefit from the Company, other than in the ordinary course of
business and (iv) certain other transactions involving the issuance or
reclassification of securities of the Company which produce the result that 5%
or more of the total equity shares of the Company, or of any class or series
thereof, is owned by an interested shareholder. An "interested shareholder" is
defined by the Georgia Law to include any person or entity that, together with
affiliates, beneficially owns or has the right to own 10% or more of the
outstanding voting shares of the Company, or any person that is an affiliate of
the Company and has, at any time within the preceding two-year period, been the
beneficial owner of 10% or more of the outstanding voting shares of the Company.
The restrictions on business combinations shall not apply to any person who was
an interested shareholder before the adoption of the Bylaws which made the
provisions applicable to the Company nor to any persons who subsequently become
interested shareholders inadvertently, subsequently divest sufficient shares so
that the shareholder ceases to be an interested shareholder and would not, at
any time within the five-year period immediately before a business combination
involving the shareholder have been an interested shareholder but for the
inadvertent acquisition.
Constituency Provisions. In addition to considering the effects of any
action on the Company and its shareholders, the Articles permit the Board of
Directors and the committees and individual members thereof to consider the
interests of various constituencies, including employees, customers, suppliers,
and creditors of the Company, communities in which the Company maintains offices
or operations, and other factors which such directors deem pertinent, in
carrying out and discharging the duties and responsibilities of such positions
and in determining what is believed to be in the best interests of the Company.
LIMITATIONS ON LIABILITY OF OFFICERS AND DIRECTORS
The Articles provide that no director shall be personally liable to the
Company or any of its shareholders for any breach of the duties of such
position, except that such elimination of liability does not apply to: (i)
appropriations of business opportunities from the Company in violation of such
director's duties; (ii) knowing or intentional misconduct or violation of law;
(iii) liability for assent to distributions which are illegal or improper under
the Georgia Law or the Articles; and (iv) liability for any transaction in which
an improper personal benefit is derived. In addition, the Articles state that if
the Georgia Law is ever amended to allow for greater exculpation of directors
than presently permitted, the directors shall be relieved from liabilities to
the fullest extent provided by the Georgia Law, as so amended, without further
action by the Board or the shareholders of the Company, unless the Georgia Law
provides otherwise. No modification or repeal of this provision will adversely
affect the elimination or reduction in liability provided thereby with respect
to any alleged act occurring before the effective date of such modification or
repeal.
The Company intends to enter into agreements with each of its current
directors and executive officers pursuant to which it is obligated to indemnify
those persons to the fullest extent authorized by law and to advance payments to
cover defense costs against an unsecured obligation to repay such advances if it
is ultimately determined that the recipient of the advance is not entitled to
indemnification. The indemnification agreements
42
<PAGE> 44
will provide that no indemnification or advancement of expenses shall be made
(a) if a final adjudication establishes that his actions or omissions to act
were material to the cause of action so adjudicated and constitute: (i) a
violation of criminal law (unless the indemnitee had reasonable cause to believe
that his actions were lawful); (ii) a transaction from which the indemnitee
derived an improper personal benefit; (iii) an unlawful distribution or dividend
under the Georgia Law; or (iv) willful misconduct or a conscious disregard for
the just interests of the Company in a derivative or shareholder action; (b) for
liability under Section 16(b) of the Exchange Act, or (c) if a final decision by
a court having jurisdiction in the matter determines that indemnification is not
lawful.
At present, the Company is not aware of any pending or threatened
litigation or proceeding involving a director, officer, employee or agent of the
Company in which indemnification would be required or permitted under the Bylaws
or the Georgia Law.
SHAREHOLDERS' AGREEMENT
The Company and all of the holders of the Class A Common Stock have
entered into a Shareholders' Agreement whereby the shareholders agreed to
certain restrictions on the transfer or other disposition of the shares of
Class A Common Stock held by each holder. In the event a shareholder intends to
transfer his or her Class A Common Stock to a non-permitted transferee, the
Company and the remaining shareholders have a right of first refusal to
purchase the transferring shareholder's Class A Common Stock at fair market
value. In addition, if the Company terminates a shareholder's employment or
engagement as a sales representative or consultant for cause(or the employment
or engagement of certain persons associated with a shareholder), the Company
shall have the right to repurchase, at fair market value, an amount of the
shareholder's Class A Common Stock which begins at 100% and declines 20% per
year for each completed year of service with the Company. If either the right
of first refusal or the Company's right to purchase is exercised, either
provision could have the effect of further concentrating the stock ownership
and voting power of the Company. See "Risk Factors - Shares Eligible for Future
Sale."
43
<PAGE> 45
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of the Offering, assuming the sale of 5,000,000 Shares
offered hereby, the Company will have outstanding 8,000,000 shares of Class B
Common Stock. Of these shares, the 5,000,000 shares 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 under the Securities Act described below, but will be
subject to certain possible restrictions pursuant to the Subscription Agreement.
See "The Offering - Transfer Restrictions." The remaining 3,000,000 shares of
Class B Common Stock outstanding upon completion of the Offering are "Restricted
Securities" under Rule 144 of the Securities Act in that they were originally
issued and sold by the Company in private transactions in reliance upon
exemptions from the registration provisions of the Securities Act. In addition,
the Company will have outstanding 14,300,000 shares of Class A Common Stock, and
all such shares are Restricted Securities.
In general, under Rule 144 as currently in effect, a person (or persons
whose shares are aggregated), including persons deemed to be affiliates, whose
Restricted Securities have been fully paid for and held for at least two years
from the date of issuance by the Company may sell such securities in brokers'
transactions or directly to market makers, provided the number of shares sold in
any three-month period does not exceed the greater of 1% of the then outstanding
shares of the Common Stock (223,000 shares based on the number of shares to be
outstanding after this Offering) or the average weekly trading volume in the
public market during the four calendar weeks preceding the filing of the
Seller's Form 144. Sales under Rule 144 are also subject to certain notice
requirements and the availability of current public information concerning the
Company. After three years have elapsed from the issuance of Restricted
Securities by the Company, such shares generally may be sold without limitation
by persons who have not been affiliates of the Company for at least three
months. Rule 144 also provides that affiliates who are selling shares which are
not Restricted Securities must nonetheless comply with the same restrictions
applicable to Restricted Securities with the exception of the holding period
requirements.
Prior to the Offering, there has been no public market for the Common
Stock of the Company, and any sale of substantial amounts of Common Stock in the
open market may adversely affect the market price of the Class B Common Stock
offered hereby. See "Risk Factors - Shares Eligible for Future Sale."
LEGAL MATTERS
The validity of the Common Stock offered hereby will be passed upon for
the Company by Nelson Mullins Riley & Scarborough, L.L.P., Atlanta, Georgia.
EXPERTS
The audited consolidated financial statements of the Company in this
Prospectus and elsewhere in the Registration Statement have been audited by
Arthur Andersen LLP, independent public accountants, as indicated in their
report with respect thereto, and are included herein in reliance upon the
authority of such firm as experts in giving said reports.
44
<PAGE> 46
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Maxxis Group, Inc.:
We have audited the accompanying consolidated balance sheet of MAXXIS GROUP,
INC. (a Georgia corporation) AND SUBSIDIARIES as of June 30, 1997 and the
related consolidated statements of operations, shareholders' equity, and cash
flows for the period from January 24, 1997 (inception) to June 30, 1997. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Maxxis Group, Inc. and
subsidiaries as of June 30, 1997 and the results of their operations and their
cash flows for the period from January 24, 1997 (inception) to June 30, 1997 in
conformity with generally accepted accounting principles.
/s/ Arthur Andersen LLP
- -----------------------------------
Atlanta, Georgia
September 22, 1997
(except with respect to that matter
discussed in the second paragraph
to Note 8, as to which the date is
October 8, 1997)
F-1
<PAGE> 47
MAXXIS GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
JUNE 30, 1997
<TABLE>
<CAPTION>
ASSETS
===============================================================================
<S> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 35,000
Short-term investments 10,000
Subscriber receivables 25,000
Inventories 185,000
Prepaid expenses 12,000
Other current assets 23,000
---------
290,000
PROPERTY AND EQUIPMENT, NET 92,000
ORGANIZATIONAL COSTS, NET 100,000
CAPITALIZED SOFTWARE DEVELOPMENT COSTS, NET 118,000
OTHER ASSETS 20,000
---------
$ 620,000
=========
LIABILITIES AND SHAREHOLDERS' EQUITY
===============================================================================
CURRENT LIABILITIES:
Accounts payable $ 158,000
Commissions payable 42,000
Accrued liabilities 103,000
---------
303,000
---------
COMMITMENTS AND CONTINGENCIES (NOTE 7)
SHAREHOLDERS' EQUITY:
Stock subscription deposits 360,000
Class A common stock, no par value; 15,000,000
shares authorized, 14,300,000 shares issued
and outstanding 0
Class B common stock, no par value; 185,000,000 shares
authorized, shares issued and outstanding 0
Subscription receivable (120,000)
Additional paid-in capital 127,000
Accumulated deficit (50,000)
---------
Total shareholders' equity 317,000
---------
$620,000
=========
The accompanying notes are an integral part of this consolidated balance sheet.
</TABLE>
F-2
<PAGE> 48
MAXXIS GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE PERIOD FROM JANUARY 24, 1997 (INCEPTION)
TO JUNE 30, 1997
<TABLE>
<CAPTION>
REVENUES:
<S> <C>
Communication services $2,666,000
Subscriber services 25,000
----------
Total revenues 2,691,000
COST OF SERVICES 1,016,000
----------
Gross margin 1,675,000
----------
OPERATING EXPENSES:
Selling and marketing 1,089,000
General and administrative 636,000
----------
Total operating expenses 1,725,000
LOSS BEFORE INCOME TAX BENEFIT (50,000)
INCOME TAX BENEFIT 0
----------
NET LOSS $ (50,000)
----------
NET LOSS PER SHARE $ (.003)
----------
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING 17,300,000
==========
The accompanying notes are an integral part of this consolidated statement.
</TABLE>
F-3
<PAGE> 49
MAXXIS GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
FOR THE PERIOD FROM JANUARY 24, 1997 (INCEPTION)
TO JUNE 30, 1997
<TABLE>
<CAPTION>
CLASS A
COMMON STOCK STOCK ADDITIONAL
---------------------- SUBSCRIPTION SUBSCRIPTION PAID-IN ACCUMULATED
SHARES AMOUNT DEPOSITS RECEIVABLE CAPITAL DEFICIT TOTAL
---------- --------- ------------ ------------ ----------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE, JANUARY 24, 1997 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
Issuance of common stock 14,300,000 0 0 (120,000) 127,000 0 7,000
Stock subscription deposits 0 0 360,000 0 0 0 360,000
Net loss 0 0 0 0 0 (50,000) (50,000)
---------- ---------- ---------- ---------- ---------- ---------- ----------
BALANCE, JUNE 30, 1997 14,300,000 $ 0 $ 360,000 $ (120,000) $ 127,000 $ (50,000) $ 317,000
========== ========== ========== ========== =========== ========== ==========
</TABLE>
The accompanying notes are an integral part of this consolidated statement.
F-4
<PAGE> 50
MAXXIS GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE PERIOD FROM JANUARY 24, 1997 (INCEPTION)
TO JUNE 30, 1997
<TABLE>
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C>
Net loss $ (50,000)
Adjustments to reconcile net loss to net cash provided by operating activities: ---------
Depreciation and amortization 30,000
Changes in assets and liabilities:
Subscriber receivables (25,000)
Inventories (185,000)
Prepaid expenses (12,000)
Deposits and other (43,000)
Commissions payable 42,000
Accounts payable 158,000
Accrued liabilities 103,000
---------
Total adjustments 68,000
---------
Net cash provided by operating activities 18,000
---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (99,000)
Purchase of short-term investment (10,000)
Software development and organizational costs (241,000)
---------
Net cash used by investing activities (350,000)
---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from stock subscriptions 360,000
Proceeds from issuance of common stock 7,000
---------
Net cash provided by financing activities 367,000
---------
NET INCREASE IN CASH AND CASH EQUIVALENTS 35,000
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 0
---------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 35,000
=========
SUPPLEMENTAL CASH FLOW DISCLOSURES:
Cash paid for interest $ 0
=========
Cash paid for income taxes $ 0
=========
Stock issued for note receivable $ 120,000
=========
</TABLE>
The accompanying notes are an integral part of this consolidated statement.
F-5
<PAGE> 51
MAXXIS GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1997
1. ORGANIZATION AND PRESENTATION
DESCRIPTION OF BUSINESS AND OPERATIONS
Maxxis Group, Inc., a Georgia corporation, was incorporated on January 24,
1997 ("inception") and is headquartered in Tucker, Georgia. The Company's
principal business operations are carried out through its wholly owned
subsidiaries, Maxxis 2000, Inc. and Maxxis Telecom, Inc., which began
operations in March 1997. Maxxis Group, Inc., together with its wholly
owned subsidiaries (collectively referred to as the "Company"), was
founded for the purpose of providing long-distance services and other
consumable products through a multilevel marketing system of independent
associates ("Associates") to subscribers throughout the United States. The
Company currently markets both long-distance service and value-added
telecommunications services, such as travel cards, prepaid phone cards,
800 service, and international telecommunications service.
The Company has a limited operating history, and its operations are
subject to the risks inherent in the establishment of any new business.
Since the Company has only recently made the transition to an operating
company, the Company's ability to manage its growth and expansion will
require it to implement and continually expand its operational and
financial systems, recruit additional employees, and train and manage both
current and new employees. Growth may place a significant strain on the
Company's operational resources and systems, and failure to effectively
manage this projected growth would have a material adverse effect on the
Company's business.
COMMUNICATION SERVICES
Communication services revenues are primarily comprised of prepaid phone
card sales to Associates. Communication services also consist of receipts
from Associates for application fees and purchases of sales aids, which
include starter kits of forms, promotional brochures, marketing materials,
and presentation materials.
Costs of services include the costs of purchasing prepaid phone cards and
start-up packages.
SUBSCRIBER SERVICES
Subscriber services revenues are generated from the Company's agreement
with a tariffed long-distance reseller that provides for the Company to
receive a percentage of the gross long-distance billings generated by the
Company's subscribers, net of allowances for bad debts and billing
adjustments.
Commissions paid to Associates based on long-distance subscribers usage
and the cost of recruiting new associates are included in selling and
marketing operating expenses.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
All significant intercompany balances and transactions have been
eliminated in consolidation.
F-6
<PAGE> 52
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments with original
maturities of three months or less to be cash equivalents.
REVENUE RECOGNITION
The Company recognizes revenues when services are provided. For prepaid
phone cards, the Company recognizes revenue, net of estimated refunds, and
the related costs when the cards are sold to Associates.
CONCENTRATIONS OF CREDIT RISK
The Company's subscribers are primarily residential subscribers and are
not concentrated in any specific geographic region of the United States.
The Company purchases its prepaid phone card services from a long-distance
reseller. Failure of this reseller to provide quality services and
customer support could have a material adverse effect on the Company's
results of operations. The Company has an additional agreement with the
long-distance reseller to provide subscriber services, which if terminated
or canceled may significantly impact results of operations of the Company.
While the Company believes it could contract with another long-distance
reseller, the potential disruption of services may have a material effect
on the Company's results of operations.
The Company's success will depend heavily upon its ability to attract,
maintain, and motivate a large base of Associates who, in turn, sponsor
subscribers, customers, and other Associates. The Company anticipates a
significant turnover among Associates, which the Company believes is
typical of direct selling. The Company has begun establishing its network
of Associates; however, there can be no assurance that the Company will be
successful in establishing a viable network of Associates.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
INVENTORIES
Inventories consist of the following:
Prepaid phone cards $ 25,000
Sales aids 160,000
---------
$ 185,000
=========
Inventories are valued at the lower of cost (determined on a first-in,
first-out basis) or market.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost and depreciated using the
straight-line method over the estimated useful lives of five years.
INCOME TAXES
The Company accounts for income taxes in accordance with Statement of
Financial Accounting Standards ("SFAS") No. 109, "Accounting for Income
Taxes," which requires that deferred income tax expenses be provided based
on estimated future tax effects of differences between the carrying
amounts of assets and
F-7
<PAGE> 53
liabilities for financial reporting purposes and the amounts used for
income tax purposes calculated based on provisions of enacted tax laws
(Note 4).
ORGANIZATIONAL COSTS
The Company has capitalized certain organizational costs related to
start-up activities and the legal formation of the Company. These costs
are amortized over five years, and amortization expense was $2,000 for the
period from inception to June 30, 1997.
CAPITALIZED SOFTWARE DEVELOPMENT COSTS
The development costs pertaining to a software application which is used
internally for processing applications and customer service have been
capitalized and are amortized over the estimated useful life of three
years. Amortization expense was $21,000 for the period from inception to
June 30, 1997.
OTHER ASSETS
Other assets include security deposits for lease obligations totaling
$20,000.
SHORT-TERM INVESTMENTS
Included in short-term investments is a certificate of deposit recorded at
cost, which approximates estimated fair value, that matures in May 1998.
This investment has been pledged as collateral for one of the Company's
cash accounts.
NET LOSS PER SHARE
Net loss per share is based on the weighted average number of shares of
common stock outstanding under the requirements of Staff Accounting
Bulletin 83. As a result, all shares issued prior to the issuance in
connection with the Registration Statement have been included as
outstanding since inception.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company's financial instruments consist primarily of cash, accounts
receivable, and accounts payable. The carrying amounts of cash, accounts
receivable, and accounts payable approximate their fair values because of
the short-term maturity of such instruments.
NEW ACCOUNTING PRONOUNCEMENTS
In February 1997, the Financial Accounting Standards Board ("FASB") issued
SFAS No. 128, "Earnings Per Share," which specifies the computation,
presentation, and disclosure requirements for earnings per share. The
Company will be required to adopt this new standard in the quarter ending
December 31, 1997.
In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive
Income," which establishes standards for reporting and display of
comprehensive income and its components in a full set of general-purpose
financial statements. The Company will be required to adopt the new
standard in 1998, and all prior period information will be restated.
Also in June 1997, the FASB issued SFAS No. 131, "Disclosure About
Segments of an Enterprise and Related Information." This statement
requires companies to determine segments based on how management makes
decisions about allocating resources to segments and measuring their
performance. Disclosures for each segment are similar to those required
under current standards, with the addition of certain quarterly disclosure
requirements. SFAS No. 131 also requires entitywide disclosure about the
products and services an entity provides, the countries in which it holds
material assets and reports material revenues, and its
F-8
<PAGE> 54
significant customers. The Company will be required to adopt the new
standard in 1998, and all prior period information presented will be
restated.
The effect of adopting the above statements is not expected to be material
to the consolidated financial statements.
3. PROPERTY AND EQUIPMENT
Property and equipment consisted of the following at June 30, 1997:
<TABLE>
<CAPTION>
<S> <C>
Furniture and fixtures $99,000
Less accumulated depreciation (7,000)
-------
Property and equipment, net $92,000
</TABLE> =======
4. INCOME TAXES
Significant components of the Company's deferred tax assets and
liabilities are as follows at June 30, 1997:
<TABLE>
<CAPTION>
<S> <C>
Net operating losses $ 18,000
Valuation allowance (18,000)
Net deferred tax assets --------
$ 0
========
</TABLE>
Based on uncertainties associated with the future realization of deferred
tax assets, the Company established a valuation allowance of $18,000 at
June 30, 1997. At June 30, 1997, the Company had net operating loss
carryforwards of approximately $50,000, which will expire in the year 2012
unless previously utilized.
The benefit for income taxes at June 30, 1997 was different than the
amount computed using the statutory income tax rate as follows:
<TABLE>
<CAPTION>
<S> <C>
Tax computed at statutory rate $(17,000)
State income taxes, net of federal benefit (2,000)
Nondeductible expenses 1,000
Change in valuation allowance 18,000
--------
$ 0
========
</TABLE>
5. TRANSACTIONS WITH AFFILIATES
The Company has significant transactions with IS 14, Inc. ("IS 14"), which
is affiliated through common ownership. IS 14 has provided funding for
certain expenses incurred by the Company, and all amounts have been repaid
as of June 30, 1997. The Company paid to IS 14 in consideration for
marketing support a fee equivalent to a percentage of revenues totaling
$184,000 from inception to June 30, 1997, which is included in selling and
marketing operating expense in the accompanying consolidated statement of
operations. Amounts due to IS 14 related to this fee and included in
commissions payable in the accompanying consolidated balance sheet totaled
$9,000 at June 30, 1997.
6. SHAREHOLDERS' EQUITY
The articles of incorporation (the "Articles") authorize the Company to
issue up to 15,000,000 shares of Class A common stock and 185,000,000
shares of Class B common stock. As of June 30, 1997, 14,300,000 shares of
Class A common stock are issued and outstanding and are held of record by
15
F-9
<PAGE> 55
shareholders and the Company had received paid subscriptions for 2,400,000
shares of Class B common stock. In addition, the Articles authorize the
Company to issue up to 10,000,000 shares of preferred stock, no par value
per share, with such rights and preferences as the board of directors
shall determine; however, no preferred stock has been issued as of June
30, 1997.
In February 1997, the Company sold 13,500,000 shares of the Company's
Class A common stock to the founders of the Company at $.0005 per share.
In May 1997, the Company sold 800,000 shares of Class A common stock to an
executive officer for $0.15 per share in exchange for a $120,000 note
receivable to an affiliate of that individual due on the earlier of (i)
May 1, 2002 or (ii) the closing of an underwritten initial public offering
with aggregate net proceeds of at least $5 million. The note is guaranteed
by the executive officer, bears interest at 8.75% per year, compounded
annually, and is classified as a subscription receivable in the balance
sheet. Each holder of the Class A common stock is entitled to ten votes
per share with respect to each company matter voted on.
The Company and all of the holders of Class A common stock have entered
into a shareholders' agreement whereby the shareholders agreed to certain
restrictions on the transfer or other disposition of the shares of Class A
common stock held by each holder. In the event a shareholder intends to
transfer his or her Class A common stock to a non-permitted transferee,
the Company and the remaining shareholders have a right of first refusal
to purchase the transferring shareholder's Class A common stock at fair
market value. In addition, if the Company terminates a shareholder's
employment or engagement as a sales representative or consultant for
cause, the Company shall have the right to repurchase, at fair market
value, an amount of the shareholder's Class A common stock which starts at
100% and declines 20% per year for each completed year of service with the
Company. If the right of first refusal or the Company's right to purchase
is exercised, these provisions could have the effect of further
concentrating the stock ownership and voting power of the Company.
Additionally, in February 1997, the Company completed a private placement
offering for 3,000,000 shares of Class B common stock at a price of $.15
per share. The Class B common stock entitles each holder to one vote per
share with respect to each company matter voted on. Potential investors
were required to complete subscription agreements for the Class B common
stock and submit cash at the date of subscription. The Company reserved
the right to reject a subscription and refund funds to a Class B
subscriber at any time prior to the acceptance of the subscription. At
June 30, 1997, the Company had received paid subscriptions for 2,400,000
shares of Class B common stock. However, since these subscriptions had not
yet been accepted by the Company and no shares had been issued as of June
30, 1997, amounts received from subscribers are included in stock
subscription deposits in the accompanying balance sheet. Subsequent to
June 30, 1997, the Company has accepted these subscriptions and additional
subscriptions for 600,000 shares of the Class B common stock.
Upon the closing of an initial public offering, each share of Class A
common stock then outstanding shall automatically be converted into one
fully paid and nonassessable share of Class B common stock. An "initial
public offering" means a public offering of the Company's capital stock
for cash which is offered and sold in a transaction that is registered
under the Securities Act through one or more underwriters, pursuant to an
underwriting agreement between the Company and such underwriters,
resulting in aggregate net proceeds of $5 million to the Company.
7. COMMITMENTS AND CONTINGENCIES
OPERATING LEASES
The Company leases certain office equipment and office space under
operating leases. Total rental expense for the period ended June 30, 1997
was approximately $45,000.
F-10
<PAGE> 56
Minimum lease payments under noncancelable leases for the years subsequent
to June 30, 1997 are as follows:
<TABLE>
<CAPTION>
<S> <C>
1998 $124,000
1999 72,000
2000 39,000
2001 34,000
2002 and thereafter 0
--------
$269,000
========
</TABLE>
LITIGATION
The Company is subject to various claims and legal actions which arise in
the ordinary course of business. In the opinion of management, the
ultimate resolution of such matters will be adequately covered by
insurance or will not have a material adverse effect on the Company's
financial position, liquidity, or results of operations.
EMPLOYMENT AGREEMENTS
In May 1997, the Company entered into an employment agreement with the
chief executive officer, and in September 1997, the Company entered into
employment agreements with the executive vice president, the chief
financial officer and a director (collectively, the "Employment
Agreements"). Generally the Employment Agreements provide for a minimum
weekly salary. In addition, the employee may participate in a bonus
program and shall be eligible to receive quarterly or annual payments of a
performance bonus based upon the achievement of targeted levels of
performance and such other criteria as the board of directors shall
establish from time to time. The chief executive officer's Employment
Agreement provides for an additional bonus payment on July 1, 1998. Each
employee may participate in insurance and other benefit plans of similarly
situated employees, including any stock option plans of the Company.
Each of the Employment Agreements has a term of one year, and the term
renews daily until either party fixes the remaining term at one year by
giving written notice. The Company can terminate each employee upon death
or disability (as defined in the Employee Agreements) or with or without
cause upon delivery of a notice of termination. If the employee is
terminated because of death, disability, or cause, the employee will
receive any accrued compensation through the termination date and any
accrued performance bonus, unless the employee is terminated for cause. If
the employee is terminated without cause, the Company shall pay the
employee severance payments equal to his minimum base salary for each week
during the six-month period following the termination date. If the
employee is a director or officer of the Company or any of its affiliates,
the employee shall tender his resignation to such positions effective as
of the termination date.
Under the Employment Agreements, each employee agrees to maintain the
confidentiality of the Company's trade secrets and confidential business
information. The employee also agrees for a period of one year following
the termination date if he is terminated or resigns for any reason not to
compete with or solicit employees or customers of the Company or any of
its affiliates within a 30-mile radius of the Company's corporate offices,
provided, that if the employee is terminated without cause, the
non-compete period shall be six months.
RELATIONSHIP WITH ASSOCIATES
Because Associates are classified as independent contractors and not as
employees of the Company, the Company is unable to provide them with the
same level of direction and oversight as company employees. While the
Company has policies and rules in place governing the conduct of the
Associates and intends to review periodically the sales tactics of the
Associates, it may be difficult to enforce such policies and rules.
Violation of these policies and rules might reflect negatively on the
Company and may lead to complaints to
F-11
<PAGE> 57
or by various federal and state regulatory authorities. Violation of the
Company's policies and rules could subject the Company and its
long-distance provider to complaints regarding the unauthorized switching
of subscribers' long-distance carriers (also known in the industry as
"slamming"). Such complaints could have a material adverse effect on the
Company's business, financial condition, and results of operations.
REGULATION OF NETWORK MARKETING; EFFECT OF STATE LAWS
The Company's network marketing system is subject to or affected by
extensive government regulation, including, without limitation, federal
and state regulations governing the offer and sale of business franchises,
business opportunities, and securities. Various governmental agencies
monitor direct selling activities, and the Company could be required to
supply information regarding its marketing plan to such agencies. Although
the Company believes that its network marketing system is in material
compliance with the laws and regulations relating to direct selling
activities, there can be no assurance that legislation and regulations
adopted in particular jurisdictions in the future will not adversely
affect the Company's business, financial condition, and results of
operations. The Company could also be found to be in non-compliance with
existing statutes or regulations as a result of, among other things,
misconduct by Associates, who are considered independent contractors over
whom the Company has limited control, the ambiguous nature of certain of
the regulations, and the considerable interpretive and enforcement
discretion given to regulators. Any assertion or determination that the
Company or the Associates are not in compliance with existing statutes or
regulations could have a material adverse effect on the Company's
business, financial condition, and results of operations. An adverse
determination by any one state on any regulatory matter could influence
the decisions of regulatory authorities in other jurisdictions.
8. SUBSEQUENT EVENTS
In October 1997, the Company filed a registration statement on Form S-1
for the sale of 5,000,000 shares of Class B common stock primarily to
individuals who are regional and executive directors of the Company.
Effective October 8, 1997, the Company declared a five-for-one reverse
stock split for all classes of common stock. All share, per share, and
weighted average share information in the financial statements and notes
thereto has been restated for this stock split.
In September 1997, the Company entered into independent sales
representative agreements (collectively the "Sales Representative
Agreements") with ten independent sales representatives. The Sales
Representative Agreements provide for a minimum weekly salary, and each
sales representative shall be eligible to receive quarterly payments of a
performance bonus based upon the achievement of targeted levels of
performance. Each sales representative is an independent contractor, and
the Company does not exercise control over the activities of the sales
representatives other than as set forth in the Sales Representative
Agreements.
Each of the Sales Representative Agreements has a term of one year, and
the term renews daily until either party fixes the remaining term at one
year by giving written notice. The Company can terminate each sales
representative upon death or disability (as defined in the Sales
Representative Agreements) or with or without cause upon delivery to the
sales representative of a notice of termination. If a sales representative
is terminated, the sales representative will receive any accrued fees
through the termination date and any accrued performance bonus, unless the
sales representative is terminated for cause. If the sales representative
is a director or officer of the Company or any of its affiliates, the
sales representative shall tender his resignation to such positions
effective as of the termination date. Under the Sales Representative
Agreements, each sales representative agrees to maintain the
confidentiality of the Company's trade secrets and confidential business
information.
F-12
<PAGE> 58
APPENDIX A
MAXXIS GROUP, INC. SUBSCRIPTION AGREEMENT
MAXXIS GROUP, INC.
1901 Montreal Road, Suite 108
Tucker, Georgia 30084
Ladies and Gentlemen:
You have informed me that Maxxis Group, Inc., a Georgia corporation
(the "Company"), is offering up to 5,000,000 shares of its Class B Common Stock,
no par value per share (the "Class B Common Stock"), at a price of $0.50 per
share payable as provided herein and as described in the Prospectus furnished
with this Subscription Agreement to the undersigned (the "Prospectus").
1. SUBSCRIPTION. Subject to the terms and conditions hereof, the
undersigned subscriber hereby tenders this subscription, together with payment
in United States currency by check, bank draft or money order payable to "Maxxis
Group, Inc." in the amount indicted below (the "Funds"), representing the
payment of $0.50 per share for the number of shares of Class B Common Stock
indicated below. The total subscription price must be paid at the time the
Subscription Agreement is executed. Tender of this Subscription Agreement by the
undersigned subscriber constitutes the undersigned subscriber's offer to
purchase the number of shares of Class B Common Stock indicated below.
2. ACCEPTANCE OF SUBSCRIPTION. It is understood and agreed that the
Company shall have the right to accept or reject this subscription in whole or
in part, for any reason whatsoever. The Company may reduce the number of shares
for which the undersigned subscriber has subscribed for any reason whatsoever,
by indicating acceptance of less than all of the shares subscribed on its
written form of acceptance. This Subscription Agreement shall not be deemed
accepted by the Company until it is countersigned by a duly authorized officer
of the Company. Acceptance of the Funds by the Company shall not constitute
acceptance of this Subscription Agreement. However, if the Company determines
not to accept this Subscription Agreement, it shall return any Funds received to
the undersigned subscriber promptly following such determination.
3. LIMITATION ON DISPOSITIONS.
(a) To induce the Company to sell shares of Class B Common Stock to
the undersigned subscriber, the undersigned subscriber:
(i) agrees during the Lock-up Period (as defined in Section 3(c)
below) not to (x) offer, pledge, sell, contract to sell, sell any option or
contract to purchase, purchase any option or contract to sell, grant any
option, right or warrant to purchase, or otherwise transfer or dispose of,
directly or indirectly, any shares of Class B Common Stock purchased pursuant
to this Subscription Agreement or any securities issued on account of such
Class B Common Stock (whether by stock split, stock dividend or otherwise)
(collectively, the "Shares") or (y) enter into any swap or other arrangement
that transfers all or a portion of the economic consequences associated with
the ownership of any Shares (regardless of whether any of the transactions
described in clause (x) or (y) is to be settled by the delivery of Shares, or
such other securities, in cash or otherwise);
(ii) authorizes the Company to cause the transfer agent during the
Lock-up Period (as defined in Section 3(c) below) to decline to transfer any
Shares and/or to note stop transfer restrictions on the transfer books and
records of the Company with respect to any Shares; and
(iii) agrees that a legend in substantially the following form will be
placed on certificates representing the Shares:
A-1
<PAGE> 59
THE SHARES REPRESENTED BY THIS CERTIFICATE (THE "SHARES") ARE
SUBJECT TO CONDITIONS THAT MAY LIMIT THEIR TRANSFERABILITY.
SUCH CONDITIONS ARE SET FORTH IN A SUBSCRIPTION AGREEMENT
(THE "SUBSCRIPTION AGREEMENT") BY AND BETWEEN THE ISSUER AND
THE ORIGINAL HOLDER OF THESE SHARES. ANY TRANSFEREE OF THESE
SHARES TAKES SUCH SHARES SUBJECT TO THE CONDITIONS SET FORTH
IN THE SUBSCRIPTION AGREEMENT.
IN SUMMARY, THESE CONDITIONS PROVIDE THAT THE ISSUER MAY
ELECT TO IMPOSE A PROHIBITION ON THE SALE OR TRANSFER OF
THESE SHARES IN THE EVENT THE ISSUER DETERMINES TO FILE A
REGISTRATION STATEMENT WITH THE U.S. SECURITIES AND EXCHANGE
COMMISSION THAT SEEKS TO REGISTER SECURITIES OF THE ISSUER IN
AN INITIAL PUBLIC OFFERING THAT IS FIRMLY UNDERWRITTEN. SUCH
RESTRICTION MAY REMAIN IN EFFECT FOR A PERIOD ENDING 180 DAYS
FOLLOWING THE EFFECTIVENESS OF SUCH REGISTRATION STATEMENT.
THE ISSUER MAY IMPOSE THESE CONDITIONS BY GIVING WRITTEN
NOTICE TO THE HOLDER OF RECORD OF THESE SHARES. THE FOREGOING
SUMMARY IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE
SUBSCRIPTION AGREEMENT, A COPY OF WHICH WILL BE PROVIDED FREE
OF CHARGE BY THE ISSUER TO ANY HOLDER, PROSPECTIVE PURCHASER
OR TRANSFEREE OF THESE SHARES UPON THEIR REQUEST.
(b) The restriction set forth in Section 3(a) may be imposed by the
Company by giving notice of the imposition of such restriction (the "Lock-up
Notice") to holders of record of the Shares by first class mail, postage prepaid
(or, at the Company's option, certified mail, return receipt requested), at the
address of the holders of record of the Shares on a date chosen by the Company
that is at least one but no more than fifteen days prior to such mailing. The
restrictions set forth herein shall be effective upon receipt of such notice,
which date of receipt shall be deemed to be three days following such mailing.
Such notice may be given by the Company such that it is received on any date
beginning fifteen days prior to the filing by the Company of a registration
statement with the U.S. Securities and Exchange Commission (the "SEC") whereby
the Company first seeks to register its securities for sale to the public in a
firmly underwritten public offering (the "IPO Registration Statement"), and
ending upon the date that the IPO Registration Statement is declared effective
by the SEC (the "Effective Date").
(c) The restrictions set forth in Section 3(a) hereof shall be
effective on the date of receipt of the Lock-up Notice and shall remain in force
and effect until 180 days following the Effective Date (such period being
referred to as the "Lock-up Period"). The Lock-up Period shall terminate if the
Company files an IPO Registration Statement but such registration statement is
subsequently withdrawn or is not declared effective within 120 days of filing
with the SEC, or if the Company transmits a Lock-up Notice prior to the filing
of an IPO Registration Statement but the IPO Registration Statement is not filed
within 15 days of receipt of such notice; provided, however, that in any such
event the restrictions set forth in Section 3(a) shall survive and shall be
applicable to each subsequent filing of an IPO Registration Statement by the
Company until an IPO Registration Statement is first declared effective by the
SEC.
(d) All obligations of the undersigned subscriber set forth herein
shall be binding upon such subscriber's heirs, personal representatives,
successors, transferees and assigns.
4. ACKNOWLEDGMENTS. The undersigned subscriber hereby acknowledges that
he or she has received and reviewed a copy of the Prospectus and all amendments
thereto. This Subscription Agreement creates a legally binding obligation, and
the undersigned subscriber agrees to be bound by the terms of this Agreement.
5. REVOCATION. The undersigned subscriber agrees that once this
Subscription Agreement is tendered to the Company, it may not be withdrawn and
that this Agreement shall survive the death or disability of the undersigned
subscriber.
BY EXECUTING THIS AGREEMENT, THE UNDERSIGNED SUBSCRIBER IS NOT WAIVING
ANY RIGHTS HE OR SHE MAY HAVE UNDER FEDERAL SECURITIES LAWS, INCLUDING THE
SECURITIES ACT OF 1933 AND THE SECURITIES EXCHANGE ACT OF 1934.
A-2
<PAGE> 60
Please indicate in the space provided below the exact name or names and
addresses in which the stock certificate representing shares subscribed for
hereunder should be registered.
- -------------------------------- --------------------------------------------
Number of Shares Subscribed Name or Names of Subscribers (please print)
for (minimum 200 shares)
$ ------------------------------ --------------------------------------------
Total Subscription Price at Please indicate form of ownership desired
$0.50 per share (individual, joint tenants with right of
(funds must be enclosed) survivorship, tenants in common, trust,
corporation, partnership, custodian, etc.)
Date: (L.S.)
--------------------------- ---------------------------------------
Signature of Subscriber(s)*
(L.S.)
- -------------------------------- ---------------------------------------
Social Security Number or Federal Signature of Subscriber(s)*
Taxpayer Identification Number
STREET (RESIDENCE) ADDRESS:
---------------------------------------
---------------------------------------
---------------------------------------
City, State and Zip Code
* When signed as attorney, trustee, administrator or guardian, please
give your full title as such. If a corporation, please sign in full
corporate name by president or other authorized officer. In the case of
joint tenants or tenants in common, each owner must sign.
FEDERAL INCOME TAX BACKUP WITHHOLDING
In order to prevent the application of federal income tax backup
withholding, each subscriber must provide the Escrow Agent with a correct
Taxpayer Identification Number ("TIN"). An individual's social security number
is his or her TIN. The TIN should be provided in the space provided in the
Substitute Form W-9, which is set forth below.
Under federal income tax law, any person who is required to furnish his
or her correct TIN to another person, and who fails to comply with such
requirements, may be subject to a $50 penalty imposed by the IRS.
Backup withholding is not an additional tax. Rather, the tax liability
of persons subject to backup withholding will be reduced by the amount of tax
withheld. If backup withholding results in an overpayment of taxes, a refund may
be obtained from the IRS. Certain taxpayers, including all corporations, are not
subject to these backup withholding and reporting requirements.
If the shareholder has not been issued a TIN and has applied for a TIN
or intends to apply for a TIN in thee near future, "Applied For" should be
written in the space provided for the TIN on the Substitute Form W-9.
A-3
<PAGE> 61
SUBSTITUTE FORM W-9
Under penalties of perjury, I certify that: (i) the number shown on
this form is my correct Taxpayer Identification Number (or I am waiting for a
Taxpayer Identification Number to be issued to me), and (ii) I am not subject to
backup withholding because: (a) I am exempt from backup withholding; or (b) I
have not been notified by the Internal Revenue Service ("IRS") that I am subject
to backup withholding as a result of a failure to report all interest or
dividends; or (c) the IRS has notified me that I am no longer subject to backup
withholding.
You must cross out item (ii) above if you have been notified by the IRS
that you are subject to backup withholding because of underreporting interest or
dividends on your tax return. However, if after being notified by the IRS that
you were subject to backup withholding you received another notification from
the IRS that you are no longer subject to backup withholding, do not cross out
item (ii).
Each subscriber should complete this section.
<TABLE>
<S> <C>
- ----------------------------------------------- ----------------------------------------------
Signature of Subscriber Signature of Subscriber
- ----------------------------------------------- ----------------------------------------------
Printed Name Printed Name
- ----------------------------------------------- ----------------------------------------------
Social Security or Employer Identification No. Social Security or Employer Identification No.
TO BE COMPLETED BY THE COMPANY:
Accepted as of ____________________, 199___, as to ______________ shares.
MAXXIS GROUP, INC.
By:
----------------------------------------------
Name:
Title:
</TABLE>
A-4
<PAGE> 62
================================================================================
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS IN
CONNECTION WITH THE OFFER MADE HEREBY. IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
COMPANY. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY THE SECURITIES OFFERED HEREBY IN ANY
JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER IN SUCH
JURISDICTION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS
BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE
INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE
HEREOF.
UNTIL_______, 1997, 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.
-------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Additional Information................................................. 2
Prospectus Summary..................................................... 3
Risk Factors........................................................... 8
The Offering........................................................... 17
Use of Proceeds........................................................ 20
Dividend Policy........................................................ 20
Capitalization......................................................... 20
Dilution............................................................... 21
Selected Consolidated Financial Data................................... 22
Management's Discussion and
Analysis of Financial Condition
and Results of Operations............................................ 23
Business............................................................... 26
Management............................................................. 34
Certain Transactions................................................... 38
Principal Shareholders................................................. 39
Description of Capital Stock........................................... 40
Shares Eligible for Future Sale........................................ 44
Legal Matters.......................................................... 44
Experts................................................................ 44
Index to Consolidated Financial Statements............................. F-1
Subscription Agreement................................................. A-1
</TABLE>
================================================================================
================================================================================
5,000,000 SHARES
[LOGO]
MAXXIS GROUP, INC.
CLASS B
COMMON STOCK
-------------------------
P R O S P E C T U S
-------------------------
, 1997
================================================================================
<PAGE> 63
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following sets forth the estimated expenses and costs (other than
underwriting discounts and commissions) expected to be incurred in connection
with the issuance and distribution of the securities registered hereby:
<TABLE>
<S> <C>
Registration Fee ...................................... $ 758
Blue Sky Fees and Expenses ............................ 50,000*
Printing and Engraving ................................ 100,000*
Legal Fees and Expenses ............................... 100,000*
Accounting Fees and Expenses .......................... 100,000*
Miscellaneous ......................................... 49,242*
--------
Total ............................................. $400,000*
========
</TABLE>
- ------------------------
* Estimated for filing purposes.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Georgia Business Corporation Code (the "Georgia Law") permits a
corporation to eliminate or limit the personal liability of a director to the
corporation or its shareholders for monetary damages for a breach of duty,
provided that no provision shall eliminate or limit the liability of a director
for: an appropriation of any business opportunity of the corporation; any act or
omission which involves an intentional misconduct or a knowing violation of law;
any transaction from which the director derives an improper personal benefit; or
any distribution that is illegal under Section 14-2-832 of the Georgia Law. The
Company's Articles contain a provision which limits the liability of a director
to the Company or its shareholders for any breach of duty as a director except
for a breach of duty for which the Georgia Law prohibits such limitation of
liability. This provision does not limit the right of the Company or its
shareholders to seek injunctive or other equitable relief not involving monetary
damages.
The Company's Articles and Bylaws contain certain provisions which
provide indemnification to directors of the Company that is broader than the
protection expressly mandated in Sections 14-2-852 and 14-2-857 of the Georgia
Law. If a director or officer of the Company has been wholly successful, on the
merits or otherwise, in the defense of any action or proceeding brought by
reason of the fact that such person was a director or officer of the Company,
Sections 14-2-852 and 14-2-857 of the Georgia Law would require the Company to
indemnify such person against expenses (including attorneys' fees) actually and
reasonably incurred in connection therewith. The Georgia Law expressly allows
the Company to provide for greater indemnification rights to its officers and
directors, subject to shareholder approval.
The indemnification provisions in the Company's Articles and Bylaws
require the Company to indemnify and hold harmless each of its directors,
officers, employees and agents to the extent that he or she is or was a party,
or is threatened to be made a party, to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative by reason of the fact that such person is or was a director,
officer, employee or agent of the Company, against expenses (including, but not
limited to, attorneys' fees and disbursements, court costs and expert witness
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by such person in connection with the action, suit or proceeding.
Indemnification would be disallowed under any circumstances where
indemnification may not be authorized by
II-1
<PAGE> 64
action of the board of directors, the shareholders or otherwise, including any
liability of a director for: (i) any appropriation, in violation of his duties,
of any business opportunity of the Company; (ii) any acts or omissions involving
intentional misconduct or a knowing violation of the law; (iii) any unlawful
distribution as set forth in Section 14-2-832 of the Georgia Law; or (iv) any
transaction from which the director received an improper personal benefit.
Indemnified persons would also be entitled to have the Company advance expenses
prior to the final disposition of the proceeding. If it is ultimately determined
that they are not entitled to indemnification, however, such amounts must be
repaid.
The Company has the power, under its Bylaws, to obtain insurance on
behalf of any director, officer, employee or agent of the Company against any
liability asserted against or incurred by such person in any such capacity,
whether or not the Company has the power to indemnify such person against such
liability at that time under the Articles, Bylaws or the Georgia Law.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
The following information relates to securities of the Company issued
or sold since the inception of the Company which were not registered under the
Securities Act:
(i) in February 1997, the Company sold 13,500,000 shares of Class A
Common Stock to the founders of the Company for $0.0005 per
share;
(ii) in May 1997, in connection with Mr. Thomas O. Cordy's employment
as President and Chief Executive Officer of the Company, the
Company sold 800,000 shares of Class A Common Stock to The
Anchora Company, an entity of which Mr. Cordy serves as
protector, for $0.15 per share; and
(iii) in August 1997, the Company sold 3,000,000 shares of Class B
Common Stock in a private placement for $0.15 per share.
Each of these transactions was completed without registration of the
respective securities under the Securities Act in reliance upon the exemptions
provided by Section 4(2) of the Securities Act and the rules and regulations
promulgated thereunder on the basis that such transactions did not involve a
public offering. All share data has been adjusted to reflect a 5 for 1 reverse
stock split effective October 8, 1997.
ITEM 16. EXHIBITS
The exhibits filed as part of this Registration Statement are as
follows:
<TABLE>
<CAPTION>
EXHIBIT NO. EXHIBIT DESCRIPTION
----------- -------------------
<S> <C>
3.1 Amended and Restated Articles of Incorporation of the Company,
as amended to date.
3.2 Amended and Restated Bylaws of the Company, as amended to date.
4.1 See Exhibits 3.1 and 3.2 for provisions of the Amended and
Restated Articles of Incorporation and Amended and Restated
Bylaws defining the rights of holders of Common Stock of the
Company.
4.2 Specimen Class B Common Stock certificate.
4.3 Shareholders Agreement, dated as of September 1, 1997 among the
Company and the holders of Class A Common Stock.
5.1 Opinion of Nelson Mullins Riley & Scarborough, L.L.P., counsel
to the Company, as to the legality of the shares being
registered.*
10.1 Form of Employment Agreement by and between the Company and
certain of its officers.
</TABLE>
II-2
<PAGE> 65
<TABLE>
<CAPTION>
EXHIBIT NO. EXHIBIT DESCRIPTION
----------- -------------------
<S> <C>
10.2 Employment Agreement by and between the Company and Thomas O.
Cordy dated May 1, 1997.
10.3 Promissory Note by The Anchora Company in favor of the Company
dated as of May 1, 1997 in the original principal amount of
$120,000.
10.4 Guarantee by Thomas O. Cordy in favor of the Company dated May
1, 1997.
10.5 Form of Independent Sales Representative Agreement by and
between the Company and certain of its sales representatives.
10.6 Consulting Agreement by and between the Company and Robert P.
Kelly dated as of September 1, 1997.
10.7 Software License Agreement between Summit V. Inc., a subsidiary
of Jenkon International, Inc. and the Company dated February 2,
1997.
10.8 Software Service Agreement between Summit V. Inc., a subsidiary
of Jenkon International, Inc. and the Company dated February 2,
1997.
10.9 Equipment Purchase Agreement between Summit V. Inc., a
subsidiary of Jenkon International, Inc. and the Company dated
February 2, 1997.
10.10 Agreement for 1-Plus Services between Colorado River
Communications Corporation and the Company dated February 20,
1997.+
10.11 Sublease Agreement between DowElanco and the Company dated
February 14, 1997.*
10.12 Warehouse lease between Malon D. Mimms and the Company dated
March 17, 1997.
10.13 Warehouse lease between Malon D. Mimms and the Company dated
June 23, 1997.
21.1 Subsidiaries of the Company.
23.1 Consent of Arthur Andersen LLP.
23.2 Consent of Nelson Mullins Riley & Scarborough, L.L.P. (included
in Exhibit 5.1).*
24.1 Power of Attorney (contained on the signature page hereto).
27.1 Financial Data Schedule.
</TABLE>
- -------------------
* To be filed by Amendment.
+ Confidential Treatment requested.
ITEM 17. UNDERTAKINGS
The undersigned Company hereby undertakes as follows:
(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 Act;
(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 in the aggregate, represent a
fundamental change in the information set forth in the
Registration Statement. 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 and of the estimated maximum
offering range may be reflected in the form of
prospectus filed with the SEC pursuant to Rule 424(b)
if, in the aggregate, the changes in volume and price
represent no more than 20 percent change in the maximum
aggregate offering price set forth in the "Calculation
of Registration Fee" table in the effective Registration
Statement; and
II-3
<PAGE> 66
(iii) To include any material information with respect to
the plan of distribution not previously disclosed in
the Registration Statement or any material change to
such information in the Registration Statement.
(2) That, for the purpose of determining any liability under
the 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.
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 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, or 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 of 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.
The 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.
II-4
<PAGE> 67
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Atlanta,
State of Georgia, on the 23rd day of October, 1997.
MAXXIS GROUP, INC.
By: /s/ Thomas O. Cordy
--------------------------------------
Thomas O. Cordy
Chief Executive Officer and President
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Ivey J. Stokes and Thomas O. Cordy, and
each of them, as his true and lawful attorney-in-fact and agent, with full power
of substitution and resubstitution for him and in his name, place and stead, in
any and all capacities, to sign any and all amendments (including post-effective
amendments) to this Registration Statement and any related Registration
Statement pursuant to Rule 462 under the Securities Act of 1933, and to file the
same, with all exhibits thereto, and other documents in connection therewith,
with the Securities and Exchange Commission, granting unto said attorney-in-fact
and agent full power and authority to do and perform each and every act and
thing requisite and necessary to be done in and about the premises, as fully and
to all intents and purposes as he might or could do in person, hereby ratifying
and confirming all which said attorney-in-fact and agent or his substitute or
substitutes may lawfully do, or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
- ---------- ----- ----
<S> <C> <C>
/s/ Ivey J. Stokes Chairman of the Board October 23, 1997
- ---------------------------------------------
Ivey J. Stokes
/s/ Thomas O. Cordy Chief Executive Officer, President October 23, 1997
- --------------------------------------------- and Director (Principal executive
Thomas O. Cordy officer)
/s/ Shawn J. Dinwiddie Chief Financial Officer and October 23, 1997
- --------------------------------------------- Treasurer (Principal financial
Shawn J. Dinwiddie and accounting officer)
/s/ James W. Brown Director and Secretary October 23, 1997
- ---------------------------------------------
James W. Brown
/s/ Charles P. Bernstein Director October 23, 1997
- ---------------------------------------------
Charles P. Bernstein
/s/ Alvin Curry Director October 23, 1997
- ---------------------------------------------
Alvin Curry
/s/ Larry W. Gates, II Director October 23, 1997
- ---------------------------------------------
Larry W. Gates, II
</TABLE>
II-5
<PAGE> 68
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
- ---------- ----- ----
<S> <C> <C>
/s/ Robert J. Glover, Jr. Director October 23, 1997
- ---------------------------------------------
Robert J. Glover, Jr.
/s/ Terry Harris Director October 23, 1997
- ---------------------------------------------
Terry Harris
/s/ Phil Lundquist Director October 23, 1997
- ---------------------------------------------
Phil Lundquist
</TABLE>
II-6
<PAGE> 69
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT NO. EXHIBIT DESCRIPTION
----------- -------------------
<S> <C>
3.1 Amended and Restated Articles of Incorporation of the
Company, as amended to date.
3.2 Amended and Restated Bylaws of the Company, as amended to
date.
4.1 See Exhibits 3.1 and 3.2 for provisions of the Amended and
Restated Articles of
Incorporation and Amended and Restated Bylaws defining the
rights of holders of Common Stock of the Company.
4.2 Specimen Class B Common Stock certificate.
4.3 Shareholders Agreement, dated as of September 1, 1997
among the Company and the holders of Class A Common Stock.
5.1 Opinion of Nelson Mullins Riley & Scarborough, L.L.P.,
counsel to the Company, as to the legality of the shares
being registered.*
10.1 Form of Employment Agreement by and between the Company
and certain of its officers.
10.2 Employment Agreement by and between the Company and Thomas
O. Cordy dated as of May 1, 1997.
10.3 Promissory Note by The Anchora Company in favor of the
Company dated as of May 1, 1997 in the original principal
amount of $120,000.
10.4 Guarantee by Thomas O. Cordy in favor of the Company dated
May 1, 1997.
10.5 Form of Independent Sales Representative Agreement by and
between the Company and certain of its sales
representatives.
10.6 Consulting Agreement by and between the Company and Robert
P. Kelly dated as of September 1, 1997.
10.7 Software License Agreement between Summit V. Inc., a
subsidiary of Jenkon International, Inc. and the Company
dated February 2, 1997.
10.8 Software Service Agreement between Summit V. Inc., a
subsidiary of Jenkon International, Inc. and the Company
dated February 2, 1997.
10.9 Equipment Purchase Agreement between Summit V. Inc., a
subsidiary of Jenkon International, Inc. and the Company
dated February 2, 1997.
10.10 Agreement for 1-Plus Services between Colorado River
Communications Corporation and the Company dated February
20, 1997.+
10.11 Sublease Agreement between DowElanco and the Company dated
February 14, 1997.*
10.12 Warehouse lease between Malon D. Mimms and the Company
dated March 17, 1997.
10.13 Warehouse lease between Malon D. Mimms and the Company
dated June 23, 1997.
21.1 Subsidiaries of the Company.
23.1 Consent of Arthur Andersen LLP.
23.2 Consent of Nelson Mullins Riley & Scarborough, L.L.P.
(included in Exhibit 5.1).*
24.1 Power of Attorney (contained on the signature page
hereto).
27.1 Financial Data Schedule.
</TABLE>
* To be filed by Amendment.
+ Confidential Treatment requested.
<PAGE> 1
EXHIBIT 3.1
AMENDED AND RESTATED ARTICLES OF INCORPORATION
OF
MAXXIS GROUP, INC.
ARTICLE I
The name of the corporation is "Maxxis Group, Inc." The principal
executive office of the corporation is 1901 Montreal Road, Suite 108, Tucker,
Georgia 30084.
ARTICLE II
The corporation shall have authority to issue not more than 210,000,000
shares of capital stock which shall consist of:
(i) 15,000,000 shares of Class A Common Stock, no par value
per share (the "Class A Common Stock"); and
(ii) 85,000,000 shares of Class B Common Stock, no par value
per share (the "Class B Common Stock," and together with the Class A
Common Stock, the "Common Stock"); and
(iii) 10,000,000 shares of preferred stock, no par value per
share (the "Preferred Stock").
A. Common Stock.
The holders of Class A Common Stock and Class B Common Stock shall have
the following specific powers, designations, preferences and relative
participating rights and privileges:
(a) Voting. Each holder of Class A Common Stock shall be entitled to
ten votes per share, whether in person or by proxy, for each share of Class A
Common Stock outstanding in his name on the transfer books of the corporation.
Each holder of Class B Common Stock shall be entitled to one vote per share,
whether in person or by proxy, for each share of Class B Common Stock
outstanding in his name on the transfer books of the corporation. Except as
otherwise provided by the Georgia Business Corporation Code, as amended (the
"Act"), or these Amended and Restated Articles of Incorporation, (i) the holders
of Class A Common Stock and Class B Common Stock shall vote together as a
combined class on all matters to be voted on by the shareholders of the
corporation, and (ii) a majority of the votes entitled to be cast on a matter as
determined for the combined class shall constitute a quorum of the single class
for action on that matter.
<PAGE> 2
(b) Conversion. On the closing date of an Initial Public Offering, each
share of Class A Common Stock then outstanding shall automatically be converted
into one fully paid and nonassessable share of Class B Common Stock. Upon such
conversion, the certificates which theretofore evidenced the shares of Class A
Common Stock shall be deemed to evidence shares of Class B Common Stock until
such time, if any, as new certificates for the shares of Class B Common Stock
are issued pursuant to procedures established by the corporation for such
purpose. For purposes hereof, "Initial Public Offering" shall mean a public
offering of the corporation's capital stock for cash which is offered and sold
in a transaction that is registered under the Securities Act of 1933, as
amended, and through one or more underwriters, pursuant to an underwriting
agreement between the corporation and such underwriters, resulting in aggregate
net proceeds of at least $5,000,000 to the corporation.
(c) Dividends. Holders of the Common Stock shall be entitled to receive
such dividends and other distributions in cash, stock or property of the
corporation as may be declared thereon by the Board of Directors from time to
time out of assets or funds of the corporation legally available therefor.
(d) Ranking. In the event of any dissolution, liquidation or winding up
of the corporation, whether voluntary or involuntary, after there shall have
been paid, or set aside for payment, to the holders of shares of any class
having preference over the Common Stock in the event of dissolution, liquidation
or winding up, the full preferential amounts to which they are respectively
entitled, then the holders of shares of Common Stock shall participate equally
with the holders of shares of any other class or series of stock entitled to
participate with the Common Stock in the event of dissolution, liquidation or
winding up, in the distribution of any remaining assets of the corporation.
B. Preferred Stock.
In addition to the Common Stock, the corporation shall have the
authority, exercisable by its Board of Directors, to issue up to 10,000,000
shares of Preferred Stock, any part or all of which shares of Preferred Stock
may be established and designated from time to time by the Board of Directors by
filing an amendment to these Amended and Restated Articles of Incorporation,
which shall be effective without shareholder action, in accordance with the
appropriate provisions of the Act, and any amendment or supplement thereto (a
"Preferred Stock Designation"), in such series and with such preferences,
limitations and relative rights as may be determined by the Board of Directors.
The number of authorized shares of Preferred Stock may be increased or decreased
(but not below the number of shares thereof then outstanding) by the affirmative
vote of a majority of the votes of the Common Stock, without a vote of the
holders of the shares of Preferred Stock, or of any series thereof, unless a
vote of any such holders is required by law or pursuant to the Preferred Stock
Designation or Preferred Stock Designations establishing the series of Preferred
Stock.
ARTICLE III
The corporation shall have not more than fifteen directors, and the
number of directors shall be set by the Board of Directors as set forth in the
corporation's Amended and Restated Bylaws. The Board of Directors shall be
divided into three classes to be known as Class I, Class
<PAGE> 3
II, and Class III, which shall be as nearly equal in number as possible. Except
in case of death, resignation, disqualification or removal for cause, each
director shall serve for a term ending on the date of the third annual meeting
of shareholders following the annual meeting at which the director was elected;
provided, however, that each initial director in Class I shall hold office until
the first annual meeting of shareholders after his election; each initial
director in Class II shall hold office until the second annual meeting of
shareholders after his election; and each initial director in Class III shall
hold office until the third annual meeting of shareholders after his election.
Despite the expiration of a director's term, he shall continue to serve until
his successor, if there is to be any, has been elected and qualified. In the
event of any increase or decrease in the authorized number of directors, the
newly created or eliminated directorships resulting from such an increase or
decrease shall be apportioned among the three classes of directors so that the
three classes remain as nearly equal in size as possible; provided, however,
that there shall be no classification of additional directors elected by the
Board of Directors until the next meeting of shareholders called for the
purposes of electing directors, at which meeting the terms of all such
additional directors shall expire, and such additional directors positions, if
they are to be continued, shall be apportioned among the classes of directors
and nominees therefor shall be submitted to the shareholders for their vote. Any
vacancy occurring on the Board of Directors, including a vacancy resulting from
an increase in the number of directors, may only be filled by the affirmative
vote of the remaining directors even if the remaining directors constitute less
than a quorum of the Board of Directors.
ARTICLE IV
No director of the corporation shall be personally liable for monetary
damages to the corporation or its shareholders for breach of the duty of care or
any other duty as a director, except that such liability shall not be eliminated
for:
(i) any appropriation, in violation of the director's
duties, of any business opportunity of the corporation;
(ii) acts or omissions which involve intentional misconduct
or a knowing violation of law;
(iii) liability under Section 14-2-832 (or any successor
provision or redesignation thereof) of the Act; and
(iv) any transaction from which the director received an
improper personal benefit.
If at any time the Act shall have been amended to authorize the further
elimination or limitation of the liability of a director, then the liability of
each director of the corporation shall be eliminated or limited to the fullest
extent permitted by the Act, as so amended, without further action by the
shareholders, unless the provisions of the Act, as amended, require further
action by the shareholders. Any repeal or modification of the foregoing
provisions of this Article IV shall not adversely affect the elimination or
limitation of liability or alleged liability pursuant hereto of any director of
the corporation for or with respect to any alleged act or omission of the
director occurring prior to such repeal or modification.
<PAGE> 4
ARTICLE V
All actions by the shareholders shall be taken at a meeting, with prior
notice which complies with the notice provisions of the corporation's Amended
and Restated Bylaws, and with a vote of the holders of the outstanding stock of
each voting group entitled to vote thereon.
ARTICLE VI
In discharging the duties of their respective positions and in
determining what is believed to be in the best interests of the corporation, the
Board of Directors, committees of the Board of Directors and individual
directors, in addition to considering the effects of any action on the
corporation or its shareholders, may consider the interests of the employees,
customers, suppliers and creditors of the corporation and its subsidiaries, the
communities in which offices or other establishments of the corporation and its
subsidiaries are located and all other factors such directors consider
pertinent; provided, however, that any such provision shall be deemed solely to
grant discretionary authority to directors and shall not be deemed to provide to
any constituency any right to be considered.
The amendments contained herein were duly approved by the written
consents of holders of a majority of the shares of the Class A and Class B
Common Stock of the corporation, voting as a single group, in accordance with
Section 14-2-1003 of the Georgia Business Corporation Code.
IN WITNESS WHEREOF, the undersigned has executed these Amended and
Restated Articles of Incorporation as of the 9th day of October, 1997.
/s/ Thomas O. Cordy
-------------------------------------------
Thomas O. Cordy
President and Chief Executive Officer
<PAGE> 1
EXHIBIT 3.2
AMENDED AND RESTATED BYLAWS
OF
MAXXIS GROUP, INC.
EFFECTIVE AS OF: OCTOBER 8, 1997
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C>
ARTICLE I - Offices............................................................................................. 1
ARTICLE II - Shareholders' Meetings............................................................................. 1
Section 1. Place of Meeting............................................................ 1
Section 2. Annual Meeting.............................................................. 1
Section 3. Special Meetings............................................................ 2
Section 4. Notice...................................................................... 2
Section 5. Quorum...................................................................... 2
Section 6. Voting, Proxies............................................................. 2
Section 7. Fixing of Record Date....................................................... 3
Section 8. Shareholders' List for Meeting.............................................. 3
Section 9. Nominations of Directors and Shareholder Proposals.......................... 3
Section 10. Voting Trust Agreements..................................................... 5
ARTICLE III - Directors......................................................................................... 5
Section 1. General Powers.............................................................. 5
Section 2. Number and Tenure........................................................... 6
Section 3. Vacancies and Removal....................................................... 6
Section 4. Place of Meeting............................................................ 6
Section 5. Compensation................................................................ 7
Section 6. Regular Meetings............................................................ 7
Section 7. Special Meetings............................................................ 7
Section 8. Notice, Waiver by Attendance................................................ 7
Section 9. Quorum and Voting........................................................... 7
Section 10. Manner of Acting............................................................ 7
Section 11. Committees.................................................................. 8
Section 12. Action Without a Meeting.................................................... 8
Section 13. Conference Call Meetings.................................................... 8
ARTICLE IV - Officers........................................................................................... 9
Section 1. Offices..................................................................... 9
Section 2. Term........................................................................ 9
Section 3. Compensation................................................................ 9
Section 4. Removal..................................................................... 9
Section 5. Chairman of the Board....................................................... 9
Section 6. President................................................................... 9
Section 7. Vice Presidents............................................................. 10
Section 8. Secretary................................................................... 10
Section 9. Treasurer................................................................... 10
</TABLE>
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<TABLE>
<S> <C>
ARTICLE V - Capital Stock....................................................................................... 10
Section 1. Form........................................................................ 10
Section 2. Rights of Corporation with Respect to Registered Owners..................... 11
Section 3. Transfers of Shares......................................................... 11
Section 4. Duty of Corporation to Register Transfer.................................... 11
Section 5. Lost, Stolen or Destroyed Certificates...................................... 11
Section 6. Business Combination........................................................ 11
ARTICLE VI - Fiscal Year........................................................................................ 11
ARTICLE VII - Seal.............................................................................................. 12
ARTICLE VIII - Annual Statements................................................................................ 12
ARTICLE IX - Indemnification.................................................................................... 12
Section 1. Indemnification of Directors................................................ 12
Section 2. Indemnification of Others................................................... 13
Section 3. Other Organizations......................................................... 13
Section 4. Determination............................................................... 13
Section 5. Advances.................................................................... 13
Section 6. Non-Exclusivity............................................................. 14
Section 7. Insurance................................................................... 14
Section 8. Notice...................................................................... 14
Section 9. Security.................................................................... 14
Section 10. Amendment................................................................... 14
Section 11. Agreements.................................................................. 15
Section 12. Continuing Benefits......................................................... 15
Section 13. Successors.................................................................. 15
Section 14. Severability................................................................ 15
Section 15. Additional Indemnification.................................................. 15
Section 16. Changes in the Act.......................................................... 15
ARTICLE X - Notices and Waiver of Notice........................................................................ 15
Section 1. Notices..................................................................... 15
Section 2. Waiver of Notice............................................................ 16
ARTICLE XI - Miscellaneous...................................................................................... 16
Section 1. Execution of Documents...................................................... 16
Section 2. Deposits.................................................................... 16
Section 3. Proxies in Respect of Stock or Other Securities
of Other Corporations....................................................... 16
ARTICLE XII - Amendments........................................................................................ 17
</TABLE>
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AMENDED AND RESTATED BYLAWS
OF
MAXXIS GROUP, INC.
EFFECTIVE AS OF: October 8, 1997
- --------------------------------------------------------------------------------
References in these Bylaws to "Articles of Incorporation" are to the
Amended and Restated Articles of Incorporation of Maxxis Group, Inc., a Georgia
corporation (the "Corporation"), as amended and restated from time to time.
All of these Bylaws are subject to contrary provisions, if any, of the
Articles of Incorporation (including provisions designating the preferences,
limitations, and relative rights of any class or series of shares), the Georgia
Business Corporation Code (the "Act"), and other applicable law, as in effect on
and after the effective date of these Bylaws. References in these Bylaws to
"Sections" shall refer to sections of the Bylaws, unless otherwise indicated.
- --------------------------------------------------------------------------------
ARTICLE I
OFFICES
The address of the registered office of the Corporation is
1901 Montreal Road, Suite 108, Tucker, Georgia 30084. The Corporation may have
other offices at such places within or without the State of Georgia as the Board
of Directors may from time to time designate or the business of the Corporation
may require or make desirable.
ARTICLE II
SHAREHOLDERS' MEETINGS
SECTION 1. PLACE OF MEETING. The Board of Directors may
designate any place within or without the State of Georgia as the place of
meeting for any annual or for any special meeting called by the Board of
Directors. A waiver of notice signed by all shareholders entitled to vote at a
meeting may designate any place within or without the State of Georgia as the
place for the holding of such meeting. If no designation is made, or if a
special meeting be otherwise called, the place of meeting shall be the principal
office of the Corporation in the State of Georgia.
SECTION 2. ANNUAL MEETING. An annual meeting of the
shareholders shall be held on such day, and at such time and place as the Board
of Directors shall determine, at which
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time the shareholders shall elect a Board of Directors and transact such other
business as may be properly brought before the meeting.
SECTION 3. SPECIAL MEETINGS. Special meetings of the
shareholders, for any purpose or purposes, unless otherwise prescribed by the
Act or the Articles of Incorporation, may be called only by the Board of
Directors or the Chairman of the Board. In addition, the Secretary shall call a
special meeting when requested in writing by shareholders owning at least 50% of
all shares entitled to vote at the meeting. Such written shareholder request
shall comply with the notice provisions of Section 9 hereof.
SECTION 4. NOTICE. Except as otherwise provided by the Act or
the Articles of Incorporation, written notice stating the place, day, and hour
of each meeting of the shareholders, whether annual or special, shall be
delivered, either personally or by first-class mail, to each shareholder of
record entitled to vote at such meeting, not less than ten nor more than 60 days
before the meeting. If the notice is mailed at least 30 days before the date of
the meeting, it may be done by a class of United States mail other than first
class. If mailed, such notice shall be deemed to be delivered when deposited in
the United States mail addressed to a shareholder at his address as it appears
on the records of the Corporation. Notice of any special meeting of shareholders
shall state the purpose or purposes for which the meeting is called. Notice of
any meeting of shareholders shall not be required to be given to any shareholder
who, in person or by his attorney thereunto authorized, either before or after
such meeting, shall waive such notice. Attendance of a shareholder at a meeting,
either in person or by proxy, shall itself constitute waiver of notice and
waiver of any and all objections to the place and time of the meeting and manner
in which it has been called or convened, except when a shareholder attends a
meeting solely for the purpose of stating, at the beginning of the meeting, any
such objections to the transaction of business. Notice of the time and place of
any adjourned meeting need not be given otherwise than by the announcement at
the meeting at which adjournment is taken. If, however, after the adjournment of
any meeting the Board of Directors fixes a new record date for the adjourned
meeting, a notice of the adjourned meeting shall be given in compliance with
this Section 4 to each shareholder of record entitled to vote on the new record
date.
SECTION 5. QUORUM. The holders of a majority of the stock
issued, outstanding and entitled to vote, present in person or represented by
proxy, shall constitute a quorum at all meetings of the shareholders and shall
be sufficient for the transaction of business, except as otherwise provided by
law or the Articles of Incorporation. If, however, such majority shall not be
present or represented at any meeting of the shareholders, the shareholders
entitled to vote thereat, present in person or by proxy, shall have the power to
adjourn the meeting from time to time, without notice other than announcement at
the meeting, until the requisite amount of voting stock shall be present. At
such adjourned meeting at which a quorum shall be present in person or by proxy,
any business may be transacted that might have been transacted at the meeting
originally called. Once a share is represented for any purpose at a meeting, it
is deemed present for quorum purposes for the remainder of the meeting and for
any adjourned meeting unless a new record date is or must be set for that
adjourned meeting.
SECTION 6. VOTING, PROXIES. At every meeting of the
shareholders, any shareholder having the right to vote shall be entitled to vote
in person or by proxy, but no proxy
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shall be voted after 11 months from its date, unless the proxy provides for a
longer period. Each holder of Class A Common Stock shall have ten votes for each
share of Class A Common Stock registered in his name on the books of the
Corporation. Each holder of Class B Common Stock shall have one vote for each
share of Class B Common Stock registered in his name on the books of the
Corporation. If a quorum is present, the affirmative vote of a majority of the
shares represented shall be the act of the shareholders, except as otherwise
provided by law, the Articles of Incorporation or these Bylaws.
SECTION 7. FIXING OF RECORD DATE. For the purpose of
determining shareholders entitled to notice of or to vote at any meeting of
shareholders or any adjournment thereof, or shareholders entitled to receive
payment of dividends, or in order to make a determination of shareholders for
any other purpose, the Board of Directors may fix in advance a date as the
record date for any such determination of shareholders, such date in any case to
be not less than ten nor more than 60 days prior to the date on which the
particular action, requiring such determination of shareholders, is to be taken.
If no record date is fixed for the determination of shareholders entitled to
notice of or to vote at a meeting of shareholders, or shareholders entitled to
receive payment of dividends, the date on which notice of the meeting is mailed,
or the date on which the resolution of the Board of Directors declaring such
dividend is adopted, as the case may be, shall be the record date. When a
determination of shareholders entitled to vote at any meeting of shareholders
has been made as provided in this Section 7, such determination shall apply to
any adjournment thereof, unless the Board of Directors fixes a new record date,
which it must do if the meeting is adjourned to a date more than 120 days after
the date fixed for the original meeting.
SECTION 8. SHAREHOLDERS' LIST FOR MEETING. After fixing a
record date for a meeting, the Corporation shall prepare an alphabetical list of
the names of all its shareholders who are entitled to notice of the
shareholders' meeting, arranged by voting group with the address of, and the
number and class and series, if any, of shares held by, each. The shareholders'
list shall be available for inspection by any shareholder for a period of ten
days prior to the meeting, or such shorter time as exists between the record
date and the meeting, and continuing through the meeting at the Corporation's
principal office or at such other place as may be permitted by the Act. Subject
to any limitations provided by the Act, a shareholder or his agent or attorney
shall be entitled on written demand to inspect the list during regular business
hours and at such shareholder's expense, during the period it is available for
inspection. Refusal or failure to comply with requirements of this Section 8
shall not affect the validity of any action taken at a shareholders' meeting,
unless otherwise provided by the Act.
SECTION 9. NOMINATIONS OF DIRECTORS AND SHAREHOLDER PROPOSALS.
(a) Nominations of Directors. Only persons who are nominated
by, or at the direction of, the Board of Directors or by a shareholder who has
given timely written notice to the Secretary prior to the meeting at which
directors are to be elected will be eligible for election as directors of the
Corporation. For notice of shareholder nominations to be timely, such notice
must be received by the Corporation not less than 90 days prior to the first
anniversary of the previous year's annual meeting. Such notification shall
contain the following information:
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(i) the name, age and business and residence
addresses of each proposed nominee;
(ii) the principal business or occupation of each
proposed nominee during the last five years;
(iii) with respect to each proposed nominee, any
affiliation with or material interest in the Corporation or
any transaction involving the Corporation, and any affiliation
with or material interest in any person or entity having an
interest materially adverse to the Corporation;
(iv) the name and residence address of the notifying
shareholder; and
(v) the number and class of shares of capital stock
of the Corporation owned by the notifying shareholder.
(b) Shareholder Proposals. At annual and special meetings only
such business may be conducted as has been brought before the meeting by, or at
the direction of, the Chairman of the Board or by a shareholder who has given
timely written notice to the Secretary of the Corporation of such shareholder's
intention to bring such business before such meeting. For notice of business to
be conducted at an annual or special meeting to be timely, such notice must be
received by the Corporation, in the case of an annual meeting, not less than 90
days prior to the first anniversary of the previous year's annual meeting or, in
the case of a special meeting, not less than 90 days prior to the date of the
meeting as set forth in the written request to the Corporation provided pursuant
to Section 3 hereof. Such notification shall contain the following information:
(i) a brief description of the business desired to
brought before the annual meeting and the reasons for
conducting such business at the annual meeting;
(ii) the name and address, as they appear on the
Corporation's books, of the shareholder proposing such
business;
(iii) the class and number of shares of the
Corporation's capital stock that are beneficially owned by
such shareholder; and
(iv) any material interest of such shareholder in
such business.
(c) Certain Procedures. The Chairman of the Board, or his
designee, at any meeting of shareholders at which one or more directors are to
be elected may disregard any nomination not made in accordance with this Section
9, and upon the instructions of the Chairman of the Board, or his designee, the
vote tellers shall disregard all votes cast for such nominees. In addition, the
Chairman of the Board, or his designee, at any annual or special meeting of
shareholders may disregard any shareholder proposals not made in accordance with
this Section 9. The Chairman of the Board, or his designee, for good cause shown
and with
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proper regard for the orderly conduct of business at the meeting, may waive in
whole or in part the operation of this Section 9.
(d) Section 14 of the Exchange Act. Notwithstanding anything
to the contrary in this Section 9, any shareholder requesting that a proposal be
included in the Corporation's proxy statement must also meet all of the
requirements of Section 14 of the Securities Exchange Act of 1934, as amended,
and Regulation 14A thereunder.
SECTION 10. VOTING TRUST AGREEMENTS.
(a) Any number of shareholders of the Corporation may create a
voting trust for the purpose of conferring on a trustee or trustees the right to
vote or otherwise represent their shares. Any such agreement shall be in
writing, shall not exceed ten years in duration, and shall specify the terms and
conditions of the voting trust.
(b) On the transfer of such shares in trust, voting trust
certificates shall be issued by the trustee or trustees to the transferring
shareholders. Such trustee or trustees shall keep a record of the holders of the
voting trust certificates evidencing a beneficial interest in the voting trust,
giving the names and addresses of all such holders, and the number and class of
shares in respect of which the voting trust certificates held by each are
issued, and shall deposit a copy of such record with the Corporation at its
registered office.
(c) The counterpart of the voting trust agreement and the copy
of such record so deposited with the Corporation shall be subject to the same
right of inspection by shareholders of the Corporation, in person or by
attorney, as are the books and records of the Corporation, and such documents
shall be subject to examination by any holder of record voting trust
certificates either in person or by agent or attorney, at any reasonable time
for any reason.
(d) At any time before the expiration of a voting trust
agreement, as originally fixed, or as extended one or more times under this
Section 10, one or more holders of voting trust certificates may, by agreement
in writing, extend the duration of a voting trust agreement nominating the same
or substitute trustee or trustees, for an additional period not to exceed ten
years. Such extension agreement shall not affect the rights or obligations of
persons not parties to the agreement, and such persons shall be entitled to
remove their shares from the trust upon any such extension and to have their
share certificates promptly reissued to them. The extension agreement shall be
executed in the manner specified in clause (a) above and shall be subject to all
other provisions of this Section 10.
ARTICLE III
DIRECTORS
SECTION 1. GENERAL POWERS. All corporate powers shall be
exercised by or under the authority of, and the business and affairs of the
Corporation shall be managed under the direction of, the Board of Directors. In
addition to the powers and authority expressly conferred by these Bylaws, the
Board of Directors may exercise all such powers of the
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Corporation and do all such lawful acts and things as are not by law, or by any
legal agreement among shareholders, or by the Articles of Incorporation or by
these Bylaws directed or required to be exercised or done by the shareholders.
SECTION 2. NUMBER AND TENURE.
(a) Number. The number of directors shall be fixed by
resolution of the Board of Directors from time to time so long as the number of
directors does not exceed 15.
(b) Election and Term of Office Generally. The Board of
Directors shall be divided into three classes to be known as Class I, Class II
and Class III, which shall be as nearly equal in number as possible. Except in
case of death, resignation, disqualification, or removal for cause, each
director shall serve for a term ending on the date of the third annual meeting
of shareholders following the annual meeting at which the director was elected;
provided, however, that each initial director in Class I shall hold office until
the first annual meeting of shareholders after his election; each initial
director in Class II shall hold office until the second annual meeting of
shareholders after his election; and each initial director in Class III shall
hold office until the third annual meeting of shareholders after his election.
Despite the expiration of a director's term, he shall continue to serve until
his successor, if there is to be any, has been elected and has qualified. In the
event of any increase or decrease in the authorized number of directors, the
newly created or eliminated directorships resulting from such an increase or
decrease shall be apportioned among the three classes of directors so that the
three classes remain as nearly equal in size as possible; provided, however,
that there shall be no classification of additional directors elected by the
Board of Directors until the next meeting of shareholders called for the
purposes of electing directors, at which meeting the terms of all such
additional directors shall expire, and such additional directors positions, if
they are to be continued, shall be apportioned among the classes of directors
and nominees therefor shall be submitted to the shareholders for their vote.
SECTION 3. VACANCIES AND REMOVAL.
(a) Vacancies. Any vacancy occurring on the Board of
Directors, including a vacancy resulting from an increase in the number of
directors, may only be filled by the affirmative vote of the remaining
directors, even if the remaining directors constitute less than a quorum of the
Board of Directors. A director elected to fill a vacancy shall hold office only
until the next election of directors by the shareholders.
(b) Removal. At a meeting of the shareholders called expressly
for the purpose of removing a director, a director may be removed, with or
without cause, if the number of votes cast to remove the director exceeds the
number of votes cast not to remove such director. If any removed director is a
member of any committee of the Board of Directors, he shall cease to be a member
of that committee when he ceases to be a director.
SECTION 4. PLACE OF MEETING. The Board of Directors may hold
its meetings at such place or places as it may from time to time determine.
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SECTION 5. COMPENSATION. Directors may be allowed such
compensation for attendance at regular or special meetings of the Board of
Directors and at any special meeting of standing committees thereof as may from
time to time be determined by resolution of the Board of Directors.
SECTION 6. REGULAR MEETINGS. A regular annual meeting of the
Board of Directors shall be held without other notice than as provided in these
Bylaws immediately after, and at the same place as, the annual meeting of
shareholders. The Board of Directors may provide, by resolution, the time and
place within or without the State of Georgia, for the holding of additional
regular meetings without other notice than such resolution.
SECTION 7. SPECIAL MEETINGS. Special meetings of the Board of
Directors may be called by the Chairman of the Board or the President on 24
hours' notice by first-class mail, overnight courier, telephone, telecopier,
electronic communication or personal delivery to each director and shall be
called by the Chairman of the Board or the President in like manner and on like
notice on the written request of any two or more directors. Any such special
meeting shall be held at such time and place as shall be stated in the notice of
the meeting. The notice need not describe the purpose of the special meeting.
SECTION 8. NOTICE, WAIVER BY ATTENDANCE. No notice of a
meeting of the Board of Directors need be given to any director who signs a
waiver of notice either before or after the meeting. The attendance of a
director at a meeting shall constitute a waiver of notice of such meeting and a
waiver of any and all objections to the place of the meeting, the time of the
meeting, or the manner in which it has been called or convened, except when a
director states, at the beginning of the meeting (or promptly upon arrival at
the meeting), any objection to the transaction of business because the meeting
is not lawfully called or convened.
SECTION 9. QUORUM AND VOTING. At all meetings of the Board of
Directors, the presence of a majority of the directors shall constitute a quorum
for the transaction of business. In the absence of a quorum, a majority of the
directors present at any meeting may adjourn from time to time until a quorum is
present. Notice of the time and place of any adjourned meeting need only be
given by announcement at the meeting at which adjournment is taken. Except as
set forth in the Articles of Incorporation, the act of a majority of the
directors present at a meeting at which a quorum is present shall be the act of
the Board of Directors. A director who is present at a meeting when corporate
action is taken is deemed to have assented to the action unless he objects at
the beginning of the meeting (or promptly upon his arrival) to holding such
meeting or transacting specified business at the meeting, or he votes against or
abstains from voting on the action taken.
SECTION 10. MANNER OF ACTING. Notwithstanding any provision in
these Bylaws to the contrary, no contract or other transaction between the
Corporation and any one or more of its directors or between the Corporation and
any other corporation, firm, association or other entity, in which one or more
of its directors are directors or officers or are financially interested, shall
be void or voidable solely: (i) because of such relationship or interest; (ii)
because such director or directors are present at the meeting of the Board of
Directors or committee thereof which authorizes, approves or ratifies such
contracts or transactions; or (iii) because the presence of such director or
directors are counted for the purpose of
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determining the presences of a quorum of directors if: (A) the facts of such
relationship or interest are disclosed or known to the Board of Directors or
committee, and the Board of Directors or the committee in good faith authorizes,
approves, or ratifies the contract or transaction by the affirmative vote or
written consent of a majority of disinterested directors or (B) the facts of
such relationship or interest are disclosed or known to the holders of the
shares entitled to vote thereon and the holders of a majority of such shares
authorize, approve or ratify such contract or transaction by vote or written
consent with the shares of the interested director not entitled to vote thereon.
An interested director may be counted in determining the presence of a quorum at
a meeting of the Board of Directors or committee thereof which authorizes,
approves or ratifies such contract or transaction, but shall not be counted in
determining whether the Corporation shall award any contract or engage in any
transaction in which the director is an interest person, which determination may
only be authorized by a majority of disinterested directors or by a solely
disinterested director, even though such directors or director may be less than
a quorum.
SECTION 11. COMMITTEES. In furtherance and not in limitation
of the powers conferred by the Act, the Board of Directors by resolution adopted
by a majority of the full Board of Directors may designate from among its
members one or more other committees each of which, to the extent provided in
such resolution or in the Articles of Incorporation or these Bylaws, shall have
authority to exercise all the powers of the Board of Directors which may be
lawfully delegated and not inconsistent with these Bylaws or the Act, at any
time and when the Board of Directors is not in session. The committee shall
elect a chairman, and a majority of the entire committee shall constitute a
quorum; and the act of a majority of members present at a meeting at which a
quorum is present shall be the act of the committee provided all members of the
committee have had notice of such meeting or waived such notice.
SECTION 12. ACTION WITHOUT A MEETING. Any action required or
permitted to be taken at any meeting of the Board of Directors or of any
committee thereof may be taken without a meeting if written consent thereto is
signed by all members of the Board of Directors or of such committee, as the
case may be, and such written consent is filed with the minutes of the
proceedings of the Board of Directors or committee. Such consent shall have the
same effect as a unanimous vote.
SECTION 13. CONFERENCE CALL MEETINGS. Members of the Board of
Directors, or any committee designated by such Board, may participate in a
meeting of such Board or committee by means of a conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other, and participation in a meeting pursuant to this
Section 13 shall constitute presence in person at such meeting.
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ARTICLE IV
OFFICERS
SECTION 1. OFFICERS. The officers of the Corporation shall
consist of a President, a Secretary, and a Treasurer, each of whom shall be
elected or appointed by the Board of Directors. The Board of Directors may also
elect a Chairman of the Board from among its members. The Board of Directors
from time to time may create and establish the duties of other offices and may
elect or appoint, or authorize specific senior officers to appoint, the persons
who shall hold such other offices, including one or more Vice Presidents
(including Executive Vice Presidents, Senior Vice Presidents, Assistant Vice
Presidents, and the like), one or more Assistant Secretaries, and one or more
Assistant Treasurers. Whether or not so provided by the Board of Directors, the
Chairman of the Board may appoint one or more Assistant Secretaries and one or
more Assistant Treasurers. Any two or more offices may be held by the same
person.
SECTION 2. TERM. Each officer shall serve at the pleasure of
the Board of Directors (or, if appointed by a senior officer pursuant to this
Article Four, at the pleasure of the Board of Directors or any senior officer
authorized to have appointed the officer) until his death, resignation, or
removal, or until his replacement is elected or appointed in accordance with
this Article IV.
SECTION 3. COMPENSATION. The compensation of all officers of
the Corporation shall be fixed by the Board of Directors or by a committee or
officer appointed by the Board of Directors. Officers may serve without
compensation.
SECTION 4. REMOVAL. All officers (regardless of how elected or
appointed) may be removed, with or without cause, by the Board of Directors, and
any officer appointed by another officer may also be removed, with or without
cause, by any senior officer authorized to have appointed the officer to be
removed. Removal will be without prejudice to the contract rights, if any, of
the person removed, but shall be effective notwithstanding any damage claim that
may result from infringement of such contract rights.
SECTION 5. CHAIRMAN OF THE BOARD. The Chairman of the Board
(if there be one) shall preside at and serve as chairman of meetings of the
shareholders and of the Board of Directors. The Chairman of the Board shall
perform other duties and have other authority as may from time to time be
delegated by the Board of Directors.
SECTION 6. PRESIDENT. Unless otherwise provided in these
Bylaws or by resolution of the Board of Directors, the President shall be the
chief executive officer of the Corporation, shall be charged with the general
and active management of the business of the Corporation, shall see that all
orders and resolutions of the Board of Directors are carried into effect, shall
have the authority to select and appoint employees and agents of the
Corporation, and shall, in the absence or disability of the Chairman of the
Board, perform the duties and exercise the powers of the Chairman of the Board.
The President shall perform any other duties and have any other authority as may
be delegated from time to time by the Board of Directors, and shall be subject
to the limitations fixed from time to time by the Board of Directors.
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SECTION 7. VICE PRESIDENTS. The Vice President (if there be
one) shall, in the absence or disability of the President, or at the direction
of the President, perform the duties and exercise the powers of the President,
whether the duties and powers are specified in these Bylaws or otherwise. If the
Corporation has more than one Vice President, the one designated by the Board of
Directors or the President (in that order of precedence) shall act in the event
of the absence or disability of the President. Vice Presidents shall perform any
other duties and have any other authority as from time to time may be delegated
by the Board of Directors or the President.
SECTION 8. SECRETARY. The Secretary shall be responsible for
preparing minutes of the meetings of shareholders, directors, and committees of
directors and for authenticating records of the Corporation. The Secretary or
any Assistant Secretary shall have authority to give all notices required by law
or these Bylaws. The Secretary shall be responsible for the custody of the
corporate books, records, contracts, and other documents. The Secretary or any
Assistant Secretary may affix the corporate seal to any lawfully executed
documents requiring it, may attest to the signature of any officer of the
Corporation, and shall sign any instrument that requires the Secretary's
signature. The Secretary or any Assistant Secretary shall perform any other
duties and have any other authority as from time to time may be delegated by the
Board of Directors or the President.
SECTION 9. TREASURER. Unless otherwise provided by the Board
of Directors, the Treasurer shall be responsible for the custody of all funds
and securities belonging to the Corporation and for the receipt, deposit, or
disbursement of these funds and securities under the direction of the Board of
Directors. The Treasurer shall cause full and true accounts of all receipts and
disbursements to be maintained and shall make reports of these receipts and
disbursements to the Board of Directors and President upon request. The
Treasurer or Assistant Treasurer shall perform any other duties and have any
other authority as from time to time may be delegated by the Board of Directors
or the President.
ARTICLE V
CAPITAL STOCK
SECTION 1. FORM. The interest of each shareholder shall be
evidenced by a certificate representing shares of stock of the Corporation,
which shall be in such form as the Board of Directors may from time to time
adopt and shall be numbered and shall be entered in the books of the Corporation
as they are issued. Each certificate shall exhibit the name of the Corporation,
the holder's name, the number of shares and class of shares and series, if any,
represented thereby, a statement that the Corporation is organized under the
laws of the State of Georgia, and the par value of each share or a statement
that the shares are without par value. Each certificate shall be signed by the
President and the Secretary or an Assistant Secretary and may be sealed with the
seal of the Corporation or a facsimile thereof. In case any officer who signed,
or whose facsimile signature has been placed upon, such certificate shall have
ceased to be such officer before such certificate is issued, it may be issued by
the Corporation with the same effect as if he were such officer at the date of
its issuance.
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SECTION 2. RIGHTS OF CORPORATION WITH RESPECT TO REGISTERED
OWNERS. Prior to due presentation for transfer of registration of its shares,
the Corporation may treat the registered owner of the shares (or the beneficial
owner of the shares to the extent of any rights granted by a nominee certificate
on file with the Corporation pursuant to any procedure that may be established
by the Corporation in accordance with the Act) as the person exclusively
entitled to vote the shares, to receive any dividend or other distribution with
respect to the shares, and for all other purposes; and the Corporation shall not
be bound to recognize any equitable or other claim to or interest in the shares
on the part of any other person, whether or not it has express or other notice
of such a claim or interest, except as otherwise provided by the Act.
SECTION 3. TRANSFERS OF SHARES. Transfers of shares shall be
made upon the books of the Corporation kept by the Corporation or by the
transfer agent designated to transfer the shares, only upon direction of the
person named in the certificate or by an attorney lawfully constituted in
writing. Before a new certificate is issued, the old certificate shall be
surrendered for cancellation or, in the case of a certificate alleged to have
been lost, stolen, or destroyed, the provisions of these Bylaws shall have been
complied with.
SECTION 4. DUTY OF CORPORATION TO REGISTER TRANSFER.
Notwithstanding any of the provisions of Section 3 of this Article V, the
Corporation is under a duty to register the transfer of its shares only if: (a)
the share certificate is endorsed by the appropriate person or persons; (b)
reasonable assurance is given that each required endorsement is genuine and
effective; (c) the Corporation has no duty to inquire into adverse claims or has
discharged any such duty; (d) any applicable law relating to the collection of
taxes has been complied with; (e) the transfer is in fact rightful or is to a
bona fide purchaser; and (f) the transfer is in compliance with applicable
provisions of any transfer restrictions of which the Corporation shall have
notice.
SECTION 5. LOST, STOLEN OR DESTROYED CERTIFICATES. Any person
claiming a certificate of stock to be lost, stolen or destroyed shall make an
affidavit or affirmation of the fact in such manner as the Board of Directors
may require and shall, if the Board of Directors so requires, give the
Corporation a bond of indemnity in the form and amount and with one or more
sureties satisfactory to the Board of Directors, whereupon an appropriate new
certificate may be issued in lieu of the one alleged to have been lost, stolen
or destroyed.
SECTION 6. BUSINESS COMBINATION. The Corporation hereby elects
to be governed by the provisions of Section 14-2-1132 of the Act, pertaining to
business combinations with interested shareholders. This Section 6 is adopted by
the Corporation as of October 8, 1997, pursuant to an amendment to the Bylaws in
accordance with Section 14-2-1133 of the Act.
ARTICLE VI
FISCAL YEAR
The fiscal year of the Corporation shall end on the 30th day
of June in each year, or on such other date as may be established by the Board
of Directors of the Corporation.
11
<PAGE> 15
ARTICLE VII
SEAL
The corporate seal shall be in such form as the Board of
Directors may from time to time determine.
ARTICLE VIII
ANNUAL STATEMENTS
Not later than four months after the close of each fiscal
year, and in any case prior to the next annual meeting of shareholders, the
Corporation shall prepare (a) a balance sheet showing in reasonable detail the
financial condition of the Corporation as of the close of its fiscal year, and
(b) a profit and loss statement showing the results of its operations during its
fiscal year. Upon receipt of written request, the Corporation promptly shall
mail to any shareholder of record a copy of the most recent such balance sheet
and profit and loss statement, in such form and with such information as the Act
may require.
ARTICLE IX
INDEMNIFICATION
SECTION 1. INDEMNIFICATION OF DIRECTORS. The Corporation shall
indemnify and hold harmless any person (an "Indemnified Person") who was or is a
party, or is threatened to be made a party, to any threatened, pending or
completed action, suit, or proceeding, whether civil, criminal, administrative,
or investigative, whether formal or informal, including any action or suit by or
in the right of the Corporation (for purposes of this Article IX, collectively,
a "Proceeding") because he is or was a director of the Corporation, against any
judgment, settlement, penalty, fine, or reasonable expenses (including, but not
limited to, attorneys' fees and disbursements, court costs, and expert witness
fees) incurred with respect to the Proceeding (for purposes of this Article IX,
a "Liability"), if he acted in a manner he believed in good faith to be in or
not opposed to the best interests of the Corporation, and, in the case of any
criminal proceeding, had no reasonable cause to believe his conduct was
unlawful; provided, however, that no indemnification shall be made for any
Liability for which, under the Act, indemnification may not be authorized by
action of the Board of Directors, the shareholders, or otherwise, including, but
not limited to, any Liability of a director to the Corporation for: (a) any
appropriation by a director, in violation of the director's duties, of any
business opportunity of the corporation; (b) any acts or omissions of a director
that involve intentional misconduct or a knowing violation of law; (c) the types
of liability set forth in Section 14-2-832 of the Act; or (d) any transaction
from which the director received an improper personal benefit. Indemnification
in connection with a Proceeding brought by or in the right of the Corporation is
limited to reasonable expenses incurred in connection with the Proceeding.
12
<PAGE> 16
SECTION 2. INDEMNIFICATION OF OTHERS. The Board of Directors shall have
the power to cause the Corporation to provide to officers, employees, and agents
of the Corporation all or any part of the right to indemnification and other
rights of the type provided under Sections 1, 5, and 11 of this Article IX
(subject to the conditions, limitations, and obligations specified in those
sections) upon a resolution to that effect identifying officers, employees, or
agents (by position or name) to be indemnified and specifying the particular
rights provided, which may be different for each of the persons identified. Each
officer, employee, or agent of the Corporation so identified shall be an
"Indemnified Person" for purposes of the provisions of this Article IX.
SECTION 3. OTHER ORGANIZATIONS. The Board of Directors shall have the
power to cause the Corporation to provide to any director, officer, employee, or
agent of the Corporation who is or was serving at the Corporation's request as a
director, officer, partner, trustee, employee, or agent of another corporation,
partnership, joint venture, trust, employee benefit plan, or other enterprise
all or any part of the right to indemnification and other rights of the type
provided under Sections 1, 5, and 11 of this Article IX (subject to the
conditions, limitations, and obligations specified in those sections) upon a
resolution to that effect identifying the persons to be identified and
specifying the particular rights provided, which may be different for each of
the persons identified. Each person so identified shall be an "Indemnified
Person" for purposes of the provisions of this Article IX.
SECTION 4. DETERMINATION. Notwithstanding any judgment, order,
settlement, conviction, or plea in any Proceeding, an Indemnified Person shall
be entitled to indemnification as provided in Section 1 of this Article IX if a
determination that such Indemnified Person is entitled to such indemnification
shall be made (a) by the Board of Directors by a majority vote of a quorum
consisting of directors who are not at the time parties to the Proceeding; (b)
if a quorum cannot be obtained under (a) above, by majority vote of a committee
duly designated by the Board of Directors (in which designation directors who
are parties may participate), consisting solely of two or more directors who are
not at the time parties to the Proceeding; (c) in a written opinion by special
legal counsel selected as required by the Act; or (d) by the shareholders;
provided, however, that shares owned by or voted under the control of directors
who are at the time parties to the Proceeding may not be voted on the
determination.
SECTION 5. ADVANCES. To the extent the Corporation has funds reasonably
available to be used for this purpose, expenses (including, but not limited to,
attorneys' fees and disbursements, court costs, and expert witness fees)
incurred by the Indemnified Person in defending any Proceeding of the kind
described in Section 1 (or in Sections 2 or 3, if the Board of Directors has
specified that advancement of expenses be made available to such Indemnified
Person) shall be paid by the Corporation in advance of the final disposition of
such Proceeding as set forth herein. The Corporation shall promptly pay the
amount of such expenses to the Indemnified Person, but in no event later than 10
days following the Indemnified Person's delivery to the Corporation of a written
request for an advance pursuant to this Section 9.5, together with a reasonable
accounting of such expenses; provided, however, that the Indemnified Person
shall furnish the Corporation a written affirmation of his good faith belief
that he has met the standard of conduct set forth in the Act and a written
undertaking and agreement to repay to the Corporation any advances made pursuant
to this Section 5 if it shall be determined that the Indemnified Person is not
entitled to be indemnified by the Corporation for such amounts.
13
<PAGE> 17
The Corporation may make the advances contemplated by this Section 5 regardless
of the Indemnified Person's financial ability to make repayment. Any advances
and undertakings to repay pursuant to this Section 5 may be unsecured and
interest-free.
SECTION 6. NON-EXCLUSIVITY. Subject to any applicable limitation
imposed by the Act or the Articles of Incorporation, the indemnification and
advancement of expenses provided by or granted pursuant to this Article IX shall
not be deemed exclusive of any other rights to which a person seeking
indemnification or advancement of expenses may be entitled under any provision
of the Articles of Incorporation, or any Bylaw, resolution, or agreement
specifically or in general terms approved or ratified by the affirmative vote of
holders of a majority of the shares entitled to be voted thereon.
SECTION 7. INSURANCE. The Corporation shall have the power to purchase
and maintain insurance on behalf of any person who is or was a director,
officer, employee, or agent of the Corporation, or who, while serving in such a
capacity, is also or was also serving at the request of the Corporation as a
director, officer, trustee, partner, employee, or agent of any corporation,
partnership, joint venture, trust, employee benefit plan, or other enterprise,
against any Liability that may be asserted against him or incurred by him in any
such capacity, or arising out of his status as such, whether or not the
Corporation would have the power to indemnify him against such liability under
the provisions of this Article IX.
SECTION 8. NOTICE. If the Corporation indemnifies or advances expenses
to a director under any of Sections 14-2-851 through 14-2-854 of the Act (or any
equivalent provision of these Bylaws) in connection with a Proceeding by or in
the right of the Corporation, the Corporation shall, to the extent required by
Section 14-2-1621 or any other applicable provision of the Act, report the
indemnification or advance in writing to the shareholders with or before the
notice of the next shareholders' meeting.
SECTION 9. SECURITY. The Corporation may designate certain of its
assets as collateral, provide self-insurance, establish one or more
indemnification trusts, or otherwise secure or facilitate its ability to meet
its obligations under this Article IX, or under any indemnification agreement or
plan of indemnification adopted and entered into in accordance with the
provisions of this Article IX, as the Board of Directors deems appropriate.
SECTION 10. AMENDMENT. Any amendment to this Article IX that limits or
otherwise adversely affects the right of indemnification, advancement of
expenses, or other rights of any Indemnified Person hereunder shall, as to such
Indemnified Person, apply only to Proceedings based on actions, events, or
omissions occurring after such amendment and after delivery of notice of such
amendment to the Indemnified Person so affected (collectively, "Post Amendment
Events"). Any Indemnified Person shall, as to any Proceeding based on actions,
events, or omissions occurring prior to the date of receipt of such notice, be
entitled to the right of indemnification, advancement of expenses, and other
rights under this Article IX to the same extent as if such provisions had
continued as part of the Bylaws of the Corporation without such amendment. This
Section 10 cannot be altered, amended, or repealed in a manner effective as to
any Indemnified Person (except as to Post Amendment Events) without the prior
written consent of such Indemnified Person.
14
<PAGE> 18
SECTION 11. AGREEMENTS. The provisions of this Article IX shall be
deemed to constitute an agreement between the Corporation and each Indemnified
Person hereunder. In addition to the rights provided in this Article IX, the
Corporation shall have the power, upon authorization by the Board of Directors,
to enter into an agreement or agreements providing to any Indemnified Person
indemnification rights substantially similar to those provided in this Article
IX.
SECTION 12. CONTINUING BENEFITS. The rights of indemnification and
advancement of expenses permitted or authorized by this Article IX shall, unless
otherwise provided when such rights are granted or conferred, continue as to a
person who has ceased to be a director, officer, employee, or agent and shall
inure to the benefit of the heirs, executors, and administrators of such person.
SECTION 13. SUCCESSORS. For purposes of this Article IX, the term
"Corporation" shall include any corporation, joint venture, trust, partnership,
or unincorporated business association that is the successor to all or
substantially all of the business or assets of this Corporation, as a result of
merger, consolidation, sale, liquidation, or otherwise, and any such successor
shall be liable to the persons indemnified under this Article IX on the same
terms and conditions and to the same extent as this Corporation.
SECTION 14. SEVERABILITY. Each of the Sections of this Article IX, and
each of the clauses set forth herein, shall be deemed separate and independent,
and should any part of any such Section or clause be declared invalid or
unenforceable by any court of competent jurisdiction, such invalidity or
unenforceability shall in no way render invalid or unenforceable any other part
thereof or any separate Section or clause of this Article IX that is not
declared invalid or unenforceable.
SECTION 15. ADDITIONAL INDEMNIFICATION. In addition to the specific
indemnification rights set forth herein, the Corporation shall indemnify each of
its directors and such of its officers as have been designated by the Board of
Directors to the full extent permitted by action of the Board of Directors
without shareholder approval under the Act or other laws of the State of Georgia
as in effect from time to time.
SECTION 16. CHANGES IN THE ACT. The Board of Directors of the
Corporation may amend any Section of this Article IX without shareholder
approval such that each Section of this Article IX will be in conformity with
the Act at all times.
ARTICLE X
NOTICES AND WAIVER OF NOTICE
SECTION 1. NOTICES. Except as otherwise provided in these
Bylaws, whenever under the provisions of these Bylaws notice is required to be
given to any shareholder, director or officer, such notice shall be given either
by personal notice, telephone, telecopier, or electronic communication, or by
overnight courier or mail by depositing the same in the post office or letter
box in a postpaid sealed envelope, addressed to such shareholder, officer or
15
<PAGE> 19
director at such address as appears on the books of the Corporation, and such
notice shall be deemed to be given at the time when the same shall be thus sent
or mailed.
SECTION 2. WAIVER OF NOTICE. Whenever any notice whatsoever is
required to be given by the Act, by the Articles of Incorporation or by these
Bylaws, a waiver thereof, in writing, signed by the person or persons entitled
to such notice given before or after the time stated therein, which shall
include a waiver given by telephone, telecopier, or electronic communication,
shall be deemed equivalent thereto. No notice of any meeting need be given to
any person who shall attend such meeting.
ARTICLE XI
MISCELLANEOUS
SECTION 1. EXECUTION OF DOCUMENTS. The Board shall designate
the officers, employees, and agents of the Corporation who shall have power to
execute and deliver deeds, contracts, mortgages, bonds, debentures, checks, and
documents for and in the name of the Corporation, and may authorize such
officers, employees, and agents to delegate such power (including authority to
redelegate) by written instrument to other officers, employees, or agents of the
Corporation. Unless so designated or expressly authorized by these Bylaws, no
officer or agent or employee shall have any power or authority to bind the
Corporation by any contract or engagement or to pledge its credit or to render
it liable pecuniarily for any purpose or any amount.
SECTION 2. DEPOSITS. All funds of the Corporation not
otherwise employed shall be deposited from time to time to the credit of the
Corporation or otherwise as the Board or the Treasurer, or any other officer of
the Corporation to whom power in this respect shall have been given by the
Board, shall select.
SECTION 3. PROXIES IN RESPECT OF STOCK OR OTHER SECURITIES OF
OTHER CORPORATIONS. The Board shall designate the officers of the Corporation
who shall have authority to appoint from time to time agents of the Corporation
to exercise in the name and on behalf of the Corporation the powers and rights
which the Corporation may have as the holder of stock or other securities in any
other corporation, and to vote or consent in respect of such stock or
securities. Such designated officers may instruct the agents so appointed as to
the manner of exercising such powers and rights, and such designated officers
may execute or cause to be executed in the name and on behalf of the Corporation
and under its corporate seal or otherwise such written proxies, powers of
attorney, or other instruments as they may deem necessary or proper in order
that the Corporation may exercise such powers and rights.
16
<PAGE> 20
ARTICLE XII
AMENDMENTS
Except as otherwise provided under the Act, the Board of Directors
shall have the power to alter, amend, or repeal these Bylaws or adopt new
Bylaws. Any Bylaws adopted by the Board of Directors may be altered, amended, or
repealed, and new Bylaws adopted, by the shareholders. The shareholders may
prescribe in adopting any Bylaw or Bylaws that the Bylaw or Bylaws so adopted
shall not be altered, amended, or repealed by the Board of Directors.
17
<PAGE> 1
EXHIBIT 4.2
[FORM OF FACE OF CERTIFICATE]
MAXXIS GROUP, INC.
INCORPORATED UNDER THE LAWS OF GEORGIA
AUTHORIZED 185,000 SHARES OF CLASS B COMMON STOCK, NO PAR VALUE
This certifies that _______________________________is the registered holder of
_______________________________ Shares of Class B Common Stock which are fully
paid and non-assessable and transferable only on the books of the Corporation by
the holder hereof in person or by Attorney upon surrender of this Certificate
properly endorsed.
In Witness Whereof, the said Corporation has caused this Certificate to be
signed by its duly authorized officers and its Corporate Seal to be hereunto
affixed this ______________ day of _______________ A.D. 19____
- -------------------------------------- -----------------------------------
JAMES W. BROWN SECRETARY THOMAS O. CORDY PRESIDENT
[FORM OF BACK OF CERTIFICATE]
THE SHARES REPRESENTED BY THIS CERTIFICATE (THE "SHARES") ARE SUBJECT TO
CONDITIONS THAT MAY LIMIT THEIR TRANSFERABILITY. SUCH CONDITIONS ARE SET FORTH
IN A SUBSCRIPTION AGREEMENT (THE "SUBSCRIPTION AGREEMENT") BY AND BETWEEN THE
ISSUER AND THE ORIGINAL HOLDER OF THESE SHARES. ANY TRANSFEREE OF THESE SHARES
TAKES SUCH SHARES SUBJECT TO THE CONDITIONS SET FORTH IN THE SUBSCRIPTION
AGREEMENT.
IN SUMMARY, THESE CONDITIONS PROVIDE THAT THE ISSUER MAY ELECT TO IMPOSE A
PROHIBITION ON THE SALE OR TRANSFER OF THESE SHARES IN THE EVENT THE ISSUER
DETERMINES TO FILE A REGISTRATION STATEMENT WITH THE U.S. SECURITIES AND
EXCHANGE COMMISSION THAT SEEKS TO REGISTER SECURITIES OF THE ISSUER IN AN
INITIAL PUBLIC OFFERING THAT IS FIRMLY UNDERWRITTEN. SUCH RESTRICTION MAY REMAIN
IN EFFECT FOR A PERIOD ENDING 180 DAYS FOLLOWING THE EFFECTIVENESS OF SUCH
REGISTRATION STATEMENT. THE ISSUER MAY IMPOSE THESE CONDITIONS BY GIVING WRITTEN
NOTICE TO THE HOLDER OF RECORD OF THESE SHARES. THE FOREGOING SUMMARY IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE SUBSCRIPTION AGREEMENT, A COPY OF
WHICH WILL BE PROVIDED FREE OF CHARGE BY THE ISSUER TO ANY HOLDER OR PROSPECTIVE
PURCHASER OR TRANSFEREE OF THESE SHARES UPON THEIR REQUEST.
<PAGE> 2
The following abbreviations, when used in the inscription on the face of
this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations.
TEN COM --as tenants in common UNIF GIFT MIN ACT-- Custodian
TEN ENT --as tenants by the entireties ----- ----
JT TEN --as joint tenants with right of (Cust) (Minor)
survivorship and not as tenants under Uniform Gifts to Minors
in common Act
---------------
(State)
Additional abbreviations may also be used though not in the above list.
For value received, _________________ hereby sell, assign and transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS OF ASSIGNEE
- --------------------------------------------------------------------------------
Shares
- --------------------------------------------------------------------------
represented by the within Certificate, and do hereby irrevocably constitute and
appoint ____________________ Attorney to transfer the said shares on the books
of the within-named Corporation with full power of substitution in the premises.
Dated,
---------------------
------------------------------
In presence of
- ----------------------------------------
NOTICE: THE SIGNATURE TO THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME AS
WRITTEN UPON THE FACE OF THE CERTIFICATE IN EVERY PARTICULAR, WITHOUT ALTERATION
OR ENLARGEMENT, OR ANY CHANGE WHATEVER.
<PAGE> 1
EXHIBIT 4.3
SHAREHOLDERS' AGREEMENT
THIS SHAREHOLDERS' AGREEMENT (this "Agreement") is made and entered
into as of the 1st day of September, 1997, by and among the persons signing as a
"Shareholder" at the end of this Agreement (individually, a "Shareholder" and
collectively, the "Shareholders") and MAXXIS GROUP, INC., a Georgia corporation
(the "Company").
W I T N E S S E T H:
WHEREAS, the Shareholders are the holders of the number of shares of
Class A Common Stock, no par value per share (the "Class A Common Stock"), of
the Company set forth opposite their names on Schedule I attached hereto;
WHEREAS, the Shareholders and the Company deem it expedient and in
their best interests to provide for certain agreements with respect to the
transfer and voting of the Class A Common Stock of the Company, as set forth in
this Agreement; and
WHEREAS, the Shareholders and the Company desire to make certain other
mutual promises for their mutual benefit and the benefit of the Company, as set
forth in this Agreement.
NOW, THEREFORE, in consideration of the mutual promises set forth in
this Agreement, and as an inducement for the Shareholders to organize the
Company, the parties hereto, intending to be legally bound, hereby agree as
follows:
SECTION 1. DEFINITIONS; BINDING AGREEMENT; RESTRICTIONS ON TRANSFER;
SECURITIES LAWS.
1.1 DEFINITIONS. For purposes of this Agreement:
"ACT" shall mean the Securities Act of 1933, as amended.
"PERMITTED TRANSFEREE," as to any Shareholder, shall mean: (i) any
trust or custodianship having that Shareholder (or another Permitted Transferee)
as the sole trustee(s) or custodian(s) and having that Shareholder (or another
Permitted Transferee) and/or his spouse, natural-born or adoptive children,
and/or his or their lineal descendants as its sole beneficiaries; (ii) a
personal representative, trustee, executor or similar fiduciary acting on behalf
of that Shareholder (or another Permitted Transferee) following such
Shareholder's death or incapacity; (iii) any other Shareholder who is a party to
this Agreement; or (iv) any other person or entity that the Company agrees in
writing may become a transferee of Restricted Stock; provided, however, that
such a person or entity shall become a Permitted Transferee only if such person
or entity agrees in writing to be bound by the provisions of this Agreement as
if the Restricted Stock continued to be held by the referenced Shareholder.
"RESTRICTED STOCK" shall mean all shares of Class A Common Stock of the
Company held by each Shareholder set forth on Schedule I hereto, together with:
(i) any other shares of Class
<PAGE> 2
A Common Stock purchased or otherwise acquired by any Shareholder from time to
time; (ii) any option, warrant or other right to acquire Class A Common Stock;
or (iii) any other rights or interests in stock or securities resulting from any
stock dividend, stock split, merger or consolidation, recapitalization or other
event involving the Class A Common Stock.
"TRANSFER," used as a noun or verb, whether or not capitalized, shall
mean any sale, assignment, transfer, pledge, encumbrance, gift (whether by
lifetime transfer or, upon death, by testamentary devise or nontestamentary
disposition pursuant to the laws of intestate succession) or other disposition,
whether with or without consideration and whether voluntary or involuntary.
1.2 PARTIES SUBJECT TO AGREEMENT. This Agreement will be binding upon
the Shareholders who are parties to this Agreement, the Company and each and
every person, firm or corporation claiming by, through or under them.
1.3 NOTICE ON STOCK CERTIFICATES AND RESTRICTIONS ON TRANSFER AGENTS.
No officer, director, transfer agent or employee of the Company will cause or
permit any certificate representing Restricted Stock (a "Certificate") to be
issued without proof of compliance with the terms of this Agreement. Every
Certificate now or hereafter owned by a Shareholder or anyone claiming by,
through or under any of them (whether owned by such Shareholder individually or
collectively with any other person, firm or corporation) will bear a legend, in
addition to any other legend on the certificate required to secure an offering
exemption under the Act, which will give notice of the terms of this Agreement
to all others, in form and content substantially as follows:
NOTICE IS HEREBY GIVEN that the transfer of the securities
represented by this Certificate is restricted by the issuer,
and all rights, powers, restrictions, limitations, redemption
and repurchase privileges reserved by the Company and its
Shareholders are hereby incorporated into and made a part
hereof as embodied in that certain Shareholders' Agreement
(the "Shareholders' Agreement"). Any attempted transfer,
pledge or other disposition of these securities that is not
made in compliance with the Shareholders' Agreement shall be
void. The Shareholders' Agreement is on file in the principal
office of the Company, and a copy of such will be provided
without cost to a prospective transferee of these securities
upon such prospective transferee's request.
1.4 RESTRICTIONS ON DISPOSITION. The Class A Common Stock is
restricted, and no Transfer of Class A Common Stock may be made by a Shareholder
in the absence of an effective registration statement under the Act or upon the
delivery of an opinion of counsel (which opinion and counsel shall be
satisfactory to the Company in the Company's sole discretion) that registration
is not required.
2
<PAGE> 3
1.5 INVESTMENT INTENT. Each Shareholder hereby represents, warrants and
covenants as follows:
(a) The Shareholder understands that the Restricted Stock held
by him under this Agreement has not been registered under the Act in reliance
upon exemptions contained in the Act and any applicable regulations promulgated
thereunder or interpretations thereof, and cannot be offered for sale, sold or
otherwise Transferred unless such Restricted Stock subsequently is so registered
or qualify for exemption from registration under the Act; that the certificates
representing shares of Restricted Stock bear legends substantially in the form
set forth in Sections 1.3 and 1.6 hereof; and that any transfer agent employed
or utilized by the Company shall be instructed not to effect any transfer of
such Restricted Stock without prior written authorization from the Company (or,
if the Company serves as its own transfer agent, a notation shall be made in the
Company's records indicating the transfer restrictions to which such Restricted
Stock is subject); provided that the Company covenants that any transfer agent
the Company employs or utilizes shall be instructed to (or, if the Company
serves as its own transfer agent, the Company shall itself) transfer Restricted
Stock at the request of a Shareholder provided that all provisions of this
Agreement have been satisfied and all tests required under the Act for the
transfer of Restricted Stock have been met.
(b) Such Restricted Stock was acquired during the formation of
the Company or were transferred pursuant to this Agreement to such Shareholder
in good faith solely for its own account, for investment and not with a view
toward resale or other distribution within the meaning of the Act; and such
Restricted Stock shall not be offered for sale, sold or otherwise transferred
without either registration or exemption from registration under the Act.
(c) Such Shareholder has such knowledge and experience in
financial and business matters that he is capable of evaluating the merits and
risks of its investment in such Restricted Stock; and such Shareholder
understands and is able to bear any economic risks associated with such
investment (including the necessity of holding such Restricted Stock for an
indefinite period of time, inasmuch as such Restricted Stock has not been
registered under the Act).
(d) Such Shareholder is familiar with the business which is
presently being conducted and is intended to be conducted by the Company,
including financial matters relating to such business; such Shareholder has been
given the opportunity to obtain such information as it has requested concerning
the business of the Company.
(e) Such Shareholder understands that such Restricted Stock
will be considered "restricted securities" within the meaning of Rule 144 under
the Act; that Rule 144 is not currently and may not ever be available to exempt
from the registration requirements of the Act sales of such "restricted
securities;" that if Rule 144 is available, sales may be made in reliance upon
Rule 144 only in accordance with the terms and conditions of Rule 144, which
among other things generally requires that the securities be held for at least
one year and that sales be made in limited amounts and in "brokers'
transactions" (volume and manner of sale requirements are subject to certain
exceptions depending upon whether the seller is an "affiliate" within the
meaning of Rule 144 and how long the securities have been held); and that, if an
exemption for
3
<PAGE> 4
such sales is not available, registration of such Restricted Stock may be
required, but that the Company is under no obligation to register such
Restricted Stock or to facilitate compliance or to comply with any exemption
except to the extent set forth in this Agreement.
1.6 LEGEND ON CERTIFICATES. In addition to the legend required by
Section 1.3, the certificates representing the Restricted Stock issued pursuant
to this Agreement shall bear a legend in substantially the following form:
The shares represented by this certificate have not been
registered under the Securities Act of 1933 (the "Act") or
applicable state securities laws and cannot be offered, sold
or transferred in the absence of registration or the
availability of an exemption from registration under the Act,
applicable state securities laws and regulations promulgated
thereunder.
The Company covenants that if and when it becomes subject to the reporting
requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of
1934, as amended, it shall comply with the then current public information
requirements of Rule 144(c)(1) and shall so certify to the Shareholders,
providing them upon request with copies of all filings.
1.7 SECURITIES LAW COVENANT OF THE COMPANY. The Company hereby
covenants with every Shareholder that it will use the information provided to it
by the Shareholders pursuant to this Agreement in a manner consistent with
applicable securities laws, rules and regulations (but by this covenant takes no
responsibility for the accuracy or completeness of such information).
SECTION 2. COMPANY'S OPTION TO PURCHASE.
2.1 TERMINATION OF EMPLOYMENT OR ENGAGEMENT FOR CAUSE. (a) If the
Company terminates a Shareholder's employment with the Company (or, if a
Shareholder is an independent contractor or consultant, such Shareholder's
engagement by the Company as an independent contractor or consultant) for
"cause" (as defined in the agreement between such Shareholder and the Company),
the Company shall have the right to repurchase, at a price equal to the Fair
Market Value (as defined below), an amount of the Shareholder's Class A Common
Stock according to the following formula: (i) 100% if termination of employment
or engagement as an independent contractor or consultant occurs prior to July 1,
1998; (ii) 80% if termination of employment or engagement as an independent
contractor or consultant occurs prior to July 1, 1999; (iii) 60% if termination
of employment or engagement as an independent contractor or consultant occurs
prior to July 1, 2000; (iv) 40% if termination of employment or engagement as an
independent contractor or consultant occurs prior to July 1, 2001; (v) 20% if
termination of employment or engagement as an independent contractor or
consultant occurs prior to July 1, 2002; provided, however, that such repurchase
right with respect to Anner Mae Stokes would be triggered by the termination for
cause of Ivey J. Stokes, such repurchase right with respect to Cynthia Glover
would be triggered by the termination for cause of Robert Glover and such
repurchase right with respect to The Anchora Company would be triggered by the
termination for cause of Thomas O. Cordy. The closing of such repurchase shall
occur on the
4
<PAGE> 5
20th business day following receipt by the Company of the final report from the
Appraiser (as defined below), but otherwise will be in accordance with Section
2.2 below.
(b) For the purposes of this Agreement, "Fair Market Value" shall mean
the price per share of the Class A Common Stock as determined by an investment
banking, appraisal or advisory firm chosen by the Company (the "Appraiser") and
reasonably acceptable to the Shareholder, it being agreed that the firm of
Gross, Collins & Cress, if chosen by the Company, shall be acceptable to the
Shareholder. The determination of the Fair Market Value of the Class A Common
Stock by the Appraiser will be conclusive and binding on the parties, absent
fraud. The Company will pay all fees and expenses of the Appraiser.
2.2 CLOSING OF OPTION PURCHASE. On the closing date agreed to by the
Shareholder and the Company (or upon the date determined in accordance with
Section 2.1 of this Agreement, as the case may be), the Shareholder shall sell
to the Company all right, title and interest in and to the Restricted Stock,
free and clear of any lien, charge, encumbrance or restriction (other than
transfer restrictions imposed by applicable securities laws), and the Company
shall purchase the Restricted Stock from the Shareholder. At the closing of such
purchase, the Shareholder shall deliver to the Company the Certificate(s)
representing the Restricted Stock duly endorsed for transfer, and the Company
shall deliver to the Shareholder a check in the amount of the Fair Market Value
of the Restricted Stock.
SECTION 3. OTHER TRANSFERS; RIGHT OF FIRST REFUSAL.
3.1 PROHIBITION ON TRANSFER. Until the earlier of (i) July
1, 2002 or (ii) the closing of an underwritten public offering of the Company's
common stock registered under the Act in which aggregate proceeds to the
Company, net of all underwriting discounts and commissions and other expenses of
issuance and distribution, are equal to at least $5,000,000, each Shareholder
shall refrain from making any transfer of any shares of Restricted Stock, unless
either:
(a) such transfer is to a Permitted Transferee; or
(b) the proposed terms of the transfer are for cash consideration
from a bona fide offer, and the Shareholder has complied with
the provisions of Section 3.2 below.
For purposes of this Section 3, a "bona fide offer" shall mean a good faith
offer, in writing, entered into with a third party unaffiliated with the
Shareholder, with the intent to purchase and sell, and without fraud or
collusion. Any transfer or attempted transfer made in contravention of this
prohibition shall be null and void.
3.2 RIGHT OF FIRST REFUSAL.
(a) Prior to any transfer of Restricted Stock by a Shareholder, such
Shareholder (the "Transferor") shall, as set forth in this Section 3.2, provide
the Company and, in the event the Company does not exercise its right of first
refusal with respect to all of such shares of
5
<PAGE> 6
Restricted Stock, the other Shareholders (the "Remaining Shareholders"), with a
right of first refusal with respect to such transfer.
(b) Prior to any transfer of Restricted Stock, the Transferor shall
notify the Company and the Remaining Shareholders in writing of his intention to
effect such transfer of the Restricted Stock. Such written notice shall
constitute an offer (the "Offer Notice") to sell such Restricted Stock to the
Company and the Remaining Shareholders on the terms and conditions set forth in
this Section 3.2. Such Offer Notice shall set forth all information regarding
the proposed transfer, including the number of shares of Restricted Stock
proposed to be transferred; the name, address, background and financial capacity
of the proposed transferee; and the terms and conditions (including price per
share) of the proposed transfer. The Transferor shall also obtain promptly and
provide such further information concerning the proposed transfer or proposed
transferee as the Company or any Remaining Shareholder may reasonably request.
(c) The Company may elect to purchase some or all of the shares of the
Restricted Stock subject to the Offer Notice by delivery of a written notice to
the Transferor and the Remaining Shareholders within 30 days of receipt of the
Offer Notice. In the event the Company does not elect to purchase all of the
shares of Restricted Stock subject to such Offer Notice, each of the Remaining
Shareholders may elect to purchase some or all of the shares of Restricted Stock
not elected to be purchased by the Company (the "Remaining Shares") by delivery
of a written notice to the Transferor within 30 days of receipt of the Company's
response to the Offer Notice. If the Remaining Shareholders who elect to
purchase Remaining Shares (the "Electing Shareholders") elect to purchase, in
the aggregate, a number of shares greater than the number of Remaining Shares,
the number of Remaining Shares to be purchased by each of the Electing
Shareholders shall be allocated by multiplying the number of shares requested by
each Electing Shareholder by a fraction, the numerator of which equals the
Remaining Shares and the denominator of which is the total number of shares
requested by the Electing Shareholders, with the number of shares eligible for
purchase by each Electing Shareholder being rounded to the nearest whole share.
The expiration of the foregoing periods without notice of exercise of such
rights of first refusal shall constitute the Company's election and/or the
Remaining Shareholders' election not to exercise such rights of first refusal.
(d) If the Company or the Shareholders elect not to exercise their
rights of first refusal, the Transferor may, subject to compliance with
applicable regulatory requirements, transfer the shares of Restricted Stock
proposed to be transferred in accordance with the information, including the
terms and conditions, set forth in the Offer Notice; provided, however, that (i)
such transfer must comply with all other terms and conditions of this Agreement,
(ii) the shares of Restricted Stock so transferred shall remain subject to all
provisions of this Agreement (including, but not limited to, this Section 3.2)
with respect to any subsequent transfer thereof by the transferee and (iii) the
Company may require the transferee to agree in writing to be bound by such
restrictions as a condition to the effectiveness of the proposed transfer. If
the Transferor does not complete such transfer within 90 days after the Company
or the Shareholders have elected not to exercise their rights of first refusal,
or if there is any material change in the terms or conditions of the proposed
transfer, the transfer shall again be subject to the right of first refusal set
forth in this Section 3.2.
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<PAGE> 7
(e) The closing of the purchase of the Restricted Stock pursuant to the
Company's or the Shareholders' exercise of their rights of first refusal shall
occur as provided in Section 3.3 hereof.
3.3 CLOSING.
(a) In the event that the Company and/or the Electing Shareholders, as
the case may be, elect to purchase Restricted Stock under Section 3.2 hereof,
the Transferor shall tender the certificates or other instruments evidencing
such Restricted Stock, duly endorsed, at the Company's offices at such date and
time as the Company or the Electing Shareholders, as the case may be, may
designate.
(b) The Company or the Electing Shareholders, as the case may be, shall
deliver the purchase price for such Restricted Stock to the Transferor upon
receipt of the certificates or other instruments evidencing such Restricted
Stock.
(c) The Company may, at its option, assign its rights under Sections
3.2 hereof to one or more other purchasers on one or more occasions.
SECTION 4. CONFIDENTIALITY.
(a) Each Shareholder shall maintain in strict confidence, and shall use
and disclose only as authorized by the Company or as he otherwise reasonably
determines to be in pursuance of the best interests and in compliance with the
internal procedures of the Company, all information of a competitively sensitive
or proprietary nature which he receives in connection with the transactions
contemplated hereby, as a holder of Class A Common Stock, or in any
representative capacity on behalf of the Company. Each Shareholder shall use his
best efforts to cause his attorneys, accountants, representatives and designees
to do likewise.
(b) These restrictions shall not be construed to apply to: (i)
information generally available to the public; (ii) information released by the
Company generally without restriction; (iii) information independently developed
or acquired by a Shareholder without reliance in any way on other protected
information of the Company; or (iv) information approved by the Company in
writing for unlimited use and disclosure by the Shareholders.
(c) Notwithstanding the foregoing restrictions, a Shareholder may use
and disclose any such information to the extent required by an order of any
court or other governmental authority, but only after the Company has been so
notified and has had the opportunity, if possible, to obtain reasonable
protection for such information in connection with its disclosure.
SECTION 5. MISCELLANEOUS.
5.1 EQUITABLE REMEDIES. The parties hereto declare that it is
impossible to measure in money the damages which may accrue to a party hereto or
to the estate or personal representative of a decedent, by reason of a failure
to perform any of the obligations of this Agreement. Therefore, if any party
hereto or the personal representative of a decedent shall
7
<PAGE> 8
institute any action or proceeding to enforce the provisions hereof, any other
party against whom such action or proceeding is brought shall have no right to
make the claim or defense therein, that such party or such personal
representative has an adequate remedy at law. The parties further agree that the
shares of Stock are unique chattels and that the equitable remedy of specific
performance shall be available to enforce the terms of this Agreement.
5.2 POST-TRANSFER RESTRICTIONS ON STOCK. From and after the date of the
sale or other transfer of any shares of Stock, including a transfer by operation
of law, the transferee Stockholders shall be subject to all of the limitations,
terms, conditions, and provisions of this Agreement as if they were original
parties.
5.3 NOTICES. Notices given hereunder shall be deemed to have been duly
given on the date of personal delivery or on the date of postmark if mailed by
certified or registered mailed by certified or registered mail, return receipt
requested, to the party being notified at his or its address specified on
Schedule II hereto or such other address as the addressee may subsequently
notify the other parties of in writing.
5.4 ENTIRE AGREEMENT AND AMENDMENTS. This Agreement constitutes the
entire agreement of the parties with respect to the subject matter hereof and
neither this Agreement nor any provision hereof may be waived, modified, amended
or terminated except by a written agreement signed by the parties hereto. Any
provision hereof may be waived, modified, amended or terminated by consent of
Shareholders holding not less than 80% of the Restricted Stock then outstanding.
5.5 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Georgia without regard to otherwise
applicable principles of conflict of laws.
5.6 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and,
subject to the restrictions set forth in this Agreement, inure to the benefit of
the Shareholders and their permitted successors and assigns. This Agreement
shall be binding upon and inure to the benefit of the Company and its successors
and assigns.
5.7 WAIVERS. No waiver of any breach or default hereunder shall be
considered valid unless in writing, and no such waiver shall be deemed a waiver
of any subsequent breach or default of the same or similar nature.
5.8 SEVERABILITY. If any provision of this Agreement shall be held to
be illegal, invalid or unenforceable, such illegality, invalidity or
unenforceability shall attach only to such provision and shall not in any manner
effect or render illegal, invalid or unenforceable any other provision of this
Agreement, and this Agreement shall be carried out as if any such illegal,
invalid or unenforceable provision weren't contained therein.
5.9 CAPTIONS. Captions are for convenience only and are not deemed to
be part of this Agreement.
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<PAGE> 9
5.10 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one of the same instrument.
5.11 LIMITATION OF BENEFITS. It is the explicit intention of the
parties hereto that no person or entity other than the parties hereto is or
shall be entitled to bring any action to enforce any provision of this Agreement
against any of the parties hereto, and the covenants, undertakings and
agreements set forth in this Agreement shall be solely for the benefit of, and
shall be enforceable only by, the parties hereto or their respective successors,
heirs, executors, administrators, legal representatives and permitted assigns.
5.12 FURTHER ASSURANCES. Each individual Shareholder agrees to insert
in his will, or to execute a codicil thereto including, a direction to his
personal representative to fulfill and comply with the provisions hereof and to
sell and transfer his shares in accordance herewith, but failure to do so shall
not release the Restricted Stock owned by the decedent from the restriction of
this Agreement or the personal representative from being bound by and acting in
accordance with the terms thereof.
5.13 GENDER AND PLURALS. Where appropriate herein, the references to
the masculine gender shall include the feminine and neuter, the singular shall
include the plural and the plural shall include the singular, in each case as
the context may require.
IN WITNESS WHEREOF, this Agreement has been executed as of the date and
year first above written.
MAXXIS GROUP, INC.
By:/s/ Thomas O. Cordy
-----------------------------------------
Name: Thomas O. Cordy
Title: President and Chief Executive Officer
SHAREHOLDERS
KING DAVID TRUST
/s/ Alvin Curry
--------------------------------------------
Alvin Curry, Trustee
9
<PAGE> 10
/s/ Alvin Curry
--------------------------------------------
Alvin Curry
/s/ Cynthia Glover, Trustee
--------------------------------------------
Cynthia Glover, trustee, U/A Louise
Glover dated January 10, 1997
/s/ James W. Brown
--------------------------------------------
James W. Brown
/s/ Maxine Graves
--------------------------------------------
Maxine Graves, trustee, U/A Corrine
Woods dated January 20, 1997
/s/ Larry W. Gates
--------------------------------------------
Larry W. Gates
/s/ Victor B. Jemison
--------------------------------------------
Victor Jemison
/s/ Edward A. Kelly, trustee
--------------------------------------------
Edward A. Kelly, trustee, U/A Sara
K. Parlee dated April 19, 1995
/s/ Kim M. Jaggers
--------------------------------------------
Kim M. Jaggers, trustee, U/A Hortense
Kirkman Bey dated January 11, 1996
THE ANCHORA COMPANY
By: /s/ M. Catherine Bruce
--------------------------------------------
Title: Director
10
<PAGE> 11
/s/ Terrell Chambers
--------------------------------------------
Terrell Chambers
/s/ Jennifer A. Parks
--------------------------------------------
Jennifer A. Parks
/s/ John T. Petty, Jr.
--------------------------------------------
John T. Petty, Jr.
/s/ Paul Seagraves
--------------------------------------------
Paul Seagraves
/s/ Richard Willis, Jr.
--------------------------------------------
Richard Willis, Jr.
11
<PAGE> 12
SCHEDULE I TO SHAREHOLDERS' AGREEMENT
The following sets forth the number of shares of Class A Common Stock
held by each Shareholder:
Number of Shares
Name of Shareholder of Class A Common Stock
------------------- -----------------------
King David Trust 25,000,000
Alvin Curry 10,000,000
Cynthia Glover, trustee, U/A Louise
Glover dated January 10, 1997 10,000,000
James W. Brown 2,500,000
Maxine Graves, trustee, U/A Corrine
Woods dated January 20, 1997 2,500,000
Larry W. Gates 2,500,000
Victor Jemison 2,500,000
Edward A. Kelly, trustee, U/A Sara
K. Parlee dated April 19, 1995 2,500,000
Kim M. Jaggers, trustee, U/A Hortense
Kirkman Bey dated January 11, 1996 2,500,000
The Anchora Company 4,000,000
Terrell Chambers 1,500,000
Jennifer A. Parks 1,500,000
John T. Petty, Jr. 1,500,000
Paul Seagraves 1,500,000
Richard Willis, Jr. 1,500,000
<PAGE> 13
SCHEDULE II TO SHAREHOLDERS' AGREEMENT
Addresses for Notices
King David Trust
5231 E. Memorial Drive
#226
Stone Mountain, GA 30083
Alvin Curry
1861 Cedar Grove Road
Conley, GA 30027
Cynthia Glover, trustee,
U/A Louise Glover dated
January 10, 1997
7839 Taylor Circle
Riverdale, GA 30274
James W. Brown
60 View Point Drive
Dawsonville, GA 30534
Maxine Graves, trustee,
U/A Corrine Woods dated
January 20, 1997
1510 Indiana Street
Pine Bluff, AR 71601
Larry W. Gates, II
7911 S. Hosmer,
Suite D-133
Tacoma, WA 98408
Victor Jemison
1150 Rankin Street E-6
Stone Mountain, GA 30083
Edward A. Kelly, trustee,
U/A Sara K. Parlee
dated April 15, 1995
P.O. Box 1002
Pittsboro, NC 27312
<PAGE> 14
Kim M. Jaggers, trustee
U/A Hortense Kirkman Bey
dated January 11, 1996
49401 Pine Ridge Drive
Plymouth, MI 48170
Terrell Chambers
1521 NW 55th Street
Miami, FL 33142
Jennifer A. Parks
4673 Raiders Ridge Court
Lithonia, GA 30038
John T. Petty, Jr.
5400 E. Williams Boulevard
#14103
Tucson, AZ 85711
Paul D. Seagraves
1309 27th Street Court NW
Gig Harbor, WA 98335
Richard Willis, Jr.
2167 Bentcreek Way SW
Atlanta, GA 30311
The Anchora Company
c/o M. Catherine Bruce
Salem Management Company, Ltd.
Design House, Leeward Highway
P.O. Box 150, Providenciales
Turks & Caicos islands, B.W.I.
<PAGE> 1
EXHIBIT 10.1
EMPLOYMENT AGREEMENT
BY AND BETWEEN
MAXXIS GROUP, INC.
AND
----------------
DATED:
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
1. Employment............................................................................................. 1
2. Term................................................................................................... 1
3. Compensation and Benefits.............................................................................. 1
4. Termination............................................................................................ 2
5. Trade Secrets, Non-Solicitation and Related Matters.................................................... 3
6. Successors; Binding Agreement.......................................................................... 5
7. Notice................................................................................................. 5
8. Settlement of Claims................................................................................... 5
9. Modification and Waiver................................................................................ 5
10. Governing Law.......................................................................................... 5
11. Severability........................................................................................... 5
12. Entire Agreement....................................................................................... 6
13. Headings............................................................................................... 6
14. Counterparts........................................................................................... 6
15. Definitions............................................................................................ 6
</TABLE>
EXHIBIT A
<PAGE> 3
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT (this "Agreement") is made by and between
MAXXIS GROUP, INC., a Georgia corporation (the "Company"), and ______________,
an individual resident of the State of Georgia (the "Employee"), as of this
______ day of ________, _____.
The Company desires to employ the Employee as its ____________. The
Company recognizes that the Employee's contribution to the growth and success
of the Company will be substantial. The Company desires to provide for the
employment of the Employee which the Company believes will reinforce and
encourage the dedication of the Employee to the Company and will promote the
best interests of the Company and its shareholders. The Employee is willing to
serve the Company on the terms and conditions herein provided. Certain terms
used in this Agreement are defined in Section 15 hereof.
In consideration of the foregoing, the mutual covenants contained
herein, and other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the parties hereto, intending to be legally
bound, hereby agree as follows:
1. Employment. The Company shall employ the Employee, and the Employee
shall serve the Company, as the Company's ____________________________ upon the
terms and conditions set forth herein. The Employee shall have such authority
and responsibilities as are consistent with his position and which may be set
forth in this Agreement, in the Bylaws or assigned by the President (the
"President") of the Company from time to time. The Employee shall devote his
full business time, attention, skill and efforts to the performance of his
duties hereunder, except during periods of vacation and leaves of absence
consistent with Company policy.
2. Term. Unless earlier terminated as provided herein, the Employee's
employment under this Agreement shall be for a continuing term (the "Term") of
one year, which shall be extended automatically (without further action of the
Company or the Employee) each day for an additional day so that the remaining
term shall continue to be one year; provided, however, that either party may at
any time, by written notice to the other, fix the Term to a finite term of one
year, without further automatic extension, commencing with the date of such
notice. Notwithstanding the foregoing, the Term of employment hereunder will end
on the date that the Employee attains the age of 65.
3. Compensation and Benefits.
a. Effective July 1, 1997, the Company shall pay the Employee a salary
at a rate of not less than $800.00 per week in accordance with the salary
payment practices of the Company. The Compensation Committee shall review the
Employee's salary at least annually (on July 1, 1998, for the first review) and
may increase the Employee's base salary if the Compensation Committee determines
in its sole discretion that an increase is appropriate.
<PAGE> 4
b. The Employee shall participate in a bonus program and shall be
eligible to receive quarterly or annual payments of a performance bonus based
upon achievement of targeted levels of performance and such other criteria as
the Board of Directors of the Company shall establish from time to time pursuant
to the bonus program.
c. The Employee shall be entitled to participate in all retirement,
welfare, deferred compensation, life and health insurance and other benefit
plans or programs of the Company now or hereafter applicable to the Employee or
applicable to all employees of the Company generally, including any stock option
plans of the Company.
d. The Company shall reimburse the Employee for travel and other
expenses actually incurred by the Employee that are directly related to the
Employee's duties set forth in this Agreement; provided, however, that the
Employee must timely submit written documentation of such expenses in a form
acceptable to the Company and the Employee shall have otherwise complied with
all other accounting practices of the Company.
4. Termination.
a. The Employee's employment under this Agreement may be terminated
prior to the end of the Term only as follows:
(i) upon the death of the Employee;
(ii) by the Company due to the Disability of the Employee upon
delivery of a Notice of Termination to the Employee;
(iii) by the Company for Cause upon delivery of a Notice of
Termination to the Employee; and
(iv) by the Company without Cause upon delivery of a Notice of
Termination to the Employee.
b. If the Employee's employment with the Company shall be terminated
during the Term (i) by reason of the Employee's death or (ii) by the Company for
Disability or Cause, the Company shall pay to the Employee (or in the case of
his death, the Employee's estate) within 15 days after the Termination Date, a
lump sum cash payment equal to the Accrued Compensation and, if such termination
is other than by the Company for Cause, any accrued performance bonus.
c. If the Company terminates the Employee without Cause pursuant to
Section 4(a)(iv) above, the Company shall pay to the Employee in cash at the end
of each week during the six-month period following the Termination Date an
amount equal to $800.00. The Employee shall not be required to mitigate the
amount of any payment provided for in this Agreement by seeking other employment
or otherwise, and no such payment shall be offset or reduced by the amount of
any compensation or benefits provided to the Employee in any subsequent
employment.
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<PAGE> 5
d. The severance pay and benefits provided for in this Section 4 shall
be in lieu of any other severance or termination pay to which the Employee may
be entitled under any Company severance or termination plan, program, practice
or arrangement. The Employee's entitlement to any other compensation or benefits
shall be determined in accordance with the Company's employee benefit plans and
other applicable programs, policies and practices then in effect.
e. In the event that the Employee is a director of the Company or any
of its affiliates and his employment hereunder is terminated for any reason, the
Employee shall, and does hereby, tender his resignation as a director of the
Company and any of its affiliates effective as of the Termination Date.
5. Trade Secrets, Non-Solicitation and Related Matters.
a. The Employee shall not, at any time, either during the Term of his
employment or after the Termination Date, use or disclose any Trade Secrets of
the Company, except in fulfillment of his duties as the Employee during his
employment, for so long as the pertinent information or data remain Trade
Secrets, whether or not the Trade Secrets are in written or tangible form.
b. The Employee agrees to maintain in strict confidence and, except as
necessary to perform his duties for the Company, not to use or disclose any
Confidential Business Information during his employment and for a period of 24
months after the Termination Date.
c. Upon termination of employment, the Employee shall leave with the
Company all business records relating to the Company and its affiliates
including, without limitation, all contracts, calendars and other materials
relating to the business records, the Company's business or its customers,
including all physical, electronic and computer copies thereof, whether or not
the Employee prepared such materials or records himself. Upon such termination,
the Employee shall retain no copies of any such materials, provided, however,
the Employee may remove and retain all personal items and materials.
d. The Employee may disclose Trade Secrets or Confidential Business
Information pursuant to any order or legal process requiring him (in his legal
counsel's reasonable opinion) to do so; provided, however, that the Employee
shall first have notified the Company of the request or order to so disclose the
Trade Secrets or Confidential Business Information in sufficient time to allow
the Company to seek an appropriate protective order.
e. If the Employee is terminated or resigns for any reason, then for a
period of one year following the Termination Date, the Employee shall not
(except on behalf of or with the prior written consent of the Company) either
directly or indirectly, on the Employee's own behalf or in the service or on
behalf of others, (i) solicit, divert, or appropriate to or for a Competing
Business, or (ii) attempt to solicit, divert, or appropriate to or for a
Competing Business, any person or entity that was a customer of the Company or
any of its affiliates on the Termination Date; provided, however, that if the
Employee is terminated without Cause, then
3
<PAGE> 6
the non-solicit period under this Section 5(e) shall be for a period of 180 days
following the Termination Date. For purposes of this Agreement, a "customer"
refers to any person or group of persons with whom the Employee had direct
material contact with regard to the selling, delivery or support of the
Company's products and services, including, servicing such person's or group's
account, during the period of two years preceding the Termination Date.
f. If the Employee is terminated or resigns for any reason, then for a
period of one year following the Termination Date, the Employee will not, either
directly or indirectly, on the Employee's own behalf or in the service or on
behalf of others, (i) solicit, divert, or hire away, or (ii) attempt to solicit,
divert, or hire away any employee of, independent associate of or consultant to
the Company or any of its affiliates engaged or experienced in the Business,
regardless of whether the employee or consultant is full-time or temporary, the
employment or engagement is pursuant to written agreement, or the employment or
engagement is for a determined period or is at will; provided, however, that if
the Employee is terminated without Cause, then the non-solicit period under this
Section 5(f) shall be for a period of 180 days following the Termination Date.
g. The Employee acknowledges and agrees that great loss and irreparable
damage would be suffered by the Company if the Employee should breach or violate
any of the terms or provisions of the covenants and agreements set forth in this
Section 5. The Employee further acknowledges and agrees that each of these
covenants and agreements is reasonably necessary to protect and preserve the
interests of the Company. The parties agree that money damages for any breach of
clauses (a) through (f) of this Section 5 will be insufficient to compensate for
any breaches thereof, and that the Employee or any of the Employee's affiliates,
as the case may be, will, to the extent permitted by law, waive in any
proceeding initiated to enforce such provisions any claim or defense that an
adequate remedy at law exists. The existence of any claim, demand, action or
cause of action against the Company, whether predicated upon this Agreement or
otherwise, shall not constitute a defense to the enforcement by the Company of
any of the covenants or agreements in this Agreement; provided, however, that
nothing in this Agreement shall be deemed to deny the Employee the right to
defend against this enforcement on the basis that the Company has no right to
its enforcement under the terms of this Agreement.
h. The Employee acknowledges and agrees that: (i) the covenants and
agreements contained in clauses (a) through (f) of this Section 5 are the
essence of this Agreement; (ii) that the Employee has received good, adequate
and valuable consideration for each of these covenants; (iii) each of these
covenants is reasonable and necessary to protect and preserve the interests and
properties of the Company; (iv) the Company is and will be engaged in and
throughout the Territory in the Business; (v) a Competing Business could be
engaged in from any place in the Territory; and (vi) the Company has a
legitimate business interest in restricting the Employee's activities throughout
the Territory. The Employee also acknowledges and agrees that: (i) irreparable
loss and damage will be suffered by the Company should the Employee breach any
of these covenants and agreements; (ii) each of these covenants and agreements
in clauses (a) through (f) of this Section 5 is separate, distinct and severable
not only from the other covenants and agreements but also from the remaining
provisions of this Agreement; and (iii) the unenforceability of any covenants or
agreements shall not affect the
4
<PAGE> 7
validity or enforceability of any of the other covenants or agreements or any
other provision or provisions of this Agreement. The Employee acknowledges and
agrees that if any of the provisions of clauses (a) through (f) of this Section
5 shall ever be deemed to exceed the time, activity or geographic limitations
permitted by applicable law, then such provisions shall be and hereby are
reformed to the maximum time, activity or geographical limitations permitted by
applicable law.
6. Successors; Binding Agreement.
a. This Agreement shall be binding upon and shall inure to the benefit
of the Company, its Successors and Assigns and the Company shall require any
Successors and Assigns to expressly assume and agree to perform this Agreement
in the same manner and to the same extent that the Company would be required to
perform it if no such succession or assignment had taken place.
b. Neither this Agreement nor any right or interest hereunder shall be
assignable or transferable by the Employee, his beneficiaries or legal
representatives, except by will or by the laws of descent and distribution. This
Agreement shall inure to the benefit of and be enforceable by the Employee's
legal personal representative.
7. Notice. For the purposes of this Agreement, notices and all other
communications provided for in the Agreement (including the Notice of
Termination) shall be in writing and shall be deemed to have been duly given
when personally delivered or sent by certified mail, return receipt requested,
postage prepaid, addressed to the respective addresses last given by each party
to the other; provided, however, that all notices to the Company shall be
directed to the attention of the President with a copy to the Secretary of the
Company. All notices and communications shall be deemed to have been received on
the date of delivery thereof.
8. Settlement of Claims. The Company's obligation to make the payments
provided for in this Agreement and otherwise to perform its obligations
hereunder shall not be affected by any circumstances, including, without
limitation, any set-off, counterclaim, recoupment, defense or other right which
the Company may have against the Employee or others. The Company may, however,
withhold from any benefits payable under this Agreement all federal, state, city
or other taxes as shall be required pursuant to any law or governmental
regulation or ruling.
9. Modification and Waiver. No provisions of this Agreement may be
modified, waived or discharged unless such waiver, modification or discharge is
agreed to in writing and signed by the Employee and the Company. No waiver by
any party hereto at any time of any breach by the other party hereto of, or
compliance with, any condition or provision of this Agreement to be performed by
such other party shall be deemed a waiver of similar or dissimilar provisions or
conditions at the same or at any prior or subsequent time.
10. Governing Law. This Agreement shall be governed by and construed
and enforced in accordance with the laws of the State of Georgia without giving
effect to the conflict
5
<PAGE> 8
of laws principles thereof. Any action brought by any party to this Agreement
shall be brought and maintained in a court of competent jurisdiction in State of
Georgia.
11. Severability. The provisions of this Agreement shall be deemed
severable and the invalidity or unenforceability of any provision shall not
affect the validity or enforceability of the other provisions hereof.
12. Entire Agreement. This Agreement constitutes the entire agreement
between the parties hereto and supersedes all prior agreements, if any,
understandings and arrangements, oral or written, between the parties hereto
with respect to the subject matter hereof.
13. Headings. The headings of Sections herein are included solely for
convenience of reference and shall not control the meaning or interpretation of
any of the provisions of this Agreement.
14. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
15. Definitions. For purposes of this Agreement, the following terms
shall have the following meanings:
a. "Accrued Compensation" shall mean an amount which shall include all
amounts earned or accrued through the Termination Date but not paid as of the
Termination Date, including (i) base salary and (ii) reimbursement for
reasonable and necessary expenses incurred by the Employee on behalf of the
Company during the period ending on the Termination Date.
b. "Business" shall mean the development, marketing or implementation
of a network marketing distribution business, a long distance reselling
business or any other related business which the Company or any of its
affiliates is engaged in as of the Termination Date.
c. "Bylaws" shall mean the Amended and Restated Bylaws of the Company,
as amended, supplemented or otherwise modified from time to time.
d. The termination of the Employee's employment shall be for "Cause" if
it is the result of:
(i) the commission or omission by the Employee of a willful or
negligent act which causes harm to the Company;
(ii) the conviction of the Employee for the commission or
perpetration by the Employee of any felony or any act of fraud;
6
<PAGE> 9
(iii) the failure of the Employee to devote his full time and
attention to the business as provided in Section 1; or
(iv) the failure of the Employee to perform his duties hereunder in
a manner satisfactory to the President, as determined in his
sole discretion; provided, however, that the Employee shall
have 30 days to cure such failure after receiving notice
from the Company. The Company shall be obligated to provide
only one notice to Employee pursuant to this Section
15(d)(iv). Thereafter, the Company may terminate the Employee,
without the Employee having a right to cure, if the Employee
fails to perform his duties in a manner satisfactory to the
President, as determined in his sole discretion.
e. "Competing Business" shall mean any business that, in whole or in
part, is the same or substantially the same as the Business.
f. "Confidential Business Information" shall mean any non-public
information of a competitively sensitive or personal nature, other than Trade
Secrets, acquired by the Employee, directly or indirectly, in connection with
the Employee's employment (including his employment with the Company prior to
the date of this Agreement), including (without limitation) oral and written
information concerning the Company or its affiliates relating to financial
position and results of operations (revenues, margins, assets, net income,
etc.), annual and long-range business plans, marketing plans and methods,
account invoices, oral or written customer information and personnel
information. Confidential Business Information also includes information
recorded in manuals, memoranda, projections, minutes, plans, computer programs
and records, whether or not legended or otherwise identified by the Company and
its affiliates as Confidential Business Information, as well as information
which is the subject of meetings and discussions and not so recorded; provided,
however, that Confidential Business Information shall not include information
that is generally available to the public, other than as a result of disclosure,
directly or indirectly, by the Employee, or was available to the Employee on a
non-confidential basis prior to its disclosure to the Employee.
g. "Disability" shall mean a physical or mental infirmity which impairs
the Employee's ability to substantially perform his duties with the Company for
a period of 180 consecutive days, as determined by an independent physician
selected with the approval of both the Company and the Employee.
h. "Notice of Termination" shall mean a written notice of termination
from the Company which specifies an effective date of termination, indicates the
specific termination provision in this Agreement relied upon, and sets forth in
reasonable detail the facts and circumstances claimed to provide a basis for
termination of the Employee's employment under the provision so indicated.
i. "President" shall have the meaning ascribed to such term in Section
1.
7
<PAGE> 10
j. "Successors and Assigns" shall mean a corporation or other entity
acquiring all or substantially all the assets and business of the Company
(including this Agreement), whether by operation of law or otherwise.
k. "Termination Date" shall mean, in the case of the Employee's death,
his date of death, and in all other cases, the date specified in the Notice of
Termination.
l. "Territory" shall mean that area specified on Exhibit A attached
hereto.
m. "Trade Secrets" shall mean any information, including but not
limited to technical or non-technical data, a formula, a pattern, a compilation,
a program, a device, a method, a technique, a drawing, a process, financial
data, financial plans, product plans, information on customers or a list of
actual or potential customers or suppliers, which: (i) derives economic value,
actual or potential, from not being generally known to, and not being readily
ascertainable by proper means by, other persons who can obtain economic value
from its disclosure or use; and (ii) is the subject of efforts that are
reasonable under the circumstances to maintain its secrecy.
IN WITNESS WHEREOF, the Company has caused this Agreement to be
executed and its seal to be affixed hereunto by its officers thereunto duly
authorized, and the Employee has signed and sealed this Agreement, effective as
of the date first above written.
MAXXIS GROUP, INC.
ATTEST:
By: By:
------------------------ ------------------------------------
Name: Name: Thomas O. Cordy
Title: Title: Chief Executive Officer
and President
EMPLOYEE
---------------------------------------
8
<PAGE> 11
EXHIBIT A
TERRITORY
30 mile radius from the Company's corporate offices located at 1901
Montreal Road, Suite 108, Tucker, Georgia 30084
<PAGE> 1
EXHIBIT 10.2
EMPLOYMENT AGREEMENT
BY AND BETWEEN
MAXXIS GROUP, INC.
AND
THOMAS O. CORDY
DATED: MAY 1, 1997
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
1. Employment........................................................................... 1
2. Term................................................................................. 1
3. Compensation and Benefits............................................................ 1
4. Sale of Stock........................................................................ 2
5. Termination.......................................................................... 2
6. Trade Secrets, Non-Solicitation and Related Matters.................................. 3
7. Successors; Binding Agreement........................................................ 5
8. Notice............................................................................... 5
9. Settlement of Claims................................................................. 6
10. Modification and Waiver.............................................................. 6
11. Governing Law........................................................................ 6
12. Severability......................................................................... 6
13. Entire Agreement..................................................................... 6
14. Headings............................................................................. 6
15. Counterparts......................................................................... 6
16. Definitions.......................................................................... 6
</TABLE>
EXHIBIT A
<PAGE> 3
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT (this "Agreement") is made by and
between MAXXIS GROUP, INC., a Georgia corporation (the "Company"), and THOMAS O.
CORDY, an individual resident of the State of Georgia (the "Employee"), as of
this 1st day of May, 1997.
The Company desires to employ the Employee as its Chief
Executive Officer and President. The Company recognizes that the Employee's
contribution to the growth and success of the Company will be substantial. The
Company desires to provide for the employment of the Employee which the Company
believes will reinforce and encourage the dedication of the Employee to the
Company and will promote the best interests of the Company and its shareholders.
The Employee is willing to serve the Company on the terms and conditions herein
provided. Certain terms used in this Agreement are defined in Section 16 hereof.
In consideration of the foregoing, the mutual covenants
contained herein, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto, intending to
be legally bound, hereby agree as follows:
1. Employment. The Company shall employ the Employee, and the
Employee shall serve the Company, as the Company's Chief Executive Officer and
President upon the terms and conditions set forth herein. The Employee shall
have such authority and responsibilities as are consistent with his position and
which may be set forth in this Agreement, in the Bylaws or assigned by the Board
of Directors of the Company from time to time. The Employee shall devote his
full business time, attention, skill and efforts to the performance of his
duties hereunder, except during periods of vacation and leaves of absence
consistent with Company policy.
2. Term. Unless earlier terminated as provided herein, the
Employee's employment under this Agreement shall be for a continuing term (the
"Term") of one year, which shall be extended automatically (without further
action of the Company or the Employee) each day for an additional day so that
the remaining term shall continue to be one year; provided, however, that either
party may at any time, by written notice to the other, fix the Term to a finite
term of one year, without further automatic extension, commencing with the date
of such notice. Notwithstanding the foregoing, the Term of employment hereunder
will end on the date that the Employee attains the age of 65.
3. Compensation and Benefits.
a. Effective July 1, 1997, the Company shall pay the Employee
a salary at a rate of not less than $800.00 per week in accordance with the
salary payment practices of the Company. The Compensation Committee shall review
the Employee's salary at least annually (on July 1, 1998, for the first review)
and may increase the Employee's base salary if the Compensation Committee
determines in its sole discretion that an increase is appropriate.
b. On July 1, 1998, if Employee remains employed by the
Company on such date, the Company shall pay the Employee a bonus, in cash, in
the amount of $83,400. If the
<PAGE> 4
Employee's employment with the Company terminates prior to July 1, 1998 pursuant
to clauses (i), (ii) or (iv) of Section 5(a), the Company shall pay Employee a
bonus on July 1, 1998 in the amount determined by multiplying $83,400 by a
fraction, the numerator of which is the number of full calendar months during
the period of July, 1997 through June, 1998 for which the Employee was employed
by the Company pursuant to this Agreement, and the denominator of which is 12.
Thereafter, the Employee shall participate in a bonus program and shall be
eligible to receive quarterly or annual payments of a performance bonus based
upon achievement of targeted levels of performance and such other criteria as
the Board of Directors of the Company shall establish from time to time pursuant
to the bonus program.
c. The Employee shall be entitled to participate in all
retirement, welfare, deferred compensation, life and health insurance and other
benefit plans or programs of the Company now or hereafter applicable to the
Employee or applicable to all employees of the Company generally, including any
stock option plans of the Company.
d. The Company shall reimburse the Employee for travel and
other expenses actually incurred by the Employee that are directly related to
the Employee's duties set forth in this Agreement; provided, however, that the
Employee must timely submit written documentation of such expenses in a form
acceptable to the Company and the Employee shall have otherwise complied with
all other accounting practices of the Company.
4. Sale of Stock. As of the date hereof, the Company hereby
agrees to sell to the Employee or his designee, and the Employee agrees to
purchase or agrees that his designee shall purchase from the Company, 4,000,000
shares of the Company's Class A Common Stock at a purchase price of $0.03 per
share, which is the fair market value of the Class A Common Stock as of the date
hereof. Such purchase and sale shall be further documented through a
subscription agreement to be prepared by legal counsel to the Company. The
closing of such sale and purchase shall occur no later than September 30, 1997.
The Class A Common Stock purchased by the Employee (or his designee) hereunder
shall be "restricted securities" within the meaning of the Securities Act of
1933, as amended, and shall bear a restrictive legend to such effect. Employee
acknowledges and agrees that Employee is acquiring such securities for
Employee's own account for investment and not with a view to the distribution
thereof.
5. Termination.
a. The Employee's employment under this Agreement may be
terminated prior to the end of the Term only as follows:
(i) upon the death of the Employee;
(ii) by the Company due to the Disability of the
Employee upon delivery of a Notice of
Termination to the Employee;
(iii) by the Company for Cause upon delivery of a
Notice of Termination to the Employee; and
2
<PAGE> 5
(iv) by the Company without Cause upon delivery of a
Notice of Termination to the Employee.
b. If the Employee's employment with the Company shall be
terminated during the Term (i) by reason of the Employee's death or (ii) by the
Company for Disability or Cause, the Company shall pay to the Employee (or in
the case of his death, the Employee's estate) within 15 days after the
Termination Date, a lump sum cash payment equal to the Accrued Compensation and,
if such termination is other than by the Company for Cause, any accrued
performance bonus.
c. If the Company terminates the Employee without Cause
pursuant to Section 5(a)(iv) above, the Company shall pay to the Employee in
cash at the end of each week during the six-month period following the
Termination Date an amount equal to $800.00. In addition, within 15 days after
the Termination Date, the Company shall pay to the Employee a lump sum cash
payment equal to the Accrued Compensation and any accrued performance bonus as
of the Termination Date. The Employee shall not be required to mitigate the
amount of any payment provided for in this Agreement by seeking other employment
or otherwise, and no such payment shall be offset or reduced by the amount of
any compensation or benefits provided to the Employee in any subsequent
employment.
d. The severance pay and benefits provided for in this Section
5 shall be in lieu of any other severance or termination pay to which the
Employee may be entitled under any Company severance or termination plan,
program, practice or arrangement. The Employee's entitlement to any other
compensation or benefits shall be determined in accordance with the Company's
employee benefit plans and other applicable programs, policies and practices
then in effect.
e. In the event that the Employee is a director of the Company
or any of its affiliates and his employment hereunder is terminated for any
reason, the Employee shall, and does hereby, tender his resignation as a
director of the Company and any of its affiliates effective as of the
Termination Date.
6. Trade Secrets, Non-Solicitation and Related Matters.
a. The Employee shall not, at any time, either during the Term
of his employment or after the Termination Date, use or disclose any Trade
Secrets of the Company, except in fulfillment of his duties as the Employee
during his employment, for so long as the pertinent information or data remain
Trade Secrets, whether or not the Trade Secrets are in written or tangible form.
b. The Employee agrees to maintain in strict confidence and,
except as necessary to perform his duties for the Company, not to use or
disclose any Confidential Business Information during his employment and for a
period of 24 months after the Termination Date.
3
<PAGE> 6
c. Upon termination of employment, the Employee shall leave
with the Company all business records relating to the Company and its affiliates
including, without limitation, all contracts, calendars and other materials
relating to the business records, the Company's business or its customers,
including all physical, electronic and computer copies thereof, whether or not
the Employee prepared such materials or records himself. Upon such termination,
the Employee shall retain no copies of any such materials, provided, however,
the Employee may remove and retain all personal items and materials.
d. The Employee may disclose Trade Secrets or Confidential
Business Information pursuant to any order or legal process requiring him (in
his legal counsel's reasonable opinion) to do so; provided, however, that the
Employee shall first have notified the Company of the request or order to so
disclose the Trade Secrets or Confidential Business Information in sufficient
time to allow the Company to seek an appropriate protective order.
e. If the Employee is terminated or resigns for any reason,
then for a period of one year following the Termination Date, the Employee shall
not (except on behalf of or with the prior written consent of the Company)
either directly or indirectly, on the Employee's own behalf or in the service or
on behalf of others, (i) solicit, divert, or appropriate to or for a Competing
Business, or (ii) attempt to solicit, divert, or appropriate to or for a
Competing Business, any person or entity that was a customer of the Company or
any of its affiliates on the Termination Date; provided, however, that if the
Employee is terminated without Cause, then the non-solicit period under this
Section 6(e) shall be for a period of 180 days following the Termination Date.
For purposes of this Agreement, a "customer" refers to any person or group of
persons with whom the Employee had direct material contact with regard to the
selling, delivery or support of the Company's products and services, including,
servicing such person's or group's account, during the period of two years
preceding the Termination Date.
f. If the Employee is terminated or resigns for any reason,
then for a period of one year following the Termination Date, the Employee will
not, either directly or indirectly, on the Employee's own behalf or in the
service or on behalf of others, (i) solicit, divert, or hire away, or (ii)
attempt to solicit, divert, or hire away any employee of, independent associate
of or consultant to the Company or any of its affiliates engaged or experienced
in the Business, regardless of whether the employee or consultant is full-time
or temporary, the employment or engagement is pursuant to written agreement, or
the employment or engagement is for a determined period or is at will; provided,
however, that if the Employee is terminated without Cause, then the non-solicit
period under this Section 6(f) shall be for a period of 180 days following the
Termination Date.
g. The Employee acknowledges and agrees that great loss and
irreparable damage would be suffered by the Company if the Employee should
breach or violate any of the terms or provisions of the covenants and agreements
set forth in this Section 6. The Employee further acknowledges and agrees that
each of these covenants and agreements is reasonably necessary to protect and
preserve the interests of the Company. The parties agree that money damages for
any breach of clauses (a) through (f) of this Section 6 will be insufficient to
compensate for any breaches thereof, and that the Employee or any of the
Employee's affiliates, as the case may be, will, to the extent permitted by law,
waive in any proceeding initiated to
4
<PAGE> 7
enforce such provisions any claim or defense that an adequate remedy at law
exists. The existence of any claim, demand, action or cause of action against
the Company, whether predicated upon this Agreement or otherwise, shall not
constitute a defense to the enforcement by the Company of any of the covenants
or agreements in this Agreement; provided, however, that nothing in this
Agreement shall be deemed to deny the Employee the right to defend against this
enforcement on the basis that the Company has no right to its enforcement under
the terms of this Agreement.
h. The Employee acknowledges and agrees that: (i) the
covenants and agreements contained in clauses (a) through (f) of this Section 6
are the essence of this Agreement; (ii) that the Employee has received good,
adequate and valuable consideration for each of these covenants; (iii) each of
these covenants is reasonable and necessary to protect and preserve the
interests and properties of the Company; (iv) the Company is and will be engaged
in and throughout the Territory in the Business; (v) a Competing Business could
be engaged in from any place in the Territory; and (vi) the Company has a
legitimate business interest in restricting the Employee's activities throughout
the Territory. The Employee also acknowledges and agrees that: (i) irreparable
loss and damage will be suffered by the Company should the Employee breach any
of these covenants and agreements; (ii) each of these covenants and agreements
in clauses (a) through (f) of this Section 6 is separate, distinct and severable
not only from the other covenants and agreements but also from the remaining
provisions of this Agreement; and (iii) the unenforceability of any covenants or
agreements shall not affect the validity or enforceability of any of the other
covenants or agreements or any other provision or provisions of this Agreement.
The Employee acknowledges and agrees that if any of the provisions of clauses
(a) through (f) of this Section 6 shall ever be deemed to exceed the time,
activity or geographic limitations permitted by applicable law, then such
provisions shall be and hereby are reformed to the maximum time, activity or
geographical limitations permitted by applicable law.
7. Successors; Binding Agreement.
a. This Agreement shall be binding upon and shall inure to the
benefit of the Company, its Successors and Assigns and the Company shall require
any Successors and Assigns to expressly assume and agree to perform this
Agreement in the same manner and to the same extent that the Company would be
required to perform it if no such succession or assignment had taken place.
b. Neither this Agreement nor any right or interest hereunder
shall be assignable or transferable by the Employee, his beneficiaries or legal
representatives, except by will or by the laws of descent and distribution. This
Agreement shall inure to the benefit of and be enforceable by the Employee's
legal personal representative.
8. Notice. For the purposes of this Agreement, notices and all
other communications provided for in the Agreement (including the Notice of
Termination) shall be in writing and shall be deemed to have been duly given
when personally delivered or sent by certified mail, return receipt requested,
postage prepaid, addressed to the respective addresses last given by each party
to the other; provided, however, that all notices to the Company shall
5
<PAGE> 8
be directed to the attention of the President with a copy to the Secretary of
the Company. All notices and communications shall be deemed to have been
received on the date of delivery thereof.
9. Settlement of Claims. The Company's obligation to make the
payments provided for in this Agreement and otherwise to perform its obligations
hereunder shall not be affected by any circumstances, including, without
limitation, any set-off, counterclaim, recoupment, defense or other right which
the Company may have against the Employee or others. The Company may, however,
withhold from any benefits payable under this Agreement all federal, state, city
or other taxes as shall be required pursuant to any law or governmental
regulation or ruling.
10. Modification and Waiver. No provisions of this Agreement
may be modified, waived or discharged unless such waiver, modification or
discharge is agreed to in writing and signed by the Employee and the Company. No
waiver by any party hereto at any time of any breach by the other party hereto
of, or compliance with, any condition or provision of this Agreement to be
performed by such other party shall be deemed a waiver of similar or dissimilar
provisions or conditions at the same or at any prior or subsequent time.
11. Governing Law. This Agreement shall be governed by and
construed and enforced in accordance with the laws of the State of Georgia
without giving effect to the conflict of laws principles thereof. Any action
brought by any party to this Agreement shall be brought and maintained in a
court of competent jurisdiction in State of Georgia.
12. Severability. The provisions of this Agreement shall be
deemed severable and the invalidity or unenforceability of any provision shall
not affect the validity or enforceability of the other provisions hereof.
13. Entire Agreement. This Agreement constitutes the entire
agreement between the parties hereto and supersedes all prior agreements, if
any, understandings and arrangements, oral or written, between the parties
hereto with respect to the subject matter hereof.
14. Headings. The headings of Sections herein are included
solely for convenience of reference and shall not control the meaning or
interpretation of any of the provisions of this Agreement.
15. Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
16. Definitions. For purposes of this Agreement, the following
terms shall have the following meanings:
a. "Accrued Compensation" shall mean an amount which shall
include all amounts earned or accrued through the Termination Date but not paid
as of the Termination
6
<PAGE> 9
Date, including (i) base salary and (ii) reimbursement for reasonable and
necessary expenses incurred by the Employee on behalf of the Company during the
period ending on the Termination Date.
b. "Business" shall mean the development, marketing or
implementation of a network marketing distribution business, a long distance
reselling business or any other related business which the Company or any of its
affiliates is engaged in as of the Termination Date.
c. "Bylaws" shall mean the Amended and Restated Bylaws of the
Company, as amended, supplemented or otherwise modified from time to time.
d. The termination of the Employee's employment shall be for
"Cause" if it is the result of:
(i) the commission or omission by the Employee of a
willful or negligent act which causes harm to
the Company;
(ii) the conviction of the Employee for the
commission or perpetration by the Employee of
any felony or any act of fraud;
(iii) the failure of the Employee to devote his full
time and attention to the business as provided
in Section 1; or
(iv) the failure of the Employee to perform his
duties hereunder in a manner satisfactory to
the Board of Directors, as determined in the
discretion of the Board of Directors; provided,
however, that the Employee shall have 30 days
to cure such failure after receiving notice
from the Company. The Company shall be
obligated to provide only one notice to
Employee pursuant to this Section 16(d)(iv).
Thereafter, the Company may terminate the
Employee, without the Employee having a right
to cure, if the Employee fails to perform his
duties in a manner satisfactory to the
President, as determined in his sole
discretion.
e. "Competing Business" shall mean any business that, in whole
or in part, is the same or substantially the same as the Business.
f. "Confidential Business Information" shall mean any
non-public information of a competitively sensitive or personal nature, other
than Trade Secrets, acquired by the Employee, directly or indirectly, in
connection with the Employee's employment (including his employment with the
Company prior to the date of this Agreement), including (without limitation)
oral and written information concerning the Company or its affiliates relating
to financial position and results of operations (revenues, margins, assets, net
income, etc.), annual and long-range business plans, marketing plans and
methods, account invoices, oral or written customer information and personnel
information. Confidential Business Information also includes information
recorded in manuals, memoranda, projections, minutes, plans, computer
7
<PAGE> 10
programs and records, whether or not legended or otherwise identified by the
Company and its affiliates as Confidential Business Information, as well as
information which is the subject of meetings and discussions and not so
recorded; provided, however, that Confidential Business Information shall not
include information that is generally available to the public, other than as a
result of disclosure, directly or indirectly, by the Employee, or was available
to the Employee on a non-confidential basis prior to its disclosure to the
Employee.
g. "Disability" shall mean a physical or mental infirmity
which impairs the Employee's ability to substantially perform his duties with
the Company for a period of 180 consecutive days, as determined by an
independent physician selected with the approval of both the Company and the
Employee.
h. "Notice of Termination" shall mean a written notice of
termination from the Company which specifies an effective date of termination,
indicates the specific termination provision in this Agreement relied upon, and
sets forth in reasonable detail the facts and circumstances claimed to provide a
basis for termination of the Employee's employment under the provision so
indicated.
i. "Successors and Assigns" shall mean a corporation or other
entity acquiring all or substantially all the assets and business of the Company
(including this Agreement), whether by operation of law or otherwise.
j. "Termination Date" shall mean, in the case of the
Employee's death, his date of death, and in all other cases, the date specified
in the Notice of Termination.
k. "Territory" shall mean that area specified on Exhibit A
attached hereto.
l. "Trade Secrets" shall mean any information, including but
not limited to technical or non-technical data, a formula, a pattern, a
compilation, a program, a device, a method, a technique, a drawing, a process,
financial data, financial plans, product plans, information on customers or a
list of actual or potential customers or suppliers, which: (i) derives economic
value, actual or potential, from not being generally known to, and not being
readily ascertainable by proper means by, other persons who can obtain economic
value from its disclosure or use; and (ii) is the subject of efforts that are
reasonable under the circumstances to maintain its secrecy.
8
<PAGE> 11
IN WITNESS WHEREOF, the Company has caused this Agreement to be
executed and its seal to be affixed hereunto by its officers thereunto duly
authorized, and the Employee has signed and sealed this Agreement, effective as
of the date first above written.
MAXXIS GROUP, INC.
ATTEST:
By: /s/ James W. Brown By: /s/ Ivey J. Stokes
--------------------------- ------------------------------
Name: James W. Brown Name: Ivey J. Stokes
Title: Secretary Title: Chairman of the Board
EMPLOYEE
/s/ Thomas O. Cordy
-------------------------------------
Thomas O. Cordy
9
<PAGE> 12
EXHIBIT A
TERRITORY
30 mile radius from the Company's corporate offices located at 1901
Montreal Road, Suite 108, Tucker, Georgia 30084
<PAGE> 1
EXHIBIT 10.3
PROMISSORY NOTE
$120,000.00 MAY 1, 1997
THE ANCHORA COMPANY (hereinafter referred to as "Maker"), for value
received, hereby promises to pay to the order of MAXXIS GROUP, INC., a Georgia
corporation (hereinafter referred to as "Payee"), the aggregate principal sum of
ONE HUNDRED TWENTY THOUSAND 00/100 DOLLARS ($120,000.00) on the earlier of (i)
May 1, 2002 or (ii) the closing of an initial public offering of Payee's capital
stock for cash which is offered and sold in a transaction registered under the
Securities Act of 1933, as amended, through one or more underwriters, all
pursuant to an underwriting agreement between Payee and such underwriters,
resulting in aggregate net proceeds of $5,000,000 to the Company, together with
interest on the unpaid principal balance at the rate of 8.75% per annum,
compounded annually. The principal hereof and the interest thereon are payable
at 1901 Montreal Road, Suite 108, Tucker, GA 30084, or at such other place as
Payee may from time to time designate to Maker in writing, in coin or currency
of the United States of America.
Maker may, at any time and from time to time, prepay all or any portion
of the principal of this Note remaining unpaid, without penalty or premium. In
the event Maker sells any shares of capital stock of Payee that are held by
Maker, a portion of this Note in an amount equal to the after-tax proceeds
received by Maker from the sale of such shares shall immediately become due and
payable. Prepayments shall be applied first to the payment of accrued but unpaid
interest on this Note and the balance to principal.
If any of the following events (an "Event of Default") shall occur and
be continuing for any reason whatsoever (and whether such occurrence shall be
voluntary or involuntary or come about or be effected by operation of law or
otherwise), then this Note shall thereupon be and become, forthwith due and
payable, without any further notice or demand of any kind whatsoever, all of
which are hereby expressly waived:
(a) If Maker defaults in the payment of principal or interest
on this Note when and as the same shall become due and payable and such
default continues for 20 days after Maker receives notice from Payee of
such default; or
(b) If Maker makes an assignment for the benefit of creditors
or admits in writing an inability to pay his or its debts generally as
they become due;
(c) If an order, judgment or decree is entered adjudicating
Maker bankrupt or insolvent;
(d) If Maker petitions or applies to any tribunal for the
appointment of a trustee or receiver of Maker, or of any substantial
part of the assets of Maker, or commences any proceedings relating to
Maker under any bankruptcy, reorganization, arrangement, insolvency,
readjustment of debt, dissolution or liquidation law of any
jurisdiction, whether now or hereafter in effect; or
<PAGE> 2
(e) If any such petition or application is filed, or any such
proceedings are commenced, against Maker, and Maker by any act
indicates its approval thereof, consent thereto, or acquiescence
therein, or an order is entered appointing any such trustee or
receiver, or approving the petition in any such proceedings, and such
order remains unstayed and in effect for more than 90 days.
This Note is with full recourse to any assets of Maker.
Any failure on the part of Payee at any time to require the performance
by Maker of any of the terms or provisions hereof, even if known, shall in no
way affect the right thereafter to enforce the same, nor shall any failure of
Payee to insist on strict compliance with the terms and conditions hereof be
taken or held to be a waiver of any succeeding breach or of the right of Payee
to insist on strict compliance with the terms and conditions hereof.
Time is of the essence.
This Note shall be governed by, and enforced and interpreted in
accordance with, the laws of the State of Georgia without regard to the
principles of conflict of laws.
In the event this note, or any part hereof, is collected by or through
an attorney-at-law, Maker agrees to pay all costs of collection including, but
not limited to, attorneys' fees equal to 15% of the principal and interest then
due. In the event that Maker fails to make any payment when due, Payee shall
provide written notice of default to Maker, which notice shall allow Maker ten
(10) days from the date of receipt of such notice in which to cure such default.
If such default is not cured within the time allowed, the balance hereof shall
be deemed to be immediately accelerated without further notice to Maker.
IN WITNESS WHEREOF, Maker has executed this Note under seal as of the
date first set forth above.
THE ANCHORA COMPANY
Bruce Secretaries Ltd.
(Secretary of the Company)
By: /s/ M. Catherine Bruce
----------------------
M. Catherine Bruce
Title: Secretary
-----------------------
-2-
<PAGE> 1
EXHIBIT 10.4
GUARANTEE AGREEMENT
Thomas O. Cordy (the "Guarantor") hereby irrevocably and
unconditionally guarantees to Maxxis Group, Inc. (the "Holder") the due and
punctual payment, performance and satisfaction of all obligations of The Anchora
Company (the "Maker") under that certain $120,000.00 Promissory Note dated May
1, 1997 payable by the Maker to the Holder (the "Note"), including, but not
limited to, the obligations to pay principal, interest and costs of collection.
It is specifically understood and agreed that: (i) the Holder shall not
be required to exhaust its remedies against the Maker before proceeding against
the Guarantor with respect to the payment, performance and satisfaction of the
foregoing obligations under the Note; (ii) the Guarantor waives any right to
notice to which he may be entitled as a result of this Guarantee Agreement;
(iii) the Guarantor's obligations under this Guarantee Agreement shall not be
discharged as a result of any waiver, modification or extension of the
provisions of the Note made or agreed to by the Holder or the Maker, and instead
the Guarantor's obligations under this Guarantee Agreement shall apply to the
Note as so waived, modified or extended; and (iv) the Guarantor shall not be
entitled to assert the invalidity or unenforceability of the Note as against the
Maker as a defense to the Guarantor's obligations under this Guarantee
Agreement.
In the event that the Note, or any part thereof, is collected from
Guarantor by or through an attorney-at-law, Guarantor agrees to pay all costs of
collection including, but not limited to, attorneys' fees equal to 15% of the
principal and interest then due.
No delay by the Holder in exercising any right or remedy shall be
construed to be a waiver thereof, but any such right or remedy may be exercised
from time to time and as often as Holder may be deem expedient. Time is of the
essence hereunder. This Guarantee Agreement shall be governed by the laws of the
State of Georgia, as applied to contracts negotiated, executed, delivered and to
be performed entirely in such State.
NOTICE OF ACCEPTANCE, PRESENTMENT, DEMAND, NOTICE OF DISHONOR, PROTEST
OR ANY OTHER NOTICES WHATSOEVER, AND DILIGENCE IN COLLECTION OR PROTECTION OF OR
REALIZATION UPON ANY OBLIGATION HEREUNDER, ARE HEREBY WAIVED BY GUARANTOR.
This Guarantee Agreement shall be binding upon the Guarantor and his
personal representatives, heirs, successors and assigns. This Guarantee
Agreement shall inure to the benefit of the Holder and its successors and
assigns.
IN WITNESS WHEREOF, the Guarantor has executed and delivered this
instrument, under seal, as of May 1, 1997.
/s/ Thomas O. Cordy (L.S.)
----------------------------
Thomas O. Cordy
ACCEPTED AND AGREED:
Maxxis Group, Inc.
By:/s/ Ivey J. Stokes
---------------------------
Ivey J. Stokes
Chairman of the Board
<PAGE> 1
EXHIBIT 10.5
INDEPENDENT SALES REPRESENTATIVE AGREEMENT
BY AND BETWEEN
MAXXIS GROUP, INC.
AND
---------------------------------
DATED: , 199___
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
1 Engagement ............................................................1
2 Term ..................................................................1
3 Payment ...............................................................1
4 Relationship of Parties ...............................................1
5 Covenants .............................................................2
6 Termination ...........................................................3
7 Trade Secrets, Confidential Business Information and Related Matters ..3
8 Successors; Binding Agreement .........................................5
9 Notice ................................................................5
10 Settlement of Claims ..................................................5
11 Modification and Waiver ...............................................5
12 Governing Law .........................................................5
13 Severability ..........................................................5
14 Entire Agreement ......................................................6
15 Headings ..............................................................6
16 Counterparts ..........................................................6
17 Definitions ...........................................................6
</TABLE>
EXHIBIT A DUTIES OF INDEPENDENT SALES REPRESENTATIVE
EXHIBIT B BONUS AMOUNT
<PAGE> 3
INDEPENDENT SALES REPRESENTATIVE AGREEMENT
This INDEPENDENT SALES REPRESENTATIVE AGREEMENT (this
"Agreement") is made by and between MAXXIS GROUP, INC., a Georgia corporation
(the "Company"), and _______________________, an individual resident of the
State of ______________ (the "Representative"), as of this day of
_______________, 199____.
The Company desires to engage the Representative as an
independent sales representative, and the Representative is willing to be
engaged by the Company in such capacity on the terms and conditions herein
provided. Certain terms used in this Agreement are defined in Section 17 hereof.
In consideration of the foregoing, the mutual covenants
contained herein, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto, intending to
be legally bound, hereby agree as follows:
1. Engagement. The Company shall engage the Representative,
and the Representative agrees to be engaged by the Company, as an independent
sales representative of the Company upon the terms and conditions set forth
herein. The Representative shall have such duties and responsibilities
("Duties") as are set forth on Exhibit A hereto. The Representative shall devote
such portion of his business time (up to and including his full business time)
and such attention, skill and efforts to the performance of his Duties hereunder
as are necessary to competently and professionally perform and discharge such
Duties.
2. Term. Unless earlier terminated as provided herein, the
Representative's engagement under this Agreement shall be for a continuing term
(the "Term") of one year, which shall be extended automatically (without further
action of the Company or the Representative) each day for an additional day so
that the remaining term shall continue to be one year; provided, however, that
either party may at any time, by written notice to the other, fix the Term to a
finite term of one year, without further automatic extension, commencing with
the date of such notice.
3. Payment.
a. Effective July 1, 1997, the Company shall pay the
Representative a fee of $800.00 per week, subject to increase upon the mutual
written agreement of the Company (following specific approval of such increase
by the Company's Board of Directors) and the Representative.
b. The Representative shall be eligible to receive quarterly
payments of a performance bonus based upon achievement of targeted levels of
performance set forth in Exhibit B hereto.
4. Relationship of Parties. The Representative shall at all
times be and act as an independent contractor, and the Company shall exercise no
control over the activities and
<PAGE> 4
operations of the Representative other than as set forth herein. The
Representatives's Federal Tax I.D. number is ____________. This Agreement shall
not be deemed to create any agency, employment, partnership or joint venture
relationship between the Company and the Representative, and the Representative
shall enjoy no fringe benefits accorded to employees of the Company. Neither
party hereto shall have the power of authority to (and agrees not to attempt to)
bind, commit or obligate the other in any manner whatsoever without the other's
prior written consent, or to use the other party's name in any way not
specifically authorized by this Agreement. No representations of either party
shall be binding upon the other party without the other party's prior written
consent.
5. Covenants. The Representative covenants and agrees, in
addition to the other duties and obligations of the Representative set forth in
the Agreement, that the Representative will:
a. bear all costs, expenses and liability relating to his
business and operations, including, but not limited to, the costs and expenses
of providing and maintaining his place of business, the wages and salaries of
his employees, if any, and expenses incurred for or in connection with his
performance under this Agreement;
b. not use any trademarks or tradenames of the Company in any
manner except with the prior written authorization of the Company;
c. maintain within limits specified by the Company (or, in the
absence of any specification by the Company, reasonable and adequate limits)
workers compensation and liability insurance (other than products liability
insurance) in connection with his operations, and to furnish the Company with a
certificate evidencing the required insurance immediately upon the Company's
request;
d. immediately give the Company written notice of any offers,
whether oral or written, received by him, or his agents or employees, during the
term of this Agreement which, if accepted, would place the Representative in
violation of his covenants or agreements hereunder;
e. give the Company notice of any person, firm or entity who
is infringing upon the trademarks, tradenames or other intellectual property of
the Company immediately upon the Representative's receipt of notice thereof;
f. hold harmless, defend and indemnify the Company and its
officers, directors, employees and agents from and against any and all claims,
damages, losses, injuries, causes of action, demands and expenses, including
reasonable legal fees and expenses, of whatever kind and nature directly or
indirectly arising out of, on account of or resulting from the Representative's
activities or out of the Representative's failure to comply with his obligations
under this Agreement; and
2
<PAGE> 5
g. comply strictly with all rules, regulations, policies and
procedures of the Company as such rules apply to independent contractors and may
be established by the Company from time to time.
6. Termination.
a. The Representative's engagement under this Agreement may be
terminated prior to the end of the Term only as follows:
(i) upon the death of the Representative;
(ii) by the Company due to the Disability of the
Representative upon delivery of a Notice of Termination to the
Representative;
(iii) by the Company for Cause upon delivery of a Notice of
Termination to the Representative; and
(iv) by the Company without Cause upon delivery of a
Notice of Termination to the Representative.
b. If the Representative's engagement with the Company shall
be terminated during the Term (i) by reason of the Representative's death or
(ii) by the Company for Disability or Cause, the Company shall pay to the
Representative (or in the case of his death, the Representative's estate) within
15 days after the Termination Date, a lump sum cash payment equal to the Accrued
Fees and, if such termination is other than by the Company for Cause, any
accrued performance bonus.
c. In the event that the Representative is a director of the
Company or any of its affiliates and his engagement hereunder is terminated for
any reason, the Representative shall, and does hereby, tender his resignation as
a director of the Company and any of its affiliates effective as of the
Termination Date.
7. Trade Secrets, Confidential Business Information and
Related Matters.
a. The Representative shall not, at any time, either during
the Term of his engagement or after the Termination Date, use or disclose any
Trade Secrets of the Company, except in fulfillment of his duties as the
Representative during his engagement, for so long as the pertinent information
or data remain Trade Secrets, whether or not the Trade Secrets are in written or
tangible form.
b. The Representative agrees to maintain in strict confidence
and, except as necessary to perform his duties for the Company, not to use or
disclose any Confidential Business Information during his engagement and for a
period of 24 months after the Termination Date.
3
<PAGE> 6
c. Upon termination of the engagement provided for herein, the
Representative shall deliver to the Company, at the Representative's expense,
all business records relating to the Company and its affiliates including,
without limitation, all contracts, calendars and other materials relating to the
business records, the Company's business or its customers, including all
physical, electronic and computer copies thereof, whether or not the
Representative prepared such materials or records himself. Upon such
termination, the Representative shall retain no copies of any such materials.
d. The Representative may disclose Trade Secrets or
Confidential Business Information pursuant to any order or legal process
requiring him (in his legal counsel's reasonable opinion) to do so; provided,
however, that the Representative shall first have notified the Company of the
request or order to so disclose the Trade Secrets or Confidential Business
Information in sufficient time to allow the Company to seek an appropriate
protective order.
e. The Representative acknowledges and agrees that great loss
and irreparable damage would be suffered by the Company if the Representative
should breach or violate any of the terms or provisions of the covenants and
agreements set forth in this Section 7. The Representative further acknowledges
and agrees that each of these covenants and agreements is reasonably necessary
to protect and preserve the interests of the Company. The parties agree that
money damages for any breach of clauses (a) through (d) of this Section 7 will
be insufficient to compensate for any breaches thereof, and that the
Representative or any of the Representative's affiliates, as the case may be,
will, to the extent permitted by law, waive in any proceeding initiated to
enforce such provisions any claim or defense that an adequate remedy at law
exists. The existence of any claim, demand, action or cause of action against
the Company, whether predicated upon this Agreement or otherwise, shall not
constitute a defense to the enforcement by the Company of any of the covenants
or agreements in this Agreement; provided, however, that nothing in this
Agreement shall be deemed to deny the Representative the right to defend against
this enforcement on the basis that the Company has no right to its enforcement
under the terms of this Agreement.
f. The Representative acknowledges and agrees that: (i) the
covenants and agreements contained in clauses (a) through (d) of this Section 7
are the essence of this Agreement; (ii) that the Representative has received
good, adequate and valuable consideration for each of these covenants; and (iii)
each of these covenants is reasonable and necessary to protect and preserve the
interests and properties of the Company. The Representative also acknowledges
and agrees that: (i) irreparable loss and damage will be suffered by the Company
should the Representative breach any of these covenants and agreements; (ii)
each of these covenants and agreements in clauses (a) through (d) of this
Section 7 is separate, distinct and severable not only from the other covenants
and agreements but also from the remaining provisions of this Agreement; and
(iii) the unenforceability of any covenants or agreements shall not affect the
validity or enforceability of any of the other covenants or agreements or any
other provision or provisions of this Agreement.
4
<PAGE> 7
8. Successors; Binding Agreement.
a. This Agreement shall be binding upon and shall inure to
the benefit of the Company, its Successors and Assigns and the Company shall
require any Successors and Assigns to expressly assume and agree to perform this
Agreement in the same manner and to the same extent that the Company would be
required to perform it if no such succession or assignment had taken place.
b. Neither this Agreement nor any right or interest hereunder
shall be assignable or transferable by the Representative, his beneficiaries or
legal representatives, except by will or by the laws of descent and
distribution. This Agreement shall inure to the benefit of and be enforceable by
the Representative's legal personal representative.
9. Notice. For the purposes of this Agreement, notices and
all other communications provided for in the Agreement (including the Notice of
Termination) shall be in writing and shall be deemed to have been duly given
when personally delivered or sent by certified mail, return receipt requested,
postage prepaid, addressed to the respective addresses last given by each party
to the other; provided, however, that all notices to the Company shall be
directed to the attention of the President with a copy to the Secretary of the
Company. All notices and communications shall be deemed to have been received on
the date of delivery thereof.
10. Settlement of Claims. The Company's obligation to make the
payments provided for in this Agreement and otherwise to perform its obligations
hereunder shall not be affected by any circumstances, including, without
limitation, any set-off, counterclaim, recoupment, defense or other right which
the Company may have against the Representative or others. The Company may,
however, withhold from any benefits payable under this Agreement all federal,
state, city or other taxes as shall be required pursuant to any law or
governmental regulation or ruling.
11. Modification and Waiver. No provisions of this Agreement
may be modified, waived or discharged unless such waiver, modification or
discharge is agreed to in writing and signed by the Representative and the
Company. No waiver by any party hereto at any time of any breach by the other
party hereto of, or compliance with, any condition or provision of this
Agreement to be performed by such other party shall be deemed a waiver of
similar or dissimilar provisions or conditions at the same or at any prior or
subsequent time.
12. Governing Law. This Agreement shall be governed by and
construed and enforced in accordance with the laws of the State of Georgia
without giving effect to the conflict of laws principles thereof. Any action
brought by any party to this Agreement shall be brought and maintained in a
court of competent jurisdiction in State of Georgia.
13. Severability. The provisions of this Agreement shall be
deemed severable and the invalidity or unenforceability of any provision shall
not affect the validity or enforceability of the other provisions hereof.
5
<PAGE> 8
14. Entire Agreement. This Agreement constitutes the entire
agreement between the parties hereto and supersedes all prior agreements, if
any, understandings and arrangements, oral or written, between the parties
hereto with respect to the subject matter hereof.
15. Headings. The headings of Sections herein are included
solely for convenience of reference and shall not control the meaning or
interpretation of any of the provisions of this Agreement.
16. Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
17. Definitions. For purposes of this Agreement, the
following terms shall have the following meanings:
a. "Accrued Fees" shall mean an amount which shall include
all amounts earned or accrued through the Termination Date but not paid as of
the Termination Date, including (i) fees payable and (ii) reimbursement for
reasonable and necessary expenses incurred by the Representative on behalf of
the Company during the period ending on the Termination Date.
b. The termination of the Representative's engagement shall
be for "Cause" if it is the result of:
(i) the commission or omission by the
Representative of a willful or negligent act
which causes harm to the Company;
(ii) the conviction of the Representative for the
commission or perpetration by the
Representative of any felony or any act of
fraud;
(iii) the failure of the Representative to devote
sufficient time and attention to the business
as provided in Section 1; or
(iv) the failure of the Representative to perform
his duties hereunder in a manner satisfactory
to the Company, as determined by the President
of the Company in his sole discretion;
provided, however, that the Representative
shall have 30 days to cure such failure after
receiving notice from the Company. The Company
shall be obligated to provide only one notice
to Representative pursuant to this Section
17(b)(iv). Thereafter, the Company may
terminate the Representative, without the
Representative having a right to cure, if the
Representative fails to perform his duties in a
manner satisfactory to the President of the
Company, as determined in his sole discretion.
6
<PAGE> 9
c. "Confidential Business Information" shall mean any
non-public information of a competitively sensitive or personal nature, other
than Trade Secrets, acquired by the Representative, directly or indirectly, in
connection with the Representative's engagement (including his engagement by the
Company prior to the date of this Agreement), including (without limitation)
oral and written information concerning the Company or its affiliates relating
to financial position and results of operations (revenues, margins, assets, net
income, etc.), annual and long-range business plans, marketing plans and
methods, account invoices, oral or written customer information and personnel
information. Confidential Business Information also includes information
recorded in manuals, memoranda, projections, minutes, plans, computer programs
and records, whether or not legended or otherwise identified by the Company and
its affiliates as Confidential Business Information, as well as information
which is the subject of meetings and discussions and not so recorded; provided,
however, that Confidential Business Information shall not include information
that is generally available to the public, other than as a result of disclosure,
directly or indirectly, by the Representative, or was available to the
Representative on a non-confidential basis prior to its disclosure to the
Representative.
d. "Disability" shall mean a physical or mental infirmity
which impairs the Representative's ability to substantially perform his duties
with the Company for a period of 180 consecutive days, as determined by an
independent physician selected with the approval of both the Company and the
Representative.
e. "Notice of Termination" shall mean a written notice of
termination from the Company which specifies an effective date of termination,
indicates the specific termination provision in this Agreement relied upon, and
sets forth in reasonable detail the facts and circumstances claimed to provide a
basis for termination of the Representative's engagement under the provision so
indicated.
f. "Successors and Assigns" shall mean a corporation or other
entity acquiring all or substantially all the assets and business of the Company
(including this Agreement), whether by operation of law or otherwise.
g. "Termination Date" shall mean, in the case of the
Representative's death, his date of death, and in all other cases, the date
specified in the Notice of Termination.
h. "Trade Secrets" shall mean any information, including but
not limited to technical or non-technical data, a formula, a pattern, a
compilation, a program, a device, a method, a technique, a drawing, a process,
financial data, financial plans, product plans, information on customers or a
list of actual or potential customers or suppliers, which: (i) derives economic
value, actual or potential, from not being generally known to, and not being
readily ascertainable by proper means by, other persons who can obtain economic
value from its disclosure or use; and (ii) is the subject of efforts that are
reasonable under the circumstances to maintain its secrecy.
7
<PAGE> 10
IN WITNESS WHEREOF, the Company has caused this Agreement to be
executed and its seal to be affixed hereunto by its officers thereunto duly
authorized, and the Representative has signed and sealed this Agreement,
effective as of the date first above written.
MAXXIS GROUP, INC.
ATTEST:
By: By:
----------------------- -----------------------
Name: Name:
Title: Title:
REPRESENTATIVE
---------------------------
8
<PAGE> 11
EXHIBIT A
DUTIES OF INDEPENDENT SALES REPRESENTATIVE
<PAGE> 12
EXHIBIT B
BONUS AMOUNT
The Representative shall be eligible to receive a performance bonus,
payable each quarter, which is a percentage of the gross revenue from the 256
legs owned by Maxxis 2000, Inc. based upon his or her performance in accordance
with the following criteria:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
OPEN LEGS NEW ACTIVATIONS PER QUARTER BONUS
- -------------------------------------------------------------------------------
<S> <C> <C>
6 180 0.5%
- -------------------------------------------------------------------------------
10 180 1.0
- -------------------------------------------------------------------------------
14 180 1.5
- -------------------------------------------------------------------------------
18 180 2.0
- -------------------------------------------------------------------------------
23 180 2.5
- -------------------------------------------------------------------------------
27 180 3.0
- -------------------------------------------------------------------------------
</TABLE>
<PAGE> 1
EXHIBIT 10.6
CONSULTING AGREEMENT
BY AND BETWEEN
MAXXIS GROUP, INC.
AND
ROBERT P. KELLY
DATED: SEPTEMBER 1, 1997
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
1 Engagement ............................................................1
2 Term ..................................................................1
3 Payment ...............................................................1
4 Relationship of Parties ...............................................1
5 Covenants .............................................................2
6 Termination ...........................................................3
7 Trade Secrets, Non-Solicitation and Related Matters ...................3
8 Successors; Binding Agreement .........................................5
9 Notice ................................................................6
10 Settlement of Claims ..................................................6
11 Modification and Waiver ...............................................6
12 Governing Law .........................................................6
13 Severability ..........................................................6
14 Entire Agreement ......................................................6
15 Headings ..............................................................6
16 Counterparts ..........................................................6
17 Definitions ...........................................................7
</TABLE>
EXHIBIT A TERRITORY
<PAGE> 3
CONSULTING AGREEMENT
This CONSULTING AGREEMENT (this "Agreement") is made by and
between MAXXIS GROUP, INC., a Georgia corporation (the "Company"), and ROBERT P.
KELLY, an individual resident of the State of Georgia (the "Consultant"), as of
this 1st day of September, 1997.
The Company desires to engage the Consultant, and the
Consultant is willing to be engaged by the Company in such capacity on the terms
and conditions herein provided. Certain terms used in this Agreement are defined
in Section 17 hereof.
In consideration of the foregoing, the mutual covenants
contained herein, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto, intending to
be legally bound, hereby agree as follows:
1. Engagement. The Company shall engage the Consultant, and
the Consultant agrees to be engaged by the Company, upon the terms and
conditions set forth herein. The Consultant shall have such duties and
responsibilities ("Duties") as are assigned by the President from time to time.
The Consultant shall devote such portion of his business time (up to and
including his full business time) and such attention, skill and efforts to the
performance of his Duties hereunder as are necessary to competently and
professionally perform and discharge such Duties.
2. Term. Unless earlier terminated as provided herein, the
Consultant's engagement under this Agreement shall be for a continuing term (the
"Term") of one year, which shall be extended automatically (without further
action of the Company or the Consultant) each day for an additional day so that
the remaining term shall continue to be one year; provided, however, that either
party may at any time, by written notice to the other, fix the Term to a finite
term of one year, without further automatic extension, commencing with the date
of such notice.
3. Payment.
a. Effective July 1, 1997, the Company shall pay the
Consultant a fee of $800.00 per week, subject to increase upon the mutual
written agreement of the Company (following specific approval of such increase
by the Company's Board of Directors) and the Consultant.
b. The Consultant may be eligible to receive a performance
bonus based on such criteria as the Board of Directors may determine from time
to time in its sole discretion.
4. Relationship of Parties. The Consultant shall at all times
be and act as an independent contractor, and the Company shall exercise no
control over the activities and operations of the Consultant other than as set
forth herein. The Consultants's Federal Tax I.D. number is ###-##-####. This
Agreement shall not be deemed to create any agency,
<PAGE> 4
employment, partnership or joint venture relationship between the Company and
the Consultant, and the Consultant shall enjoy no fringe benefits accorded to
employees of the Company. Neither party hereto shall have the power of authority
to (and agrees not to attempt to) bind, commit or obligate the other in any
manner whatsoever without the other's prior written consent, or to use the other
party's name in any way not specifically authorized by this Agreement. No
representations of either party shall be binding upon the other party without
the other party's prior written consent.
5. Covenants. The Consultant covenants and agrees, in
addition to the other duties and obligations of the Consultant set forth in the
Agreement, that the Consultant will:
a. bear all costs, expenses and liability relating to his
business and operations, including, but not limited to, the costs and expenses
of providing and maintaining his place of business, the wages and salaries of
his employees, if any, and expenses incurred for or in connection with his
performance under this Agreement;
b. not use any trademarks or tradenames of the Company in any
manner except with the prior written authorization of the Company;
c. maintain within limits specified by the Company (or, in the
absence of any specification by the Company, reasonable and adequate limits)
workers compensation and liability insurance (other than products liability
insurance) in connection with his operations, and to furnish the Company with a
certificate evidencing the required insurance immediately upon the Company's
request;
d. immediately give the Company written notice of any offers,
whether oral or written, received by him, or his agents or employees, during the
term of this Agreement which if accepted, would place the Consultant in
violation of his covenants or agreements hereunder;
e. give the Company notice of any person, firm or entity who
is infringing upon the trademarks, tradenames or other intellectual property of
the Company immediately upon the Consultant's receipt of notice thereof;
f. hold harmless, defend and indemnify the Company and its
officers, directors, employees and agents from and against any and all claims,
damages, losses, injuries, causes of action, demands and expenses, including
reasonable legal fees and expenses, of whatever kind and nature directly or
indirectly arising out of, on account of or resulting from the Consultant's
activities or out of the Consultant's failure to comply with his obligations
under this Agreement; and
g. comply strictly with all rules, regulations, policies and
procedures of the Company applicable to independent contractors as such may be
established by the Company from time to time.
2
<PAGE> 5
6. Termination.
a. The Consultant's engagement under this Agreement may be
terminated prior to the end of the Term only as follows:
(i) upon the death of the Consultant;
(ii) by the Company due to the Disability of the
Consultant upon delivery of a Notice of Termination
to the Consultant;
(iii) by the Company for Cause upon delivery of a Notice of
Termination to the Consultant; and
(iv) by the Company without Cause upon delivery of a
Notice of Termination to the Consultant.
b. If the Consultant's engagement with the Company shall be
terminated during the Term (i) by reason of the Consultant's death or (ii) by
the Company for Disability or Cause, the Company shall pay to the Consultant (or
in the case of his death, the Consultant's estate) within 15 days after the
Termination Date, a lump sum cash payment equal to the Accrued Fees and, if such
termination is other than by the Company for Cause, any accrued performance
bonus.
c. If the Company terminates the Consultant without Cause
pursuant to Section 6(a)(iv) above, the Company shall pay to the Consultant in
cash at the end of each week during the six-month period following the
Termination Date an amount equal to $800.00 The severance fee payments provided
for in this Section 6 shall be in full and complete discharge of any and all
liabilities of the Company to the Consultant and shall be in lieu of any other
severance or termination pay to which the Consultant may also be entitled. The
Consultant shall not be required to mitigate the amount of any payment provided
for in this Agreement by seeking other consulting arrangements or otherwise, and
no such payment shall be offset or reduced by the amount of any compensation or
benefits provided to the Consultant in any subsequent consulting arrangement.
7. Trade Secrets, Non-Solicitation and Related Matters.
a. The Consultant shall not, at any time, either during the
Term of his engagement or after the Termination Date, use or disclose any Trade
Secrets of the Company, except in fulfillment of his duties as the Consultant
during his engagement, for so long as the pertinent information or data remain
Trade Secrets, whether or not the Trade Secrets are in written or tangible form.
b. The Consultant agrees to maintain in strict confidence and,
except as necessary to perform his duties for the Company, not to use or
disclose any Confidential Business Information during his engagement and for a
period of 24 months after the Termination Date.
3
<PAGE> 6
c. Upon termination of the engagement provided for herein, the
Consultant shall deliver to the Company, at the Consultant's expense, all
business records relating to the Company and its affiliates including, without
limitation, all contracts, calendars and other materials relating to the
business records, the Company's business or its customers, including all
physical, electronic and computer copies thereof, whether or not the Consultant
prepared such materials or records himself. Upon such termination, the
Consultant shall retain no copies of any such materials.
d. The Consultant may disclose Trade Secrets or Confidential
Business Information pursuant to any order or legal process requiring him (in
his legal counsel's reasonable opinion) to do so; provided, however, that the
Consultant shall first have notified the Company of the request or order to so
disclose the Trade Secrets or Confidential Business Information in sufficient
time to allow the Company to seek an appropriate protective order.
e. If the Consultant is terminated or resigns for any reason,
then for a period of one year following the Termination Date, the Consultant
shall not (except on behalf of or with the prior written consent of the Company)
either directly or indirectly, on the Consultant's own behalf or in the service
or on behalf of others, (i) solicit, divert, or appropriate to or for a
Competing Business, or (ii) attempt to solicit, divert, or appropriate to or for
a Competing Business, any person or entity that was a customer of the Company or
any of its affiliates on the Termination Date; provided, however, that if the
Consultant is terminated without Cause, then the non-solicit period under this
Section 5(e) shall be for a period of 180 days following the Termination Date.
For purposes of this Agreement, a "customer" refers to any person or group of
persons with whom the Consultant had direct material contact with regard to the
selling, delivery or support of the Company's products and services, including,
servicing such person's or group's account, during the period of two years
preceding the Termination Date.
f. If the Consultant is terminated or resigns for any reason,
then for a period of one year following the Termination Date, the Consultant
will not, either directly or indirectly, on the Consultant's own behalf or in
the service or on behalf of others (i) solicit, divert, or hire away, or (ii)
attempt to solicit, divert, or hire away, any employee of, independent associate
of or consultant to the Company or any of its affiliates engaged or experienced
in the Business, regardless of whether the employee or consultant is full-time
or temporary, the engagement is pursuant to written agreement, or the engagement
is for a determined period or is at will; provided, however, that if the
Consultant is terminated without Cause, then the non-solicit period under this
Section 7(f) shall be for a period of 180 days following the Termination Date.
g. The Consultant acknowledges and agrees that great loss and
irreparable damage would be suffered by the Company if the Consultant should
breach or violate any of the terms or provisions of the covenants and agreements
set forth in this Section 7. The Consultant further acknowledges and agrees that
each of these covenants and agreements is reasonably necessary to protect and
preserve the interests of the Company. The parties agree that money damages for
any breach of clauses (a) through (f) of this Section 7 will be insufficient to
compensate for any breaches thereof, and that the Consultant or any of the
Consultant's affiliates, as the case may be, will, to the extent permitted by
law, waive in any proceeding initiated to enforce such provisions any claim or
defense that an adequate remedy at law exists.
4
<PAGE> 7
The existence of any claim, demand, action or cause of action against the
Company, whether predicated upon this Agreement or otherwise, shall not
constitute a defense to the enforcement by the Company of any of the covenants
or agreements in this Agreement; provided, however, that nothing in this
Agreement shall be deemed to deny the Consultant the right to defend against
this enforcement on the basis that the Company has no right to its enforcement
under the terms of this Agreement.
h. The Consultant acknowledges and agrees that: (i) the
covenants and agreements contained in clauses (a) through (f) of this Section 7
are the essence of this Agreement; (ii) that the Consultant has received good,
adequate and valuable consideration for each of these covenants; (iii) each of
these covenants is reasonable and necessary to protect and preserve the
interests and properties of the Company; (iv) the Company is and will be engaged
in and throughout the Territory in the Business; (v) a Competing Business could
be engaged in from any place in the Territory; and (vi) the Company has a
legitimate business interest in restricting the Consultant's activities
throughout the Territory. The Consultant also acknowledges and agrees that: (i)
irreparable loss and damage will be suffered by the Company should the
Consultant breach any of these covenants and agreements; (ii) each of these
covenants and agreements in clauses (a) through (f) of this Section 7 is
separate, distinct and severable not only from the other covenants and
agreements but also from the remaining provisions of this Agreement; and (iii)
the unenforceability of any covenants or agreements shall not affect the
validity or enforceability of any of the other covenants or agreements or any
other provision or provisions of this Agreement. The Consultant acknowledges and
agrees that if any of the provisions of clauses (a) through (f) of this Section
7 shall ever be deemed to exceed the time, activity or geographic limitations
permitted by applicable law, then such provisions shall be and hereby are
reformed to the maximum time, activity or geographical limitations permitted by
applicable law.
8. Successors; Binding Agreement.
a. This Agreement shall be binding upon and shall inure to the
benefit of the Company, its Successors and Assigns and the Company shall require
any Successors and Assigns to expressly assume and agree to perform this
Agreement in the same manner and to the same extent that the Company would be
required to perform it if no such succession or assignment had taken place.
b. Neither this Agreement nor any right or interest hereunder
shall be assignable or transferable by the Consultant, his beneficiaries or
legal representatives, except by will or by the laws of descent and
distribution. This Agreement shall inure to the benefit of and be enforceable by
the Consultant's legal personal representative.
9. Notice. For the purposes of this Agreement, notices and
all other communications provided for in the Agreement (including the Notice of
Termination) shall be in writing and shall be deemed to have been duly given
when personally delivered or sent by certified mail, return receipt requested,
postage prepaid, addressed to the respective addresses last given by each party
to the other; provided, however, that all notices to the Company shall be
directed to the attention of the President with a copy to the Secretary of the
Company. All
5
<PAGE> 8
notices and communications shall be deemed to have been received on the date of
delivery thereof.
10. Settlement of Claims. The Company's obligation to make the
payments provided for in this Agreement and otherwise to perform its obligations
hereunder shall not be affected by any circumstances, including, without
limitation, any set-off, counterclaim, recoupment, defense or other right which
the Company may have against the Consultant or others. The Company may, however,
withhold from any benefits payable under this Agreement all federal, state, city
or other taxes as shall be required pursuant to any law or governmental
regulation or ruling.
11. Modification and Waiver. No provisions of this Agreement
may be modified, waived or discharged unless such waiver, modification or
discharge is agreed to in writing and signed by the Consultant and the Company.
No waiver by any party hereto at any time of any breach by the other party
hereto of, or compliance with, any condition or provision of this Agreement to
be performed by such other party shall be deemed a waiver of similar or
dissimilar provisions or conditions at the same or at any prior or subsequent
time.
12. Governing Law. This Agreement shall be governed by and
construed and enforced in accordance with the laws of the State of Georgia
without giving effect to the conflict of laws principles thereof. Any action
brought by any party to this Agreement shall be brought and maintained in a
court of competent jurisdiction in State of Georgia.
13. Severability. The provisions of this Agreement shall be
deemed severable and the invalidity or unenforceability of any provision shall
not affect the validity or enforceability of the other provisions hereof.
14. Entire Agreement. This Agreement constitutes the entire
agreement between the parties hereto and supersedes all prior agreements, if
any, understandings and arrangements, oral or written, between the parties
hereto with respect to the subject matter hereof.
15. Headings. The headings of Sections herein are included
solely for convenience of reference and shall not control the meaning or
interpretation of any of the provisions of this Agreement.
16. Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
17. Definitions. For purposes of this Agreement, the
following terms shall have the following meanings:
a. "Accrued Fees" shall mean an amount which shall include
all amounts earned or accrued through the Termination Date but not paid as of
the Termination Date,
6
<PAGE> 9
including (i) fees payable and (ii) reimbursement for reasonable and necessary
expenses incurred by the Consultant on behalf of the Company during the period
ending on the Termination Date.
b. "Business" shall mean the development, marketing or
implementation of a network marketing distribution business, a long distance
reselling business or any other related business which the Company or any of its
affiliates is engaged in as of the Termination Date.
c. The termination of the Consultant's engagement shall be for
"Cause" if it is the result of:
(i) the commission or omission by the Consultant of
a willful or negligent act which causes harm to
the Company;
(ii) the conviction of the Consultant for the
commission or perpetration by the Consultant of
any felony or any act of fraud;
(iii) the failure of the Consultant to devote
sufficient time and attention to the business
as provided in Section 1; or
(iv) the failure of the Consultant to perform his
duties hereunder in a manner satisfactory to
the Company, as determined by the President of
the Company in his sole discretion; provided,
-------- however, that the Consultant shall
have 30 days to cure such ------- failure after
receiving notice from the Company. The Company
shall be obligated to provide only one notice
to Consultant pursuant to this Section
17(c)(iv). Thereafter, the Company may
terminate the Consultant, without the
Consultant having a right to cure, if the
Consultant fails to perform his duties in a
manner satisfactory to the President of the
Company, as determined in his sole discretion.
d. "Competing Business" shall mean any business that, in
whole or in part, is the same or substantially the same as the Business.
e. "Confidential Business Information" shall mean any
non-public information of a competitively sensitive or personal nature, other
than Trade Secrets, acquired by the Consultant, directly or indirectly, in
connection with the Consultant's engagement (including his engagement by the
Company prior to the date of this Agreement), including (without limitation)
oral and written information concerning the Company or its affiliates relating
to financial position and results of operations (revenues, margins, assets, net
income, etc.), annual and long-range business plans, marketing plans and
methods, account invoices, oral or written customer information and personnel
information. Confidential Business Information also includes information
recorded in manuals, memoranda, projections, minutes, plans, computer programs
and records, whether or not legended or otherwise identified by the Company and
its affiliates as Confidential Business Information, as well as information
which is the subject of meetings and discussions and not so recorded; provided,
however, that Confidential Business Information
7
<PAGE> 10
shall not include information that is generally available to the public, other
than as a result of disclosure, directly or indirectly, by the Consultant, or
was available to the Consultant on a non- confidential basis prior to its
disclosure to the Consultant.
f. "Disability" shall mean a physical or mental infirmity
which impairs the Consultant's ability to substantially perform his duties with
the Company for a period of 180 consecutive days, as determined by an
independent physician selected with the approval of both the Company and the
Consultant.
g. "Notice of Termination" shall mean a written notice of
termination from the Company which specifies an effective date of termination,
indicates the specific termination provision in this Agreement relied upon, and
sets forth in reasonable detail the facts and circumstances claimed to provide a
basis for termination of the Consultant's engagement under the provision so
indicated.
h. "Successors and Assigns" shall mean a corporation or other
entity acquiring all or substantially all the assets and business of the Company
(including this Agreement), whether by operation of law or otherwise.
i. "Termination Date" shall mean, in the case of the
Consultant's death, his date of death, and in all other cases, the date
specified in the Notice of Termination.
j. "Territory" shall mean that area specified on Exhibit A
attached hereto.
k. "Trade Secrets" shall mean any information, including but
not limited to technical or non-technical data, a formula, a pattern, a
compilation, a program, a device, a method, a technique, a drawing, a process,
financial data, financial plans, product plans, information on customers or a
list of actual or potential customers or suppliers, which: (i) derives economic
value, actual or potential, from not being generally known to, and not being
readily ascertainable by proper means by, other persons who can obtain economic
value from its disclosure or use; and (ii) is the subject of efforts that are
reasonable under the circumstances to maintain its secrecy.
8
<PAGE> 11
IN WITNESS WHEREOF, the Company has caused this Agreement to be
executed and its seal to be affixed hereunto by its officers thereunto duly
authorized, and the Consultant has signed and sealed this Agreement, effective
as of the date first above written.
MAXXIS GROUP, INC.
ATTEST:
By: /s/ James W. Brown By: /s/ Thomas O. Cordy
-------------------------- --------------------------------
Name: James W. Brown Name: Thomas O. Cordy
Title: Secretary Title: Chief Executive Officer
and President
CONSULTANT
/s/ Robert P. Kelly
-------------------------------------
Robert P. Kelly
9
<PAGE> 12
EXHIBIT A
TERRITORY
30 mile radius from the Company's corporate offices located at 1901
Montreal Road, Suite 108, Tucker, Georgia 30084
<PAGE> 1
EXHIBIT 10.7
===============================================================================
SOFTWARE LICENSE AGREEMENT
===============================================================================
The following document constitutes a Purchase Agreement between:
SUMMIT V, INC., a subsidiary of Jenkon International, Inc., a corporation
organized and existing under the laws of the State of Washington, United States
of America, located at 4601 NE 77TH AVENUE, SUITE 300, VANCOUVER, WA 98662,
hereinafter referred to as Seller, and
IS 14, Inc. (Maxxis Group, Inc.), a corporation organized and existing under the
State of GEORGIA, United States of America, located at 11205 ALPHARETTA HWY,
SUITE G-3, ROSWELL, GA 30076, hereinafter referred to as BUYER.
1. BASIS OF AGREEMENT/GRANT OF LICENSE
For the consideration and under the terms and conditions of this
Software License Agreement (hereinafter "this Agreement"), Licensor
hereby grants and Licensee hereby accepts a perpetual, nonexclusive,
nontransferable license to use the software described in 2. below
(hereinafter, the "Licensed Software"). Licensor reserves all rights
not expressly granted to Licensee. In undertaking and performing this
Agreement, Licensee shall be entitled to act through, in concert with,
or for the benefit of its Affiliates; in this regard, "Affiliate" shall
mean any corporation, partnership or other entity that is in or under
the direct or indirect control of Licensee or of another Affiliate of
Licensee, or any corporation, partnership or other entity that is under
common control with Licensee or another Affiliate, or any successor to
all or substantially all the business of Licensee or successor to all
or substantially all the business of Licensee or such an Affiliate and
"control" shall exist whenever there is an ownership, profits, voting
or similar interest (including right or option to obtain such an
interest) representing at least 30% of the total interests of the
pertinent entity then outstanding (treating as outstanding any
interests obtainable by Licensee or the relevant Affiliate pursuant to
the exercise of the aforementioned rights or options). This provision
shall not be construed to change any restrictions applicable to the
number of CPUs or the locations where the Software may be executed. All
references to use by Licensee shall be construed to permit and include
use by Affiliates or by suppliers, sales agents, customers, management
companies, joint venture partners and other business entities given
access to or use of the software in furtherance of their business with
Licensee or any Affiliates.
2. LICENSEE FEE, PAYMENT SCHEDULE, EFFECTIVE DATE, DESIGNATED SITE AND
COMPUTER:
2.1 LICENSE FEE
<TABLE>
<CAPTION>
=================================================================================================================
Licensed Software Check if Users Fee
Included
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
SUMMIT V BASE PACKAGE CONSISTING OF: X 8 $40,500.00
DISTRIBUTOR TRACKING AND MAINTENANCE MODULE
SALES ORDER PROCESSING MODULE
INVENTORY CONTROL MODULE
COMMISSIONS MODULE*
CUSTOMER SERVICE MODULE
SYSTEM SECURITY MODULE
==================================================================================================================
</TABLE>
<PAGE> 2
<TABLE>
<CAPTION>
=================================================================================================================
Licensed Software Check if Users Fee
Included
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
EXECUTIVE INFORMATION SYSTEM
ACCOUNTS RECEIVABLE
REGIONAL INFORMATION SYSTEM
SALES TAX GST/PST MANAGEMENT MODULE
*Includes 100 hours towards the set-up of the compensation
plan. At this time the plan has not been defined. Should
the set-up require more than ____ hours, then additional
fees will be applied at $100/hour for time in excess of ___
hours.
TOTAL $40,500.00
==================================================================================================================
</TABLE>
2.2 PAYMENT SCHEDULE
<TABLE>
<S> <C> <C>
Deposit of $20,250.00 due upon execution of this Agreement
Payment of $10,125.00 due February 22, 1997.
Balance of $10,125.00 due upon installation of base software package at Licensee Site.
</TABLE>
Any late payment according to the terms set forth in the payment
schedule above shall be subject to a late payment charge of one and one
half percent ( 1 1/2% ) per month, or the maximum allowed by law,
whichever is less, on the past due balance, commencing with the
payment's due date.
2.3 EFFECTIVE DATE
Date: 2/2/97. This is the effective date of this Agreement.
2.4 DESIGNATED INSTALLATION SITE
Licensee address as noted above.
This is the sole physical location at which the Licensee may use the
Licensed Software on Licensee's Computer or computers designated under
Section 2.5 ( the "Designated Computer").
2.5 DESIGNATED COMPUTER
Designated Computer Manufacturer
Computer Model
Serial Number
Buyer may change platforms, operating systems or equipment without
upgrade charge.
2.6 MOVING
Licensee may move the Designated Computer and Licensed Software to a
new site and use the Designated Computer and Licensed Software at the
new site provided Licensee notifies Licensor of the new location, in
writing, at least 48 hours prior to moving the Designated Computer and
Licensed Software.
2
<PAGE> 3
3. MANUALS
Licensor will provide one full set of the SUMMIT V Licensed Software
manuals. Additional manuals can be purchased as desired.
4. SOFTWARE LICENSE
4.1 OWNERSHIP OF LICENSED SOFTWARE
Licensor is and shall remain sole owner of the Licensed Software and of
all information related to the Licensed Software, including, but not
limited to source code, object code, algorithms, screen displays, file
designs, report formats, and documentation (all of which are deemed as
"Confidential Information") furnished in connection with this
Agreement, and of all right, title, interest, and goodwill related
thereto.
4.2 TITLE AND OWNERSHIP RIGHTS INDEMNIFICATION
4.2.1 Licensee acknowledges that Licensor is the sole owner of the
Licensed Software and all past, present, and future versions
and releases thereof, including any and all modifications
thereof made by Licensor and all patents, copyrights, and
other proprietary rights relating thereto.
4.2.2 Licensor shall defend Licensee against suits, proceedings at
law and any and all liability or expense arising out of or in
connection with, any claim that the use of the Licensed
Software and any module described in 2. hereof, or any module
licensed at a later date covered as an item of the Licensed
Software, infringes on any existing patent, copyright or other
property right and, subject to the limitation of liability
contained herein. Licensor will pay all costs, charges and
attorney's fees that a court finally awards as a result of
such claim. To qualify for such defense and payment, the
Licensee must:
4.2.2.1 Give Licensor prompt, written notice of any such
claim; and
4.2.2.2 Allow Licensor to control, and fully cooperate with
Licensor in the defense and all related settlement
negotiations.
4.3 TERM AND TERMINATION
The term of Licensee's license under this Agreement shall commence upon
the Effective Date, and shall remain in force perpetually so long as
Licensee is not in default under this Agreement. Should Licensee
terminate or if default results in termination, Licensee's license to
use the licensed software shall terminate, and Licensee shall do the
following:
4.3.1 Delete and destroy or return to Licensor all copies of the
Licensed Software and not retain any copies of the Licensed
Software.
4.3.2 Assist the Licensor in changing the renewal code to reflect
the termination date as soon as termination notice is given by
Licensor or Licensee.
4.3.3 Confirm in writing that it has complied with the terms of this
paragraph within thirty days of termination of the Agreement.
The terms and conditions pertaining to the nondisclosure of the
Licensed Software will remain in effect beyond default and/or
termination of Licensee's license.
3
<PAGE> 4
4.4 SOFTWARE WARRANTY
EXCEPT AS IS EXPRESSLY PROVIDED FOR HEREIN, LICENSOR MAKES NO WARRANTY,
EXPRESSED OR IMPLIED RESPECTING THE LICENSED SOFTWARE, INCLUDED, BUT
NOT LIMITED TO THE IMPLIED WARRANTIES OF MERCHANTABILITY OR FITNESS FOR
A PARTICULAR PURPOSE. A WARRANTY IS AVAILABLE FROM LICENSOR UNDER A
SOFTWARE MAINTENANCE AGREEMENT.
4.5 LIMITATIONS OF LIABILITY
In all situations involving performance or nonperformance of the
Licensed Software furnished hereunder, the entire liability of the
Licensor to the Licensee, or to any third party, and the Licensee's, or
any third party's exclusive remedy shall be as follows:
4.5.1 The correction by Licensor of Licensed software defects, or,
4.5.2 If, after reasonable efforts, Licensor is unable to make the
unmodified Licensed Software operate as documented, Licensee
shall be entitled to recover actual damages to the limits as
set forth in this section. For any other claim concerning
performance or nonperformance of Licensed Software pursuant to
or in any other way related to the subject matter of this
Agreement and any supplement hereto, the Licensee shall be
entitled to recover actual damages to the limits set forth in
this section.
4.5.3 Licensor's liability for damages to the Licensee for any cause
whatsoever, and regardless of the form of action, whether in
contract or in tort, including negligence, shall be limited to
the total amounts paid to Licensor under this Agreement.
4.5.4 In as much as Licensee shall prepare commission checks from
time to time, Licensee shall accept full responsibility to
audit and verify all commission calculation amounts before
sending any commission check to any person. In the event an
error is found, whether before or after any commission check
is sent to any person, Licensor's exclusive liability shall be
to correct the software programs in a timely fashion. If
Licensee sends incorrect commission checks to any person,
Licensor shall not be liable for loss of profits or damages of
any kind resulting from the incorrect calculations of
commission amounts.
4.5.5 No action regardless of form, arising out of a claim of a
breach of this Agreement may be brought by either party more
than one (1) year after the date of the alleged breach, except
that an action for nonpayment will be limited only by the
statute of limitations of the State of Washington
4.6 NON-DISCLOSURE OF LICENSED SOFTWARE AND CONFIDENTIAL INFORMATION
4.6.1 Licensee is prohibited from distributing, transferring
possession of, or otherwise disclosing or making available the
Licensed Software or Confidential Information to any person
(other than Consultants as described herein) and from
reproducing or installing the Licensed Software for use on any
computer other than the Designated Computer. Licensee shall
exercise the highest degree of care in safeguarding the
Licensed Software and Confidential Information against loss,
theft, or other deliberate or inadvertent disclosure and shall
generally take all steps necessary or that are requested by
Licensor to ensure maintenance of confidentiality.
4.6.2 Section Removed
4.6.3 Licensee's obligations under this section shall survive any
termination or breach of this Agreement. VIOLATION OF ANY
PROVISION IN THIS SECTION SHALL BE THE BASIS FOR THE IMMEDIATE
TERMINATION OF THIS AGREEMENT.
4
<PAGE> 5
4.6.4 If Licensee engages Consultants to assist in the adaptation
and modification of the Licensed Software, each Consultant
shall sign a confidentiality and nondisclosure agreement in a
form acceptable to Licensor, prior to any such work being
carried out.
4.7 MODIFICATION AND ADAPTATION OF LICENSED SOFTWARE
Licensee may modify the Licensed Software, but only for Licensee's own
use. Any portion of the Licensed Software included or merged into other
software, and Licensed Software modified by Licensor, Licensee or any
other party shall at all times remain subject to all terms of this
License Agreement. Should Licensee modify the Licensed Software,
Licensor shall not be responsible for any failure, damages, or injuries
resulting from the use of such modified Licensed Software. Absent
written agreement to the contrary, any modification or merger of the
Licensed Software by the Licensee directly or indirectly may result in
the voiding of any warranties made herein and may void this agreement,
at the option of Licensor. On Licensor's request, Licensee shall
furnish Licensor with a copy of all such modifications, adaptations,
and translations, including source code. Licensor shall have a
perpetual, royalty-free, and nonexclusive right to use and distribute
any such modification, adaptation, or translation developed by Licensee
or any of Licensee's consultants.
4.8 NONDISCLOSURE
4.8.1 Licensee recognizes and acknowledges that breach of the
confidentiality and nondisclosure provisions of this Agreement
by Licensee, its employees, Consultants, agents,
representatives, or persons authorized to have access to the
Licensed Software will cause Licensor irreparable damage which
cannot be readily remedied in damages in an action at law,
thereby entitling Licensor, in addition to any other remedies
available to it, to have injunctive relief against Licensee.
4.8.2 The Licensee shall take all reasonable steps necessary to
ensure that the Licensed Software or Confidential information
is not made available in any form to any person, persons or
company not licensed by this Agreement. In particular, the
Licensee recognizes the proprietary nature of the Licensed
Software and Confidential Information and agrees to make no
copies, with the exception of normal backup requirements, of
the Licensed Software and Confidential Information or any of
its components by any means or for any purpose whatsoever,
except as expressly stated in this License Agreement, without
prior written approval of the Licensor.
4.9 PROTECTION OF SOURCE CODE
This section applies only if Source Code is provided to Licensee.
4.9.1 Source Code, being Confidential Information, is subject to all
confidentiality and nondisclosure provisions of this
Agreement. Any new source code created or derived from
existing Source Code by Licensee or any Consultant shall be
for Licensee's internal use only and shall remain subject to
all confidentiality and nondisclosure provisions hereof.
4.9.2 Licensee will not allow anyone to attempt to re-create Source
Code from Object Code by reconstruction, reverse compiling or
reverse engineering.
4.9.3 Under this Agreement a Source Code License is not available to
Buyer
4.9.4 This Agreement is contingent upon execution of a Source Code
Agreement between both Buyer and Seller within 90 days.
4.10 COPYRIGHT AND COPYRIGHT NOTICES
Copyright in the Licensed Software is and shall remain in Licensor's
name. Licensee shall include and cause to be included in all
modifications, adaptations, and translations of the
5
<PAGE> 6
Licensed Software, Licensor's notice of copyright and of proprietary
interest, in English and translated into foreign language adaptation.
No such notices of copyright or of proprietary interest shall be
deleted or modified. Licensee shall, at Licensor's reasonable request,
promptly execute and sign any and all applications, including but not
limited to copyright applications, and any and all assignments, and
other instruments of all modifications, adaptations and translations of
the Licensed Software it makes or causes to be made, and Licensee may
freely use them, but for Licensee's internal use only and not by any
other person. All such modifications, adaptations, and translations
shall remain subject to all confidentiality and nondisclosure
provisions of this Agreement.
4.11 TAXES, DUTIES, ETC.
The license fees stated herein are for the defined Software only and
are exclusive of all taxes, duties, and other governmental charges. The
Licensee agrees to pay any and all taxes, duties, and other
governmental charges on the Licensed Software however designated or
levied whether or not specifically included in this Agreement,
excluding Licensor's income taxes.
4.12 ACCEPTANCE/DELIVERY/DEPOSIT
4.12.1 Acceptance: Licensor shall deliver the current general release
version of Licensed Software in magnetic form, tape or floppy
disk, compatible with the Designated Computer within 14 days
of the on-site installation, unless Licensee and Licensor
agree upon another date in writing. It shall be considered
that the Licensed Software programs have been accepted by the
Licensee when the programs have been loaded on the designated
computer and the main menu for the licensed software can be
displayed on a screen.
4.12.2 Delivery: The date the Licensee has possession of the Licensed
Software.
4.12.3 Deposit: Licensee recognizes that any deposit paid under this
agreement will be utilized immediately in preparation of
installation, set up of documentation and administration, and
order processing costs. Should Licensee cancel this agreement
Licensor reserves the right to charge Licensee at Licensor's
current rates or a minimum of 30 percent of the total initial
license fee, whichever is greater, for any expenses incurred
between Licensee signing contracts and canceling same. The
aforementioned expenses will be deducted from any deposits
paid.
4.13 ASSIGNMENT
This Agreement is assignable by Licensor upon written notice to
Licensee. This Agreement is not assignable by Licensee without written
consent of Licensor. In the event of assignment, the promises and
covenants herein contained shall continue to be binding upon the
original parties.
4.14 LIMITATION OF USE
Licensee shall not, without the prior written permission of Licensor,
use the Licensed Software except to process the normal and regular
business information of Licensee. Licensee is expressly prohibited from
using the Licensed Software to process data from other businesses,
parties, or corporations for compensation of any kind whatsoever
without the expressed written consent of Licensor in advance.
4.15 DEFINITIONS
4.15.1 "Software": Computer programs, routines, and other proprietary
system information, which when applied to a computer would
enable or permit the same to perform the intended tasks. This
definition of software fully contemplates that the computer
programs may be transferred or transposed between or among
various typed listings, paper printouts, magnetic media and
may be stored in computer language and may be in the form of
regularly typed listings, paper printouts, or magnetic media,
and may be
6
<PAGE> 7
stored in memory devices of various types including random
access memory, read only memory, disks or diskettes, and the
like.
4.15.2 "Confidential Information": Licensed Software and all
information related to the Licensed Software, including, but
not limited to source code, object code, algorithms, screen
displays, file designs, report formats, and documentation.
4.15.3 "Consultant": a person or company under Licensee's direction
or control, but not an employee of the Licensee, who shall be
given access to the Source Code, Software, or Confidential
Information. Consultants are required to sign a
confidentiality and nondisclosure agreement with Licensor
before they are given access to the Software by Licensee.
4.15.4 "Copy": Any reproduction of any of the software, in whole or
in part, in any form whatsoever, including but not limited to
printouts of any form in any computer language. Also included
are recordings or reproductions on any recordable material
including but no limited to magnetic tapes, disks, diskettes,
in any language or form.
4.15.5 "Use": Operating the Licensed Software on the designated
computer at the Designated Computer Site for the express
purpose of fulfilling the regular and normal business
activities and duties of the Licensee.
4.15.6 "Source Code": The actual words, phrases, sentences, and
paragraphs of the Licensed Software that comprise the program
commands that when operated on by the computer, cause the
computer to act according to said commands. Some Source Code
must be compiled translated by the computer into machine
readable command code.
5. GENERAL:
5.1 DEFAULT
It is a default under this Agreement if any one or more of the
following events occur and Licensor is adversely affected:
5.1.1 Licensee breaches any one or more of the covenants, terms or
conditions of this Agreement to be paid, performed, or
complied with by Licensee; or
5.1.2 Licensee becomes bankrupt or insolvent
In the event that a default on the payment terms occur on this
agreement, Licensor may exercise his rights of enforcement under the
Uniform Commercial Code in force in the State in which the Licensee
resides at the date of this security agreement and, in conjunction
with, addition to, or substitution for those rights, at Licensor's
discretion, may
5.1.3 Section Removed
5.1.4 Enter upon Licensee's premises to take possession of,
assemble, and collect the Collateral or render it unusable.
5.2 SECTION REMOVED
5.3 NOTICES
All other notices required hereunder shall be given in writing and
shall be delivered or sent by postage prepaid mail addressed to the
parties at their addresses first mentioned, or at such other addresses
as either party may designate to the other by notice as provided in
this section. Notices shall be deemed effective upon their deposit into
the U.S. Mail, properly addressed and postage prepaid.
7
<PAGE> 8
5.4 INVALID PROVISIONS
If any provision of this Agreement be invalid or unenforceable, then
the remainder of this Agreement shall not be affected thereby.
5.5 ENTIRE AGREEMENT
This Agreement supersedes all prior agreements, letters of intent,
negotiations, representations and proposals, written or oral, requests
for proposals, or previous discussions of the parties. There have been
no other promises or inducements, oral or written, given by any party
to the other to enter into this Agreement. The parties agree that this
Agreement or any term or provision thereof shall not be modified in any
manner whatsoever without the written authorization of both parties
hereto and signed by both an authorized representative of Licensee and
by an authorized representative of Licensor.
5.6 ARBITRATION
If any controversy or dispute arises out of this Agreement, or the
breach thereof, the parties will endeavor to settle such dispute
amicable. If the parties shall fail to settle any dispute, such dispute
shall be finally settled by binding arbitration conducted in Clark
County, Washington. All arbitration shall be in accordance with the
then existing Commercial Arbitration rules of the American Arbitration
Association, and judgment upon the award rendered by the competent
jurisdiction to obtain temporary relief pending resolution of the
dispute through arbitration. The parties hereby agree that service of
any notices in the course of such arbitration at their respective
addresses as provided for in this Agreement shall be valid and
sufficient. If either party seeks to enforce its rights under this
Agreement, the non-prevailing party shall pay all costs and expenses
incurred by the prevailing party.
5.7 ATTORNEY FEES
The prevailing party in any arbitration or lawsuit concerning this
Agreement or any matter related thereto shall be entitled to any award
of reasonable attorney fees and costs from the other, including fees
incurred through trial, appeal or in bankrupt proceedings. Licensor
shall be entitled to recover reasonable attorney's fees incurred with
regard to collection of payments due to repossession or disposal of
collateral, without regard to the institution of legal proceedings.
5.8 HIRING OF JENKON PERSONNEL
5.8.1 Licensee understands that significant time and resources have
been invested by Licensor into selecting, training, educating,
and developing each Licensor employee. Licensee agrees,
therefore, that significant harm and damage would result to
Licensor in the event Licensor's employee was to terminate
employment with Licensor to work under the employ of Licensee,
whether as an employee or as a Consultant.
5.8.2 Licensee agrees that no discussion of employment or
compensation in any form whatsoever, or the possibility of the
same including offers of employment, compensation, or other
arrangements of forming a business relationship directly with
any employee will be made by Licensee or his representative or
agent unless express written permission has been granted by
Licensor in advance. The parties hereto do hereby acknowledge
that Licensor would suffer damage in the event that an
employee of Licensor were to become employed in any way by
Licensee within one (1) year of the employees termination from
Licensor.
5.8.3 The parties further agree that it would be difficult to
ascertain with any degree of certainty the amount of damages
which would be sustained by Licensor. In light of the
foregoing, the parties hereto do hereby agree that in the
event an employee of Licensor does become so employed by
Licensee within the time period set forth herein, Licensee
8
<PAGE> 9
shall pay to Licensor as liquidated damages an amount equal to
twelve (12) months of the employee's last salary at Licensor,
which sum shall be compensation to Licensor for the
inconvenience, disruption, recruitment, training, education
and development of the replacement employee. Said payment by
Licensee to Licensor shall be made within thirty (30) days of
the date on which the former employee of Licensor commences
employment with Licensee.
5.8.4 Licensor warrants that no known viruses are contained in the
Licensed Software.
5.9 MILLENNIUM COMPLIANCE
Seller warrants that Licensed Software shall function in accordance
with the Specifications before, during, and after January 1, 2000,
without any change in operations associated with the advent of the new
century.
6. AUTHORIZED SIGNATURE
This Agreement shall be binding upon Licensee and Licensor only at such
time as it has been signed by an Authorized Officer of the Licensee and
by an Officer, identified below, of Licensor.
<TABLE>
===========================================================================================================
<S> <C> <C>
ACCEPTED BY: Summit V, Inc. IS 14, Inc.
(Maxxis Group, Inc.)
- -----------------------------------------------------------------------------------------------------------
NAME (PLEASE PRINT) Brian W. Maggs James W. Brown
- -----------------------------------------------------------------------------------------------------------
NAME (SIGNATURE) /S/ Brian W. Maggs /s/ James W. Brown
- -----------------------------------------------------------------------------------------------------------
TITLE: Executive Vice President President
- -----------------------------------------------------------------------------------------------------------
DATE: 2/10/97 2/2/97
===========================================================================================================
</TABLE>
9
<PAGE> 1
EXHIBIT 10.8
===============================================================================
SOFTWARE SERVICE AGREEMENT
===============================================================================
The following document constitutes a Software Service Agreement between:
SUMMIT V, INC., a subsidiary of Jenkon International, Inc., a corporation
organized and existing under the laws of the State of Washington, United States
of America, located at 4601 NE 77TH AVENUE, SUITE 300, VANCOUVER, WASHINGTON
98662, hereinafter referred to as Seller, and
IS 14, INC. (MAXIS GROUP INC.), a corporation organized and existing under the
laws of the State of GEORGIA, United States of America, located at 11205
ALPHARETTA HWY, SUITE G-3, ROSWELL, GEORGIA 30076, hereinafter referred to as
Buyer.
1. BASIS OF AGREEMENT:
Buyer has engaged Seller to provide certain software as described
further below with respect to the Summit V Jenkon Software Base System
and related modules (hereinafter referred to as the "Software") which
are the subject of a Software License Agreement dated as of 2/2/97
between Seller and Buyer.
2. PRICE AND PAYMENT:
2.1 PRICE:
Buyer shall pay annually to Seller for Covered Service as defined, the
sum of $6,075.00 in U.S. Funds.
2.2 PAYMENT SCHEDULE:
Seller will invoice Buyer in advance for each period of Covered
Service. Payments are required to be received by Seller prior to the
start of the period to insure continued service.
Payment Schedule: Payment of $506.00 Monthly
2.3 EFFECTIVE DATE
Date: 2/2/97. This is the effective date of this Agreement.
2.4 TAXES:
All service charges are exclusive of applicable federal, state or local
taxes. Buyer shall pay or reimburse Seller for any such taxes to the
invoices submitted to Buyer by Seller.
2.5 CHANGES IN SERVICE RATE:
Seller may change the service charges for Covered Service anytime with
thirty (30) days prior written notice to the Buyer. Buyer has the right
to cancel this Agreement within thirty (30) days of receiving such
notice with a written cancellation notice. Seller shall not increase
charges more than 10% of the price paid by Seller in accordance with
Section 2.1.
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<PAGE> 2
3. COVERED SERVICE:
3.1 COVERED SERVICE:
The term "Covered Service" as used herein means the periodic service
Seller deems reasonable, appropriate and necessary to keep Buyer's
Software performing as documented in the documentation manuals provided
by Seller to Buyer. Covered Service shall be provided during Seller's
normal business hours on all weekdays, Monday through Friday. Buyer
shall have access to Emergency Hotline Support outside of normal
business hours and during holidays. Seller shall provide to Buyer under
the terms of this Agreement, the following:
3.1.1 Continuing warranty that the licensed programs will perform
substantially as described in the written manuals for the
version of Licensed Software in use.
3.1.2 Free telephone support service during Seller's normal business
hours.
3.1.3 Free access to 24 hour Emergency Hotline Support Services.
3.1.4 New enhancements and upgrades to Licensed Software. Major
enhancements that are priced separately to other Buyers who
purchase similar Software from Seller will be made available
to Buyer at costs charged by Seller to such other customers.
Where Buyer has implemented special changes to existing
programs, the new enhancements may required special
installation work to incorporate the Buyer's special changes.
In such cases, Seller will install the enhancements at buyers
request with special changes incorporated, and charge the fees
based on Seller's current rates.
3.1.5 New versions of computer equipment operating system tapes as
they are made available to Seller from the equipment vendors.
Seller will provide installation instructions for each tape.
3.1.6 Manufacturer/vendor technical notes as they are made available
to Seller. These notes often describe operating system
problems and solutions that the vendor has discovered and
other information of a technical nature that may assist Buyer
to keep the computer equipment operational and operating
system Software at the most current version releases and
functionality.
3.1.7 Seller will, from time to time, advise Buyer of new devices,
software programs, or other information that will aid Buyer in
the ongoing utilization of the computer system.
3.1.8 Patches and fixes to the Software as they are made generally
available by Seller.
3.1.9 System efficiency evaluation. Performed and reported as
needed.
3.1.10 Free Software program updates to generate 1099 and T4A forms
for U.S. and Canadian tax reporting.
3.1.11 Repair or correction of Software programming due to special
changes made by Seller at Buyer's request.
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<PAGE> 3
3.2 EXCLUSIONS FROM COVERED SERVICE
Covered Service does not include the following:
3.2.1 Those items listed under 3.4, "Billable Service Call".
3.2.2 Correction of Buyer data caused by Buyer's error or equipment
failure.
3.2.3 Work on Software not sold and licensed to Buyer by the Seller.
3.2.4 Buyer shall advise Seller in writing of any modifications made
to the Software. Seller shall not be responsible for
maintaining Buyer modified portions of the Software.
Corrections or defects traceable to Buyer's errors or system
changes will be billed at Seller's standard time and materials
rate.
3.3 TRAINING
Seller reserves the right to require that Buyer undertakes further
training if the number of requests for support are excessive. If
further training is not undertaken, additional support fees may be
incurred by Buyer.
3.4 BILLABLE SERVICE CALL
Billable service call will be any service, other than Covered Service,
performed by Seller and includes, but is not limited to, the following
types of service:
3.4.1 Work requested by the Buyer for the creation of new software
programs, or the enhancement or customizing, of existing
Software programs.
3.4.2 Training, consulting, or advising Buyer on matters not covered
under Covered Service.
3.4.3 Correcting or changing data at the request of Buyer.
3.4.4 Work requested by Buyer to install new enhancements to
previously changed or customized programs where the new
version of the programs does not contain the special change or
customized feature previously installed for Buyer.
3.4.5 Work required to correct the Operating System or Licensed
Software which has been modified by the Buyer or a third
party.
3.4.6 Work required to correct problems which would not have
occurred if the current release of the Software, which had
been offered to the Buyer, was being used by Buyer but the
Buyer elected not to load it on the system.
3.4.7 Revisions to the operating system and the application Software
that are made available to the Seller by the Manufacturer for
a fee, are excluded from being provided at no charge and will
be made available to Buyer for a fee.
3.4.8 Assistance with setup of peripheral devices purchased from
Seller.
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<PAGE> 4
3.5 BILLABLE SERVICE TERMS AND RATES
Billable service will be charged to the Buyer according to the Seller's
billable rates in force at the time the service is carried out. All
charges for billable service shall be paid by Buyer within the terms
set in the sales order for any work sold on a sales order, otherwise
within the due date on the invoice. Failure to comply with this shall
cause a default of this Agreement. Interest will be charged on the past
due balances at an annualized rate of 18% (1.5% per month) or the
maximum allowed by law, whichever is less.
Billable service calls, as defined herein, performed at Buyer's
location will be charged at the minimum rate of $800 for the first
eight hours. Each additional hour beyond the first eight will be
charged at the Seller's current billable rates, plus transportation,
lodging, and other related business expenses.
3.6 TAXES
All service charges are exclusive of applicable federal, state or local
taxes. Buyer shall pay or reimburse Seller for any such taxes to the
invoices submitted to Buyer by Seller.
4. TERM AND TERMINATION:
This Agreement shall become effective on the Effective Date of this
Agreement, and unless sooner terminated as hereinafter provided, shall
remain in full force and effect for an initial term of one (1) year
from such date, and then automatically renewed each subsequent year
unless otherwise terminated by either party by written notice delivered
at least 30 days in advance. Automatic renewal shall not occur if Buyer
is in default of a material term of the Agreement.
Buyer, after the initial term, may terminate this Software Service
Agreement at any time upon thirty (30) days written notice. Subject to
Sections 4.1-4.7 below, Seller may not elect to terminate for a minimum
of five years.
Seller shall have the right at its option to immediately terminate this
Agreement by written notice to Buyer in the event of:
4.1 An assignment for the benefit of creditors, or
4.2 Admitted insolvency, or
4.3 Dissolution or loss of charter by forfeiture, or
4.4 Being adjudged bankrupt or insolvent by a United States Court
of competent jurisdiction, or
4.5 A trustee or receiver being appointed for all assets or any
substantial proportion thereof, or
4.6 Filing a voluntary petition under any bankruptcy or other
similar law providing for reorganization, dissolution, or
liquidation, or
4.7 Consenting to the appointment of a receiver or a trustee for
all assets of any substantial part thereof.
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<PAGE> 5
5. LIMITATION OF LIABILITY:
5.1 LIMITATIONS
In all situations involving performance or nonperformance of the
Licensed Software furnished hereunder, Licenser's entire liability and
the Licensee's exclusive remedy shall be as follows:
5.1.1 Buyer agrees that any damages resulting from Seller's
liability hereunder would be difficult to calculate with
certainty and, therefore, agrees that Seller's total liability
hereunder, including but not limited to any negligence of
Seller, shall not exceed the amount paid for Covered Service
by Buyer to Seller for the three (3) months immediately
preceding the occurrence giving rise to any claim by Buyer and
said amount shall constitute the maximum amount of liquidated
damages. In no event, will Seller be liable for any loss of
data, loss of profit, or liability to third parties, however
caused.
5.1.2 No action regardless of form, arising out of a claim of a
breach of this Agreement may be brought by either party more
than one (1) year after the date of the alleged breach, except
that an action for nonpayment will be limited only by the
statute of limitations of the State of Washington
6. GENERAL:
6.1 DEFAULT
It is a default under this Agreement if any one or more of the
following events occur and Seller is adversely affected:
6.1.1 Buyer breaches any one or more of the covenants, terms or
conditions of this Agreement to be paid, performed, or
complied with by Buyer; or
6.1.2 Buyer becomes bankrupt or insolvent
6.2 NOTICES
All notices required hereunder shall be given in writing and shall be
personally delivered or sent by postage prepaid mail addressed to the
parties at their addresses first mentioned, or at such other addresses
as either party may designate to the other by notice as provided in
this section. Notices shall be deemed effective upon their deposit into
the U.S. Mail, properly addressed and postage prepaid.
6.3 INVALID PROVISIONS
If any provision of this Agreement be invalid or unenforceable, then
the remainder of this Agreement shall not be affected thereby.
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(360) 256-8099 Fax January 30, 1997
<PAGE> 6
6.4 ENTIRE AGREEMENT
This Agreement supersedes all prior agreements, letters of intent,
negotiations, representations and proposals, written or oral, requests
for proposals, or previous discussions of the parties. There have been
no other promises or inducements, oral or written, given by any party
to the other to enter into this Agreement. The parties agree that this
Agreement or any term or provision thereof shall not be modified in any
manner whatsoever without the written authorization of both parties
hereto and signed by both an authorized representative of Buyer and by
an authorized representative of Seller.
6.5 ARBITRATION
If any controversy or dispute arises out of this Agreement, or the
breach thereof, the parties will endeavor to settle such dispute
amicably. If the parties shall fail to settle any dispute, such dispute
shall be finally settled by binding arbitration conducted in Clark
County, Washington. All arbitration shall be in accordance with the
then existing Commercial Arbitration rules of the American Arbitration
Association, and judgment upon the award rendered by the arbitrators
may be entered in any court having jurisdiction thereof, provided that
nothing in this section shall prevent a party from applying to a court
of competent jurisdiction to obtain temporary relief pending resolution
of the dispute through arbitration. The parties hereby agree that
service of any notices in the course of such arbitration at their
respective addresses as provided for in this Agreement shall be valid
and sufficient. If either party seeks to enforce its rights under this
Agreement, the non-prevailing party shall pay all costs and expenses
incurred by the prevailing party.
6.6 ATTORNEY FEES
The prevailing party in any arbitration or lawsuit concerning this
Agreement or any matter related thereto shall be entitled to any award
of reasonable attorney fees and costs from the other, including fees
incurred through trial, appeal or in bankrupt proceedings. Seller shall
be entitled to recover reasonable attorney's fees incurred with regard
to collection of payments due to repossession or disposal of
collateral, without regard to the institution of legal proceedings.
7. AUTHORIZED SIGNATURE:
This Agreement shall be binding upon Buyer and Seller only at such time
as it has been signed by an Authorized Officer of the Buyer and by an
Officer, identified below, of Seller.
<TABLE>
<CAPTION>
===========================================================================================================
ACCEPTED BY: SUMMIT V, INC. GLOBAL ALLIANCE
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
NAME (PLEASE PRINT) Brian W. Maggs James W. Brown
(Maxxis Group, Inc.)
- -----------------------------------------------------------------------------------------------------------
NAME (SIGNATURE) /S/ Brian W. Maggs /s/ James W. Brown
- -----------------------------------------------------------------------------------------------------------
TITLE: Executive Vice President President
- -----------------------------------------------------------------------------------------------------------
DATE: 2/10/97 2/2/97
===========================================================================================================
</TABLE>
Summit V, Inc. Global Alliance
(360) 256-4400 Phone Software Service Agreement Page 6
(360) 256-8099 Fax January 30, 1997
<PAGE> 1
EXHIBIT 10.9
===============================================================================
EQUIPMENT PURCHASE AGREEMENT
===============================================================================
The following document constitutes a Purchase Agreement between:
SUMMIT V, INC., a subsidiary of Jenkon International, Inc., a corporation
organized and existing under the laws of the State of Washington, United States
of America, located at 4601 NE 77TH AVENUE, SUITE 300, VANCOUVER, WA 98662,
hereinafter referred to as Seller, and
ISM, Inc. (Maxxis Group, Inc.), a corporation organized and existing under the
State of GEORGIA, United States of America, located at 11205 ALPHARETTA HWY,
SUITE G-3, ROSWELL, GA 30076, hereinafter referred to as BUYER.
1. BASIS OF AGREEMENT
Buyer agrees to purchase the equipment identified herein, and Seller
agrees to sell the respective specified products listed at the
Agreement price in Paragraph 3.1 as agreed upon in the Terms and
Conditions of this Equipment Purchase Agreement.
2. HARDWARE EQUIPMENT
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
LIST OF EQUIPMENT PRICE
- --------------------------------------------------------------------------------------------------------------------
<S> <C>
MONOLITH MARQUIS POWER SERVER $14,750.00
1 Intel 586/200mhz Pentium Pro Processor
1 SVGA 14' Color System Monitor and 101 -Key Keyboard
1 2.0 GB Hard Disk
1 1.44 MB Diskette Drive
1 32MB RAM
1 2 Serial Ports
1 Parallel Printer Port
1 SmartSource UPS 650
1 2.5 Gb 1/4 Tape Back-Up System
1 16 - Port Mux
1 1 year On-Site Maintenance
1 Support Modem with Cable
1 On-Site Installation
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
3. PRICE AND PAYMENT SCHEDULE
3.1 The stated price that Buyer agrees to pay Seller for the full
performance of this Agreement is the sum of: $14,750.00
3.2 PAYMENT SCHEDULE
<TABLE>
<S> <C> <C>
Deposit of $7,375.00 due upon execution of this Agreement.
Payment of $3,688.00 due February 22, 1997.
Balance of $3,688.00 due upon installation of base hardware package at
Licensee site.
</TABLE>
Any late payment according to the terms set forth in the payment
schedule above shall be subject to a late payment charge of one and one
half percent (I 1/2%) per month, or the maximum allowed by law,
whichever is less, on the past due balance, commencing with the
payment's due date.
Summit V, Inc. Global Alliance
(360) 256-4400 Phone Equipment Purchase Agreement Page 1
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<PAGE> 2
4. EFFECTIVE DATE
Date 2/2/97. This is the effective date of this Agreement.
5. HARDWARE PURCHASE
5.1 DELIVERY/DELAYS
The Seller shall deliver the equipment in conjunction with the
Manufacturer's production schedule; and in any case, no later that
sixty days. Delivery shall be the date on which:
- The Equipment arrives at the Buyer's installation address, or
- The Manufacturer delivers the product to the Buyer's freight
carrier, or
- The Buyer takes possession from the Seller's freight carrier.
5.2 WARRANTIES
The equipment purchased pursuant to this Agreement is manufactured by a
vendor other than Seller, and any warranties for the equipment
specified herein shall be only as may be provided by the
vendor/manufacturer, SELLER MAKES NO WARRANTIES, EITHER EXPRESSED OR
IMPLIED, WITH RESPECT TO SUCH EQUIPMENT, INCLUDING, BUT NOT LIMITED TO,
THE IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR
PURPOSE.
Seller shall assign to Buyer the benefits of the vendor/manufacturer's
warranty which Seller may receive from vendor/manufacturer with respect
to such equipment. Seller will furnish Buyer with a copy of the
standard warranty which may be applicable to the machine from the
vendor/manufacturer. Seller agrees to test such equipment and process
all returns or warranty.
Seller agrees to take no action nor fail to take any action which would
make vendors/manufacturers warranty inapplicable to the Buyer unless
requested to do so by the Buyer.
5.3 EQUIPMENT ACCEPTANCE
Acceptance takes place when the Hardware has been installed and the
Operating System software has been loaded either by Buyer, or by
Seller, or by Manufacturer's Service Technician. Acceptance for
peripheral equipment, not a part of the system equipment, such as video
terminals, printers, modems, occurs when said peripheral equipment is
received by Buyer. Title to the equipment will be delivered to Buyer
upon receipt of payment in full.
5.4 DEPOSIT AND RESTOCKING FEES
Buyer recognizes that any deposit paid under this Agreement will be
withheld as down payment for equipment ordered by Seller for Buyer.
Should Buyer cancel this Agreement, any deposit refunded under this
Agreement will be subject to a deduction of a minimum of $1,500, actual
costs incurred by Seller, or 10% of the value of the equipment as per
this Agreement, whichever is the greater.
The equipment price stated herein is exclusive of all taxes, duties and
other governmental charges. The Buyer agrees to pay any and all taxes,
and other governmental charges on the equipment however designated or
levied whether or not specifically included in this Agreement.
5.6 LIMITATION OF REMEDIES
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<PAGE> 3
The entire liability of Seller to Buyer, or to any third party, and the
Buyer's exclusive remedy, shall be as follows:
Seller's liability for damages to the Buyer or any third party for any
cause whatsoever, and regardless of the form of action, whether in
contract or in tort, including negligence, shall be limited to direct
and actual damages directly and solely caused by Seller's performance
or nonperformance hereunder and will not exceed the purchase price paid
by Buyer for the specific equipment that is the subject matter of, or
is directly related to, the cause of action. The measure of damages
shall not include any amounts for indirect, consequential, or punitive
damages of any party, including third parties, or for damages which
could have been avoided, and the data furnished by the equipment has
been verified before utilization thereof. In no event will Seller be
liable for any damages caused by the Buyer's failure to perform the
Buyer's responsibilities, or for any lost profits or savings or other
consequential damages, regardless of the form of action, whether in
contract or in tort, including negligence, even if Seller has been
advised of the possibility of such damages, or for any claim against
the Buyer by another party, or for any damages caused by performance or
nonperformance of the equipment.
5.7 MANUALS
Seller will provide one full set of the required primary System Manuals
as provided by manufacturer.
5.8 COMMUNICATION AND POWER WIRING
The actual installation of wiring and the associated costs are the
responsibility of the Buyer. The proper electrical service must be
available prior to the installation of the Computer. To make it
possible to do remote system maintenance, and acceptable modem must be
connected to the computer, and a voice-grade phone live for this must
be installed prior to the equipment installation. The operator must
also have access to another voice communication phone adjacent to the
System console terminal. Seller shall provide functional and technical
specifications to allow Buyer to comply with the requirements of this
section.
6. GENERAL:
6.1 DEFAULT
It is a default under this Agreement if any one or more of the
following events occur and Seller is adversely affected:
6.1.1 Buyer breaches any one or more of the covenants, terms or
conditions of this Agreement to be paid, performed, or
complied with by Buyer; or
6.1.2 Buyer becomes bankrupt or insolvent
In the event that a default on the payment terms
occur on this agreement, Seller may exercise his
rights of enforcement under the Uniform Commercial
Code in force in the State of STATE at the date of
this Security Agreement and, in conjunction with,
addition to,, or substitution for those rights, at
Seller's discretion, may
6.1.3 Section Removed
6.1.4 Enter upon Licensee's premises to take possession of,
assemble, and collect the Collateral or render it unusable.
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<PAGE> 4
6.2 SECURITY INTEREST GRANTED
Licensee hereby grants a money purchase security interest in and
assigns to the Licensor the collateral described in Section 6.1.4 above
to secure payment and performance of this Agreement.
Licensee will sign and execute any financing statement or other
document or procure any document and pay all connected costs necessary
to protect the security interest of Licensee against the rights and
interests of a third party.
This security interest will be removed after has been paid in full, the
amount of which is stipulated in Section 6.1.3 above.
6.3 NOTICES
All other notices required hereunder shall be given in writing and
shall be personally delivered or sent by postage prepaid mail addressed
to the parties at their addresses first mentioned, or at such other
addresses as either party may designate to the other by notice as
provided in this Section. Notices shall be deemed effective upon their
deposit into the U.S. Mail, properly addressed and postage prepaid.
6.4 INVALID PROVISIONS
If any provision of this Agreement be invalid or unenforceable, then
the remainder of this Agreement shall not be affected thereby.
6.5 ENTIRE AGREEMENT
This Agreement supersedes all prior agreements, letters of intent,
negotiations, representations and proposals, written or oral, requests
for proposals, or previous discussions of the parties. There have been
no other promises or inducements, oral or written, given by any party
to the other to enter into this Agreement. The parties agree that this
Agreement or any term or provision thereof shall not be modified in any
manner whatsoever without the written authorization of both parties
hereto and signed by both an authorized representative of Buyer and by
an authorized representative of Seller.
6.6 ARBITRATION
If any controversy or dispute arises out of this Agreement, or the
breach thereof, the parties will endeavor to settle such dispute
amicably. If the parties shall fail to settle any dispute, such dispute
shall be finally settled by blinding arbitration conducted in Clark
County, Washington. All arbitration shall be in accordance with the
then existing Commercial Arbitration rules of the American Arbitration
Association, and judgment upon the award rendered by the arbitrators
may be entered in any court having jurisdiction thereof-, provided that
nothing in this Section shall prevent a party from applying to a court
of competent jurisdiction to obtain temporary relief pending resolution
of the dispute through arbitration. The parties hereby agree that
service of any notices in the course of such arbitration at their
respective addresses as provided for in this Agreement shall be valid
and sufficient. If either party seeks to enforce its rights under this
Agreement, the non-prevailing party shall pay all costs and expenses
incurred by the prevailing party.
6.7 ATTORNEY FEES
The Prevailing party in any arbitration or lawsuit concerning this
Agreement or any matter related thereto shall be entitled to any award
of reasonable attorney fees and costs from the other, including fees
incurred through trial, appeal or in bankrupt proceedings. Seller shall
be entitled to recover reasonable attorney's fees incurred with regard
to collection of payments due to repossession or disposal of
collateral, without regard to the institution of legal proceedings.
Summit V, Inc. Global Alliance
(360) 256-4400 Phone Equipment Purchase Agreement Page 4
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<PAGE> 5
7. AUTHORIZED SIGNATURE
This Agreement shall be binding upon Buyer and Seller only at such time
as it has been signed by an Authorized Officer of the Buyer and by an
Officer, identified below, of Seller.
<TABLE>
<CAPTION>
===========================================================================================================
<S> <C> <C>
ACCEPTED BY: Summit V, Inc. IS 14, Inc.
- -----------------------------------------------------------------------------------------------------------
NAME (PLEASE PRINT) Brian W. Maggs James W. Brown
(Maxxis Group, Inc.)
- -----------------------------------------------------------------------------------------------------------
NAME (SIGNATURE) /S/ Brian W. Maggs /s/ James W. Brown
- -----------------------------------------------------------------------------------------------------------
TITLE: Executive Vice President President
- -----------------------------------------------------------------------------------------------------------
DATE: 2/10/97 2/2/97
===========================================================================================================
</TABLE>
Summit V, Inc. Global Alliance
(360) 256-4400 Phone Equipment Purchase Agreement Page 5
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<PAGE> 1
EXHIBIT 10.10
CONFIDENTIAL TREATMENT REQUESTED
AGREEMENT FOR
1 PLUS SERVICES
THIS AGREEMENT is made and entered into this day of
between
Colorado River Communications Inc. ("CRC")
4275 East Sahara, Suite 6
Las Vegas, Nevada 89104
and
Maxxis Telecom, Inc. (MTI)
1080 Holcomb Bridge Rd.
Building 100, Suite 135
Roswell, Georgia 30076
WITNESSETH:
WHEREAS, CRC is in the business of providing telecommunications
services and specifically desires to sell Services to hotels, motels, health
care facilities, educational entities, military bases, resort rental
condominiums, as well as business and individual consumers;
WHEREAS, MTI is in the business of marketing telecommunications
services to users and specifically desires to use CRC's Services;
NOW, THEREFORE, in consideration of the material covenants and
agreements contained herein, the parties do hereby agree as follows:
1. APPOINTMENT OF AGENTS
CRC hereby appoints MTI as an Independent Agent for long distance
telephone service, specifically CRC Services ("Services") to those facilities
identified by MTI.
2. TERM AND TERMINATION
The initial term of this Agreement shall be three (3) years from the
date first written above provided however, MTI may terminate this Agreement in
the event of a material breach
<PAGE> 2
of the Agreement by CRC. Such termination will be effective thirty-five (35)
days after written notice is mailed by Certified Mail in a properly addressed
envelope to the other party. In the event of termination of this Agreement by
either party, CRC agrees to continue payments hereunder for so long as CRC is
supplying service to properties under contract with MTI. Further, at the end of
the initial term, CRC agrees to extensions of this Agreement as negotiated
between the Parties.
3. SERVICES OFFERED
The Service shall consist of receiving, processing, and completing
when possible 1 + and 800 calls originating from MTI customer locations. The
calls shall be validated, billed, and revenue collected by CRC. Commissions
shall be paid to MTI as per Schedule A.
The services shall be provided only in those areas where permitted by
any regulatory agency having jurisdiction, and where CRC is certified to do
business.
CRC will endeavor to supply quality Service, equal or better than that
offered by its major competitors. Service, operator performance and response
time will be within acceptable industry standards. CRC will use its best
efforts to keep the Service operational twenty-four hours a day, seven days a
week, fifty-two weeks a year.
4. SOLICITATION OF SERVICE
All contracts and other property rights acquired by MTI in pursuit of
its rights or obligations hereunder will be and will remain the property of
MTI. MTI will obtain a signed Letter of Agency from each location to which
Service is to be provided and deliver a copy of it to CRC.
5. PROCESSING OF ORDERS
MTI shall submit all service data and requirements for Service to CRC
by means agreeable to both parties. Faxed information, followed by confirming
mail delivery, are acceptable to both parties. CRC will use all reasonable
efforts to promptly process the MTI orders. CRC will promptly notify MTI of any
and all reasons for inability to process the MTI orders on a timely basis (when
processing and/or installations may exceed 15 working days). CRC will respond
within thirty (30) days of submission of the order as to whether it will accept
or reject the order.
6. LIMITATIONS OF LIABILITY
CRC's liability to an end user or site owner with respect to providing
the Service shall be as set forth in the CRC tariffs. CRC's liability for its
acts or omissions to end users or site owners with respect to its performance
of the non-tariffed terms and conditions of this Agreement shall be limited to
direct damages caused by its sole negligence, and will not include
consequential, incidental, special, or indirect loss or damage. CRC shall in no
event
<PAGE> 3
be liable to any person or entity marketing or using the Service supplied under
this Agreement, for loss of time, inconvenience, consequential, or indirect
damages regardless of the basis for such action or claim. CRC's liability shall
be limited to direct damages caused by its sole negligence.
7. REGULATORY REQUIREMENTS
Performance of this Agreement by the parties is subject to all
applicable existing and future laws, rules and regulations of any duly
constituted governmental authority having jurisdiction, and is contingent upon
the obtaining and continuance of such approval, consents, governmental
authorizations, licenses and permits as may be required or deemed necessary for
the Agreement by the Parties hereto. The Parties shall obtain and maintain such
approvals, consents, authorizations, licenses and permits as may be necessary
to institute and continue agency services as contemplated by this Agreement. In
the event that a regulatory authority with jurisdiction over the subject matter
of this agreement takes any action which affects CRC's ability to provide
Service, CRC shall have the right to redirect intrastate calls to another
inter-exchange carrier, or terminate the Service in the particular state. In
the event calls are redirected to another inter-exchange carrier, no
commissions or revenues will be paid to MTI with respect to such calls. Agent
agrees to require customer(s) subscribing to the Service to promptly display
notice of CRC provided Service. CRC will furnish appropriate notice to be
distributed by MTI to its customers using the Service. MTI agrees not to block
or cause to be blocked access to carriers other than CRC as required by law.
8. COMPLIANCE
MTI hereby certifies to CRC that MTI is in compliance with any and all
local, state, and federal regulations as to pertain to supplying MTI customers
with the Service including, but not limited to, rates, locations surcharges,
and end user notification i.e. tent cards, and contract language. CRC agrees to
supply the necessary tent cards.
9. INDEMNIFICATION
MTI will protect, indemnify and hold harmless CRC, its directors,
officers, employees and agents, from any and all claims, costs and expenses,
including reasonable attorney's fees, arising from Agent's performance under
this agreement.
CRC will protect, indemnify and hold harmless MTI, its directors,
officers, employees, and agents, from any and all claims, costs and expenses,
including reasonable attorney's fees, arising from CRC's performance under this
Agreement.
10. GENERAL RELATIONSHIP
Nothing in this Agreement will be construed to imply a joint venture,
employer-employee relationship, and MTI will have no right, power or authority
to create any obligation, expressed or implied, on behalf of CRC.
<PAGE> 4
11. ASSIGNMENT AND SUBCONTRACTING
MTI may not assign any of its rights, and no obligation of MTI may be
assumed by any entity other than MTI without prior written consent of CRC. This
Agreement may be assigned by CRC in the event of a change of control of CRC,
however all terms and conditions of this Agreement will remain in effect.
12. NON- WAIVER
No delay or failure of either party in exercising any rights under
this Agreement, and no partial or single exercise thereof, will he deemed to
constitute a waiver of such right or other rights thereunder.
13. HEADINGS
Headings are inserted for convenience and will not be used in the
construction or interpretation of any Article in this Agreement.
14. GOVERNING LAW
This Agreement will be construed and enforced in accordance with, and
the validity and performance will be governed by the laws of the state of
Nevada and it is agreed that any action or suit based on the Agreement must be
brought in the City of Las Vegas, Nevada.
15. ENTIRE AGREEMENT
This Agreement sets forth the entire Agreement of the parties with
respect to the subject matter hereof, and may not be altered or amended except
in writing signed by both parties.
COLORADO RIVER COMMUNICATIONS, CORP.
Signature: /s/ Alex McCarty
--------------------------------
Title: President
--------------------------------
Date: 2/20/97
--------------------------------
MAXXIS TELECOM, INC.
Signature: /s/ James W. Brown
--------------------------------
Title: Chief Executive Officer
--------------------------------
Date: 2/20/97
--------------------------------
<PAGE> 5
SCHEDULE A CRC-MTI AGREEMENT
Billing Units: Full Minutes for all travel card services, sixty second minimum
with six second billing thereafter for all 1-Plus services.
Billing Agents: LEC's (local exchange carriers)
RATES:
Interstate: $***
Intrastate: $*** (All but *** states)
$*** (*** states)
800 Inbound: $***
Intrastate: $***
Special Intrastate: $***
USA Enhanced feature travel card: $***
No feature travel card: $***
Monthly fees:
CRC/FCC access: $***
Maxxis pass through fee: $***
A ***% bad debt holdback is applied to gross billing before commission
is paid, Plus all taxes and any State or Federal imposed charges.
COMMISSION:
Monthly Billing Commission
*** to $*** ***%
$*** to *** ***%
$*** and over ***%
Other:
1. CRC acknowledges that you own the customer base when monthly
revenues reach $*** per month. If this is not reached, the
customer base reverts to you after *** of service on CRC if a
minimum monthly billing of $*** is maintained for ***.
2. At *** of monthly billing, CRC will establish Sub carrier
identification for Maxxis.
3. CRC requires a *** notice before you can move any customer to
another carrier, with the exception as provided in this
contract of failure of CRC to perform.
4. CRC agrees to allow a *** ramp up period at the ***%
commission level.
- --------------
*** Omitted pursuant to a request for confidential treatment and filed
separately with the Commission.
<PAGE> 1
EXHIBIT 10.12
================================================================================
WAREHOUSE LEASE
1901 MONTREAL ROAD
BY AND BETWEEN
MALON D. MIMMS, A SOLE PROPRIETORSHIP
-------------------------------------
("Landlord")
and
MAXXIS GROUP, INC.
("Tenant")
This 17th day of March, 1997
================================================================================
<PAGE> 2
MIMMS ENTERPRISES
85-A MILL STREET, SUITE 100
ROSWELL, GEORGIA 30075
WAREHOUSE LEASE
THIS LEASE, made and entered into as of this day of March, 1997, by and
between Landlord and Tenant as specified in Items I and 2 of the Definitions
appearing in Section 1.1 hereof.
Landlord hereby demises and rents unto Tenant, and Tenant hereby leases
from Landlord, certain Premises now existing in Landlord's Warehouse Center
("Center"), as described in Item 3 of the Definitions appearing in Section 1. I
hereof, and upon the terms, covenants and conditions contained herein.
ARTICLE I
EXHIBITS, PREMISES, USE OF PREMISES AND TERM
SECTION 1.1 COVENANTS OF LANDLORD'S AUTHORITY
Landlord represents and covenants that: a) prior to commencement of the
Lease term, it will have either good title to or a valid leasehold interest in
the land and building of which the Premises form a part; and b) upon performing
all of its obligations hereunder, Tenant shall peacefully and quietly have, hold
and enjoy the Premises for the term of this Lease.
SECTION 1.2 DEFINITIONS
The following Items shall be defined or be referred to as indicated
below for the purposes of this Lease and the Exhibits attached hereto:
<TABLE>
<S> <C>
Item 1 Landlord: MALON. D. MIMMS, a sole proprietorship
Item 2 Tenant: MAXXIS GROUP, INC.
Item 3 Premises (Section 1.3): An office/warehouse known as:
1901 MONTREAL ROAD
SUITES 112-114
TUCKER, GEORGIA 30084
having a gross leasable area of approximately
5,030+/- SQUARE FEET of a 101,736 square foot
office/warehouse building
Item 4 Use of Premises (Section 1.4): MISCELLANEOUS OFFICES, TRAINING CENTER FOR
MARKETING AND ASSOCIATED SERVICES
Item 5 Tenant's Trade Name: MAXXIS GROUP, INC.
Item 6 Lease Term (Section 1.5): FOUR (4) YEARS AND FIFTEEN (15) DAYS
</TABLE>
<PAGE> 3
<TABLE>
<S> <C>
Item 7 Lease Commencement Date(Section 1.5): APRIL 15, 1997
Lease Expiration Date (Section 1.5): APRIL 30, 2001
Item 8 Rent Commencement Date (Section 1.6): APRIL 15, 1997
Item 9 Total Fixed Minimum Rent (Section 2.1): SEE EXHIBIT "A" ATTACHED HERETO
Item 10 Fixed Minimum Rent Increase(s): SEE EXHIBIT "A" ATTACHED HERETO
Item 11 Security Deposit (Section 10.1): $3,385.00
Item 12 Tenant's Participation in Real
Estate Taxes (Section 4.2): BASE YEAR 1997
Item 13 Tenant's Participation in Insurance
(Sections 7.1, 7.2, 7.3, and 7.4): BASE YEAR 1997
Item 14 Notices (Section 12.1): TENANT:
MAXXIS GROUP, INC.
1901 MONTREAL ROAD
SUITES 112 - 114
TUCKER, GEORGIA 30084
ATTENTION: MR. JIM BROWN
LANDLORD:
MIMMS ENTERPRISES
85-A MILL STREET, SUITE 100
ROSWELL, GEORGIA 30075
BROKER:
RICHARD BOWERS & CO.
3475 LENOX ROAD, SUITE 800
ATLANTA, GEORGIA 30326
ATTENTION: CHET LACY
Item 15 Special Provisions: SEE SPECIAL STIPULATIONS ATTACHED HERETO AS EXHIBIT
"A" AND MADE A PART HEREOF.
</TABLE>
SECTION 1.3 EXHIBITS
2
<PAGE> 4
The exhibits listed hereunder and attached to this Lease are
incorporated and made a part hereof by reference:
EXHIBIT "A" - SPECIAL STIPULATIONS
EXHIBIT "B" - SITE PLAN / FLOOR PLAN
EXHIBIT "C" - RULES AND REGULATIONS
EXHIBIT "D" - CONSTRUCTION PLANS AND SPECIFICATIONS
SECTION 1.4 PREMISES LEASED BY TENANT
The Premises leased by Tenant are located at the Center set forth in
Item 3 of the Definitions, which Premises are particularly described in Item 3
of the Definitions. The boundaries and location of the Premises are highlighted
on Exhibit "B" attached hereto which sets forth the general layout of the
Center, but shall not be deemed to be a warranty, representation, or agreement
upon the part of the Landlord that said Center will be exactly as indicated on
said diagram.
The Premises includes, for the purpose of this Lease, the Premises
within Landlord's Center leased to Tenant herein and shall extend to the
exterior faces of all walls or to the building line where there is no wall, or
to the center line of those walls separating the Premises from other premises in
the Center, together with the appurtenances specifically granted in this Lease,
but reserving and excepting to Landlord the use of the exterior walls and the
roof and the right to install, maintain, use, repair and replace pipes, ducts,
conduits, and wires leading through the Premises in locations which will not
materially interfere with Tenant's use thereof and serving other parts of the
Center.
SECTION 1.5 USE OF PREMISES
The Premises shall be used and occupied only for the purpose as
specified in Item 4 of the Definitions and for no other purpose or purposes
without Landlord's prior written consent. Tenant shall, at its own risk and
expense, obtain all governmental licenses and permits necessary for such use.
SECTION 1.6 LEASE TERM
The term of this Lease shall be for the period specified in Item 6 of
the Definitions commencing and expiring as provided in Item 7 of the
Definitions, unless sooner terminated or extended as hereinafter provided.
SECTION 1.7 RENT COMMENCEMENT DATE
Tenant shall commence payment of Rent at the earlier of (a) the date
specified in Item 8 of the Definitions, or (b) the date when the Tenant shall
occupy the Premises, which date shall be agreed to by both parties in writing.
If the Rent Commencement Date falls on a day other than the first day of a
calendar month, the Fixed Minimum Rent for such month shall be prorated on a per
diem basis, calculated on the basis of a Thirty (30) day month.
SECTION 1.8 LEASE YEAR
For purpose of this Lease, the term Lease year is defined to mean a
calendar year (beginning January I and extending through December 31 of any
given year). Any portion of a year which is less than a Lease year, that is,
from the Lease Commencement Date through the next December 3 1, and from the
last January I failing within the term of the Lease through the last day of the
term, shall be defined as a Partial Lease Year.
SECTION 1.9 ACCEPTANCE OF PREMISES
Tenant acknowledges that it has fully inspected and accepts the
Premises in their present condition and "as is" and that the same are suitable
for the use specified in Item 4 of the Definitions.
3
<PAGE> 5
ARTICLE II
RENT
SECTION 2.1 FIXED MINIMUM RENT
The total Fixed Minimum Rent for the Lease Term as specified in Item 9
of the Definitions shall be payable by Tenant as specified in Item 9 of the
Definitions.
The phrase Fixed Minimum Rent shall be the Fixed Minimum Rent above
specified, payable monthly in advance on the first day of each month, without
prior demand therefor and without any deduction or set off whatsoever. In
addition, Tenant covenants and agrees to pay Landlord all applicable sales or
other taxes which may be imposed on the above specified rents or payments
hereinafter provided for to be received by Landlord when each such payment is
made. Should Tenant fail to pay installment of rent when due and continuing for
a period of time constituting a default as further defined under the provisions
of this Lease, Section 9 I., Default, Landlord may, at its option, require the
total Fixed Minimum Rent remaining for the term of this Lease to immediately
become due and payable. If Tenant pays any installment of Fixed Minimum Rent or
any other sum by check and such check is returned for insufficient funds or
other reasons not the fault of Landlord, then Tenant. shall pay to Landlord on
demand a processing fee of Fifteen and No/100 Dollars ($15.00) per returned
check. Landlord, at its option, may subtract any such processing fee from any
Security Deposit held by Landlord, and, in such event, Tenant shall deposit a
like amount with Landlord in accordance with the terms of Section 10.1.
SECTION 2.2 FIXED MINIMUM RENT INCREASE INTENTIONALLY DELETED.
SECTION 2.3 LATE PAYMENT PENALTY
Should Tenant fail to pay when due any installment of Fixed Minimum
Rent or any other sum payable to Landlord under the terms of this Lease, then
Landlord shall assess a servicing fee of Ten Percent (10%) of any sum due to
Landlord from and after the Tenth (10th) day following the date on which any sum
shall be due and payable, until the required payments are made. Landlord, at its
option, may subtract any such amount that is not paid from any Security Deposit
held by Landlord and, in such event, Tenant shall deposit a like amount with
Landlord in accordance with the terms of Section 10. I herein. Should Tenant
remit a partial payment for any outstanding Fixed Minimum Rent or Additional
Rent due, Landlord shall apply said partial payment to the outstanding Fixed
Minimum Rent or Additional Rent as Landlord deems necessary, in its sole
discretion.
SECTION 2.4 ADDITIONAL RENT - DEFINITION
In addition to the foregoing Fixed Minimum Rent and Fixed Minimum Rent
Increase, all payments to be made under this Lease by Tenant to Landlord shall
be deemed to be and shall become Additional Rent hereunder and, together with
Fixed Minimum Rent, shall be included in the term "Rent" whenever such term is
used herein. Unless another time shall be herein expressly provided for the
payment thereof, any Additional Rent shall be due and payable on demand or
together with the next succeeding installment of Fixed Minimum Rent, whichever
shall first occur, together with all applicable State taxes and interest thereon
at the then prevailing legal rate, and Landlord shall have the same remedies for
failure to pay the same as for non-payment of Fixed Minimum Rent. Landlord, at
its election, shall have the right to pay or do any act which requires the
expenditure of any sums of money by reason of the failure or neglect of Tenant
to perform any of the provisions of this Lease, and in the event Landlord elects
to pay such sums or do such acts requiring the expenditure of monies, all such
sums so paid by Landlord, together with interest thereon, shall be deemed to be
Additional Rent and payable as such by Tenant to Landlord upon demand.
ARTICLE III
UTILITY SERVICES
SECTION 3.1 UTILITIES
Tenant agrees that it shall not install any equipment which will exceed
or overload the capacity of any
4
<PAGE> 6
existing utility facilities and that if any equipment installed by Tenant shall
require additional utility facilities, the same shall be installed at Tenant's
expense in accordance with plans and specifications to be approved in writing by
Landlord. Tenant shall promptly pay for all public utilities rendered or
furnished to the Premises from and after the date Tenant assumes possession of
the Premises (irrespective of whether Tenant shall have opened for business in
the Premises) including but not limited to water, gas, electricity and sewer
charges and all taxes thereon. Landlord, at its election, may install
re-registering meters and collect any and all charges aforesaid from Tenant as
and when bills are rendered by Landlord; making returns to be proper public
utility company or governmental unit, provided that Tenant shall not be charged
more than the rates it would be charged for the same services if furnished
direct to the Premises by such companies or governmental units.
SECTION 3.2 FURNISHING OF UTILITY SERVICES
Any utility or related service, including a privately owned sewerage
disposal system, which Landlord elects to provide or causes to be provided to
the Premises, may be furnished by any agent employed by Landlord or by an
independent contractor selected by Landlord, and Tenant shall accept the same
therefrom to the exclusion of all other suppliers so long as the rates charged
by the Landlord or by the supplier of such utility or related service are
competitive. The charges for such services so furnished shall be Additional Rent
due on the first day of the calendar month following rendition of a bill
therefor. Landlord may discontinue furnishing such services if the same are not
so paid for, upon not less than Five (5) days written notice to Tenant, and no
such discontinuation shall be deemed an eviction or render Landlord liable to
Tenant for damages or relieve Tenant from performance of its obligations
hereunder. Interruption or impairment of any such utility or related service,
caused or necessitated by repairs or improvements, or by hazards beyond the
reasonable control of Landlord, shall not give rise to a right or cause of
action by Tenant against Landlord in damages or otherwise. Landlord may cease to
furnish any one or more of such services at any time without any responsibility
to Tenant except to connect the service facilities with such other sources of
supply as may be available for the services so discontinued.
Tenant agrees to either: a) pay its pro rata share of the water bill
for the Premises within ten (10) days after original date of billing from
Landlord; or b) if space is metered individually, Tenant shall have the water in
its own name during the Term of this Lease.
ARTICLE IV
TAXES
SECTION 4.1 TENANT'S TAXES
Tenant covenants and agrees to pay promptly when due all taxes imposed
upon its business operations and its personal property situated in the Premises.
SECTION 4.2 TENANT'S PARTICIPATION IN REAL ESTATE TAXES
Landlord will pay in the first instance all real property taxes,
including extraordinary and/or special assessments (and all costs and fees
incurred in contesting the same), hereinafter collectively referred to as Real
Estate Taxes, which may be levied or assessed by the lawful tax authorities
against the land, buildings, and all other improvements in the Center.
Tenant, for each Lease Year or Partial Lease Year, as defined in
Section 1.7, during the term of this Lease or any renewal thereof, shall pay to
Landlord its proportionate share, as hereinafter defined, of all Real Estate
Taxes assessed or levied against the land and buildings of the Center over the
sum specified in Item 12 of the Definitions per square foot per year. Tenant's
proportionate share for said Real Estate Taxes for each Lease year or Partial
Lease Year of the term of this Lease or any renewal thereof shall be determined
by dividing the total number of square feet of all leasable building space
within the Center into the total Real Estate Taxes due for the Center during
said Lease Year of the Lease Term or any renewal thereof. If the resulting
quotient is an amount over the sum specified in Item 12 of the Definitions per
square foot, Tenant shall pay to Landlord the amount in excess of the sum
specified in Item 12 of the Definitions per square foot multiplied by the number
of square feet of Tenant's Premises.
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Any payments due by Tenant hereunder shall be made during each Lease Year or
Partial Lease Year of the term of this Lease or any renewal thereof within
Thirty (30) days after Tenant's receipt of Landlord's written certification of
the amount due. Tenant's share shall be prorated in the event Tenant is required
to make such payment for a Partial Lease Year. In addition, should the taxing
authorities include in such Real Estate Taxes the value of any improvements made
by Tenant, or include machinery, equipment, fixtures, inventory or other
personal property or assets of the Tenant, then Tenant shall also pay 100% of
the Personal Property Taxes and Real Estate Taxes for such items.
If the Lease expires during a Partial Lease Year, Landlord shall bill
Tenant, not more than Sixty (60) days prior to the expiration date of the Lease,
for its estimated pro rata share of Real Estate Taxes for the Partial Lease
Year. Tenant shall remit full payment to Landlord within Seven (7) days of such
bill. If Tenant fails to remit such full payment to Landlord, Landlord in its
sole discretion, may deduct the amount due from Tenant's Security' Deposit and
be entitled to all other rights and remedies hereunder for Tenant's default.
Should any governmental taxing authority, acting under any present or
future law, ordinance, or regulation, levy, assess or impose a tax, excise
and/or assessment (other than income or franchise tax) upon or against or in any
way related to the land and buildings comprising the Center, either by way of
substitution or in addition to any existing tax on land and buildings or
otherwise, Tenant shall be responsible for and shall pay to Landlord its
proportionate share as set forth above of such tax, excise and/or assessment.
ARTICLE V
REPAIRS AND MAINTENANCE
SECTION 5.1 REPAIRS BY LANDLORD
Landlord shall, at its expense, keep the foundations, exterior walls,
gutters, downspouts and the roof in good order and repair, and shall make
structural repairs and replacements necessary to keep in good order and repair
the Center and the pipes and ducts running through the Premises and installed by
Landlord, but not including Tenant's service connections therewith. Landlord
shall have no obligation to repair until a reasonable time after the receipt by
Landlord of written notice of the need for repairs. 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 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 whatsoever nature. All property of Tenant, including merchandise and
furnishings, kept or stored on the 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. If Landlord is required to make repairs by
reason of any act, omission or negligence of Tenant, any permitted subtenants,
concessionaires or their respective employees, agents, invitees, licensees or
contractors, the cost of such repairs shall be borne by Tenant and shall be due
and payable immediately upon receipt of Landlord's notification of the amount
due.
SECTION 5.2 REPAIRS AND MAINTENANCE BY TENANT
Tenant shall make and pay for all repairs to the interior of the
Premises and shall replace all things necessary to keep the same in a good state
of repair, such as, but not limited to, all fixtures, furnishings, lighting,
doors, and store signs of Tenant. Tenant shall maintain, replace and keep in
good repair all air-conditioning, plumbing, heating and electrical installations
for the Premises. Any air-conditioning unit supplied by Tenant shall remain in
the Premises for the duration of the Lease Term and any renewals thereof, and
shall become the property of the Landlord upon installation of such unit. Tenant
shall at all times keep the Premises and the immediate areas in front, behind
and adjacent to it, exterior entrances, all glass and show windows, moldings and
bulkheads, and all partitions, doors, floor surfaces, fixtures, equipment and
appurtenances thereof in good order, condition and repair, and in a satisfactory
condition of cleanliness. Tenant shall be fully responsible and liable for the
maintenance and lighting of all its exterior signs, and shall periodically
repaint metal surfaces that rust or begin to deteriorate from any causes. Any
damage to the exterior walls to which a sign may be attached, including but not
limited to rust stains and structural cracking of the facia, caused by Tenant's
use of such sign, shall be repaired by Tenant at its own cost. Tenant shall make
such other necessary repairs in and to the Premises not specified in Section 5.1
hereof as the
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responsibility of Landlord, and shall obtain, at Tenant's sole cost, a
maintenance agreement subject to Landlord's approval, with a reputable HVAC
contractor for the servicing of the HVAC system throughout the Term of this
Lease and all renewals thereafter. The agreement shall provide that the HVAC
system shall be serviced at least four (4) times each year by the service
provider. Landlord shall be provided with a copy of said agreement. In addition
to the foregoing, Tenant shall install, repair, replace and maintain fire
extinguishers and other fire prevention equipment, in accordance with the
recommendations or requirements of Landlord's fire engineer or Landlord's fire
insurance carrier or in accordance with any future recommendations of Landlord's
fire insurance carrier or fire engineer, and in accordance with applicable
governmental codes.
All garbage and refuse shall be kept in the kind of container specified
by Landlord or duly constituted public authority, and shall be placed outside of
the Premises prepared for collection in the manner and at the times and places
specified by Landlord. If Landlord shall provide or designate a service for
picking up refuse and garbage, Tenant shall use same at Tenant's cost. Tenant
shall pay the cost of removal of any Tenant's refuse or rubbish and maintain all
common loading areas and areas adjacent to garbage receptacles in a clean manner
satisfactory to the Landlord. Should Tenant fail to keep the area around his
garbage receptacle in a clean manner as specified by Landlord, Landlord or its
agents or subcontractors may clean such area and bill Tenant for the cost of
cleaning plus 20% overhead, to be paid upon presentation of the bill.
If Tenant refuses or neglects to properly repair and/or maintain the
Premises as required herein and to the reasonable satisfaction of Landlord as
soon as reasonably possible after written demand, Landlord may, but shall not be
obligated to, make such repairs and/or maintenance, without liability for any
loss or damage that may accrue to Tenant's merchandise, fixtures, or other
property or to Tenant's business by reason thereof, and upon completion thereof,
Tenant shall pay Landlord's costs for making such repairs plus twenty percent
(20%) for overhead, upon presentation of the bill. Such bill shall include
interest at the highest permissible non-usurious rate or, if there is none, then
at fifteen percent (15%) per annum on the cost from the date of completion of
repairs until the date payment is received by Landlord.
SECTION 5.3 RIGHT OF ENTRY
Landlord or its representatives shall have the right to enter the Premises at
reasonable hours of any day during the Lease Term to: a) ascertain if the
Premises are in proper repair and condition, and further, Landlord or its
representatives shall have the right, without liability, to enter the Premises
for the purposes of making repairs, additions or alterations thereto or to the
building in which the same are located, including the right to take the required
materials therefore into and upon the Premises without the same constituting an
eviction of Tenant in whole or in part, and the Rent shall not abate while such
repairs, alterations, replacement or improvements are being made by reason of
loss or interruption of Tenant's business due to the performance of any such
work; and b) show the Premises to prospective purchasers, lenders and tenants.
If Tenant shall not be personally present to permit an entry into said Premises
when for any reason an entry therein shall be permissible, Landlord may enter
the same by a master key or by the use of force without rendering Landlord
liable therefor and without in any manner affecting Tenant's obligations under
this Lease. During the ninety (90) days prior to the expiration or earlier
termination of the Lease Term, Landlord may place a "For Lease" sign on the
Premises.
SECTION 5.4 SIDEWALKS AND OUTSIDE AREAS
Nothing shall be thrown or swept out of doors or windows of Tenant's
Premises onto sidewalks, entrances, passages, courts, plazas or any of the
Common Areas. Tenant agrees to be use reasonable diligence to keep the sidewalks
and outside areas immediately in front, behind and adjacent to the Premises
broom-clean and otherwise keep said areas free of trash, litter or obstruction
of any kind.
SECTION 5.5 REPLACEMENT OF GLASS
At the commencement of the term of this Lease, all glass in the
Premises shall be in good condition, scraped clean of any paint and undamaged.
Tenant shall, at its own expense, replace all glass thereafter broken or damaged
with glass of the same quality and physical properties.
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ARTICLE VI
ALTERATIONS, CHANGES, AND IMPROVEMENTS
SECTION 6.1 ALTERATIONS, CHANGES AND IMPROVEMENTS
Tenant shall not make or permit any alterations, additions or
improvements to the Premises without the prior written consent of the Landlord.
Consent for alterations, additions or improvements will not be unreasonably
withheld by Landlord. Provided Tenant is not in default hereunder, Tenant shall
have the right, at the termination of this Lease, to remove any and all trade
fixtures, equipment and other items of personal property not constituting a part
of the freehold which it may have stored or installed in the Premises including,
but not limited to, counters, shelving, showcases, chairs, and moveable
machinery purchased or provided by Tenant and which are susceptible of being
moved without damage to the building and the Premises, provided this right is
exercised before the Lease is terminated or during the Ten (10) day period
immediately following such termination and provided that Tenant, at its own cost
and expense, shall repair any damage to the Premises caused thereby. The right
granted Tenant in this Section 8.5 shall not include the right to remove any
plumbing or electrical fixtures or equipment, heating or air-conditioning
equipment, floor-coverings (including wall-to-wall carpeting) glued or fastened
to the floors or any paneling, file or the materials fastened or attached to the
walls or ceilings, all of which shall be deemed to constitute a part of the
freehold, and, as a matter of course, shall not include the right to remove any
fixtures or machinery that were furnished or paid for by Landlord. The Premises
and the immediate areas in front, behind and adjacent to it shall be left in a
broom-clean condition. Should Tenant fail to comply with this provision,
Landlord may deduct the cost of cleanup from Tenant's Security Deposit. If
Tenant shall fail to remove its trade fixtures or other property at the
termination of this Lease or within Ten (10) days thereafter, such fixtures and
other property not removed by Tenant shall be deemed abandoned by Tenant, and,
at the option of Landlord, shall become the property of Landlord.
Notwithstanding any provision of this Lease seemingly to the contrary,
Tenant shall never, under any circumstances, have the power to subject the
interest of Landlord in the Premises to any mechanics' or materialmen's liens or
liens of any kind, nor shall any provision contained in this Lease ever be
construed as empowering the Tenant to encumber or cause the Landlord to encumber
the title or interest of Landlord in the Premises.
Tenant hereby expressly acknowledges and agrees that no alterations,
additions, repairs or improvements to the Premises of any kind are required or
contemplated to be performed as a prerequisite to the execution of this Lease
and the effectiveness thereof according to its terms or in order to place the
Premises in a condition necessary for use of the Premises for the purposes set
forth in this Lease, that the Premises are presently complete and usable for the
purposes set forth in this Lease and that this Lease is in no way conditioned on
Tenant making or being able to make alterations, additions, repairs or
improvements to the Premises, unless otherwise specified under the Special
Provisions section of the Definitions, notwithstanding the fact that
alterations, repairs, additions or improvements may be made by Tenant, for
Tenant's convenience or for Tenant's purposes, subject to Landlord's prior
written consent, at Tenant's sole cost and expense.
Landlord and Tenant expressly acknowledge and agree that neither the
Tenant nor any one claiming by, through or under the Tenant, including without
limitation contractors, sub-contractors, materialmen, mechanics and laborers,
shall have any right to file or place any mechanics' or materialmen's liens of
any kind whatsoever upon the Premises nor upon any building or improvement
thereon; on the contrary, any such liens are specifically prohibited. All
parties with whom the Tenant may deal are hereby put on notice that the Tenant
has no power to subject the Landlord's interest in the Premises to any claim or
lien of any kind or character and any persons dealing with the Tenant must look
solely to the credit of the Tenant for payment and not to the Landlord's
interest in the Premises or otherwise.
Any lien filed against the Premises in violation of this paragraph
shall be null and void and of no force or effect. In addition, Tenant shall
cause any lien filed against the Premises in violation of this paragraph to be
cancelled, released, discharged and extinguished within fifteen (15) days from
and against any such lien and any costs, damages, charges and expenses,
including, but not limited to, attorneys' fees incurred in connection with or
with respect to any such lien.
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ARTICLE VII
INSURANCE AND INDEMNITY
SECTION 7.1 TENANT'S INSURANCE
Tenant shall maintain, at its own cost and expense, in responsible
companies approved by Landlord, combined single limit public liability
insurance, insuring Landlord and Tenant, as their interests may appear, against
all claims, demands or actions for bodily injury, personal injury or death of
any one person in an amount of not less than $ 1,000,000.00; and for bodily
injury, personal injury or death of more than one person in any one accident in
an amount of not less than $ 1,000,000.00; and for damage to property in an
amount of not less than $ 1,000,000.00. Landlord shall have the right to direct
Tenant to increase such amounts whenever it considers them inadequate. Such
liability insurance shall also cover and include all exterior signs maintained
by Tenant. The policy of insurance may be in the form of a general coverage or
floater policy covering these and other premises, provided that Landlord is
specifically insured therein. Tenant shall carry like coverage against loss or
damage by boiler or compressor or internal explosion of boilers or compressors,
if there is a boiler or compressor in the Premises. Tenant shall maintain
insurance covering all glass forming a part of the Premises including plate
glass in the Premises and fire insurance against loss or damage by fire or
windstorms, with such endorsements for extended coverage, vandalism, malicious
mischief and special extended coverage as Landlord may require, covering 100% of
the replacement costs of any items of value, including but not limited to signs,
stock, inventory, fixtures, improvements, floor coverings and equipment. All of
said insurance shall be in form and in responsible companies satisfactory to
Landlord, and shall provide that it will not be subject to cancellation,
termination or change except after at least thirty (30) days prior written
notice to Landlord. Any insurance procured by Tenant as herein required shall
contain an express waiver of any right of subrogation by the insurance company
against Landlord. The policies, together with satisfactory evidence of the
payment of the premiums thereon, shall be deposited with Landlord on the day
Tenant begins operations. Thereafter, Tenant shall provide Landlord with
evidence of proof of payment upon renewal of any such policy, not less than
thirty (30) days prior to expiration of the term of such coverage. In the event
Tenant fails to obtain or maintain the insurance required hereunder, Landlord
may obtain same and any costs incurred by Landlord in connection therewith shall
be payable by Tenant upon demand. Landlord shall carry public liability
insurance covering the exterior of the Premises, including, but not limited to
the sidewalks, malls and parking lot.
Tenant shall pay its pro rata share of the increase in the insurance
premium for the Premises above a 1997 base year within ten (10) days after the
original billing, date from Landlord. Wherever reference is made to Tenant's
"pro rata share," it shall mean the proportion that the square foot area of the
Premises shall bear to the entire Center's gross leasable area. The prorating of
such share shall be determined by the use of a formula, the numerator of which
is the square footage of the Premises (5,030 square feet), and the denominator
of which is the gross leasable area of the Center (101,736 square feet) at the
commencement of this Lease, with the resulting percentage (4.94%) being Tenant's
pro rata area of the Center, which, when multiplied by the cost of any
additional charges, represents the dollar amount of Tenant's annual pro rata
share.
SECTION 7.2 EXTRA HAZARD INSURANCE PREMIUMS
Tenant agrees that it will not keep, use, sell or offer for sale in or
upon the Premises any article or permit any activity which may be prohibited by
the standard form of fire or public liability insurance policy. Tenant agrees to
pay any increase in premiums for fire and extended coverage or public liability
insurance which may be carried by Landlord on the Premises or the building of
which they are a part, resulting from the type of merchandise sold or services
rendered by Tenant or activities in the Premises, whether or not Landlord has
consented to the same. In determining whether increased premiums are the result
of Tenant's use of the Premises, a schedule, issued by the organization making
the insurance rate on the Premises, showing various components of such rate,
shall be conclusive evidence of the several items and charges which make up the
fire and public liability insurance rate on the Premises.
Tenant shall not knowingly use or occupy the Premises or any part
thereof, or suffer or permit the same to
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be used or occupied for any business or purpose deemed extra hazardous on
account of fire or otherwise. In the event Tenant's use and/or occupancy causes
any increase of premium for the fire, boiler and/or casualty rates on the
Premises or any part thereof above the rate for the least hazardous type of
occupancy legally permitted in the Premises, Tenant shall pay such additional
premium on the fire, boiler and/or casualty insurance policy that may be carried
by Landlord for its protection against rent loss through fire. Bills for such
additional premiums shall be rendered by Landlord to Tenant at such times as
Landlord may elect, and shall be due from and payable by Tenant when rendered in
writing, but such increases in the rate of insurance shall not be deemed a
breach of this covenant by Tenant. Failure to pay amounts due hereunder shall be
a breach of the Lease.
SECTION 7.3 INDEMNITY
Tenant during the term hereof shall indemnify and save harmless
Landlord from and against any and all claims and demands whether for injuries to
persons or loss of life, or damage to property, occurring within the Premises
and immediately adjoining the Premises and arising out of the use and occupancy
of the Premises by Tenant, or occasioned wholly or in part by any act or
omission of Tenant, its subtenants, agents, contractors, employees, servants,
lessees or concessionaires, excepting however such claims and demands, whether
for injuries to persons or loss of life, or damage to property, caused by the
negligence of Landlord. If, however, any liability arises in the Common Areas
because of the negligence of Tenant, Tenant's subtenants, agents, employees,
contractors, invitees, customers or visitors, then in such event Tenant shall
hold Landlord harmless. In case Landlord shall, without fault on its part, be
made a party to any litigation commenced by or against Tenant, then Tenant shall
protect and hold Landlord harmless and shall pay all costs, expenses and
reasonable attorneys' fees incurred or paid by Landlord in connection with such
litigation. Tenant shall also pay all costs, expenses and reasonable attorneys'
fees that may be incurred or paid by Landlord in enforcing the covenants and
agreements of this Lease.
SECTION 7.4 DEFINITION AND LIABILITY OF LANDLORD
The term Landlord as used in this Lease means only the owner or the
mortgagee in possession for the time being of the building in which the Premises
are located or the possession for the time being of the building in which the
Premises are located or the owner of a leasehold interest in the building and/or
the land thereunder so that in the event of a sale of the building or an
assignment of this Lease, or a demise of the building and/or land, Landlord
shall be and hereby is entirely freed and relieved of all obligations of
Landlord hereunder and it shall be deemed without further agreement between the
parties and such purchaser(s), assignee(s) or lessee(s) that the purchaser,
assignee or lessee has assumed and agreed to observe and perform all obligations
of Landlord hereunder.
It is specifically understood and agreed that there shall be no
personal liability on Landlord in respect to any of the covenants, conditions or
provisions of this Lease; in the event of a breach or default by Landlord of any
of its obligations under this Lease, Tenant shall look solely to the equity of
Landlord in the Center for the satisfaction of Tenant's remedies.
ARTICLE VIII
DAMAGE, DESTRUCTION AND CONDEMNATION
SECTION 8.1 DAMAGE OR DESTRUCTION BY FIRE OR OTHER CASUALTY
a) Tenant shall give prompt notice to Landlord in case of fire or other
damage to the Premises or the building(s) containing the Premises. In the event
the Premises are damaged by fire, explosion, flood, tornado or by the elements,
or through any casualty, or otherwise, after the commencement of the term of
this Lease, the Lease shall continue in full force and effect. If the extent of
the damage is less than fifty percent (50%) of the cost of replacement of the
Premises, the damage shall promptly be repaired by Landlord at Landlord's
expense, provided that Landlord shall not be obligated to so repair if such
fire, explosion or other casualty is caused directly by the negligence of
Tenant, its subtenants, permitted concessionaires, or their agents, servants or
employees, and provided further that Landlord shall not be obligated to expend
for such repair an amount in excess of the insurance proceeds recovered or
recoverable as a result of such damage, and that in no event shall Landlord be
required to replace Tenant's stock in trade, fixtures, furniture, furnishings,
floor coverings and equipment. In the event of any such damage and (i) Landlord
is not required to repair as hereinabove provided; or (ii) the Premises shall be
damaged to
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the extent of fifty percent (50%) or more of the cost of replacement; or (iii)
the building of which the Premises are a part is damaged to the extent of
twenty-five percent (25%) or more of the cost of replacement; or (iv) all
buildings (taken in the aggregate) in the Center shall be damaged to the extent
of more than twenty-five percent (25%) of the aggregate cost of replacement,
Landlord may elect either to repair or rebuild the Premises or the building or
buildings, or to terminate this Lease upon giving notice of such election to
Tenant within ninety (90) days after the occurrence of the event causing the
damage.
b) If the casualty, repairing, or rebuilding shall render the Premises
untenantable, in whole or in part, and the damage shall not have been due to the
default or neglect of Tenant, a proportionate abatement of the Fixed Minimum
Rent shall be allowed from the date when the damage occurred until the date
Landlord completes the repairing or rebuilding, said proportion to be computed
on the basis of the relation which the gross square foot area of the space
rendered untenantable bears to the floor area of the Premises. If Landlord is
required or elects to repair the Premises, as herein provided, Tenant shall
repair or replace its stock in trade, fixtures, furniture, furnishings, floor
coverings and equipment, and if Tenant has closed for business, Tenant shall
promptly reopen for business upon the completion of such repairs.
c) In the event the Premises or the building(s) shall be damaged in
whole or in substantial part within the last twenty-four (24) months of the
original term, or within the last twenty-four (24) months of the last renewal
term, if renewals are provided for herein, Landlord shall have the option,
exercisable within ninety (90) days following such damage, of terminating this
Lease, effective as of the date of receipt of mailing notice to Tenant thereof.
If any such termination occurs during the initial term, any options for renewal
shall automatically be of no further force or effect.
d) No damage or destruction of the Premises or the building(s) shall
allow Tenant to surrender possession of the Premises nor affect Tenant's
liability for the payment of rent or any other covenant contained herein, except
as may be specifically provided in this Lease. Notwithstanding any of the
provisions herein to the contrary, Landlord shall have no obligation to rebuild
the Premises or the building(s) and may at its own option cancel this Lease
unless the damage or destruction is a result of a casualty covered by Landlord's
insurance policy.
SECTION 8.2 CONDEMNATION
a) Total: In the event the entire Premises shall be appropriated or
taken under the power of eminent domain by any public or quasi-public authority,
this Lease shall terminate and expire as of the date of title vesting in such
proceedings, and Landlord and Tenant shall thereupon be released from any
further liability hereunder.
b) Partial: If any part of the Premises shall be taken as aforesaid,
and such partial taking shall render that portion not so taken unsuitable for
the business of Tenant, as determined by Landlord, then this Lease and the term
herein shall cease and terminate as aforesaid. If such partial taking is not
extensive enough to render the Premises unsuitable for the business of Tenant,
then this Lease shall continue in effect, except that the Fixed Minimum Rent
shall be reduced in the same proportion that the floor area of the Premises
taken bears to the original floor area leased and Landlord shall, upon receipt
of the award in condemnation, make all necessary repairs or alterations to the
building in which the Premises are located so as to constitute the portion of
the building not taken a complete architectural unit, but such work shall not
exceed the scope of the work to be done by Landlord in originally constructing
said building, nor shall Landlord, in any event, be required to spend for such
work an amount in excess of the amount received by Landlord as damages for the
part of the Premises so taken. "Amount received by Landlord" shall mean that
part of the award in condemnation which is free and clear to Landlord of any
collection by mortgagee for the value of the diminished fee.
c) Termination: If more than twenty percent (20%) of the floor area of
the building in which the Premises are located shall be taken as aforesaid,
Landlord may, by written notice to Tenant, terminate this Lease, such
termination to be effective as aforesaid.
d) Rent on Termination: If this Lease is terminated as provided in this
paragraph, the rent shall be paid up to date that possession is so taken by
public authority and Landlord shall make an equitable refund of any rent paid by
Tenant in advance.
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e) Award: Tenant shall not be entitled to and expressly waives all
claim to any condemnation award for any taking, whether whole or partial, and
whether for diminution in value of the leasehold or to the fee although Tenant
shall have the right, to the extent that the same shall not reduce Landlord's
award, to claim from the condemnor, but not from Landlord, such compensation as
may be recoverable by Tenant in its own right for damage to Tenant's business,
fixtures and improvements installed by Tenant at its expense.
ARTICLE IX
DEFAULT
SECTION 9.1 DEFAULT
Landlord may, at its option, terminate this Lease, as provided below
and take the action outlined in Paragraph 9.2 hereof, IF:
a) Tenant defaults in the payment of any rentals or any other payments
when due, and such default shall continue for five (5) days after notice from
Landlord to Tenant; OR
b) Tenant defaults in fulfilling any of the other covenants or
obligations of this Lease on Tenant's part to be performed hereunder, and such
default has not been cured within five (5) days after written notice from
Landlord to Tenant specifying the nature of said default; OR
c) The default so specified shall be such a nature that the same cannot
be reasonably cured or remedied within said five (5) day period, if Tenant shall
not in good faith have commenced the curing or remedying of such default within
such five (5) day period and shall not thereafter diligently proceed therewith
to completion, which completion shall in no event be more than thirty (30) days
after notice from Landlord; OR
d) Tenant shall fail to occupy the Premises on the commencement date as
fixed herein, or anytime thereafter, or shall fail to remain open for noisiness
throughout the term of this Lease, as hereinbefore provided; OR
e) At any time during the term should there be filed by or against
Tenant or against any successor tenant then in possession, in any court,
pursuant to any statute, either of the United States or any state, a petition;
(i) In bankruptcy;
(ii) Alleging insolvency;
(iii) For reorganization;
(iv) For the appointment of a receiver or trustee;
(v) For an arrangement under the Bankruptcy Acts; or
(vi) If a similar type of proceeding shall be filed and
any such petition or filing against Tenant has not
been dismissed within a period of twenty (20) days;
OR
f) Tenant makes or proposes to make an assignment for the benefit of
creditors; OR
g) Tenant does, or permits to be done, any act which creates a
mechanics' lien or claim therefore against the Premises or the Center; OR
h) Tenant fails to furnish Landlord with a copy of any insurance policy
required to be furnished by Tenant to Landlord when due, and such default shall
continue for thirty (30) days after written notice from Landlord, Landlord may
elect:
(i) to terminate this Lease, or
(ii) to assess and collect an administrative fee of Five
Dollars ($5.00) for each day said policy has not been
received in the office of Landlord at the close of
each business day.
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i) Tenant conducts telemarketing as a principal business upon the
Premises; OR
j) Tenant parks in excess of twenty (20) vehicles upon the Premises
during normal and reasonable business hours 8:00 a.m. to 6:00 p.m. Monday
through Friday;
Then the Landlord may elect to declare the entire rent for the balance
of the term, or any part thereof, due and payable forthwith, or at the option of
the Landlord, this Lease and the term thereunder shall terminate and come to an
end on the date specified in such notice of cancellation, and Tenant shall quit
and surrender the Premises to Landlord as if the term hereunder ended by the
expiration of the time fixed herein, but Tenant shall remain liable as
hereinafter provided.
SECTION 9.2 LANDLORD'S RIGHTS ON DEFAULT
If the notice provided shall have been given and the term shall expire
as aforesaid, or should Landlord elect to terminate this Lease, Landlord shall
have the immediate right of re-entry and may remove all persons and property
from the Premises and such property may be removed and stored in a public
warehouse or elsewhere at the cost of, and for the account of Tenant, all
without service of notice or resort to legal process, all of which Tenant
expressly waives, and Landlord shall not be deemed guilty of trespass, or become
liable for any loss or damage which may be occasioned thereby. Landlord shall
have a lien for the payment of all sums agreed to be paid by Tenant herein upon
all Tenant's property, which is to be in addition to Landlord's lien now or that
may hereafter be provided by law.
Should Landlord elect to re-enter or should it take possession pursuant
to legal proceedings or pursuant to any notice provided for by law, it may make
such alterations and repairs as may be necessary in order to relet the Premises
or any part thereof, for such term or terms (which may be for a term extending
beyond the term of this Lease) and at such rentals and upon such other terms and
conditions as Landlord, in its sole discretion, may deem advisable. Upon each
such reletting, all rentals received by Landlord from such reletting shall be
applied, first, to the payment of any indebtedness, other than rent due
hereunder, from Tenant to Landlord; second, to the payment of any costs and
expenses of such reletting, including brokerage fees and to costs of such
alterations and repairs; third, to the payment of rent due and unpaid hereunder,
the residue, if any, shall be held by Landlord and applied in payment of future
rent as the reletting during any month be less than that to be paid during that
month by Tenant as set forth herein, Tenant shall pay any such deficiency to
Landlord. Such deficiency shall be calculated and paid monthly. Landlord shall
recover from Tenant all damages it may incur by reason of Tenant's default,
including the cost of recovering the Premises and, including charges equivalent
to rent reserved in this Lease for the remainder of the stated term, all of
which amounts shall be immediately due and payable from Tenant to Landlord.
The parties hereby waive trial by jury in any action, proceeding or
counterclaim brought by either of the parties hereto against the other or 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 Premises,
and/or claim of injury or damage.
In the event of a breach by Tenant of any of the covenants or
provisions hereof, Landlord shall have, in addition to any other remedies which
it may have, the right to invoke any remedy allowed at law or in equity,
including injunctive relief, to enforce Landlord's rights or any of them, as if
re-entry and other remedies were not herein provided for.
In the event of any litigation arising out of enforcement of this
Lease, the prevailing party in such litigation shall be entitled to recovery of
all costs, including reasonable attorneys' fees.
Notwithstanding anything in this lease to the contrary, Landlord
reserves all rights which any state or local laws, rules, regulations or
ordinances confer upon a Landlord against a Tenant in default. This article
shall apply to any renewals or extension of this Lease.
In the event that it is necessary to bring suit to enforce or seek a
declaration under the terms of the Lease, the parties hereto agree that any
court of competent jurisdiction situated in DeKalb County, Georgia, shall have
venue of such action. This agreement shall be deemed to have been made in DeKalb
County, Georgia, and shall be
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interpreted, and the rights and liabilities of the parties here determined, in
accordance with the laws of the State of Georgia; and the Tenant hereby
designates _____________________________________________________________ , as
agent for the purpose of accepting service of any process. Tenant agrees that
said agent may notify Tenant of service of process by mailing a certified copy
of said process to the Tenant at the Tenant's address as specified in Item 14 of
the Definitions.
SECTION 9.3 NON-WAIVER PROVISIONS
The failure of Landlord to insist upon a strict performance of any of
the terms, conditions and covenants herein shall not be deemed to be a waiver of
any rights or remedies that Landlord may have and shall not be deemed a waiver
of any subsequent breach or default in the terms, conditions and covenants
herein contained except as may be expressly waived in writing.
The maintenance of any action or proceeding to recover possession of
the Premises or any installment or installments of rent or any other monies that
may be due or become due from Tenant to Landlord shall not preclude Landlord
from thereafter instituting and maintaining subsequent action or proceedings for
the recovery or possession of the Premises or of any other monies that may be
due or become due from Tenant including all expenses, court costs and attorneys'
fees and disbursements incurred by Landlord in recovering possession of the
Premises and all costs and charges for the care of the Premises while vacant. An
entry or re-entry by Landlord shall not be deemed to absolve or discharge Tenant
from liability hereunder.
SECTION 9.4 INABILITY TO PERFORM
If Landlord is delayed or prevented from performing any of its
obligations under this Lease by reason of strike, labor disputes, or any cause
whatsoever beyond Landlord's reasonable control, the period of such delay or
such prevention shall be deemed added to the time herein provided for the
performance of any obligation by Landlord.
ARTICLE X
SECURITY
SECTION 10.1 SECURITY DEPOSIT
a) Tenant has deposited with Landlord the sum specified in Item 11 of
the Definitions to be retained by Landlord without liability for interest, as
security for the payment of all rent and other sums of money which shall or may
be payable for the full stated term of this Lease, and any extension or renewal
thereof, and for the faithful performance of all the terms of this Lease to be
observed and performed by Tenant.
b) The Security Deposit shall not be mortgaged, assigned, transferred
or encumbered by Tenant without the prior written consent of Landlord and any
such act on the part of Tenant shall be without force or effect and shall not be
binding upon Landlord. If any of the rents herein reserved or any other sum
payable by Tenant to Landlord shall be overdue and unpaid or should Landlord
make payments on behalf of Tenant, or if Tenant shall failed to perform any of
the terms of this Lease, then Landlord may, at its option and without prejudice
to any other remedy which Landlord may have on account thereof, appropriate and
apply said entire deposit or so much thereof as may be necessary to compensate
Landlord toward the payment of rent or Additional Rent or loss or damage
sustained by Landlord due to breach on the part of Tenant; and Tenant shall
promptly upon demand restore said security to the original sum deposited. If
Tenant should be overdue in the payment of monthly rent or other sums payable to
Landlord on at least two or more occasions during a year, Landlord, at its
option, may require Tenant to increase the amount of Security Deposit now held
by Landlord by an amount sufficient to cover at least two month's rent or
greater amount to be determined at sole discretion of Landlord. In this event,
upon receipt of the additional security sum, Landlord and Tenant shall evidence
such receipt by a letter signed and acknowledged by both parties to be
incorporated as part of this Lease amending Section 11 hereof, stating the "New
Total Amount" so held without liability for any interest. Within sixty (60) days
after the expiration of the tenancy hereby created, whether by lapse of time or
otherwise, provided Tenant shall not be in default hereunder and shall have
complied with all the terms,
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covenants and conditions of this Lease, including the yielding up of the
immediate possession to Landlord, Landlord shall, upon being furnished with
affidavits and other satisfactory evidence by Tenant that Tenant has paid all
bills incurred by it in connection with its performance of the terms, covenants
and conditions of this Lease, return to Tenant said sum on deposit or such
portion thereof then remaining on deposit with Landlord as set forth herein. In
the event Tenant has not complied with all the obligations provided for
hereunder, Landlord may appropriate a part or all of the Security Deposit as
liquidated damages to satisfy Tenant's obligations.
SECTION 10.2 PERSONAL PROPERTY
As additional security for the performance of Tenant's obligations
hereunder, Tenant hereby pledges and assigns to Landlord all the furniture,
fixtures, goods, inventory, stock and chattels and all other personal property
of Tenant which are now or may hereafter be brought or put in the Premises, and
further grants to Landlord a security interest therein under the Uniform
Commercial Code. Upon default of the payment of rent, assessments, charges,
penalties and damages herein covenanted to be paid by Tenant, and for the
purpose of securing the performance of all other obligations of Tenant
hereunder, and at the request of Landlord, Tenant hereby agrees to execute and
deliver to Landlord all financing statements, amendments thereto or other
similar statements which Landlord may reasonably request. Nothing herein
contained shall be deemed to be a waiver by Landlord of its statutory lien to
rent and remedies, rights and privileges of Landlord in the case of default of
Tenant as set forth above and shall not be exclusive and, in addition thereto,
Landlord may also exercise and enforce all its rights at law or in equity which
it may otherwise have as a result of Tenant's default hereunder. Landlord is
herein specifically granted all of the rights of a secured credit under the
Uniform Commercial Code with respect to the property in which Landlord has been
granted a security interest by Tenant, including, but not limited to, the right
to take possession of the above mentioned property and dispose of it by sale in
a commercially reasonable manner.
SECTION 10.3 TRANSFER OF DEPOSIT
In the event of a sale or transfer of the Center or any portion thereof
which includes the Premises, or in the event of the making of a lease of the
Center or of any portion, or in the event of a sale or transfer of the leasehold
estate under any such underlying lease, the grantor, transferor or Landlord, as
the case may be, shall thereafter be entirely relieved of all terms, covenants
and obligations thereafter to be performed by Landlord under this Lease to the
extent of the interest or portion so sold, transferred or leased, and it shall
be deemed and construed, without further agreement between the parties and the
purchaser, transferee or Tenant, as the case may be, has assumed and agreed to
carry out any and all covenants of Landlord hereunder; provided that (i) any
amount then due and payable to Tenant or for which Landlord or the then grantor,
transferor or Landlord would otherwise then be liable to pay to Tenant (it being
understood that the owner of an undivided interest in the fee or any such lease
shall be liable only for his or its proportionate share of such amount) shall be
paid to Tenant; (ii) the interest of the grantor, transferor or Landlord, as
Landlord, in any funds then in the hands of Landlord or then grantor, transferor
or Landlord in which Tenant has an interest, shall be turned over, subject to
such interest, to the then grantee, transferee or Tenant; and (iii) notice of
such sale, transfer or lease shall be delivered to Tenant.
ARTICLE XI
ADDITIONAL TENANT AGREEMENTS
SECTION 11.1 MORTGAGE FINANCING AND SUBORDINATION
This Lease and all of Tenant's rights hereunder are and shall be
subordinate to the present mortgage upon the Center, as well as to any existing
ground lease, however, Tenant shall, upon request of either Landlord or the
holder of any mortgage or Deed of Trust now or hereafter placed upon the
Landlord's interest in the Premises or future additions thereto, and to any
ground lease now or hereafter affecting the Premises, execute and deliver upon
demand, such further instruments subordinating this Lease to the lien of any
such mortgage or mortgages, and such ground lease, provided such subordination
shall be upon the express condition that this Lease shall be recognized by the
mortgagees and ground lessors and that the rights of Tenant shall remain in full
force and effect during the term of this Lease and any extension thereof,
notwithstanding any default by the mortgagors with respect to the mortgage or
any foreclosure thereof, or any default by the ground lessee, so long as Tenant
shall perform all of the covenants
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and conditions of this Lease. Tenant hereby irrevocably appoints Landlord as
attorney-in-fact for Tenant, with power to execute and deliver, without
subjecting Landlord to liability of any kind, such instrument or instruments for
and in the name of Tenant, in the event Tenant shall fail to execute such
instrument or instruments within five (5) days after written notice to do so is
given to Tenant. Tenant agrees to execute all agreements required by Landlord's
mortgagee or ground lessor or any purchaser at a foreclosure sale or sale in
lieu of foreclosure by which agreements Tenant will attorn to the mortgagee or
purchaser or ground lessor.
SECTION 11.2 ASSIGNMENT OR SUBLETTING
All assignments of this Lease or sublease or subleases of the Premises
by Tenant shall be subject to and in accordance with all of the provisions of
this Section.
Tenant may not assign this Lease or sublease the Premises, in whole or
in part, to a wholly-owned corporation or controlled subsidiary of Tenant or to
a party other than a wholly-owned corporation or controlled subsidiary of Tenant
without first having obtained the written consent of Landlord, such consent not
to be unreasonably withheld.
Any assignment or sublease by Tenant shall be only for the purpose
specified in Section 1.4, Use of Premises, and for no other purpose, and in no
event shall any assignment or sublease of the Premises release or relieve Tenant
from any obligations of this Lease.
In the event that Tenant shall seek Landlord's permission to assign
this Lease or sublet the Premises, Tenant shall provide to Landlord the name,
address, financial statement and the business experience resume for the
immediately preceding ten (10) years of the proposed assignee or subtenant and
such other information certain such proposed assignee or subtenant as Landlord
may require. This information shall be in writing and shall be received by
Landlord no less than thirty (30) days prior to the effective date of the
proposed assignment or sublease. It shall be a condition to any consent by
Landlord to an assignment or sublease that Tenant shall pay to Landlord a
processing fee in the amount of One Hundred Fifty and No/100 Dollars ($150.00)
or one percent (10/o) of the annual Rent, whichever is greater, as reimbursement
to Landlord for any and all legally-related expenses in connection with the
review and preparation of assignment or sublease-related documents which may be
incurred by Landlord in connection therewith. Payment of such fee shall be
submitted along with Tenant's request for Landlord's consent. Any consent by
Landlord to any assignment or sublease, or to the operation of a concessionaire
or licensee, shall not constitute a waiver or the necessity for such consent to
any subsequent assignment or sublease, or operation by a concessionaire or
licensee.
If Tenant is a corporation and any transfer, sale, pledge or other
disposition of more than ten percent (10%) of the common stock shall occur, or
voting control or power to vote the majority of the outstanding capital stock be
changed, such action shall be deemed an assignment under the terms of this Lease
and shall be subject to all the terms and conditions thereof. Any breach of the
assignment clause by Tenant will constitute a default under the terms of this
Lease and Landlord shall have all rights and remedies available to it as set
forth herein.
In the event Tenant shall sublease the entire Premises for rentals in
excess of those rentals payable hereunder, Tenant shall pay to Landlord, as
Additional Rent hereunder, all such excess rentals.
Any proposed assignee or subtenant of Tenant shall assume T 's
obligations hereunder and deliver to Landlord an assumption agreement in form
satisfactory to Landlord no less than ten (10) days prior to the effective date
of the proposed assignment.
Notwithstanding any of the foregoing provisions, if Tenant is in
default under any of the terms of this Lease, Tenant may not assign or sublet
the Premises in whole or in part.
SECTION 11.3 TENANT'S NOTICE TO LANDLORD OF DEFAULT
Should Landlord be in default under any of the terms of this Lease,
Tenant shall give Landlord prompt written notice thereof in the manner specified
in Section 12.1, Notices, and Tenant shall allow Landlord a reasonable
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length of time in which to cure such default, which time shall not in any event
be less than thirty (30) days from the date of such notice.
SECTION 11.4 SHORT FORM LEASE
Tenant agrees not to record this Lease without the express written
consent of Landlord. Tenant further agrees, however, to execute, acknowledge and
deliver the short form Lease attached hereto and made a part hereof by
reference.
SECTION 11.5 SURRENDER OF PREMISES AND HOLDING OVER
a) Tenant shall give written notice to Landlord not less than one hundred
and eighty (180) days nor more than two hundred forty (240) days prior
to the expiration of the Lease term and each extension or renewal thereof of
Tenant's intention to: (i) vacate the Premises at the end of the Lease Term or
extension or renewal; (ii) to enter into a new lease agreement for the Premises
at terms to be negotiated by Landlord and Tenant, if no such renewal or
extension rights remain. As to (ii) above, Tenant shall deliver to Landlord an
executed copy of the new lease agreement within thirty (30) days after receipt
of said document from Landlord. In the event that Tenant 1) fails to notify
Landlord of Tenant's intention to vacate the Premises at the expiration of the
Lease Term; or 2) fails to execute a new lease agreement as specified above,
Tenant shall be in default of this Lease and Landlord shall have the right to
appropriate the entire amount of the Security Deposit as liquidated damages and
to declare this Lease terminated.
b) At the expiration of the tenancy and subject to Paragraph 11.5A,
Tenant shall surrender the Premises in good condition, reasonable wear and tear
excepted, and damage by unavoidable casualty (except to the extent that the same
is covered by Landlord's fire insurance policy with extended coverage
endorsement), and Tenant shall surrender all keys for the Premises to Landlord
at the place then fixed for the payment of rent and shall inform Landlord of all
combinations on locks, safes and vaults, if any, in the Premises. Tenant shall
remove all its trade fixtures and any alterations or improvements, subject to
the provisions of Section 6.1, before surrendering the Premises, and shall
repair, at its own expense, any damage to the Premises caused thereby. Tenant's
obligations to observe or perform this covenant shall survive the expiration or
other termination of the term of this Lease. In the event Tenant remains in
possession of the Premises after the expiration of the tenancy created
hereunder, whether or not with the consent or acquiescence of Landlord, and
without the execution of a new Lease, Tenant, at the option of Landlord, shall
be deemed to be occupying the Premises as a tenant at will on a week-to-week
tenancy and in no event on a month-to-month or on a year-to-year term rent
during this week-to-week tenancy shall be pay-weekly at 150% the Fixed Minimum
Rent, and 150% all other charges due hereunder, and it shall be subject to
conditions, covenants, provisions and obligations of this Lease, and no
extension or renewal of deemed to have occurred by such holding over. Tenant's
obligations to observe or perform this covenant shall survive the expiration or
other termination of the term of this Lease.
SECTION 11.6 ESTOPPEL CERTIFICATE
Tenant agrees to provide at any time, within five (5) days of
Landlord's written request, a statement certifying that this Lease is unmodified
and in full force and effect or, if there have been modifications, that the
Lease is in full force and effect as modified and stating the modifications, the
dates to which the Fixed Minimum Rent and other charges have been paid in
advance, if any, and such other information reasonably requested by Landlord, a
prospective purchaser or mortgagee. The Tenant hereby irrevocably appoints
Landlord as attorney-in-fact for Tenant, with power to execute and deliver,
without subjecting Landlord to liability of any kind, such instrument or
instruments for and in the name of Tenant, in the event Tenant shall fail to
execute such instrument or instruments within five (5) days after written notice
to do so is given to Tenant. It is intended that any such statement delivered
pursuant to this paragraph may be relied upon by any prospective purchaser or
mortgagee of the Premises.
SECTION 11.7 DELAY OF POSSESSION
If the Landlord is unable to give possession of the Premises on the
date of the commencement of the aforesaid term by reason of the holding over of
any prior tenant or tenants or for any other reason; an abatement or
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diminution of the rent to be paid hereunder shall be allowed Tenant under such
circumstances, but nothing herein shall operate to extend the term of the Lease
beyond the agreed expiration date; and said abatement of rent shall be the full
extent of Landlord's liability to Tenant for any loss or damage to Tenant on
account of said delay in obtaining possession of the Premises.
SECTION 11.8 COMPLIANCE WITH LAW, WASTE AND QUIET
Tenant shall comply with all governmental laws, ordinances and
regulations applicable to the use of the Premises and shall promptly comply with
all governmental orders and to the use of the Premises and shall promptly comply
with all governmental orders and directives for the correction, prevention and
abatement of nuisances in, upon or connected with the Premises, all at Tenant's
sole risk and expense. Tenant shall not commit, or suffer to be committed, any
waste upon the Premises or any nuisance, other act, or thing which may disturb
the quiet enjoyment of any other tenant in the building in which the Premises
may be located.
SECTION 11.9 RULES AND REGULATIONS
Tenant's use of the Premises shall be subject, at all times during the
term of this Lease, to Landlord's right to adopt in writing, from time to time,
modify and/or rescind reasonable Rules and Regulations not in conflict with any
of the express provisions hereof governing the use of the parking areas, walks,
driveways, passageways, signs, exterior of building, lighting and other matters
affecting other tenants in and the general management and appearance of the
Center of which the Premises are a part, but no such rule or regulation shall
discriminate against Tenant. The current Rules and Regulations are attached
hereto as Exhibit "C" and made a part hereof
SECTION 11.10 ABANDONMENT
Tenant shall not vacate or abandon the Premises at any time during the
term of this Lease, nor permit the Premises to remain unoccupied for a period
longer than ten (10) consecutive days during the term of this Lease; and if
Tenant shall abandon, vacate or surrender the Premises, or be dispossessed by
process of law or otherwise, any personal property belonging to Tenant left on
the Premises shall, at the option of the Landlord, be deemed abandoned.
ARTICLE XII
MISCELLANEOUS PROVISIONS
SECTION 12.1 NOTICES
Whenever notice shall or may be given to either of the parties by the
other, each such notice shall be either delivered in person or sent by
registered or certified mail, with return receipt requested. Notice to Landlord
shall be sent to the address specified in Item 14 of the Definitions.
Notice to Tenant shall be sent to the address specified in Item 14 of
the Definitions.
If by mail, any notice under this Lease shall be deemed to have been
given at the time it is received by the addressee.
SECTION 12.2 ENTIRE AND BINDING AGREEMENT
This Lease contains all of the agreements between the parties hereto,
and it may not be modified in any manner other than by agreement in writing
signed by all parties hereto or their successors in interest. Tenant shall pay
Landlord for any and all legally-related expenses which may be incurred by
Landlord in connection with the review or preparation of all lease-related
documents including, without limitation, consents, amendments, modifications and
assignments therewith. The terms, covenants and conditions contained herein
shall inure to the benefit of and be binding upon Landlord and Tenant and their
respective heirs, successors and assigns, except as may be otherwise expressly
provided in this Lease.
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SECTION 12.3 PROVISIONS SEVERABLE
If any term or provision of this Lease or the application thereof to
any person or circumstance shall, to any extent, be illegal, invalid or
unenforceable, the remainder of this Lease, or the application of such term or
provision to persons or circumstances other than those to which it is held
illegal, invalid or unenforceable shall not be affected hereby and each term and
provision of this Lease shall be valid and be enforced to the fullest extent
permitted by law.
SECTION 12.4 CAPTIONS
The captions contained herein are for convenience and reference only
and shall not be deemed as part of this Lease or construed as in any manner
limiting or amplifying the terms and provisions of this Lease to which they re I
ate.
SECTION 12.5 RELATIONSHIP OF THE PARTIES
Nothing herein contained shall be deemed or construed as creating the
relationship of principal and agent or of partnership or joint venture between
the parties hereto; it being understood and greed that neither the method of
computing rent nor any other provision contained herein nor any acts of the
parties hereto shall be deemed to create any relationship between the parties
other than that of Landlord and Tenant.
SECTION 12.6 ACCORD AND SATISFACTION
No payment by Tenant or receipt by Landlord of a lesser amount than the
rental 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 any 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 for in this Lease or available at law or in equity.
SECTION 12.7 BROKER'S COMMISSION
Tenant warrants that there are no claims for broker's commissions or
finder's fees in connection with its execution of this Lease and agrees to
indemnify and save Landlord harmless from any liability that may arise from such
claim, including reasonable attorneys' fees, with the exception of Richard
Bowers & Co.
SECTION 12.8 CORPORATE STATUS
If Tenant is a corporation, Tenant's corporate status shall
continuously be in good standing and active and current with the state of its
incorporation and the state in which the Center is located at the time of
execution of the Lease and at all times thereafter and Tenant shall keep its
corporate status active and current throughout the term of the Lease or any
extensions or renewals. Tenant shall annually file with Landlord a current copy
of the Certificate of Good Standing under Seal. Failure of Tenant to keep its
corporate status active and current shall constitute a default under the terms
of this Lease.
SECTION 12.9 HAZARDOUS SUBSTANCES
Tenant hereby warrants to Landlord as follows:
a) As regards all material or substance stored, created, or utilized on
the Premises, Tenant will comply with all applicable requirements of State and
Federal environmental regulations as they may apply from time to time; and
b) Tenant will dispose of any hazardous or controlled materials only in
accordance with applicable
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Federal and State regulations; and
c) Any hazardous or controlled material created, stored, or maintained
on the Premises shall be contained in safe, leak-proof containers and removed at
such intervals as is prudent, but no less frequently than quarterly, to a
hazardous waste facility approved as applicable by State and Federal
authorities; and
d) At such time that Tenant vacates the Premises, whether at the end of
the Term, or earlier as herein provided, Tenant will leave the Premises free of
all hazardous or controlled materials and substances.
Tenant shall save, indemnify and hold Landlord harmless from any and
all claims, demands, actions, costs and damages including Landlord's reasonable
attorney's fees which Landlord may suffer by reason of any violation by Tenant
of any of the warranties set forth in the preceding paragraph.
SECTION 12.10 PREPAID RENT
Tenant shall prepay the first month's rent, including common area
maintenance, and security deposit upon the execution of this Lease.
SECTION 12.11 SIGNAGE
Any signage installed by Tenant shall be at the sole expense of Tenant
and the design, size, color and layout shall be presented to Landlord for
approval.
IN WITNESS WHEREOF, Landlord and Tenant above duly executed this Lease
as of the day and year first above written, each acknowledging receipt of an
executed copy hereof.
LANDLORD
Signed, sealed and delivered
in the presence of: MALON D. MIMMS, A SOLE PROPRIETORSHIP
By: /s/ Malon D. Mimms
- ---------------------------------- ----------------------------------
Notary Public or Witness
Title: Agent for Landlord
- ---------------------------------- ------------------------------
Name (Please Print)
TENANT
Signed, sealed and delivered
in the presence of: MAXXIS GROUP, INC.
By: /s/ James W. Brown
- ---------------------------------- ----------------------------------
Notary Public or Witness
Name: James W. Brown
- ---------------------------------- -------------------------------
Name (Please Print) (Please Print)
20
<PAGE> 22
Title: President/CEO
----------------------
[CORPORATE SEAL]
BROKER
Signed, sealed and delivered
in the presence of: RICHARD BOWERS & CO.
By: /S/ Chett Lacy
- ---------------------------------- --------------------------
Notary Public or Witness
Title: Vice President
- ---------------------------------- ----------------------
Name (Please Print)
21
<PAGE> 23
EXHIBIT "A"
MAXXIS GROUP, INC.
1901 MONTREAL ROAD
SPECIAL STIPULATIONS
1. In the event that any of the foregoing printed or typed matters shall
conflict with the following Special Stipulations, then in such event
the within and following Special Stipulations shall control.
2. Rental shall be as follows
<TABLE>
<CAPTION>
Term Base Rent Common Area Total Base Rent and
---- Monthly Maintenance Monthly Common Area
------- ------------------- Maintenance Monthly
-------------------
<S> <C> <C> <C>
April 15, 1997-May 14, 1997 $2,914.00 $105.00 $3,019.00
May 15, 1997-May 31, 1997 $1,598.00 $ 57.58 $1,655.58
June 1, 1997-April 30, 1998 $2,914.00 $105.00 $3,019.00
May 1, 1998-April 30, 1999 $3,031.00 $105.00 $3,136.00
May 1, 1999-April 30,2000 $3,153.00 $105.00 $3,258.00
May 1, 2000-April 30, 2001 $3,280.00 $105.00 $3,385.00
</TABLE>
3. Tenant acknowledges that Tenant is accepting the Premises described in
the Lease in its present "as is" condition with the exception of
Special Stipulation 4. Tenant recognizes and acknowledges that Tenant
has had an opportunity and duty to inspect the Premises and all
improvements thereon with regard to all matters of concern to Tenant.
Tenant does hereby acknowledge that Tenant understands and agrees that
Landlord will perform or have performed Landlord's work according to
Landlord's best efforts. Upon completion of said work, according to
Landlord's best efforts to be determined by Landlord, Tenant does
hereby accept the work as is and as completed.
Further, Tenant agrees and understands that it is Tenant's obligation
to obtain or cause to be obtained any local governmental agencies'
requirements for permits or certificates of occupancy for Tenant's use
of the Premises according to the terms of the Lease and state, county,
local and municipal law.
4. Landlord agrees to complete the following improvements at its sole
expense:
a) The Landlord will deliver to Tenant the heating, venting and
air-conditioning systems ("HVAC"), plumbing (toilets, sinks),
electrical (outlets, switches and panels), fighting and
overhead doors and any other systems in place on the property
as of the date the Tenant takes possession of the Premises
(hereinafter the "Systems") in good working c Upon taking the
possession of the Premises by the Tenant, the Tenant-shall
have twenty (20) days within which to inspect or cause said
Systems to be inspected, to determine if any of the Systems
are not in reasonable working order. Tenant acknowledges that
Tenant has a duty and an obligation to make such an inspection
or cause such an inspection to be made and notify the Landlord
within the time provided for herein of any non-compliance. If
the Landlord shall not receive any such notice then, in such
event, it shall be conclusive that the Tenant has accepted the
Systems "as is" "where-is" on the date of taking possession of
the Premises and Landlord shall have no further obligation
with regard to said Systems except as provided for in the
within Lease. Should the Tenant notify the Landlord of any
system which is not in working order, then the Landlord shall
make reasonable efforts to cause the
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<PAGE> 24
system to be operating in reasonable working order.
b) The office area shall be recarpeted with new commercial grade
26-ounce, glued-down, level loop pile carpeting (color to be
selected by Tenant);
c) All office walls and doors shall be repainted (color to be
selected by Tenant);
d) All damaged or missing ceiling tiles shall be replaced;
e) Sheetrock walls shall be added and demolished pursuant to the
attached floor plan.
5. Notwithstanding anything set forth herein to the contrary, Tenant
acknowledges and agrees that should the within Tenant secure the
services of another broker for the purpose of leasing or purchasing any
space or realty from Landlord herein at any time, even during the Term
of the within Lease or any extension or renewal hereof, then in such
event, Tenant shall hold Landlord harmless from any additional
commissions of any kind concerning any purchase, releasing, renewal,
renegotiation or extension as contemplated herein.
The term "broker," as used herein, means the leasing Broker who is a
party to this Lease. Landlord and Tenant each acknowledge and
understand that the leasing Broker, Richard Bowers & Co. and its
salespersons are acting as Broker for Tenant in this transaction and
are not acting as Broker for Landlord.
The commission to be paid in connection with this transaction has been
negotiated between Landlord and Broker and Landlord agrees to pay
Broker, as compensation for services rendered in procuring this Lease,
the first full regular month's rental hereunder and five percent (5%)
of all rentals paid under this Lease as collected by Landlord.
Landlord, with the consent of Tenant, hereby assigns to Broker the
aforesaid commission. If the Term of this Lease is extended, or if a
new lease is entered into covering the leased Premises, or any part
thereof, or covering any other premises as an expansion of, or
substitute for, the Premises herein leased, then in either of said
events, Landlord, in consideration of Broker having procured Tenant
hereunder agrees to pay Broker an additional commission of five percent
(5%) of all rentals paid to Landlord by Tenant under such extension,
amendment, or new lease as collected by Landlord.
Broker agrees that, in the event Landlord sells the leased Premises and
upon Landlord's furnishing Broker with an agreement signed by a
purchaser assuming Landlord's obligations to Broker under this Lease,
Broker will release the original Landlord from any further obligations
to Broker hereunder.
23
<PAGE> 25
EXHIBIT "B"
[SITE PLAN]
24
<PAGE> 26
EXHIBIT "C"
WAREHOUSE LEASE
RULES AND REGULATIONS
1. All loading and unloading of goods shall be done only at such times in
the areas and through the entrances designated for such purposes by
Landlord.
2. The delivery or shipping of merchandise, supplies and fixtures to and
from the Premises shall be subject to such rules and regulations as in
the judgment of Landlord are necessary for the proper operation of the
Premises or the Center.
3. Tenant will not utilize-any unethical method of business operation nor
shall any space in the Premises be used for living quarters, whether
temporary or permanent.
4. Tenant shall have full responsibility for protecting the Premises and
the property located therein from theft and robbery and shall keep all
doors and windows securely fastened when not in use.
5. No radio or television or other similar device shall be installed
without first obtaining in each instance Landlord's consent in writing.
No aerial shall be erected on the roof or exterior walls of the
Premises or on the grounds without, in each instance, the written
consent of Landlord. Any aerial so installed with such written consent
shall be subject to removal without notice at any time without
liability to Landlord and the expenses involved in said removal shall
be charged to and paid by Tenant upon demand.
6. No loudspeakers, televisions, phonographs, radios or other devices
shall be used in a manner so as to be heard or seen outside of the
Premises without the prior written consent of Landlord.
7. Tenant shall maintain the inside of the Premises at a temperature
sufficiently high to prevent freezing of water in pipes and fixtures
inside the Premises.
8. The plumbing facilities shall not be used for any other purpose than
that for which they are constructed and no foreign substance of any
kind shall be deposited therein. The expense of any breakage, stoppage
or damage resulting from a violation of this provision shall be borne
by Tenant.
9. Tenant shall not bum any trash or garbage of any kind in or about the
Premises, the Center or within one mile of the outside property lines
of the Center.
10. Tenant shall not cause or permit any unusual or objectionable odors to
be produced upon or permeated from the Premises nor shall Tenant vent
any cooking fumes or odors into the interior of the Center.
11. Tenant shall not permit, allow or cause any public or private auction,
"going-out-of-business," bankruptcy, distress or liquidation sale in
the Premises. It is the intent of the preceding sentence to prevent the
Tenant from conducting his business in any manner that would give the
public the impression that he is about to cease operation and Landlord
shall be the sole judge as to what shall constitute a "distress-type"
sale.
12. The sidewalk, entrances, passages, quarters or halls shall not be
obstructed or encumbered by any Tenant or used for any purpose other
than ingress or egress to and from the Premises.
13. No sales tables, merchandise displays, signs or other articles shall be
put in front of or affixed to any part of the exterior building nor
placed in the halls, common passageways, corridors, vestibule or
parking area without the prior written consent of the Landlord.
14. Tenant shall not erect or maintain any barricade or scaffolding which
may obscure the signs, entrances or
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<PAGE> 27
show window of any other Tenant in the Center or tend to interfere with
any such other Tenant's business. Warehouse Lease - Rules and
Regulations (Continued)
15. Tenant shall not create or maintain, nor allow others to create or
maintain, any nuisances, including without limiting the foregoing
general language, loud noises, sound effects, bright lights, changing,
flashing, flickering or lighting devices or similar devices, smoke or
dust, the effect of which will be visible from the exterior of the
Premises.
16. Landlord reserves the right to waive any rule in any particular
instance or as to any particular person or occurrence and further,
Landlord reserves the right to amend or rescind any of these rules or
make, amend or rescind new rules to the extent Landlord, in its sole
judgment, deems suitable for the safety, care and cleanliness of the
Center and the conduct of high standards of merchandising and services
therein. Tenant agrees to conform to such new or amended rules upon
receiving written notice of the same.
<PAGE> 1
EXHIBIT 10.13
================================================================================
WAREHOUSE LEASE
NORTHLAKE BUSINESS PARK
1901 MONTREAL ROAD
BY AND BETWEEN
MALON D. MIMMS, a sole proprietorship
("Landlord")
and
MAXXIS GROUP, INC.
("Tenant")
This 23rd of June, 1997
================================================================================
<PAGE> 2
MIMMS ENTERPRISES
85-A Mill Street, Suite 100
Roswell, Georgia 30075
WAREHOUSE LEASE
THIS LEASE, made and entered into as of this 23rd day of June, 1997, by
and between Landlord and Tenant as specified in Items 1 and 2 of the Definitions
appearing in Section 1.1 hereof.
Landlord hereby demises and rents unto Tenant, and Tenant hereby leases
from Landlord, certain Premises now existing in Landlord's Warehouse Center
("Center"), as described in Item 3 of the Definitions appearing in Section 1.1
hereof, and upon the terms, covenants and conditions contained herein.
ARTICLE I
EXHIBITS, PREMISES, USE OF PREMISES AND TERM
Section 1.1 Covenants of Landlord's Authority
Landlord represents and covenants that: (a) prior to commencement of
the Lease term, it will have either good title to or a valid leasehold interest
in the land and building of which the Premises form a part; and (b) upon
performing all of its obligations hereunder, Tenant shall peacefully and quietly
have, hold and enjoy the Premises for the term of this Lease.
Section 1.2 Definitions
The following Items shall be defined or be referred to as indicated
below for the purposes of this Lease and the Exhibits attached hereto:
Item 1 Landlord: MALON D. MIMMS, a sole proprietorship
Item 2 Tenant: MAXXIS GROUP, INC.
Item 3 Premises (Section 1.3): An office/warehouse known as:
1901 MONTREAL ROAD
SUITE 108
TUCKER, GEORGIA 30084
having a gross leasable area of
approximately 7,200.+ square feet
of a 101,736 square foot office/
warehouse building
<PAGE> 3
Item 4 Use of Premises (Section 1.4): MISCELLANEOUS OFFICES, TRAINING
CENTER FOR MARKETING AND
ASSOCIATED SERVICES
Item 5 Tenant's Trade Name: MAXXIS GROUP, INC.
Item 6 Lease Term (Section 1.5): THREE (3) YEARS AND TEN (10)
MONTHS
Item 7 Lease Commencement Date
(Section 1.5): JULY 1, 1997
Lease Expiration Date
(Section 1.5): APRIL 30, 2001
Item 8 Rent Commencement Date
(Section 1.6): OCTOBER 1, 1997
Item 9 Total Fixed Minimum Rent
(Section 2. 1): SEE EXHIBIT "A" ATTACHED HERETO
Item 10 Fixed Minimum Rent Increase(s): SEE EXHIBIT "A" ATTACHED HERETO
Item 11 Security Deposit (Section 10.1): $4,606.00
Item 12 Tenant's Participation in
Real Estate Taxes (Section 4.2): BASE YEAR 1997
Item 13 Tenant's Participation in Insurance
(Sections 7.1, 7.2, 7.3, and 7.4): BASE YEAR 1997
Item 14 Notices (Section 12.1): TENANT:
MAXXIS GROUP, INC.
1901 MONTREAL ROAD
SUITE 108
TUCKER, GEORGIA 30084
ATTENTION: MR. JIM BROWN
2
<PAGE> 4
LANDLORD:
MIMMS ENTERPRISES
85-A MILL STREET, SUITE 100
ROSWELL, GEORGIA 30075
BROKER:
RICHARD BOWERS & CO.
3475 LENOX ROAD, SUITE 800
ATLANTA, GEORGIA 30326
ATTENTION: CHET LACY
Item 15 Special Provisions: SEE SPECIAL STIPULATIONS ATTACHED
HERETO AS EXHIBIT "A" AND MADE A
PART HEREOF.
Section 1.3 Exhibits
The exhibits listed hereunder and attached to this Lease are
incorporated and made a part hereof by reference:
EXHIBIT "A" - SPECIAL STIPULATIONS
EXHIBIT "B" - SITE PLAN/FLOOR PLAN
EXHIBIT "C" - RULES AND REGULATIONS
EXHIBIT "D" - CONSTRUCTION PLANS AND SPECIFICATIONS
Section 1.4 Premises Leased by Tenant
The Premises leased by Tenant are located at the Center set forth in
Item 3 of the Definitions, which Premises are particularly described in Item 3
of the Definitions. The boundaries and location of the Premises are highlighted
on Exhibit "B" attached hereto which sets forth the general layout of the
Center, but shall not be deemed to be a warranty, representation, or agreement
upon the part of the Landlord that said Center will be exactly as indicated on
said diagram.
The Premises includes, for the purpose of this Lease, the Premises
within Landlord's Center leased to Tenant herein and shall extend to the
exterior faces of all walls or to the building line where there is no wall, or
to the center line of those walls separating the Premises from other premises in
the Center, together with the appurtenances specifically granted in this Lease,
but reserving and excepting to Landlord the use of the exterior walls and the
roof and the right to install, maintain, use, repair and replace pipes, ducts,
conduits, and wires leading through the Premises in locations which will not
materially interfere with Tenant's use thereof and serving other parts of the
Center.
Section 1.5 Use of Premises
The Premises shall be used and occupied only for the purpose as
specified in Item 4 of the Definitions and for no other purpose or purposes
without Landlord's prior written consent. Tenant shall, at its own risk and
expense, obtain all governmental licenses and permits necessary for such use.
3
<PAGE> 5
Section 1.6 Lease Term
The term of this Lease shall be for the period specified in Item 6 of
the Definitions commencing and expiring as provided in Item 7 of the
Definitions, unless sooner terminated or extended as hereinafter provided.
Section 1.7 Rent Commencement Date
Tenant shall commence payment of Rent at the earlier of (a) the date
specified in Item 8 of the Definitions, or (b) the date when the Tenant shall
occupy the Premises, which date shall be agreed to by both parties in writing.
If the Rent Commencement Date falls on a day other than the first day of a
calendar month, the Fixed Minimum Rent for such month shall be prorated on a per
them basis, calculated on the basis of a Thirty (30) day month.
Section 1.8 Lease Year
For purposes of this Lease, the term Lease year is defined to mean a
calendar year (beginning January 1 and extending through December 3 1 of any
given year). Any portion of a year which is less than a Lease year, that is,
from the Lease Commencement Date through the next December 31, and from the last
January 1 falling within the term of the Lease through the last day of the term,
shall be defined as a Partial Lease Year.
Section 1.9 Acceptance of Premises
Tenant acknowledges that it has fully inspected and accepts the
Premises in their present condition and "as is" and that the same are suitable
for the use specified in Item 4 of the Definitions.
ARTICLE II
RENT
Section 2.1 Fixed Minimum Rent
The total Fixed Minimum Rent for the Lease Term as specified in Item 9
of the Definitions shall be payable by Tenant as specified in Item 9 of the
Definitions.
The phrase Fixed Minimum Rent shall be the Fixed Minimum Rent above
specified, payable monthly in advance on the first day of each month, without
prior demand therefor and without any deduction or set off whatsoever. In
addition, Tenant covenants and agrees to pay Landlord all applicable sales or
other taxes which may be imposed on the above specified rents or payments
hereinafter provided for to be received by Landlord when each such payment is
made. Should Tenant fail to pay installment of rent when due and continuing for
a period of time constituting a default as further defined under the provisions
of this Lease, Section 91., Default, Landlord may, at its option, require the
total Fixed Minimum Rent remaining for the term of this Lease to immediately
become due and payable. If Tenant pays any installment of Fixed Minimum Rent or
any other sum by check and such check is returned for insufficient funds or
other reasons not the fault of Landlord, then Tenant shall pay to Landlord on
demand a processing fee of Fifteen and No/100 Dollars ($15.00) per returned
check. Landlord, at its option, may subtract any such processing fee from any
Security Deposit held by Landlord, and, in such event, Tenant shall deposit a
like amount with Landlord in accordance with the terms of Section 10.1.
Section 2.2 Fixed Minimum Rent Increase Intentionally Deleted.
Section 2.3 Late Payment Penalty
4
<PAGE> 6
Should Tenant fail to pay when due any installment of Fixed Minimum
Rent or any other sum payable to Landlord under the terms of this Lease, then
Landlord shall assess a servicing fee of Ten Percent (10%) of any sum due to
Landlord from and after the Tenth (10th) day following the date on which any sum
shall be due and payable, until the required payments are made. Landlord, at its
option, may subtract any such amount that is not paid from any Security Deposit
held by Landlord and, in such event, Tenant shall deposit a like amount with
Landlord in accordance with the terms of Section 10.1 herein. Should Tenant
remit a partial payment for any outstanding Fixed Minimum Rent or Additional
Rent due, Landlord shall apply said partial payment of the outstanding Fixed
Minimum Rent or Additional Rent as Landlord deems necessary, in its sole
discretion.
Section 2.4 Additional Rent - Definition
In addition to the foregoing Fixed Minimum Rent and Fixed Minimum Rent
Increase, all payments to be made under this Lease by Tenant to Landlord shall
be deemed to be and shall become Additional Rent hereunder and, together with
Fixed Minimum Rent, shall be included in the term "Rent" whenever such term is
used herein. Unless another time shall be herein expressly provided for the
payment thereof, any Additional Rent shall be due and payable on demand or
together with the next succeeding installment of Fixed Minimum Rent, whichever
shall first occur, together with all applicable State taxes and interest thereon
at the then prevailing legal rate, and Landlord shall have the same remedies for
failure to pay the same as for non-payment of Fixed Minimum Rent. Landlord, at
its election, shall have the right to pay or do any act which requires the
expenditure of any sums of money by reason of the failure or neglect of Tenant
to perform any of the provisions of this Lease, and in the event Landlord elects
to pay such sums or do such acts requiring the expenditure of monies, all such
sums so paid by Landlord, together with interest thereon, shall be deemed to be
Additional Rent and payable as such by Tenant to Landlord upon demand.
ARTICLE III
UTILITY SERVICES
Section 3.1 Utilities
Tenant agrees that it shall not install any equipment which will exceed
or overload the capacity of any existing utility facilities and that if any
equipment installed by Tenant shall require additional utility facilities, the
same shall be installed at Tenant's expense in accordance with plans and
specifications to be approved in writing by Landlord. Tenant shall promptly pay
for all public utilities rendered or furnished to the Premises from and after
the date Tenant assumes possession of the Premises (irrespective of whether
Tenant shall have opened for business in the Premises) including but not limited
to water, gas, electricity and sewer charges and all taxes thereon. Landlord, at
its election, may install re-registering meters and collect any and all charges
aforesaid from Tenant as and when bills are rendered by Landlord, making returns
to be proper public utility company or governmental unit, provided that Tenant
shall not be charged more than the rates it would be charged for the same
services if furnished direct to the Premises by such companies or governmental
units.
Section 3.2 Furnishing of Utility Services
Any utility or related service, including a privately owned sewerage
disposal system, which Landlord elects to provide or causes to be provided to
the Premises, may be furnished by any agent employed by Landlord or by an
independent contractor selected by Landlord, and Tenant shall accept the same
therefrom to the exclusion of all other suppliers so long as the rates charged
by the Landlord or by
5
<PAGE> 7
the supplier of such utility or related service are competitive. The charges for
such services so furnished shall be Additional Rent due on the first day of the
calendar month following rendition of a bill therefor. Landlord may discontinue
furnishing such services if the same are not so paid for, upon not less than
Five (5) days written notice to Tenant, and no such discontinuation shall be
deemed an eviction or render Landlord liable to Tenant for damages or relieve
Tenant from performance of its obligations hereunder. Interruption or impairment
of any such utility or related service, caused or necessitated by repairs or
improvements, or by hazards beyond the reasonable control of Landlord, shall not
give rise to a right or cause of action by Tenant against Landlord in damages or
otherwise. Landlord may cease to furnish any one or more of such services at any
time without any responsibility to Tenant except to connect the service
facilities with such other sources of supply as may be available for the
services so discontinued.
Tenant agrees to either: a) pay its pro rata share of the water bill
for the Premises within ten (10) days after original date of billing from
Landlord; or b) if space is metered individually, Tenant shall have the water in
its own name during the Term of this Lease.
ARTICLE IV
TAXES
Section 4.1 Tenant's Taxes
Tenant covenants and agrees to pay promptly when due all taxes imposed
upon its business operations and its personal property situated in the Premises.
Section 4.2 Tenant's Participation in Real Estate Taxes
Landlord will pay in the first instance all real property taxes,
including extraordinary and/or special assessments (and all costs and fees
incurred in contesting the same), hereinafter collectively referred to as Real
Estate Taxes, which may be levied or assessed by the lawful tax authorities
against the land, buildings, and all other improvements in the Center.
Tenant, for each Lease Year or Partial Lease Year, as defined in
Section 1.7, during the term of this Lease or any renewal thereof, shall pay to
Landlord its proportionate share, as hereinafter defined, of all Real Estate
Taxes assessed or levied against the land and buildings of the Center over the
sum specified in Item 12 of the Definitions per square foot per year. Tenant's
proportionate share for said Real Estate Taxes for each Lease year or Partial
Lease Year of the term of this Lease or any renewal thereof shall be determined
by dividing the total number of square feet of all leasable building space
within the Center into the total Real Estate Taxes due for the Center during
said Lease Year of the Lease Term or any renewal thereof. If the resulting
quotient is an amount over the sum specified in Item 12 of the Definitions per
square foot, Tenant shall pay to Landlord the amount in excess of the sum
specified in Item 12 of the Definitions per square foot multiplied by the number
of square feet of Tenant's Premises. Any payments due by Tenant hereunder shall
be made during each Lease Year or Partial Lease Year of the term of this Lease
or any renewal thereof within Thirty (30) days after Tenant's receipt of
Landlord's written certification of the amount due. Tenant's share shall be
prorated in the event Tenant is required to make such payment for a Partial
Lease Year. In addition, should the taxing authorities include in such Real
Estate Taxes the value of any improvements made by Tenant or include machinery,
equipment fixtures, inventory or other personal property or assets of the
Tenant, then Tenant shall also pay 100% of the Personal Property Taxes and Real
Estate Taxes for such items.
If the Lease expires during a Partial Lease Year, Landlord shall bill
Tenant, not more than Sixty (60) days prior to the expiration date of the Lease,
for its estimated pro rata share of Real Estate Taxes for
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<PAGE> 8
the Partial Lease Year. Tenant shall remit full payment to Landlord within Seven
(7) days of such bill. If Tenant fails to remit such full payment to Landlord,
Landlord in its sole discretion, may deduct the amount due from Tenant's
Security Deposit and be entitled to all other rights and remedies hereunder for
Tenant's default.
Should any governmental taxing authority, acting under any present or
future law, ordinance, or regulation, levy, assess or impose a tax, excise
and/or assessment (other than income or franchise tax) upon or against or in any
way related to the land and buildings comprising the Center, either by way of
substitution or in addition to any existing tax on land and buildings or
otherwise, Tenant shall be responsible for and shall pay to Landlord its
proportionate share as set forth above of such tax, excise and/or assessment.
ARTICLE V
REPAIRS AND MAINTENANCE
Section 5.1 Repairs by Landlord
Landlord shall, at its expense, keep the foundations, exterior walls,
gutters, downspouts and the roof in good order and repair, and shall make
structural repairs and replacements necessary to keep in good order and repair
the Center and the pipes and ducts running through the Premises and installed by
Landlord, but not including Tenant's service connections therewith. Landlord
shall have no obligation to repair until a reasonable time after the receipt by
Landlord of written notice of the need for repairs. 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 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 whatsoever nature. All property of Tenant, including merchandise and
furnishings, kept or stored on the 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. If Landlord is required to make repairs by
reason of any act, omission or negligence of Tenant, any permitted subtenants,
concessionaires or their respective employees, agents, invitees, licensees or
contractors, the cost of such repairs shall be home by Tenant and shall be due
and payable immediately upon receipt of Landlord's notification of the amount
due.
Section 5.2 Repairs and Maintenance by Tenant
Tenant shall make and pay for all repairs to the interior of the
Premises and shall replace all things necessary to keep the same in a good state
of repair, such as, but not limited to, all fixtures, furnishings, lighting,
doors, and store signs of Tenant. Tenant shall maintain, replace and keep in
good repair all air-conditioning, plumbing, heating and electrical installations
for the Premises. Any air-conditioning unit supplied by Tenant shall remain in
the Premises for the duration of the Lease Term and any renewals thereof, and
shall become the property of the Landlord upon installation of such unit. Tenant
shall at all times keep the Premises and the immediate areas in front, behind
and adjacent to it, exterior entrances, all glass and show windows, moldings and
bulkheads, and all partitions, doors, floor surfaces, fixtures, equipment and
appurtenances thereof in good order, condition and repair, and in a satisfactory
condition of cleanliness. Tenant shall be fully responsible and liable for the
maintenance and lighting of all its exterior signs, and shall periodically
repaint metal surfaces that rust or begin to deteriorate from any causes. Any
damage to the exterior walls to which a sign may be attached, including but not
limited to rust stains and structural cracking of the facia, caused by Tenant's
use of such sign, shall be repaired by Tenant at its own cost. Tenant shall make
such other necessary repairs in and to the
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<PAGE> 9
Premises not specified in Section 5.1 hereof as the responsibility of Landlord,
and shall obtain, at Tenant's sole cost, a maintenance agreement, subject to
Landlord's approval, with a reputable HVAC contractor for the servicing of the
HVAC system throughout the Term of this Lease and all renewals thereafter. The
agreement shall provide that the HVAC system shall be serviced at least four (4)
times each year by the service provider. Landlord shall be provided with a copy
of said agreement. In addition to the foregoing, Tenant shall install, repair,
replace and maintain fire extinguishers and other fire prevention equipment, in
accordance with the recommendations or requirements of Landlord's fire engineer
or Landlord's fire insurance carrier or in accordance with any future
recommendations of Landlord's fire insurance carrier or fire engineer, and in
accordance with applicable governmental codes.
All garbage and refuse shall be kept in the kind of container specified
by Landlord or duly constituted public authority, and shall be placed outside of
the Premises prepared for collection in the manner and at the times and places
specified by Landlord. If Landlord shall provide or designate a service for
picking up refuse and garbage, Tenant shall use same at Tenant's cost. Tenant
shall pay the cost of removal of any Tenant's refuse or rubbish and maintain all
common loading areas and areas adjacent to garbage receptacles in a clean manner
satisfactory to the Landlord. Should Tenant fail to keep the area around his
garbage receptacle in a clean manner as specified by Landlord, Landlord or its
agents or subcontractors may clean such area and bill Tenant for the cost of
cleaning plus 20% overhead, to be paid upon presentation of the bill.
If Tenant refuses or neglects to properly repair and/or maintain the
Premises as required herein and to the reasonable satisfaction of Landlord as
soon as reasonably possible after written demand, Landlord may, but shall not be
obligated to, make such repairs and/or maintenance, without liability for any
loss or damage that may accrue to Tenant's merchandise, fixtures, or other
property or to Tenant's business by reason thereof, and upon completion thereof,
Tenant shall pay Landlord's costs for making such repairs plus twenty percent
(20%) for overhead, upon presentation of the bill. Such bill shall include
interest at the highest permissible non-usurious rate or, if there is none, then
at fifteen percent (15%) per annum on the cost from the date of completion of
repairs until the date payment is received by Landlord.
Section 5.3 Right of Entry
Landlord or its representatives shall have the right to enter the
Premises at reasonable hours of any day during the Lease Term to: a) ascertain
if the Premises are in proper repair and condition, and further, Landlord or its
representatives shall have the right, without liability, to enter the Premises
for the purposes of making repairs, additions or alterations thereto or to the
building in which the same are located, including the right to take the required
materials therefore into and upon the Premises without the same constituting an
eviction of Tenant in whole or in part, and the Rent shall not abate while such
repairs, alterations, replacement or improvements are being made by reason of
loss or interruption of Tenant's business due to the performance of any such
work; and b) show the Premises to prospective purchasers, lenders and tenants.
If Tenant shall not be personally present to permit an entry into said Premises
when for any reason an entry therein shall be permissible, Landlord may enter
the same by a master key or by the use of force without rendering Landlord
liable therefor and without in any manner affecting Tenant's obligations under
this Lease. During the ninety (90) days prior to the expiration or earlier
termination of the Lease Term, Landlord may place a "For Lease" sign on the
Premises.
Section 5.4 Sidewalks and Outside Areas
Nothing shall be thrown or swept out of doors or windows of Tenant's
Premises onto sidewalks, entrances, passages, courts, plazas or any of the
Common Areas. Tenant agrees to be use reasonable diligence to keep the sidewalks
and outside areas immediately in front, behind and adjacent to the Premises
broom-clean and otherwise keep said areas free of trash, litter or obstruction
of any kind.
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Section 5.5 Replacement of Glass
At the commencement of the term of this Lease, all glass in the
Premises shall be in good condition, scraped clean of any paint and undamaged.
Tenant shall, at its own expense, replace all glass thereafter broken or damaged
with glass of the same quality and physical properties.
ARTICLE VI
ALTERATIONS, CHANGES, AND IMPROVEMENTS
Section 6.1 Alterations, Changes and Improvements
Tenant shall not make or permit any alterations, additions or
improvements to the Premises without the prior written consent of the Landlord.
Consent for alterations, additions or improvements will not be unreasonably
withheld by Landlord. Provided Tenant is not in default hereunder, Tenant shall
have the right, at the termination of this Lease, to remove any and all trade
fixtures, equipment and other items of personal property not constituting a part
of the freehold which it may have stored or installed in the Premises including,
but not limited to, counters, shelving, showcases, chairs, and moveable
machinery purchased or provided by Tenant and which are susceptible of being
moved without damage to the building and the Premises, provided this right is
exercised before the Lease is terminated or during the Ten (10) day period
immediately following such termination and provided that Tenant, at its own cost
and expense, shall repair any damage to the Premises caused thereby. The right
granted Tenant in this Section 8.5 shall not include the right to remove any
plumbing or electrical fixtures or equipment, heating or air-conditioning
equipment, floor-coverings (including wall-to-wall carpeting) glued or fastened
to the floors or any paneling, file or the materials fastened or attached to the
walls or ceilings, all of which shall be deemed to constitute a part of the
freehold, and, as a matter of course, shall not include the right to remove any
fixtures or machinery that were furnished or paid for by Landlord. The Premises
and the immediate areas in front, behind and adjacent to it shall be left in a
broom-clean condition. Should Tenant fail to comply with this provision,
Landlord may deduct the cost of cleanup from Tenant's Security Deposit. If
Tenant shall fail to remove its trade fixtures or other property at the
termination of this Lease or within Ten (10) days thereafter, such fixtures and
other property not removed by Tenant shall be deemed abandoned by Tenant, and,
at the option of Landlord, shall become the property of Landlord.
Notwithstanding any provision of this Lease seemingly to the contrary,
Tenant shall never, under any circumstances, have the power to subject the
interest of Landlord in the Premises to any mechanics' or materialmen's liens or
liens of any kind, nor shall any provision contained in this Lease ever be
construed as empowering the Tenant to encumber or cause the Landlord to encumber
the title or interest of Landlord in the Premises.
Tenant hereby expressly acknowledges and agrees that no alterations,
additions, repairs or improvements to the Premises of any kind are required or
contemplated to be performed as a prerequisite to the execution of this Lease
and the effectiveness thereof according to its terms or in order to place the
Premises in a condition necessary for use of the Premises for the purposes set
forth in this Lease, that the Premises are presently complete and usable for the
purposes set forth in this Lease and that this Lease is in no way conditioned on
Tenant making or being able to make alterations, additions, repairs or
improvements to the Premises, unless otherwise specified under the Special
Provisions section of the Definitions, notwithstanding the fact that
alterations, repairs, additions or improvements may be made by Tenant, for
Tenant's convenience or for Tenant's purposes, subject to Landlord's prior
written consent, at Tenant's sole cost and expense.
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Landlord and Tenant expressly acknowledge and agree that neither the
Tenant nor any one claiming by, through or under the Tenant, including without
limitation contractors, sub-contractors, materialmen, mechanics and laborers,
shall have any right to file or place any mechanics' or materialmen's liens of
any kind whatsoever upon the Premises nor upon any building or improvement
thereon; on the contrary, any such liens are specifically prohibited. All
parties with whom the Tenant may deal are hereby put on notice that the Tenant
has no power to subject the Landlord's interest in the Premises to any claim or
lien of any kind or character and any persons dealing with the Tenant must look
solely to the credit of the Tenant for payment and not to the Landlord's
interest in the Premises or otherwise.
Any lien filed against the Premises in violation of this paragraph
shall be null and void and of no force or effect. In addition, Tenant shall
cause any lien filed against the Premises in violation of this paragraph to be
canceled, released, discharged and extinguished within fifteen (15) days from
and against any such lien and any costs, damages, charges and expenses,
including, but not limited to, attorneys' fees incurred in connection with or
with respect to any such lien.
ARTICLE VII
INSURANCE AND INDEMNITY
Section 7.1 Tenant's Insurance
Tenant shall maintain, at its own cost and expense, in responsible
companies approved by Landlord, combined single limit public liability
insurance, insuring Landlord and Tenant, as their interests may appear, against
all claims, demands or actions for bodily injury, personal injury or death of
any one person in an amount of not less than $1,000,000.00; and for bodily
injury, personal injury or death of more than one person in any one accident in
an amount of not less than $ 1,000,000.00; and for damage to property in an
amount of not less than $1,000,000.00. Landlord shall have the right to direct
Tenant to increase such amounts whenever it considers them inadequate. Such
liability insurance shall also cover and include all exterior signs maintained
by Tenant. The policy of insurance may be in the form of a general coverage or
floater policy covering these and other premises, provided that Landlord is
specifically insured therein. Tenant shall carry like coverage against loss or
damage by boiler or compressor or internal explosion of boilers or compressors,
if there is a boiler or compressor in the Premises. Tenant shall maintain
insurance covering all glass forming a part of the Premises including plate
glass in the Premises and fire insurance against loss or damage by fire or
windstorms, with such endorsements for extended coverage, vandalism, malicious
mischief and special extended coverage as Landlord may require, covering 100% of
the replacement costs of any items of value, including but not limited to signs,
stock, inventory, fixtures, improvements, floor coverings and equipment. All of
said insurance shall be in form and in responsible companies satisfactory to
Landlord, and shall provide that it will not be subject to cancellation,
termination or change except after at least thirty (30) days prior written
notice to Landlord. Any insurance procured by Tenant as herein required shall
contain an express waiver of any right of subrogation by the insurance company
against Landlord. The policies, together with satisfactory evidence of the
payment of the premiums thereon, shall be deposited with Landlord on the day
Tenant begins operations. Thereafter, Tenant shall provide Landlord with
evidence of proof of payment upon renewal of any such policy, not less than
thirty (30) days prior to expiration of the term of such coverage. In the event
Tenant fails to obtain or maintain the insurance required hereunder, Landlord
may obtain same and any costs incurred by Landlord in connection therewith shall
be payable by Tenant upon demand. Landlord shall carry public liability
insurance covering the exterior of the Premises, including, but not limited to
the sidewalks, malls and parking lot.
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Tenant shall pay its prorata share of the increase in the insurance
premium for the Premises above a 1997 base year within ten (10) days after the
original billing date from Landlord. Wherever reference is made to Tenant's "pro
rata share," it shall mean the proportion that the square foot area of the
Premises shall bear to the entire Center's gross leasable area. The prorating of
such share shall be determined by the use of a formula, the numerator of which
is the square footage of the Premises (7,200 square feet), and the denominator
of which is the gross leasable area of the Center (101,736 square feet) at the
commencement of this Lease, with the resulting percentage (7.08%) being Tenant's
pro rata area of the Center, which, when multiplied by the cost of any
additional charges, represents the dollar amount of Tenant's annual pro rata
share.
Section 7.2 Extra Hazard Insurance Premiums
Tenant agrees that it will not keep, use, sell or offer for sale in or
upon the Premises any article or permit any activity which may be prohibited by
the standard form of fire or public liability insurance Policy. Tenant agrees to
pay any increase in premiums for fire and extended coverage or public liability
insurance which may be carried by Landlord on the Premises or the building of
which they are a part, resulting from the type of merchandise sold or services
rendered by Tenant or activities in the Premises, whether or not Landlord has
consented to the same. In determining whether increased premiums are the result
of Tenant's use of the Premises, a schedule, issued by the organization making
the insurance rate on the Premises, showing various components of such rate,
shall be conclusive evidence of the several items and charges which make up the
fire and public liability insurance rate on the Premises.
Tenant shall not knowingly use or occupy the Premises or any part
thereof, or suffer or permit the same to be used or occupied for any business or
purpose deemed extra hazardous on account of fire or otherwise. In the event
Tenant's use and/or occupancy causes any increase of premium for the fire,
boiler and/or casualty rates on the Premises or any part thereof above the rate
for the least hazardous type of occupancy legally permitted in the Premises,
Tenant shall pay such additional premium on the fire, boiler and/or casualty
insurance policy that may be carried by Landlord for its protection against rent
loss through fire. Bills for such additional premiums shall be rendered by
Landlord to Tenant at such times as Landlord may elect, and shall be due from
and payable by Tenant when rendered in writing, but such increases in the rate
of insurance shall not be deemed a breach of this covenant by Tenant, Failure to
pay amounts due hereunder shall be a breach of the Lease.
Section 7.3 Indemnity
Tenant during the term hereof shall indemnify and save harmless
Landlord from and against any and all claims and demands whether for injuries to
persons or loss of life, or damage to property, occurring within the Premises
and immediately adjoining the Premises and arising out of the use and occupancy
of the Premises by Tenant, or occasioned wholly or in part by any act or
omission of Tenant, its subtenants, agents, contractors, employees, servants,
lessees or concessionaires, excepting however such claims and demands, whether
for injuries to persons or loss of life, or damage to property, caused by the
negligence of Landlord. If, however, any liability arises in the Common Areas
because of the negligence of Tenant, Tenant's subtenants, agents, employees,
contractors, invitees, customers or visitors, then in such event Tenant shall
hold Landlord harmless. In case Landlord shall, without fault on its part, be
made a party to any litigation commenced by or against Tenant, then Tenant shall
protect and hold landlord harmless and shall pay all costs, expenses and
reasonable attorneys' fees incurred or paid by Landlord in connection with such
litigation. Tenant shall also pay all costs, expenses and reasonable attorneys'
fees that may be incurred or paid by Landlord in enforcing the covenants and
agreements of this Lease.
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Section 7.4 Definition and Liability of Landlord
The term Landlord as used in this Lease means only the owner or the
mortgagee in possession for the time being of the building in which the Premises
are located or the possession for the time being of the building in which the
Premises are located or the owner of a leasehold interest in the building and/or
the land thereunder so that in the event of a sale of the building or an
assignment of this Lease, or a demise of the building and/or land, Landlord
shall be and hereby is entirely freed and relieved of all obligations of
Landlord hereunder and it shall be deemed without further agreement between the
parties and such purchaser(s), assignee(s) or lessee(s) that the purchaser,
assignee or lessee has assumed and agreed to observe and perform all obligations
of Landlord hereunder.
It is specifically understood and agreed that there shall be no
personal liability on Landlord in respect to any of the covenants, conditions or
provisions of this Lease; in the event of a breach or default by Landlord of any
of its obligations under this Lease, Tenant shall look solely to the equity of
Landlord in the Center for the satisfaction of Tenant's remedies.
ARTICLE VIII
DAMAGE, DESTRUCTION AND CONDEMNATION
Section 8.1 Damage or Destruction by Fire or Other Casualty
(a) Tenant shall give prompt notice to Landlord in case of fire or
other damage to the Premises or the building(s) containing the Premises. In the
event the Premises are damaged by fire, explosion, flood, tornado or by the
elements, or through any casualty, or otherwise, after the commencement of the
term of this Lease, the Lease shall continue in full force and effect. If the
extent of the damage is less than fifty percent (50%) of the cost of replacement
of the Premises, the damage shall promptly be repaired by Landlord at Landlord's
expense, provided that Landlord shall not be obligated to so repair if such
fire, explosion or other casualty is caused directly by the negligence of
Tenant, its subtenants, permitted concessionaires, or their agents, servants or
employees, and provided further that Landlord shall not be obligated to expend
for such repair an amount in excess of the insurance proceeds recovered or
recoverable as a result of such damage, and that in no event shall Landlord be
required to replace Tenant's stock in trade, fixtures, furniture, furnishings,
floor coverings and equipment. In the event of any such damage and (i) Landlord
is not required to repair as hereinabove provided; or (ii) the Premises shall be
damaged to the extent of fifty percent (50%) or more of the cost of replacement;
or (iii) the building of which the Premises are a part is damaged to the extent
of twenty-five percent (25%) or more of the cost of replacement; or (iv) all
buildings (taken in the aggregate) in the Center shall be damaged to the extent
of more than twenty-rive percent (25%) of the aggregate cost of replacement,
Landlord may elect either to repair or rebuild the Premises or the building or
buildings, or to terminate this Lease upon giving notice of such election to
Tenant within ninety (90) days after the occurrence of the event causing the
damage.
(b) If the casualty, repairing, or rebuilding shall render the Premises
untenantable, in whole or in part, and the damage shall not have been due to the
default or neglect of Tenant, a proportionate abatement of the Fixed Minimum
Rent shall be allowed from the date when the damage occurred until the date
Landlord completes the repairing or rebuilding, said proportion to be computed
on the basis of the relation which the gross square foot area of the space
rendered untenantable bears to the floor area of the Premises. If Landlord is
required or elects to repair the Premises as herein provided, Tenant shall
repair or replace its stock in trade, fixtures, furniture, furnishings, floor
coverings and equipment, and if Tenant has closed for business, Tenant shall
promptly reopen for business upon the completion of such repairs.
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(c) In the event the Premises or the building(s) shall be damaged in
whole or in substantial part within the last twenty-four (24) months of the
original term, or within the last twenty-four (24) months of the last renewal
term, if renewals are provided for herein, Landlord shall have the option,
exercisable within ninety (90) days following such damage, of terminating this
Lease, effective as of the date of receipt of mailing notice to Tenant thereof.
If any such termination occurs during the initial term, any options for renewal
shall automatically be of no further force or effect.
No damage or destruction of the Premises or the building(s) shall allow
Tenant to surrender possession of the Premises nor affect Tenant's liability for
the payment of rent or any other covenant contained herein, except as may be
specifically provided in this Lease. Notwithstanding any of the provisions
herein to the contrary, Landlord shall have no obligation to rebuild the
Premises or the building(s) and may at its own option cancel this Lease unless
the damage or destruction is a result of a casualty covered by Landlord's
insurance policy.
Section 8.2 Condemnation
(a) Total: In the event the entire Premises shall be appropriated or
taken under the power of eminent domain by any public or quasi-public authority,
this Lease shall terminate and expire as of the date of title vesting in such
proceedings, and Landlord and Tenant shall thereupon be released from any
further liability hereunder.
(b) Partial: If any part of the Premises shall be taken as aforesaid,
and such partial taking shall render that portion not so taken unsuitable for
the business of Tenant, as determined by Landlord, then this Lease and the term
herein shall cease and terminate as aforesaid. If such partial taking is not
extensive enough to render the Premises unsuitable for the business of Tenant,
then this Lease shall continue in effect, except that the Fixed Minimum Rent
shall be reduced in the same proportion that the floor area of the Premises
taken bears to the original floor area leased and Landlord shall, upon receipt
of the award in condemnation, make all necessary repairs or alterations to the
building in which the Premises are located so as to constitute the portion of
the building not taken a complete architectural unit, but such work shall not
exceed the scope of the work to be done by Landlord in originally constructing
said building, nor shall Landlord, in any event, be required to spend for such
work an amount in excess of the amount received by Landlord as damages for the
part of the Premises so taken. "Amount received by Landlord" shall mean that
part of the award in condemnation which is free and clear to Landlord of any
collection by mortgagee for the value of the diminished fee.
(c) Termination: If more than twenty percent (20%) of the floor area of
the building in which the Premises are located shall be taken as aforesaid,
Landlord may, by written notice to Tenant, terminate this Lease, such
termination to be effective as aforesaid.
(d) Rent on Termination: If this Lease is terminated as provided in
this paragraph, the rent shall be paid up to date that possession is so taken by
public authority and Landlord shall make an equitable refund of any rent paid by
Tenant in advance.
(e) Award: Tenant shall not be entitled to and expressly waives all
claim to any condemnation award for any taking, whether whole or partial, and
whether for diminution in value of the leasehold or to the fee although Tenant
shall have the right, to the extent that the same shall not reduce Landlord's
award, to claim from the condemnor, but not from Landlord, such compensation as
may be recoverable by Tenant in its own right for damage to Tenant's business,
fixtures and improvements installed by Tenant at its expense.
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ARTICLE IX
DEFAULT
Section 9.1 Default
Landlord may, at its option, terminate this Lease, as provided below
and take the action outlined in Paragraph 9.2 hereof, IF:
(a) Tenant defaults in the payment of any rentals or any other payments
when due, and such default shall continue for five (5) days after notice from
Landlord to Tenant; OR
(b) Tenant defaults in fulfilling any of the other covenants or
obligations of this Lease on Tenant's part to be performed hereunder, and such
default has not been cured within five (5) days after written notice from
Landlord to Tenant specifying the nature of said default; OR
(c) The default so specified shall be such a nature that the same
cannot be reasonably cured or remedied within said five (5) day period, if
Tenant shall not in good faith have commenced the curing or remedying of such
default within such five (5) day period and shall not thereafter diligently
proceed therewith to completion, which completion shall in no event be more than
thirty (30) days after notice from Landlord; OR
(d) Tenant shall fail to occupy the Premises on the commencement date
as fixed herein, or anytime thereafter, or shall fail to remain open for
business throughout the term of this Lease, as hereinbefore provided; OR
(e) At any time during the term should there be filed by or against
Tenant or against any successor tenant then in possession, in any court,
pursuant to any statute, either of the United States or any state, a petition;
(i) In bankruptcy;
(ii) Alleging insolvency;
(iii) For reorganization;
(iv) For the appointment of a receiver or trustee;
(v) For an arrangement under the Bankruptcy Acts; or
(vi) If a similar type of proceeding shall be filed and
any such petition or Filing against Tenant has not
been dismissed within a period of twenty (20) days;
OR
(f) Tenant makes or proposes to make an assignment for the benefit of
creditors; OR
(g) Tenant does, or permits to be done, any act which creates a
mechanics' lien or claim therefore against the Premises or the Center; OR
(h) Tenant fails to furnish Landlord with a copy of any insurance
policy required to be furnished by Tenant to Landlord when due, and such default
shall continue for thirty (30) days after written notice from Landlord, Landlord
may elect:
(i) to terminate this Lease, or
(ii) to assess and collect an administrative fee of Five
Dollars ($5.00) for each day said policy has not been
received in the office of Landlord at the close of
each business day.
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(i) Tenant conducts telemarketing as a principal business upon the
Premises; OR
(j) Tenant parks in excess of twenty (20) vehicles upon the Premises
during normal and reasonable business hours 8:00 a.m. to 6:00 p.m. Monday
through Friday;
Then the Landlord may elect to declare the entire rent for the balance
of the term, or any part thereof, due and payable forthwith, or at the option of
the Landlord, this Lease and the term thereunder shall terminate and come to an
end on the date specified in such notice of cancellation, and Tenant shall quit
and surrender the Premises to Landlord as if the term hereunder ended by the
expiration of the time fixed herein, but Tenant shall remain liable as
hereinafter provided.
Section 9.2 Landlord's Rights on Default
If the notice provided shall have been given and the term shall expire
as aforesaid, or should Landlord elect to terminate this Lease, Landlord shall
have the immediate right of re-entry and may remove all persons and property
from the Premises and such property may be removed and stored in a public
warehouse or elsewhere at the cost of, and for the account of Tenant, all
without service of notice or resort to legal process, all of which Tenant
expressly waives, and Landlord shall not be deemed guilty of trespass, or become
liable for any loss or damage which may be occasioned thereby. Landlord shall
have a lien for the payment of all sums agreed to be paid by Tenant herein upon
all Tenant's property, which is to be in addition to Landlord's lien now or that
may hereafter be provided by law.
Should Landlord elect to re-enter or should it take possession pursuant
to legal proceedings or pursuant to any notice provided for by law, it may make
such alterations and repairs as may be necessary in order to relet the Premises
or any part thereof, for such term or terms (which may be for a term extending
beyond the term of this Lease) and at such rentals and upon such other terms and
conditions as Landlord, in its sole discretion, may deem advisable. Upon each
such relenting, all rentals received by Landlord from such reletting shall be
applied, first, to the payment of any indebtedness, other than rent due
hereunder, from Tenant to Landlord; second, to the payment of any costs and
expenses of such reletting, including brokerage fees and to costs of such
alterations and repairs; third, to the payment of rent due and unpaid hereunder,
the residue, if any, shall be held by Landlord and applied in payment of future
rent as the reletting during any month be less than that to be paid during that
month by Tenant as set forth herein, Tenant shall pay any such deficiency to
Landlord. Such deficiency shall be calculated and paid monthly. Landlord shall
recover from Tenant all damages it may incur by reason of Tenant's default,
including the cost of recovering the Premises and, including charges equivalent
to rent reserved in this Lease for the remainder of the stated term, all of
which amounts shall be immediately due and payable from Tenant to Landlord.
The parties hereby waive trial by jury in any action, proceeding or
counterclaim brought by either of the parties hereto against the other or 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 Premises,
and/or claim of injury or damage.
In the event of a breach by Tenant of any of the covenants or
provisions hereof, Landlord shall have, in addition to any other remedies which
it may have, the right to invoke any remedy allowed at law or in equity,
including injunctive relief, to enforce Landlord's rights or any of them, as if
re-entry and other remedies were not herein provided for.
In the event of any litigation arising out of enforcement of this
Lease, the prevailing party in such litigation shall be entitled to recovery of
all costs, including reasonable attorneys' fees.
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Notwithstanding anything in this lease to the contrary, Landlord
reserves all rights which any state or local laws, rules, regulations or
ordinances confer upon a Landlord against a Tenant in default. This article
shall apply to any renewals or extension of this Lease.
In the event that it is necessary to bring suit to enforce or seek a
declaration under the terms of the Lease, the parties hereto agree that any
court of competent jurisdiction situated in DeKalb County, Georgia, shall have
venue of such action. This agreement shall be deemed to have been made in DeKalb
County, Georgia, and shall be interpreted, and the rights and liabilities of the
parties here determined, in accordance with the laws of the State of Georgia;
and the Tenant hereby designates N/A, as agent for the purpose of accepting
service of any process. Tenant agrees that said agent may notify Tenant of
service of process by mailing a certified copy of said process to the Tenant at
the Tenant's address as specified in Item 14 of the Definitions.
Section 9.3 Non-Waiver Provisions
The failure of Landlord to insist upon a strict performance of any of
the terms, conditions and covenants herein shall not be deemed to be a waiver of
any rights or remedies that Landlord may have and shall not be deemed a waiver
of any subsequent breach or default in the terms, conditions and covenants
herein contained except as may be expressly waived in writing.
The maintenance of any action or proceeding to recover possession of
the Premises or any installment or installments of rent or any other monies that
may be due or become due from Tenant to Landlord shall not preclude Landlord
from thereafter instituting and maintaining subsequent action or proceedings for
the recovery or possession of the Premises or of any other monies that may be
due or become due from Tenant including all expenses, court costs and attorneys'
fees and disbursements incurred by Landlord in recovering possession of the
Premises and all costs and charges for the care of the Premises while vacant. An
entry or re-entry by Landlord shall not be deemed to absolve or discharge Tenant
from liability hereunder.
Section 9.4 Inability to Perform
If Landlord is delayed or prevented from performing any of its
obligations under this Lease by reason of strike, labor disputes, or any cause
whatsoever beyond Landlord's reasonable control, the period of such delay or
such prevention shall be deemed added to the time herein provided for the
performance of any obligation by Landlord.
ARTICLE X
SECURITY
Section 10.1 Security Deposit
(a) Tenant has deposited with Landlord the sum specified in Item 11 of
the Definitions to be retained by Landlord without liability for interest as
security for the payment of all rent and other sums of money which shall or may
be payable for the full stated term of this Lease, and any extension or renewal
thereof, and for the faithful performance of all the terms of this Lease to be
observed and performed by Tenant.
(b) The Security Deposit shall not be mortgaged, assigned, transferred
or encumbered by Tenant without the prior written consent of Landlord and any
such act on the part of Tenant shall be
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without force or effect and shall not be binding upon Landlord. If any of the
rents herein reserved or any other sum payable by Tenant to Landlord shall be
overdue and unpaid or should Landlord make payments on behalf of Tenant, or if
Tenant shall failed to perform any of the terms of this Lease, then Landlord
may, at its option and without prejudice to any other remedy which Landlord may
have on account thereof, appropriate and apply said entire deposit or so much
thereof as may be necessary to compensate Landlord toward the payment of rent or
Additional Rent or loss or damage sustained by Landlord due to breach on the
part of Tenant; and Tenant shall promptly upon demand restore said security to
the original sum deposited. If Tenant should be overdue in the payment of
monthly rent or other sums payable to Landlord on at least two or more occasions
during a year, Landlord, at its option, may require Tenant to increase the
amount of Security Deposit now held by Landlord by an amount sufficient to cover
at least two month's rent or greater amount to be determined at sole discretion
of Landlord. In this event, upon receipt of the additional security sum,
Landlord and Tenant shall evidence such receipt by a letter signed and
acknowledged by both parties to be incorporated as part of this Lease amending
Section 11 hereof, stating the "New Total Amount" so held without liability for
any interest. Within sixty (60) days after the expiration of the tenancy hereby
created, whether by lapse of time or otherwise, provided Tenant shall not be in
default hereunder and shall have complied with all the terms, covenants and
conditions of this Lease, including the yielding up of the immediate possession
to Landlord, Landlord shall, upon being furnished with affidavits and other
satisfactory evidence by Tenant that Tenant has paid all bills incurred by it in
connection with its performance of the terms, covenants and conditions of this
Lease, return to Tenant said sum on deposit or such portion thereof then
remaining on deposit with Landlord as set forth herein. In the event Tenant has
not complied with all the obligations provided for hereunder, Landlord may
appropriate a part or all of the Security Deposit as liquidated damages to
satisfy Tenant's obligations.
Section 10.2 Personal Property
As additional security for the performance of Tenant's obligations
hereunder, Tenant hereby pledges and assigns to Landlord all the furniture,
fixtures, goods, inventory, stock and chattels and all other personal property
of Tenant which are now or may hereafter be brought or put in the Premises, and
further grants to Landlord a security interest therein under the Uniform
Commercial Code. Upon default of the payment of rent, assessments, charges,
penalties and damages herein covenanted to be paid by Tenant, and for the
purpose of securing the performance of all other obligations of Tenant
hereunder, and at the request of Landlord, Tenant hereby agrees to execute and
deliver to Landlord all financing statements, amendments thereto or other
similar statements which Landlord may reasonably request. Nothing herein
contained shall be deemed to be a waiver by Landlord of its statutory lien to
rent and remedies, rights and privileges of Landlord in the case of default of
Tenant as set forth above and shall not be exclusive and, in addition thereto,
Landlord may also exercise and enforce all its rights at law or in equity which
it may otherwise have as a result of Tenant's default hereunder. Landlord is
herein specifically granted all of the rights of a secured credit under the
Uniform Commercial Code with respect to the property in which Landlord has been
granted a security interest by Tenant, including, but not limited to, the right
to take possession of the above mentioned property and dispose of it by sale in
a commercially reasonable manner.
Section 10.3 Transfer of Deposit
In the event of a sale or transfer of the Center or any portion thereof which
includes the Premises, or in the event of the making of a lease of the Center or
of any portion, or in the event of a sale or transfer of the leasehold estate
under any such underlying lease, the grantor, transferor or Landlord, as the
case may be, shall thereafter be entirely relieved of all terms, covenants and
obligations thereafter to be performed by Landlord under this Lease to the
extent of the interest or portion so sold, transferred or leased, and it shall
be deemed and construed, without further agreement between the parties and the
purchaser, transferee or Tenant, as the case may be, has assumed and agreed to
carry out any and all covenants of
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Landlord hereunder, provided that (i) any amount then due and payable to Tenant
or for which Landlord or the then grantor, transferor or Landlord would
otherwise then be liable to pay to Tenant (it being understood that the owner of
an undivided interest in the fee or any such lease shall be liable only for his
or its proportionate share of such amount) shall be paid to Tenant; (ii) the
interest of the grantor, transferor or Landlord, as Landlord, in any funds then
in the hands of Landlord or then grantor, transferor or Landlord in which Tenant
has an interest, shall be turned over, subject to such interest, to the then
grantee, transferee or Tenant; and (iii) notice of such sale, transfer or lease
shall be delivered to Tenant.
ARTICLE XI
ADDITIONAL TENANT AGREEMENTS
Section 11.1 Mortgage Financing and Subordination
This Lease and all of Tenant's rights hereunder are and shall be
subordinate to the present mortgage upon the Center, as well as to any existing
ground lease, however, Tenant shall, upon request of either Landlord or the
holder of any mortgage or Deed of Trust now or hereafter placed upon the
Landlord's interest in the Premises or future additions thereto, and to any
ground lease now or hereafter affecting the Premises execute and deliver upon
demand, such further instruments subordinating this Lease to the lien of any
such mortgage or mortgages, and such ground lease, provided such subordination
shall be upon the express condition that this Lease shall be recognized by the
mortgagees and ground lessors and that the rights of Tenant shall remain in full
force and effect during the term of this Lease and any extension thereof,
notwithstanding any default by the mortgagors with respect to the mortgage or
any foreclosure thereof, or any default by the ground lessee, so long as Tenant
shall perform all of the covenants and conditions of this Lease. Tenant hereby
irrevocably appoints Landlord as attorney-in-fact for Tenant, with power to
execute and deliver, without subjecting Landlord to liability of any kind, such
instrument or instruments for and in the name of Tenant, in the event Tenant
shall fail to execute such instrument or instruments within five (5) days after
written notice to do so is given to Tenant. Tenant agrees to execute all
agreements required by Landlord's mortgagee or ground lessor or any purchaser at
a foreclosure sale or sale in lieu of foreclosure by which agreements Tenant
will attorn to the mortgagee or purchaser or ground lessor.
Section 11.2 Assignment or Subletting
All assignments of this Lease or sublease or subleases of the Premises
by Tenant shall be subject to and in accordance with all of the provisions of
this Section.
Tenant may not assign this Lease or sublease the Premises, in whole or
in part, to a wholly-owned corporation or controlled subsidiary of Tenant or to
a party other than a wholly-owned corporation or controlled subsidiary of Tenant
without first having obtained the written consent of Landlord, such consent not
to be unreasonably withheld.
Any assignment or sublease by Tenant shall be only for the purpose
specified in Section 1.4, Use of Premises, and for no other purpose, and in no
event shall any assignment or sublease of the Premises release or relieve Tenant
from any obligations of this Lease.
In the event that Tenant shall seek Landlord's permission to assign
this Lease or sublet the Premises, Tenant shall provide to Landlord the name,
address, financial statement and the business experience resume for the
immediately preceding ten (10) years of the proposed assignee or subtenant and
such other information concerning such proposed assignee or subtenant as
Landlord may require. This
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information shall be in writing and shall be received by Landlord no less than
thirty (30) days prior to the effective date of the proposed assignment or
sublease. It shall be a condition to any consent by Landlord to an assignment or
sublease that Tenant shall pay to Landlord a processing fee in the amount of One
Hundred Fifty and No/100 Dollars ($150.00) or one percent (1%) of the annual
Rent, whichever is greater, as reimbursement to Landlord for any and all
legally-related expenses in connection with the review and preparation of
assignment or sublease-related documents which may be incurred by Landlord in
connection therewith. Payment of such fee shall be submitted along with Tenant's
request for Landlord's consent. Any consent by Landlord to any assignment or
sublease, or to the operation of a concessionaire or licensee, shall not
constitute a waiver or the necessity for such consent to any subsequent
assignment or sublease, or operation by a concessionaire or licensee.
If Tenant is a corporation and any transfer, sale, pledge or other
disposition of more than ten percent (10%) of the common stock shall occur, or
voting control or power to vote the majority of the outstanding capital stock be
changed, such action shall be deemed an assignment under the terms of this Lease
and shall be subject to all the terms and conditions thereof. Any breach of the
assignment clause by Tenant will constitute a default tinder the terms of this
Lease and Landlord shall have all rights and remedies available to it as set
forth herein.
In the event Tenant shall sublease the entire Premises for rentals in
excess of those rentals payable hereunder, Tenant shall pay to Landlord, as
Additional Rent hereunder, all such excess rentals.
Any proposed assignee or subtenant of Tenant shall assume Tenant's
obligations hereunder and deliver to Landlord an assumption agreement in form
satisfactory to Landlord no less than ten (10) days prior to the effective date
of the proposed assignment.
Notwithstanding any of the foregoing provisions, if Tenant is or has
been at any time in default under any of the terms of this Lease, Tenant may not
assign or sublet the Premises in whole or in part.
Section 11.3 Tenant's Notice to Landlord of Default
Should Landlord be in default under any of the terms of this Lease,
Tenant shall give Landlord prompt written notice thereof in the manner specified
in Section 12.1, Notices, and Tenant shall allow Landlord a reasonable length of
time in which to cure such default, which time shall not in any event be less
than thirty (30) days from the date of such notice.
Section 11.4 Short Form Lease
Tenant agrees not to record this Lease without the express written
consent of Landlord. Tenant further agrees, however, to execute, acknowledge and
deliver the short form Lease attached hereto and made a part hereof by
reference.
Section 11.5 Surrender of Premises and Holding Over
(a) Tenant shall give written notice to Landlord not less than one
hundred and eighty (18O) days nor more than two hundred forty (240) days prior
to the expiration of the Lease term and each extension or renewal thereof of
Tenant's intention to: (i) vacate the Premises at the end of the Lease Term or
extension or renewal; (ii) to enter into a new lease agreement for the Premises
at terms to be negotiated by Landlord and Tenant, if no such renewal or
extension rights remain. As to (ii) above, Tenant shall deliver to Landlord an
executed copy of the new lease agreement within thirty (30) days after receipt
of said document from Landlord. In the event that Tenant 1) fails to notify
Landlord of Tenant's intention to vacate the Premises at the expiration of the
Lease Term; or 2) fails to execute a new lease agreement as
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specified above, Tenant shall be in default of this Lease and Landlord shall
have the right to appropriate the entire amount of the Security Deposit as
liquidated damages and to declare this Lease terminated.
(b) At the expiration of the tenancy and subject to Paragraph 11.5A,
Tenant shall surrender the Premises in good condition, reasonable wear and tear
excepted, and damage by unavoidable casualty (except to the extent that the same
is covered by Landlord's fire insurance policy with extended coverage
endorsement), and Tenant shall surrender all keys for the Premises to Landlord
at the place then fixed for the payment of rent and shall inform Landlord of all
combinations on locks, safes and vaults, if any, in the Premises. Tenant shall
remove all its trade fixtures and any alterations or improvements, subject to
the provisions of Section 6.1, before surrendering the Premises, and shall
repair, at its own expense, any damage to the Premises caused thereby. Tenant's
obligations to observe or perform this covenant shall survive the expiration or
other termination of the term of this Lease. In the event Tenant remains in
possession of the Premises after the expiration of the tenancy created
hereunder, whether or not with the consent or acquiescence of Landlord, and
without the execution of a new Lease, Tenant, at the option of Landlord, shall
be deemed to be occupying the Premises as a tenant at will on a week-to-week
tenancy and in no event on a month-to-month or on a year-to-year tenancy. 'Me
rent during this week-to-week tenancy shall be payable weekly at one hundred
fifty percent (150%) of the Fixed Minimum Rent, and one hundred fifty percent
(150%) of all other charges due hereunder, and it shall be subject to all the
other terms, conditions, covenants, provisions and obligations of this Lease,
and no extension or renewal of this Lease shall be deemed to have occurred by
such holding over. Tenant's obligations to observe or perform this covenant
shall survive the expiration or other termination of the ten-n of this Lease.
Section 11.6 Estoppel Certificate
Tenant agrees to provide at any time, within five (5) days of
Landlord's written request, a statement certifying that this Lease is unmodified
and in full force and effect or, if there have been modifications, that the
Lease is in full force and effect as modified an(; stating the modifications,
the dates to which the Fixed Minimum Rent and other charges have been paid in
advance, if any, and such other information reasonably requested by Landlord, a
prospective purchaser or mortgagee. The Tenant hereby irrevocably appoints
Landlord as attorney-in-fact for Tenant, with power to execute and deliver,
without subjecting Landlord to liability of any kind, such instrument or
instruments for and in the name of Tenant, in the event Tenant shall fail to
execute such instrument or instruments within five (5) days after written notice
to do so is given to Tenant. It is intended that any such statement delivered
pursuant to this paragraph may be relied upon by any prospective purchaser or
mortgagee of the Premises.
Section 11.7 Delay of Possession
If the Landlord is unable to give possession of the Premises on the
date of the commencement of the aforesaid term by reason of the holding over of
any prior tenant or tenants or for any other reason; an abatement or diminution
of the rent to be paid hereunder shall be allowed Tenant under such
circumstances, but nothing herein shall operate to extend the term of the Lease
beyond the agreed expiration date; and said abatement of rent shall be the full
extent of Landlord's liability to Tenant for any loss or damage to Tenant on
account of said delay in obtaining possession of the Premises.
Section 11.8 Compliance with Law, Waste and Quiet
Tenant shall comply with all governmental laws, ordinances and
regulations applicable to the use of the Premises and shall promptly comply with
all governmental orders and to the use of the Premises and shall promptly comply
with all governmental orders and directives for the correction, prevention and
abatement of nuisances in, upon or connected with the Premises, all at Tenant's
sole risk and expense. Tenant shall not commit, or suffer to be committed, any
waste upon the Premises or any nuisance, other
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act, or thing which may disturb the quiet enjoyment of any other tenant in the
building in which the Premises may be located.
Section 11.9 Rules and Regulations
Tenant's use of the Premises shall be subject, at all times during the
term of this Lease, to Landlord's right to adopt in writing, from time to time,
modify and/or rescind reasonable Rules and Regulations not in conflict with any
of the express provisions hereof governing the use of the parking areas, walks,
driveways, passageways, signs, exterior of building, lighting and other matters
affecting other tenants in and the general management and appearance of the
Center of which the Premises are a part, but no such rule or regulation shall
discriminate against Tenant. The current Rules and Regulations are attached
hereto as Exhibit "C" and made a part hereof.
Section 11.10 Abandonment
Tenant shall not vacate or abandon the Premises at any time during the
term of this Lease, nor permit the Premises to remain unoccupied for a period
longer than ten (10) consecutive days during the term of this Lease; and if
Tenant shall abandon, vacate or surrender the Premises, or be dispossessed by
process of law or otherwise, any personal property belonging to Tenant left on
the Premises shall, at the option of the Landlord, be deemed abandoned.
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ARTICLE XII
MISCELLANEOUS PROVISIONS
Section 12.1 Notices
Whenever notice shall or may be given to either of the parties by the
other, each such notice shall be either delivered in person or sent by
registered or certified mail, with return receipt requested.
Notice to Landlord shall be sent to the address specified in Item 14 of
the Definitions.
Notice to Tenant shall be sent to the address specified in Item 14 of
the Definitions.
If by mail, any notice under this Lease shall be deemed to have been
given at the time it is received by the addressee.
Section 12.2 Entire and Binding Agreement
This Lease contains all of the agreements between the parties hereto,
and it may not be modified in any manner other than by agreement in writing
signed by all parties hereto or their successors in interest. Tenant shall pay
Landlord for any and all legally-related expenses which may be incurred by
Landlord in connection with the review or preparation of all lease-related
documents including, without limitation, consents, amendments, modifications and
assignments therewith. The terms, covenants and conditions contained herein
shall inure to the benefit of and be binding upon Landlord and Tenant and their
respective heirs, successors and assigns, except as may be otherwise expressly
provided in this Lease.
Section 12.3 Provisions Severable
If any term or provision of this Lease or the application thereof to any person
or circumstance shall, to any extent, be illegal, invalid or unenforceable, the
remainder of this Lease, or the application of such term or provision to persons
or circumstances other than those to which it is held illegal, invalid or
unenforceable shall not be affected hereby and each term and provision of this
Lease shall be valid and be enforced to the fullest extent permitted by law.
Section 12.4 Captions
The captions contained herein are for convenience and reference only
and shall not be deemed as part of this Lease or construed as in any manner
limiting or amplifying the terms and provisions of this Lease to which they
relate.
Section 12.5 Relationship of the Parties
Nothing herein contained shall be deemed or construed as creating the
relationship of principal and agent or of partnership or joint venture between
the parties hereto; it being understood and greed that neither the method of
computing rent nor any other provision contained herein nor any acts of the
parties hereto shall be deemed to create any relationship between the parties
other than that of Landlord and Tenant.
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Section 12.6 Accord and Satisfaction
No payment by Tenant or receipt by Landlord of a lesser amount than the
rental 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 any 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 for in this Lease or available at law or in equity.
Section 12.7 Broker's Commission
Tenant warrants that there are no claims for broker's commissions or
finder's fees in connection with its execution of this Lease and agrees to
indemnify and save Landlord harmless from any liability that may arise from such
claim, including reasonable attorneys' fees, with the exception of Richard
Bowers & Co.
Section 12.8 Corporate Status
If Tenant is a corporation, Tenant's corporate status shall
continuously be in good standing and active and current with the state of its
incorporation and the state in which the Center is located at the time of
execution of the Lease and at all times thereafter and Tenant shall keep its
corporate status active and current throughout the term of the Lease or any
extensions or renewals. Tenant shall annually file with Landlord a current copy
of the Certificate of Good Standing under Seal. Failure of Tenant to keep its
corporate status active and current shall constitute a default under the terms
of this Lease.
Section 12.9 Hazardous Substances
Tenant hereby warrants to Landlord as follows:
(a) As regards all material or substance stored, created, or utilized
on the Premises, Tenant will comply with all applicable requirements of State
and Federal environmental regulations as they may apply from time to time; and
(b) Tenant will dispose of any hazardous or controlled materials only
in accordance with applicable Federal and State regulations; and
(c) Any hazardous or controlled materials created, stored, or
maintained on the Premises shall be contained in safe, leak-proof containers and
removed at such intervals as is prudent, but no less frequently than quarterly,
to a hazardous waste facility approved as applicable by State and Federal
authorities; and
(d) At such time that Tenant vacates the Premises, whether at the end
of the Term, or earlier as herein provided, Tenant will leave the Premises free
of all hazardous or controlled materials and substances.
Tenant shall save, indemnify and hold Landlord harmless from any and
all claims, demands, actions, costs and damages including Landlord's reasonable
attorney's fees which Landlord may suffer by reason of any violation by Tenant
of any of the warranties set forth in the preceding paragraph.
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Section 12.10 Prepaid Rent
Tenant shall prepay the first month's rent, including common area
maintenance, and security deposit upon the execution of this Lease.
Section 12.11 Signage
Any signage installed by Tenant shall be at the sole expense of Tenant
and the design, size, color and layout shall be presented to Landlord for
approval.
IN WITNESS WHEREOF, Landlord and Tenant above duly executed this Lease
as of the day and year first above written, each acknowledging receipt of an
executed copy hereof.
LANDLORD
Signed, sealed and delivered MALON D. MIMMS, a sole proprietorship
in the presence of:
By: /s/ Malon D. Mimms
- ---------------------------- ----------------------------------
Notary Public or Witness
Title: Agent for Landlord
- ---------------------------- -------------------------------
Name (Please Print)
TENANT
Signed, sealed and delivered MAXXIS GROUP, INC.
in the presence of:
By: /s/ Thomas O. Cordy
- ---------------------------- ----------------------------------
Notary Public or Witness
Name: Thomas O. Cordy
- ---------------------------- --------------------------------
Name (Please Print) (Please Print)
Title: President/CEO
-------------------------------
[CORPORATE SEAL]
BROKER
Signed, sealed and delivered RICHARD BOWERS & CO.
in the presence of:
By: /s/ Charles D. Jag
- ---------------------------- ----------------------------------
Notary Public or Witness
Title: Vice President
- ---------------------------- -------------------------------
Name (Please Print)
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EXHIBIT "A"
MAXXIS GROUP, INC.
1901 MONTREAL ROAD
SPECIAL STIPULATIONS
1. In the event that any of the foregoing printed or typed matters shall
conflict with the following Special Stipulations, then in such event
the within and following Special Stipulations shall control.
2. Rental shall be as follows:
<TABLE>
<CAPTION>
Term Base Rent Common Area Total Base Rent
---------------------------------------- Monthly Maintenance and Common Area
--------- Monthly Maintenance Monthly
----------- -------------------
<S> <C> <C> <C>
July 1, 1997 - September 30, 1997 $ 0.00 $ 0.00 $ 0.00
October 1, 1997 - September 30, 1998 $3,960.00 $150.00 $4,110.00
October 1, 1998 - September 30, 1999 $4,119.00 $150.00 $4,269.00
October 1, 1999 - September 30, 2000 $4,284.00 $150.00 $4,434.00
October 1, 2000 - April 30, 2001 $4,456.00 $150.00 $4,606.00
</TABLE>
3. Tenant acknowledges that Tenant is accepting the Premises described in
the Lease in its present "as is" condition with the exception of
Special Stipulation 4. Tenant recognizes and acknowledges that Tenant
has had an opportunity and duty to inspect the Premises and all
improvements thereon with regard to all matters of concern to Tenant.
Tenant does hereby acknowledge that Tenant understands and agrees that
Landlord will perform or have performed Landlord's work according to
Landlord's best efforts. Upon completion of said work, according to
Landlord's best efforts to be determined by Landlord, Tenant does
hereby accept the work as is and as completed.
Further, Tenant agrees and understands that it is Tenant's obligation
to obtain or cause to be obtained any local governmental agencies'
requirements for permits or certificates of occupancy for Tenant's use
of the Premises according to the terms of the Lease and state, county,
local and municipal law.
4. Landlord agrees to complete the following improvements at its sole
expense:
(a) The Landlord will deliver to Tenant the heating, venting and
air-conditioning systems ("HVAC"), plumbing (toilets, sinks),
electrical (outlets, switches and panels), lighting and
overhead doors and any other systems in place on the property
as of the date the Tenant takes possession of the Premises
(hereinafter the "Systems") in good working order. Upon taking
the possession of the Premises by the Tenant, the Tenant shall
have twenty (20) days within which to inspect, or cause said
Systems to be inspected, to determine if any of the Systems
are not in reasonable working order. Tenant acknowledges that
Tenant has a duty and an obligation to make such an inspection
or cause such an inspection to be made and notify the Landlord
within the time provided for herein of any non-compliance. If
the Landlord shall not receive any such notice then, in such
event, it shall be conclusive that the Tenant has accepted the
Systems "basis" "where-is" on the date of taking possession of
the Premises and Landlord shall have no further obligation
with regard to said Systems
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except as provided for in the within Lease. Should the Tenant
notify the Landlord of any system which is not in working
order, then the Landlord shall make reasonable efforts to
cause the system to be operating in reasonable working order.
(b) The office area shall be recarpeted with new commercial grade
26-ounce, glued-down, level loop pile carpeting (color to be
selected by Tenant);
(c) All walls and doors shall be repainted (color to be selected
by Tenant). The wallpaper shall be stripped from the lobby
area, which shall then be repainted;
(d) All damaged or missing ceiling tiles shall be replaced;
(e) Sheetrock walls shall be demolished pursuant to the attached
floor plan.
5. Notwithstanding anything set forth herein to the contrary, Tenant
acknowledges and agrees that should the within Tenant secure the
services of another broker for the purpose of leasing or purchasing any
space or realty from Landlord herein at any time, even during the Term
of the within Lease or any extension or renewal hereof, then in such
event, Tenant shall hold Landlord harmless from any additional
commissions of any kind concerning any purchase, releasing, renewal,
renegotiation or extension as contemplated herein.
The term "broker," as used herein, means the leasing Broker who is a
party to this Lease. Landlord and Tenant each acknowledge and
understand that the leasing Broker, Richard Bowers & Co. and its
salespersons are acting as Broker for Tenant in this transaction and
are not acting as Broker for Landlord.
The commission to be paid in connection with this transaction has been
negotiated between Landlord and Broker and Landlord agrees to pay
Broker, as compensation for services rendered in procuring this Lease,
the first full regular month's rental hereunder and five percent (5%)
of all rentals paid under this Lease as collected by Landlord.
Landlord, with the consent of Tenant, hereby assigns to Broker the
aforesaid commission. If the Term of this Lease is extended, or if a
new lease is entered into covering the leased Premises, or any part
thereof, or covering any other premises as an expansion of, or
substitute for, the Premises herein leased, then in either of said
events, Landlord, in consideration of Broker having procured Tenant
hereunder agrees to pay Broker an additional commission of five percent
(5%) of all rentals paid to Landlord by Tenant under such extension,
amendment, or new lease as collected by Landlord.
Broker agrees that, in the event Landlord sells the leased Premises and
upon Landlord's furnishing Broker with an agreement signed by a
purchaser assuming Landlord's obligations to Broker under this Lease,
Broker will release the original Landlord from any further obligations
to Broker hereunder.
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EXHIBIT "B"
[Site Plan]
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EXHIBIT "C"
WAREHOUSE LEASE
RULES AND REGULATIONS
1. All loading and unloading of goods shall be done only at such times in
the areas and through the entrances designated for such purposes by
Landlord.
2. Tile delivery or shipping of merchandise, supplies and fixtures to and
from tile Premises shall be subject to such rules and regulations as in
the judgment of Landlord are necessary for the proper operation of the
Premises or the Center.
3. Tenant will not utilize any unethical method of business operation nor
shall any space in the Premises be used for living quarters, whether
temporary or permanent.
4. Tenant shall have full responsibility for protecting the Premises and
the property located therein from theft and robbery and shall keep all
doors and windows securely fastened when not in use.
5. No radio or television or other similar device shall be installed
without first obtaining in each instance Landlord's consent in writing.
No aerial shall be erected on the roof or exterior walls of the
Premises or on the grounds without, in each instance, the written
consent of Landlord. Any aerial so installed with such written consent
shall be subject to removal without notice at any time without
liability to Landlord and the expenses involved in said removal shall
be charged to and paid by Tenant upon demand.
6. No loudspeakers, televisions, phonographs, radios or other devices
shall be used in a manner so as to be heard or seen outside of the
Premises without the prior written consent of Landlord.
7. Tenant shall maintain the inside of the Premises at a temperature
sufficiently high to prevent freezing of water in pipes and fixtures
inside the Premises.
8. The plumbing facilities shall not be used for any other purpose than
that for which they are constructed and no foreign substance of any
kind shall be deposited therein. The expense of any breakage, stoppage
or damage resulting from a violation of this provision shall be borne
by Tenant.
9. Tenant shall not bum any trash or garbage of any kind in or about the
Premises, the Center or within one mile of the outside property lines
of the Center.
10. Tenant shall not cause or permit any unusual or objectionable odors to
be produced upon or permeated from the Premises nor shall Tenant vent
any cooking fumes or odors into the interior of the Center.
11. Tenant shall not permit, allow or cause any public or private auction,
"going-out-of-business," bankruptcy, distress or liquidation sale in
the Premises. It is the intent of the preceding sentence to prevent the
Tenant from conducting his business in any manner that would give the
public the impression that he is about to cease operation and Landlord
shall be the sole judge as to what shall constitute a "distress-type"
sale.
12. The sidewalk, entrances, passages, quarters or halls shall not be
obstructed or encumbered by any Tenant or used for any purpose other
than ingress or egress to and from the Premises.
13. No sales tables, merchandise displays, signs or other articles shall be
put in front of or affixed to any part of
28
<PAGE> 30
the exterior building nor placed in the halls, common passageways,
corridors, vestibule or parking area without the prior written consent
of the Landlord.
14. Tenant shall not erect or maintain any barricade or scaffolding which
may obscure the signs, entrances or show window of any other Tenant in
the Center or tend to interfere with any such other Tenants business.
15. Tenant shall not create or maintain, nor allow others to create or
maintain, any nuisances, including without limiting the foregoing
general language, loud noises, sound effects, bright lights, changing,
flashing, flickering or lighting devices or similar devices, smoke or
dust, the effect of which will be visible from the exterior of the
Premises.
16. Landlord reserves the right to waive any rule in any particular
instance or as to any particular person or occurrence and further,
Landlord reserves the right to amend or rescind any of these rules or
make, amend or rescind new rules to the extent Landlord, in its sole
judgment, deems suitable for the safety, care and cleanliness of the
Center and the conduct of high standards of merchandising and services
therein. Tenant agrees to conform to such new or amended rules upon
receiving written notice of the same.
29
<PAGE> 1
EXHIBIT 21.1
Subsidiaries of the Company
Maxxis 2000, Inc.
Maxxis Telecom, Inc.
Maxxis SC, Inc.
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our report
(and all references to our firm) included in or made a part of this registration
statement.
/s/ Arthur Andersen LLP
ARTHUR ANDERSEN LLP
Atlanta, Georgia
October 21, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
EXHIBIT 27.1
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM AUDITED
FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 1997 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH AUDITED FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-START> JAN-24-1997
<PERIOD-END> JUN-30-1997
<EXCHANGE-RATE> 1
<CASH> 35,000
<SECURITIES> 10,000
<RECEIVABLES> 25,000
<ALLOWANCES> 0
<INVENTORY> 185,000
<CURRENT-ASSETS> 290,000
<PP&E> 99,000
<DEPRECIATION> 7,000
<TOTAL-ASSETS> 620,000
<CURRENT-LIABILITIES> 303,000
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 317,000
<TOTAL-LIABILITY-AND-EQUITY> 620,000
<SALES> 2,691,000
<TOTAL-REVENUES> 2,691,000
<CGS> 1,016,000
<TOTAL-COSTS> 2,741,000
<OTHER-EXPENSES> 1,725,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (50,000)
<INCOME-TAX> 0
<INCOME-CONTINUING> (50,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (50,000)
<EPS-PRIMARY> (.003)
<EPS-DILUTED> (.003)
</TABLE>
