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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1998.
Or
[ ] TRANSACTION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM ______TO______ , 19__.
Commission File Number: 333-38623
-------------------------
MAXXIS GROUP, INC.
(Exact name of registrant as specified in its charter)
GEORGIA 22-78241
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
1901 MONTREAL ROAD, SUITE 108, TUCKER, GEORGIA 30084
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (770) 696-6343
Indicate by a check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
--- ---
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Class Outstanding at November 11, 1998
Common Stock, no par value 1,571,187
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MAXXIS GROUP, INC.
INDEX TO FORM 10-Q
<TABLE>
<CAPTION>
PAGE
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<S> <C> <C> <C>
PART I FINANCIAL INFORMATION
Item 1. Financial Statements............................................... 3
Condensed Consolidated Balance Sheets as of
September 30, 1998 (Unaudited) and June 30, 1998................... 3
Condensed Consolidated Statements of Operations for the
Three Months ended September 30, 1998 and 1997 (Unaudited)......... 4
Condensed Consolidated Statements of Cash Flows for the
Three Months ended September 30, 1998 and 1997 (Unaudited)......... 5
Notes to Condensed Consolidated Financial
Statements (Unaudited)............................................. 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations................................ 7
Item 3. Quantitative and Qualitative Disclosure About
Market Risks....................................................... 12
PART II OTHER INFORMATION
Item 1. Legal Proceedings.................................................. 12
Item 4. Submission of Matters to a Vote of Security Holders................ 12
Item 5. Other Information.................................................. 13
Item 6. Exhibits and Reports on Form 8-K................................... 14
</TABLE>
SIGNATURES
2
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PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
MAXXIS GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
SEPTEMBER 30, 1998 JUNE 30, 1998
------------------ ---------------
(UNAUDITED)
ASSETS
<S> <C> <C>
Current assets:
Cash .............................................................. $ 803,000 $ 372,000
Short-term investments ............................................ 10,000 10,000
Communications receivable, net of allowance for
doubtful accounts of $40,000 .................................... 475,000 316,000
Inventories, net .................................................. 725,000 218,000
Prepaid expenses .................................................. 214,000 43,000
Other current assets .............................................. 26,000 --
---------- ----------
Total current assets ............................................ 2,253,000 959,000
Property and equipment, net .......................................... 5,950,000 169,000
Capitalized software development costs, net .......................... 191,000 126,000
Other assets ......................................................... 237,000 9,000
---------- ----------
Total assets ................................................ $8,631,000 $1,263,000
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable .................................................. $ 691,000 $ 211,000
Commissions payable ............................................... 154,000 101,000
Taxes payable ..................................................... 572,000 130,000
Current maturities of long-term capital lease obligations ......... 392,000 --
Accrued liabilities ............................................... 403,000 282,000
Deferred revenue .................................................. 489,000 55,000
---------- ----------
Total current liabilities ....................................... 2,701,000 779,000
Long-term capital lease obligations .................................. 4,866,000 --
Shareholders' equity:
Preferred Stock, no par value; 10,000,000 shares authorized;
100,000 shares designated as Series A Convertible Preferred
Stock of which 36,359 shares are issued and outstanding ......... 200,000 200,000
Common Stock, no par value; 20,000,000 shares authorized;
1,571,187 shares issued and outstanding ......................... 574,000 574,000
Shareholder note receivable ....................................... (120,000) (120,000)
Accumulated earnings (deficit) .................................... 410,000 (170,000)
---------- ----------
Total shareholders' equity ...................................... 1,064,000 484,000
---------- ----------
Total liabilities and shareholders' equity .................. $8,631,000 $1,263,000
========== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
3
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MAXXIS GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
SEPTEMBER 30,
---------------------------------------
1998 1997
---------------- ----------------
<S> <C> <C>
Net revenues:
Communications services ........................................... $3,686,000 $1,465,000
Nutritional products .............................................. 375,000 --
Marketing services ................................................ 1,042,000 353,000
---------- ----------
Total net revenues .............................................. 5,103,000 1,818,000
---------- ----------
Cost of services:
Communications services ........................................... 706,000 438,000
Nutritional products .............................................. 202,000 --
Marketing services ................................................ 552,000 101,000
---------- ----------
Total cost of services .......................................... 1,460,000 539,000
---------- ----------
Gross margin ......................................................... 3,643,000 1,279,000
---------- ----------
Operating expenses:
Selling and marketing ............................................. 2,005,000 716,000
General and administrative ........................................ 778,000 597,000
---------- ----------
Total operating expenses ........................................ 2,783,000 1,313,000
---------- ----------
Operating income (loss) .............................................. 860,000 (34,000)
---------- ----------
Income (loss) before income taxes .................................... 860,000 (34,000)
Provision for income taxes ........................................... 280,000 --
---------- ----------
Net income (loss) .................................................... $ 580,000 $ (34,000)
========== ==========
Income (loss) per share:
Basic ............................................................. $ 0.37 $ (0.02)
========== ==========
Diluted ........................................................... $ 0.36 $ (0.02)
========== ==========
Weighted average number of shares outstanding:
Basic ............................................................. 1,571,187 1,571,187
========== ==========
Diluted ........................................................... 1,607,546 1,571,187
========== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
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MAXXIS GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
SEPTEMBER 30,
-----------------------------------
1998 1997
---------------- --------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) ................................................. $ 580,000 $ (34,000)
Adjustments to reconcile net income (loss) to net cash provided
by operating activities:
Depreciation and amortization ................................... 107,000 50,000
Changes in assets and liabilities:
Communications receivables .................................... (159,000) (100,000)
Inventories ................................................... (507,000) (49,000)
Prepaid expenses .............................................. (171,000) (10,000)
Other assets .................................................. (26,000) 23,000
Accounts payable .............................................. 480,000 133,000
Commissions payable ........................................... 53,000 15,000
Taxes payable ................................................. 442,000 --
Accrued liabilities ........................................... 121,000 42,000
Deferred revenue .............................................. 434,000 --
---------- ----------
Total adjustments ........................................... 774,000 104,000
---------- ----------
Net cash provided by operating activities .............. 1,354,000 70,000
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures .............................................. (41,000) (75,000)
Software development costs ........................................ (153,000) (48,000)
---------- ----------
Net cash used by investing activities .................. (194,000) (123,000)
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds (payments) from (for) issuance of common stock ........... (228,000) 87,000
Payments on capital lease obligations ............................. (501,000) --
---------- ----------
Net cash provided (used) by financing activities ....... (729,000) 87,000
---------- ----------
NET INCREASE IN CASH EQUIVALENTS ..................................... 431,000 34,000
CASH AND CASH EQUIVALENTS, beginning of the period ................... 372,000 35,000
---------- ----------
CASH AND CASH EQUIVALENTS, end of the period ......................... $ 803,000 $ 69,000
========== ==========
SUPPLEMENTAL CASH FLOW DISCLOSURES:
Capital lease obligations incurred ................................ $5,759,000 $ --
========== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
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MAXXIS GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. ORGANIZATION AND PRESENTATION
Maxxis Group, Inc., a Georgia corporation (the "Company"), was
incorporated on January 24, 1997 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 Communications,
Inc., each of which began operations in March 1997, and Maxxis
Nutritionals, Inc., which began operations in November 1997. The Company
was founded for the purpose of providing long-distance services, private
label nutritional products, and other services and consumable products
through a multilevel marketing system of independent associates ("IAs").
The Company's IAs currently market communications and Internet services
and nutritional and health enhancement products.
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 IAs, and train and manage both
current and new IAs. Continued growth would place a significant strain on
the Company's operational resources and systems, and failure to
effectively manage any such growth would have a material adverse effect on
the Company's business, financial condition and results of operations.
2. UNAUDITED INTERIM FINANCIAL STATEMENTS
In the opinion of management, the unaudited financial statements contain
all the normal and recurring adjustments necessary to present fairly the
financial position of the Company as of September 30, 1998 and the results
of the Company's operations and its cash flows for the three-month periods
ended September 30, 1998 and 1997 in conformity with generally accepted
accounting principles. The results of operations are not necessarily
indicative of the results to be expected for the full fiscal year.
3. INVENTORIES
Inventories consist of the following:
<TABLE>
<CAPTION>
SEPTEMBER 30, JUNE 30,
1998 1998
------------- ----------
<S> <C> <C>
Prepaid phone cards $ 74,000 $ 10,000
Sales aids 263,000 158,000
Nutritional products 388,000 76,000
-------- --------
$725,000 $218,000
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</TABLE>
1. CAPITAL LEASE OBLIGATIONS
On September 29, 1998, the Company entered into certain leases for
telephone switching equipment, which are classified as capital lease
obligations. These leases expire within five years and have purchase
options at the end of the original lease term. Assets under capital leases
are included in property and equipment in the September 30, 1998
consolidated balance sheet at a fair market value of approximately
$5,759,000.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
OVERVIEW
Maxxis Group, Inc., a Georgia corporation ("Maxxis" or the "Company"),
markets communications and Internet services and nutritional and health
enhancement products in the United States through its multi-level network
marketing system of "independent associates," or "IAs." The Company operates
through its subsidiaries: Maxxis 2000, Inc. ("Maxxis 2000"); Maxxis
Communications, Inc. (formerly known as Maxxis Telecom, Inc., "Maxxis
Communications"); and Maxxis Nutritionals, Inc. (formerly known as Maxxis
Nutritional, Inc., "Maxxis Nutritionals").
Maxxis 2000 is a network marketing company that currently markets
1-Plus long distance service, travel cards, prepaid phone cards, 800 service and
international telecommunications services, Internet access and Web-page
development and hosting services, and nutritional and health enhancement
products. The Company believes that its multi-level 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 telecommunications customer base developed by the
Company's IAs provides a potential customer base for the Company's nutritional
and health enhancement products, Internet-related services and for future
products.
The Company has built a customer base without committing capital or
management resources to construct its own communications network and
transmission facilities. In February 1997, Maxxis Communications contracted with
Colorado River Communications, Corp. ("CRC") to obtain switching and network
services and to allow CRC's communications services to be sold by the Company's
IAs. Maxxis Communications obtains telecommunications services and purchases
time for its prepaid 1 hour, 30 minute and 10 minute phone cards from CRC. In
September 1998, the Company entered into a long-term lease commitment for the
exclusive use of telecommunications switching equipment (the "Maxxis Switch")
along with certain ancillary computer hardware and software required to operate
the Maxxis Switch. The Company is currently in the process of filing tariffs and
applying for the required regulatory approvals necessary to offer interstate and
intrastate long distance service throughout the United States. In 1999, Maxxis
intends to migrate its long distance customers from CRC's network to the Maxxis
Switch and intends to sell additional network capacity, to the extent available,
to third parties.
In November 1997, the Company began marketing several private label
dietary supplements to its customers and IAs. Recently, the Company began
marketing additional nutritional and health enhancement products that are
manufactured by various suppliers. In September 1998, the Company began
providing Internet access and Web-page development and hosting services.
Internet access is provided by Maxxis Communications through its agreement with
InteReach Internet Services, LLC, and Web-page development and hosting services
are provided by Maxxis Communications.
The Company conducts its marketing activities exclusively through its
network of IAs. The Company believes that IAs are generally attracted to the
Company's multi-level 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 market services and products to persons with whom the IAs have
an ongoing relationship, such as family members, friends, business associates
and neighbors. The Company also sponsors meetings at which current IAs are
encouraged to bring in others for an introduction to the Company's marketing
system. The Company's multi-level network marketing system and the Company's
reliance upon IAs are intended to reduce marketing costs, customer acquisition
costs and customer attrition. The Company believes that its multi-level network
marketing system will continue to build a base of potential customers for
additional services and products.
The Company derives revenues from communications services, nutritional
products and marketing services. Communications services revenues are comprised
of: sales of prepaid phone cards to the Company's IAs; commissions from the
Company's agreement with CRC whereby the Company receives a percentage of the
7
<PAGE> 8
long distance billings received by CRC from the customers originated by the
Company's IAs, net of allowances for bad debts and billing adjustments; and
subscription fees from the Company's Internet subscribers. Because of the
administrative procedures that must be complied with in order to establish
1-Plus customers and to collect the usage and access fees from the local
exchange carriers, there is generally a delay of up to 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. In the future, the Company believes that commissions generated on the
sales of 1-Plus long distance services will constitute an increasing percentage
of its total revenues.
Nutritional products revenues include sales of private-label
nutritional products to the Company's IAs. Recently, the Company began marketing
new health enhancement products and additional nutritional products, including a
weight management program and skin care system. Marketing services revenues
include application fees from IAs and purchases of sales aids by IAs, including
distributor kits which consist of forms, promotional brochures, audio and video
tapes, marketing materials and presentation materials. Marketing services
revenues also include training fees paid by senior associates and "managing
directors" or "MDs." To become an IA, individuals (other than individuals in
North Dakota) must complete an application and purchase a distributor kit for
$99. IAs also pay an annual non-refundable fee in order to maintain their status
as an IA, which fee the Company amortizes over the renewal period. To become an
MD, a senior associate, director or regional director must attend a Company
approved training school. The fee to attend the training school is currently
$99, and MDs must attend continuing education training schools each year which
also are subject to a fee. The training fees are recognized at the time the
training is received. The Company does not receive any fees from IAs for the
training provided by MDs or national training directors.
Cost of services consists of communications services cost, nutritional
products cost and marketing services cost. Communications services cost consists
primarily of the cost of purchasing activated prepaid phone cards. Nutritional
products cost consists of the cost of purchasing private label nutritional
products. Marketing services cost includes the costs of purchasing IA
distributor kits, sales aids and promotional materials and training costs.
Operating expenses consist of selling and marketing expenses and general and
administrative expenses. Selling and marketing expenses include commissions paid
to IAs based on: (i) usage of long distance services by customers; (ii) sales of
products to new IAs sponsored into the Company; and (iii) sales of additional
products and services to customers. General and administrative expenses 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 maintain profitability. If the Company
continues to grow rapidly, the Company will be required to continually expand
and modify its operational and financial systems, add additional IAs and new
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 any such growth
could have a material adverse effect on the Company's business, financial
condition and results of operations.
8
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RESULTS OF OPERATIONS
The following table sets forth the percentage of total net revenues
attributable to each category for the periods shown.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
SEPTEMBER 30,
------------------------------
1998 1997
---------- ----------
<S> <C> <C>
Net revenues:
Communications services ................................. 72% 81%
Nutritional products .................................... 7 --
Marketing services ...................................... 21 19
---------- ----------
Total net revenues .................................... 100% 100%
========== ==========
Cost of services:
Communications services ................................. 14% 24%
Nutritional products .................................... 4 --
Marketing services ...................................... 11 6
---------- ----------
Total cost of services ................................ 29 30
Operating expenses:
Selling and marketing ................................... 39 39
General and administrative .............................. 15 33
---------- ----------
Total operating expenses .............................. 54% 72%
========== ==========
</TABLE>
THREE MONTHS ENDED SEPTEMBER 30, 1998 COMPARED TO THREE MONTHS ENDED SEPTEMBER
30, 1997
Revenues. Total net revenues are derived from sales of communications
services, nutritional products and marketing services net of any returns of
prepaid phone cards, distributor kits or other products. Total net revenues
increased $3.3 million, or 181%, to $5.1 million for the three months ended
September 30, 1998 from $1.8 million for the same period in 1997. The increase
in total net revenues was primarily due to the growth in the number of IAs
enrolled in the Maxxis marketing network.
Communications services revenues increased $2.2 million, or 152%, to
$3.7 million for the three months ended September 30, 1998 from $1.5 million for
the same period in 1997. This increase was primarily due to increased phone card
sales to the Company's IAs and increased long distance telephone commissions
resulting from the Company's larger communications customer base.
Nutritional products revenues were $375,000 for the three months ended
September 30, 1998. Because the Company did not begin selling nutritional
products until November 1997, there were no nutritional products revenues for
the three months ended September 30, 1997.
Marketing services revenues increased $689,000, or 195%, to $1.0
million for the three months ended September 30, 1998 from $353,000 for the same
period in 1997. This increase was due to the growth in the numbers of IAs, the
increased attendance of the IAs at the Company's training schools and the
increased sales of promotional items and sales aids.
Cost of Services. Cost of services includes communications services
cost, nutritional products cost and marketing services cost. Total cost of
services for the three months ended September 30, 1998 was $1.5 million, or 29%
of total net revenues, as compared to $539,000, or 30% of total net revenues,
for the same period in 1997. The decline in total cost of services as a
percentage of total net revenues resulted from the improvement in communications
services margins which was partially offset by declines in marketing services
margins.
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Communications services cost was $706,000, or 14% of total net
revenues, for the three months ended September 30, 1998, as compared to
$438,000, or 24% of total net revenues, for the same period in 1997. This
decrease as a percentage of total net revenues was due mainly to the increase in
long distance usage commissions and access fees. Nutritional products cost was
$202,000, or 4% of total net revenues, for the three months ended September 30,
1998. Marketing services cost was $552,000, or 11% of total net revenues, for
the three months ended September 30, 1998 as compared to $101,000, or 6% of
total net revenues, for the same period in 1997. The increase as a percentage of
total net revenues was primarily due to higher costs associated with the
Company's 1998 annual summit meeting.
Gross Margin. Gross margin increased to $3.6 million for the three
months ended September 30, 1998 from $1.3 million for the same period in 1997.
As a percentage of total net revenues, gross margin improved to 71% from 70%
over those respective periods.
Operating Expenses. For the three months ended September 30, 1998,
selling and marketing expenses were $2.0 million, or 39% of total net revenues,
as compared with $716,000, or 39% of total net revenues, for the same period in
1997. General and administrative expenses were $778,000, or 15% of total net
revenues, for the three months ended September 30, 1998, as compared to
$597,000, or 33% of total net revenues, for the same period in 1997. The
decrease in general and administrative expenses as a percentage of total net
revenues reflects economies of scale in connection with the Company's growth.
Primarily as a result of the Company's lower general and administrative expenses
as a percentage of net revenues, total operating expenses declined to 54% of net
revenues for the three months ended September 30, 1998 from 72% for the same
period in 1997.
Net Income. Net income for the three months ended September 30, 1998
was $582,000 for the three months ended September 30, 1998 as compared to a net
loss of $34,000 for the same period in 1997. The increase in net income reflects
an increase in total net revenues, improved margins on communications services
and a decline in general and administrative expenses relative to total net
revenues.
Income Taxes. As a result of the Company's recent profitability,
provision for income taxes was $280,000 for the three months ended September 30,
1998.
LIQUIDITY AND CAPITAL RESOURCES
On September 29, 1998, the Company entered into a long-term lease
commitment for the exclusive use of the Maxxis Switch, along with certain
ancillary computer hardware and software required to operate the Maxxis Switch.
In connection with the lease of the Maxxis Switch, Maxxis made an initial
payment of $501,000. Monthly payments of $118,000 begin in January 1999 and will
continue for a period of five years.
During the three months ended September 30, 1998, cash provided by
operating activities was $1.4 million, as compared to $70,000 for the same
period in 1997. Operating activities for the three months ended September 30,
1998 included $580,000 of net income, $107,000 of depreciation and amortization
and $774,000 related to changes in assets and liabilities.
Cash used in investing activities was $194,000 for the three months
ended September 30, 1998, as compared to $123,000 for the same period in 1997.
Investing activities for the three months ended September 30, 1998 consisted
primarily of capital expenditures totaling $41,000 and software development
costs of $153,000.
Cash used by financing activities was $729,000 for the three months
ended September 30, 1998, as compared to cash provided by financing activities
of $87,000 for the same period in 1997. Financing activities for the three
months ended September 30, 1998 consisted of $228,000 paid by the Company to
third parties in connection with the preparation of the Company's registration
statement on Form S-1 and payments on capital lease obligations of $501,000.
As of September 30, 1998, the Company had cash of $803,000 and a
working capital deficit of $448,000 as compared to cash of $372,000 and working
capital of $180,000 as of June 30, 1998.
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<PAGE> 11
The Company anticipates that cash generated from operations, together
with proceeds from its ongoing equity offering, will be sufficient to meet the
Company's capital requirements for the next 12 months. However, if the Company
does not receive sufficient funds from its operations and equity offering to
fund its operations, the Company may need to raise additional capital. In
addition, any increases in the Company's growth rate, shortfalls in anticipated
revenues, increases in expenses or significant acquisitions could have a
material adverse effect on the Company's liquidity and capital resources and
could require the Company to raise additional capital. The Company may also 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. Sources of additional capital may include venture capital financing,
cash flow from operations, lines of credit and private equity and debt
financings. The Company's cash and financing needs for fiscal 1999 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,
accounting and/or inventory control systems to monitor and analyze the Company's
growing multi-level network marketing system. The Company has not identified
financing sources to fund such cash needs in fiscal 1999 and beyond. 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.
YEAR 2000 COMPLIANCE
The Company's business and customer relationships rely on computer
software programs, internal operating systems and telephone and other network
communications connections. If any of these programs, systems or network
communications are not programmed to recognize and properly process dates after
December 31, 1999 (the "Year 2000" issue), the Company could experience
significant system failures or errors, which could have a material adverse
effect on the Company's business, financial condition or results of operations.
The Company has not yet begun to review its computerized information
and non-information systems to identify internal accounting programs and
operating systems (collectively, "Systems") that might malfunction due to a
misidentification of the Year 2000. Although the Company has not yet undertaken
a review of its Systems, it believes that its Systems are adequately programmed
to address the Year 2000 issue or can be modified or replaced to address the
Year 2000 issue without material costs or delays. However, there can be no
assurances that these Systems are Year 2000 compliant. In addition, as its
review is in the early stages of assessment, Maxxis cannot predict whether
significant problems will be identified with its Systems. Therefore, the Company
has not yet determined the extent of contingency planning that may be required.
The Company may not be able to develop, implement or test remediation or
contingency plans with such Year 2000 problems or may find that the costs of
these plans exceed current expectations. If the Company fails to satisfactorily
resolve Year 2000 issues related to its Services in a timely manner, it could be
exposed to liability from third parties.
Furthermore, Maxxis has only made limited inquiries of third party
providers of products and systems used in its business and at its offices or on
the systems used by its IAs or other third parties. The Company has contacted
one provider of software used in Maxxis' operations and has received assurances
from this provider that its software is capable of addressing the Year 2000
issue. There can be no assurance, however, that any or all of the products and
services used and relied upon by the Company are Year 2000 compliant. Maxxis
believes that if its providers, IAs or other third parties do not successfully
address Year 2000 issues in their operations, the Company's operations may be
interrupted, hindered or delayed which could cause a material adverse effect on
the Company's business, financial condition and results of operations. Maxxis
further believes that CRC, its IAs and other third parties may be in the
preliminary stages of analyzing their software and systems to address the Year
2000 issue. Therefore, the Company does not believe it is possible to accurately
analyze or predict possible "worst-case" scenarios related to the Year 2000
issue and the potential impact on the Company's business if any of these parties
fail to adequately address the Year 2000 issue. The Company has not developed a
contingency plan for Year 2000 problems experienced by CRC, its IAs or other
third parties. Thus, the Company believes it is impossible to estimate the
potential expenses involved with a large scale failure of CRC, the Company's IAs
or other third parties to resolve their Year 2000 issues. The Company can
provide no assurance that it will not suffer business interruptions, either
because of its own Year 2000 problems or those of CRC, its IAs and other
11
<PAGE> 12
third parties whose Year 2000 problems may make it difficult or impossible for
them to fulfill their commitments to the Company.
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
This report contains statements which constitute forward-looking
statements within the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"). These statements appear in a number of places in this Report
and include all statements which are not historical facts and which relate to
the intent, belief or current expectations of the Company, its directors or its
officers with respect to, among other things: (i) the Company's financing plans,
including the Company's ability to obtain financing in the future; (ii) trends
affecting the Company's financial condition or results of operations, including
those related to Year 2000 issues; (iii) the Company's growth and operating
strategy; (iv) the Company's anticipated capital needs and anticipated capital
expenditures; and (v) projected outcomes and effects on the Company of potential
litigation and investigations concerning the Company. When used in this Report,
the words "expects," "intends," "believes," "anticipates," "estimates," "may,"
"could," "should," "would," "will," "plans" and similar expressions and
variations thereof are intended to identify forward-looking statements.
Investors are cautioned that any such forward-looking statements are not
guarantees of future performance and involve risks and uncertainties, and that
actual results may differ materially from those projected in forward-looking
statements as a result of: (i) factors affecting the availability, terms and
cost of capital; risks associated with meeting lease obligations and obtaining
necessary regulatory approvals in connection with the Maxxis Switch; competitive
factors and pricing pressures; general economic conditions; the failure of the
market demand for the Company's products and services to be commensurate with
management's expectations or past experience; the impact of present or future
laws and regulations on the Company's business; changes in operating expenses or
the failure of operating expenses to be consistent with management's
expectations; and the difficulty of accurately predicting the outcome and effect
of certain matters, such as matters involving potential litigation and
investigations; (ii) various factors discussed herein; and (iii) those factors
discussed in detail in the Company's filings with Securities and Exchange
Commission (the "Commission"), including the "Risk Factors" section of the
Company's Registration Statement on Form S-1 (Registration number (333-38623),
as declared effective by the Commission on June 15, 1998.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISKS
Not applicable.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is not a party to, nor is any of its property subject to,
any material legal proceedings. The Company may be subject from time to time to
legal proceedings that arise out of the Company's business operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The 1998 Annual Meeting of the shareholders of the Company was held on
October 1, 1998 to: (i) elect three directors to serve on the Company's Board of
Directors, each for a three-year term; (ii) consider and vote upon the proposed
Maxxis Group, Inc. 1998 Stock Option Plan (the "Option Plan"); and (iii) ratify
the appointment of Arthur Andersen LLP as independent public accountants of the
Company for the fiscal year ending June 30, 1999.
12
<PAGE> 13
Election of Directors. The shareholders were asked to elect Ivey J.
Stokes, Thomas O. Cordy and Alvin Curry to the Company's Board of Directors,
each for a three-year term. 1,278,170 votes were cast for the election of
Messrs. Stokes, Cordy and Curry, and no votes were cast against. There were no
abstentions. In addition to the foregoing, the following persons continue to
serve as directors: Larry W. Gates, II; Charles P. Bernstein; Robert J. Glover,
Jr.; Terry Harris; and Philip E. Lundquist.
Option Plan. The shareholders were asked to consider and vote upon the
approval of the Option Plan which was adopted by the Board of Directors on
September 16, 1998, subject to shareholder approval. The Option Plan permits the
Company to grant options to purchase shares of the Company's common stock, no
par value ("Common Stock"), to officers, directors, key employees, advisors and
consultants of the Company. The purpose of the Option Plan is to advance the
interests of the Company, its subsidiaries and its shareholders by affording
certain employees and directors of the Company and its subsidiaries, as well as
key consultants and advisors to the Company or any subsidiary, an opportunity to
acquire or increase their proprietary interests in the Company. The aggregate
number of shares of Common Stock reserved for the issuance of options under the
Option Plan will be 300,000 shares, subject to adjustment in accordance with the
Option Plan. 1,278,170 votes were cast for the adoption of the Option Plan, and
no votes were cast against. There were no abstentions.
Accountants. The shareholders were asked to ratify the appointment by
the Board of Directors of the firm of Arthur Andersen LLP as independent public
accountants of the Company for the fiscal year ending June 30, 1999. 1,278,170
votes were cast for the ratification of Arthur Andersen LLP, and no votes were
cast against. There were no abstentions.
ITEM 5. OTHER INFORMATION
On October 31, 1998, James W. Brown resigned from the Company's Board
of Directors and as Executive Vice President and Secretary of the Company. The
Board of Directors has not yet appointed a new director to fill his vacancy.
13
<PAGE> 14
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(A) EXHIBITS
<TABLE>
<CAPTION>
Exhibit
Number Exhibit Description
- ------ -------------------
<S> <C>
10.1 Software Purchase Agreement between UsefulWare Incorporated
and the Company dated as of August 13, 1998.*
10.2 Asset Purchase Agreement by and among Cherry Communications
Incorporated ("Cherry"), World Access, Inc. ("World Access")
and the Company dated as of September 29, 1998.
10.3 Promissory Note by the Company in favor of Cherry dated
September 29, 1998.
10.4 Security Agreement between the Company and World Access dated
as of September 29, 1998.
10.5 Software License Agreement between Alcatel USA Marketing, Inc.
and the Company dated as of September 29, 1998.
10.6 Sublease between Cherry and the Company dated as of September
30, 1998.
10.7 Master Lease Agreement between Rockford Industries, Inc. and
the Company dated as of September 29, 1998 (World Access).
10.8 Master Lease Agreement between Rockford Industries, Inc. and
the Company dated as of September 29, 1998 (NACT
Telecommunications, Inc.).
10.9 Employment Agreement between Daniel McDonough and the Company
dated as of October 13, 1998.
27 Financial Data Schedule (for SEC use only).
</TABLE>
- ---------------------------------
* Confidential treatment has been requested for certain confidential
portions of this exhibit pursuant to Rule 24(b)(2) under the Exchange
Act. In accordance with Rule 24(b)(2), these confidential portions have
been omitted from this exhibit and filed separately with the
Commission.
(B) REPORTS ON FORM 8-K.
None.
14
<PAGE> 15
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this Report to be signed on its behalf by the
undersigned thereunto duly authorized.
MAXXIS GROUP, INC.
November 12, 1998 /s/ Thomas O. Cordy
-----------------------------------
Thomas O. Cordy
President and Chief Executive Officer
(Principal executive officer)
November 12, 1998 /s/ Daniel McDonough
-----------------------------------
Daniel McDonough
Chief Financial Officer
(Principal financial and accounting officer)
15
<PAGE> 1
Page 1 of 7
EXHIBIT 10.1
CONFIDENTIAL TREATMENT REQUESTED BY MAXXIS GROUP, INC.
SOFTWARE PURCHASE AGREEMENT
THIS AGREEMENT IS MADE BETWEEN USEFULWARE INCORPORATED, A GEORGIA CORPORATION,
AND MAXXIS GROUP, INC. ("PURCHASER).
UsefulWare will provide a Custom Installation Program for the purpose of
installing and configuring a set of Internet tools, utilizing the software shown
in item 11, including ConnectionMagic (tm), Internet Control Center (tm), and
other bundled applications. A review copy of the software will be provided for
Purchaser to approve before the initial purchase is final. The review period is
limited to 10 days, during which time any money paid will be refunded should
Purchaser decide not to use the software. This agreement can be cancelled during
that 10 day review period.
All purchases made by InteReach Internet Services, an affiliate of Maxxis Group
Inc., will be counted towards the volume requirements outlined in this
agreement, and the combined total purchases will be used for cumulative pricing
discounts as outlined in the pricing schedule below.
Maxxis Group, Inc. agrees to purchase a minimum of *** of UsefulWare's
Connection Magic software package in return for pricing concessions outlined in
this agreement. Purchases made by InteReach Internet Services are counted
towards this total. Maxxis Group, Inc. is purchasing *** immediately, with an
order for an additional *** to follow within *** of this agreement. Another
order for *** is required within the following ***. Then for *** following the
date of this agreement, all subsequent purchases will be subject to discounted
pricing based on the cumulative purchases as described below.
1. PAYMENT AND PRICING
The initial order must be accompanied by a one-third down payment, with the
balance due within 30 days of delivery of the master copy of the software. All
re-orders of additional user licenses will be billed on 60-day net. Any orders
for duplicated media are payable in advance.
All additional orders under this agreement must be in multiples of 10,000 units,
with a 10,000 unit minimum for any order. For the first *** user licenses
purchased under this agreement, Purchaser will pay UsefulWare ***. All
subsequent purchases within *** of the date of this agreement will be priced
based on the combined total purchased up to and including the current purchase,
with pricing as follows:
<TABLE>
<S> <C>
***----------------------------------------- ***
***----------------------------------------- ***
***----------------------------------------- ***
***----------------------------------------- ***
***----------------------------------------- ***
***----------------------------------------- ***
***----------------------------------------- ***
***----------------------------------------- ***
***----------------------------------------- ***
***----------------------------------------- ***
***----------------------------------------- ***
***----------------------------------------- ***
</TABLE>
*** Omitted pursuant to a request for confidential treatment and filed
separately with the Commission.
<PAGE> 2
Page 2 of 7
CONFIDENTIAL TREATMENT REQUESTED BY MAXXIS GROUP, INC.
2. VOLUME REBATES
The above prices *** will be retroactively applied to prior purchases made under
this agreement, with the difference credited to the current purchase or future
purchases. These credits can not be granted in cash back to Purchaser, but are
only valid to be used against new purchases from UsefulWare, or used as a credit
to trade for additional user licenses. At the time of each purchase, the credit
will be determined by calculating all prior purchases at the new current price,
and deducting that amount from the actual amount paid or billed up until that
time, with the resulting difference being credited to the account.
An EXAMPLE of this rebate calculation is as follows:
***
***
***
***
Another example:
***
***
***
***
These rebates can be granted towards the same purchase which puts the total over
the number required for that rebate. The credit can also be applied to future
purchases. It cannot be granted as cash back to Purchaser.
3. MONEY-BACK GUARANTEE
During the first 30 days from the date UsefulWare delivers the software, if
Purchaser is not satisfied with the software package UsefulWare will refund any
license fees paid for copies which were not distributed, subject to the
discontinuance of further distribution. Should the number of distributed copies
fall into a different price bracket than the total number ordered, the number of
distributed copies will be charged as if that was the total number purchased and
the refund will be calculated by deducting that amount from the amount paid.
This guarantee applies only to the initial software order and does not apply to
any re-orders, updates or revisions. There are no refunds for re-orders. Setup
fees are not refundable and license fees for copies distributed to end-users are
not refundable except as provided under our Support Guarantee described herein.
THIS POLICY DOES NOT APPLY TO THE 10-DAY APPROVAL PERIOD AFTER THE INITIAL
ORDER, DURING WHICH TIME ALL MONEY PAID IS REFUNDABLE AS DESCRIBED ABOVE.
4. MASTERS AND DUPLICATION
UsEfulWare will provide master CD-ROM's and/or master diskette sets with all
orders, and Purchaser may use UsefulWare's duplication services as shown on the
current price list. User licensing can be purchased without duplication if
Purchaser intends to do their own duplication. For each order of 10,000 units
UsefulWare will provide up to 10 separate masters if needed by Purchaser to
account for different setups needed. Additional masters can be provided for a
fee of ***.
*** Omitted pursuant to a request for confidential treatment and filed
separately with the Commission.
<PAGE> 3
Page 3 of 7
CONFIDENTIAL TREATMENT REQUESTED BY MAXXIS GROUP, INC.
5. USER REPORTING
Purchaser agrees to provide UsefulWare with monthly reports which contain the
information required to track the number of copies of the software that have
been used. At a minimum these reports should contain the total number of new
users signed up during the month and the total number of active users. If
certain users or groups of users are not being provided the software, this
information should also be included.
Each end-user's name is automatically sent to UsefulWare via the Internet on the
first use of each new installation. This information will not be used for any
purpose other than internal tracking of the number of users, and will not be
disclosed to any third parties, nor will any users be directly contacted by
UsefulWare or any other party based on this information.
This software can not be resold, redistributed, or sub-licensed to anyone other
than end-users subscribing to Purchaser's Internet service. Business users with
multiple machines in an office must be issued separate copies of the software
for each machine. This software is licensed on a per-user basis.
6. END-USER SUPPORT GUARANTEE
Subject to the following conditions, UsefulWare will provide toll-free telephone
support to the subscribers (end-users) of Purchaser.
A. Toll-free telephone support will be provided only to licensed
end-users, and the user will be asked to provide their individual
registration code.
B. Toll-free telephone support will be provided for the installation of
UsefulWare's software, to ensure the user is able to successfully log
on and use their Internet account. Once the user is successfully online
using UsefulWare's software, all further support must be provided by
the Internet Service Provider. See item J below for ongoing support
which UsefulWare provides to the Internet Service Provider staff.
C. UsefulWare will not provide support to end-users concerning the use
of individual applications which are a part of the UsefulWare software
package except to ensure they run properly as installed. All support
concerning the use of individual applications is the responsibility of
the Internet Service Provider.
D. The hours of operation for the support line will be 9am to 10pm
eastern time, Monday through Friday. These hours and days may change
from time to time at UsefulWare's discretion. Voice mail will always be
available so users can be called back by UsefulWare.
E. Support will be provided for users of Windows 3.x, Windows 95, and
Macintosh, plus Windows NT4 Workstation and Windows 98 users with
ConnectionMagic version 5.0 or later. Windows NT 3.51 is not supported.
F. The Internet Service Provider agrees to provide the end-user with
software that matches the current configuration of their network, and
if the network configuration changes, the Internet Service Provider
must have the
<PAGE> 4
Page 4 of 7
CONFIDENTIAL TREATMENT REQUESTED BY MAXXIS GROUP, INC.
software revised accordingly. UsefulWare cannot and will not support a
user attempting to install software not properly configured for the
Internet Service Provider's system.
G. The Internet Service Provider will provide UsefulWare's toll-free
support number to the end-user when they establish their account, but
this number should not be advertised to the general public. When the
number is included in any literature that the Internet Service Provider
gives to the end-users, it must clearly state that this number is for
installation support only.
H. To qualify for the Guarantee below, the user must have the Minimum
System Requirements as listed in the current Installation Instructions.
I. Should UsefulWare's technical support staff be unable to
successfully get any new user online after all the above conditions are
met, UsefulWare will credit the Internet Service Provider three times
the amount paid to UsefulWare for that individual software license.
This credit will be applied to software orders placed by the Internet
Service Provider, equivalent to three free user licenses. The Internet
Service Provider has the responsibility to document such incidents and
request any credits due, as UsefulWare often may not know if a fix was
successful if the user does not call back. UsefulWare maintains records
of all support calls including any steps taken, and these records can
be made available for review upon request.
J. Additional ongoing support to the Internet Service Provider's staff
is provided using UsefulWare's normal business number at 770-424-2525,
9-5pm EST Monday-Friday, or via email to [email protected].
7. REVISIONS
UsefulWare revises and/or updates software packages periodically to stay current
with the included applications, and also to continuously improve the setup
programs. Whenever a re-order is placed for more licenses, a revised or updated
software package may be requested at no charge if changes have been made since
the last order. Since all of the packages are custom-built for a specific
service, there are no routine or automatic updates or revisions, and revisions
or updates will not be automatically sent out. When a request is made for a
revision or update please advise UsefulWare of any changes which need to be
incorporated into the software due to system changes, new logos, new phone
numbers, new text files, etc. They will be included at no extra charge subject
to the limitations otherwise outlined in this policy. ANY REVISION OR UPDATE
REQUESTED THAT DOES NOT ACCOMPANY A RE-ORDER WILL BE SUBJECT TO A FEE OF ***.
ANY RE-ORDER WITHIN THE PRECEDING 30 DAYS WILL BE CONSIDERED TO ACCOMPANY THE
REVISION AND THE FEE WILL BE WAIVED. This policy does not apply to the 10-day
approval period after an initial order, to ensure correctness of the software.
This policy also does not apply to any configuration errors discovered
subsequent to the 10-day period as long as the system for which the software was
originally configured has not been altered. Configuration errors by UsefulWare
will be corrected at no charge.
*** Omitted pursuant to a request for confidential treatment and filed
separately with the Commission.
<PAGE> 5
Page 5 of 7
CONFIDENTIAL TREATMENT REQUESTED BY MAXXIS GROUP, INC.
8. DISCLAIMER OF WARRANTY
Purchaser expressly agrees and acknowledges that Purchaser and its licensees use
this software, documentation and technical support solely at their own risk.
Purchaser purchases the software, documentation and technical support on an
as-is basis, without any warranty other than that expressly provided for in this
agreement. To the maximum extent provided under applicable law UsefulWare Inc.
expressly disclaims all warranties, express or implied including but not limited
to any implied warranties of merchantability or fitness for a particular
purpose. Some jurisdictions do not allow the limitation of or exclusion of
implied warranties of merchantability or fitness for a particular purpose so the
above limitation or exclusion may not apply. UsefulWare Inc. does not warrant
that this software will function correctly for any particular end-user or on any
particular computer system. UsefulWare Inc. does not warrant that this software
will function in an error free or uninterrupted manner.
9. LIMITATIONS OF LIABILITY
To the maximum extent permitted under applicable law, under no circumstances,
including negligence shall UsefulWare Inc., it's directors, officers, employees
or agents be liable for any special or consequential damages (including loss of
business information or records, business interruption, business profits and the
like) arising out of the use of or inability to use the software provided herein
even if UsefulWare Inc. or it's agents have prior notice of the possibility of
such special or consequential damages arising out of the purchaser's use of the
software. Some jurisdictions do not allow the limitation or exclusion of
liability for incidental or consequential damages so the above limitation or
exclusion may not apply. In no event shall UsefulWare Inc.'s total liability for
all damages including contract, tort or negligence or any other damage exceed
the amount paid by the Purchaser for the software and any documentation
accompanying it. UsefulWare Inc. is not responsible for any damages related to
use of this software except for those, which if any, are expressly provided for
in this Agreement.
10. APPLICABLE LAWS AND SEVERABILITY
This Agreement shall be construed under the laws of the State of Georgia, USA.
By entering into this Agreement the parties hereto agree that this Agreement is
made in the State of Georgia, United States of America and that jurisdiction for
any disputes arising out of this Agreement will be heard in the court system of
the State of Georgia, USA. If any court of competent jurisdiction finds that any
part or portion of this agreement is unenforceable that part or portion of this
agreement shall be enforced to the maximum extent possible under applicable law
in order to carry out the intent of the parties to this agreement. In such
event, any portion of this agreement found to be unenforceable shall be severed
from this agreement and the remainder of this agreement shall be construed to
bind the parties as if the whole agreement was held by a competent court to be
fully enforceable.
11. LICENSING
The software components of UsefulWare's packages are licensed as follows:
CONNECTIONMAGIC (TM) INSTALLER - copyright (c) 1998 UsefulWare Inc.
INTERNET CONTROL CENTER (TM) - copyright (c) 1995-98 UsefulWare Inc.
NETSCAPE NAVIGATOR - distributed under an agreement between UsefulWare
Inc. and Netscape Communications Corp., 501 East Middlefield Rd.,
Mountain View, CA 94043.
<PAGE> 6
Page 6 of 7
CONFIDENTIAL TREATMENT REQUESTED BY MAXXIS GROUP, INC.
EUDORA LIGHT - distributed under an agreement with Qualcomm Inc., 6455
Lusk Blvd., San Diego, CA 92121, which includes a distribution fee paid
by UsefulWare Inc.
NEWSXPRESS - freeware, distributed with permission of the author, W.L.
Ken, Ng.
FREE AGENT - distributed under an agreement with Forte, 2141 Palomar
Airport Rd., Suite 100, Carlsbad, CA 92009, which includes a
distribution fee paid by UsefulWare Inc.
WS_FTP LIMITED EDITION - distributed under an agreement with Ipswitch,
Inc., 81 Hartwell Ave., Lexington, MA 02173.
EWAN TELNET - freeware with no copyright or distribution restrictions,
created by Peter Zander.
WS_PING - public domain software, created by John Junod.
TRUMPET WINSOCK - purchased for resale by UsefulWare Inc., from Trumpet
Software International Pty. Ltd., 24 Cambridge Rd., Bellerive 7018,
Tasmania Australia.
MICROSOFT INTERNET EXPLORER - distributed under an agreement with
Microsoft Corporation, One Microsoft Way, Redmond, WA 98052.
FREEPPP, MACPPP -distributed under an agreement with Merit Network,
Inc., 4251 Plymouth Road, Suite C, Ann Arbor, MI 48105, which includes
a distribution fee paid by UsefulWare Inc.
INTERNET SETUP MONKEY - purchased for resale by UsefulWare Inc., under
a distribution agreement with Rockstar Studios, 524-A Union St., San
Francisco, CA 94133. The Internet Setup Monkey includes MACTCP system
software which is licensed from Apple Computers Inc. by Rockstar
Studios.
NCSA TELNET - public domain software.
GLOBAL CHAT - freeware, copyright Quarterdeck Systems Research, Inc.,
520 Frederick St., #19, San Francisco, CA 94117.
STUFFIT EXPANDER - freeware, copyright Aladdin Systems Inc., 165
Westridge, Watsonville, CA 95076.
FETCH FTP - purchased for resale by UsefulWare Inc., under a
distribution agreement with Dartmouth College Software Sales, 6028
Kiewit Computer Center, Hanover, NH 03755.
UsefulWare Inc. warrants that all the above software is properly licensed for
distribution and that any fees due the copyright owners for software purchased
under this agreement are the sole responsibility of UsefulWare Inc. UsefulWare
Inc. shall indemnify and hold harmless the above name customer (Company) from
all claims, losses, or damages arising out of or related to licensing, patent,
or copyright infringement claims related to this agreement.
12. CUSTOM SUPPORT OPTION
UsefulWare agrees that within 120 days of the date of this agreement, Purchaser
will be offered the option to have a dedicated toll-free phone number for users
to call UsefulWare for support, and callers to this number will be greeted with
a customized greeting identifying Purchaser as the company answering the call.
All telephone line end equipment costs associated with this option will be the
responsibility of UsefulWare. If during any 120-day period Purchaser fails to
purchase a minimum of 5,000 units under this agreement, UsefulWare may
discontinue this custom number with 30 days notice to Purchaser.
<PAGE> 7
Page 7 of 7
CONFIDENTIAL TREATMENT REQUESTED BY MAXXIS GROUP, INC.
13. CONFIDENTIALITY
Each party undertakes to retain in confidence the terms of this agreement and
all other non-public information and know-how disclosed pursuant to this
agreement which is either designated as proprietary and/or confidential or by
the nature of the circumstances surrounding disclosure, ought in good faith to
be treated as proprietary and/or confidential ("Confidential Information");
provided that each party may disclose the terms and conditions of this agreement
to its immediate legal and financial consultants in the ordinary course of its
business. Each party agrees to use its best efforts to protect Confidential
Information with precautions at least as great as those taken to protect its own
confidential information. A party's disclosure of Confidential Information as
required by government or judicial order is not prohibited by this agreement,
provided that the disclosing party gives the other party prompt notice of such
order and assists in the procurement of appropriate protective order (or
equivalent) imposed on such disclosure.
14. ENTIRE AGREEMENT
This agreement constitutes the entire agreement between the parties. This
agreement supersedes any and all prior oral or written agreements. All terms for
the purchases of UsefulWare Inc. software are found within this agreement and
any and all other terms are hereby rejected by the parties herein. This
agreement can only be modified in writing. An authorized representative of
UsefulWare Inc. must sign all modifications to this agreement.
for UsefulWare Inc. for customer
signed /s/ John Foltz signed /s/ Thomas O. Cordy
---------------- --------------------
title President and CEO
-------------------
Corporate Name if any The Maxxis Group
--------------------
Address 1901 Montreal Rd.
-------------------
date 8/13/98
-------------------
<PAGE> 1
EXHIBIT 10.2
ASSET PURCHASE AGREEMENT
THIS AGREEMENT (the "Agreement") dated as of September 29, 1998 is by
and among Cherry Communications Incorporated, an Illinois corporation (d/b/a
Resurgens Communications Group, the "Seller"), World Access, Inc., a Delaware
corporation ("World Access"), and Maxxis Group, Inc., a Georgia corporation (the
"Buyer").
W I T N E S S E T H:
WHEREAS, Buyer desires to acquire assets (including a
telecommunications switch, other equipment and related licenses, authorizations
and carrier identification and access codes) that will provide Buyer with a
system (the "System") to provide intrastate and interstate long distance
telecommunications services in each State and the District of Columbia and
throughout the United States;
WHEREAS, concurrently with the execution hereof, Buyer is entering into
a Master Lease Agreement (the "Lease Agreement") with Rockford Industries, Inc.
("Rockford") to lease certain equipment set forth on the schedules thereto (the
"Equipment"), certain of which Equipment was owned by Seller and has been sold
to World Access and subsequently sold to Rockford; and
WHEREAS, the lease of the Equipment by the Buyer pursuant to the Lease
Agreement is a material benefit to Seller and World Access; and
WHEREAS, Buyer is entering into this Agreement to purchase certain
assets from Seller and to obtain certain representations and warranties from
World Access and Seller regarding such assets, the Equipment and the System;
NOW, THEREFORE, with the intent of inducing the Buyer to enter into the
Lease Agreement, in consideration of the representations, warranties and
covenants contained herein, for other good and valuable consideration, the
receipt, sufficiency and adequacy of which are hereby acknowledged, and upon and
subject to the terms and conditions hereinafter set forth, the parties hereto do
hereby agree as follows:
1. Acquisition of Equipment. Concurrently with the execution of this
Agreement, Buyer agrees to enter into the Lease Agreement, to cause the lease
Agreement to be delivered and to lease the Equipment pursuant to the terms set
forth in the Lease Agreement.
2. Transfer of Assets. Seller agrees to transfer assets and rights to
Buyer, solely as set forth and provided for in this Agreement, that are used by
the Seller in the operation of the System. To such end:
(a) Upon the terms and subject to the conditions of this Agreement,
Seller hereby agrees to sell, transfer and convey to Buyer, and Buyer agrees to
purchase, accept and acquire,
<PAGE> 2
all right, title and interest in and to any written registration, license,
certificate, approval, other authorization or tariff to provide intrastate
telecommunications services (collectively, "Authorizations") and related assets
set forth on Exhibit A hereto (individually, a "License," and collectively, the
"Licenses") for the Purchase Price (as defined below) and the other
consideration set forth in this Section 2.
(b) The transfer contemplated hereunder of each License is expressly
contingent upon obtaining the applicable necessary governmental consent or
approval with respect to such License. If any License is unable to be
transferred, Seller shall make all necessary filings in the applicable
jurisdiction to cause a new Authorization to be issued to Buyer. In transferring
the Licenses and in applying for new Authorizations, Buyer and Seller shall
follow the procedures described in this Section 2(b):
(i) Seller shall cause its agents to prepare promptly all filings
necessary to cause the Licenses to be transferred to Buyer.
(ii) In any jurisdiction in the United States where Seller does not
as of the date of this Agreement hold a License that entitles
it the unencumbered and unrestricted right to provide
intrastate long distance service, the Seller shall be
responsible for promptly filing new applications on behalf of
the Buyer for authority to provide such service.
(iii) Following preparation of all filings, the Seller shall forward
such filings to Buyer for Buyer's review prior to making the
filings. Buyer shall promptly review all such draft filings
and provide any comments to Seller's agent. Seller will not
cause such filings or any amendments or supplements thereto to
be made unless approved by the Buyer.
(iv) Recognizing that Buyer's customers are concentrated in certain
geographic areas, if Buyer provides Seller a written list of
jurisdictions ranked in the priority in which it desires to
obtain Authorizations, Seller shall thereafter make filings in
such jurisdictions in the specified order.
(v) If any state commission rejects or comments on a filing, the
Seller shall cause its agent to amend such filing, supply
additional information or make a new filing, as may be
necessary or advisable.
(vi) Seller shall bear all costs and expenses of making the filings
required pursuant to this Section 2, excepting only the costs
and expenses (including travel costs) incurred by officers of
Buyer in appearing in person before public utility commissions
or similar bodies of various jurisdictions.
(vii) Seller shall make all required filings within 30 days
following the date of this Agreement. Seller shall use its
best efforts to cause Buyer to obtain all necessary licenses
and approvals in a minimum of 30 states within 90
2
<PAGE> 3
days following the execution of this Agreement and in all 50
states and the District of Columbia within 180 days following
the execution of this Agreement.
(viii) If Seller fails to make the filings or to cause Buyer to
become qualified upon the schedule set forth in Section
2(vii), in addition to the obligations of indemnity set forth
elsewhere herein, Seller shall, at no additional cost to
Buyer, provide services under licenses, certificates and
tariffs held by Seller to customers to whom Buyer's agents
have marketed long distance services; provided, however, that
until Buyer and Seller shall agree in their reasonable
judgment that it is improbable that such Licenses can be
transferred to or acquired by Buyer, Seller shall have a
continuing obligation to pursue the transfer and acquisition
of the Licenses as contemplated by this Section 2 and, upon
Buyer obtaining Licenses to provide long distance service, all
such customers of Seller shall be transferred to Buyer without
the payment of any additional consideration. In the event that
Seller is required to provide services under its Licenses
pursuant to this Section 2(b)(viii), Buyer shall indemnify and
hold harmless Seller from and against all claims, liabilities,
expenses and damages that Seller incurs by reason of Buyer
engaging in improper activities with respect to such Licenses
or telecommunications customers who receive services pursuant
to such Licenses.
(c) The aggregate purchase price for the Licenses and services to be
provided pursuant to this Section 2 shall be $100,000.00 (the "Purchase Price")
which shall be payable by Buyer's delivery to Seller of a promissory note in the
form attached hereto as Exhibit B.
3. Assignment of Receivables to Seller. In exchange for the sum of
$150,000 which shall be paid in cash to Buyer by World Access concurrently with
the execution of this Agreement, Buyer hereby agrees to convey to World Access,
upon the terms and conditions set forth in this Section 3, all amounts paid to
Buyer by Colorado River Communications Corp. ("CRC"). Buyer shall deliver such
amounts to World Access, properly endorsed, in the same form as such amounts are
delivered to Buyer, promptly following receipt of such amounts by Buyer.
Following execution of this Agreement, Buyer shall use its commercially
reasonable best efforts to obtain the consent of CRC to an assignment of all
amounts payable to Buyer by CRC ("CRC Accounts Receivable"). Following receipt
of such consent, Buyer will convey all CRC Accounts Receivable to World Access.
Following such conveyance, World Access shall use its diligent best efforts to
collect such CRC Accounts Receivable. World Access shall retain one-half of all
amounts delivered to or collected by it pursuant to this Section 3 until the
total amount retained by World Access equals $150,000. Thereafter, World Access
shall promptly remit to Buyer all amounts that World Access is not entitled to
retain pursuant to this Section 3. If by December 31, 1998, World Access has not
retained at least $150,000 in the aggregate pursuant to this Section 3, Buyer
shall pay to World Access in cash within ten business days the difference
between $150,000 and the amount that had been withheld by World Access pursuant
to this Section 3 in the aggregate as of December 31, 1998.
3
<PAGE> 4
4. Representations and Warranties of Seller and World Access. As an
inducement for Buyer to enter into this Agreement and the Lease Agreement and to
consummate the transactions contemplated hereby and thereby, intending that
Buyer rely thereon in entering into and performing this Agreement and the Lease
Agreement, Seller and World Access jointly and severally represent and warrant
to Buyer that each and all of the following are true and correct in all respects
as of the date hereof:
(a) Each of Seller and World Access is a corporation duly organized,
validly existing and in good standing under the laws of the state of its
incorporation or organization.
(b) Each of Seller and World Access has the corporate power, authority
and legal right to execute and deliver this Agreement and perform the
transactions contemplated hereby. The execution, delivery and performance of
this Agreement by each of Seller and World Access have been duly authorized by
all necessary corporate action. This Agreement constitutes the legal, valid and
binding obligation of Seller and World Access, enforceable against each of
Seller and World Access in accordance with its terms.
(c) The execution, delivery and performance of this Agreement by each
of the Seller and World Access does not violate, conflict with or result in the
breach of any term, condition or provision of, or require the consent of any
other person under (a) any existing law, rule or regulation to which either the
Seller or World Access is subject, (b) any judgment or order to which either the
Seller or World Access is subject, (c) the charter documents of the Seller or
World Access or (d) any mortgage, contract, or other instrument, document or
understanding, oral or written, to which either the Seller or World Access is a
party or by which either Seller or World Access is otherwise bound.
(d) Seller conveyed to World Access, and World Access conveyed to
Rockford, good and marketable title to all of the Equipment, free and clear of
any and all liens, encumbrances, security devices, security interests, financing
statements, mortgages, pledges, conditional sales agreements, factor's liens,
environmental liens, charges, leases, leasehold interests, licenses, sales
taxes, use taxes, tax claims, judgments, restrictions, covenants, easements,
attachments, equities, liabilities or claims of any kind, nature or description
whatsoever (collectively, the "Encumbrances").
(e) Prior to the sale of the Equipment to Rockford and as of the date
hereof, all of the Equipment to be leased under the Lease Agreement has been
maintained in all material respects in accordance with general industry
practices. By December 30, 1998, the Equipment will be in good operating
condition and repair, subject only to ordinary wear and tear, and will be usable
and fit in all material respects in accordance with general industry practices
for its intended purposes.
(f) Seller had the corporate power and authority and the legal right to
transfer the Equipment to World Access. The transfer of the Equipment by Seller
to World Access had been duly authorized by all necessary corporate action.
World Access had the corporate power and authority and the legal right to
transfer the Equipment to Rockford. The transfer of the
4
<PAGE> 5
Equipment by World Access to Rockford had been duly authorized by all necessary
corporate action.
(g) With respect to In Re: Cherry Communications Incorporated (d/b/a
Resurgens Communications Group) (United States Bankruptcy Court Northern
District of Illinois Eastern Division, Case No. 97 B 32873) (the "Seller's
Bankruptcy"), the Confirmation Order dated September 3, 1998 has been executed
and entered by the judge in the Seller's Bankruptcy prior to the date hereof.
Neither Seller nor World Access is required to obtain any consent or approval of
any court, governmental agency or other party that has not been obtained
(including, without limitation, any consent or approval in connection with
Seller's Bankruptcy) in connection with the entering into of this Agreement or
the transfer of the Licenses or the Equipment pursuant to this Agreement or as
contemplated hereby.
(h) Seller has good, valid and marketable title to the Licenses, free
and clear of all Encumbrances. Except as set forth on Exhibit A, Seller is not
in default, nor has it received any notice of any claim of default, with respect
to any such License.
(i) Seller has complied with each, and is not in violation of any, law,
ordinance, or governmental or regulatory rule or regulation, whether federal,
state, local or foreign, to which the Licenses or the Equipment are subject.
(j) No representation or warranty by Seller or World Access in this
Agreement contains any untrue statement of a material fact or omits a material
fact required to be stated herein or necessary to make any statement herein not
misleading.
5. Representations and Warranties of Buyer. The Buyer hereby represents
and warrants to Seller and World Access that:
(a) Buyer is a corporation duly organized, validly existing and in good
standing under the laws of the State of Georgia.
(b) Buyer has the corporate power, authority and legal right to
execute, deliver and perform this Agreement. The execution, delivery and
performance of this Agreement by Buyer have been duly authorized by all
necessary corporate action. This Agreement has been duly executed and delivered
by Buyer and constitutes the legal, valid and binding obligation of Buyer
enforceable against Buyer in accordance with its terms.
(c) The execution, delivery and performance of this Agreement by Buyer
does not violate, conflict with or result in the breach of any term, condition
or provision of, or require the consent of any other person under (a) any
existing law, rule or regulation to which Buyer is subject, (b) any judgment or
order to which Buyer is subject, (c) the charter documents of the Buyer or (d)
any mortgage, contract, or other instrument, document or understanding, oral or
written, to which Buyer is a party or by which Buyer is otherwise bound.
6. Indemnification of Buyer. The Seller and World Access will jointly
and severally indemnify, reimburse and hold harmless Buyer, the directors,
officers, employees
5
<PAGE> 6
and agents of Buyer and each person, if any, who controls Buyer, from and
against any and all losses, claims, liabilities, expenses and damages (including
any and all investigative, legal and other expenses reasonably incurred in
connection with, and any amount paid in settlement of, any action, suit or
proceeding or any claim asserted) (including, but not limited to, all amounts
required to be paid pursuant to the Lease Agreement), to which they, or any of
them, may become subject, at common law or otherwise, insofar as such losses,
claims, liabilities, expenses or damages are caused by (i) any inaccuracy in the
representations and warranties of Seller or World Access contained herein or
(ii) any failure of Seller or World Access to perform its obligations hereunder
or under law.
7. Indemnification of Seller. The Buyer will indemnify, reimburse and
hold harmless Seller, the directors, officers, employees and agents of Seller
and each person, if any, who controls Seller, from and against any and all
losses, claims, liabilities, expenses and damages (including any and all
investigative, legal and other expenses reasonably incurred in connection with,
and any amount paid in settlement of, any action, suit or proceeding or any
claim asserted), to which they, or any of them, may become subject, at common
law or otherwise, insofar as such losses, claims, liabilities, expenses or
damages are caused by (i) any inaccuracy in the representations and warranties
of Buyer contained herein or (ii) any failure of Buyer to perform its
obligations hereunder or under law.
8. Indemnification of World Access. Buyer will indemnify, reimburse and
hold harmless World Access, the directors, officers, employees and agents of
World Access and each person, if any, who controls World Access, from and
against any and all losses, claims, liabilities, expenses and damages (including
any and all investigative, legal and other expenses reasonably incurred in
connection with, and any amount paid in settlement of, any action, suit or
proceeding or any claim asserted), to which they, or any of them, may become
subject, at common law or otherwise, insofar as such losses, claims,
liabilities, expenses or damages are caused by: (i) any inaccuracy in the
representations and warranties of Buyer contained herein; (ii) any failure of
Buyer to perform its obligations hereunder or under law; or (iii) World Access
being required to pay any amount pursuant to its guaranty of the obligations of
Buyer pursuant to the Lease Agreement.
9. Miscellaneous.
(a) Seller and Buyer each represent and warrant that all negotiations
relative to this Agreement have been carried on by it directly without the
intervention of any person who may be entitled to any brokerage or finder's fee
or other commission in respect of this Agreement or the consummation of the
transactions contemplated hereby, and Seller and Buyer each agree to indemnify
and hold harmless the other against any and all claims, losses, liabilities and
expenses which may be asserted against or incurred by it as a result of any
dealings, arrangements or agreements with any such person.
(b) Seller shall pay all federal, state and local sales, documentary
and other transfer taxes, if any, due as a result of the purchase, sale or
transfer of the Licenses in accordance herewith.
6
<PAGE> 7
(c) Each party hereto shall pay its own expenses incidental to the
preparation of this Agreement and the consummation of the transactions
contemplated hereby.
(d) This Agreement sets forth the entire understanding of the parties
hereto with respect to the transactions contemplated hereby. It shall not be
amended or modified except by written instrument duly executed by each of the
parties hereto. Any and all previous agreements and understandings between or
among the parties regarding the subject matter hereof, whether written or oral,
are superseded by this Agreement.
(e) Any term or provision of this Agreement may be waived at any time
by the party entitled to the benefit thereof by a written instrument duly
executed by such party.
(f) Any notice, request, demand, waiver, consent, approval or other
communication which is required or permitted hereunder shall be in writing and
shall be deemed given only if delivered personally, by telegram, by a nationally
recognized overnight carrier or by registered or certified mail, postage
prepaid, as follows:
If to Buyer, to:
Maxxis Group, Inc.
1901 Montreal Road, Suite 108
Tucker, Georgia 30084
Attention: Mr. Thomas O. Cordy
With a copy to:
Nelson Mullins Riley & Scarborough, L.L.P.
First Union Plaza, Suite 1400
999 Peachtree Street, N.E.
Atlanta, GA 30309
Attention: James Walker IV, Esq.
If to Seller, to:
Cherry Communications, Inc. (d/b/a Resurgens
Communications Group)
945 East Paces Ferry Road, Suite 2210
Atlanta, Georgia 30326
Attention: Mr. John D. Phillips
If to World Access, to:
World Access, Inc.
945 East Paces Ferry Road, Suite 2240
Atlanta, Georgia 30326
Attention: Mr. Mark A. Gergel
7
<PAGE> 8
or to such other address as the addressee may have specified in a notice duly
given to the sender as provided herein. Such notice, request, demand, waiver,
consent, approval or other communication will be deemed to have been given as of
the date so delivered, telegraphed or mailed.
(g) This Agreement shall be governed by and interpreted and enforced in
accordance with the laws of the State of Georgia, without regard to its conflict
of law principles.
(h) The invalidity or unenforceability of any provision of this
Agreement in any jurisdiction shall not invalidate or render unenforceable such
provision in any other jurisdiction.
(i) This Agreement may be executed in any number of counterparts and
any party hereto may execute any such counterpart, each of which when executed
and delivered shall be deemed to be an original and all of which counterparts
taken together shall constitute but one and the same instrument.
8
<PAGE> 9
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement on the date first written above:
MAXXIS GROUP, INC.
/s/ Thomas O. Cordy
--------------------------------------------
By: Thomas O. Cordy
Title: Chief Executive Officer and
President
CHERRY COMMUNICATIONS
INCORPORATED (d/b/a RESURGENS
COMMUNICATIONS GROUP)
/s/ W. Tod Chmar
--------------------------------------------
By: W. Tod Chmar
Title: Executive Vice President
WORLD ACCESS, INC.
/s/ Mark A. Gergel
--------------------------------------------
By: Mark A. Gergel
Title: Executive Vice President and Chief
Financial Officer
9
<PAGE> 10
EXHIBIT A
LICENSES
All licenses described on the attachment hereto.
All numerical access codes which customers use to obtain access to
Seller's services including, but not limited to, all Carrier Identification
Codes described on the attachment hereto.
<PAGE> 11
<TABLE>
<S> <C> <C>
SECOND DRAFT SEPTEMBER 28, 1998 INTRASTATE AUTHORITY PRIVILEGED AND CONFIDENTIAL
</TABLE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
GOVERNMENTAL AGENCY REFERENCE EFF. DATE AUTHORITY GRANTED
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Certificate of Public Convenience and
1. Alabama Public Service Necessity authorizing operations as a
Commission Docket No. 22594 10/5/92 provider of Telephone Toll Resale Service
- ---------------------------------------------------------------------------------------------------------------------
Authority to provider interexchange
telecommunications services via
Registration filed 6/24/92. Subsequent
Reseller Certification Application filed
2. Arizona Corporation 11/30/95 in Docket #T-02677A-92-0181
Commission Registration 6/24/92 (still pending).
- ---------------------------------------------------------------------------------------------------------------------
Certificate of Public Convenience and
Necessity to operate as a reseller of
3. Arkansas Public Service competitive intrastate long distance toll
Commission Docket No. 92-173-U 8/5/92 services.
- ---------------------------------------------------------------------------------------------------------------------
Certificate of Public Convenience and
Necessity granting authority to operate
as a reseller of the InterLATA
4. California Public telecommunication service offered by
Utilities Commission Application No. 92-08-015 3/10/93 communication common carriers.
- ---------------------------------------------------------------------------------------------------------------------
See copy of California PUC 1.95-10-007
Settlement Agreement attached herein
effective September 4, 1996 when it was
signed by the Commission; a copy of the
September 4, 1996 order is attached
" " " " herein.
- ---------------------------------------------------------------------------------------------------------------------
5. Colorado Public Authority to provide interexchange
Utilities Commission Registration 12/9/92 telecommunications services.
- ---------------------------------------------------------------------------------------------------------------------
Certificate of Public Convenience and
6. Delaware Public Necessity to provide intrastate
Utilities Commission Docket No. 94-187 12/20/94 telecommunications services to the public.
- ---------------------------------------------------------------------------------------------------------------------
7. District of Columbia Unregulated
- ---------------------------------------------------------------------------------------------------------------------
Non-dominant interexchange carrier
Certificate No. 3134. See Florida
8. Florida Public Service September 21, 1995 PSC Order accepting
Commission Docket No. 920732-TI 11/12/92 settlement attached herein.
- ---------------------------------------------------------------------------------------------------------------------
Interim Certificate of Public Convenience
and Necessity to Resell Interexchange
Telecommunications Services. Interim
Certificate has recently expired.
Waiting for status response from Georgia
9. Georgia Public Service PSC staff which shall be shortly
Commission Docket No. 5426-U 5/2/95 forthcoming.
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
Page 1
<PAGE> 12
<TABLE>
<S> <C> <C>
SECOND DRAFT SEPTEMBER 28, 1998 INTRASTATE AUTHORITY PRIVILEGED AND CONFIDENTIAL
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Per Dennis Sewell September 28, 1998, 2 pm
CST, Cherry was granted another 12 month
Interim Certificate so that the Georgia PSC
could wait and see the outcome of Cherry's
Chapter 11 reorganization. In addition,
Dennis Sewell asked for some additional
information from Cherry. Waiting for
" " " " " confirmation and information requests fax
from Dennis Sewell.
- ---------------------------------------------------------------------------------------------------------------------
" " " " "
- ---------------------------------------------------------------------------------------------------------------------
10. Idaho Public Utilities Authority to provide interexchange
Commission Registration 8/16/92 telecommunications services
- ---------------------------------------------------------------------------------------------------------------------
Certificate of Interexchange Service
Authority granted to provide resold
11. Illinois Commerce interexchange IntraMSA and InterMSA
Commission File No. 92-0234 8/26/92 telecommunications services.
- ---------------------------------------------------------------------------------------------------------------------
TF 92-58 (Tariff) Reseller of interexchange
12. Iowa Utilities Board WRU-92-19 (Waivers) 3/31/92 telecommunications services.
- ---------------------------------------------------------------------------------------------------------------------
13. Kansas Corporation Docket No. 183.413-U Certificate of Convenience and Authority
Commission 93-CHRC-090-C 10/19/92 to resell telecommunication services.
- ---------------------------------------------------------------------------------------------------------------------
14. Commonwealth of
Kentucky Public Service Authority to resell intrastate
Commission Case No. 94-423 3/15/95 long-distance telecommunications services.
- ---------------------------------------------------------------------------------------------------------------------
Certificate of Authority to provide
15. Louisiana Public resold interexchange telecommunication
Service Commission Registration 7/23/92 services.
- ---------------------------------------------------------------------------------------------------------------------
16. Maryland Public Service Authorization to operate as a reseller of
Commission ML##s 44064 & 44478; TE-785 7/20/94 MTS and WATS telephone services.
- ---------------------------------------------------------------------------------------------------------------------
Cherry Communications, Inc.'s Mass.
Tariff No. 1 Allowed to go into effect as
17. Massachusetts filed to provide intrastate interexchange
Department of Public telecommunications services on a reseller
Utilities Registration 7/13/95 basis.
- ------------------------------------------------------------------------------------------------------------------------------------
18. Michigan Public Service
Commission Registration 12/17/92 Resale Interexchange carrier
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
Page 2
<PAGE> 13
<TABLE>
<S> <C> <C>
SECOND DRAFT SEPTEMBER 28, 1998 INTRASTATE AUTHORITY PRIVILEGED AND CONFIDENTIAL
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Certificate of Public Convenience and
Necessity to provide InterLATA and
19. Mississippi Public IntraLATA toll telecommunications
Service Commission Case No. 95-UA-0095 4/6/95 services on a resale basis.
- ---------------------------------------------------------------------------------------------------------------------
20. Montana Public Service Authority to provide telecommunication
Commission Registration 12/10/92 services on a resale basis.
- ---------------------------------------------------------------------------------------------------------------------
Extension of Conditional Authority to
provide InterLATA and IntraLATA
Interexchange telecommunications
services. See copy of Conditional
Authority Order from the Nebraska PSC
21. Nebraska Public Service dated July 31, 1995; copy of the January
Commission Application No. C-1183 7/31/95 9, 1996 Nebraska PSC Order.
- ---------------------------------------------------------------------------------------------------------------------
Copy of the June 16, 1998 Nebraska PSC
Rule to Show Cause Order to Revoke
Cherry's Conditional Authority; and a
copy of Attorney Jack Shultz's (Cherry's
local Nebraska Attorney) July 29,1998
22. " " " " letter to the Nebraska PSC.
- ---------------------------------------------------------------------------------------------------------------------
Certificate of Public Convenience and
Necessity to operate as a reseller of
23. Nevada Public Service intrastate interexchange
Commission Docket No. 95-7018 9/21/95 telecommunications services.
- ---------------------------------------------------------------------------------------------------------------------
24. New Jersey Board of Authorization as a non-dominant
Public Utilities Registration 11/16/92 interexchange carrier.
- ---------------------------------------------------------------------------------------------------------------------
25. New Mexico State Certificate of Public Convenience and
Corporation Necessity for authority to provide public
Commission Docket No. 92-249-TC 12/27/94 intrastate telecommunications services.
- ---------------------------------------------------------------------------------------------------------------------
Certificate of Public Convenience and
Necessity to operate as a reseller of
telephone services via landline telephone
26. New York Public Service company or other common carrier
Commission Case No. 92-C-0585 8/27/92 facilities.
- ---------------------------------------------------------------------------------------------------------------------
Certificate of Registration No. 231 as
27. North Dakota Public Intrastate long distance
Service Commission Case No. PU-1346-95-121 4/12/95 telecommunications reseller.
- ---------------------------------------------------------------------------------------------------------------------
Certificate of Public Convenience and
28. Public Utilities Necessity to provide competitive
Commission of Ohio Case No. 94-1982-CT-ACE 5/22/95 telecommunication services.
- ---------------------------------------------------------------------------------------------------------------------
Registration authorizing interexchange
carrier service on December 11, 1992.
Subsequent application for Certificate of
Public Convenience and Necessity filed
29. Oklahoma Corporation 10/30/95, Case No. PUD-95-0000318 (still
Commission Registration 12/11/92 pending).
- ---------------------------------------------------------------------------------------------------------------------
Application for authority to provide
30. Oregon Public Utility telecommunications services as a
Commission UM 489, Order No. 92-992 7/7/92 competitive provider.
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
Page 3
<PAGE> 14
<TABLE>
<S> <C> <C>
SECOND DRAFT SEPTEMBER 28, 1998 INTRASTATE AUTHORITY PRIVILEGED AND CONFIDENTIAL
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Certificate of Public Convenience to
31. Pennsylvania Public furnish service as a reseller of
Utility Commission Application A.310123 8/5/93 interexchange telecommunication service.
- ---------------------------------------------------------------------------------------------------------------------
Certificate of Public Convenience and
necessity to provide intrastate InterLATA
service on a one year probationary basis
issued 7/13/95. Order removing probation
32. South Carolina Public status and granting permanent status
Service Commission Docket No. 94-621-C 7/13/95 dated August 19, 1996.
- ---------------------------------------------------------------------------------------------------------------------
33. South Dakota Public Certificate of Authority to provide
Utilities Commission Docket No. TC95-059 4/23/96 intrastate telecommunications services
- ---------------------------------------------------------------------------------------------------------------------
Certificate of Convenience and Necessity
34. Tennessee Regulatory as an interexchange telecommunications
Authority Case Number 95-03214 10/13/95 reseller.
- ---------------------------------------------------------------------------------------------------------------------
35. Texas Public Utility Authority as a non-dominant interexchange
Commission Registration 9/22/92 carrier
- ---------------------------------------------------------------------------------------------------------------------
36. Utah Public Service Authority as a non-dominant interexchange
Commission Registration 12/16/92 carrier
- ---------------------------------------------------------------------------------------------------------------------
37. Virginia State Registration as a non-dominant
Corporation Commission Registration 12/8/92 interexchange carrier
- ---------------------------------------------------------------------------------------------------------------------
38. Washington Utilities Authorizing registration as a
and Transportation telecommunications company to provide
Commission Docket No. UT-930978 9/30/92 service.
- ---------------------------------------------------------------------------------------------------------------------
39. Public Service Certificate of Convenience and Necessity
Commission of West to provide resold telecommunications
Virginia Docket No. 95-0151-T-CN 7/11/95 services.
- ---------------------------------------------------------------------------------------------------------------------
40. Wisconsin Public Authorized to provide services as an
Service Commission Docket No. 7814-TI-101 3/30/95 Alternative Telecommunications Utility
- ---------------------------------------------------------------------------------------------------------------------
Cherry Communications
Incorporated's CIC
(Carrier Identification
Code) is 270.
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
Page 4
<PAGE> 15
EXHIBIT B
PROMISSORY NOTE
$100,000.00 SEPTEMBER 29, 1998
MAXXIS GROUP, INC. (hereinafter referred to as "Maker"), for value
received, hereby promises to pay to the order of CHERRY COMMUNICATIONS
INCORPORATED d/b/a Resurgens Communications Group, an Illinois corporation
(hereinafter referred to as "Payee"), the aggregate principal sum of ONE HUNDRED
THOUSAND DOLLARS ($100,000.00) on the earlier of (i) March 1, 2000 or (ii) the
closing of an initial public offering of Maker'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 Maker and such underwriters, resulting in aggregate gross
proceeds of $7,500,000 to the Company. After January 1, 1999, Maker shall pay
monthly in arrears simple interest on the principal at the rate of 8.00% per
annum. Maker and Payee expressly agree that no interest on the principal shall
begin to accrue until January 1, 1999. The principal hereof and the interest
thereon are payable at 945 East Paces Ferry Road, Suite 2210, Atlanta, Georgia
30326, 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.
Prepayments shall be applied first to the payment of accrued but unpaid interest
on this Note and the balance to principal.
This Note is without recourse to any assets of Maker.
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 that Maker fails to make any payment when due, Payee shall
provide written notice of default to Maker, which notice shall allow Maker 30
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 Promissory Note as of the
date first set forth above.
MAXXIS GROUP, INC.
By:
----------------------------------------
Title:
----------------------------------------
<PAGE> 1
EXHIBIT 10.3
PROMISSORY NOTE
$100,000.00 SEPTEMBER 29, 1998
MAXXIS GROUP, INC. (hereinafter referred to as "Maker"), for value
received, hereby promises to pay to the order of CHERRY COMMUNICATIONS
INCORPORATED d/b/a Resurgens Communications Group, an Illinois corporation
(hereinafter referred to as "Payee"), the aggregate principal sum of ONE HUNDRED
THOUSAND DOLLARS ($100,000.00) on the earlier of (i) March 1, 2000 or (ii) the
closing of an initial public offering of Maker'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 Maker and such underwriters, resulting in aggregate gross
proceeds of $7,500,000 to the Company. After January 1, 1999, Maker shall pay
monthly in arrears simple interest on the principal at the rate of 8.00% per
annum. Maker and Payee expressly agree that no interest on the principal shall
begin to accrue until January 1, 1999. The principal hereof and the interest
thereon are payable at 945 East Paces Ferry Road, Suite 2210, Atlanta, Georgia
30326, 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.
Prepayments shall be applied first to the payment of accrued but unpaid interest
on this Note and the balance to principal.
This Note is without recourse to any assets of Maker.
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 that Maker fails to make any payment when due, Payee shall
provide written notice of default to Maker, which notice shall allow Maker 30
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 Promissory Note as of the
date first set forth above.
MAXXIS GROUP, INC.
By: /s/ Thomas O. Cordy
---------------------------------------
Title: Chief Executive Officer
---------------------------------------
<PAGE> 1
EXHIBIT 10.4
SECURITY AGREEMENT
FOR VALUE RECEIVED, Maxxis Group, Inc. (hereinafter "Debtor")
and World Access, Inc. (hereinafter "Secured Party") hereby agree as follows:
1. SECURITY INTEREST
A security interest pursuant to the Uniform Commercial Code is
hereby created and provided for Secured Party in and attaches to the personal
property (hereinafter "Collateral") described below to secure payment and
performance of Debtor's Obligations including the Indebtedness as defined in
Paragraph 3 below.
2. COLLATERAL
The Collateral of Debtor is set forth on Exhibit "A" hereto,
which is made a part hereof by this reference, and includes all additions and
accessions thereto and replacements thereof with respect to all such Collateral;
and all products and proceeds of the property described on Exhibit A, including
without limitation, money, deposit accounts, goods, insurance proceeds and other
tangible or intangible property received upon the sale or other disposition of
the foregoing.
3. DEFINITIONS
Any and all terms used in this Agreement shall be construed
and defined in accordance with the definition of such terms under the Uniform
Commercial Code as in effect in the State of Georgia and the specific
definitions provided herein:
(A) "Indebtedness" shall mean all debts, obligations and
liabilities now existing or hereafter arising, whether absolute or contingent,
direct or indirect, of Debtor to Secured Party arising under that certain Asset
Purchase Agreement dated as of September 29, 1998, to which Debtor and Secured
Party are Parties ("Asset Purchase Agreement").
(B) "Debtor's Obligations" shall mean the Indebtedness
defined in Paragraph 3(A) hereof, all sums and expenses, including without
limitation attorneys' fees, collection, legal and receiver's expense, advanced
or incurred by Secured Party for or in connection with the Collateral or any
obligation of Debtor, and all extensions and renewals thereof, and the
warranties agreements and liabilities undertaken by Debtor herein and in any
other present or future agreement, instrument or guaranty delivered to or made
by Debtor in favor of Secured Party.
-1-
<PAGE> 2
4. DEBTOR'S REPRESENTATIONS, WARRANTIES AND AGREEMENTS
Now, and for so long as any Debtor's Obligations shall remain
outstanding, Debtor warrants, represents, covenants and agrees that:
(A) All of the Collateral is owned by Debtor alone free and
clear of all liens, claims, security interests or encumbrances, except those
granted to Secured Party.
(B) Debtor shall indemnify and save Secured Party harmless
from all loss, cost, damage, liability or expense, including without limitation,
reasonable attorneys' fees, that Secured Party may sustain or incur by reason of
any matter arising out of or relating to this Agreement, including without
limitation, enforcing or collecting Debtor's Obligations or defending or
protecting the Collateral, Secured Party's security interest therein or the
priority thereof.
(C) Secured Party may, at its option, but is not obligated to,
discharge any taxes, liens, security interests or other encumbrances at any time
levied or placed on the Collateral and may pay for the maintenance and
preservation of the Collateral. Debtor shall reimburse Secured Party on demand
for each amount so paid by Secured Party, with interest thereon at the interest
rate specified the applicable evidence of Indebtedness. Any payment made by
Secured Party shall not constitute an agreement to make similar payments in the
future or a waiver of any default under this Agreement. Secured Party need not
inquire as to, or contest the validity of, any expense, tax, security interest,
encumbrance or lien, and the receipt of the usual official notice requiring the
payment thereof shall be conclusive evidence that the same was validly due and
owing.
(D) Debtor shall comply with the terms and conditions of any
leases covering the premises wherein the Collateral is located, and any orders,
ordinances, laws or statutes of any governmental body having jurisdiction with
respect to such premises or the conduct of business therein.
(E) Debtor shall at its expense, when requested by Secured
Party execute and deliver to Secured Party any written document which Secured
Party deems necessary or desirable to protect the interests or rights of Secured
Party and do any other acts necessary or advisable to effectuate more fully the
purposes and provisions of this Agreement, including without limitation,
executing and filing financing or continuation statements in form and substance
satisfactory to Secured Party.
(F) Debtor's books, and records fully and completely reflect
all of its assets, liabilities (both absolute and contingent), profits and
losses and are kept in the ordinary
-2-
<PAGE> 3
course of business in accordance with generally accepted accounting principles
consistently applied. All information contained in Debtor's books and records is
and shall continue to be true and correct.
(G) Debtor has the legal power and authority to enter into
this Agreement and to perform and discharge all obligations hereunder. The
execution of this Agreement and its performance will not violate any loan or
security agreement or other contractual arrangement to which Debtor is a party
or by which Debtor is bound. This Agreement has been duly authorized by all
necessary corporate action, and when executed and delivered, will be a valid and
binding obligation of Debtor enforceable in accordance with its terms.
(H) At all times, Debtor shall maintain the Collateral for the
benefit of Secured Party.
(I) Debtor shall properly care for, house, store and maintain
Collateral in good condition, free of misuse, abuse, waste and deterioration.
Debtor shall not permit anything to be done that may impair, or fail to do
anything necessary or advisable to preserve, the value of Collateral.
(J) All agreements, covenants and undertakings by Debtor to
Secured Party set forth in this Agreement or in any other writing shall be
promptly performed by Debtor according to their terms.
5. EVENTS OF DEFAULT
Debtor shall be in default under this Agreement upon the
happening of any one of the following (each an "Event of Default"):
(A) Failure by Debtor to perform its obligations to Secured
Party pursuant to Section 3 or Section 8 of the Asset Purchase Agreement.
(B) Dissolution, termination of the existence or insolvency of
Debtor; the appointment of a trustee, receiver or conservator for the property
of Debtor; any assignment for the benefit of creditors of Debtor, or the
commencement of a proceeding under any provision of any bankruptcy or insolvency
law by or against the Debtor, including without limitation, requests,
applications, petitions or proceedings seeking an extension, reorganization,
compromise or any other relief whatsoever under any of said laws.
-3-
<PAGE> 4
6. SECURED PARTY'S RIGHTS, POWERS AND REMEDIES
(A) Upon the occurrence of an Event of Default, or any event
which upon notice or passage of time or both would constitute an Event of
Default, and notwithstanding any other agreement to the contrary, Secured Party
may do any one or more of the following, without presentment, notice, or demand
of any kind:
(1) Make such payments and do such acts as Secured Party
considers necessary or convenient to protect its security interest in the
Collateral.
(2) Prior to the disposition of any Collateral, store,
process, repair or recondition it or otherwise prepare it for disposition in any
manner and to the extent Secured Party deems appropriate, and in connection
therewith and with the disposition of any part or all of the Collateral, use any
trademark, trade name, trade style, copyright, patent or technical process used
by Debtor.
(3) Require Debtor to assemble any part or all of the
Collateral and make it available to Secured Party at a place to be designated by
Secured Party. Debtor agrees that Secured Party, by itself or its agent, may
without notice to any person and without judicial process of any kind, enter
into any premises or upon any land (including access roads and rights of way)
owned, leased or otherwise under the real or apparent control of Debtor or any
agent of Debtor where Collateral may be or where Secured Party believes
Collateral may be and disassemble, render unusable, disconnect and separate all
Collateral from any other property and/or repossess and remove all or any item
of Collateral. Debtor will not hinder or delay Secured Party or its agent in any
way and will, if requested, assist Debtor or its agent in disassembling and/or
removing Collateral. Debtor expressly waives all further rights to possession of
the Collateral after default and all claims for damages related to such removal,
disassembling, entering and/or repossession.
(4) Foreclose or otherwise enforce Secured Party's
security interest in any manner permitted or provided for in this Agreement or
by applicable law.
(5) Sell, lease or otherwise dispose of any part or all of
the Collateral at one or more public or private sales or auctions, for cash or
on credit, in such manner and at such place or places (including Debtor's
premises) as Secured Party in its sole discretion deems commercially reasonable,
and Secured Party may bid and become purchaser at any sale. It is not necessary
that the Debtor be present at any such sale. Any deficiency which exists after
disposition of the Collateral as provided above shall be paid immediately by
Debtor.
-4-
<PAGE> 5
(B) Secured Party's rights, powers and remedies under this
Agreement, all other agreements between Debtor and Secured Party, at law, in
equity or otherwise shall be cumulative and not alternative. Secured Party shall
have all other rights, powers and remedies provided under the Uniform Commercial
Code and any other applicable law to the extent not inconsistent with the terms
of this Agreement.
7. WAIVER OF DEBTOR
Debtor waives any right to require Secured Party to proceed
against any person or entity, or to exhaust any Collateral or to pursue any
remedy in Secured Party's power whatsoever. Secured Party shall not be required
to make presentment, demand or protest or, except as may otherwise be provided
in this Agreement, give any notice or take any action to preserve rights against
prior parties with respect to any of the Collateral or in connection with any
part of Debtor's Obligations.
8. WAIVER OF DEFAULTS
Secured Party may, in the exercise of its sole discretion,
waive a default, or cure a default at Debtor's expense. Any such waiver shall
not constitute a waiver of other defaults or of the same kind of default
occurring at another time, or a modification of this Agreement.
9. SECURED PARTY AS ATTORNEY IN FACT
Upon the happening of an Event of Default or an event which,
with the passage of time or giving of notice, or both, would constitute an Event
of Default, Secured Party may, as Debtor's attorney in fact, and Debtor hereby
irrevocably appoints, authorizes and empowers Secured Party, subject to such
powers as have been granted to secured lenders existing at the time of the
execution of this Agreement, to, endorse and affix Debtor's name to or upon any
check, draft, note, instrument, or other writing relating to the collection of
any Collateral or upon any check or other instrument given in payment thereof,
or upon any omitted assignment, notification of assignment or demand relating to
Collateral and upon all other instruments and writings required to assert and
protect Secured Party's rights in the Collateral, including any change of
address to the United State Post Office; these powers, being coupled with an
interest, shall be irrevocable for so long as Debtor's Obligations remain
unsatisfied.
10. NOTICES
All notices given by Debtor or Secured Party to the other
under or relating to this Agreement shall be in writing and either delivered or
sent by first class mail, with postage
-5-
<PAGE> 6
prepaid, addressed to Debtor or Secured Party, as appropriate, at its address
set forth herein, or to such other address as the parties here to may from time
to time specify in writing.
11. GENERAL PROVISIONS
(A) This Agreement together with any other instrument,
document or other agreement executed by the parties hereto constitute the entire
agreement between Debtor and Secured Party. No modification, amendment or change
in this Agreement shall be binding upon Secured Party unless in writing and
signed by, an authorized officer of Secured Party.
(B) This Agreement shall be binding upon and inure to the
benefit of the respective successors and assigns of Debtor and Secured Party;
provided, however, that Debtor may not assign this Agreement without Secured
Party's prior written consent, and any purported assignment by Debtor without
such consent shall be absolutely void.
(C) This is a continuing grant of security interest and
applies to all past, present and future Indebtedness, Debtor's Obligations, and
transactions of any kind between Debtor and Secured Party, whether or not such
transactions continue, increase, decrease or create new indebtedness after or
before payment of prior indebtedness; and whether or not such transactions are
contemplated by the parties at the time of the granting of this security
interest; and notwithstanding the incapacity or bankruptcy of, or other event or
proceedings affecting, Debtor.
(D) Debtor (i) will give Secured Party prior written notice of
any change of place of business and address thereof; and (ii) hereby assigns to
Secured Party any return or unearned premium becoming due on any insurance
covering Collateral, directs the insurer to pay same to Secured Party, and
irrevocably appoints Secured Party as Debtor's attorney-in-fact to cancel such
insurance and to endorse and sign any instrument payable to Debtor or required
to obtain such insurance premium or proceeds.
(E) The singular includes the plural. If there is more than
one Debtor, their obligations and agreements hereunder are joint and several,
and delivery or other accounting of Collateral (in whatever form) to any one of
them shall discharge Secured Party of all liability therefor. If Debtor is a
married person recourse may be had against his/her separate property for his/her
indebtedness and obligations to Secured Party.
(F) Each provision of this Agreement shall be severable from
each other provision of this Agreement for the purpose of determining the legal
enforceability of any specific provision.
(G) Time is of the essence of this Agreement.
-6-
<PAGE> 7
(H) Paragraph headings and paragraph numbers have been set
forth herein for convenience only.
(I) The validity of this Agreement, its construction,
interpretation and enforcement and the rights of the parties hereunder and
concerning the Collateral shall be determined under and according to the laws of
the State of Georgia.
This Security Agreement is entered into as of the 29th day of
September, 1998.
Maxxis Group, Inc.
By: /s/ Thomas O. Cordy
----------------------------------------------
Thomas O. Cordy, President
By /s/ James W. Brown
----------------------------------------------
James W. Brown, Secretary
World Access, Inc.
By: /s/ Michael F. Mies
----------------------------------------------
Michael F. Mies, Treasurer
-7-
<PAGE> 8
EXHIBIT A
Collateral:
1. The "1 -plus" customer base of Maxxis Group, Inc. and its
subsidiaries, and all related contracts, reports, documentation,
manuals, orders, etc.
2. All CIC codes and all tariffs, licenses, permits, authorizations,
etc. of Maxxis Group, Inc. and its subsidiaries, as identified on
the attached schedule.
-8-
<PAGE> 9
EXHIBIT A-1
LICENSES
All licenses described on the attachment hereto.
All numerical access codes which customers use to obtain access to
Seller's services including, but not limited to, all Carrier Identification
Codes described on the attachment hereto.
<PAGE> 10
<TABLE>
<S> <C> <C>
SECOND DRAFT SEPTEMBER 28, 1998 INTRASTATE AUTHORITY PRIVILEGED AND CONFIDENTIAL
</TABLE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
GOVERNMENTAL AGENCY REFERENCE EFF. DATE AUTHORITY GRANTED
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Certificate of Public Convenience and
1. Alabama Public Service Necessity authorizing operations as a
Commission Docket No. 22594 10/5/92 provider of Telephone Toll Resale Service
- ---------------------------------------------------------------------------------------------------------------------
Authority to provider interexchange
telecommunications services via
Registration filed 6/24/92. Subsequent
Reseller Certification Application filed
2. Arizona Corporation 11/30/95 in Docket #T-02677A-92-0181
Commission Registration 6/24/92 (still pending).
- ---------------------------------------------------------------------------------------------------------------------
Certificate of Public Convenience and
Necessity to operate as a reseller of
3. Arkansas Public Service competitive intrastate long distance toll
Commission Docket No. 92-173-U 8/5/92 services.
- ---------------------------------------------------------------------------------------------------------------------
Certificate of Public Convenience and
Necessity granting authority to operate
as a reseller of the InterLATA
4. California Public telecommunication service offered by
Utilities Commission Application No. 92-08-015 3/10/93 communication common carriers.
- ---------------------------------------------------------------------------------------------------------------------
See copy of California PUC 1.95-10-007
Settlement Agreement attached herein
effective September 4, 1996 when it was
signed by the Commission; a copy of the
September 4, 1996 order is attached
" " " " herein.
- ---------------------------------------------------------------------------------------------------------------------
5. Colorado Public Authority to provide interexchange
Utilities Commission Registration 12/9/92 telecommunications services.
- ---------------------------------------------------------------------------------------------------------------------
Certificate of Public Convenience and
6. Delaware Public Necessity to provide intrastate
Utilities Commission Docket No. 94-187 12/20/94 telecommunications services to the public.
- ---------------------------------------------------------------------------------------------------------------------
7. District of Columbia Unregulated
- ---------------------------------------------------------------------------------------------------------------------
Non-dominant interexchange carrier
Certificate No. 3134. See Florida
8. Florida Public Service September 21, 1995 PSC Order accepting
Commission Docket No. 920732-TI 11/12/92 settlement attached herein.
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
Page 1
<PAGE> 11
<TABLE>
<S> <C> <C>
SECOND DRAFT SEPTEMBER 28, 1998 INTRASTATE AUTHORITY PRIVILEGED AND CONFIDENTIAL
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Interim Certificate of Public Convenience
and Necessity to Resell Interexchange
Telecommunications Services. Interim
Certificate has recently expired.
Waiting for status response from Georgia
9. Georgia Public Service PSC staff which shall be shortly
Commission Docket No. 5426-U 5/2/95 forthcoming.
- ---------------------------------------------------------------------------------------------------------------------
Per Dennis Sewell September 28, 1998, 2 pm
CST, Cherry was granted another 12 month
Interim Certificate so that the Georgia PSC
could wait and see the outcome of Cherry's
Chapter 11 reorganization. In addition,
Dennis Sewell asked for some additional
information from Cherry. Waiting for
" " " " " confirmation and information requests fax
from Dennis Sewell.
- ---------------------------------------------------------------------------------------------------------------------
" " " " "
- ---------------------------------------------------------------------------------------------------------------------
10. Idaho Public Utilities Authority to provide interexchange
Commission Registration 8/16/92 telecommunications services
- ---------------------------------------------------------------------------------------------------------------------
Certificate of Interexchange Service
Authority granted to provide resold
11. Illinois Commerce interexchange IntraMSA and InterMSA
Commission File No. 92-0234 8/26/92 telecommunications services.
- ---------------------------------------------------------------------------------------------------------------------
TF 92-58 (Tariff) Reseller of interexchange
12. Iowa Utilities Board WRU-92-19 (Waivers) 3/31/92 telecommunications services.
- ---------------------------------------------------------------------------------------------------------------------
13. Kansas Corporation Docket No. 183.413-U Certificate of Convenience and Authority
Commission 93-CHRC-090-C 10/19/92 to resell telecommunication services.
- ---------------------------------------------------------------------------------------------------------------------
14. Commonwealth of
Kentucky Public Service Authority to resell intrastate
Commission Case No. 94-423 3/15/95 long-distance telecommunications services.
- ---------------------------------------------------------------------------------------------------------------------
Certificate of Authority to provide
15. Louisiana Public resold interexchange telecommunication
Service Commission Registration 7/23/92 services.
- ---------------------------------------------------------------------------------------------------------------------
16. Maryland Public Service Authorization to operate as a reseller of
Commission ML##s 44064 & 44478; TE-785 7/20/94 MTS and WATS telephone services.
- ---------------------------------------------------------------------------------------------------------------------
Cherry Communications, Inc.'s Mass.
Tariff No. 1 Allowed to go into effect as
17. Massachusetts filed to provide intrastate interexchange
Department of Public telecommunications services on a reseller
Utilities Registration 7/13/95 basis.
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
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<PAGE> 12
<TABLE>
<S> <C> <C>
SECOND DRAFT SEPTEMBER 28, 1998 INTRASTATE AUTHORITY PRIVILEGED AND CONFIDENTIAL
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
18. Michigan Public Service
Commission Registration 12/17/92 Resale Interexchange carrier
- ---------------------------------------------------------------------------------------------------------------------
Certificate of Public Convenience and
Necessity to provide InterLATA and
19. Mississippi Public IntraLATA toll telecommunications
Service Commission Case No. 95-UA-0095 4/6/95 services on a resale basis.
- ---------------------------------------------------------------------------------------------------------------------
20. Montana Public Service Authority to provide telecommunication
Commission Registration 12/10/92 services on a resale basis.
- ---------------------------------------------------------------------------------------------------------------------
Extension of Conditional Authority to
provide InterLATA and IntraLATA
Interexchange telecommunications
services. See copy of Conditional
Authority Order from the Nebraska PSC
21. Nebraska Public Service dated July 31, 1995; copy of the January
Commission Application No. C-1183 7/31/95 9, 1996 Nebraska PSC Order.
- ---------------------------------------------------------------------------------------------------------------------
Copy of the June 16, 1998 Nebraska PSC
Rule to Show Cause Order to Revoke
Cherry's Conditional Authority; and a
copy of Attorney Jack Shultz's (Cherry's
local Nebraska Attorney) July 29,1998
22. " " " " letter to the Nebraska PSC.
- ---------------------------------------------------------------------------------------------------------------------
Certificate of Public Convenience and
Necessity to operate as a reseller of
23. Nevada Public Service intrastate interexchange
Commission Docket No. 95-7018 9/21/95 telecommunications services.
- ---------------------------------------------------------------------------------------------------------------------
24. New Jersey Board of Authorization as a non-dominant
Public Utilities Registration 11/16/92 interexchange carrier.
- ---------------------------------------------------------------------------------------------------------------------
25. New Mexico State Certificate of Public Convenience and
Corporation Necessity for authority to provide public
Commission Docket No. 92-249-TC 12/27/94 intrastate telecommunications services.
- ---------------------------------------------------------------------------------------------------------------------
Certificate of Public Convenience and
Necessity to operate as a reseller of
telephone services via landline telephone
26. New York Public Service company or other common carrier
Commission Case No. 92-C-0585 8/27/92 facilities.
- ---------------------------------------------------------------------------------------------------------------------
Certificate of Registration No. 231 as
27. North Dakota Public Intrastate long distance
Service Commission Case No. PU-1346-95-121 4/12/95 telecommunications reseller.
- ---------------------------------------------------------------------------------------------------------------------
Certificate of Public Convenience and
28. Public Utilities Necessity to provide competitive
Commission of Ohio Case No. 94-1982-CT-ACE 5/22/95 telecommunication services.
- ---------------------------------------------------------------------------------------------------------------------
Registration authorizing interexchange
carrier service on December 11, 1992.
Subsequent application for Certificate of
Public Convenience and Necessity filed
29. Oklahoma Corporation 10/30/95, Case No. PUD-95-0000318 (still
Commission Registration 12/11/92 pending).
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
Page 3
<PAGE> 13
<TABLE>
<S> <C> <C>
SECOND DRAFT SEPTEMBER 28, 1998 INTRASTATE AUTHORITY PRIVILEGED AND CONFIDENTIAL
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Application for authority to provide
30. Oregon Public Utility telecommunications services as a
Commission UM 489, Order No. 92-992 7/7/92 competitive provider.
- ---------------------------------------------------------------------------------------------------------------------
Certificate of Public Convenience to
31. Pennsylvania Public furnish service as a reseller of
Utility Commission Application A.310123 8/5/93 interexchange telecommunication service.
- ---------------------------------------------------------------------------------------------------------------------
Certificate of Public Convenience and
necessity to provide intrastate InterLATA
service on a one year probationary basis
issued 7/13/95. Order removing probation
32. South Carolina Public status and granting permanent status
Service Commission Docket No. 94-621-C 7/13/95 dated August 19, 1996.
- ---------------------------------------------------------------------------------------------------------------------
33. South Dakota Public Certificate of Authority to provide
Utilities Commission Docket No. TC95-059 4/23/96 intrastate telecommunications services
- ---------------------------------------------------------------------------------------------------------------------
Certificate of Convenience and Necessity
34. Tennessee Regulatory as an interexchange telecommunications
Authority Case Number 95-03214 10/13/95 reseller.
- ---------------------------------------------------------------------------------------------------------------------
35. Texas Public Utility Authority as a non-dominant interexchange
Commission Registration 9/22/92 carrier
- ---------------------------------------------------------------------------------------------------------------------
36. Utah Public Service Authority as a non-dominant interexchange
Commission Registration 12/16/92 carrier
- ---------------------------------------------------------------------------------------------------------------------
37. Virginia State Registration as a non-dominant
Corporation Commission Registration 12/8/92 interexchange carrier
- ---------------------------------------------------------------------------------------------------------------------
38. Washington Utilities Authorizing registration as a
and Transportation telecommunications company to provide
Commission Docket No. UT-930978 9/30/92 service.
- ---------------------------------------------------------------------------------------------------------------------
39. Public Service Certificate of Convenience and Necessity
Commission of West to provide resold telecommunications
Virginia Docket No. 95-0151-T-CN 7/11/95 services.
- ---------------------------------------------------------------------------------------------------------------------
40. Wisconsin Public Authorized to provide services as an
Service Commission Docket No. 7814-TI-101 3/30/95 Alternative Telecommunications Utility
- ---------------------------------------------------------------------------------------------------------------------
Cherry Communications
Incorporated's CIC
(Carrier Identification
Code) is 270.
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
Page 4
<PAGE> 1
EXHIBIT 10.5
SOFTWARE LICENSE AGREEMENT
(TRANSFER OF LICENSE RIGHTS)
This Software License Agreement ("Agreement") is entered into by and between
ALCATEL USA MARKETING, INC. (formerly known as DSC Marketing Services, Inc.),
with principal offices at 1000 Coit Road, Plano, Texas 75075 ("ALCATEL") and
MAXXIS GROUP, Inc., with principal offices at 1901 Montreal Road, Tucker,
Georgia 30084 ("Licensee") to be effective the date of signature by ALCATEL's
authorized representative.
WHEREAS, Licensee understands and acknowledges that wherever the term ALCATEL is
used herein it shall include those companies formerly known as DSC
Communications Corporation and/or DSC Marketing Services, Inc.; and
WHEREAS, Licensee wishes to obtain the Right To Use ("RTU") certain Software
(defined as machine readable computer programs, instruction sequences,
procedures, data, logic, and/or rules provided by ALCATEL, exclusive of source
code, in or by any form or media) from ALCATEL for use on ALCATEL manufactured
equipment which Licensee has obtained from a third party (Cherry Communications,
Inc.); and
WHEREAS, ALCATEL is willing to license that certain Software to Licensee under
certain terms and conditions;
NOW THEREFORE, in consideration of the premises the parties agree as follows:
AFFIRMATION
Licensee hereby affirms that it is not a competitor of, nor controlled
by, nor under common control with a competitor of ALCATEL.
CONFIDENTIAL INFORMATION
Licensee acknowledges that all technical information, documentation,
Software and other information or data that ALCATEL supplies to Licensee which
is marked or otherwise identified as confidential and proprietary information of
ALCATEL shall hereinafter be collectively referred to as "Confidential
Information". Licensee agrees that it shall: (a) not disclose any Confidential
Information to any person, except to its employees having a need to know in
connection with the operation and maintenance of the Equipment (defined as any
equipment, components, assemblies, accessories, line cards, boards, and similar
items provided by ALCATEL, or obtained from a third party under a transaction
authorized by ALCATEL) or Software, and, where applicable, its contractors who
have agreed, in writing, to treat such Confidential Information in the same
manner; (b) not copy any Confidential Information, except as provided herein;
(c) not reverse engineer or decompile any Equipment, Software or Confidential
Information; and (d) compensate ALCATEL for any loss or damages resulting from a
breach of this provision.
License Transfer, 9/29/98
<PAGE> 2
LICENSE GRANT
ALCATEL hereby grants Licensee, and Licensee hereby accepts, a
nonexclusive, nontransferable license to use the Software and those features of
the Software for which activation has been authorized by ALCATEL, solely on a
single System (defined as an arrangement of Equipment which, when interfaced
with Software, is operable to perform predetermined functions), or unit of
Equipment, as may be applicable. Use of the Software on multiple Systems or with
any equipment furnished by a party other than ALCATEL or its authorized
resellers is not licensed hereunder in the absence of a separate written
agreement between the parties hereto.
In accepting such Software license grant Licensee agrees to treat such
Software as Confidential Information. Licensee agrees to use such Software or
any portions or aspects thereof (including any methods or concepts utilized
therein) solely on the Equipment. Licensee agrees, within thirty (30) days after
the occurrence of either of the following events, to return, or certify to
ALCATEL in writing the destruction of, all Software, memory media, documentation
and/or other material (a) that has been modified, updated, or replaced; and/or
(b) upon Licensee's discontinued use of the Equipment. Licensee agrees that it
shall not at any time modify, disassemble, or decompile such Software, or
transfer or reverse engineer any portion of the Software or functioning of any
Equipment, or permit others to do so, without ALCATEL's prior written consent.
Licensee agrees it will not attempt to transfer Confidential Information,
including any Software or System, without the prior written consent of ALCATEL.
Licensee further agrees that it shall not reproduce or copy such Software in
whole or in part except for backup and archival purposes.
In the event Licensee breaches any of the above provisions, ALCATEL
reserves the right, upon notice to Licensee, to (a) require the immediate return
of all Confidential Information, including all applicable Software and copies
thereof, wherever such Confidential Information and copies thereof shall reside,
including any and all associated documentation for which Licensee is in breach
of license rights, or has not paid the applicable fee, and (b) terminate the
license for such Software and associated documentation granted to Licensee. Upon
receipt of such notice, Licensee agrees to immediately discontinue use of such
Software and associated documentation.
The rights and obligations of Licensee hereunder will survive
expiration or termination of this Agreement for any reason, and shall continue
even if the Software is no longer used with the Equipment.
INDEMNIFICATION
ALCATEL shall, at its expense, defend any claim or legal action
(collectively "claim") against Licensee to the extent that it is based on a
substantive allegation that the Software infringes any patent, copyright, trade
secret, or other intellectual property right of a third party. ALCATEL shall pay
all costs and damages, including reasonable attorneys fees, finally awarded
against Licensee that are directly attributable to such infringement, up to a
limit of
License Transfer, 9/29/98
<PAGE> 3
ONE MILLION DOLLARS ($1,000,000), provided that ALCATEL is (a) given written
notice of any communications or actions taken with respect to such claim,
including copies of such communications, as soon as practicable but in no event
later than fourteen (14) calendar days after Licensee's receipt of such
communications, and (b) given the sole authority and reasonable assistance
necessary to defend or settle such claim.
This indemnity shall not apply if the alleged infringement arises from
(a) the use of any Software supplied that is produced in accordance with the
Licensee's specifications, designs or special instructions, (b) combining or
incorporating the Software with or into software components not furnished by
ALCATEL, if the Software alone would not have resulted in infringement, (c) the
use of the Software in a manner not contemplated by this Agreement, including in
a proprietary or patented process not contemplated herein, or (d) the Licensee's
modification of the Software.
If an injunction is obtained against Licensee's use of the Software, in
whole or in part, as a result of an infringement claim, or ALCATEL determines
that Licensee's use may be subject to such a claim, then ALCATEL may either: (a)
procure for Licensee the right to continue to use the Software, or (b) replace
or modify the Software with functionally equivalent or better Software so that
Licensee's use is not subject to the injunction or claim. If ALCATEL determines
that it cannot accomplish either of the foregoing in a commercially reasonable
manner, then Licensee may return to ALCATEL, or ALCATEL may require the return,
of the Software, or parts thereof, that are enjoined or determined by ALCATEL to
be subject to the claim. Upon ALCATEL's receipt thereof, it shall promptly
refund to Licensee the depreciated value of the returned Software or parts
thereof.
THE PROVISIONS OF THIS SECTION SET FORTH THE ENTIRE OBLIGATION OF
ALCATEL AND LICENSEE'S SOLE REMEDY WITH RESPECT TO ANY CLAIM OF INFRINGEMENT OF
ANY PATENT, COPYRIGHT, TRADE SECRET, OR OTHER INTELLECTUAL PROPERTY RIGHT OF A
THIRD PARTY, AND ALCATEL DISCLAIMS ALL OTHER WARRANTIES AND OBLIGATIONS WITH
RESPECT TO ANY SUCH CLAIM.
WARRANTY
ALCATEL warrants only that it has the right to license or sublicense
the Software covered under this Agreement. ALCATEL makes no further warranties
in this Agreement regarding the Software. The Software is provided "as is".
ALCATEL AND ITS SUPPLIERS AND LICENSORS DISCLAIM ALL OTHER WARRANTIES,
WHETHER EXPRESS OR IMPLIED, INCLUDING THE WARRANTIES OF MERCHANTABILITY AND
FITNESS FOR INTENDED OR PARTICULAR PURPOSE.
License Transfer, 9/29/98
<PAGE> 4
LIMITATION OF LIABILITY
IN NO EVENT SHALL ALCATEL OR ALCATEL'S SUPPLIERS OR LICENSORS HAVE ANY
LIABILITY TO LICENSEE FOR CONSEQUENTIAL, INDIRECT, INCIDENTAL, OR SPECIAL
DAMAGES, INCLUDING, BUT NOT LIMITED TO, LOSS OF REVENUE OR PROFITS. ALCATEL'S
LIABILITY FOR ANY CLAIM, LOSS OR DAMAGE ARISING FROM OR IN CONNECTION WITH THIS
AGREEMENT SHALL BE LIMITED TO ACTUAL DAMAGES.
GENERAL
Licensee shall neither disclose the existence of this Agreement or its
terms and conditions, nor use the name of ALCATEL in any news release, public
announcement, advertisement, or other form of publicity without the prior
written consent of ALCATEL.
The rights and obligations of the parties and all interpretations and
performance of this Agreement shall be governed in all respects by the laws of
the State of Texas without regard to its conflict of laws rules.
This Agreement constitutes the entire agreement between ALCATEL and
Licensee with respect to the licensing of certain Software for use on certain
ALCATEL manufactured Equipment which Licensee obtained from a third party
through a transaction authorized by ALCATEL and supersedes all previous
negotiations, proposals, commitments, representations, writings, advertisements,
publications, and understandings of any nature whatsoever.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
by their duly authorized representatives effective the date of signature by
ALCATEL's authorized representative.
MAXXIS GROUP, INC. ALCATEL USA MARKETING, INC.
By: /s/ Thomas O. Cordy By: /s/ Buddy Barnes
---------------------------- -----------------------------
Name: Thomas O. Cordy Name: Buddy Barnes
-------------------------- ---------------------------
Title: President and CEO Title: Vice President
-------------------------- ---------------------------
Date: 9/30/98 Date: 10/1/98
-------------------------- ---------------------------
License Transfer, 9/29/98
<PAGE> 1
EXHIBIT 10.6
SUBLEASE
1. Parties. This Sublease, dated as of September 30, 1998 is made between Cherry
Communications Incorporated, an Illinois corporation, d/b/a Resurgens
Communications Group ("Sublandlord"), and Maxxis Group, Inc., a Georgia
corporation ("Subtenant").
2. Master Lease. Sublandlord is the tenant under a lease dated February 10,
1995, as amended March 11, 1996, wherein LaSalle National Trust, N.A. personally
but solely as Trustee under Trust Agreement dated April 14, 1978 ("Master
Landlord") leased to Sublandlord certain premises described as approximately
7,119 rentable square feet in that certain building (the "Building") commonly
known as Printers' Square, with a street address of 600-780 S. Federal Street,
76 West Polk Street, and 75 West Harrison Street in the City of Chicago, State
of Illinois (the "Master Premises").
Such lease and amendments are herein collectively referred to as the "Master
Lease" and are attached hereto as EXHIBIT A.
3. Premises. Sublandlord hereby subleases to Subtenant on the terms and
conditions set forth in this Sublease a portion of the Master Premises
consisting of a portion of the Master Premises (the "Premises"), as more
particularly described in EXHIBIT B attached hereto and made a part hereof.
4. Term. The term ("Term") of this Sublease shall commence (the "Commencement
Date") on October 1, 1998 and end on March 31, 2001 (the "Termination Date"),
unless otherwise sooner terminated in accordance with the provisions of this
Sublease.
5. Rent.
(i) Subtenant shall pay to Sublandlord as monthly base rent, without
deduction, setoff, notice, or demand, at the address set forth in Section 10,
or at such other place as Sublandlord shall designate from time to time by
notice to Subtenant, the amounts per month set forth on EXHIBIT C (the
"Rent"), in advance, on the first day of each month of the Term. The Rent
shall be subject to upward adjustment proportional to any rent increases
pursuant to the Master Lease, including without limitation Section 22 of the
Master Lease.
(ii) Subtenant recognizes that late payment of any rent or other sum due
hereunder Subtenant to Sublandlord will result in administrative expense to
Sublandlord, the extent of which additional expense is extremely difficult
and economically impracticable to ascertain. Subtenant therefore agrees that
if rent or any other payment due hereunder from Subtenant to Sublandlord
remains unpaid ten (10) days after said amount is due, the amount of such
unpaid rent or other payment shall be increased by a late charge to be paid
Sublandlord by Subtenant in an amount equal to five percent (5%) of the
amount of the delinquent rent or other payment. Subtenant
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agrees that such amount is a reasonable estimate of the loss and expense to
be suffered by Sublandlord as a result of such late payment by Subtenant and
may be charged by Sublandlord to defray such loss and expense. The provisions
of this Paragraph shall not relieve Subtenant of the obligation to pay rent
or other payments on or before the date on which they are due; nor do the
terms of this Paragraph in any way affect Sublandlord's remedies pursuant to
the other provisions of this Sublease or otherwise at law in the event said
rent or other payment is unpaid after the date due.
6. Use of the Premises. The Premises shall be used and occupied only for general
office purposes, and for no other use or purpose without the consent of
Sublandlord, which shall not be unreasonably withheld, and the consent of the
Master Landlord in accordance with the terms and conditions of the Master Lease.
7. Assignment and Subletting. Subtenant shall not hypothecate its interest in or
assign this Sublease, or further sublet all or any part of the Premises without
(i) the prior written consent of Sublandlord, which shall not be unreasonably
withheld, and (ii) the prior written consent of Master Landlord in accordance
with the terms and provisions of the Master Lease; nor shall Subtenant permit
any lien to be leased on Subtenant's interest by operation of law.
8. Other Provisions of Sublease. Except as noted elsewhere in this Sublease, all
applicable terms and conditions of the Master Lease are incorporated into and
made a part of this Sublease as if Sublandlord were the landlord thereunder,
Subtenant the tenant thereunder, and the Premises the Master Premises, but
incorporating such provisions herein shall not obligate Sublandlord to perform
any maintenance or repair of or provide utilities or services to the Premises or
be responsible for any representations or warranties of Master Landlord under
the Master Lease. Subtenant assumes and agrees to perform the tenant's
obligations under the Master Lease during the Term to the extent that such
obligations are applicable to the Premises, except that the obligation to pay
rent to Master Landlord under the Master Lease shall be considered performed by
Subtenant to the extent and in the amount rent is paid to Sublandlord in
accordance with Section 5 of this Sublease. Subtenant shall not commit or suffer
any act or omission that will violate any of the provisions of the Master Lease.
If the Master Lease gives Sublandlord any right to terminate the Master Lease in
the event of the partial or total damage, destruction, condemnation of the
Master Premises or the Building or otherwise, the exercise of such right by
Sublandlord shall not constitute a default or breach hereunder.
9. Attorney's Fees. If Sublandlord or Subtenant shall commence an action against
the other arising out of or in connection with this Sublease, the prevailing
party shall be entitled to recover its costs of suit and reasonable attorney's
fees actually incurred.
10. Notices. All notices and demands which may or are to be required or
permitted to be given by either party on the other hereunder shall be in
writing. All notices and demands by the Sublandlord to Subtenant shall be sent
by United States mail, postage prepaid, by overnight courier service, or by hand
delivery, addressed to the Subtenant at the address set forth below, or to such
other place as Subtenant may from time to time designate in a notice to the
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<PAGE> 3
Sublandlord. All notices and demands by the Subtenant to Sublandlord shall be
sent by United States mail, postage prepaid, by overnight courier service, or by
hand delivery, addressed to the Sublandlord at the address set forth below, or
to such other person or place as the Sublandlord may from time to time designate
in a notice to the Subtenant.
To Sublandlord: Resurgens Communications Group
Suite 2210
945 East Paces Ferry Road
Atlanta, Georgia 30326
Attention: Chief Financial Officer
To Subtenant: Maxxis Group, Inc.
1901 Montreal Road
Suite 108
Tucker, Georgia 30084
Attention: Tom Cordy
11. Time Periods for Performance. Notwithstanding the provisions of Section 8 of
this Sublease, the time limits contained in the Master Lease for the giving of
notices, making of demands or performing of any act, condition or covenant on
the part of tenant under the Master Lease, or for the exercise by the tenant
thereunder of any right, remedy or option incorporated herein are changed for
the purpose of incorporation herein by reference by shortening the same, in each
instance, by five (5) days, so that, instance, Subtenant shall have five (5)
days less time to observe or perform hereunder than Sublandlord has as tenant
under the Master Lease. If the Master Lease, as incorporated herein, only allows
ten (10) days or less for Subtenant to perform any act or to correct any failure
relating to the Premises or this Sublease, then, except in the event of an
emergency, Subtenant shall nevertheless be allowed the time limit provided by
the Master Lease to perform any such act or correct any such failure.
12. Performance by Sublandlord. Sublandlord covenants and agrees that it will
fully and punctually pay all rent and other charges due any payable under the
Master Lease as and when the same shall become due and payable.
13. Enforcement of Rights. If Master Landlord defaults in any of its obligations
under the Master Lease, Subtenant shall be entitled to participate with
Sublandlord in any action undertaken by Sublandlord in the enforcement of
Sublandlord's rights against Master Landlord. If Sublandlord elects not to take
action, whether legal action or otherwise, for the enforcement of Sublandlord's
rights against Master Landlord, Subtenant shall have the right to take such
action in its own name and, for that purpose and only to such extent, all the
rights of Sublandlord under the Master Lease with respect to the Premises shall
be and are hereby conferred upon and assigned to Subtenant, and Subtenant shall
be subrogated to such rights to the extent they apply to the Premises.
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<PAGE> 4
14. Delivery of Possession. Subject to the provisions of Section 25, the
Premises shall be delivered in their "as is" condition, broom clean, as of the
Commencement Date. Subtenant acknowledges that it has inspected the Premises and
found them to be in acceptable condition. In the event that Sublandlord fails to
deliver possession of the Premises to Subtenant within thirty (30) days of the
Commencement Date, Subtenant may terminate this Sublease upon written notice to
Sublessor and upon the giving of such notice, shall have no further liability to
Sublessor hereunder.
15. Cross Default. In the event either party defaults under other agreements
with the other party, then the non-defaulting party may terminate this Sublease
upon giving written notice thereof to the other party, which termination shall
be effective upon receipt.
16. Subtenant's Indemnity. Subtenant shall defend, indemnify and hold harmless
Sublandlord, its partners, employees, and agents, from and against any and all
claims, liabilities, suits, judgments, awards, damages, losses, fines,
penalties, costs and expenses, including reasonable attorney's fees, that
Sublandlord, its partners, employees and agents actually incur by reason of or
arising out of or related to the breach by Subtenant of any of the duties,
obligations, liabilities or covenants applicable to Subtenant hereunder,
Subtenant's occupancy or use of the Premises, any alterations, additions or
modifications made to the Premises by Subtenant or Subtenant's negligence or
willful misconduct; provided, however, that this Section 16 shall not apply to
matters arising out of or resulting from the negligence or willful misconduct of
Landlord or its agents or employees. This indemnification shall survive
termination of this Sublease.
17. Limitations on Sublandlord.
(i) Subtenant acknowledges that Sublandlord has made no representations or
warranties with respect to the Building or the Premises except as expressly
provided in this Sublease.
(ii) If Sublandlord assigns its leasehold estate in the Master Premises
with Master Landlord's consent, Sublandlord shall have no obligation to
Subtenant arising thereafter, provided that such assignee agrees in writing
to be bound by the terms and conditions of this Sublease. Subtenant shall
then recognize Sublandlord's assignee as sublessor under this Sublease.
18. Subtenant's Obligations upon Termination of this Sublease. Subtenant shall
keep the Premises in good order and condition and, at the expiration or sooner
termination of this Sublease, shall surrender and deliver up the same, "broom
clean" and in good order and condition, ordinary wear and tear and damage by
fire and other casualty excepted. Subject to the preceding sentence, Subtenant
may, and shall, if requested by Sublandlord, restore the Premises to their
condition as of the Commencement Date. Subtenant shall repair any damage to the
Premises or the Building caused by Subtenant's move into the Premises, the
removal from the Premises of any property by or on behalf of Subtenant, and any
damage otherwise caused by Subtenant.
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<PAGE> 5
19. Subordination to the Master Lease. This Sublease is expressly subject and
subordinate to the Master Lease. Subtenant acknowledges that it has received a
copy, and has reviewed the terms of, the Master Lease. In addition to
Subtenant's, obligations under this Sublease and to the extent not inconsistent
with this Sublease, Subtenant shall observe and perform all of the terms,
covenants and conditions of the Master Lease which Sublandlord, as tenant under
the Master Lease, is obligated to observe and perform with respect to the
Premises, except for the payment of rent thereunder, as such terms, covenants
and conditions of the Master Lease are incorporated herein pursuant to Section 8
of this Sublease. Subtenant shall not do, omit to do, or permit to be done or
omitted any act in or related to the Premises which could or does constitute a
breach or default under the terms of the Master Lease. If any of the express
provisions of this Sublease shall conflict with any of the provisions
incorporated by reference, such conflict shall be resolved in favor of the
express provisions of this Sublease.
20. Sublandlord's Access. Sublandlord and its agents and employees and Master
Landlord shall have the right to enter the Premises in the event of an
emergency, and at other reasonable times, from time to time, upon reasonable
notice to Subtenant (which notice may be oral) to ascertain whether Subtenant is
in compliance with the provisions of this Sublease, to make such repairs as
Sublandlord deems necessary, and, in the case of Master Landlord, to exhibit the
Premises to prospective tenants during the last twelve (12) months of the Term.
21. Consent or Approval of Master Landlord. If the consent or approval of Master
Landlord is required under the Master Lease with respect to any matter relating
to the Premises, it shall also be required hereunder. Subtenant shall be
required first to obtain the consent or approval of Sublandlord with respect
thereto and, if Sublandlord grants such consent or approval, such consent may be
conditioned upon receipt of Consent or approval delivered to Master Landlord.
Subtenant shall be required to deliver to Sublandlord a copy of any request for
consent or approval delivered to Master Landlord and Master Landlord's response
thereto within five (5) days of delivery or receipt, as the case may be.
Sublandlord shall, if requested, assist Subtenant in obtaining such consent or
approval from Master Landlord, but Sublandlord shall not be responsible for
obtaining such consent or approval or any costs or expenses in connection
therewith.
22. Right to Cure Subtenant's Defaults. If Subtenant shall at any time fail to
make any payment or perform any other obligation of Subtenant hereunder, then
Sublandlord shall have the right, but not the obligation, after the lesser of
five (5) days' notice to Subtenant or the time within which Master Landlord may
act on Sublandlord's behalf under the Master Lease, or without notice to
Subtenant in the case of any emergency, and without waiving or releasing
Subtenant from any obligations of Subtenant hereunder, to make such payment or
perform such other obligation of Subtenant in such manner and to such extent as
Sublandlord shall deem reasonably necessary, and in exercising any such right,
to pay any incidental costs and expenses, employ attorneys and other
professionals, and incur and pay attorneys' fees and other costs reasonably
required in connection therewith. Subtenant shall pay to Sublandlord upon demand
all sums so paid by Sublandlord and all incidental costs and expenses of
Sublandlord in connection therewith.
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<PAGE> 6
23. Survival. Except as otherwise set forth in this Sublease, any obligations of
Subtenant (including, without limitation, rental and other monetary obligations,
repair obligations and obligations to indemnify Sublandlord), shall survive the
expiration or sooner termination of this Sublease, and Subtenant shall
immediately reimburse Sublandlord for any expense incurred by Sublandlord in
curing Subtenant's failure to satisfy any such obligation (notwithstanding the
fact that such cure might be effected by Sublandlord following the expiration or
earlier termination of this Sublease). Subtenant shall have reciprocal rights in
all respects as to Sublandlord under this Section 23.
24. Brokers. Sublandlord and Subtenant warrant and represent that they have had
no dealings with any real estate broker or agent in connection with the
negotiation of this Sublease, and that they know of no other real estate broker
or agent who is or might be entitled to a commission in connection with this
Sublease. Sublandlord and Subtenant each agree to indemnify, defend and hold the
other party harmless from and against any and all liabilities or expenses,
including reasonable attorneys' fees and costs actually incurred, arising out of
or in connection with a breach of the representation contained in this section.
25. Compliance with Applicable Laws. Sublandlord shall be responsible for, and
shall indemnify and hold Subtenant harmless from and against, any and all
losses, damages, claims, expenses (including reasonable attorneys' fees) or
costs resulting from a failure to comply with any law, regulation, ordinance or
code applicable to the Premises (or the condition thereof) up to the
Commencement Date; provided, however, that Sublandlord shall not be responsible
for any noncompliance arising from a material change to the law, regulation,
ordinance or code at issue from or after the Commencement Date, nor any
noncompliance arising from Subtenant's specific use or occupancy of the
Premises. Subject to the foregoing, Subtenant shall be responsible for
compliance with all laws, regulations, codes or ordinances applicable to the
Premises from and after the Commencement Date.
26. Use and Enjoyment of Amenities. This Sublease shall entitle Subtenant to the
use and enjoyment of all amenities associated with the Premises under the Master
Lease, including, without limitation, use of common areas and facilities, access
to services and utilities provided to other tenants of the Building and parking
rights specifically associated with the Premises. Subtenant's use and enjoyment
of such amenities shall be equal, on a proportional basis, at all times to that
of Sublandlord's during the Term.
27. Quiet Enjoyment. Provided that Subtenant is not in default of this Sublease
(subject to any applicable notice and cure period under the Master Lease),
Sublandlord covenants that Subtenant shall have the right to, and Sublandlord
shall warrant and defend Subtenant in, the exclusive possession and quiet
enjoyment of the Premises during the Term against any and all claims made by,
through or under Sublandlord.
28. Default by Sublandlord. Sublandlord shall take no action or fail to take a
required action which would cause a default under the Master Lease and shall
indemnify, defend and hold Subtenant harmless from and against any and all
losses, damages, claims expenses
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<PAGE> 7
(including reasonable attorneys' fees) and costs (including court costs)
actually incurred by Subtenant as a result thereof. Sublandlord shall
immediately deliver copies of all notices of default under the Master Lease to
Subtenant.
29. Termination of Master Lease. In the event the Master Lease is terminated,
this Sublease may be terminated upon written notice by either party to the other
and in such event, neither party, provided it is not responsible for a default
causing such termination of the Master Lease, shall have any further obligation
or liability to the other arising out of this Sublease except for rights or
obligations accruing prior to the termination of this Sublease. Sublandlord
shall forward a copy of any notice of termination of the Master Lease to
Subtenant promptly upon receipt.
30. Services. Subtenant shall receive directly from the Master Landlord all
services and utilities and the performance of all obligations which the Master
Landlord is required to provide in and for the benefit of the Premises.
Sublandlord agrees to cooperate with Subtenant in good faith in dealings with
and notices to Master Landlord regarding services, utilities, maintenance and
repair of the Premises. Subtenant agrees that, in cooperation with the
Sublandlord, it shall look solely to the Master Landlord for the rendition of
all such services (including special or additional services) and the performance
of all obligations required to be furnished and performed in the Premises;
provided, however, that upon a failure by Master Landlord to cure any material
breach of its obligations with respect to the Premises within a reasonable time
after receipt of written notice of such breach, such time not to exceed thirty
(30) days, Subtenant shall be entitled to terminate this Sublease and shall have
no further liability to Sublandlord hereunder.
31. Insurance. Subtenant shall obtain and maintain insurance policies identical
to those required to be maintained by Sublandlord as "Tenant" pursuant to the
Master Lease.
32. Abatement of Rent. Should Sublandlord receive an abatement of Rent under the
Master Lease, such abatement shall be passed through and inure to the benefit of
Subtenant.
33. Choice of Law. This Sublease shall be governed by the laws of the State of
Illinois without regard to conflicts of laws.
34. Corporate Authority. Each individual executing this Sublease on behalf of
Sublandlord or Subtenant represents and warrants that he or she is duly
authorized to execute and deliver this Sublease on behalf of such party.
35. Capitalized Terms. Capitalized terms not defined herein shall have the
meanings ascribed to them in the Master Lease.
36. No Defaults. Sublandlord represents and warrants to Subtenant that, as of
the Sublandlord's execution and delivery of this Sublease and the Commencement
Date, there exists (a) no default on the part of Sublandlord under the Master
Lease, (b) no circumstance which, upon the giving of notice or passage of time
or both, would comprise a default on the
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<PAGE> 8
part of Sublandlord under the Master Lease, and (c) to Sublandlord's knowledge,
no default on the part of Master Landlord.
37. Exclusions from Master Lease. The following provisions are excluded from the
Master Lease:
(i) Section 4. Subtenant shall not be required to pay a security deposit.
(ii) Section 5.4. Subtenant shall be entitled to use the electric and
telephone facilities currently serving the Premises. However, Subtenant shall
contract directly with the appropriate service providers for such utilities.
(iii) Section 10.2. Sublandlord shall not exercise the rights of Master
Landlord to discharge any lien against the Premises as otherwise permitted or
caused by Subtenant unless Subtenant has received thirty (30) days notice of
the existence of such lien.
(iv) Section 12.2. Upon an event of default by Subtenant, Sublandlord shall
be entitled to collect Rent as it becomes due under the Sublease and shall
not be entitled to collect the balance of Rent due under the Sublease on an
accelerated basis.
(v) Section 15.4. Should any or all of the Premises be damaged by fire or
other casualty and this Sublease not be terminated, Subtenant shall have the
right, but not the obligation, to restore leasehold improvements and personal
property within the Premises to their condition existing prior to such
casualty.
(vi) Section 19. Sublandlord shall not exercise any right of Master Landlord
under this section without the prior consent of Subtenant, which consent
shall not be unreasonably withheld.
(vii) Section 26.4. Sublandlord shall be bound by the terms of any
endorsement or statement on any check or letter accompanying such check
tendered by Subtenant upon acceptance and cashing of such check by
Sublandlord.
This Sublease has been executed on the day and year first written above.
SUBLANDLORD: SUBTENANT:
RESURGENS COMMUNICATIONS GROUP MAXXIS GROUP, INC.
By: /s/ John D. Philips By: Tom Cordy
------------------------------- --------------------------------
Name: John D. Phillips Name: Tom Cordy
Title: President and Title: President and
Chief Executive Officer Chief Executive Officer
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EXHIBIT A
PRINTERS' SQUARE OFFICE LEASE
CHERRY COMMUNICATIONS, INC.
AN ILLINOIS CORPORATION
12-01-85/2-10-95
9
<PAGE> 10
TABLE OF CONTENTS
<TABLE>
<S> <C>
1. BASIC LEASE PROVISIONS AND IDENTIFICATION OF EXHIBITS........................................................................1
2. PREMISES AND TERM............................................................................................................2
3. RENT.........................................................................................................................4
4. SECURITY DEPOSIT.............................................................................................................4
5. SERVICES.....................................................................................................................4
6. POSSESSION, USE AND ENJOYMENT................................................................................................6
7. CONDITION OF PREMISES........................................................................................................7
8. ASSIGNMENT AND SUBLETTING....................................................................................................7
9. MAINTENANCE..................................................................................................................8
10. ALTERATIONS AND IMPROVEMENTS SUBSEQUENT TO INITIAL OCCUPANCY.................................................................9
11. WAIVER OF CLAIMS AND INDEMNITY..............................................................................................10
12. LANDLORD'S REMEDIES.........................................................................................................11
13. SURRENDER OF PREMISES.......................................................................................................12
14. HOLDING OVER................................................................................................................13
15. DAMAGE BY FIRE OR OTHER CASUALTY............................................................................................13
</TABLE>
<PAGE> 11
<TABLE>
<S> <C>
16. EMINENT DOMAIN...............................................................................................................14
17. TENANT'S INSURANCE...........................................................................................................15
18. RULES AND REGULATIONS........................................................................................................16
19. LANDLORD'S RIGHTS............................................................................................................18
20. ESTOPPEL CERTIFICATE.........................................................................................................19
21. RELOCATION OF TENANT.........................................................................................................20
22. ADJUSTMENTS TO MONTHLY BASE RENT.............................................................................................20
23. REAL ESTATE BROKERS..........................................................................................................24
24. SUBORDINATION AND ATTORNMENT.................................................................................................25
25. NOTICES......................................................................................................................25
26. MISCELLANEOUS................................................................................................................26
27. PARKING......................................................................................................................27
28. EXCULPATION..................................................................................................................27
</TABLE>
<PAGE> 12
OFFICE LEASE
1. BASIC LEASE PROVISIONS AND IDENTIFICATION OF EXHIBITS
1.1. BASIC LEASE PROVISIONS
A. Buildings and Address:
Printers' Square
600-780 So. Federal Street, 76 West Polk Street
and 75 West Harrison Street
Chicago, Illinois 60605
B. Landlord and Address:
LaSalle National Trust, N.A., not personally, but
solely as Trustee under Trust Agreement dated April 14, 1978
and known as Trust Number 54214
c/o Anvan Realty & Management Company
1901 South Meyers Road, Suite 520
Oakbrook Terrace, Illinois 60181
C. Tenant and Current Address:
Cherry Communications, Inc., an Illinois corporation
2205 Enterprise Drive, Suite 501
Westchester, IL 60154
D. Date of Lease: February 10, 1995
E. Lease Term: Five (5) Years
F. Commencement Date of Term: March 1, 1995
G. Expiration Date of Term: February 28, 2000
H. Monthly Base Rent:
Commencing March 1, 1995, to and including February 28, 1996, Tenant
shall pay Monthly Base Rent in the amount of Three Thousand Five
Hundred Forty-Nine and no/100 Dollars ($3,549.00) per calendar month
($14.00 per square foot; $42,588.00 per annum); provided, however, if
Tenant is not in default under the covenants, terms and conditions of
this Lease, Monthly Base Rent in the amount of $3,549.00 shall be
abated for the period of March 1, 1995 to and including June 30, 1995
(4 months). Notwithstanding the foregoing, Base Rent for the month of
July, 1995 shall be due and payable upon Tenant's signing of this
Lease.
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Commencing March 1, 1996, to and including February 28, 1997, Tenant
shall pay Monthly Base Rent in the amount of Three Thousand Six Hundred
Fifty-Five and 47/100 Dollars ($3,655.47) per calendar month ($14.42
per square foot; $43,865.64 per annum).
Commencing March 1, 1997, to and including February 28, 1998, Tenant
shall pay Monthly Base Rent in the amount of Three Thousand Seven
Hundred Sixty-Four and 48/100 Dollars ($3,764.48) per calendar month
($14.85 per square foot; $45,173.70 per annum).
Commencing March 1, 1998, to and including February 28, 1999, Tenant
shall pay Monthly Base Rent in the amount of Three Thousand Eight
Hundred Seventy-Eight and 55/100 Dollars ($3,878.55) per calendar month
($15.30 per square foot; $46,542.60 per annum).
Commencing March 1, 1999, to and including February 28, 2000, Tenant
shall pay Monthly Base Rent in the amount of Three Thousand Nine
Hundred Ninety-Five and 16/100 Dollars ($3,995.16) per calendar month
($15.76 per square foot; $47,941.92 per annum).
I. Rentable Area Of The Premises: 3,042 Square Feet
J. Security Deposit: Three Thousand Five Hundred Forty-Nine Dollars
($3,549.00)
K. Floor: Third Floor, Suite 301
L. Option: None
1.2. IDENTIFICATION OF EXHIBITS. The exhibits set forth below and attached to
this Lease are incorporated in this Lease by this reference:
EXHIBIT A - Plan of Premises
2. PREMISES AND TERM
2.1. LEASE OF PREMISES; DESCRIPTION OF COMPLEX. Landlord leases to Tenant and
Tenant leases from Landlord the premises (the "Premises") shown on
Exhibit A, which are or will be contained in the Buildings (the
"Buildings") located at the address stated in 1.1.A., which Buildings
are part of an office, commercial and apartment building complex known
as Printers' Square and located at 600-780 South Federal Street, 76 West
Polk Street and 75 West Harrison Street, Chicago, Illinois, upon the
following terms and conditions. For purposes of this
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Lease, "Complex" shall mean all land, Buildings and improvements,
including the "Common Areas" (hereinafter defined) comprising Printers'
Square.
A. The office and commercial area of the Complex means:
(1) The entire first floor of the entire Complex with entrance ways
at the following addresses: 76 West Polk, 700 South Federal, 620
South Federal, 600 South Federal and 75 West Harrison Streets.
(2) The entire second and third floors at 600 South Federal, 620
South Federal and 640 South Federal Streets.
(3) The entire fourth floor at 600 South Federal and 620 South
Federal Streets.
(4) The entire fifth, sixth, seventh and eighth floors at 620 South
Federal Street.
B. The residential area of the Complex means:
(1) The entire second floor at 780 South Federal Street, 740 South
Federal Street and 680 South Federal Street.
(2) The entire third floor at 780 South Federal Street, 740 South
Federal Street and 680 South Federal Street.
(3) The entire fourth floor at 780 South Federal Street, 740 South
Federal Street, 680 South Federal Street and 640 South Federal
Street.
(4) The entire fifth, sixth, seventh and eighth floors at 780 South
Federal Street, 740 South Federal Street, 680 South Federal
Street and 640 South Federal Street.
(5) The entire ninth floor at 780 South Federal Street, 740 South
Federal Street and 680 South Federal Street.
(6) The entire tenth, eleventh and twelfth floors at 780 South
Federal Street and 740 South Federal Street.
2.2. TERM. The term of this Lease (the "Term") shall commence on the date
(the "Commencement Date"), which is the earlier to occur of the date
stated in section 1.1.F, or the date Tenant first occupies all or part
of the Premises for the conduct of business. The Term shall expire on
the date (the "Expiration Date") stated in section 1.1.G, unless
sooner terminated, as otherwise provided in this Lease.
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3. RENT. Tenant agrees to pay to Landlord at the office of the managing agent
(the "Manager") of the beneficiary of Landlord (the "Beneficiary"), or at
such other place designated by Landlord, without any prior notice or demand
and without any deduction or setoff whatsoever, base rent at the initial
monthly rate stated in section 1.1.H ("Monthly Base Rent"). Monthly Base
Rent is subject to adjustment pursuant to section 22.2, and as adjusted is
called "Adjusted Monthly Base Rent". Adjusted Monthly Base Rent shall be
paid monthly in advance on the first day of each month of the Term, except
that the first installment of Monthly Base Rent shall be paid by Tenant to
Landlord upon execution of this Lease by Tenant. Adjusted Monthly Base Rent
shall be prorated for partial months within the Term. All charges, costs
and sums required to be paid by Tenant to Landlord under this Lease, in
addition to Adjusted Monthly Base Rent shall be considered additional rent,
and Adjusted Monthly Base Rent and additional rent shall be collectively
called "Rent". Tenant's covenant to pay Rent shall be independent of every
other covenant in this Lease.
4. SECURITY DEPOSIT. As security for the performance of its obligations under
this Lease, Tenant, upon its execution of this Lease, had paid to a
representative of the Landlord a security deposit (the "Security Deposit")
in the amount stated in section 1.1.J. The Security Deposit may be applied
by Landlord to cure any default of Tenant under this Lease, and upon notice
by Landlord of such application, Tenant shall replenish the Security
Deposit in full by promptly paying to Landlord the amount so applied.
Landlord shall not pay any interest on the Security Deposit. Within
forty-five (45) days after the Expiration Date, Landlord shall return to
Tenant the balance, if any, of the Security Deposit. The Security Deposit
shall not be deemed an advance payment of Rent or a measure of damages for
any default by Tenant under this Lease, nor shall it be a bar or defense to
any action which Landlord may at any time commence against Tenant.
5. SERVICES.
5.1. LANDLORD'S GENERAL SERVICES. Landlord shall provide the following
services:
A. heat and air-conditioning in the Premises, Monday through Friday,
from 8:00 A.M. to 6:00 P.M., excluding national holidays, to the
extent necessary for the comfortable occupancy of the premises
under normal business operations and in the absence of the use of
machines or equipment which affect the temperature otherwise
maintained in the Premises, subject, however, to applicable legal
requirements and restrictions;
B. city water from the regular Buildings fixtures for drinking,
lavatory and toilet purposes only;
C. customary cleaning and janitorial services in the Premises,
Monday through Friday, excluding national holidays;
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D. customary cleaning, mowing, groundskeeping, snow removal and
trash removal in the "Common Areas" (hereinafter defined);
E. washing of windows in the Premises, inside and outside at
reasonable intervals;
F. adequate passenger elevator service in common with other tenants
of the Buildings and freight elevator service subject to
scheduling by Landlord;
G. heating, air-conditioning and lighting of Common Areas (House
Meter); and
H. security services, the nature and extent of which shall be
determined by Landlord in its sole discretion.
5.2. ADDITIONAL AND AFTER-HOUR SERVICES. Landlord shall not be obligated to
furnish any services or utilities, other than those stated in section
5.1 above. If Landlord elects to furnish services or utilities
requested by Tenant in addition to those listed in section 5.1 or at
times other than those stated in section 5.1, Tenant shall pay to
Landlord the prevailing charges for such services and utilities,
within ten (10) days after billing. If Tenant fails to make any such
payment, Landlord may, without notice to Tenant and in addition to
Landlord's other remedies under this Lease, discontinue any or all of
such additional or after-hour services. No such discontinuance of any
service shall result in any liability of Landlord to Tenant or be
considered an eviction or a disturbance of Tenant's use of the
Premises.
5.3. DELAYS IN FURNISHING SERVICES. If, as a result of any failure to
furnish or delay in furnishing any of the services described in
section 5.1, the Premises are rendered substantially untenantable for
a period of 72 consecutive hours and the Tenant is unable to occupy
the Premises due to such untenantability, then, commencing upon the
expiration of said 72-hour period, Adjusted Monthly Base Rent shall
abate for the duration of such untenantability until normal services
are resumed. Tenant agrees that Landlord shall not be liable for
damages for failure to furnish or delay in furnishing any service if
attributable to any of the causes described in section 26.7. In
addition, no such failure or delay shall be considered to be an
eviction or disturbance of Tenant's use or possession of the Premises,
or relieve Tenant from its obligation to pay all Rent when due or from
any other obligations of Tenant under this Lease, except as stated in
the first sentence of this section.
5.4. TENANT'S UTILITIES. Tenant shall make arrangements directly with the
telephone company and the public utility electric company servicing
the Buildings for telephone service and all electric power or current
in the Premises desired by Tenant. Tenant shall pay for all telephone
and electric service (other than for the services provided under
section 5.1.A) used or consumed in the Premises, including the cost of
installation of any separate meters. Tenant shall also pay for the
maintenance and replacement of all light fixtures, electrical
switches, electrical outlets, lamps, bulbs, tubes, ballasts and
starters located in the Premises.
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6. POSSESSION, USE AND ENJOYMENT
6.1. POSSESSION AND USE OF PREMISES. Tenant shall be entitled to possession
of the Premises upon the Commencement Date of the Lease. Tenant shall
occupy and use the Premises for general office purposes only. Tenant
shall not occupy or use the Premises or permit the use or occupancy of
the Premises for any purpose or in any manner which:
A. is unlawful or in violation of any applicable legal, governmental
or quasi-governmental requirement, ordinance or rule (including
the Board of Fire Underwriters);
B. may be dangerous to persons or property;
C. may invalidate or increase the amount of premiums for any policy
of insurance affecting the Buildings or the Complex, and if any
additional amounts of insurance premiums are so incurred, Tenant
shall pay to Landlord the additional amounts on demand; or
D. may create a nuisance, disturb any other tenant of the Buildings
or the Complex or the occupants of neighboring property or injure
the reputation of the Buildings or the Complex.
6.2. QUIET ENJOYMENT. So long as Tenant is not in default under this Lease,
Tenant shall be entitled to peaceful and quiet enjoyment of the
Premises, subject to the terms of this Lease.
6.3. COMMON AREAS
A. For purposes of this Lease "Common Areas" shall mean all areas,
improvements, space, equipment and special services in or at the
Complex provided by Landlord for the common or joint use and
benefit of tenants, customers, and other invitees, including,
without limitation, driveways, entrances and exits, retaining
walls, landscaped areas, truck serviceways or tunnels, loading
docks, pedestrian walkways, walls, malls, courtyards, concourses,
stairs, ramps, sidewalks, washrooms, signs identifying or
advertising the Complex, maintenance and utility rooms and
closets, hallways, lobbies, elevators and their housing and
rooms, common window areas, walls and ceiling in Common Areas,
and trash or rubbish areas.
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B. Provided Tenant is not in default under this Lease, Tenant shall
be entitled to use, in common with others entitled thereto, the
Common Areas as may be designated from time to time by Landlord,
subject, however, to the terms and conditions of this Lease and
to the rules and regulations for the use thereof as may be
prescribed from time to time by Landlord. If the size or
configuration of the Common Areas is diminished or altered,
Landlord shall not be liable to Tenant therefor, nor shall Tenant
be entitled to any compensation or diminution or abatement of
Adjusted Monthly Base Rent, nor shall such diminution or
alteration of the Common Areas be considered a constructive or
actual eviction.
7. CONDITION OF PREMISES. Tenant shall notify Landlord in writing within
thirty (30) days after Tenant takes possession of the Premises of any
defects in the Premises claimed by tenant. Except for defects stated in
such notice and latent defects, Tenant shall be conclusively presumed to
have accepted the Premises in the condition existing on the date Tenant
first takes possession, and to have waived all claims relating to the
condition of the Premises. No agreement of Landlord to alter, remodel,
decorate, clean or improve the Premises, the Buildings, the Common Areas or
the Complex and no representation regarding the condition of the Premises,
the Buildings, the Common Areas or the Complex has been made by or on
behalf of Landlord to Tenant, except as stated in this Lease.
8. ASSIGNMENT AND SUBLETTING
8.1. ASSIGNMENT AND SUBLETTING. Without the prior written consent of
Landlord, Tenant shall not sublease the Premises, or assign, mortgage,
pledge, hypothecate or otherwise transfer or permit the transfer of
this Lease or the interest of Tenant in this Lease, in whole or in
part, by operation of law or otherwise. If Tenant desires to assign
this Lease or enter into any sublease of the Premises, Tenant shall
deliver written notice of such intent to Landlord, together with a
copy of the proposed assignment or sublease at least sixty (60) days
prior to the effective date of the proposed assignment or commencement
date of the term of the proposed sublease. Any approved sublease shall
be expressly subject to the terms and conditions of this Lease, and
Tenant shall pay Landlord on the first day of each month during the
term of the sublease the excess of all rent and other consideration
due from the subtenant for such month over that portion of the
Adjusted Monthly Base Rent due under this Lease for said month, which
is allocable on a square footage basis to the space sublet. In the
event of any approved sublease or assignment, Tenant shall not be
released or discharged from any liability, whether past, present or
future, under this Lease, including any renewal term of this Lease.
For purposes of this Section, an assignment shall be considered to
include a change in the majority ownership or control of Tenant if
Tenant is a partnership or a corporation whose shares of stock are not
traded publicly.
8.2. RECAPTURE AGREEMENT. If Tenant desires to enter into any sublease of
the Premises, Landlord shall have the option to exclude from the
Premises covered by
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this Lease, the space proposed to be sublet by Tenant, effective as of
the proposed commencement date of sublease of said space by Tenant.
Landlord may exercise said option by giving Tenant written notice
within twenty (20) days after receipt by Landlord of Tenant's notice
of the proposed sublease. If Landlord exercises said option, Tenant
shall surrender possession of the proposed sublease space to Landlord
on the effective date of exclusion of said space from the Premises
covered by this Lease, and neither party hereto shall have any further
rights or liabilities with respect to said space under this Lease.
Effective as of the date of exclusion of any portion of the Premises
covered by this Lease pursuant to this paragraph, (i) the Monthly Base
Rent specified in section 1.1.H shall be reduced in the same
proportion as the number of square feet of the rentable area contained
in the portion of the Premises so excluded bears to the number of
square feet of rentable area contained in the Premises immediately
prior to such exclusion, and (ii) the rentable area of the Premises
specified in section 1.1.I shall be decreased by the number of square
feet of rentable area contained in the portion of the Premises so
excluded, for all purposes under this Lease.
9. MAINTENANCE
9.1. LANDLORD'S MAINTENANCE. Landlord, at its expense, shall maintain and
make necessary repairs to the structural elements and exterior windows
of the Buildings and the Common Areas, and, subject to section 5.4,
the electrical, plumbing, heating, ventilation and air-conditioning
systems therein, except that:
A. Landlord shall not be responsible for the maintenance, repair or
replacement of any such systems which are located within the
Premises and are supplemental or special to the Buildings'
standard system, whether installed pursuant to any Work Agreement
or otherwise, or floor or wall coverings in the Premises; and
B. the cost of performing any of said maintenance or repairs caused
by the negligence of Tenant, its employees, agents, servants,
licensees, subtenants, contractors or invitees, or the failure of
Tenant to perform its obligations under this Lease shall be paid
by Tenant, except to the extent of insurance proceeds, if any,
actually collected by Landlord with regard to the damage
necessitating such repairs.
9.2. TENANT'S MAINTENANCE. Tenant, at its expense, shall keep and maintain
the Premises in good order, condition and repair and in accordance
with all applicable legal, governmental and quasi-governmental
requirements, ordinances and rules (including the Board of Fire
Underwriters).
9.3. MAINTENANCE OF COMMON AREAS. The Common Areas shall at all times be
subject to the exclusive control, management, operation and
maintenance of Landlord. Landlord shall have the right from time to
time to establish, modify and enforce rules and regulations with
respect to the Common Areas. Tenant agrees to
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comply with such rules and regulations, to cause its officers, agents,
contractors and employees to so comply. Landlord shall have the right
to construct, maintain and operate lighting facilities in and on the
Common Areas; to police the same; from time to time to change the
area, level, location or arrangement of parking areas, loading docks,
pedestrian walkways, walls, malls, concourses, stairs, ramps,
washrooms and other facilities located in the Common Areas; to close
all or any portion of the Common Areas to such extent as may, in the
opinion of Landlord, be legally sufficient to prevent a dedication
thereof or accrual of any rights to any person or the public therein;
to close temporarily all or any part of the parking areas or parking
facilities; and to do and perform such other acts in and to the Common
Areas as, in the exercise of good business judgment, Landlord shall
determine to be advisable. Landlord will operate and maintain the
Common Areas in such manner as Landlord, in its sole discretion, shall
determine from time to time.
10. ALTERATIONS AND IMPROVEMENTS SUBSEQUENT TO INITIAL OCCUPANCY
10.1. TENANT'S ALTERATIONS SUBSEQUENT TO INITIAL OCCUPANCY. Tenant shall
not, without the prior written consent of Landlord, make or cause to
be made any alterations, improvements, additions or installations in
or to the Premises subsequent to the initial occupancy of the Premises
or the Buildings by Tenant. If Landlord so consents, before
commencement of any such work or delivery of any materials into the
Premises or the Building, Tenant shall furnish to Landlord for
approval: architectural plans and specifications, names and addresses
of all contractors, contracts, necessary permits and licenses,
certificates of insurance and instruments of indemnification against
any and all claims, costs, expenses, damages and liabilities which may
arise in connection with such work, all in such form and amount as may
be satisfactory to Landlord. In addition, prior to commencement of any
such work or delivery of any materials into the Premises, Tenant shall
provide Landlord with evidence reasonably satisfactory to Landlord of
Tenant's ability to pay for such work and materials in full, and, if
requested by Landlord, shall deposit with Landlord at such time such
security for the payment of said work and materials as Landlord may
require. Tenant agrees to hold Landlord, the Beneficiary, the Manager
and their respective agents and employees forever harmless against all
claims and liabilities of every kind, nature and description which may
arise out of or in any way be connected with such work. All such work
shall be done only by contractors or mechanics approved by Landlord
and at such time and in such manner as Landlord may from time to time
designate. Tenant shall pay the cost of all such work. Upon completion
of such work, Tenant shall furnish Landlord with contractor's
affidavits and full and final waivers of lien and receipted bills
covering all labor and materials expended. All such work shall be in
compliance with all applicable legal, governmental and
quasi-governmental requirements, ordinances and rules (including the
Board of Fire Underwriters), and all requirements of applicable
insurance companies. All such work shall be done in a good and
workmanlike manner and with the use of good grades of materials.
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Tenant shall permit Landlord, if Landlord so desires, to supervise
construction operations in connection with such work; provided,
however, that such supervision or right to supervise by Landlord shall
not constitute any warranty by Landlord to Tenant of the adequacy of
the design, workmanship or quality of such work or materials for
Tenant's intended use or impose any liability upon Landlord in
connection with the performance of such work. All alterations,
improvements, additions and installations to or on the Premises shall
(subject to section 13) become part of the Premises at the time of
their installation and shall remain in the Premises at the expiration
or termination of Tenant's right of possession of the Premises,
without compensation or credit to Tenant.
10.2. LIENS. Tenant shall not permit any lien or claim for lien of any
mechanic, laborer or supplier or any other lien to be filed against
the Complex, the Buildings, the Common Areas, the land which comprises
the Complex, the Premises or any part of such property arising out of
work performed, or alleged to have been performed by, or at the
direction of, or on behalf of Tenant. If any such lien or claim for
lien is filed, Tenant shall have five (5) days after such filing to
either have such lien or claim for lien released of record or shall
deliver to Landlord a bond or other security in form, content, amount
and issued by a company satisfactory to Landlord indemnifying
Landlord, the Beneficiary and others designated by Landlord against
all costs and liabilities resulting from such lien or claim for lien
and the foreclosure or attempted foreclosure thereof. If Tenant fails
to have such lien or claim for lien so released or to deliver such
bond to Landlord, Landlord, without investigating the validity of such
lien, may pay or discharge the same and Tenant shall reimburse
Landlord upon demand for the amount so paid by Landlord, including
Landlord's expenses and attorneys' fees.
11. WAIVER OF CLAIMS AND INDEMNITY
11.1. WAIVER. To the full extent permitted by law, Tenant hereby releases
and waives all claims against Landlord, the Beneficiary, the Manager
and their respective agents and employees for injury or damage to
person, property or business sustained in or about the Complex, the
Buildings or the Premises by Tenant, its agent or employees other than
damage caused by the negligence of Landlord, the Beneficiary, the
Manager or their respective agents or employees.
11.2. INDEMNIFICATION. Tenant agrees to indemnify and hold harmless
Landlord, the Beneficiary, the Manager and their respective agents and
employees, from and against any and all liabilities, claims, demands,
costs and expenses of every kind and nature (including attorneys'
fees), including those arising from any injury or damage to any
person, property or business (i) sustained in or about the Premises,
(ii) resulting from the negligence of Tenant, its employees, agents,
servants, invitees, licensees or subtenants, or (iii) resulting from
the failure of Tenant to perform its obligations under this Lease;
provided, however, Tenant's obligations under this Section shall not
apply to injury or damage resulting from the negligence
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of Landlord, the Beneficiary, the Manager or their respective agents
or employees. If any such proceeding is brought against Landlord, the
Beneficiary, the Manager or their respective agents or employees,
Tenant covenants to defend such proceeding at its sole cost by legal
counsel reasonably satisfactory to Landlord, if requested by Landlord.
The indemnity herein set forth shall apply, without limitation, to the
performance of Tenant's Alterations Subsequent to Initial Occupancy
set forth in section 10.1.
12. LANDLORD'S REMEDIES
12.1. EVENTS OF DEFAULT. Each of the following shall constitute an event of
default by Tenant under this Lease:
Tenant fails to pay any Rent, or any installment of Rent, when due;
Tenant fails to observe or perform any of the other covenants,
conditions or provisions of this Lease to be observed or performed by
Tenant and fails to cure such default within ten (10) days after
written notice to Tenant; the interest of Tenant in this Lease is
levied upon under execution or other legal process; a petition is
filed by or against Tenant to declare Tenant bankrupt or seeking a
plan or reorganization or arrangement under any Chapter of the
Bankruptcy Code, or any amendment, replacement or substitution
therefor, or to delay payment of, reduce or modify Tenant's debts, or
any petition is filed or other action taken to reorganize or modify
Tenant's capital structure or upon the dissolution of Tenant; Tenant
is declared insolvent by law or any assignment of Tenant's property is
made for the benefit of creditors; a receiver is appointed for Tenant
or Tenant's property; or Tenant abandons the Premises.
12.2. LANDLORD'S REMEDIES. Upon the occurrence of an event of default by
tenant under this Lease, Landlord, at its option, without further
notice or demand to Tenant, may, in addition to all other rights and
remedies provided in this Lease, at law or in equity:
A. Terminate this Lease and Tenant's right of possession of the
Premises, and recover all damages to which Landlord is entitled
under law, specifically including, without limitation, (a) all
Landlord's expenses of reletting (including repairs, alterations,
improvements, additions, decorations, legal fees and brokerage
commissions), plus (b) the amount of all Rent owing under this
Lease for the balance of the Term discounted at the rate of 8%
per year, which amount shall be automatically considered
accelerated and immediately due and payable in full by Tenant to
Landlord upon Landlord's election to terminate this Lease.
Landlord's right to terminate this Lease may also be exercised at
any time after an election by Landlord under Section 12.2.B. to
terminate Tenant's right to possession of the Premises.
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B. Terminate Tenant's right of possession of the Premises without
terminating this Lease, in which event Landlord may, but shall
not be obligated to, relet the Premises, or any part thereof for
the account of the Tenant, for such rent and term and upon such
terms and conditions as are acceptable to Landlord. For purposes
of such reletting, Landlord is authorized to decorate, repair,
alter and improve the Premises to the extent reasonably
necessary. If Landlord does not relet the Premises, then Tenant
shall pay Landlord monthly on the first day of each month during
the period that Tenant's right of possession is terminated, a sum
equal to the amount of Rent due under this Lease for such month
(less any amount which Landlord could have realized if Landlord
relet the Premises to a reputable, creditworthy substitute tenant
procured by Tenant and presented to Landlord in writing, which
substitute tenant was ready, willing and able to lease the entire
Premises from Landlord under a lease in form identical to the
form of this Lease.) If the Premises are relet and a sufficient
sum is not realized from such reletting after payment of all
Landlord's expenses of reletting (including repairs, alterations,
improvements, additions, decorations, legal fees and brokerage
commissions) to satisfy the payment of Rent due under this Lease
for any month, Tenant shall pay Landlord any such deficiency
monthly upon demand. Tenant agrees that Landlord may file suit to
recover any sums due to Landlord under this Section from time to
time and that such suit or recovery or any amount due Landlord
shall not be any defense to any subsequent action brought for any
amount not previously reduced to judgment in favor of Landlord.
If Landlord elects to terminate Tenant's right to possession only
without terminating this Lease, Landlord may, at its option,
enter into the Premises, remove Tenant's signs and other
evidences of tenancy, and take and hold possession thereof, as
stated in section 13.; provided, however, that such entry and
possession shall not terminate this Lease or release Tenant, in
whole or in part, from Tenant's obligation to pay the Rent
reserved hereunder for the full Term or from any other obligation
of Tenant under this Lease.
C. In the event a petition is filed by or against Tenant seeking a
plan of reorganization or arrangement under Chapter 9, 11 or 13
of the Bankruptcy Code, Landlord and Tenant agree, to the extent
permitted by law, that the trustee in bankruptcy shall determine
within sixty (60) days after commencement of the case, whether to
assume or reject this Lease.
12.3. ATTORNEYS' FEES. Tenant shall pay upon demand, all costs and
expenses, including attorneys' fees, incurred by Landlord in
enforcing Tenant's obligations under this Lease, or resulting
from Tenant's default under this Lease.
13. SURRENDER OF PREMISES. Upon the expiration or termination of this Lease or
termination of Tenant's right of possession of the Premises, Tenant shall
surrender and
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vacate the Premises immediately and deliver possession thereof to Landlord
in a clean, good and tenantable condition, ordinary wear excepted. Upon any
termination which occurs other than by reason of Tenant's default, Tenant
shall be entitled to remove from the Premises all movable trade fixtures
and personal property of Tenant without credit or compensation from
Landlord, provided Tenant immediately shall repair all damage resulting
from such removal and shall restore the Premises to a tenantable condition.
In the event possession of the Premises is not immediately delivered to
Landlord or if Tenant shall fail to remove any movable trade fixtures or
personal property which Tenant is entitled to remove, Landlord may remove
same without any liability to Tenant. Any movable trade fixtures and
personal property which may be removed from the Premises by Tenant, but
which are not so removed, shall be conclusively presumed to have been
abandoned by Tenant and title to such property shall pass to Landlord
without any payment or credit, and Landlord may, at its option and at
Tenant's expense, store and/or dispose of such property.
14. HOLDING OVER. Tenant shall pay Landlord double the Adjusted Monthly Base
Rent then applicable for each month or partial month during which Tenant
retains possession of the Premises, or any part of the Premises, after the
expiration or termination of this Lease. Tenant shall indemnify Landlord
against all liabilities and damages sustained by Landlord by reason of such
retention of possession. The provisions of this section shall not
constitute a waiver by Landlord of any re-entry rights of Landlord
available under this Lease or by law. If Tenant retains possession of the
Premises, or any part of the Premises, for thirty (30) days after the
expiration or termination of this Lease, then at the sole option of
Landlord expressed by written notice to Tenant, but not otherwise, such
holding over shall constitute a renewal of this Lease for a period of one
year on the same covenants, terms, and conditions.
15. DAMAGE BY FIRE OR OTHER CASUALTY
15.1. SUBSTANTIAL UNTENANTABILITY. If either the Premises, the particular
building in which it is located, or the Complex is rendered
substantially untenantable by fire or other casualty, Landlord may
elect by giving Tenant written notice ("Landlord's Casualty Notice")
within one hundred twenty (120) days after the date of said fire or
casualty, either to:
A. terminate this lease as of the date of the fire or other
casualty; or
B. proceed to repair or restore the Premises, the Buildings or the
Complex other than leasehold improvements and personal property
installed by Tenant, to substantially the same condition as
existed immediately prior to such fire or casualty.
If Landlord elects to proceed pursuant to subsection B above,
Landlord's notice shall contain Landlord's reasonable estimate of the
time required to substantially complete such repair or restoration. If
such estimate indicates that the time so required will exceed one
hundred eighty (180) days from the date of Landlord's
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Casualty Notice, then Tenant shall have the right to terminate this
Lease as of the date of such casualty by giving written notice to
Landlord not later than twenty (20) days after the date of Landlord's
notice. If Landlord's estimate indicates that the repair or
restoration can be substantially completed within 180 days, or if
Tenant fails to exercise its said right to terminate this Lease, this
Lease shall remain in full force and effect.
15.2. INSUBSTANTIAL UNTENANTABILITY. If either the Premises, the particular
building in which it is located, or the Complex is damaged by fire or
other casualty, but is not rendered substantially untenantable, then
Landlord shall diligently proceed to repair and restore the damaged
portions thereof, other than the leasehold improvements and personal
property installed by Tenant, to substantially the same condition as
existed immediately prior to such fire or casualty, unless such damage
occurs during the last twelve (12) months of the Term, in which event
Landlord shall have the right to terminate this Lease as of the date
of such fire or other casualty by giving written notice to Tenant
within thirty (30) days after the date of such fire or other casualty.
15.3. RENT ABATEMENT. If all or any part of the Premises are damaged by
fire or other casualty and this Lease is not terminated, Adjusted
Monthly Base Rent shall abate for all or that part of the Premises
which are untenantable on a per diem and proportionate area basis from
the date of the fire or other casualty until Landlord has
substantially completed the repair and restoration work in the
Premises, which it is required to perform, provided, that as a result
of such fire or other casualty, Tenant does not occupy the portion of
the Premises which are untenantable during such period.
15.4. TENANT'S RESTORATION. If all or any part of the Premises are damaged
by fire or other casualty and this Lease is not terminated, Tenant
shall promptly and with due diligence repair and restore the leasehold
improvements and personal property previously installed by Tenant
pursuant to this Lease.
16. EMINENT DOMAIN.
16.1. SUBSTANTIAL TAKING. If all or any part of the Premises, the
particular building in which it is located, or the Complex is
permanently taken or condemned by any competent authority for any
public use or purpose (including a deed given in lieu of
condemnation), which renders the Premises substantially untenantable,
this Lease shall terminate as of the date title vests in such
authority, and Adjusted Monthly Base Rent shall be apportioned as of
such date.
16.2. INSUBSTANTIAL TAKING. If any part of the Premises, the particular
building in which it is located, or the Complex is taken or condemned
for any public use or purpose (including a deed given in lieu of
condemnation) and this Lease is not terminated pursuant to section
16.1, Adjusted Monthly Base Rent shall be reduced for the period of
such taking by an amount which bears the same ratio to Adjusted
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Monthly Base Rent then in effect as the number of square feet of
rentable area in the Premises so taken or condemned, if any, bears to
the number of square feet of rentable area specified in section 1.1.I.
Landlord, upon receipt and to the extent of the award in condemnation
or proceeds of sale, shall make necessary repairs and restorations
(exclusive of leasehold improvements and personal property installed
by Tenant) to restore the Premises remaining to as near its former
condition as circumstances will permit, and to the Buildings and
Complex to the extent necessary to constitute the portion of same not
so taken or condemned as a complete architectural unit. In the event
of any taking or condemnation described in this section 16.2, the
rentable area of the Premises stated in section 1.1.I, and the
rentable area of the Complex as specified in this Lease shall be
reduced, respectively, for all purposes under this Lease by the number
of square feet of rentable area of the Premises, if any, and the
Complex, if any, so taken or condemned.
16.3. COMPENSATION. Landlord shall be entitled to receive the entire price
or award from any such sale, taking or condemnation without any
payment to Tenant, and Tenant hereby assigns to Landlord Tenant's
interest, if any, in such award; provided, however, Tenant shall have
the right separately to pursue against the condemning authority an
award in respect of the loss, if any, to leasehold improvements paid
for by tenant without any credit or allowance from Landlord.
17. TENANT'S INSURANCE. Tenant, at its expense, shall maintain in force during
the Term:
A. Comprehensive general public liability insurance, which shall include
coverage for personal liability, contractual liability, tenant's legal
liability, business interruption, bodily injury, death and property
damage, all on an occurrence basis with respect to the business
carried on, in, or from the Premises and Tenant's use and occupancy of
the Premises, with coverage for injury or death of any one person in
an amount of not less than $2,000,000 and for injury or death of more
than any one person in any one occurrence in an amount of not less
than $5,000,00 and for damage to property of not less than $500,000 or
such other amounts as Landlord may reasonably require upon not less
than sixty (60) days' prior written notice, which insurance shall
include Landlord, the Beneficiary, the Manager, or their respective
agents and employees as named insureds and shall protect them in
respect of claims by Tenant as if they were separately insured; and
B. Insurance against such other perils and in such amounts as Landlord
may from time to time reasonably require upon not less than thirty
(30) days' prior written notice, such requirement to be made on the
basis that the required insurance is customary at the time for prudent
tenants of properties similar to the Complex in the Chicago, Illinois
area.
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All insurance required to be maintained by Tenant shall be on terms and
with insurers reasonably acceptable to Landlord. Each policy shall
contain a waiver by the insurer of any rights of subrogation or
indemnity or any other claim to which the insurer might otherwise be
entitled against Landlord, the Beneficiary, the Manager or their
respective agents or employees, and shall also contain an undertaking
by the insurer that no material change adverse to Landlord or Tenant
will be made, and the policy will not lapse or be cancelled, except
after not less than thirty (30) days' prior written notice to Landlord
of the intended change, lapse or cancellation. Tenant shall furnish to
Landlord, if and whenever requested by it, certificates or other
evidences acceptable to Landlord as to the insurance from time to time
effected by Tenant and its renewal or continuation in force.
18. RULES AND REGULATIONS. Tenant agrees for itself and for its subtenants,
employees, agents and invitees to comply with the following rules and
regulations and with all reasonable modifications and additions thereto
which Landlord may from time to time make:
A. any sign, lettering, picture, notice or advertisement installed
within the Premises, which is visible from the public corridors
within the Buildings, shall be installed in such manner and be of
such character and style as Landlord shall approve in writing. No
sign, lettering, picture, notice or advertisement shall be placed
on any outside window or in a position to be visible from outside
the Buildings;
B. Tenant shall not use the name "Printers' Square" for any purpose
other than Tenant's business address;
C. Tenant shall not use the name "Printers' Square" for Tenant's
business address after Tenant vacates the Premises;
D. Sidewalks, entrances, passages, courts, corridors, halls,
elevators and stairways in and about the Premises shall not be
obstructed nor shall objects be placed against glass partitions,
doors or windows which would be unsightly from the corridors of
the Buildings or from the exterior of the Buildings;
E. No animals, pets, bicycles or other vehicles shall be brought or
permitted to be brought in the Buildings or the Premises;
F. Room to room canvasses to solicit business from other tenants of
the Complex are not permitted;
G. Tenants shall not waste electricity, water or air-conditioning
and shall cooperate fully with Landlord to assure the most
effective and efficient operation of the heating and
air-conditioning systems of the Buildings. All controls shall be
adjusted only by authorized building personnel;
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H. All corridor doors shall remain closed at all times;
I. No locks or similar devices shall be attached to any door except
by Landlord and Landlord shall have the right to retain a key to
all such locks;
J. Tenant assumes full responsibility for protecting the Premises
from theft, robbery and pilferage. Except during Tenant's normal
business hours, Tenant shall keep all doors to the Premises
locked and other means of entry to the Premises closed and
secured;
K. Only machinery or mechanical devices of a nature directly related
to Tenant's ordinary use of the Premises shall be installed,
placed or used in the Premises and the installation and use of
all such machinery and mechanical devices is subject to the other
rules contained in this 18. and the other portions of this Lease;
L. All cleaning, repairing, janitorial, decorating, painting or
other services and work in and about the Premises shall be done
only by authorized Building personnel;
M. Safes, furniture, equipment, machines and other large or bulky
articles shall be brought to the Buildings and into and out of
the Premises at such times and in such manner as Landlord shall
direct (including the designation of elevator) and at Tenant's
sole risk and cost. Prior to Tenant's removal of such articles
from the Buildings, Tenant shall obtain written authorization of
the office of the Buildings and shall present such authorization
to a designated employee of Landlord;
N. Tenant shall not in any manner deface or damage the Buildings or
the Complex;
O. Inflammables such as gasoline, kerosene, naphtha and benzene, or
explosives or any other articles of an intrinsically dangerous
nature are not permitted in the Buildings or Premises;
P. Tenant shall ascertain from Landlord the maximum amount of
electrical current which can safely be used in the Premises,
taking into account the capacity of the electric wiring of the
Buildings and the Premises and the needs of other tenants, and
shall not use more than such safe capacity. Landlord's consent to
the installation of electrical equipment shall not relieve Tenant
from the obligation not to use more electricity than such safe
capacity;
Q. To the extent permitted by law, Tenant shall not permit picketing
or other union activity involving its employees in the Buildings
or the Complex,
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except in those locations and subject to time and other
limitations as to which Landlord may give prior written consent;
R. Tenant shall not enter into or upon the roof or basement of the
Buildings or any storage, heating, ventilation, air-conditioning,
mechanical or elevator machinery housing areas;
S. Tenant shall not distribute literature, flyers, handouts or
pamphlets of any type in any of the common areas of the
Buildings, without the prior written consent of Landlord;
T. Tenant shall not cook, otherwise prepare, sell or dispense any
food or beverages in or from the Premises;
U. Tenant shall not permit the use of any apparatus for sound
production or transmission in such manner that the sound so
transmitted or produced shall be audible or vibrations therefrom
shall be detectable beyond the Premises;
V. Tenant shall keep all electrical and mechanical apparatus free of
vibration, noise and air waves which may be transmitted beyond
the Premises;
W. Tenant shall not permit objectionable odors or vapors to emanate
from the Premises;
X. Tenant shall not place a load upon any floor of the Premises
exceeding the floor load capacity for which such floor was
designed or allowed by law to carry; and
Y. No floor covering shall be affixed to any floor in the Premises
by means of glue or other adhesive, unless the installation
procedure is approved by Landlord.
Landlord shall not be responsible for the violation of any of the foregoing
rules and regulations by other tenants of the Buildings or the Complex and
shall not be obligated to enforce the same against other tenants.
19. LANDLORD'S RIGHTS. Landlord shall have the following rights exercisable
without notice (except as expressly provided to the contrary) and without
being deemed an eviction or disturbance of Tenant's use or possession of
the Premises or giving rise to any claim for set-off or abatement of Rent:
A. To change the name or street address of the Buildings or the
Complex, upon thirty (30) days' prior written notice to Tenant;
B. To install, affix and maintain all signs on the exterior and/or
interior of the Buildings and in and about the Complex;
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C. To designate and/or approve prior to installation, all types of
signs, window shades, blinds, drapes, awnings or other similar
items, and all internal lighting that may be visible from the
exterior of the Premises;
D. To display the Premises to prospective tenants at reasonable
hours during the last twelve (12) months of the Term;
E. To change the arrangement of entrances, doors, corridors,
elevators and stairs in the Buildings and Complex, provided that
no such change shall materially adversely affect access to the
Premises;
F. To grant to any party the exclusive right to conduct any business
or render any service in or to the Buildings, provided such
exclusive right shall not operate to prohibit Tenant from using
the Premises for the purposes permitted hereunder;
G. To prohibit the placing of vending or dispensing machines of any
kind in or about the Premises other than for use by Tenant's
employees;
H. To have access for Landlord and other tenants of the Buildings to
any mail chutes and boxes located in or on the Premises according
to the rules of the United States Post Office;
I. To close the Buildings and Complex after normal business hours,
except that Tenant and its employees and invitees shall be
entitled to admission at all times, under such regulations as
Landlord prescribes for security purposes;
J. To take any and all reasonable measures, including inspections
and repairs to the Premises of the Buildings, as may be necessary
or desirable in the operation or protection thereof;
K. To retain at all times master keys or pass keys to the Premises;
L. To install, operate and maintain security systems which monitor,
by closed circuit television or otherwise, all persons entering
and leaving the Buildings or the Complex; and
M. To install and maintain pipes, ducts, conduits, wires and
structural elements located in the Premises which serve other
parts or other tenants of the Buildings.
20. ESTOPPEL CERTIFICATE. Tenant shall, from time to time, upon not less than
ten (10) days' prior written request by Landlord or any mortgagee or ground
lessor of the Complex, deliver to Landlord or such mortgagee or ground
lessor, a statement in writing certifying:
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A. That this Lease is unmodified and in full force and effect or, if
there have been modifications, that this Lease, as modified, is
in full force and effect;
B. The amount of Adjusted Monthly Base Rent then payable under this
Lease and the date to which Rent has been paid;
C. That Landlord is not in default under this Lease or any work
letter agreement, or, if in default, a detailed description of
such default(s);
D. That Tenant is or is not in possession of the Premises, as the
case may be; and
E. Such other information as may be requested.
21. RELOCATION OF TENANT. At any time after the date of this Lease, Landlord
may substitute for the Premises, other premises in the Complex (the "New
Premises"), in which event the new Premises shall be deemed to be the
Premises for all purposes under this Lease, provided: the New Premises
shall be similar to the Premises in area and configuration; the
substitution shall be made in order to lease the Premises to a new or
existing tenant, who will occupy all or a substantial part of the floor of
the Buildings on which the Premises are located; if Tenant is then
occupying the Premises, Landlord shall pay the actual and reasonable
expenses of physically moving Tenant, its property and equipment to the New
Premises; Landlord shall give Tenant not less than thirty (30) days' prior
written notice of such substitution; and Landlord, at its expense, shall
improve the New Premises with improvements substantially similar to those
in the Premises at the time of such substitution, if the Premises are then
improved, or if not then improved, Landlord, at its expense, shall improve
the New Premises in accordance with the Work Agreement.
22. ADJUSTMENTS TO MONTHLY BASE RENT
22.1. DEFINITIONS. For the purpose of this section 22, the following words,
terms and phrases shall have the following meanings:
A. "Adjustment Date" shall mean each January 1st occurring during
the Term, except the first Adjustment Date shall be January 1,
1995.
B. "Adjustment Year" shall mean each calendar year during which an
Adjustment Date occurs.
C. "Consumer Price Index" - Intentionally omitted.
D. "Operating Expenses" shall mean all costs, expenses and
disbursements of every kind and nature which Landlord shall pay
or become obligated to pay in connection with the management,
operation, maintenance, replacement and repair of all Buildings,
improvements and land comprising the Complex and of the personal
property, fixtures,
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machinery, equipment, systems and apparatus located in or used in
connection therewith, including (without limitation) the cost of
security and security devices and systems, snow and ice and trash
removal, cleaning and sweeping, planting and replacing
decorations, flowers and landscaping, maintenance, repair and
replacement of utility systems, elevators and escalators,
electricity, steam, water, sewers, fuel, heating, lighting, air
conditioning, window cleaning, janitorial service, insurance,
including but not limited to, fire, extended coverage, all risk,
liability, workmen's compensation, elevator, or any other
insurance carried by the Landlord and applicable to the Complex,
painting, uniforms, management fees, supplies, sundries, sales or
use taxes on supplies or services, cost of wages and salaries of
all persons engaged in the operation, management, maintenance and
repair of the Complex, and so-called fringe benefits, including
social security taxes, unemployment insurance taxes, cost for
providing coverage for disability benefits, cost of any pensions,
hospitalization, welfare or retirement plans, or any other
similar or like expenses incurred under the provisions of any
collective bargaining agreement, or any other cost or expense
which Landlord pays or incurs to provide benefits for employees
so engaged in the operation, management, maintenance and repair
of the Complex, the charges of any independent contractor who,
under contract with the Landlord or its representatives, does any
of the work of operating, managing, maintaining or repairing of
the Complex, legal and accounting expenses, or any other expense
or charge, whether or not hereinbefore mentioned, which, in
accordance with generally accepted accounting and management
principles, would be considered as an expense of owning,
managing, operating, maintaining or repairing the Complex.
Operating Expenses shall not include the following: costs of
improvement of the Premises and the premises of other tenants of
the Buildings; charges for depreciation of the Buildings and
improvements comprising the Complex; interest and principal
payments on mortgages; real estate brokerage and leasing
commissions; salaries and other compensation of executive
officers of the Manager senior to the individual Building or
Complex manager; any expenditures for which Landlord has been
reimbursed (other than pursuant to rent abatement and escalation
provisions provided in leases); capital improvements to the
Complex; and all taxes and assessments other than sales, use and
payroll taxes. For purposes of determining Tenant's prorata share
of Operating Expenses, Operating Expenses are divided into five
(5) categories; namely, Insurance, Water, Outside Maintenance
Costs, Inside Maintenance Costs and Other Operating Expenses.
Outside Maintenance Costs shall include all charges for exterior
maintenance and upkeep, including, but not limited to, snow
removal, loading docks, roofs, shrubs and general exterior
maintenance. Inside Maintenance Costs shall include all charges
for interior maintenance and upkeep, including, but not limited
to, lobbies, corridors, rest rooms, elevators, receiving rooms
and
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vestibules in the office and commercial areas. Operating Expenses
which, in Landlord's sole and absolute judgment, do not fall into
any one of the categories of Insurance, Water, Outside
Maintenance Costs or Inside Maintenance Costs shall be included
in Other Operating Costs.
E. "Per Square Foot Operating Expenses" shall mean the total amount
of Operating Expenses for any Adjustment Year relating to
Insurance, Water, Outside Maintenance Costs, Inside Maintenance
Costs and Other Expenses and shall be determined as follows:
(1) For that portion of the Operating Expenses relating to
Insurance, the total insurance premium shall be divided by
523,686* square feet;
(2) For that portion of the Operating Expenses relating to
Water, the product of twenty-five (0.25) percent** of the
total water bill shall be divided by 161,770* square feet;
(3) For that portion of the Operating Expenses relating to
Outside Maintenance Costs, the total Outside Maintenance
Costs shall be divided by 523,686* square feet;
(4) For that portion of the Operating Expenses relating to
Inside Maintenance Costs, the total Inside Maintenance Costs
shall be divided by 161,770* square feet;
(5) For that portion of the Operating Expenses relating to Other
Operating Costs, the total Other Operating Costs shall be
divided by 523,686* square feet;
F. "Taxes" shall mean all federal, state and local governmental
taxes, assessments and charges (including transit or transit
district taxes or assessments) of every kind or nature, whether
general, special, ordinary or extraordinary, which Landlord shall
pay or become obligated to pay because of or in connection with
the ownership, leasing, management, control or operation of all
Buildings, improvements and land comprising the Complex, or of
the personal property, fixtures, machinery, equipment, systems
and apparatus located therein or used in connection therewith
(including any rental or similar taxes levied in lieu of or in
addition to general real and/or personal property taxes). For
purposes hereof, Taxes for any year shall be Taxes which are due
for payment or paid in that year, rather than Taxes which are
assessed or become a lien during such year. There shall be
included in Taxes for any year the amount of all fees, costs and
expenses (including reasonable attorneys' fees) paid by Landlord
during such year in seeking or obtaining any refund or reduction
of Taxes. Taxes in any year shall be reduced by the net amount of
any tax refund received by Landlord during such year. If a
special assessment
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payable in installments is levied against the Complex, Taxes for
any year shall include only the installment of such assessment
and any interest payable or paid during such year. Taxes shall
not include any federal, state or local sales, use, franchise,
capital stock, inheritance, general income, payroll, gift or
estate taxes, except that if a change occurs in the method of
taxation resulting in whole or in part in the substitution of any
such taxes, or any other assessment, for any Taxes as above
defined, such substituted taxes or assessments shall be included
in the Taxes.
G. "Per Square Foot Taxes" shall mean (i) the product of (a) the
amount of Taxes for which payment is due or made in any
Adjustment Year multiplied by (b) thirty-four and ninety-one/one
hundredths (.3491) percent, divided by (ii) 161,770* square feet.
H. Intentionally omitted.
* I. For purposes of determining Tenant's Share of Operating Expenses
and Taxes, Landlord and Tenant agree that the total rentable
office and commercial area of the Complex consists of 161,770
square feet and the total rentable office, commercial and
residential area of the Complex consists of 523,686 square feet.
** J. For purposes of determining Tenant's Share of that portion of the
Operating Expenses relating to Water, Landlord and Tenant agree
that the office and commercial tenants of the Complex will use
twenty-five (0.25) percent of the total water that will be
metered coming into the Complex.
22.2. ADJUSTMENTS TO MONTHLY BASE RENT.
Effective as of each Adjustment Date, Monthly Base Rent shall be
increased by an amount equal to one-twelfth (1/2) of the product of:
A. The rentable area of the Premises stated in section 1.1.I
multiplied by
B. the amount by which the sum of the Per Square Foot Operating
Expenses and Per Square Foot Taxes for the Adjustment Year in
which such Adjustment Date occurs exceeds the sum of $7.50 per
square foot.
22.3. PROJECTIONS. For purposes of calculating Taxes and Operating Expenses
for any Adjustment Year, Landlord may make reasonable estimates,
forecasts or projections (collectively, the "Projections") of Taxes
and Operating Expenses for such Adjustment Year. Landlord shall
deliver to Tenant a written statement setting forth the amount of the
Projections of Operating Expenses and Taxes Per Square Foot for the
Adjustment Year in which such Adjustment Date occurs and providing a
calculation of the increase in installments of Monthly Base Rent to
become effective as of said Adjustment Date; provided, however, that
the failure of
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Landlord to provide any such statement shall not relieve Tenant from
its obligation to continue to pay Adjusted Monthly Base Rent at the
rate then in effect under this Lease, and if and when Tenant receives
such statement from Landlord, Tenant shall pay any increases in
Monthly Base Rent reflected thereby effective retroactively to the
most recently preceding Adjustment Date.
22.4. READJUSTMENTS. On or about April 1st following the end of each
Adjustment Year, or at such later time as Landlord shall be able to
determine the actual amounts of Operating Expenses and Taxes for the
Adjustment Year last ended, Landlord shall notify Tenant in writing of
such actual amounts. If such actual amounts exceed the Projections for
each Adjustment Year, then Tenant shall, within thirty (30) days after
the date of such written notice from Landlord pay to Landlord an
amount equal to the excess of the Adjusted Monthly Base Rent payable
for the Adjustment Year last ended based upon actual Operating
Expenses and Taxes for such year over the total Adjusted Monthly Base
Rent paid by Tenant during such Adjustment Year. The obligation to
make such payments shall survive the expiration or earlier termination
of the Term. If the total Adjusted Monthly Base Rent paid by Tenant
during such Adjustment Year exceeds the amount thereof payable for
such year based upon actual Operating Expenses and Taxes for such
Adjustment Year, then Landlord shall credit such excess to
installments of Adjusted Monthly Base Rent payable after the date of
Landlord's notice until such excess has been exhausted, or if this
Lease shall expire prior to full application of such excess, Landlord
shall pay to Tenant the balance thereof not theretofore applied
against Rent. No interest or penalties shall accrue on any amounts
which Landlord is obligated to credit or pay to Tenant by reason of
this Section.
22.5. PARTIAL OCCUPANCY. For purposes of determining adjustments to
installments of Monthly Base Rent for any Adjustment Year in which the
Complex is not fully occupied by tenants, the amount of the Taxes and
the amount of Operating Expenses for such Adjustment Year shall be
appropriately adjusted by the Landlord to the amount that would have
been payable or incurred by the Landlord had the Complex been fully
occupied during such Adjustment Year.
22.6. BOOKS AND RECORDS. Landlord shall maintain books and records showing
Operating Expenses and Taxes in accordance with sound accounting and
management practices. The books and records shall be available to
Tenant for inspection during normal business hours upon prior
reasonable notice.
22.7. NO DECREASES IN MONTHLY BASE RENT. Notwithstanding anything to the
contrary contained in this Lease, Monthly Base Rent shall not be
adjusted or decreased below the amount set forth in section 1.1.H.
23. REAL ESTATE BROKERS. Tenant represents that Tenant has not dealt with any
real estate broker, salesperson, or finder in connection with this Lease,
and no such person initiated or participated in the negotiation of this
Lease, or showed the Premises to Tenant.
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Tenant agrees to indemnify and hold harmless Landlord, the Beneficiary and
the Manager from and against any and all liabilities and claims for
commissions and fees arising out of breach of the foregoing representation.
Landlord shall be responsible for the payment of all commissions to the
broker, if any, specified in this section 23, based upon the leasing
commission policy of Landlord applicable to the Complex as of the date of
this Lease.
24. SUBORDINATION AND ATTORNMENT
24.1. SUBORDINATION. This Lease and the rights of Tenant hereunder are
expressly subject and subordinate to any ground lease of the land
comprising the Complex now or hereafter existing and all amendments,
renewals and modifications and extensions of and to any said ground
lease, and to the lien of any mortgage now or hereafter existing
encumbering the Complex, or any part thereof, or said ground leasehold
estate, and all amendments, renewals and modifications and extensions
of and to any said mortgage, and to all advances made or hereafter to
be made upon the security of said mortgage. Tenant agrees to execute
and deliver such further instruments subordinating this Lease to any
such ground lease or to the lien of any such mortgage as may be
requested in writing by Landlord from time to time.
24.2. ATTORNMENT. In the event of the cancellation or termination of any
such ground lease in accordance with its terms or by the surrender of
such ground leasehold estate, whether voluntary, involuntary or by
operation of law, or by summary proceedings, or the foreclosure of any
such mortgage by voluntary agreement or otherwise, or the commencement
of any judicial action seeking such foreclosure, Tenant, at the
request of the then Landlord, shall attorn to and recognize such
ground lessor, mortgagee or purchaser in foreclosure as Tenant's
Landlord under this Lease. Tenant agrees to execute and deliver at any
time upon request of such ground lessor, mortgagee, purchaser, or
their successors, any instrument to further evidence such attornment.
25. NOTICES. All notices required or permitted under this Lease shall be in
writing and shall be deemed given and delivered, whether or not received,
when deposited in the United States Mail, postage prepaid and properly
addressed, certified mail, return receipt requested, at the following
addresses:
To Landlord: LaSalle National Trust N.A., not personally, but as
Trustee under Trust Agreement dated April 14, 1978 and
known as Trust 54214
c/o Anvan Realty & Management Company
1901 South Meyers Road, Suite 520
Oakbrook Terrace, Illinois 60181
Attention: Mr. Raymond T. Denten
or such other address as Landlord shall designate by written notice to
Tenant; and
25
<PAGE> 37
To Tenant: Cherry Communications, Inc.
2205 Enterprise Drive, Suite 501
Westchester, IL 60154
or such other address as Tenant shall designate by written notice to
Landlord.
26. MISCELLANEOUS
26.1. LATE CHARGES. All delinquent Rent shall bear interest at the maximum
rate permitted by law or eighteen (18%) percent per annum, whichever
is less, from the date due until paid.
26.2. ENTIRE AGREEMENT. This Lease and the Exhibits attached hereto contain
the entire agreement between Landlord and Tenant concerning the
Premises and there are no other agreements, either oral or written.
26.3. NO OPTION. The execution of this Lease by Tenant and delivery of same
to Landlord or Manager does not constitute a reservation of or option
for the Premises or an agreement to enter into a Lease and this Lease
shall become effective only if and when Landlord executes and delivers
same to Tenant; provided, however, the execution and delivery by
Tenant of this Lease to Landlord or the Manager shall constitute an
irrevocable offer by Tenant to lease the Premises on the terms and
conditions herein contained, which offer may not be withdrawn or
revoked for thirty (30) days after such execution and delivery. If
Tenant is a corporation, it shall deliver to Landlord concurrently
with the delivery to Landlord of an executed Lease, if requested by
it, certified resolutions of Tenant's directors authorizing execution
and delivery of this Lease and the performance by Tenant of its
obligations hereunder.
26.4. ACCORD AND SATISFACTION. No payment by Tenant or receipt by Landlord
of a lesser amount than any installment or payment of Rent due shall
be deemed to be other than on account of the amount due, and no
endorsement or statement on any check or any letter accompanying any
check or payment of Rent shall 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 installment or payment
of Rent or pursue any other remedies available to Landlord. No receipt
of money by Landlord from Tenant after the termination of this Lease
or Tenant's right of possession of the Premises shall reinstate,
continue or extend the Term.
26.5. LANDLORD'S OBLIGATION ON SALE OF BUILDINGS. In the event of any sale
or other transfer of the Complex or the Buildings, Landlord and the
seller or transferor (and the beneficiaries of any selling or
transferring land trust) shall be entirely freed and relieved of all
agreements and obligations of Landlord hereunder accruing or to be
performed after the date of such sale or transfer.
26
<PAGE> 38
26.6. BINDING EFFECT. This Lease shall be binding upon and inure to the
benefit of Landlord and Tenant and their respective heirs, legal
representatives, successors and permitted assigns.
26.7. FORCE MAJEURE. Landlord shall not be deemed in default with respect
to any of the terms, covenants and conditions of this Lease on
Landlord's part to be performed, if Landlord fails to timely perform
same and such failure is due in whole or in part to any strike,
lockout, labor trouble (whether legal or illegal), civil disorder,
inability to procure materials, failure of power, restrictive
governmental laws and regulations, riots, insurrections, war, fuel
shortages, accidents, casualties, Acts of God, acts caused directly or
indirectly by Tenant (or Tenant's agents, employees or invitees) or
any other cause beyond the reasonable control of Landlord.
26.8. CAPTIONS. The article and section captions in this Lease are inserted
only as a matter of convenience and in no way define, limit, construe,
or describe the scope or intent of such articles or sections.
26.9. APPLICABLE LAW. This Lease shall be construed in accordance with the
laws of the State of Illinois.
26.10. TIME. Time is of the essence of this Lease and the performance of
all obligations hereunder.
26.11. LANDLORD'S RIGHT TO PERFORM TENANT'S DUTIES. If Tenant fails timely
to perform any of its duties under this Lease, Landlord shall have the
right (but not the obligation) after the expiration of any grace
period elsewhere under this Lease expressly granted to Tenant for the
performance of such duty, to perform such duty on behalf and at the
expense of Tenant without further prior notice to Tenant, and all sums
expended or expenses incurred by Landlord in performing such duty
shall be deemed to be additional Rent under this Lease and shall be
due and payable upon demand by Landlord.
26.12. RIDERS. All Riders attached hereto and executed by both Landlord and
Tenant shall be deemed to be a part hereof and are hereby incorporated
herein.
27. PARKING. A parking garage is located within the Complex. The parking garage
and garage access road are not included in the Common Areas. Should Tenant
desire to have parking privileges in the parking garage, Tenant should make
the necessary arrangements therefor with the operator of the parking
garage.
28. EXCULPATION. This Lease is executed by LaSalle National Trust N.A., not
personally, but as Trustee as aforesaid in the exercise of the power and
authority conferred upon and vested in it as such Trustee and it is
expressly understood and agreed that nothing herein contained shall be
construed as creating any liability on said LaSalle National Trust N.A. or
any person interested beneficially or otherwise in said Trust Agreement
establishing
27
<PAGE> 39
Trust No. 54214 personally to pay any sums owing hereunder or to perform
any covenant either express or implied herein contained, all such
liability, if any, being expressly waived by Tenant, and the heirs,
personal representatives, successors and assigns of Tenant, and so far as
said LaSalle National Trust N.A. and any person interested beneficially or
otherwise in said Trust Agreement establishing Trust No. 54214 are
concerned, Tenant, and the heirs, personal representatives, successors and
assigns of Tenant, shall look solely to the property specifically described
in said Trust Agreement establishing Trust No. 54214 for the payment of any
sums owing hereunder or the enforcement of any covenant either express or
implied herein contained.
28
<PAGE> 40
IN WITNESS WHEREOF, this Lease has been executed as of the date set forth in
section 1.1.D hereof.
LANDLORD: TENANT:
LaSalle National Trust N.A.,
not personally, but solely as
Trustee under Trust Agreement
dated April 14, 1978 and Cherry Communications, Inc.
known as Trust Number 54214 an Illinois corporation
By: /s/ Joseph M. Larry By: /s/ David Giangreco
--------------------------------- ---------------------
Title: Sr. Vice President Its: President
------------------------------ ----------------------
President
ATTEST:
By: /s/ Jo Ann Vaitenas
------------------------
Its: Secretary
----------------------
Secretary
29
<PAGE> 41
EXHIBIT A
PLAN OF PREMISES
(to be inserted)
<PAGE> 42
AMENDMENT NUMBER ONE
TO CHERRY COMMUNICATION, INC.
OFFICE LEASE
This Amendment Number One ("Amendment") is dated as of March 11, 1996
and is made by and between LASALLE NATIONAL TRUST, N.A., not personally, but
solely as Trustee under Trust Agreement dated April 14, 1978 and known as Trust
Number 54214 ("Landlord") and CHERRY COMMUNICATIONS, INC., an Illinois
corporation ("Tenant").
RECITALS
WHEREAS, on February 10, 1995 Landlord and Tenant entered into that
certain lease for certain premises located in the Complex commonly known as
Printer's Square (the "Lease"); and
WHEREAS, the Term of the Lease will expire on February 28, 2000; and
WHEREAS, the Tenant wants to expand into additional premises in the
Complex and the Landlord has additional premises to lease to Tenant; and
WHEREAS, Tenant and Landlord desire to further extend the Term of
the Lease.
NOW, THEREFORE, in consideration of Ten and no/100 ($10.00) Dollars
and other good and valuable consideration, the receipt and legal sufficiency of
which is hereby acknowledged the parties, Landlord and Tenant agree as follows:
1. The recitals set forth above are hereby incorporated by reference as
if fully set forth herein.
2. Unless otherwise provided to the contrary, the capitalized words and
phrases herein shall have the same meaning as defined in the Lease.
3. EXTENSION OF TERM. The term of the Lease is hereby extended for an
additional thirteen calendar months from March 1, 2000 to March 31, 2001.
4. EXPIRATION DATE. Paragraph 1.1.G. of the Lease is hereby deleted in
is entirety and the following is substituted in its place:
1.1.G. EXPIRATION DATE OF TERM:
March 31, 2001
5. MONTHLY BASE RENT. Paragraph 1.1.H of the Lease is modified and
amended to reflect the following rental amounts during the following time
periods:
- 4/1/96 - 3/31/97: Eight thousand five hundred fifty four and
67/100 ($8,554.67) dollars per calendar month (ie. $14.42/square
foot/annum; $102,655.98/annum); and
1
<PAGE> 43
- 4/1/97 - 3/31/98: Eight thousand eight hundred nine and 76/100
($8,809.76) dollars per calendar month (ie. $14.85/square foot/annum;
$105,717.15/annum); and
- 4/1/98 - 3/31/99: Nine thousand seventy six and 25/100 ($9,076.25)
dollars per calendar month (ie. $15.30/square foot/annum;
$108,920.70/annum); and
- 4/1/99 - 3/31/00: Nine thousand three hundred forty nine and 62/100
($9,349.62) dollars per calendar month (ie. $15.76/square foot/annum;
$112,195.44/annum); and
- 4/1/00 - 3/31/01: Nine thousand six hundred twenty eight and 45/100
($9,628.45) dollars per calendar month (ie. $16.23/square foot/annum;
$115,541.37/annum).
6. RENTABLE AREA/FLOOR. Paragraphs 1.1.I and 1.1.K. of the Lease are
hereby deleted in their entirety and the following is substituted in their
place:
<TABLE>
<S> <C>
1.1.I. RENTABLE AREA OF THE PREMISES
3/1/95 - 3/31/96 3,042 square feet
4/1/96 - 3/31/01 7,119 square feet
1.1.K. FLOOR
3/1/95 - 3/31/96 Third Floor-Suite 301
4/1/96 - 3/31/01 Third Floor-Suite 301 and Second Floor-Suite 250
</TABLE>
7. NOTICES. Notwithstanding anything in the Lease to the contrary, any
and all notice to be sent to the Landlord shall be addressed to the Landlord and
sent to the following address:
c/o Anvan Realty & Management Company
1901 South Meyers Road, Suite 200
Oakbrook Terrace, Illinois 60181
Attn: Andreas A. Antoniou
8. Except as, and to the extent amended herein, the Lease is hereby
restated by this reference and deemed to be in full force and effect.
9. This Amendment is to be read consistently with the Lease, but in the
event of any conflict between the Lease and this Amendment, this Amendment will
control.
10. This Amendment is executed by LaSalle National Trust N.A., not
personally, but as Trustee as aforesaid in the exercise of the power and
authority conferred upon and vested in it as such Trustee and it is expressly
understood and agreed that nothing herein contained shall be construed as
creating any liability on said LaSalle National Trust N.A. or any person
interested beneficially or otherwise in said Trust Agreement establishing Trust
No. 54214 personally to pay
2
<PAGE> 44
any sums owing hereunder or to perform any covenant either express or implied
herein contained, all such liability, if any, being expressly waived by Tenant,
and the heirs, personal representatives, successors and assigns of Tenant, and
so far as said LaSalle National Trust N.A. and any person interested
beneficially or otherwise in said Trust Agreement establishing Trust No. 54214
are concerned, Tenant, and the heirs, personal representatives, successors and
assigns of Tenant, shall look solely to the property specifically described in
said Trust Agreement establishing Trust No. 54214 for the payment of any sums
owing hereunder or the enforcement of any covenant either express or implied
herein contained.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed as of the day and year first above written.
Landlord:
LASALLE NATIONAL TRUST, N.A., not
personally, but solely as Trustee aforesaid
By: /s/ Joseph M. Larry
----------------------------------------------
Its: Sr. Vice President
----------------------------------------------
Tenant:
CHERRY COMMUNICATIONS, INC., a Illinois
corporation
By: /s/ Robert Carrabis
----------------------------------------------
Its: Vice President and
----------------------------------------------
Chief Operating Officer
----------------------------------------------
Attest: /s/ Jo Ann Vaitenas
-------------------------------------------
Its: Secretary
---------------------------------------------
3
<PAGE> 45
EXHIBIT B
Third Floor - Suite 301
3,042 Square Feet
<PAGE> 46
EXHIBIT C
Monthly Base Rent
<TABLE>
<S> <C>
10/01/98 - 03/31/99 $3,878.55 per month
04/01/99 - 03/31/00 $3,995.16 per month
04/01/00 - 03/31/01 $4,114.30 per month
</TABLE>
<PAGE> 1
EXHIBIT 10.7
ROCKFORD INDUSTRIES, INC. Master Lease No.64553-89916-001
1851 East First Street, Sixth Floor
Santa Ana, CA 92705 LESSEE NAME & ADDRESS
Tel: (714) 547-7166 (800) 876-7788 MAXXIS GROUP, INC.
Fax: (714) 547-3889 1901 MONTREAL RD
TUCKER, GA 30084
MASTER LEASE AGREEMENT
On the terms and conditions hereof, Lessee agrees to lease from Rockford
Industries, Inc. ("LESSOR"), and Lessor agrees to lease to Lessee, certain
equipment (together with all additions thereto and substitutions and
replacements thereof, collectively, the "EQUIPMENT") in the quantities, models
and prices, and for the term as designated in each equipment schedule in the
form of Schedule "A" attached hereto (each, a "SCHEDULE," and collectively, the
"SCHEDULES") and to be acquired from the respective suppliers designated on each
Schedule (each, a "SUPPLIER"). LESSEE REPRESENTS AND WARRANTS THAT IT HAS
SELECTED THE EQUIPMENT AND EACH SUPPLIER BASED SOLELY ON ITS OWN JUDGMENT. Each
Schedule shall reference this Master Lease Agreement (this "MASTER LEASE") and
shall be deemed to incorporate therein all of the terms and conditions hereof,
unless and to the extent any provisions hereof are expressly excluded or
modified therein, and shall contain such additional terms as Lessor and Lessee
shall, in their sole discretion, agree upon. All Equipment leased subsequent to
the date hereof shall be subject to the terms and conditions of the related
Schedule and this Master Lease, as incorporated therein. All of the terms and
conditions of this Master Lease shall survive its termination and apply in full
force and effect to any and all Schedules. Each Schedule, together with (a) the
terms and conditions of this Master Lease so incorporated therein, and (b) any
schedules, attachments or exhibits thereto or hereto, shall constitute a
separate lease agreement (each, a "LEASE" and collectively, the "LEASES"). Each
such Lease may be assigned by Lessor and/or reassigned separate and apart from
any other Leases hereunder. With respect to each Lease, Lessor or its assignee
shall have all of the rights of the "Lessor" thereunder, and such rights shall
be separately exercisable by Lessor or such assignee, as the case may be,
exclusively and independently of the rights of Lessor or such assignee with
respect to any other Leases. To the extent that any Schedule constituting a
Lease hereunder would constitute "chattel paper" as such term is defined under
the Uniform Commercial Code (the "UCC"), a security interest therein may be
created only through the transfer or possession of the original counterpart of
such Schedule executed pursuant to this Master Lease. The transfer or possession
of an original counterpart of this Master Lease shall not be necessary to
perfect such security interest and no security interest in any Schedule
constituting a Lease hereunder may be created by the transfer or possession of
any other counterpart of such Schedule or by the transfer or possession of any
counterpart of this Master Lease. Lessee confirms that each Lease is a
commercial lease and that all Equipment leased pursuant to any Lease will be
used solely for commercial or business purposes (and not for consumer, personal,
family or household purposes) on the terms and conditions set forth in the Lease
covering such Equipment. With respect to each Lease, Lessee acknowledges that
such lease is intended to be a "true" lease, and is a "finance lease" as defined
in UCC Section 2A-103(l)(g). Lessee further acknowledges that it is entitled
under UCC Article 2A (as such Article, as amended from time to time, may be in
effect, "UCC 2A") to the promises and warranties, including those of any third
party, provided to Lessor by any Supplier in connection with the acquisition by
Lessor of the Equipment or the right to possession and use thereof. Lessor
acknowledges that Lessee may communicate with any Supplier and receive an
accurate and complete statement of such promises and warranties, including any
related disclaimers, limitations or remedies. Lessee also
<PAGE> 2
acknowledges that it received and read the notifications contained in this
paragraph before Lessee signed any Schedule constituting a Lease hereunder.
A. TERM. The term of this Master Lease shall commence on the date hereof
and shall continue until the latest of the respective termination dates of this
Master Lease and the Leases, unless otherwise terminated earlier pursuant to the
provisions of this Master Lease. In the event that this Master Lease shall be
terminated pursuant to the provisions hereof and prior to the latest of the
respective termination dates of the Leases, then, at the sole option of Lessor
and any assignees of Lessor, and provided that all obligations of Lessee under
each Lease shall have been satisfied, all outstanding Leases shall be terminated
concurrently herewith. The term of each Lease shall commence (the "COMMENCEMENT
DATE") on: (a) the first date on which any Equipment is delivered to Lessee or
Lessee's agents; or (b) at Lessor's election, such later date on which either
(i) physical delivery of all of the Equipment covered by a Schedule constituting
a Lease hereunder has been completed, or (ii) the fist commercial use of any
Equipment covered by a Schedule constituting a Lease hereunder shall have
occurred prior to Lessor's receipt of the Certificate of Acceptance (as defined
in Section G hereof), and shall terminate as indicated in such Schedule, unless
terminated earlier pursuant to the terms of this Master Lease. If Lessor should
decide to cancel this Master Lease or any Lease prior to the Commencement Date
of such Lease, in addition to any other liability hereunder and under any
Leases, each Obligor (as defined below) shall assume all of Lessor's obligations
with respect to all of the related Equipment. As used in this Master Lease, the
term "OBLIGOR" shall mean Lessee and each guarantor, surety and other person or
entity liable for any of Lessee's obligations under this Master Lease or any
Lease.
B. RENTAL AND FEES. With respect to each Lease: (a) all advance rentals
(collectively, the "ADVANCE RENTALS") shall be due at the later of (i) the date
of execution by Lessee of this Master Lease; or (ii) the date of execution by
Lessee of the related Schedule; and (b) the subsequent rentals under such Lease
(together with the Advance Rentals, collectively, the "Rentals") shall be
payable in advance beginning on the Commencement Date in the amounts and at the
times specified in the related Schedule. In the event the term of any Lease does
not commence for any reason, the Advance Rentals thereunder shall not be
refunded to Lessee and shall be retained by Lessor not as a penalty but as
liquidated damages to cover Lessor's administrative expenses in processing the
application for such Lease, preparing any related documentation, undertaking any
due diligence and taking any other actions relating to the foregoing. Lessee
shall, upon Lessor's demand, promptly pay or reimburse Lessor for all
documentation and administrative fees and expenses relating to the Equipment and
each Lease, including (without limitation) Lessor's standard documentation fees,
UCC and other search fees, UCC filing fees, fees and expenses of Lessor's
attorneys' and other related fees, costs and expenses.
C. NOTICES; NO WAIVER; TIME; ENTIRE AGREEMENT; SEVERABILITY; GOVERNING
LAW. Any notices to be given under this Master Lease or any Lease shall be
effective at the end of the fifth day following the mailing thereof, via United
States first class mail with postage prepaid, to the other party at the address
set forth herein or such other address as such other party may have specified by
written notice. No failure on the part of Lessor to exercise, and no delay in
exercising, any right hereunder shall operate as a waiver thereof; nor shall any
single or partial exercise by Lessor of any right hereunder preclude any other
or further exercise thereof or the exercise of any other right. Time is of the
essence with respect to this Master Lease and each Lease. With respect to each
Lease, this Master Lease and the related Schedule, together with all schedules,
attachments and exhibits hereto and thereto, contain the entire agreement with
respect to the transactions described herein and therein and supersede any
conflicting provision of any contract, purchase order or any other verbal or
written agreement. No term or provision of this Master Lease or any Lease may be
<PAGE> 3
amended, altered, waived, discharged or terminated except by a written
instrument, signed by Lessor and Lessee, which complies with the requirements of
the UCC. Any provision of this Master Lease or any Lease which is invalid under
the law of any state shall, as to such state, be ineffective to the extent of
such prohibition in such state only, without invalidating the remaining
provisions of this Master Lease or such Lease in such state. Lessee shall make
the payments set forth in this Master Lease and the Schedules relating to each
Lease at Lessor's address set forth above, and this Master Lease and each Lease
shall be performed in Orange County, California where Lessee's payments shall be
sent. THIS MASTER LEASE AND EACH LEASE IS ENTERED INTO IN AND SHALL BE GOVERNED
BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA, WITHOUT
REGARD TO PRINCIPLES OF CONFLICTS OF LAW OR CHOICE OF LAW. Lessee hereby
consents to the exclusive venue and jurisdiction of any Federal or state court
located in Orange County, California with respect to any action commenced
hereunder or under any Lease. Lessee agrees that service of process in any
action hereunder or under any Lease shall be sufficient if made by first class
certified mail to Lessee at the address set forth herein or such other address
as such other party may have specified by written notice in accordance with the
terms hereof. TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, LESSEE HEREBY
WAIVES THE RIGHT TO TRIAL BY JURY IN ANY ACTION COMMENCED HEREUNDER OR UNDER ANY
LEASE.
D. LATE PAYMENTS. When Lessee fails to pay any part of any monthly lease
payment or other sum due hereunder and is not received by Lessor within five (5)
days of its due date, Lessee agrees, so as to compensate Lessor for costs and
Lessor's inability to reinvest the sums due, to pay Lessor in regards to said
delinquent payment: a) a late charge equal to the greater of ten cents
(10(cents)) per one dollar ($1.00) of each delinquent payment or twenty five
($25) dollars; plus b) a late charge of one fifteenth of one percent (1/15%) per
day on the delinquent amount commencing one month after the amount was due,
until paid.
E. LEASE NON-CANCELABLE; PAYMENTS TO BE NET. Lessee agrees that all
Rentals or other sums payable by Lessee hereunder or under any Lease shall be
the unconditional obligation of Lessee and shall be made without abatement,
reduction or setoff of any nature, including (without limitation) any thereof
arising out of any security deposit amounts, certificates of deposit and similar
credit supports provided by Lessee or on its behalf, or any present or future
claim Lessee may have against Lessor, any of Lessor's assignees, any Supplier or
any manufacturer, carrier or vendor of the Equipment or any part of the
Equipment. THIS MASTER LEASE AND EACH LEASE SHALL NOT BE CANCELABLE OR
TERMINABLE BY LESSEE PRIOR TO THE END OF THE TERM HEREOF OR THEREOF EXCEPT AS
EXPRESSLY PROVIDED HEREIN OR THEREIN.
F. TAXES; INDEMNITY. With respect to each Lease, agrees that taxes are not
included in the Lease calculations. Lessee agrees: (a) to pay, promptly when
due, all license fees and assessments, and all sales, use, property, excise and
other taxes or charges (including any interest and penalties), now or hereafter
imposed by any governmental body or agency upon any Equipment or the purchase,
ownership, possession, leasing, operation, use or disposition thereof made
thereunder, or the Rentals or other payments thereunder (excluding taxes on or
measured by the net income of Lessor); (b) to prepare and file promptly with the
appropriate offices any and all tax and other similar returns required to be
filed with respect thereto (promptly sending copies thereof to Lessor) or, if
requested by Lessor, to notify Lessor of such requirement and furnish Lessor
with all information required by Lessor so that it may effect such filing; (c)
to assume all risks of liability arising from or pertaining to the purchase,
delivery, ownership, possession, leasing, operation, use, maintenance, storage,
repair, condition, transportation or other disposition of any Equipment or the
return of any Equipment to Lessor or any claims of patent, trademark or
copyright infringement and, at Lessee's sole expense and irrespective of whether
any of the
<PAGE> 4
following shall have resulted from or be attributable in any way to any action
or inaction of Lessee, to indemnify and save Lessor, and Lessor's directors,
officers, employees, affiliates, servants, agents, successors and assigns,
harmless from and against, and to defend them against any and all claims,
actions, proceedings, settlements, judgments, losses, liens, obligations, costs,
expenses, attorneys' fees, fines, damages and liabilities arising therefrom or
pertaining thereto (including, without limitation, any thereof arising out of
injury to or death of persons or damage to property); and (d) that Lessor will
have the right each year to estimate the yearly property taxes that will be due
on the Equipment and that Lessee will pay the estimated personal property taxes
when requested or, at Lessor's election regarding personal property taxes,
Lessee will pay Lessor a monthly personal property tax fee equal to three-tenths
of one percent (0.3%) of the original Equipment cost to reimburse Lessor for
Lessor's payment of taxes and costs for preparing, reviewing and filing returns.
Any amounts required to be paid by Lessee under this Section F which Lessee
fails to pay may be paid by Lessor and shall, at Lessor's option, become
immediately due from Lessee to Lessor. Lessee's obligations contained in this
Section F shall survive the termination of this Master Lease and the Leases.
G. ACCEPTANCE. Promptly upon delivery to Lessee of the Equipment to be
leased under any Lease, Lessee shall inspect the Equipment and execute and
deliver to Lessor a Certificate of Acceptance (the "Certificate of Acceptance")
in form and content satisfactory to Lessor. Unless Lessee gives Lessor and
Supplier written notice of each defect or other proper objection to any
Equipment within five (5) days after delivery thereof, such Equipment shall be
deemed to have been duly delivered to and unconditionally accepted by Lessee. If
Lessee wrongfully refuses delivery of any Equipment for any reason, then Lessee
agrees to promptly pay the price invoiced by Supplier to Lessor, or if such
payment is not made, Lessee indemnifies and holds Lessor harmless from and
against, and agrees to protect and (at Lessor's option) to defend Lessor at
Lessee's sole expense (with counsel acceptable to Lessor) against, any claim of
liability and damage by Supplier with reference to such Equipment. Upon such
payment, the related Schedule and Lease shall terminate as to such Equipment
only, and the Rentals thereunder shall be proportionately adjusted.
H. INSURANCE. With respect to each Lease, for the period from the date on
which the Equipment is delivered to Lessee or Lessee's agent until the date of
its redelivery to Lessor, Lessee, at its sole cost and expense, shall procure,
maintain, and pay for (a) casualty insurance, naming Lessor as "loss payee,"
against the loss, theft or destruction of or damage to the Equipment, including
(without limitation) loss by fire and such other hazards as are customary for
personal property of the same or similar type as the Equipment, subject to
customary deductions, and (b) public liability insurance, naming Lessor as an
"additional insured," covering both personal injury and property damage arising
out of or in connection with the use or operation of the Equipment. All such
insurance shall be with companies and in form and amount satisfactory to Lessor,
but shall in no event be in an amount less than the full replacement value of
the Equipment as determined by Lessor. Lessee shall deliver the policies of
insurance (or duplicates thereof) or certificates of insurance to Lessor. Each
insurer shall agree by endorsement upon the policy or policies issued by it, or
by independent instrument furnished to Lessor, that it will give Lessor at least
thirty (30) days prior written notice before the policy in question shall be
altered or canceled and that, as to the interest or coverage of Lessor or
Lessor's assignee thereunder, such policy shall not be suspended, forfeited or
in any manner prejudiced by any default, misrepresentation or other breach of
warranty, condition or covenant by Lessor or Lessee under such policy or any
Lease. The proceeds of such insurance, at the option of Lessor, shall be applied
(i) toward the replacement, restoration or repair of the Equipment, or (ii)
toward payment of the obligations of Lessee hereunder and under the Leases.
<PAGE> 5
Lessee hereby appoints Lessor as Lessee's attorney-in-fact to make claim for,
receive payment of, execute and endorse all documents, checks or drafts for loss
or damage under any such insurance policy. In the event the amount of insurance
proceeds with respect to any Total Loss (as defined below in Paragraph I) is
less than the Reimbursement Amount required under Paragraph I of this Agreement,
Lessee agrees to promptly pay to Lessor the difference in such amounts. When not
insured by Lessee, Lessor will be exposed to increased credit risks;
consequently, Lessee agrees to pay Lessor each month a NON-COVERAGE CHARGE equal
to one quarter of one percent (0.25%) of Actual Total Equipment Cost, until
Lessee complies with the insurance requirements described above. Such charges do
not take the place of insurance requirements contained herein.
I. FINANCIAL STATEMENTS. If requested by Lessor, Lessee agrees to promptly
deliver to Lessor annual and interim financial statements.
J. RISK OF LOSS. With respect to each Lease, for the period from the date
on which the Equipment is delivered to Lessee or Lessee's agent until the date
of its redelivery to Lessor: (a) the Equipment shall be held at all times at the
sole risk of Lessee for injury, damage (including damage to third parties and
their property), loss, destruction, theft, expropriation or requisition (as to
either title or use); and (b) in case before return to Lessor any or all of the
Equipment is destroyed, lost, stolen, damaged beyond repair, permanently
rendered unfit for normal use, expropriated or requisitioned for any reason
whatsoever (each, a "TOTAL LOSS"), Lessee agrees promptly to notify Lessor and
to pay, at Lessor's option, on demand, as reimbursement to Lessor for such Total
Loss, an amount equal to the Reimbursement Amount (as defined below), payment of
which shall relieve Lessee from liability for any further rent with respect to
such Equipment. As used in this Master Lease: (i) the term "REIMBURSEMENT
AMOUNT" shall mean, with respect to any Total Loss, the greater of (A) the Fair
Market Value (as defined below) of the related Equipment, as determined
immediately prior to the occurrence of such Total Loss, or (B) the sum of (1)
the entire unpaid balance of Rentals for the entire original term allocable to
such Equipment, discounted at a rate of 5.50% per annum as of the date of such
Total Loss, PLUS (2) Lessor's residual value as may be allocated to such
Equipment, plus (3) any other amounts then due and owing under the related
Lease; and (ii) the "FAIR MARKET VALUE" of any Equipment shall mean the fair
market sales value of such Equipment, assuming such Equipment is in the
condition required to be maintained under Section O hereof, after deducting
reasonable costs and expenses of sale, as reasonably determined by Lessor or, at
Lessor's option, by an independent appraiser selected by Lessor, at Lessee's
sole cost and expense, whose determination shall be conclusive and binding upon
the parties hereto.
K. TITLE; PERSONAL PROPERTY; ENCUMBRANCES; LOCATION. With respect to each
Lease, Lessee covenants and agrees that: (a) title to the Equipment is and at
all times shall remain in Lessor, and Lessee shall not cause or suffer any
substitution, exchange or addition of the Equipment; (b) the Equipment is and
shall remain personal property of Lessor and shall not be attached to or become
part of any realty; (c) the Equipment shall be installed and used at the address
of Lessee or such other location as specified on the Schedule constituting a
Lease hereunder, and Lessee will not relocate any Equipment without the prior
written consent of Lessor; (d) Lessee will not sell, secrete, mortgage, assign,
transfer, lease, sublet, loan, part with possession of or encumber the Equipment
or permit any liens or charges to become effective thereon or permit or attempt
to do any of the acts aforesaid; and (e) Lessee shall, at Lessee's own expense,
take such action as may be necessary (i) to remove any encumbrance, lien or
charge, and (ii) to prevent any third party from acquiring any other interest in
any Equipment (including, without limitation, by reason of such Equipment being
deemed to be a fixture or part of any realty). Upon request, Lessee shall, at
Lessee's own expense, affix and maintain on the Equipment a plate, label or
other marking, satisfactory to Lessor, indicating Lessor's interest therein.
Prior to
<PAGE> 6
the relocation of any Equipment, Lessee shall promptly execute and deliver such
agreements and documents as may be reasonably requested by Lessor in connection
with such relocation, including (without limitation) any UCC financing
statements.
L. MAINTENANCE; ACCESSIONS; INSPECTION, ALTERATIONS. Lessee agrees
that, at its sole expense, it will have sole responsibility for maintenance and
preservation of the Equipment and for all repairs and replacements necessary to
keep the Equipment in good repair, working order and condition, ordinary wear
and tear resulting from proper use thereof excluded. Lessee further agrees that
it will maintain the Equipment in such condition at its sole expense
continuously throughout the term of this Master Lease. All replacements or
substitutions of parts of or in any of the Equipment shall constitute accessions
thereto and shall become part of the Equipment owned by Lessor. Upon Lessor's
request, Lessee will permit Lessor to have access to the Equipment at all
reasonable times for the purpose of inspection and examination. Lessee shall
neither make nor cause to be made any alterations in the Equipment without the
prior written consent of Lessor.
M. USE OF EQUIPMENT. With respect to each Lease, Lessee shall be entitled
to the right to possession and control of the Equipment and the use thereof
during the term of such Lease so long as no Event of Default (as defined in
Section P hereof) has occurred. Lessee will comply with all laws, regulations
and ordinances, and all applicable requirements of the manufacturer of the
Equipment, applicable to the physical possession, operation, condition, use and
maintenance of the Equipment. Lessee agrees to obtain all permits and licenses
necessary for the operation of the Equipment. LESSEE COVENANTS, WARRANTS AND
REPRESENTS TO LESSOR THAT THE EQUIPMENT WILL BE USED FOR BUSINESS OR COMMERCIAL
USE ONLY.
N. DENIAL OF WARRANTIES. LESSOR HAS NOT MADE AND MAKES NO WARRANTY OR
REPRESENTATION OF ANY KIND, DIRECTLY OR INDIRECTLY, EXPRESS OR IMPLIED, WITH
RESPECT TO THE EQUIPMENT, INCLUDING (WITHOUT LIMITATION) AS TO ITS DESIGN OR
CONDITION, THE QUALITY OF THE MATERIAL AND EQUIPMENT IN OR WORKMANSHIP OF THE
EQUIPMENT, MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE, OR AS TO
LESSOR'S TITLE TO IT OR ANY COMPONENT THEREOF OR AS TO ANY OTHER MATTER, IT
BEING AGREED THAT ALL SUCH RISKS, AS BETWEEN LESSOR AND LESSEE, ARE TO BE BORNE
BY LESSEE, AND THE BENEFITS OF ANY AND ALL IMPLIED WARRANTIES OF LESSOR ARE
HERBY WAIVED BY LESSEE. With respect to each Lease, Lessee acknowledges that it
has selected the Supplier and the Equipment on the basis of its own judgment and
expressly disclaims any reliance upon any statements or representations made by
Lessor. Notwithstanding any fees which may be paid by Lessor to any Supplier, or
any salesperson, employer or agent of any Supplier, LESSEE UNDERSTANDS AND
AGREES THAT NEITHER SUCH SUPPLIER NOR SUCH SALESPERSON, EMPLOYEE OR AGENT IS AN
AGENT OF LESSOR OR IS AUTHORIZED TO BIND LESSOR OR TO WAIVE OR ALTER ANY TERM OR
CONDITION OF THIS MASTER LEASE OR ANY SCHEDULE CONSTITUTING A LEASE HEREUNDER OR
TO ADD ANY PROVISION HERETO OR THERETO (WHICH ACTS MAY BE EFFECTED ONLY IN A
WRITING SIGNED BY AN AUTHORIZED OFFICER OF LESSOR). NO WARRANTY OR
REPRESENTATION, EXPRESS OR IMPLIED, AS TO THE EQUIPMENT OR ANY OTHER MATTER BY
ANY SUPPLIER SHALL BE BINDING ON LESSOR, NOR SHALL THE BREACH OF SUCH IN ANY WAY
AFFECT LESSEE'S DUTY TO PERFORM ITS OBLIGATIONS AS SET FORTH IN THIS MASTER
LEASE OR ANY SCHEDULE CONSTITUTING A LEASE HEREUNDER. IN NO EVENT SHALL LESSOR
BE LIABLE FOR ANY INDIRECT, SPECIAL OR CONSEQUENTIAL DAMAGES RELATING TO ANY
EQUIPMENT. WITH RESPECT TO EACH LEASE, LESSOR MAKES NO WARRANTY AS TO THE
TREATMENT OF SUCH LEASE FOR ACCOUNTING PURPOSES, OR AS TO THE COMPLIANCE OF THE
EQUIPMENT WITH APPLICABLE GOVERNMENTAL REGULATIONS OR REQUIREMENTS, WHICH SHALL
BE THE SOLE RESPONSIBILITY OF THE SUPPLIER AND/OR THE MANUFACTURER OF THE
EQUIPMENT. Lessee agrees to look solely to the Supplier, manufacturer and/or the
carrier of the Equipment (which are solely responsible for supplying Lessee with
all literature and manuals respecting the Equipment) for any claim arising from
any defect, breach of warranty, failure or delay in delivery, misdelivery or
inability to use any
<PAGE> 7
Equipment for any reason and Lessee's obligations to Lessor under each Lease
shall not in any manner be affected thereby, including (without limitation)
Lessee's obligations to pay Lessor all rent and other amounts payable under such
Lease. LESSOR EXPRESSLY DISCLAIMS ANY WARRANTY THAT NO PERSON HOLDS A CLAIM TO
OR INTEREST IN THE EQUIPMENT (NOT ARISING SOLELY FROM ANY ACT OR OMISSION OF
LESSOR) THAT WILL INTERFERE WITH LESSEE'S ENJOYMENT OF ITS LEASEHOLD INTEREST IN
THE EQUIPMENT.
O. ASSIGNMENT. Lessee shall not assign this Master Lease, any
Lease or any interest herein or therein, or sublease any Equipment, or part with
possession of any Equipment, without the prior written consent of Lessor.
Lessor's rights, title and interest in and to this Master Lease, each Lease and
the Equipment may be sold, transferred and assigned by Lessor (and its
assignees) without notice, and Lessor's assignees (and their respective
assignees) shall have all of the rights, powers, privileges and remedies of
Lessor hereunder. Except to the extent any assignee otherwise agrees in writing,
no assignee shall be obligated to perform any of the obligations of Lessor
hereunder or under any Lease and Lessee (if notified of such assignment) shall
not be entitled to terminate or amend this Master Lease or any Lease without the
prior written consent of such assignee.
P. RETURN OF EQUIPMENT. Lessee shall, at its own cost and expense, at the
end of the term of each Lease, crate and ship all of the Equipment in a proper
manner to Lessor, freight and insurance prepaid, to any location specified by
Lessor within the continental United States, the Equipment to be in good
operating condition as required by Section K hereof. With respect to each Lease,
Lessee will continue to make Rental payments after the term of such Lease
expires until all the Equipment is returned. Lessee agrees to pay Lessor the
replacement cost and/or the repair and refurbishing cost, including cleaning,
for an amount designated by Lessor, if any Equipment is returned damaged or
incomplete, or shows signs of excessive wear and tear, within ten (10) days of
Lessor's request.
Q. EVENTS OF DEFAULT; REMEDIES, EXPENSES. Each of the following events
shall constitute an "Event of Default": (a) Lessee shall default in the payment
when due of any Rentals under any Lease, or any Obligor shall default in the
payment when due of any other sums payable hereunder or under any Lease; or (b)
Lessee shall default in the observance or performance of any other covenant or
agreement in this Master Lease or any Lease, and such default shall continue for
a period of fifteen (15) days; or (c) any representation or warranty made by or
on behalf of any Obligor in this Master Lease or any Lease shall at any time
prove to have been incorrect or untrue when made; or (d) any Obligor shall make
any misrepresentation to Lessor or fail to disclose to Lessor any material fact
in connection with the Master Lease or any Lease or otherwise, either
contemporaneously with or at any time prior or subsequent to the execution
hereof or thereof; or (e) any Obligor shall breach any warranty, covenant or
agreement contained in this Master Lease or any Lease; or (f) or suspend its
usual business; or (g) any Obligor shall dissolve (if such Obligor is a
corporation, partnership, limited liability company or other business entity) or
become insolvent (however evidenced) or bankrupt, commit any act of bankruptcy,
make an assignment for the benefit of creditors, suspend the transaction of its
usual business or consent to the appointment of a trustee or receiver, or a
trustee or a receiver shall be appointed, for any Obligor or for a substantial
part of its property, or bankruptcy, reorganization, insolvency or similar
proceedings shall be instituted by or against any Obligor; or (h) an order,
judgment or decree shall be entered against any Obligor by a court of competent
jurisdiction and such order, judgment or decree shall continue unpaid or
unsatisfied and in effect for any period of sixty (60) consecutive days without
a stay of execution, or any execution or writ or process shall be issued in
connection with any action or proceeding against any Obligor or its property
whereby the Equipment or any substantial part of such Obligor's property may be
taken or restrained; or (i)
<PAGE> 8
any Obligor shall default in the performance of any obligation or in the payment
when due of any sum to Lessor or any assignee of Lessor's rights hereunder under
any other contract, agreement, arrangement or understanding; or (j) any
indebtedness of any Obligor for borrowed money shall become (or shall be
permitted to become) due and payable by acceleration of maturity thereof; or (k)
any event or circumstance shall, in Lessor's opinion, give Lessor reasonable
cause to doubt any Obligor's willingness or ability to fully and promptly
perform its obligations to Lessor; or (l) any change in the condition or affairs
(financial or otherwise) of any Obligor shall, in Lessor's opinion, increase
Lessor's risk with respect to any Lease or Equipment or any security therefor;
or (m) Lessee is in default under any other agreement, lease, master lease or
schedule, whether presently or hereafter held by Lessor. Upon the occurrence of
any Event of Default, Lessor may, by written notice to Lessee (to the extent
legally permitted to do so): (i) immediately declare this Master Lease and any
or all of the Leases in default, whereupon as liquidated damages for breach of
such Lease(s) an amount equal to the sum of (A) the entire unpaid balance of the
Rentals under such Leases for the entire original term thereof, discounted at a
rate of 5.50% per annum as of the date of default, plus (B) any other amounts
then due and owing under such Lease, plus (C) twenty percent (20%) of original
cost of the related Equipment, will become immediately due and payable; and/or
(ii) proceed by appropriate court action, either at law or in equity, to enforce
performance by Lessee of the applicable covenants of this Master Lease and the
Leases or to recover damages for the breach hereof and thereof; and/or (iii)
with necessity of process or other legal action (A) terminate this Master Lease
and the Leases, (B) require Lessee, at Lessee's sole expense and for Lessor's
benefit, to assemble the Equipment at a place reasonably designated by Lessor,
and/or (C) enter onto the premises of Lessee or such other premises as the
Equipment may then be located and take possession of the Equipment, all without
liability to Lessor or any other person arising out of the taking of such
action. In addition, Lessee shall continue to be liable for all indemnities
under this Master Lease and the Leases, and for all legal fees and other costs
and expenses resulting from the foregoing defaults or the exercise of Lessor's
remedies, including (without limitation) placing any Equipment in the condition
required by Section K hereof. No remedy referred to in this Section P is
intended to be exclusive, but each shall be cumulative and in addition to any
other remedy referred to above or otherwise available to Lessor at law or in
equity. Lessor shall be entitled to take or retain, by way of offset against any
or all amounts due and owing under this Master Lease and the Leases as
aforesaid, any assets, tangible or intangible, of Lessee which may then be in
the possession off Lessor, its correspondents, or agents. LESSEE AND EACH OTHER
OBLIGOR AGREE TO PAY AS DAMAGES LESSOR'S COLLECTION AND LEGAL EXPENSES AND
REASONABLE ATTORNEYS FEES. In all proceedings arising hereunder, reasonable
attorneys fees are stipulated and liquidated to be equal to twenty percent (20%)
of the total collection amount, plus one half (1/2) of the amount (the "Excess")
by which Lessor's actual attorneys' fees exceed twenty percent (20%) of the
total collection amount. In consideration for Lessor's agreeing to absorb the
other half (1/2) of the Excess, Lessee agrees to pay and not dispute the
attorneys' fees agreed upon by the parties as a fair and reasonable liquidated
amount. Lessee agrees that each Lease is a "true lease" and hereby waives any
provision which may require Lessor to sell, lease, or otherwise use any
Equipment in the mitigation of damages. Lessee further agrees to compensate
Lessor for collection expenses of twenty dollars ($20) per collection phone call
and up to one hundred dollars ($100) per personal visit. Lessee also agrees to
reimburse Lessor for the costs associated with returned checks, for whatever
reason returned, paying the greater of twenty-five dollars ($25) or Lessor's
actual bank charges for each such returned check. IN NO EVENT, HOWEVER, SHALL
ANY CHARGES IN THIS PARAGRAPH OR IN THIS MASTER LEASE
<PAGE> 9
OR ANY LEASE, OR THE SUM THEREOF, EXCEED THE MAXIMUM PERMITTED BY APPLICABLE
LAW.
R. FURTHER ASSURANCES. Lessee will cooperate fully with Lessor (or any
assignee of Lessor pursuant to Section N hereof) for the purpose of carrying out
the intent and purposes hereof and of the Leases and to protect the interests of
Lessor. Lessor is hereby authorized, to the extent permitted by applicable law,
to file one or more UCC financing statements, whether precautionary or
otherwise, as appropriate, disclosing Lessor's interest in the Equipment, this
Master Lease, the Leases, the sums due under and/or in connection with this
Master Lease and the Leases, and in any and all other collateral which secures
Lessee's obligations to Lessor, without the signature of Lessee or signed by
Lessor as attorney-in-fact for Lessee. Lessee hereby irrevocably appoints Lessor
(and any of Lessor's officers, employees or agents designated by Lessor) as
Lessee's agent and attorney-in-fact, in Lessee's name, place and stead, to do
all things necessary to carry out the intent of this paragraph, including,
without limitation, the execution, endorsement, and filing of all UCC financing
statements. As security for the payment and performance of all of Lessee's
present and future liabilities and obligations to Lessor, Lessee hereby grants
to Lessor, a security interest in the Equipment and all proceeds of the
foregoing, which shall secure the performance of all of Lessee's obligations of
any kind whatsoever, whenever originated, to Lessor. Lessee will pay all costs
of filing any financing, continuation or termination statements with respect to
this Master Lease and the Leases, including, without limitation, any intangibles
tax and/or documentary stamp taxes relating thereto. Lessee shall also execute
and deliver to Lessor upon request such other instruments and assurances as
Lessor deems necessary or advisable for the implementation, effectuation,
confirmation or perfection of this Master Lease, the Lease and any rights of
Lessor hereunder and thereunder. LESSEE HEREBY AUTHORIZES LESSOR TO ADD TO THIS
MASTER LEASE AND/OR THE LEASES OR ANY DOCUMENT RELATED HERETO OR THERETO, SERIAL
NUMBERS, IDENTIFICATION DATA AND, WHEN DETERMINED BY LESSOR TO BE NECESSARY, ANY
DATES OR OTHER OMITTED FACTUAL DATA.
S. LESSEE'S WAIVERS. To the extent permitted by applicable law, Lessee
hereby waives any and all rights and remedies otherwise available to Lessee (a)
under Section 2A-401 and 2A-402 of UCC 2A to suspend performance of any of its
obligations under this Master Lease or any Lease, and (b) under Sections 2A-508
through 2A-522 of UCC 2A, including by way of example only but not limited to,
Lessee's rights to: (i) cancel this Master Lease or any Lease; (ii) repudiate
this Master Lease or any Lease; (iii) reject any Equipment; (iv) revoke
acceptance of any Equipment; (v) recover damages from Lessor for any breach of
warranty or for any other reason; (vi) claim a security interest in any
Equipment in Lessee's possession or control for any reason; (vii) deduct from
payments to Lessor all or any part of any claimed damages resulting from
Lessor's default, if any, under this Master Lease or any Lease; (viii) accept
partial delivery of any Equipment; (ix) "cover" by making any purchase or lease,
or contract to purchase or lease, equipment in substitution for any Equipment to
be leased from Lessor; (x) recover from Lessor any general, special, incidental
or consequential damages, for any reason whatsoever; and (xi) bring a proceeding
for specific performance, replevin, detinue, sequestration, claim and delivery
or the like for any Equipment relating to this Master Lease or any Lease. To the
extent permitted by applicable law, Lessee also hereby waives any rights now or
hereafter conferred by statute or otherwise which may require Lessor to sell,
lease or otherwise use any Equipment to reduce Lessor's damages as set forth in
this Master Lease or which may otherwise limit or modify any of Lessor's rights
or remedies under this Master Lease.
T. BINDING EFFECT. Lessee agrees that Lessee's obligations under this
Master Lease and each Lease are absolute and unconditional and shall continue
without abatement, regardless of (a) any claim of right, rescission, setoff,
<PAGE> 10
counterclaim, recoupment or defense of any kind or for any reason, including
(without limitation) any defense of usury, or (b) any inability of Lessee to use
any Equipment or any part thereof for any reason, including (without limitation)
war, act of God, governmental regulations, strike, loss, damage, destruction,
obsolescence, failure of or delay in delivery, failure of any Equipment to
operate properly, termination by operation of law or any other cause. If more
than one Lessee is named herein or on any Schedule constituting a Lease
hereunder, then the obligations and liabilities of each hereunder is joint and
several. This Master Lease and the Leases shall be binding upon Lessee and any
other Obligors and their respective heirs, personal representatives, successors,
executors, and permitted assigns, in favor of Lessor and/or Lessor's successors
or assigns. LESSEE REPRESENTS AND WARRANTS THAT IT HAS READ, UNDERSTOOD AND
AGREED TO ALL OF THE CONDITIONS CONTAINED HEREIN. LESSEE FURTHER REPRESENTS AND
WARRANTS THAT IT HAS SOUGHT THE ADVICE OF LEGAL COUNSEL TO EXPLAIN ANY AND ALL
TERMS CONTAINED HEREIN.
U. LEASE PAYMENT ADJUSTMENT. The amount of each Lease
Payment is based on the supplier's best estimate of the equipment cost including
(if Applicable), any installation, other related costs and estimated sales or
use tax. The Lease Payments will be adjusted proportionately upward or downward
if the actual total cost of the equipment or taxes is more or less than the
estimate. In that event, you authorize us to ADJUST THE LEASE PAYMENTS BY UP TO
FIFTEEN PERCENT (15%).
<TABLE>
<S> <C>
LESSEE: By: /s/ Thomas O. Cordy /s/ Thomas O. Cordy Date: 9/29/98
--------------------------------- --------------------------- -------
Authorized Signature Print Name and Title President/CEO
LESSEE: By: Date:
--------------------------------- --------------------------- -------
Authorized Signature Print Name and Title
ACCEPTED BY
LESSOR: Date:
--------------------------------- --------------------------- -------
Authorized Signature Title
(NOT VALID UNTIL ACCEPTED BY LESSOR)
</TABLE>
<PAGE> 11
EQUIPMENT SCHEDULE TO
MASTER LEASE AGREEMENT
ROCKFORD INDUSTRIES, INC. Master Lease # 89916
1851 East First Street, Sixth Floor Schedule # 62862-89916-001
Santa Ana, CA 92705
Tel: (714) 547-7166 (800) 876-7788 Fax: (714) 547-3889
LESSEE: MAXXIS GROUP, INC. Supplier: See Exhibit "A" Attached Hereto
1901 Montreal Rd
Tucker, GA
EQUIPMENT LOCATION: 600 S Federal, Suite 301, Chicago, IL 60605
(if different from billing address)
- --------------------------------------------------------------------------------
LEASED EQUIPMENT DESCRIPTION:
- --------------------------------------------------------------------------------
TOGETHER WITH ALL ACCESSORIES, ADDITIONS AND ATTACHMENTS THERETO, REPLACEMENTS
AND SUBSTITUTIONS THEREFORE, NOW OWNED OR HEREAFTER ACQUIRED (COLLECTIVELY, THE
"EQUIPMENT").
- --------------------------------------------------------------------------------
See Exhibit A attached hereto and made a part hereof
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
INITIAL LEASE MONTHLY LEASE PAYMENT ADVANCE RENTAL
- ------------- --------------------- --------------
TERM (CHECK MUST ACCOMPANY SCHEDULE)
----
<S> <C> <C>
#1 @ $400,000.00 (PLUS APPLICABLE TAXES)
#2 @ $0.00 (PLUS APPLICABLE TAXES) $400,000.00(PLUS APPLICABLE TAXES)
#60 @ $107,586.06 (PLUS APPLICABLE TAXES) Representing the first and last 0 month's rent.
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
TERMS AND CONDITIONS - PLEASE READ BEFORE SIGNING
A. Lessor agrees to lease to Lessee, and Lessee agrees to lease from
Lessor, the Equipment described above on the terms specified in this equipment
schedule (this "Schedule") and the Master Lease Agreement. BY SIGNING BELOW,
LESSEE HEREBY REPRESENTS AND WARRANTS THAT IT HAS READ AND UNDERSTOOD ALL OF THE
TERMS AND CONDITIONS CONTAINED IN THIS SCHEDULE AND IN THE MASTER LEASE
AGREEMENT. THE TERMS OF THE MASTER LEASE AGREEMENT ARE HEREBY RATIFIED AND
INCORPORATED IN THIS SCHEDULE AS IF SET FORTH HEREIN IN FULL AND SHALL REMAIN IN
FULL FORCE AND EFFECT AND BE FULLY ENFORCEABLE THROUGHOUT THE TERM OF THIS
SCHEDULE. Capitalized terms used and not otherwise defined in this Schedule have
the respective meanings set forth in the Master Lease.
B. All Rentals shall be payable in advance and shall be due monthly (or
such other period as specified above) beginning on the Commencement Date and
continuing on the same day of each subsequent calendar month (or other specified
period) during the term hereof.
C. Lessee agrees to lease the Equipment on an AS-IS, WHERE-IS BASIS,
WITHOUT REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, INCLUDING (WITHOUT
LIMITATION) MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE.
D. Lessee hereby irrevocably appoints Lessor (and any of Lessor's
officers, employees or agents designated by Lessor) as Lessee's agent and
attorney-in-fact, coupled with an interest, to do all things necessary to carry
out the intent of this Schedule and/or the Master Lease Agreement,
<PAGE> 12
including (without limitation) the execution and filing of all Uniform
Commercial Code financing statements as Lessor may deem necessary to perfect
such interest.
E. FOR PURPOSES OF PERFECTION OF A SECURITY INTEREST IN CHATTEL PAPER BY
POSSESSION UNDER THE UNIFORM COMMERCIAL CODE, IT IS UNDERSTOOD AND AGREED THAT:
(A) COUNTERPART NO. 1 OF THIS SCHEDULE SHALL BE DEEMED THE ONLY ORIGINAL
COUNTERPART OF THIS SCHEDULE, AND TRANSFER AND POSSESSION THEREOF SHALL EFFECT
SUCH PERFECTION; (B) TRANSFER OR POSSESSION OF NO OTHER PURPORTED COUNTERPART
OF THE SCHEDULE SHALL EFFECT SUCH PERFECTION; AND (C) TRANSFER OR POSSESSION
OF AN ORIGINAL COUNTERPART OF THE MASTER LEASE AGREEMENT SHALL NOT BE
NECESSARY TO EFFECT SUCH PERFECTION.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
CERTIFICATE OF
LESSEE ACCEPTANCE OF LEASED EQUIPMENT
------ ------------------------------
<S> <C>
BY SIGNING BELOW, LESSEE ACKNOWLEDGES The above named and undersigned Lessee hereby
READING AND AGREEING TO ALL THE TERMS acknowledges complete and satisfactory delivery,
AND CONDITIONS SET FORTH ON THIS receipt and installation of the Equipment description
SCHEDULE AND THE MASTER LEASE in this Schedule. Lessee understands and agrees that
AGREEMENT the lack or failure of the Equipment or any misoperation
thereof of any kind shall not be a basis for non-fulfillment
of any of Lessee's obligations under this Schedule or the
Master Lease Agreement and that Lessee's obligations to Lessor
THE EQUIPMENT IS FOR BUSINESS USE ONLY and Lessor's assigns as set forth in the Master Lease Agreement
-------------------------------------- are not subject to any claims, counterclaims, defenses or
setoffs.
THIS SCHEDULE AND MASTER LEASE
AGREEMENT ARE NON-CANCELLABLE
X/s/ Thomas O. Cordy DATE: 9/29/98 WE HEREBY AUTHORIZE YOU TO
------------------- -------- PAY FOR AND PURCHASE THE EQUIPMENT
(Authorized Signature) Thomas O. Cordy
X___________________ DATE: ______ X/s/ Thomas O. Cordy, President/CEO
(Authorized Signature) --------------------------------------
(Authorized Signature) Thomas O. Cordy
</TABLE>
- --------------------------------------------------------------------------------
PERSONAL GUARANTY:
In order to induce Lessor to enter into this Schedule with Lessee, the
undersigned, jointly and severally, hereby irrevocably and unconditionally,
guaranty, without deduction or diminution by reason of counterclaim, offset, or
defense, the prompt and complete payment under, whenever due, and performance of
this Schedule to Lessor or its assigns, including any and all modifications,
additions, supplements and amendments thereof, as well as all of Lessee's other
Schedules with Lessor that have commencement dates not later than ten (10) days
after Lessor receives written notice from the undersigned of their desire not to
guaranty any additional Schedules. The undersigned warrant and guaranty that
this Schedule has been properly executed by Lessee, and agree that this guaranty
shall be of full force and effect irrespective of any invalidity or
unenforceability of the Schedule or any provisions thereof, or the existence,
validity or value of any security. The undersigned hereby waive presentment
notice of acceptance hereof, all notices of any kind to which we may be
entitled, and all defenses of a
<PAGE> 13
guarantor or surety. The undersigned consent that from time to time, without
notice to or further consent from the undersigned and without releasing or
affecting the undersigned's liability hereunder, the time for payment or
performance under this Schedule may be extended or accelerated in whole or part,
any security therefore may be exchanged, rescheduled, enforced, sold, scheduled
or otherwise dealt with, the provision of any documents may be canceled,
modified or waived, any other guarantors may be rescheduled, and any indulgence
may be granted to Lessee, as Lessor may in its sole discretion determine. The
obligation and liability of each undersigned is direct, continuing and
unconditional, shall not be diminished or affected whether or not the Equipment
is repossessed, and Lessor may in its sole discretion determine. The obligation
and liability of each undersigned is direct, continuing and unconditional, shall
not be diminished or affected whether or not the Equipment is repossessed, and
Lessor shall not be required to proceed against Lessee or resort to any other
right or remedy before proceeding against the undersigned under this guaranty.
No payment by the undersigned, except payment in full of all liabilities
hereunder, shall entitle the undersigned to be subrogated to any of the rights
or remedies of Lessor under this Schedule. The undersigned warrant they have
read this Schedule and hereby waive any and all rights to a trial by jury, and
agree to the venue and jurisdiction contained therein, and agree that only full
payment and performance of the Schedule can discharge the undersigned's
liability. (Guarantor hereby grants to lessor a security interest in all goods
as set forth in the Master Lease Agreement. This guaranty shall be binding upon
the undersigned and the heirs, representatives, successors and assigns of he
undersigned, in favor of Lessor and Lessor's successors and assigns. This
guaranty cannot be terminated or changed orally and no provision hereof may be
modified or waived except in writing.)
- -------------------------------------------------------------------------------
X______________________ DATE: ______ X______________________ DATE: ______
( ) An Individual ( ) An Individual
- -------------------------------------------------------------------------------
Accepted By:
ROCKFORD INDUSTRIES, INC., ("LESSOR") X______________________ DATE: ______
(Not valid until accepted by Lessor)
- -------------------------------------------------------------------------------
<PAGE> 14
EXHIBIT "A"
LOCATION: 600 S. FEDERAL, SUITE 301
CHICAGO, IL 60605
VENDOR: WORLD ACCESS, INC.
945 E. PACES FERRY ROAD SUITE 2240
ATLANTA, GA 30326
<TABLE>
<CAPTION>
QTY EQUIPMENT
---------------------------
<S> <C>
15 FIFTEEN (15) M-13 MUZ'S
14 FOURTEEN (14) ECHO CANCELLAR CARDS
153 ECHO CANCELLER CARDS
1 CP2000 75% FULL
33 64 POS DSX
1 DEX 600 SC
1 12,288 PORTS
SP AND SS7 EQUIPMENT
1 FULL BATTERY BACKUP (2-4 HOURS)
</TABLE>
This Exhibit A is attached to and a part of Rockford Industries, Inc. Lease No.
64553-89916-001 and constitutes a true and accurate description of the
equipment.
LESSEE: MAXXIS GROUP, INC.
BY:/s/ Thomas O Cordy, President/CEO DATE: 9/29/98
--------------------------------- ---------------------
THOMAS O. CORDY (Title)
<PAGE> 15
END OF LEASE PURCHASE PRIVILEGE
LEASE NUMBER: 64553-89916-001
LESSEE: MAXXIS GROUP, INC.
ESTIMATED VALUE: NOT TO EXCEED 10% OF ORIGINAL EQUIPMENT COST
(PLUS ALL APPLICABLE TAXES)
EQUIPMENT: TELEPHONE SWITCHING EQUIPMENT
Provided that the Lessee named above ("Lessee") is not then nor has ever been in
default under that certain lease agreement dated 9/29/98, between the
undersigned and Lessee ("Lease"), and has paid all rentals and other obligations
due to the undersigned Lessor or its assigns ("Lessor"), then at Lessors option,
Lessee shall have the right, exercisable at the end of the lease term, to
purchase the equipment described above or attached on any schedule hereto (the
"Equipment"), as-is and where-is, for the additional consideration of a FAIR
MARKET VALUE not to EXCEED 10% OF THE ORIGINAL COST OF THE EQUIPMENT.
The Lessee shall give to the Lessor written notice at least 60 days, and not
more than 180 days, prior to the end of original lease term, of its election to
exercise an option provided for herein. Payment or notice of the option shall be
made to the Lessor or its assigns at its address or at such other place as
Lessor or its assigns may designate in writing.
This "OPTION LETTER" shall not amend or alter any of the terms or conditions
contained in the Lease agreement and may be exercised only after all of the
terms and conditions of the original Lease agreement have been fulfilled. This
document must be accepted by an authorized signatory of Lessor in order to be
valid and binding.
- -------------------------------------------------------------------------------
LESSEE: MAXXIS GROUP, INC.
By: /s/ Thomas O. Cordy, President/CEO Date: 9/29/98
----------------------------------- ---------------
LESSOR: ROCKFORD INDUSTRIES, INC.
By: Date:
---------------------------------------------------- -----------------
(AGREED AND ACCEPTED BY ROCKFORD INDUSTRIES, INC.)
<PAGE> 16
EARLY LEASE TERMINATION
LESSEE: Maxxis Group, Inc.
LEASE NO: 89916
Schedule #: 64553-89916-001
It is Rockford's general policy to allow a lessee to prepay the lease rental
payments before the expiration assuming the lessee is and has been faithfully
and promptly fulfilling his monthly payment obligation to Rockford Industries,
Inc. and its assigns.
The payoff is calculated by determining the total equipment cost, service fees
and end of lease residual to be paid on the lease. After calculating this
amount, a refund of unearned service fees is deducted from the aggregate payment
schedule to determine the current payoff figure.
There is no additional prepayment penalty added to the payoff calculations,
however, it is recommended that you check with your accountant before
considering an early payoff as it can effect the tax treatment of a lease.
By way of example, below is an overview of the estimated buyouts during the
lease terms, assuming completely prompt payment throughout the term:
*After 15 Monthly Payments = $ 4,891,848
*After 27 Monthly Payments = $ 3,971,471
*After 39 Monthly Payments = $ 2,987,454
*After 51 Monthly Payments = $ 1,860,934
*After 63 Monthly Payments = See Purchase Option Letter
These balance amounts do not include any unpaid obligations on the lease,
including any sales and use taxes, property taxes or other fees.
LESSEE: /s/ Thomas O. Cordy, President/CEO DATE: 9/29/98
----------------------------------- ---------------
LESSOR: DATE:
------------------------------------ ----------------
<PAGE> 1
EXHIBIT 10.8
ROCKFORD INDUSTRIES, INC. Master Lease No.62862-89916-000
1851 East First Street, Sixth Floor
Santa Ana, CA 92705 LESSEE NAME & ADDRESS
Tel: (714) 547-7166 (800) 876-7788 MAXXIS GROUP, INC.
Fax: (714) 547-3889 1901 MONTREAL RD
TUCKER, GA 30084
MASTER LEASE AGREEMENT
On the terms and conditions hereof, Lessee agrees to lease from Rockford
Industries, Inc. ("LESSOR"), and Lessor agrees to lease to Lessee, certain
equipment (together with all additions thereto and substitutions and
replacements thereof, collectively, the "EQUIPMENT") in the quantities, models
and prices, and for the term as designated in each equipment schedule in the
form of Schedule "A" attached hereto (each, a "SCHEDULE," and collectively, the
"SCHEDULES") and to be acquired from the respective suppliers designated on each
Schedule (each, a "SUPPLIER"). LESSEE REPRESENTS AND WARRANTS THAT IT HAS
SELECTED THE EQUIPMENT AND EACH SUPPLIER BASED SOLELY ON ITS OWN JUDGMENT. Each
Schedule shall reference this Master Lease Agreement (this "MASTER LEASE") and
shall be deemed to incorporate therein all of the terms and conditions hereof,
unless and to the extent any provisions hereof are expressly excluded or
modified therein, and shall contain such additional terms as Lessor and Lessee
shall, in their sole discretion, agree upon. All Equipment leased subsequent to
the date hereof shall be subject to the terms and conditions of the related
Schedule and this Master Lease, as incorporated therein. All of the terms and
conditions of this Master Lease shall survive its termination and apply in full
force and effect to any and all Schedules. Each Schedule, together with (a) the
terms and conditions of this Master Lease so incorporated therein, and (b) any
schedules, attachments or exhibits thereto or hereto, shall constitute a
separate lease agreement (each, a "LEASE" and collectively, the "LEASES"). Each
such Lease may be assigned by Lessor and/or reassigned separate and apart from
any other Leases hereunder. With respect to each Lease, Lessor or its assignee
shall have all of the rights of the "Lessor" thereunder, and such rights shall
be separately exercisable by Lessor or such assignee, as the case may be,
exclusively and independently of the rights of Lessor or such assignee with
respect to any other Leases. To the extent that any Schedule constituting a
Lease hereunder would constitute "chattel paper" as such term is defined under
the Uniform Commercial Code (the "UCC"), a security interest therein may be
created only through the transfer or possession of the original counterpart of
such Schedule executed pursuant to this Master Lease. The transfer or possession
of an original counterpart of this Master Lease shall not be necessary to
perfect such security interest and no security interest in any Schedule
constituting a Lease hereunder may be created by the transfer or possession of
any other counterpart of such Schedule or by the transfer or possession of any
counterpart of this Master Lease. Lessee confirms that each Lease is a
commercial lease and that all Equipment leased pursuant to any Lease will be
used solely for commercial or business purposes (and not for consumer, personal,
family or household purposes) on the terms and conditions set forth in the Lease
covering such Equipment. With respect to each Lease, Lessee acknowledges that
such lease is intended to be a "true" lease, and is a "finance lease" as defined
in UCC Section 2A-103(l)(g). Lessee further acknowledges that it is entitled
under UCC Article 2A (as such Article, as amended from time to time, may be in
effect, "UCC 2A") to the promises and warranties, including those of any third
party, provided to Lessor by any Supplier in connection with the acquisition by
Lessor of the Equipment or the right to possession and use thereof. Lessor
acknowledges that Lessee may communicate with any Supplier and receive an
accurate and complete statement of such promises and warranties, including any
related disclaimers, limitations or remedies. Lessee also
<PAGE> 2
acknowledges that it received and read the notifications contained in this
paragraph before Lessee signed any Schedule constituting a Lease hereunder.
A. TERM. The term of this Master Lease shall commence on the date hereof
and shall continue until the latest of the respective termination dates of this
Master Lease and the Leases, unless otherwise terminated earlier pursuant to the
provisions of this Master Lease. In the event that this Master Lease shall be
terminated pursuant to the provisions hereof and prior to the latest of the
respective termination dates of the Leases, then, at the sole option of Lessor
and any assignees of Lessor, and provided that all obligations of Lessee under
each Lease shall have been satisfied, all outstanding Leases shall be terminated
concurrently herewith. The term of each Lease shall commence (the "COMMENCEMENT
DATE") on: (a) the first date on which any Equipment is delivered to Lessee or
Lessee's agents; or (b) at Lessor's election, such later date on which either
(i) physical delivery of all of the Equipment covered by a Schedule constituting
a Lease hereunder has been completed, or (ii) the fist commercial use of any
Equipment covered by a Schedule constituting a Lease hereunder shall have
occurred prior to Lessor's receipt of the Certificate of Acceptance (as defined
in Section G hereof), and shall terminate as indicated in such Schedule, unless
terminated earlier pursuant to the terms of this Master Lease. If Lessor should
decide to cancel this Master Lease or any Lease prior to the Commencement Date
of such Lease, in addition to any other liability hereunder and under any
Leases, each Obligor (as defined below) shall assume all of Lessor's obligations
with respect to all of the related Equipment. As used in this Master Lease, the
term "OBLIGOR" shall mean Lessee and each guarantor, surety and other person or
entity liable for any of Lessee's obligations under this Master Lease or any
Lease.
B. RENTAL AND FEES. With respect to each Lease: (a) all advance rentals
(collectively, the "ADVANCE RENTALS") shall be due at the later of (i) the date
of execution by Lessee of this Master Lease; or (ii) the date of execution by
Lessee of the related Schedule; and (b) the subsequent rentals under such Lease
(together with the Advance Rentals, collectively, the "Rentals") shall be
payable in advance beginning on the Commencement Date in the amounts and at the
times specified in the related Schedule. In the event the term of any Lease does
not commence for any reason, the Advance Rentals thereunder shall not be
refunded to Lessee and shall be retained by Lessor not as a penalty but as
liquidated damages to cover Lessor's administrative expenses in processing the
application for such Lease, preparing any related documentation, undertaking any
due diligence and taking any other actions relating to the foregoing. Lessee
shall, upon Lessor's demand, promptly pay or reimburse Lessor for all
documentation and administrative fees and expenses relating to the Equipment and
each Lease, including (without limitation) Lessor's standard documentation fees,
UCC and other search fees, UCC filing fees, fees and expenses of Lessor's
attorneys' and other related fees, costs and expenses.
C. NOTICES; NO WAIVER; TIME; ENTIRE AGREEMENT; SEVERABILITY; GOVERNING
LAW. Any notices to be given under this Master Lease or any Lease shall be
effective at the end of the fifth day following the mailing thereof, via United
States first class mail with postage prepaid, to the other party at the address
set forth herein or such other address as such other party may have specified by
written notice. No failure on the part of Lessor to exercise, and no delay in
exercising, any right hereunder shall operate as a waiver thereof; nor shall any
single or partial exercise by Lessor of any right hereunder preclude any other
or further exercise thereof or the exercise of any other right. Time is of the
essence with respect to this Master Lease and each Lease. With respect to each
Lease, this Master Lease and the related Schedule, together with all schedules,
attachments and exhibits hereto and thereto, contain the entire agreement with
respect to the transactions described herein and therein and supersede any
conflicting provision of any contract, purchase order or any other verbal or
written agreement. No term or provision of this Master Lease or any Lease may be
<PAGE> 3
amended, altered, waived, discharged or terminated except by a written
instrument, signed by Lessor and Lessee, which complies with the requirements of
the UCC. Any provision of this Master Lease or any Lease which is invalid under
the law of any state shall, as to such state, be ineffective to the extent of
such prohibition in such state only, without invalidating the remaining
provisions of this Master Lease or such Lease in such state. Lessee shall make
the payments set forth in this Master Lease and the Schedules relating to each
Lease at Lessor's address set forth above, and this Master Lease and each Lease
shall be performed in Orange County, California where Lessee's payments shall be
sent. THIS MASTER LEASE AND EACH LEASE IS ENTERED INTO IN AND SHALL BE GOVERNED
BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA, WITHOUT
REGARD TO PRINCIPLES OF CONFLICTS OF LAW OR CHOICE OF LAW. Lessee hereby
consents to the exclusive venue and jurisdiction of any Federal or state court
located in Orange County, California with respect to any action commenced
hereunder or under any Lease. Lessee agrees that service of process in any
action hereunder or under any Lease shall be sufficient if made by first class
certified mail to Lessee at the address set forth herein or such other address
as such other party may have specified by written notice in accordance with the
terms hereof. TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, LESSEE HEREBY
WAIVES THE RIGHT TO TRIAL BY JURY IN ANY ACTION COMMENCED HEREUNDER OR UNDER ANY
LEASE.
D. LATE PAYMENTS. When Lessee fails to pay any part of any monthly lease
payment or other sum due hereunder and is not received by Lessor within five (5)
days of its due date, Lessee agrees, so as to compensate Lessor for costs and
Lessor's inability to reinvest the sums due, to pay Lessor in regards to said
delinquent payment: a) a late charge equal to the greater of ten cents
(10(cents)) per one dollar ($1.00) of each delinquent payment or twenty five
($25) dollars; plus b) a late charge of one fifteenth of one percent (1/15%) per
day on the delinquent amount commencing one month after the amount was due,
until paid.
E. LEASE NON-CANCELABLE; PAYMENTS TO BE NET. Lessee agrees that all
Rentals or other sums payable by Lessee hereunder or under any Lease shall be
the unconditional obligation of Lessee and shall be made without abatement,
reduction or setoff of any nature, including (without limitation) any thereof
arising out of any security deposit amounts, certificates of deposit and similar
credit supports provided by Lessee or on its behalf, or any present or future
claim Lessee may have against Lessor, any of Lessor's assignees, any Supplier or
any manufacturer, carrier or vendor of the Equipment or any part of the
Equipment. THIS MASTER LEASE AND EACH LEASE SHALL NOT BE CANCELABLE OR
TERMINABLE BY LESSEE PRIOR TO THE END OF THE TERM HEREOF OR THEREOF EXCEPT AS
EXPRESSLY PROVIDED HEREIN OR THEREIN.
F. TAXES; INDEMNITY. With respect to each Lease, agrees that taxes are not
included in the Lease calculations. Lessee agrees: (a) to pay, promptly when
due, all license fees and assessments, and all sales, use, property, excise and
other taxes or charges (including any interest and penalties), now or hereafter
imposed by any governmental body or agency upon any Equipment or the purchase,
ownership, possession, leasing, operation, use or disposition thereof made
thereunder, or the Rentals or other payments thereunder (excluding taxes on or
measured by the net income of Lessor); (b) to prepare and file promptly with the
appropriate offices any and all tax and other similar returns required to be
filed with respect thereto (promptly sending copies thereof to Lessor) or, if
requested by Lessor, to notify Lessor of such requirement and furnish Lessor
with all information required by Lessor so that it may effect such filing; (c)
to assume all risks of liability arising from or pertaining to the purchase,
delivery, ownership, possession, leasing, operation, use, maintenance, storage,
repair, condition, transportation or other disposition of any Equipment or the
return of any Equipment to Lessor or any claims of patent, trademark or
copyright infringement and, at Lessee's sole expense and irrespective of whether
any of the
<PAGE> 4
following shall have resulted from or be attributable in any way to any action
or inaction of Lessee, to indemnify and save Lessor, and Lessor's directors,
officers, employees, affiliates, servants, agents, successors and assigns,
harmless from and against, and to defend them against any and all claims,
actions, proceedings, settlements, judgments, losses, liens, obligations, costs,
expenses, attorneys' fees, fines, damages and liabilities arising therefrom or
pertaining thereto (including, without limitation, any thereof arising out of
injury to or death of persons or damage to property); and (d) that Lessor will
have the right each year to estimate the yearly property taxes that will be due
on the Equipment and that Lessee will pay the estimated personal property taxes
when requested or, at Lessor's election regarding personal property taxes,
Lessee will pay Lessor a monthly personal property tax fee equal to three-tenths
of one percent (0.3%) of the original Equipment cost to reimburse Lessor for
Lessor's payment of taxes and costs for preparing, reviewing and filing returns.
Any amounts required to be paid by Lessee under this Section F which Lessee
fails to pay may be paid by Lessor and shall, at Lessor's option, become
immediately due from Lessee to Lessor. Lessee's obligations contained in this
Section F shall survive the termination of this Master Lease and the Leases.
G. ACCEPTANCE. Promptly upon delivery to Lessee of the Equipment to be
leased under any Lease, Lessee shall inspect the Equipment and execute and
deliver to Lessor a Certificate of Acceptance (the "Certificate of Acceptance")
in form and content satisfactory to Lessor. Unless Lessee gives Lessor and
Supplier written notice of each defect or other proper objection to any
Equipment within five (5) days after delivery thereof, such Equipment shall be
deemed to have been duly delivered to and unconditionally accepted by Lessee. If
Lessee wrongfully refuses delivery of any Equipment for any reason, then Lessee
agrees to promptly pay the price invoiced by Supplier to Lessor, or if such
payment is not made, Lessee indemnifies and holds Lessor harmless from and
against, and agrees to protect and (at Lessor's option) to defend Lessor at
Lessee's sole expense (with counsel acceptable to Lessor) against, any claim of
liability and damage by Supplier with reference to such Equipment. Upon such
payment, the related Schedule and Lease shall terminate as to such Equipment
only, and the Rentals thereunder shall be proportionately adjusted.
H. INSURANCE. With respect to each Lease, for the period from the date
on which the Equipment is delivered to Lessee or Lessee's agent until the date
of its redelivery to Lessor, Lessee, at its sole cost and expense, shall
procure, maintain, and pay for (a) casualty insurance, naming Lessor as "loss
payee," against the loss, theft or destruction of or damage to the Equipment,
including (without limitation) loss by fire and such other hazards as are
customary for personal property of the same or similar type as the Equipment,
subject to customary deductions, and (b) public liability insurance, naming
Lessor as an "additional insured," covering both personal injury and property
damage arising out of or in connection with the use or operation of the
Equipment. All such insurance shall be with companies and in form and amount
satisfactory to Lessor, but shall in no event be in an amount less than the full
replacement value of the Equipment as determined by Lessor. Lessee shall deliver
the policies of insurance (or duplicates thereof) or certificates of insurance
to Lessor. Each insurer shall agree by endorsement upon the policy or policies
issued by it, or by independent instrument furnished to Lessor, that it will
give Lessor at least thirty (30) days prior written notice before the policy in
question shall be altered or canceled and that, as to the interest or coverage
of Lessor or Lessor's assignee thereunder, such policy shall not be suspended,
forfeited or in any manner prejudiced by any default, misrepresentation or other
breach of warranty, condition or covenant by Lessor or Lessee under such policy
or any Lease. The proceeds of such insurance, at the option of Lessor, shall be
applied (i) toward the replacement, restoration or repair of the Equipment, or
(ii) toward payment of the obligations of Lessee hereunder and under the Leases.
<PAGE> 5
Lessee hereby appoints Lessor as Lessee's attorney-in-fact to make claim for,
receive payment of, execute and endorse all documents, checks or drafts for loss
or damage under any such insurance policy. In the event the amount of insurance
proceeds with respect to any Total Loss (as defined below in Paragraph I) is
less than the Reimbursement Amount required under Paragraph I of this Agreement,
Lessee agrees to promptly pay to Lessor the difference in such amounts. When not
insured by Lessee, Lessor will be exposed to increased credit risks;
consequently, Lessee agrees to pay Lessor each month a NON-COVERAGE CHARGE equal
to one quarter of one percent (0.25%) of Actual Total Equipment Cost, until
Lessee complies with the insurance requirements described above. Such charges do
not take the place of insurance requirements contained herein.
I. FINANCIAL STATEMENTS. If requested by Lessor, Lessee agrees to promptly
deliver to Lessor annual and interim financial statements.
J. RISK OF LOSS. With respect to each Lease, for the period from the date
on which the Equipment is delivered to Lessee or Lessee's agent until the date
of its redelivery to Lessor: (a) the Equipment shall be held at all times at the
sole risk of Lessee for injury, damage (including damage to third parties and
their property), loss, destruction, theft, expropriation or requisition (as to
either title or use); and (b) in case before return to Lessor any or all of the
Equipment is destroyed, lost, stolen, damaged beyond repair, permanently
rendered unfit for normal use, expropriated or requisitioned for any reason
whatsoever (each, a "TOTAL LOSS"), Lessee agrees promptly to notify Lessor and
to pay, at Lessor's option, on demand, as reimbursement to Lessor for such Total
Loss, an amount equal to the Reimbursement Amount (as defined below), payment of
which shall relieve Lessee from liability for any further rent with respect to
such Equipment. As used in this Master Lease: (i) the term "REIMBURSEMENT
AMOUNT" shall mean, with respect to any Total Loss, the greater of (A) the Fair
Market Value (as defined below) of the related Equipment, as determined
immediately prior to the occurrence of such Total Loss, or (B) the sum of (1)
the entire unpaid balance of Rentals for the entire original term allocable to
such Equipment, discounted at a rate of 5.50% per annum as of the date of such
Total Loss, PLUS (2) Lessor's residual value as may be allocated to such
Equipment, plus (3) any other amounts then due and owing under the related
Lease; and (ii) the "FAIR MARKET VALUE" of any Equipment shall mean the fair
market sales value of such Equipment, assuming such Equipment is in the
condition required to be maintained under Section O hereof, after deducting
reasonable costs and expenses of sale, as reasonably determined by Lessor or, at
Lessor's option, by an independent appraiser selected by Lessor, at Lessee's
sole cost and expense, whose determination shall be conclusive and binding upon
the parties hereto.
K. TITLE; PERSONAL PROPERTY; ENCUMBRANCES; LOCATION. With respect to each
Lease, Lessee covenants and agrees that: (a) title to the Equipment is and at
all times shall remain in Lessor, and Lessee shall not cause or suffer any
substitution, exchange or addition of the Equipment; (b) the Equipment is and
shall remain personal property of Lessor and shall not be attached to or become
part of any realty; (c) the Equipment shall be installed and used at the address
of Lessee or such other location as specified on the Schedule constituting a
Lease hereunder, and Lessee will not relocate any Equipment without the prior
written consent of Lessor; (d) Lessee will not sell, secrete, mortgage, assign,
transfer, lease, sublet, loan, part with possession of or encumber the Equipment
or permit any liens or charges to become effective thereon or permit or attempt
to do any of the acts aforesaid; and (e) Lessee shall, at Lessee's own expense,
take such action as may be necessary (i) to remove any encumbrance, lien or
charge, and (ii) to prevent any third party from acquiring any other interest in
any Equipment (including, without limitation, by reason of such Equipment being
deemed to be a fixture or part of any realty). Upon request, Lessee shall, at
Lessee's own expense, affix and maintain on the Equipment a plate, label or
other marking, satisfactory to Lessor, indicating Lessor's interest therein.
Prior to
<PAGE> 6
the relocation of any Equipment, Lessee shall promptly execute and deliver such
agreements and documents as may be reasonably requested by Lessor in connection
with such relocation, including (without limitation) any UCC financing
statements.
L. MAINTENANCE; ACCESSIONS; INSPECTION, ALTERATIONS. Lessee agrees that,
at its sole expense, it will have sole responsibility for maintenance and
preservation of the Equipment and for all repairs and replacements necessary to
keep the Equipment in good repair, working order and condition, ordinary wear
and tear resulting from proper use thereof excluded. Lessee further agrees that
it will maintain the Equipment in such condition at its sole expense
continuously throughout the term of this Master Lease. All replacements or
substitutions of parts of or in any of the Equipment shall constitute accessions
thereto and shall become part of the Equipment owned by Lessor. Upon Lessor's
request, Lessee will permit Lessor to have access to the Equipment at all
reasonable times for the purpose of inspection and examination. Lessee shall
neither make nor cause to be made any alterations in the Equipment without the
prior written consent of Lessor.
M. USE OF EQUIPMENT. With respect to each Lease, Lessee shall be entitled
to the right to possession and control of the Equipment and the use thereof
during the term of such Lease so long as no Event of Default (as defined in
Section P hereof) has occurred. Lessee will comply with all laws, regulations
and ordinances, and all applicable requirements of the manufacturer of the
Equipment, applicable to the physical possession, operation, condition, use and
maintenance of the Equipment. Lessee agrees to obtain all permits and licenses
necessary for the operation of the Equipment. LESSEE COVENANTS, WARRANTS AND
REPRESENTS TO LESSOR THAT THE EQUIPMENT WILL BE USED FOR BUSINESS OR COMMERCIAL
USE ONLY.
N. DENIAL OF WARRANTIES. LESSOR HAS NOT MADE AND MAKES NO WARRANTY OR
REPRESENTATION OF ANY KIND, DIRECTLY OR INDIRECTLY, EXPRESS OR IMPLIED, WITH
RESPECT TO THE EQUIPMENT, INCLUDING (WITHOUT LIMITATION) AS TO ITS DESIGN OR
CONDITION, THE QUALITY OF THE MATERIAL AND EQUIPMENT IN OR WORKMANSHIP OF THE
EQUIPMENT, MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE, OR AS TO
LESSOR'S TITLE TO IT OR ANY COMPONENT THEREOF OR AS TO ANY OTHER MATTER, IT
BEING AGREED THAT ALL SUCH RISKS, AS BETWEEN LESSOR AND LESSEE, ARE TO BE BORNE
BY LESSEE, AND THE BENEFITS OF ANY AND ALL IMPLIED WARRANTIES OF LESSOR ARE
HERBY WAIVED BY LESSEE. With respect to each Lease, Lessee acknowledges that it
has selected the Supplier and the Equipment on the basis of its own judgment and
expressly disclaims any reliance upon any statements or representations made by
Lessor. Notwithstanding any fees which may be paid by Lessor to any Supplier, or
any salesperson, employer or agent of any Supplier, LESSEE UNDERSTANDS AND
AGREES THAT NEITHER SUCH SUPPLIER NOR SUCH SALESPERSON, EMPLOYEE OR AGENT IS AN
AGENT OF LESSOR OR IS AUTHORIZED TO BIND LESSOR OR TO WAIVE OR ALTER ANY TERM OR
CONDITION OF THIS MASTER LEASE OR ANY SCHEDULE CONSTITUTING A LEASE HEREUNDER OR
TO ADD ANY PROVISION HERETO OR THERETO (WHICH ACTS MAY BE EFFECTED ONLY IN A
WRITING SIGNED BY AN AUTHORIZED OFFICER OF LESSOR). NO WARRANTY OR
REPRESENTATION, EXPRESS OR IMPLIED, AS TO THE EQUIPMENT OR ANY OTHER MATTER BY
ANY SUPPLIER SHALL BE BINDING ON LESSOR, NOR SHALL THE BREACH OF SUCH IN ANY WAY
AFFECT LESSEE'S DUTY TO PERFORM ITS OBLIGATIONS AS SET FORTH IN THIS MASTER
LEASE OR ANY SCHEDULE CONSTITUTING A LEASE HEREUNDER. IN NO EVENT SHALL LESSOR
BE LIABLE FOR ANY INDIRECT, SPECIAL OR CONSEQUENTIAL DAMAGES RELATING TO ANY
EQUIPMENT. WITH RESPECT TO EACH LEASE, LESSOR MAKES NO WARRANTY AS TO THE
TREATMENT OF SUCH LEASE FOR ACCOUNTING PURPOSES, OR AS TO THE COMPLIANCE OF THE
EQUIPMENT WITH APPLICABLE GOVERNMENTAL REGULATIONS OR REQUIREMENTS, WHICH SHALL
BE THE SOLE RESPONSIBILITY OF THE SUPPLIER AND/OR THE MANUFACTURER OF THE
EQUIPMENT. Lessee agrees to look solely to the Supplier, manufacturer and/or the
carrier of the Equipment (which are solely responsible for supplying Lessee with
all literature and manuals respecting the Equipment) for any claim arising from
any defect, breach of warranty, failure or delay in delivery, misdelivery or
inability to use any
<PAGE> 7
Equipment for any reason and Lessee's obligations to Lessor under each Lease
shall not in any manner be affected thereby, including (without limitation)
Lessee's obligations to pay Lessor all rent and other amounts payable under such
Lease. LESSOR EXPRESSLY DISCLAIMS ANY WARRANTY THAT NO PERSON HOLDS A CLAIM TO
OR INTEREST IN THE EQUIPMENT (NOT ARISING SOLELY FROM ANY ACT OR OMISSION OF
LESSOR) THAT WILL INTERFERE WITH LESSEE'S ENJOYMENT OF ITS LEASEHOLD INTEREST IN
THE EQUIPMENT.
O. ASSIGNMENT. Lessee shall not assign this Master Lease, any Lease or
any interest herein or therein, or sublease any Equipment, or part with
possession of any Equipment, without the prior written consent of Lessor.
Lessor's rights, title and interest in and to this Master Lease, each Lease and
the Equipment may be sold, transferred and assigned by Lessor (and its
assignees) without notice, and Lessor's assignees (and their respective
assignees) shall have all of the rights, powers, privileges and remedies of
Lessor hereunder. Except to the extent any assignee otherwise agrees in
writing, no assignee shall be obligated to perform any of the obligations of
Lessor hereunder or under any Lease and Lessee (if notified of such assignment)
shall not be entitled to terminate or amend this Master Lease or any Lease
without the prior written consent of such assignee.
P. RETURN OF EQUIPMENT. Lessee shall, at its own cost and expense, at the
end of the term of each Lease, crate and ship all of the Equipment in a proper
manner to Lessor, freight and insurance prepaid, to any location specified by
Lessor within the continental United States, the Equipment to be in good
operating condition as required by Section K hereof. With respect to each Lease,
Lessee will continue to make Rental payments after the term of such Lease
expires until all the Equipment is returned. Lessee agrees to pay Lessor the
replacement cost and/or the repair and refurbishing cost, including cleaning,
for an amount designated by Lessor, if any Equipment is returned damaged or
incomplete, or shows signs of excessive wear and tear, within ten (10) days of
Lessor's request.
Q. EVENTS OF DEFAULT; REMEDIES, EXPENSES. Each of the following events
shall constitute an "Event of Default": (a) Lessee shall default in the payment
when due of any Rentals under any Lease, or any Obligor shall default in the
payment when due of any other sums payable hereunder or under any Lease; or (b)
Lessee shall default in the observance or performance of any other covenant or
agreement in this Master Lease or any Lease, and such default shall continue for
a period of fifteen (15) days; or (c) any representation or warranty made by or
on behalf of any Obligor in this Master Lease or any Lease shall at any time
prove to have been incorrect or untrue when made; or (d) any Obligor shall make
any misrepresentation to Lessor or fail to disclose to Lessor any material fact
in connection with the Master Lease or any Lease or otherwise, either
contemporaneously with or at any time prior or subsequent to the execution
hereof or thereof; or (e) any Obligor shall breach any warranty, covenant or
agreement contained in this Master Lease or any Lease; or (f) or suspend its
usual business; or (g) any Obligor shall dissolve (if such Obligor is a
corporation, partnership, limited liability company or other business entity) or
become insolvent (however evidenced) or bankrupt, commit any act of bankruptcy,
make an assignment for the benefit of creditors, suspend the transaction of its
usual business or consent to the appointment of a trustee or receiver, or a
trustee or a receiver shall be appointed, for any Obligor or for a substantial
part of its property, or bankruptcy, reorganization, insolvency or similar
proceedings shall be instituted by or against any Obligor; or (h) an order,
judgment or decree shall be entered against any Obligor by a court of competent
jurisdiction and such order, judgment or decree shall continue unpaid or
unsatisfied and in effect for any period of sixty (60) consecutive days without
a stay of execution, or any execution or writ or process shall be issued in
connection with any action or proceeding against any Obligor or its property
whereby the Equipment or any substantial part of such Obligor's property may be
taken or restrained; or (i)
<PAGE> 8
any Obligor shall default in the performance of any obligation or in the payment
when due of any sum to Lessor or any assignee of Lessor's rights hereunder under
any other contract, agreement, arrangement or understanding; or (j) any
indebtedness of any Obligor for borrowed money shall become (or shall be
permitted to become) due and payable by acceleration of maturity thereof; or (k)
any event or circumstance shall, in Lessor's opinion, give Lessor reasonable
cause to doubt any Obligor's willingness or ability to fully and promptly
perform its obligations to Lessor; or (l) any change in the condition or affairs
(financial or otherwise) of any Obligor shall, in Lessor's opinion, increase
Lessor's risk with respect to any Lease or Equipment or any security therefor;
or (m) Lessee is in default under any other agreement, lease, master lease or
schedule, whether presently or hereafter held by Lessor. Upon the occurrence of
any Event of Default, Lessor may, by written notice to Lessee (to the extent
legally permitted to do so): (i) immediately declare this Master Lease and any
or all of the Leases in default, whereupon as liquidated damages for breach of
such Lease(s) an amount equal to the sum of (A) the entire unpaid balance of the
Rentals under such Leases for the entire original term thereof, discounted at a
rate of 5.50% per annum as of the date of default, plus (B) any other amounts
then due and owing under such Lease, plus (C) twenty percent (20%) of original
cost of the related Equipment, will become immediately due and payable; and/or
(ii) proceed by appropriate court action, either at law or in equity, to enforce
performance by Lessee of the applicable covenants of this Master Lease and the
Leases or to recover damages for the breach hereof and thereof; and/or (iii)
with necessity of process or other legal action (A) terminate this Master Lease
and the Leases, (B) require Lessee, at Lessee's sole expense and for Lessor's
benefit, to assemble the Equipment at a place reasonably designated by Lessor,
and/or (C) enter onto the premises of Lessee or such other premises as the
Equipment may then be located and take possession of the Equipment, all without
liability to Lessor or any other person arising out of the taking of such
action. In addition, Lessee shall continue to be liable for all indemnities
under this Master Lease and the Leases, and for all legal fees and other costs
and expenses resulting from the foregoing defaults or the exercise of Lessor's
remedies, including (without limitation) placing any Equipment in the condition
required by Section K hereof. No remedy referred to in this Section P is
intended to be exclusive, but each shall be cumulative and in addition to any
other remedy referred to above or otherwise available to Lessor at law or in
equity. Lessor shall be entitled to take or retain, by way of offset against any
or all amounts due and owing under this Master Lease and the Leases as
aforesaid, any assets, tangible or intangible, of Lessee which may then be in
the possession off Lessor, its correspondents, or agents. LESSEE AND EACH OTHER
OBLIGOR AGREE TO PAY AS DAMAGES LESSOR'S COLLECTION AND LEGAL EXPENSES AND
REASONABLE ATTORNEYS FEES. In all proceedings arising hereunder, reasonable
attorneys fees are stipulated and liquidated to be equal to twenty percent (20%)
of the total collection amount, plus one half (1/2) of the amount (the "Excess")
by which Lessor's actual attorneys' fees exceed twenty percent (20%) of the
total collection amount. In consideration for Lessor's agreeing to absorb the
other half (1/2) of the Excess, Lessee agrees to pay and not dispute the
attorneys' fees agreed upon by the parties as a fair and reasonable liquidated
amount. Lessee agrees that each Lease is a "true lease" and hereby waives any
provision which may require Lessor to sell, lease, or otherwise use any
Equipment in the mitigation of damages. Lessee further agrees to compensate
Lessor for collection expenses of twenty dollars ($20) per collection phone call
and up to one hundred dollars ($100) per personal visit. Lessee also agrees to
reimburse Lessor for the costs associated with returned checks, for whatever
reason returned, paying the greater of twenty-five dollars ($25) or Lessor's
actual bank charges for each such returned check. IN NO EVENT, HOWEVER, SHALL
ANY CHARGES IN THIS PARAGRAPH OR IN THIS MASTER LEASE
<PAGE> 9
OR ANY LEASE, OR THE SUM THEREOF, EXCEED THE MAXIMUM PERMITTED BY APPLICABLE
LAW.
R. FURTHER ASSURANCES. Lessee will cooperate fully with Lessor (or any
assignee of Lessor pursuant to Section N hereof) for the purpose of carrying out
the intent and purposes hereof and of the Leases and to protect the interests of
Lessor. Lessor is hereby authorized, to the extent permitted by applicable law,
to file one or more UCC financing statements, whether precautionary or
otherwise, as appropriate, disclosing Lessor's interest in the Equipment, this
Master Lease, the Leases, the sums due under and/or in connection with this
Master Lease and the Leases, and in any and all other collateral which secures
Lessee's obligations to Lessor, without the signature of Lessee or signed by
Lessor as attorney-in-fact for Lessee. Lessee hereby irrevocably appoints Lessor
(and any of Lessor's officers, employees or agents designated by Lessor) as
Lessee's agent and attorney-in-fact, in Lessee's name, place and stead, to do
all things necessary to carry out the intent of this paragraph, including,
without limitation, the execution, endorsement, and filing of all UCC financing
statements. As security for the payment and performance of all of Lessee's
present and future liabilities and obligations to Lessor, Lessee hereby grants
to Lessor, a security interest in the Equipment and all proceeds of the
foregoing, which shall secure the performance of all of Lessee's obligations of
any kind whatsoever, whenever originated, to Lessor. Lessee will pay all costs
of filing any financing, continuation or termination statements with respect to
this Master Lease and the Leases, including, without limitation, any intangibles
tax and/or documentary stamp taxes relating thereto. Lessee shall also execute
and deliver to Lessor upon request such other instruments and assurances as
Lessor deems necessary or advisable for the implementation, effectuation,
confirmation or perfection of this Master Lease, the Lease and any rights of
Lessor hereunder and thereunder. LESSEE HEREBY AUTHORIZES LESSOR TO ADD TO THIS
MASTER LEASE AND/OR THE LEASES OR ANY DOCUMENT RELATED HERETO OR THERETO, SERIAL
NUMBERS, IDENTIFICATION DATA AND, WHEN DETERMINED BY LESSOR TO BE NECESSARY, ANY
DATES OR OTHER OMITTED FACTUAL DATA.
S. LESSEE'S WAIVERS. To the extent permitted by applicable law, Lessee
hereby waives any and all rights and remedies otherwise available to Lessee (a)
under Section 2A-401 and 2A-402 of UCC 2A to suspend performance of any of its
obligations under this Master Lease or any Lease, and (b) under Sections 2A-508
through 2A-522 of UCC 2A, including by way of example only but not limited to,
Lessee's rights to: (i) cancel this Master Lease or any Lease; (ii) repudiate
this Master Lease or any Lease; (iii) reject any Equipment; (iv) revoke
acceptance of any Equipment; (v) recover damages from Lessor for any breach of
warranty or for any other reason; (vi) claim a security interest in any
Equipment in Lessee's possession or control for any reason; (vii) deduct from
payments to Lessor all or any part of any claimed damages resulting from
Lessor's default, if any, under this Master Lease or any Lease; (viii) accept
partial delivery of any Equipment; (ix) "cover" by making any purchase or lease,
or contract to purchase or lease, equipment in substitution for any Equipment to
be leased from Lessor; (x) recover from Lessor any general, special, incidental
or consequential damages, for any reason whatsoever; and (xi) bring a proceeding
for specific performance, replevin, detinue, sequestration, claim and delivery
or the like for any Equipment relating to this Master Lease or any Lease. To the
extent permitted by applicable law, Lessee also hereby waives any rights now or
hereafter conferred by statute or otherwise which may require Lessor to sell,
lease or otherwise use any Equipment to reduce Lessor's damages as set forth in
this Master Lease or which may otherwise limit or modify any of Lessor's rights
or remedies under this Master Lease.
T. BINDING EFFECT. Lessee agrees that Lessee's obligations under this
Master Lease and each Lease are absolute and unconditional and shall continue
without abatement, regardless of (a) any claim of right, rescission, setoff,
<PAGE> 10
counterclaim, recoupment or defense of any kind or for any reason, including
(without limitation) any defense of usury, or (b) any inability of Lessee to use
any Equipment or any part thereof for any reason, including (without limitation)
war, act of God, governmental regulations, strike, loss, damage, destruction,
obsolescence, failure of or delay in delivery, failure of any Equipment to
operate properly, termination by operation of law or any other cause. If more
than one Lessee is named herein or on any Schedule constituting a Lease
hereunder, then the obligations and liabilities of each hereunder is joint and
several. This Master Lease and the Leases shall be binding upon Lessee and any
other Obligors and their respective heirs, personal representatives, successors,
executors, and permitted assigns, in favor of Lessor and/or Lessor's successors
or assigns. LESSEE REPRESENTS AND WARRANTS THAT IT HAS READ, UNDERSTOOD AND
AGREED TO ALL OF THE CONDITIONS CONTAINED HEREIN. LESSEE FURTHER REPRESENTS AND
WARRANTS THAT IT HAS SOUGHT THE ADVICE OF LEGAL COUNSEL TO EXPLAIN ANY AND ALL
TERMS CONTAINED HEREIN.
U. LEASE PAYMENT ADJUSTMENT. The amount of each Lease Payment is based on the
supplier's best estimate of the equipment cost including (if Applicable), any
installation, other related costs and estimated sales or use tax. The Lease
Payments will be adjusted proportionately upward or downward if the actual total
cost of the equipment or taxes is more or less than the estimate. In that event,
you authorize us to ADJUST THE LEASE PAYMENTS BY UP TO FIFTEEN PERCENT (15%).
<TABLE>
<S> <C>
LESSEE: By: /s/ Thomas O. Cordy /s/ Thomas O. Cordy Date: 9/29/98
--------------------------------- --------------------------- -------
Authorized Signature Print Name and Title President/CEO
LESSEE: By: Date:
--------------------------------- --------------------------- -------
Authorized Signature Print Name and Title
ACCEPTED BY
LESSOR: Date:
--------------------------------- --------------------------- -------
Authorized Signature Title
(NOT VALID UNTIL ACCEPTED BY LESSOR)
</TABLE>
<PAGE> 11
EQUIPMENT SCHEDULE TO
MASTER LEASE AGREEMENT
ROCKFORD INDUSTRIES, INC. Master Lease # 89916
1851 East First Street, Sixth Floor Schedule # 62862-89916-001
Santa Ana, CA 92705
Tel: (714) 547-7166 (800) 876-7788 Fax: (714) 547-3889
LESSEE: MAXXIS GROUP, INC Supplier: NACT Telecommunications, Inc.
1901 Montreal Rd 191 W 5200 N
Tucker, GA Provo, UT 84604
EQUIPMENT LOCATION: 600 S Federal, Suite 301, Chicago, IL 60605
(if different from billing address)
LEASED EQUIPMENT DESCRIPTION:
TOGETHER WITH ALL ACCESSORIES, ADDITIONS AND ATTACHMENTS THERETO, REPLACEMENTS
AND SUBSTITUTIONS THEREFORE, NOW OWNED OR HEREAFTER ACQUIRED (COLLECTIVELY, THE
"EQUIPMENT").
- --------------------------------------------------------------------------------
See Exhibit A attached hereto and made a part hereof
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INITIAL LEASE MONTHLY LEASE PAYMENT ADVANCE RENTAL
TERM (CHECK MUST ACCOMPANY SCHEDULE)
<S> <C> <C>
#1 @ $100,000.00 (PLUS APPLICABLE TAXES)
#2 @ $ 0.00 (PLUS APPLICABLE TAXES) $100,000.00 (PLUS APPLICABLE TAXES)
#60 @ $ 10,375.18 (PLUS APPLICABLE TAXES) Representing the first and last 0 month's rent.
</TABLE>
- --------------------------------------------------------------------------------
TERMS AND CONDITIONS - PLEASE READ BEFORE SIGNING
A. Lessor agrees to lease to Lessee, and Lessee agrees to lease from
Lessor, the Equipment described above on the terms specified in this equipment
schedule (this "Schedule") and the Master Lease Agreement. BY SIGNING BELOW,
LESSEE HEREBY REPRESENTS AND WARRANTS THAT IT HAS READ AND UNDERSTOOD ALL OF THE
TERMS AND CONDITIONS CONTAINED IN THIS SCHEDULE AND IN THE MASTER LEASE
AGREEMENT. THE TERMS OF THE MASTER LEASE AGREEMENT ARE HEREBY RATIFIED AND
INCORPORATED IN THIS SCHEDULE AS IF SET FORTH HEREIN IN FULL AND SHALL REMAIN IN
FULL FORCE AND EFFECT AND BE FULLY ENFORCEABLE THROUGHOUT THE TERM OF THIS
SCHEDULE. Capitalized terms used and not otherwise defined in this Schedule have
the respective meanings set forth in the Master Lease.
B. All Rentals shall be payable in advance and shall be due monthly (or
such other period as specified above) beginning on the Commencement Date and
continuing on the same day of each subsequent calendar month (or other specified
period) during the term hereof.
C. Lessee agrees to lease the Equipment on an AS-IS, WHERE-IS BASIS,
WITHOUT REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, INCLUDING (WITHOUT
LIMITATION) MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE.
D. Lessee hereby irrevocably appoints Lessor (and any of Lessor's
officers, employees or agents designated by Lessor) as Lessee's agent and
attorney-in-fact, coupled with an interest, to do all things necessary to carry
out the intent of this Schedule and/or the Master Lease Agreement,
<PAGE> 12
including (without limitation) the execution and filing of all Uniform
Commercial Code financing statements as Lessor may deem necessary to perfect
such interest.
E. FOR PURPOSES OF PERFECTION OF A SECURITY INTEREST IN CHATTEL PAPER BY
POSSESSION UNDER THE UNIFORM COMMERCIAL CODE, IT IS UNDERSTOOD AND AGREED THAT:
(A) COUNTERPART NO. 1 OF THIS SCHEDULE SHALL BE DEEMED THE ONLY ORIGINAL
COUNTERPART OF THIS SCHEDULE, AND TRANSFER AND POSSESSION THEREOF SHALL EFFECT
SUCH PERFECTION; (B) TRANSFER OR POSSESSION OF NO OTHER PURPORTED COUNTERPART OF
THE SCHEDULE SHALL EFFECT SUCH PERFECTION; AND (C) TRANSFER OR POSSESSION OF AN
ORIGINAL COUNTERPART OF THE MASTER LEASE AGREEMENT SHALL NOT BE NECESSARY TO
EFFECT SUCH PERFECTION.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
CERTIFICATE OF
LESSEE ACCEPTANCE OF LEASED EQUIPMENT
<S> <C>
BY SIGNING BELOW, LESSEE ACKNOWLEDGES The above named and undersigned Lessee hereby
READING AND AGREEING TO ALL THE TERMS acknowledges complete and satisfactory delivery,
AND CONDITIONS SET FORTH ON THIS receipt and installation of the Equipment description
SCHEDULE AND THE MASTER LEASE in this Schedule. Lessee understands and agrees that
AGREEMENT the lack or failure of the Equipment or any misoperation
thereof of any kind shall not be a basis for non-
fulfillment of any of Lessee's obligations under
this Schedule or the Master Lease Agreement and that Lessee's
obligations to Lessor and Lessor's assigns as set
THE EQUIPMENT IS FOR BUSINESS USE ONLY forth in the Master Lease Agreement are not subject to any
-------------------------------------- claims, counterclaims, defenses or setoffs.
THIS SCHEDULE AND MASTER LEASE
AGREEMENT ARE NON-CANCELLABLE
X/s/ Thomas O. Cordy DATE: 9/29/98 WE HEREBY AUTHORIZE YOU TO
------------------- ------- PAY FOR AND PURCHASE THE EQUIPMENT
(Authorized Signature) Thomas O. Cordy
X DATE: X/s/ Thomas O. Cordy, President/CEO
------------------- ------- --------------------------------------
(Authorized Signature) (Authorized Signature) Thomas O. Cordy
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
PERSONAL GUARANTY:
In order to induce Lessor to enter into this Schedule with Lessee, the
undersigned, jointly and severally, hereby irrevocably and unconditionally,
guaranty, without deduction or diminution by reason of counterclaim, offset, or
defense, the prompt and complete payment under, whenever due, and performance of
this Schedule to Lessor or its assigns, including any and all modifications,
additions, supplements and amendments thereof, as well as all of Lessee's other
Schedules with Lessor that have commencement dates not later than ten (10) days
after Lessor receives written notice from the undersigned of their desire not to
guaranty any additional Schedules. The undersigned warrant and guaranty that
this Schedule has been properly executed by Lessee, and agree that this guaranty
shall be of full force and effect irrespective of any invalidity or
unenforceability of the Schedule or any provisions thereof, or the existence,
validity or value of any security. The undersigned hereby waive presentment
notice of acceptance hereof, all notices of any kind to which we may be
entitled, and all defenses of a
<PAGE> 13
guarantor or surety. The undersigned consent that from time to time, without
notice to or further consent from the undersigned and without releasing or
affecting the undersigned's liability hereunder, the time for payment or
performance under this Schedule may be extended or accelerated in whole or part,
any security therefore may be exchanged, rescheduled, enforced, sold, scheduled
or otherwise dealt with, the provision of any documents may be canceled,
modified or waived, any other guarantors may be rescheduled, and any indulgence
may be granted to Lessee, as Lessor may in its sole discretion determine. The
obligation and liability of each undersigned is direct, continuing and
unconditional, shall not be diminished or affected whether or not the Equipment
is repossessed, and Lessor may in its sole discretion determine. The obligation
and liability of each undersigned is direct, continuing and unconditional, shall
not be diminished or affected whether or not the Equipment is repossessed, and
Lessor shall not be required to proceed against Lessee or resort to any other
right or remedy before proceeding against the undersigned under this guaranty.
No payment by the undersigned, except payment in full of all liabilities
hereunder, shall entitle the undersigned to be subrogated to any of the rights
or remedies of Lessor under this Schedule. The undersigned warrant they have
read this Schedule and hereby waive any and all rights to a trial by jury, and
agree to the venue and jurisdiction contained therein, and agree that only full
payment and performance of the Schedule can discharge the undersigned's
liability. (Guarantor hereby grants to lessor a security interest in all goods
as set forth in the Master Lease Agreement. This guaranty shall be binding upon
the undersigned and the heirs, representatives, successors and assigns of he
undersigned, in favor of Lessor and Lessor's successors and assigns. This
guaranty cannot be terminated or changed orally and no provision hereof may be
modified or waived except in writing.)
- --------------------------------------------------------------------------------
X DATE: X DATE:
---------------------- ------ ---------------------- ------
( ) An Individual ( ) An Individual
- --------------------------------------------------------------------------------
Accepted By:
ROCKFORD INDUSTRIES, INC., ("LESSOR") X Date:
(Not valid until accepted by Lessor) ---------------------- ------
- --------------------------------------------------------------------------------
<PAGE> 14
EXHIBIT "A"
LOCATION: 600 S. FEDERAL, SUITE 301
CHICAGO, IL 60605
VENDOR: NACT TELECOMMUNICATIONS, INC.
191 WEST 5200 NORTH
PROVO, UT 84604
QTY EQUIPMENT
---------------------------
1 STX BASIC SYSTEM
SWITCH BAY - 19" RACK MOUNT ENCLOSURE
21 SLOT CARD CAGE
68040 CPU BOARD WITH 64 MB RAM
BACK PLANE CLOCKING BOARD
TWO UDS 28.8 K BAUD MODEMS
TWO 4 GB HARD DRIVES
ONE 2 GB DAT TAPE DRIVE
8 RS-232 SERIAL PORTS
1344 PORT SOFTWARE LICENSE
TWO DSX PATCH CORD PANEL
WYSE 55 RACK MOUNT TERMINAL
SENSPHONE ALARM UNIT & CABLE
TOOLKIT
7 DSP BOARD
7 TI BOARD
1 STX RAID SYSTEM 8 GIG W/DLT
1 UPS, 2.0K VA WITH BATTERY PACK
This Exhibit A is attached to and a part of Rockford Industries, Inc. Lease No.
62862-89916-000 and constitutes a true and accurate description of the
equipment.
LESSEE: MAXXIS GROUP, INC.
BY:/s/ Thomas O. Cordy, President/CEO DATE: 9/29/98
---------------------------------- ---------------------
(Title)
<PAGE> 15
EXHIBIT "A"
1 INTERNATIONAL CALL BACK
1 PREPAID CALLING CARD
1 ENHANCED PREPAID RATING
1 REAL TIME VALIDATION
1 AUTOMATED OPERATOR
1 PHONE CENTERS
1 REAL TIME CALL COLLECTION & PP CONTROL
1 AUTOMATIC PAYMENT SELECTION
1 SUITE OF 10 LANGUAGES
1 CPU BOARD (64 MEG RAM)
1 DSP BOARD
1 TI BOARD
1 120 VOLT POWER TRAY
1 BACK PLANE CLOCKING BOARD
1 NTS 2000 BASIC SYSTEM WITH RAID
COMPAQ PROLIANT 2500, PENTIUM PRO, 200 MHZ
256 MEG RAM
SVGA COLOR MONITOR
KEYBOARD
MOUSE
1.44 FLOPPY DRIVE
CD ROM DRIVE
2 GB DAT INTERNAL SCSI TAPE DRIVE
10 GB DLT INTERNAL TAPE DRIVE
TEN 2GB TAPES
ETHERNET CARD
SCSI RAID CONTROLLER
FIVE PLUGGABLE 4 GIG HARD DRIVE
This Exhibit A is attached to and a part of Rockford Industries, Inc. Lease No.
62862-89916-000 and constitutes a true and accurate description of the
equipment.
LESSEE: MAXXIS GROUP, INC.
BY:/s/ Thomas O. Cordy, President/CEO DATE: 9/29/98
---------------------------------- --------------------
(Title)
<PAGE> 16
EXHIBIT "A"
ONE PLUGGABLE 4 GIG HARD DRIVE (COLD SPARE)
PC16EMDB2 DIGIBOARD (16 PORT)
SCO UNIX 5.2 OPEN SERVER 15 USER PACKAGE
INFORMIX 15 USER DATA BASE
CTAR
UNIX PERFORMANCE MONITORING SOFTWARE (OLYMPUS)
NTS SOFTWARE LICENSE FOR 1-3 MILLION CDR'S PER MON
1 EXTRA CPU
1 REDUNDANT POWER SUPPLY
1 UPS-800 VA
1 HP LASER JET PRINTER 5 SI
2 UDS 28800 BAUD MODEM V.3229 LED
This Exhibit A is attached to and a part of Rockford Industries, Inc. Lease No.
62862-89916-000 and constitutes a true and accurate description of the
equipment.
LESSEE: MAXXIS GROUP, INC.
BY:/s/ Thomas O. Cordy, President/CEO DATE: 9/29/98
---------------------------------- --------------------
(Title)
<PAGE> 17
END OF LEASE PURCHASE PRIVILEGE
LEASE NUMBER: 62862-89916-000
LESSEE: MAXXIS GROUP, INC.
ESTIMATED VALUE: NOT TO EXCEED 10% OF ORIGINAL EQUIPMENT COST
(PLUS ALL APPLICABLE TAXES)
EQUIPMENT: TELEPHONE SWITCHING EQUIPMENT
Provided that the Lessee named above ("Lessee") is not then nor has ever been in
default under that certain lease agreement dated 9/29/98, between the
undersigned and Lessee ("Lease"), and has paid all rentals and other obligations
due to the undersigned Lessor or its assigns ("Lessor"), then at Lessors option,
Lessee shall have the right, exercisable at the end of the lease term, to
purchase the equipment described above or attached on any schedule hereto (the
"Equipment"), as-is and where-is, for the additional consideration of a FAIR
MARKET VALUE not to EXCEED 10% OF THE ORIGINAL COST OF THE EQUIPMENT.
The Lessee shall give to the Lessor written notice at least 60 days, and not
more than 180 days, prior to the end of original lease term, of its election to
exercise an option provided for herein. Payment or notice of the option shall be
made to the Lessor or its assigns at its address or at such other place as
Lessor or its assigns may designate in writing.
This "OPTION LETTER" shall not amend or alter any of the terms or conditions
contained in the Lease agreement and may be exercised only after all of the
terms and conditions of the original Lease agreement have been fulfilled. This
document must be accepted by an authorized signatory of Lessor in order to be
valid and binding.
- --------------------------------------------------------------------------------
LESSEE: MAXXIS GROUP, INC.
By: /s/ Thomas O. Cordy, President/CEO Date: 9/29/98
- --------------------------------------------------------------------------------
LESSOR: ROCKFORD INDUSTRIES, INC.
By: Date:
------------------------------------------------- ------------------
(AGREED AND ACCEPTED BY ROCKFORD INDUSTRIES, INC.)
<PAGE> 18
EARLY LEASE TERMINATION
LESSEE: Maxxis Group, Inc.
LEASE NO: 89916
Schedule #: 62862-89916-000
It is Rockford's general policy to allow a lessee to prepay the lease rental
payments before the expiration assuming the lessee is and has been faithfully
and promptly fulfilling his monthly payment obligation to Rockford Industries,
Inc. and its assigns.
The payoff is calculated by determining the total equipment cost, service fees
and end of lease residual to be paid on the lease. After calculating this
amount, a refund of unearned service fees is deducted from the aggregate payment
schedule to determine the current payoff figure.
There is no additional prepayment penalty added to the payoff calculations,
however, it is recommended that you check with your accountant before
considering an early payoff as it can effect the tax treatment of a lease.
By way of example, below is an overview of the estimated buyouts during the
lease terms, assuming completely prompt payment throughout the term:
*After 15 Monthly Payments = $473,944
*After 27 Monthly Payments = $398,120
*After 39 Monthly Payments = $295,984
*After 51 Monthly Payments = $169,359
*After 63 Monthly Payments = See Purchase Option Letter
These balance amounts do not include any unpaid obligations on the lease,
including any sales and use taxes, property taxes or other fees.
LESSEE: /s/ Thomas O. Cordy, President/CEO DATE: 9/29/98
-------------------------------------- ---------------------
LESSOR: DATE:
-------------------------------------- ---------------------
<PAGE> 1
EXHIBIT 10.9
EMPLOYMENT AGREEMENT
BY AND BETWEEN
MAXXIS GROUP, INC.
AND
DANIEL MCDONOUGH
DATED: OCTOBER 13, 1998
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <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...............................6
10. Governing Law.........................................6
11. Severability..........................................6
12. Entire Agreement......................................6
13. Headings..............................................6
14. Counterparts..........................................6
15. Definitions...........................................6
</TABLE>
<PAGE> 3
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT (this "Agreement") is made by and between
MAXXIS GROUP, INC., a Georgia corporation (the "Company"), and DANIEL MCDONOUGH,
an individual resident of the State of Georgia (the "Employee"), as of this 13th
day of October, 1998.
The Company currently employs the Employee as its Chief Financial
Officer. The Company recognizes the importance of the Employee's contribution to
the growth and success of the Company. The Company desires to provide for the
continued 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
continue serving 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 continue to employ the Employee, and
the Employee shall continue to serve the Company, as the Company's Chief
Financial Officer 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 the date hereof, the Company shall pay the Employee a
salary at a rate of $75,000.00 per year to be paid 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, 1999, 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.
1
<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.
d. The Board of Directors agrees to grant to the Employee as of the
date hereof a non-qualified stock option (the "Option") to purchase 6,819 shares
of Common Stock of the Company for no consideration per share, of which 50%
shall vest immediately and the remainder shall vest on the first anniversary of
the date hereof. The parties agree that the Option will be subject to the terms
and conditions of the Maxxis Group, Inc. 1998 Stock Option Plan and that the
parties will enter into a stock option agreement to memorialize the grant of the
Option.
e. The Company shall reimburse the Employee for reasonable 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;
(iv) by the Company without Cause upon delivery of a
Notice of Termination to the Employee; or
(v) by Employee's resignation on the date of such
resignation.
b. If the Employee's employment with the Company shall be terminated
during the Term (i) by reason of the Employee's death, (ii) by the Company for
Disability or Cause, or (iii) by Employee's resignation, 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
2
<PAGE> 5
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 $1,440. 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 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, Confidential Business Information, 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
3
<PAGE> 6
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 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 parties agree that the
Company shall be entitled to injunctive relief in the event of any such breach
or threatened breach without the necessity of proving monetary damages. 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.
4
<PAGE> 7
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. 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 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.
5
<PAGE> 8
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 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 the 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.
6
<PAGE> 9
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 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.
7
<PAGE> 10
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.
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, in the case of Employee's resignation, the date of
such resignation, and in all other cases, the date specified in the Notice of
Termination.
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/ Kelly Wilder By: /s/ Thomas O. Cordy
---------------------------- ----------------------------------
Name: Kelly Wilder Name: Thomas O. Cordy
Title: Executive Assistant Title: Chief Executive Officer
and President
EMPLOYEE
/s/ Daniel McDonough
-------------------------------------
Daniel McDonough
9
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
UNAUDITED FINANCIAL STATEMENTS FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1998 AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH UNAUDITED FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1999
<PERIOD-START> JUL-01-1998
<PERIOD-END> SEP-30-1998
<EXCHANGE-RATE> 1
<CASH> 803,000
<SECURITIES> 10,000
<RECEIVABLES> 515,000
<ALLOWANCES> 40,000
<INVENTORY> 725,000
<CURRENT-ASSETS> 26,000
<PP&E> 5,950,000
<DEPRECIATION> 107,000
<TOTAL-ASSETS> 8,631,000
<CURRENT-LIABILITIES> 2,701,000
<BONDS> 0
0
200,000
<COMMON> 574,000
<OTHER-SE> 290,000
<TOTAL-LIABILITY-AND-EQUITY> 8,631,000
<SALES> 5,103,000
<TOTAL-REVENUES> 5,103,000
<CGS> 1,460,000
<TOTAL-COSTS> 4,243,000
<OTHER-EXPENSES> 2,783,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 860,000
<INCOME-TAX> (280,000)
<INCOME-CONTINUING> 580,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 580,000
<EPS-PRIMARY> .37
<EPS-DILUTED> .36
</TABLE>
